R.    H.    F,    VARIEL 
ATTORNEY  AT  LAW- 
LOS  AHSBLBB.  «AL. 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


A  TREATISE 


ON 


STOCK  AND  STOCKHOLDERS, 


BONDS,  MORTGAGES, 


AND 


GENERAL  CORPORATION  LAW, 


AS   APPLICABLE  TO 


RAILROAD.  BANKING.  INSURANCE,  MANUFACTURING,  MINING, 
TELEGRAPH,  TELEPHONE.  EXPRESS,  GAS,  WATER- WORKS, 
COMMERCIAL,  TURNPIKE,  BRIDGE,  CANAL,  STEAM- 
SHIP, AND  OTHER  PRIVATE  CORPORATIONS. 


BY 


WILLIAM  W.  COOK, 

Ml 

Of  the  New  York  Bar. 


TBXRD  EDITION". 


VOL.  I. 


CHICAGO : 

CALLAGHAN  AND  COMPANY. 

1894. 


T 

CTl37c 
4 


COFYBIGHT,  18H 

By  WILLIAM  W.  CO  >K 


STATE  JOURNAL  PRINTING  COMPANY, 
Printers  and  Stereotypers, 

MADISON,  wis. 


TO 

THE  HONORABLE 

THOMAS  M.  COOLEY,  LL.D., 

PROFESSOR,  AUTHOR  AND  JUDGE, 

WHOSE    PRE-EMINENT    ABILITY,   UNTIRING    RESEARCH, 

PROFOUND  LEARNING   AND   EXALTED   CHARACTER 

HAVE    SECURED    FOR    HIM    AN 

IMPERISHABLE   FAME   AS   A   JURIST, 

UNDER  WHOSE  INSTRUCTION  THE  AUTHOR  ACQUIRED  A  DESIRE  TO  SEARCH  OUT 
AND  MASTER  THE  PRINCIPLES  OF  THE  LAW, 

THIS    WORK 
IS 

RESPECTFULLY  DEDICATED. 


G6784 


*  2 


PEEFACE  TO  THIRD  EDITION. 


This  edition  contains  double  the  amount  of  material  found  in 
the  second  edition,  and  has  increased  the  size  of  the  work  to  two 
volumes. 

The  subjects  covered  by  the  additional  material  are  important 
and  extensive.  Bonds,  mortgages,  deeds  of  trust,  foreclosures,  re- 
ceivers and  reorganizations  are  treated  in  several  chapters  in  detail 
and  with  full  notes.  Xew  chapters  on  the  law  peculiar  to  steam 
railroads,  street  railroads,  gas,  telegraph,  telephone,  electric  light, 
plank-road,  and  other  corporations  owing  a  duty  to  the  public,  have 
been  added.  In  addition  thereto  a  comprehensive  synopsis  of  the 
constitutional  and  statutory  provisions  of  the  various  states  so  far 
as  they  atfect  corporations  is  contained  in  this  edition. 

Several  chapters  of  the  second  edition  have  been  rewritten,  nota- 
bly the  chapters  on  corporate  meetings,  corporate  elections,  divi- 
dends, preferred  stock  and  "watered"  stock.  Moreover,  the  nu- 
merous cases  and  new  principles  of  law  that  have  arisen  on  the 
.subject  of  corporations  during  the  past  four  years  have  been  em- 
bodied in  this  third  edition. 

The  large  sales  of  the  second  as  well  as  first  editions  indicate  that 
the  original  plan  of  the  work  —  a  statement  of  general  principles 
in  the  text  and  an  exhaustive  analysis  of  the  cases  in  the  notes  — 
is  satisfactory  to  the  profession.  In  this  belief  the  author  has  pur- 
sued the  same  mode  of  treatment  in  the  expansion  of  the  work  and 
the  inclusion  of  new  subjects. 

William  W.  ('wok. 
New  York,  January  9,  1894. 


PREFACE  TO  SECOND  EDITION. 


The  second  edition  of' this  work  is  a  treatise  on  the  law  of  cor- 
porations as  approached  from  the  stand-point  of  stock  and  stock- 
holders. 

The  first  edition  has  been  revised,  enlarged,  extended,  and  in  large 
part  rewritten.  No  substantial  part  of  it  has  been  omitted,  and 
the  general  arrangement,  order  and  section  numbers  have  been  re- 
tained. But  the  notes  have  been  enlarged  by  all  the  recent  cases, 
the  text  has  been  compressed  into  brief  forms  of  expression,  and 
many  chapters  have  been  entirely  remodeled. 

In  addition  to  this  a  large  number  of  new  subjects  and  princi- 
ples are  given,  so  as  to  make  the  book  a  complete  work  on  corpora- 
tion law.  Among  these  new  subjects  may  be  mentioned  the  power 
of  a  corporation  to  hold  land;  to  make  mortgages;  to  borrow 
money;  to  loan  money;  to  issue  bills  and  notes;  to  issue  debent- 
ures; to  issue  bonds  secured  by  mortgages;  to  assign  for  the 
benefit  of  creditors;  to  give  preferences;  to  exercise  the  power  of 
eminent  domain;  to  sell  all  its  property;  to  consolidate,  merge, 
amalgamate,  absorb  and  lease;  to  enter  into  pools;  to  limit  its  lia- 
bility; to  make  traffic  arrangements;  to  make  discriminations;  to 
maintain  monopolies  and  exclusive  privileges;  to  become  a  partner 
in  a  copartnership;  to  guaranty  the  bonds  or  stocks  of  another 
corporation;  to  be  an  accommodation  indorser;  to  undertake  a  new 
business;  to  be  an  executor  or  trustee;  to  pay  for  lobbying,  and 
various  other  acts.  A  detailed  statement  of  the  law  is  made  as 
to  the  power  of  the  directors,  executive  committee,  president,  sec- 
retary, treasurer,  cashier,  general  manager,  superintendent  and 
other  agents  to  act  and  contract  for  the  company.  The  proper 
method  of  executing  corporate  contracts  and  the  liability  of  officers 
on  irregularly-executed  contracts;  the  character  and  use  of  the  cor- 
porate seal;  the  law  as  to  notice  and  admissions;  the  liability  of 
the  corporation  for  torts;  and  the  rules,  regulations  and  complica- 
tions of  directors'  acts  and  meetings,  are  fully  explained.  Irregular 
incorporations;  lapses  of  charters;  misfeasances,  malfeasances  and 
non-feasances;  and  dissolutions  of  corporations,  with  all  the  inter- 
ests and  complicated  questions  connected  therewith,  are  examined. 


viii  PREFACE    TO    SECOND    EDITION. 

"Trusts,"  the  recent  combinations  in  trade,  are  explained  and 
their  legality  considered.  This  edition  also  treats  of  foreign  cor- 
porations, with  their  various  rights,  disabilities  and  liabilities,  and 
of  the  process,  pleadings,  procedure  and  service  in  suits  by  and 
against  foreign  and  domestic  corporations. 

The  author  believes  that  the  law  of  stock  and  stockholders  leads 
naturally  up  to  and  includes  the  whole  law  of  corporations.  Be 
believes  that  the  difficulty  in  understanding  corporation  law  is 
due  largelv  to  the  method  of  studying  the  subject.  That  legal 
fiction,  that  intangible  existence,  that  imaginary  bodv  called  the 
corporation,  is  not  easily  understood,  and  is  not  always  dealt 
with  intelligently.  It  is  believed,  however,  that  be  who  under- 
stands the  rights,  duties,  powers  and  liabilities  of  stock  and  st< 
holders  will  have  little  difficulty  in  understanding  the  nature 
corporations,  the  powers  of  corporations,  t;  corporate 

creditors,  and  the  various  peculiarities  of  corporation  law.     A  com- 
plete exposition  of  the  law  of  stock  and  Btockholdi 
exposition  of  the  law  of  corporations. 

The  remarkably  rapid  growth  of  corporations  during  the  \ 
twenty-five  years  has  created  a  body  of  law  which  ning 

a  system  of  juris]  rudence  in   itself.     In  the  i  11   and 

Ames,  corporation   law  was  just  arising,  and  in  tie  tt  work  it 

was  impossible  to  give  the  infinite  detail  and  subdivision  of  prin- 
ciple which  now  exist.  In  these  latter  days,  however,  a  text-book 
on  corporation  law  must  give  more  than  general  principles  and  un- 
digested citations  of  cases.  It  must  explain  theapplii  3  of  the 
general  principles;  subdivide  the  topics;  evolve  rules  from 
quently-recurring  facts;  point  out  the  difficulties,  rights  and  rem. 
edies  in  the  separate  cases  as  they  have  arisen;  and  give  the  j  I 
of  the  decisions  themselves. 

The  write'r  has  sought  to  make  a  clear,  practical  ami  com  pi 
presentation  of  the  subject  for  the  every-day  use  of  the  bench  and 
bar.  The  subdivisions,  the  chapter  subjects  and  the  section  head- 
ings are  made  so  as  to  aid  in  finding,  without  delay,  the  point  of 
law  in  which  any  one  may  be  interested.  These  divisions  ami  head- 
ings have  been  built  up  from  the  cases  themselves,  and  from  a 
study  of  the  subjects  which  arise  most  frequently  in  the  courts  and 
in  business  transactions.  The  writer  has  carefully  avoided  all 
theories,  long  discussions,  and,  as  far  as  possible,  the  use  of  t> 
nical  language.  He  has  not  hesitated  to  express  his  opinion  when 
the  occasion  seemed  to  warrant  it,  but  his  sole  object  has  been  to 
give  a  complete  and  concise  statement  of  the  law  governing  the 
subject. 

The  plan  of  the  work  is  original,  and  this  volume  is  the  result  of 


PEEFACE    TO    SECOND    EDITION.  JX 

a  loner  and  conscientious  studv  of  the  sources  of  authority  —  the 
cases  themselves.  These  have  been  systematically  examined  and 
collected,  and  made  the  groundwork  of  the  subdivisions  of  the 
book. 

A  special  effort  has  been  made  to  develop  fully  those  subjects 
which  are  litigated  most  often  in  the  courts,  and  which  occasion 
doubt,  difficulty,  danger  and  lawsuits  to  corporations  and  stock- 
holders. The  number  and  complexity  of  the  decisions  have  caused 
some  confusion  and  doubt,  even  in  the  mind  of  the  bench  itself. 
Out  of  the  chaos  of  material  which  lay  scattered  throughout  many 
thousands  of  reports,  the  writer  has  sought  to  construct  a  treatise 
that  will  be  a  practical  guide  on  all  subjects  relative  to  stocks  and 
corporation  law.  A  special  effort  has  been  made  to  explain  fully 
those  principles  which  are  of  importance  and  constant  interest  and 
use  to  lawyers,  investors,  directors,  stockholders,  corporations  and 
the  general  public. 

Copious  notes  are  given  for  the  purpose  of  illustrating,  fortify- 
ing  and  explaining  the  text,  By  this  method  it  is  believed  that  the  . 
thread  of  the  subject  is  preserved  in  the  text,  and  the  mind  of  the 
reader  not  distracted  by  a  mass  of  details.  On  the  other  hand,  by 
the  notes  the  subject  is  still  further  developed,  and  the  application 
of  the  principles  to  particular  facts  fully  set  forth. 

The  dates  of  the  cases  are  given  in  the  notes.  It  is  believed  that 
thereby  the  relative  importance  of  a  given  case  can  be  more  easily 
ascertained  and  determined.  It  is  also  worthy  of  note  that  the 
dates  of  the  cases  become  of  great  use  when  there  is  a  conflict  of 
authority.  15v  the  dates  also  the  important  facts  are  brought  out 
that  the  law  of  stock  and  stockholders  and  of  corporations  is  of 
verv  recent  origin;  that  most  of  the  cases  have  arisen  within  the 
past  fifty  years;  that  the  law  relative  to  stockholders'  actions 
against  directors  has  arisen  within  thirty  vears;  and  that  we  are  as 
yet  only  on  the  threshold  of  that  new  jurisprudence  which,  though 
now  in  a  formative  state,  is  for  the  future  to  regulate  the  great 
subject  of  corporations  having  a  capital  stock. 

In  the  composition  of  this  work  the  author  has  been  burdened 
with  an  abundance  rather  than  a  paucity  of  material.  The  law  of 
corporations,  when  explored  in  all  its  branches  and  details,  is  a  vast 
subject.  There  are  over  twelve  thousand  cases  cited  in  this  vol- 
ume. Although  it  is  difficult  to  exhaust  in  a  single  volume  the  law 
contained  in  so  great  a  number  of  cases,  yet  a  conscientious  effort 
has  been  made  to  do  so. 

The  generous  reception, given  to  the  first  edition,  which  was 
double  the  number  usually  printed,  is  appreciated  by  the  author. 
The  mode  of  treatment  appears  to  have  been  satisfactory,  and  it 


X  PREFACE    TO    SECOND    EDITION. 

has  been  retained  in  the  present  enlargement  of  the  work  to  the 
whole  Geld  of  corporation  law.  If  an  equally  favorable  judgment 
is  passed  upon  the  second  edition,  it  will  be  a  reward  commen- 
surate with  the  labor  and  thought  involved  in  a  work  of  this  mag- 
nitude. 

William  "W".  Cook. 
New  York,  November  4,  1S89. 


CONTENTS. 


PART  I. 

ISSUE  OF  AND  LIABILITY  ON  STOCK 

CHAPTER  I. 

Sec. 
Definitions  and  Scope  of  the  Work 1. 

CHAPTER  II. 

Stock  May  be   Issued  Legally  for   Money  or  Property  or  by  a 

Stock  Dividend 16- 

CHAPTER  III. 

••  Watered"  Stock  —  Stock  Issued  Illegally  for  Money,  Property 
or  by  a  Stock  Dividend  —  It  is  Then  Called  "  Watered  " 
or  Fictitiously  Paid-up  Stock 28 

A.  Nature  of  Watered  Stock. 

B.  Watered  Stock  Issued  lor  Cash. 

C.  Watered  Stock  Issued  for  Property  or  Construction  Work. 

D.  Who  May  Complain  and  Against  Whom  Complaint  May  be  Made. 

E.  Issue  of  Watered  Stock  by  a  Stock  Dividend. 

CHAPTER  IV. 

Method  of  Subscribing  —  Parties  to  Subscriptions  —  Action  to  En- 
force Subscriptions 52 

A.  Methods  of  Subscribing. 

B.  Who  is  Competent  to  Subscribe  for  Stock. 

C.  An  Action  Lies  to  Collect  Subscriptions. 

CHAPTER  V. 
Conditional  Subscriptions 77 

CHAPTER  YI. 
Municipal  Subscriptions 90 

CHAPTER  VII. 
Calls 104 


Xil  CONTENTS. 

CHAPTER  VIII. 

Sec 

Forfeiture  of  Shares  for  Non-payment 121 

CHAPTER  IX. 

Defense  of  Parol  Agreements  and  Fraudulent  Representations  In- 
ducing Subscriptions  for  Stock 135 

CHAPTER  X. 
Miscellaneous  Defenses  to  Subscriptions  for  Cap;  .    .        .      MM 

CHAPTER   XI. 

The  Stockholders'  Liability  to  Corporate  Credit  n  Unpaid 

Subscriptions 199 

CHAPTEE   XII. 

Statutory  Liability  of  Stockholders  to  <  tors        .      SIS 

A.  Extent  of  the  Liability. 

B.  Enforcement  of  the  Statutory  Liability. 

CHAPTEE  XIII. 

Liability  of  Stockholders  Where  tiik  Supposi  d  In* 

Not  Protect  Them,  and  fob  Assessments              i  the  I'm;  Vai 
of  the  Stock 

CHAPTEE  XIV. 
Liability  of  Pledgees,  Trustees,  Executors,  Agents,  etc,         .        .      2H 

CHAPTEE  XV. 

Liability  as  Affected  by  Transfers 2'<\ 

CHAPTEE  XVI. 

issue  of  Preferred  Stock  and  Stock  Upon  Which  Interest  is  Guar- 
antied   

CHAPTER  XVII. 

Increase    and   Reduction   of   the   Capital   Stock    and   Overisse. 

Stock 379 

A.  Legal  Iucrease  or  Reduction  of  Capital  Stock. 

B.  Illegal  Iucrease  of  Stock,  Being  Overissued  Stock. 


CONTENTS.  Xlll 

PAET  II. 

TRANSFERS  OF  STOCK. 

CHAPTER  XVIII. 

Sec. 
Legacies  and  Gifts  of  Stock 299 

CHAPTER  XIX. 
Who  May  Buy  and  Sell,  Stock 309 

CHAPTER  XX. 

Sales  of  Stock  — The  Formation  and  Performance  of  the  Con- 
tract —  Gambling  Sales  —  Fraudulent  Sales  .  .      331 

A.  Formation  and  Performance  of  Contracts  to  Purchase  Stock. 

B.  Gambling  Sales  of  Stock. 

C.  Fraud  as  Affecting  a  Sale  of  Stock. 

rilAPTER  XXI. 

Sales  of  Stock  — Sales  While  Suits  Are  Pending  Affecting  that 
Stock;  Forgery;  Lost  and  Stolen  Certificates  of  Stock; 
Confiscation  of  Stock 358 

A.  Purchases  Without  a  Certificate  of  the  Stock. 

B.  Sales  of  Stock  While  Suits  Are  Pending  Affecting  that  Stock. 

C.  Forgery. 

D.  Stolen  or  Lost  Certificate. 

E.  Confiscation  of  Stock. 

CHAPTER  XXII. 

Sales  of  Stock  —  Formal  Method  of  Transferring  Certificates  and 

Registry  Thereof 372 

A.  Method  of  Transferring  the  Certificate. 

B.  Method  of  Registering  a  Transfer  of  Stock. 

C.  Rights  and  Duties  of  the  Corporation  in  Allowing  or  Refusing  Reg- 

istry. 

CHAPTER  XXIII. 

Rules  for  Corporations  in  Regard  to  Refusing  or  Allowing  Reg- 
istries of  Transfers  of  Stock 393 

CHAPTER  XXIY. 

Non-negotiability  of  Stock  and  Dangers  Incurred  in  the  Purchase 

of  Certificates  of  Stock 411 

A.  Non-negotiability. 

B.  Dangers  Incurred  in  Purchasing  Stock. 


Si 


4- 


xiv 

TAUT   HI 

HBCELLAN1        -  UOHB  :i& 

CHAPTEB   XXV. 

CK-BROKKRS   4KB   1  

CHAPTER  XXVI. 

DOES    A"  ...••• 

ell  \ri  vn. 

l.hvv  09  An  v 

CHAPTER     XXVIII. 

n 

<   1 1  A  I  \  \  I  X 

•  i  •        • 

(HAi 

CHAPTER  XXXI. 

,  Rs'Dnrraro 

rin  • 


Ml 


.    m 


CHAPTER  XXXII. 

Divmmofl • 

CHAPTER    XXXIII. 

I.n  ■••••' 

<  HAPTER    XXXIV. 

Xjj  ...       Ml 

\. 

S 


XV 

CHAPTER  XXXV. 

Sec, 
Forms  01  Aon  «s  and  Measure  of  Damages   \Vhere  a  Stockholder 
Baa  l  pan  bd  op  His  3tOck 

CHAPTEB   XXXVI. 

STOCKnOLDi .I:.-"  M  -  (  '.ALLS,  TIME,  PLAGE  AND  CLASSES  OF  MEETINGS.        588 

CHAPTER    XXXVII. 

TIONS  AND  OTHEB  COEFOBATI    Ml  !  UN'  602 

CHAPTEB    XXXVIII. 

DlSSOLl  AMi    II.  I  ■RPORA1.  .  .  .028 


PART   IV. 


n:\ri  -  -INTRA  VIRES   ACTS  —  NEGLIGEN<  E 

D   IRREGULAR  3  01     I'll:! "»  TORS,  BTOCKHOLD] 

-  PROMOTERS  AND  A( 

CHAPTEB    XXXIX. 

UTO  THIRD 

643 

<\  Pui  pose  of  I  ct  I  [erein. 

H.  Prau  ;  f  a  Majority  <>f  the  stc.rk!  i  >r 

Third   I  Remedy  Which  a  Stockholder  May  Bring 

Suit 

(  HAPTEB    XL 

Ultra  Vnu  In  Otheb  Words,  Acts  and  Con- 
tracts \Yhi>  ii  Ari  thi.  Charteb  Powers  of  the 
Corp  k>rs  ob  Sto  kh  i  00i 

CHAPTEB   XI. I. 

Intra  Vibes  a                             re— Is  Other  Words,  Acts  and  C 
tra<  ts  \\"i 1 1  h  Abb  Within  the  Charter  Powers  of  the  Corpora- 
tion. Direct  eholders 683 

CHAPTEB    XLII. 

Stockhoi  Actions  to  Bold    phi     l    kectors  Liable  for  Negli- 

qbncb  in  the  Discharge  op  Their  Duties 701 


xvi  i  K.vrs. 

CHAPTER  XIJII. 


Tur.   POWER  OF  VARIOUS  I  Ml  [I  i  BS  AND  AGl 

p.  i)  Tin:   filoi  I  K" 

POB  .1  B  M  T8         U>MISS1   IN 

A.  1'o^r  ol  Pron  Stockholdi  re,  Dir<  i  I 

Pri  sident,  iry,  Tr  'J 

Miscellam  o  ats  to  « 

B.  The    I  orno   ol  <  or)  orate  '  antra* 

I  ning  and  Sealing  —  Liability  of  Offl<  u- 

l.nlv  Executed. 

C.  Ado  of  <  Mfii  ■ 

CHAPTER  XI. IV. 

Ratification,  Acqi  d 

Ai  nos  Hi  BEHI  

(IIAI'l  1.1;    XI.  V. 

I'ai:  III  s  PLEADING       I  N    ,;'  "  » 

I      RPOEAT]      ■ 

'  :  \l ... 

A.  Suits  by  Stockholders  in  Behalf  <>f  t! 

B.  Suite  bj  oi 


PART  \ 

Bi  >NDS,    MORTGAGES,    FORI  I  I  0SURE8,    REC1  l\  NI- 

CHAPTER  XI .VI. 

& ...      .  

[APTER  XLVIL 

MORTG  LQES     -  POWEB  TO  .... 

\.  l '.>w  er  t"  Make  M<  •  I 

B.  I  '■  Tin  and  Proi  isions  "i  the  Mori  D  I    I 

( '.  Authoi 

CHAPTER  XI. \  III. 

Trustees  \m'  Bonds  -  Rembdh  lob  .... 

A.  The  Position,  Duties  and  Liabilities  of  Trust 
|:.  The  l'-  mediee  of  th<    1 1  usl  ; 

I  ■  ;mil  Taking  I  >n. 

< '.  Bondholders'  Suits  to    I  ind  to  Pro!  I 

iit.-. 


CONTENTS.  XV  ii 

CHAPTER  XLIX. 

Secl 
The  Foreclosure  of  Mortgages  by  Suit  in  Equity     .        .        .        .832 

CHAPTER  L. 

Priority  of  the  Mortgage  Lien  Over  Other  Liens,  Mortgages,  Deeds, 

Leases,  Claims,  Judgments,  Debts  and  Liabilities  .        .        .851 

CHAPTER  LI. 

Receivers 862 

A.  Appointment  of  Receiver  —  Effect  as  to  Title  to  the  Property; 

B.  Suits  and  Claims  by  and  Against  Receivers. 

C.  Duties  and  Powers  of  Receivers. 

D.  Liability,  Compensation,  Accounts  and  Discharge  of  Receivers, 

CHAPTER  LII. 
Purchases  and  Reorganizations 883 


PAET  VI. 

RAILROADS,  STREET  RAILROADS,  TELEGRAPH,  TELEPHONE,  GAS, 
ELECTRIC  LIGHT,  WATER-WORKS  AND  OTHER  QUASI-PUBLIC 
CORPORATIONS 

CHAPTER  Lin. 
Railroads 891 

CHAPTER  LIV. 
Street  Railroads 912 

CHAPTER  LV. 

Telegraph,  Telephone,  Gas,  Electric- Light  and  Other  Quasi- Public 

Corporations 922 


PAET  VII. 

STATUTORY  AND  CONSTITUTIONAL  PROVISIONS  REGULATING  COR- 
PORATIONS. 

CHAPTER  LVI. 

Statutory  and  Constitutional  Provisions  of  the  Various  States  of 

the  Union  in  Reoaiu)  to  Corporations 934 

B 


xviii  CONTENTS. 

CHAPTER  LYII. 
The  Tebbjtories  —  Statutory  Provisions  Affectlno  Corporations    .      980 

CITAPTER  LVIII. 
The  Federal  Government  —  Constitutional  and  BlATDTOSf  Vn->-- 

IONS   AFFECTING   CORPORATIONS 9^» 


TABLE    OF   CASES. 


[The  references  are  to  the  foot-paging.  J 


A. 


Abbey  v.  Chase,  1104 

Abbey  v.  Long; 

Abbey  v.  W.  R,  eta,  Co.,  3851 

Abbot  v.  American  Hard   Rubber  Co., 

821.  B59,  954,  1055,  1146. 
Abbott  v.   Aspinwall,  388,  388,  384,  - 
Abbott  v.  Baltimore,  etc,  I 
Abbott  v.  Cobb,  668,  1036 
Abbott  v.  Bapgi  od,  1089,  1047. 
Abbott  v.  Jewett,  I 
Abbott  v.  Johnstown,  etc.,   EL   R.   R., 

1498,  1586 
Abbott  v.  Merriam,  1 1 
Abbott  v.  N.  m  fork,  eta,  R  R.  H 

bott  v.  <  iin.ilia  Smelting  <  'o.,  308. 
Abe  chran,  416 

Abels  v.  M<  Kean,  663,  671. 
la  v.  Mobile,  etc.,  Co,  831. 

Abercorn's,  Marquis  of,  Case,  88. 

Abercrombie  v.  Riddle,  '  10,  7  r>. 

Aberdeen  i:'y  Co.  v.  Blaikie,  903,  916 

Abratb    v.    Northeastern   R'y  Co.,    205, 
1010. 

Academy  of  Music,  Appeal  of,  536  834. 

Accidental   Insurance  Co.  v.  Davis,  197. 

Areola  v.  ('..  B.  &  Q.  R  R,  1016 

Achlin  v.  Paschal,  889. 

Ackerman  v.  Emott,  134. 

Ackerntan  v.  Halsev,  1033. 

Ackerson  v.  Erie  R'y  Co.,  1010,  101 1. 

Ackerson  v.  Lodi,  etc.,  R  R,  1323. 

Adair  v.  Brimmer,  434. 

Adamantine    Brick    Co.    v.    Woodruff, 
1056 

Adams  v.  Creditors,  1100. 

Adams  v.  Cross,  etc.,  Co.,  939,  1167. 

Adams  v.  Empire,  etc.,  Co.,  966. 

Adams  v.  Fort,  etc..  Bank,  376. 

Adams  v.  Goodrich,  273,  274. 


Adams  v.  Hannibal,  etc.,  R  R.  Co.,  1113. 
Adams  v.  Kehlor.  etc.,  Co.,  939. 
Adams  v.  Lamson,  etc.,  Co.,  1166. 

A. lams  v.  Mills.  1084. 

Adams  v.  Nashville,  703,  706. 

Adams  v.  Rivers,  1631. 

Adams'  rase,  97.  313. 

Adams  Exp.  Co.  v.  Denver,  etc.,  R'y  Co., 

1183. 
Adams  Exp  Co.  v.  Hoeing,  1579. 
Adams  Exp  Co  v.  Holmes,  1579. 
Adamson  v.  Jams.  567. 
Adamsori's  <  lase,  159. 
Addaras  v.  Ferick,  338. 
Adderly  v.  Storm.  15,  880,  850,  353,, 58a 
Addiev.  Western  J '.auk,  etc.,  913. 
Addison's  Case,  313,  386 
Addli  stone,  eta,  Co.,  Re,  46. 
Adelbert  College,  etc.,   v.  Toledo,   etc, 

R'y,  1838. 
A  elk  ins  v.  Thornton.  385. 
Adler  v.  Kansas,  etc..  R  R.  1010. 
Adler  V.    Milwaukee  Pat,    B.   Mfg.   Co., 

160,  355,  356,  357,  356  261. 
Adley  v.  Reeves.  17::. 
Adley  v.  Whitstable  Co.,  183.  1023.  1035. 
Adm'r  of  Bigelow  v.  Cong.  Society  of 

M..  814 
Adolph  v.  Central  Park,  etc.,  R.  R  Ca, 

1576 
Adriance  v.  Roome,  955,  1089. 
.Etna,  etc.,  Ins.  Co.  v.  Middleport,  153. 
JEtna.  Ins.  Co.  v.  Harvey,  1002,  1005. 
.Etna  Ins.  Co.  v.  Shields,  201. 
yEtna  National  Bank  v.  Charter  Oak  L. 

I.  Co.,  1243. 
African,  etc.,  Church  v.  Conover,  005. 
Agar  v.  Athenaeum  Life,  etc.,  Co.,  1108, 

1254. 
Agate  v.  Sands,  300. 
Aggs  v.  Nicholson,  1105. 


TARI.K    OF    CA 


[TTtr  references  (ire 

•nltural  Bank  v.  Burr, 
Agricultural  Hank  v.  Wilson,  87,  529. 
Lgricurtural  Branch  R  B  Win- 

cl 
Agricultural  C.  L  M, 

- 

cultural,  •  i 
Aiken  r.  Western  R  R, 
Aikin  v.  Wasson,  I 
Ait-  v.  Bit 

Akin  v.  Blanchard,  188,  11    I 
\  ibama  <r.  M 
Alabama   Hank  v.  I 

Alabama  ft  Chatl 

ir 
Alabaui  ».  etc*  R  R  w.  <  r,  1171. 

A  la  I 

ibama,  H    ,  I:   R.  f   K 
All'  anaa,  - 1  •■..  l;.  B.  r.  Mount,  • :  .  • 

1584, 
Alabama,  <  t      B  B  ••   B    it 
98 

•■■..  R,  R  v.  Tl. 

Re,  N 
Alabam  i  a    I 

15S 
Alabama  ft  Florida  B 

-  1  69,  r 
Alabama  QoW  l    l  Oo  r.  I  fenti 

\--     i  ition,  1 ' 
Albany    Ot>    Natl   Hank    v.  Mali.-r.  3 

Albert  t    Clarendon,  ■  1 115, 

Albert   \    S 
3     MI 

-  IL 
Albion  -  Martin.  81      I 

Albright  X    1  \»ociation. 

AMebert  «  L141, 16C 

Alden  e.  Boston,  -•!•• .  B.  R.  1 1 
Alderman  Flnley,  l  II 

Aldhara  v.  Brown,  1040,  1041. 

II. 
Aldrich  r.  Ai 

•  ich  v.  Drury,  l 
Al.iii.h  v.  Press  Printing 
I    x  index  v.  Atlanti  l:    R.  1914, 


to  the  foot-paging.] 

srney,  1016. 
trown,  1 
Alexand  luldwell,  1084,  1119 

Kander  v.  Centra)  R  R.  1980,  I 

•'J. 
i    ;. 
-    ircy,  194,888, 1188,  mi. 
1144,  1- 
Ale\ 

tb,  880,0 
tnder  v.  Willia  i 
ind<  r  v.  Worn 

Alexandra  ;  Ini 

Jiam,  KJ84. 
Alfoi  -    -    \ 
A  If.  rd  v.  Mill< 

v. 
. 
All  E 

All 

v  Work-hoOM  v.Moore, 

Alleghei  '^ 

•  k  \   i  19, 

3 

Allen  v.  Baikiinj  Vss'n 

><86. 

.188. 

Allen  v.  ii.uk. 

All. 

Allen  v.  i>.,;  1190,  1197, 

:.  v.    D} 

208, 

k.  984. 

All 

Allen  v.  Herrick, 

Allen  r.  Hill,  83     - 

Allen  v.  Inhabitant-  of  -bay.  188,  139, 

All  .  Ry.  875. 

Allen  v.  I 

Allen  v.  oa,  181. 

u  v.  M  '•">!. 


TAB  I  L    OF    CASKS. 


XXI 


[The  references  a  re 

Allen  v.  IfcConilu  T7. 

Allen  v.  IfcKean,  6  - 

Allen  v.  Montgomery  R  R  Co,  175. 176, 

177,2:      J55    860,  843, 
39,  136a 
Allen  v.  X.  J.  Southern   R  R  Co,   1144. 

1145.  1158 
Allen  v.  Fogram. -Jl.::.  470. 

Hi    -   wall.  384  88 
Allen  v.  South  Boston  R  R.  396,  5  ' 
Allen  v.  Sullivan,  etc..  R  R.  10   - 
Allen  v.  T<  ras.  etc.,  R*yCa,  1183. 
Allen  v.  Walsh,  98 
Allen  v.  Wilson.  1125,  1130,  115 
Allen  v.  \Y  .  t  Co,  967. 

AUentown   v.    Western    Union   T. 

15! 
AUentown.  First  Natl  Bank  of.  v.  Hook. 

! 
Aller  v.  Town  of  Cameron.  s7i». 
Allerton  v.  Allerton,  Hi 
Allerton  v.  Lai  _ 
AlUbone  v.  Bager.  104.  243,  336. 
Ailing  v.  Ward,  42,  815,  816,  337,  344 
Allin's  Case,  359. 
Allis  v.  Jones  -       87,  1263, 

18 
Allison  v.  Coal,  eto..  Co.,  1131. 
Allison  v.  Versailles,  eto,  R  R  Co..  134. 
Allison  v.  Wood,  466, 
Allman  v.   Havana   R   &   E.  R  R  Co, 

OOP 

Almado,  eto,  C  o..  Re,  46. 

\M.  eto..  Co.  \    Alta,  .  1294 

Alt.  San  Autonia.  1397. 

Alvord  v.  Syracuse  Saw  Bank, 
Alward  v.  Holmes.  992, 
Amador,  etc,  Co.  v.  Dewitt,  1529. 
Ambergate,    Nottingham  ft    Boston  ft 

Bast  rn  K'y  Co.  v.  Mitchell,  157,  162, 

394  69 
Ambergate  K'y  Co.  v.  Noroliff.  167. 
Ambrose,  etc,  Co,  Iu  re.  43.  013. 
Ambrose  Lake  T.  ft  G  Mia  Co,  Re.  46 
American  Academy,  etc..  Appeal  of,  15. 
American  Bank  v.  Faker.  16, 
American  Bank  v.  Mumford,  757. 
American   Bible  Soc,  v.    Marshall.   990. 

1001. 
American  Bible  Soc.  v.  Noble,  000. 


to  the  foot-paging.] 

American    Bridge    Co.    v.   Hetdelbach, 

1317.  1300.  14' 
American    Button,    etc..    Ca    v.    Moore. 

K"  . 
American   Can  Co.  v.  Jacksonville,  etc.. 

K'y.  1300.  1423,  1434. 
American  Coal  Co.  v.  Alleghany  County. 

American  Coal  Co,  v.  County  Comm'rs, 

754. 
American  Colonization  Soc.  v.  Cartrell. 

Ill 
American,  etc..  v.  Chicago,  etc..  1023, 
American,   etc..   Bank  v.  Oregon,   etc.. 

Co.,  1077. 
American,  etc..  clans  v.  Merrill.  1014. 
American,  etc..  Co.  v.   Bayless,    51,   509, 

American,  etc..  Ca  v.  Conant,  117' 
American,  etc..  Ca  v.    Kentucky.    1288, 

1304. 
American.  •  v.  Klot/,  040. 

American,  etc..  Ca  v.   Linn.    835,     1 1-15. 

1147. 
American,  etc..  Co.  v.  Manrer, 
American,  etc..  Ca,  Appeal  of,  58S 
American,  etc..  *.'o..  K.\  parte.  1109, 
American,   etc..   Ins,  Co.    v.  0« 

in 

American,   etc..   K'y  v.   Miles.  923,  1083, 

148 
American,   etc..   Tel.   Ca    v.    Middleton, 

151 
American  Exp.  Ca  v.  Johnson.  1170. 
rican  Exp,  Ca  v.    Patterson,    1009, 

1530. 
American  File  Ca  v.  Garrett,  338,  1231. 
American  Ins,  Ca  v.  Butler.  1002. 
American  Ins,  Ca  V,  Oakley.   1078,  1093, 

1005. 
American  Ins.  Ca  v.  Welhnan.  1002. 
American  Ins.  Ca  v.  Yost.  889. 
American  Life  Ins,  Ca  V,  Dobbin,  W9. 
American   Loan  ft   T.  Oa    v.   East,  etc. 

R  R.  1003,  133,0.  1351.  1400. 
American   L.  ft  T.  Co.  v.  St.  Louis,  etc.. 

K'y.  10SC.  1215. 
American   L  ft  T.  Co.  v.  Smith.  1504. 
American    I-  ft   T.  Ca  v.  Toledo,   etc.. 

RV  848.  1155.  1209,  1336,  1400. 


XXII 


TABLE    OF    CA 


[The  reference*  are 

American  Mortg.  Ox  r.  T.nnille,  993. 
American  Nafl   Bank  v.  Oriental  Mills, 

American   P.  Trust  v.  Taylor,  etc. 

MA 
American  Paper  Bag  Co.  v.  Van 

ui.k.    1' 

American  Pi  rs  Co.  v.  Norrii 

American   Primitfri    S        ty  v.  Billing, 

American   Railway  Frog  Oar.  Ha 

1: 
Amerian  Etapid  Tel  Ca  v.  Conn.  T. ■!.- 

phone  Ca, 

in    Ball  oheimer, 

812. 
Ami  -  Ik  Works,  Tin  man, 

Ami 

American  Tube  Work 

01. 
American   ' 

American  U.  T.  <  '••.  r.  Weati  ra 

American  Water-work 

1062,  i 
An 

Amee  w.  K  ins  its  I  ' 
Am-  ce  Baperioi 

MO. 
Amee  i   Vf.O   •■■  .  R  B  . 
Ames  v.  Tru  1 110,  I    I 

Amee  v.  Williamson,  7 15. 
Amesbury  r.  B  w  ditcl  1024 

Aroey  r.  Alleghany  City,  142,  145, 
\i 
Amherst   Academy  v.   Cowls,  28,   112, 

l  24 
A mli. Tst  Bank  v.  Root,  101 
Ammont  v.  Pittsburg  T.  Co,  I 
Ammont  v.  President,  etc.,  1170. 
Amory  r.  Lawreni 
Amory  v.  aferryweather,  177. 
Amoski  1  Bank  v.  To*  n  i 

tawa,  188,  18S. 
Amsden  v.  Norwich,  etc.,  Ins.  Soc.,  1181. 
v.  1  Nibuque,  1240. 
onda  Tribe  r.  Murbach.  l 


to  thr  foot-paging.] 

Ancient  Club  v.  Miller,  5 
Anderson  v.  Beal,  I 
Anderson  r.  C  B.  el  ..  R  I 

rson  t.   Jacksonville,    etc.,   R   R, 

Anderson  r.  Jett,  M4 

Anderson  v.  Kiesam,  ~>68. 

Anderson  » 

Anderson  v.  I 

Anderson  r.  Hid  .  R  R, 

\-  Richmo: 
R  <  ...  101, 
Anderson  r.  Nichol  781 

:  v.    Ph  .rehouse 

Anderson  v.  E 

•  i  Anna, 

Andi 

Wolf,  1145,  111 

dd,  112,  115,  17  1. 

l .  i. 

it 
Andorer    Turn|  r.   11  ■>'.    1068, 

108 
Andi  M   l:   B  .  198. 

Andn  w  »   Vanderbilt,  5 
Andi 
Andn 

Andrews  r.  I  lai 
Andi 

Andrews  r.  Hart,  1 
Andi  in  Central  R  R  Ca, 

111 
Andrew 
Andi  Union,  i  "»88t 

-     V.     \\ 

Andi  Yam  gstown,  etc., 

.  1106. 

ppeal,  4fl 
And 
Andi  in,  etc-,  Ca  v.  Bethel, 

:a. 

I  v.  Hume,  1 14 
I  11  v.  Hadd 

AngeU  v.  Lawtoa,  480,  878. 

II  v.    Springfield    Home  for    ' 
Women,  4u7,  409. 


TABLE    OF    CASES. 


xxiil 


[The  references  are 

Angelo,  Re,  587. 

Angirhoefer  v.  Bradstreet  Co.,  1177. 

Angle  v.  Mississippi  &  Mo.  R  R  Co., 

153a 
Anglesea  Colliery  Co.,  Re.  330. 
Anglo-California    Gold    Mining  Co.   v. 

Lewis.  802. 
Anglo-Californian  Bank    v.    Grangers' 

Bank,  688,  689,  695,  699. 
Anglo-Danubian,  etc.,  Co.,  Re,  366. 
Anglo,  etc.,  Bank  v.  Baragnon,  165. 
Anglo,  etc..  Co.,  In  re,  1305, 
Angus  v.  Clifford.  491. 
Angus  v.  Robinson's  Adm'r,  598. 
Anonymous,  1016. 
Anson ia  Brass  &   Copper  Co.   v.  New 

Lamp  Chimney  Co..  251,  28L 
Anthony  v.  Household,  etc.,  Co.,  364 
Anthony  v.  Jasper  County,  143. 
Antipaedo  Baptist  Soc.  v.  Mulford,  1018. 
Antoine  v.  Smith,  339. 
Appeal  of  Larimer,  etc.,  St.  R'y,  1557. 
Apperly  v.  Page,  1041. 
Applegarth  v.  McQuiddy,  1152, 
Applegate  v.  Ernst.  775. 
Aj. pieman  v.  Fisher.  562,  576,  579. 
Appleton  v.  Turnbull,  241,  607. 
Appleton  Mut   Fire  Ins.   Co.  v.  Jesser, 

231. 
Appleyard's  Case,  33. 
Apthorp  v.  North,  1093. 
Arapahoe,  etc..  Co.   v.  Stevens,  34,  58, 

1079.  1109. 
Archer  v.  American,  etc.,  Co.,  455,  830. 
Archer  v.  Rose, 
Archer  v.  Terre  Haute,  etc.,  R  R,  1489. 

1504,  1506. 
Archer  v.  Whiting.  1053. 
Ardesco,  etc.,  v.  North  American,  etc., 

989. 
Arentz   v.    Commonwealth,  1231,   1232, 

1233,  1236,  1247,  1248. 
Arenz  v.  Weir,  278. 
Argus  Co.  v.  Mayor,  etc.,  1067. 
Argus  Printing  Co.,  In  re,  812,  813,  824, 

827,  850. 
Argyle,  C.  &  C.  Co.,  Re,  212. 
Arkadelphia,  etc.,  Mills  v.  Trimble,  224. 
Arkansas,  etc.,  Co.  v.  Farmers",  etc..  Co., 

50,  70,  905,  1126,  1137,  1139,  1217. 


to  the  foot-paging.'] 

Arkansas,  etc.,  Soc.    v.  Eichholtz,   111, 

387,  922. 
Arkansas  Midland  R  R  Co.  v.  Berry, 

774. 
Arkright  v.  Newbold,  193,  489.  494,  914, 

915. 
Armant  v.  New  Orleans,  etc,  RR,  716. 
Arminton  v.  Barney,  1591. 
Armi6ton,  etc.,  R  R  v.  Jacksonville,  etc., 

R  R,  1530. 
Armour,  etc.,  Co.  v.  Smith,  615. 
Arms  v.  Conant  1059,  1070,  1293. 
Armstrong  v.  Abbott,  1120. 
Armstrong  v.  Chemical  Nat'l  Bank,  991. 
Armstrong  v.  Church  Society,  968, 1139. 
Armstrong  v.  Karshner,    122,    124,    188, 

210,  235,  237,  246,  1499,  1507. 
Armstrong   v.  Savannah,   eta,  WorkB, 

975 
Armstrong  v.  Treasurer,  etc.,  194L 
Arnison  v.  Smith,  194,  204. 
Arnold  v.  Fawtuxet,  etc..  Co.,  683. 
Arnold  v.  Ruggles,  21,  22,  429. 
Arnold  v.  Suffolk  Bank,  26, 525, 087, 688, 

690,  693,  779. 
Arnold,  Appeal  of,  409. 
Arnoldi  v.  Gonin,  274. 
Arnot  v.  Erie  R'y,  1245,  1249,  1511. 
Arnot  v.  Pitteton,  etc.,  Coal  Co.,  449(  646. 
A  mot's  Case,  76. 
Aron  v.  De  Castro,  454,  492. 
Arrington  v.   Savannah,   eta,   R'y  Ca. 

1541. 
Arthur  v.  Clark,  223. 
Arthur  v.  Commercial,  eta.  Bank,  885, 

989,  1267,  1272.  1273. 
Arthur  v.  Griswold,  206.  489.  49L 
Arthur  v.  Midland  R'y  Co.,  340. 
Arthur  v.  Willing,  276,  289,  29U. 
Ash  v.  Guie,  661. 
Ashburner  v.  Macguire.  410. 
Ashbury  v.  Watson,  365. 
Ashbury  R  C.  etc..  Co.  v.  Rich,  So%  1125.  - 
Ash  by  v.  Blackwell.  506. 
Ashe  v.  Johnson's  Adm'r.  460. 
Asher  v.  American,  etc.,  Co.,  833. 
Asher  v.  Sutton.  1075. 
Asheville   Division  v.    Aston,   991,  9&t, 

1017. 
Ashhurst  v.  Fowler,  1033, 


XXIV 


TABLE    OF   CASES. 


[The  references  are 

Ash  hurst  v.  Mason,  41G. 

Ashhurst  v.  Montour  Iron  Co.,  1300. 

Ashhurst's  Appeal.  919,  1128,  1130,  1473. 

Ashland  v.  Montour  Iron  Co.,  1334. 

Ashley  v.  Rinnan,  936. 

Ashley's  Case,  195,  207,  208.  209. 

Ash  mead  v.  Colby,  203. 

Ashpitel  v.  Sercorube,  1040. 

Ashtabula  &  New  London   R  R  Co.  v. 

Smith,  89,  92,  113,  122,  125,  219,  814. 
Ashton  v.  Ashton,  404. 
Ashton  v.  Atlantic  Hank,  439. 
Ashton   v.  Buibank.  17."),  <):;:;,  <;:!!»,  1586. 
Ashton  v.  Dakin,  473. 
Ashton    v.  Dashaway   Assoc,  891,  947. 

1150. 
Ashton  v.  Langdale,  22. 
Ashton,  Ex  parte,  <'><>3. 
Ashton's  Appeal,  598. 
Ashuelot,  etc.,  Co.  v.  Marsh.  1078. 
Ashuelot  R  R  v.  Elliot.  629,  1285,  1304, 

1318.  1347,  1469 
Ashuelot.  etc.  Co.  v.  Boit,  118. 
Ashurat  v.  Field's  Adm'r,  739. 
Ashworth  v.  Munn,  167. 
Askew'B  <  'ase,  202. 
Aspbitel  v.  Sercombe,  103. 
Aspinwall  v.  Butler,  890. 
Aspinwall  \.  Commissioners  of  Daviess 

County.  1942. 
Aspinwall  v.  Jo.  Daviess  Co.,  140. 148, 158. 
Aspinwall  v.  Ohio,  etc.,  R  R  Co.,  1059, 

1542. 
Aspinwall  v.  Sacchi,  233,  305. 
Aspinwall  v.  Torrence,  269. 
Assessors  v.  Commissioners,  142. 
Assiguee,  Freeman's,  v.  Stine,  56. 
Aston  v.  Dashaway,  672,  730. 
Astor    v.    Westchester,    etc.,    Co.,    955, 

1265,  1272. 
Astoria,  etc.,  R  R  v.  Hill,  239. 
Astoria,  etc.,  R  R.  v.  Neill.  224. 
As}Tlum  v.  New  Orleans.  1944. 
Atchafalaya  Rank  v.  Dawson,  875,  878. 
Atcherson  v.  Troy,  etc.,  R  R  Co..  273. 
Atchison,  etc.,  R  R  v.  Cochran,  9,  423, 

951,  1050. 
Atchison,  etc.,  R  R  Co.  v.  Fletcher,  423, 

424,  632,  1133,  1142,  1147,  1248,  1492, 

1505, 


to  the  foot-paging.] 

Atchison,  etc.,  R'y  v.  Nave,  1558. 
Atchison,  etc.,  R  R  Co.  v.  Phillips  Co., 

151,  150. 
Atchison,  etc.,  R  R  v.  Roach,  1534. 
Atchison,  T.  &  S.  F.  R  R  v.  Denver  & 

N.  O.  R,  1510,  1511,  1532. 
Athenaeum,  etc.,  Soc.  v.  Pooley,  1856. 
Athenaeom,  etc.,  Society,  Re,  276,  1110. 
Atherford  v.  Beard,  46a 
Atherton  v.  Sugar,  eta.  Co.,  162. 
Athol,  etc.,  <'•>.  v.  Carey,  113. 
Athol,  <'t<\,   R  R  Co.  v.  Inhabitants  of 

Prescott,  17").  17i). 
Atkins  v.  Albree,  789,  744 
Atkins  v.  Gamble,  23.  590,  596,  781. 
Atkins  v.  Wabash,  etc.,  R  Co.,  20,  1346, 

1413,  1418,  1462 
Atkinson  v.  Atkinson,  441,  ">10. 
Atkinson  v.  Foster,  501,  584. 
Atkinson  v.  Marietta    &  C.    R  R  Co., 

1278,  127."). 
Atkinson  v.  Pocock,  1041. 
Atkinson  v.  Rochester,    etc,,    Co.,    990, 

1107. 
Atkinson,  Appeal  of,  986. 
Atlanta  v.  <  late,  eta, '  So.,  864 
Atlanta,  etc.,  R  R  I  a  v.  State,  1545. 
Atlanta,  etc.,  R  R  v. Western  R'y,  IS64 
Atlanta  &  West  Point  R  R  Co.  v.  Bod- 

netr,  198 
Atlantic  City  Water-works  v.  Atlantic 

City.  1597. 
Atlantic  Cotton  Mills  v.  Abbott,  116,229. 
Atlantic  Delaine  Co.  v.  Mason,  829,  802. 
Atlantic,  etc..  Hank  v.  Savery.  1120. 
Atlantic  etc,  Ins.  Co.  v.  Sanders,  1062, 

1067. 
Atlantic,  etc.,  Mill  v.  Indian,  etc.,  Mill, 

1116. 
Atlantic,  etc.,  R  R  v.  Allen,  774. 
Atlantic,  etc.,  R.  R  v.  Johnson,  1497. 
Atlantic,  etc.,  R  R  Co.  v.  Reiser,  1089. 
Atlantic,  etc.,  R.  R  Co.  v.  St.  Louis.  875, 

1525,  1551. 
Atlantic,  etc.,  R.  R  v.  Sullivant,  876. 
Atlantic,  etc.,  R.  R.  Case.  1440.  1447. 
Atlantic,  etc.,  Telegraph  Co.  v.  Common- 
wealth, 712. 
Atlantic,  etc.,  Tel.  Co.  v.  Union  P.  R'y, 

1595. 


TABLE    OF    CASES. 


XXV 


[Tlie  references  are 

Atlantic  &  G.  W.  R'y  Co.  v.  Dunn,  1011. 
Atlantic  &  Pac.  Tel.  Co.  v.  Union  Pac. 

R'y  Co.,  1153. 
Atlantic  Trust  Co.  v.  Consolidated,  etc., 

Co.,  1415. 
Atlas  Bank  v.  Nahant  Bank,  1170. 
Atlas  Nat'l  Bank  v.  F.  B.  Gardner  Co., 

852,  854. 
Attaway  v.  Third  Nat.  Bank,  904. 
Atterbury  v.  Knox,  998. 
Attleboro  Nat'l  Bank  v.  Wendell,  894. 
Attleborough  Nat'l  Bank  v.  Rogers,  982. 
Attorney-General  v.   Atlantic,  etc.,  Ins. 

Co.,  Matter  of,  1423. 
Attorney-General  v.  Bank  of  Columbia, 

20. 
Attorney-General  v.  Bank  of  Niagara, 

864,  873,  954. 
Attorney-General  v.  Bay  State  Min.  Co., 

748,  776. 
Attorney-General  v.  Boston,  etc.,  R.  R. 

Co.,  386. 
Attorney-General  v.  Clergy  Society,  858. 
Attorney-General   v.    Continental,  etc., 

Ins.  Co.,  1157,  1459. 
Attorney-General  v.  Corporation,  977. 
Attorney-General  v.  Evart  Booming  Co., 

1527,  1600. 
Attorney-General  v.   Foundling  Hospi- 
tal, 874. 
Attorney-General  v.  Germantown,  etc., 

Road,  1591. 
Attorney-General  v.  Great  Eastern  R'y 

Co.,  873,  1540. 
Attorney -General  v.  Great  Northern  R'y 

Co.,  873. 
Attorney-General  v.  Grote,  407. 
Attorney-General  v.  Guardian,  etc.,  Ins. 

Co.,  278,  1164,  1429. 
Attorney-General  v.  Jamaica,  etc.,  Corp., 

873. 
Attorney-General  v.  Joy,  1015. 
Attorney-General     v.     Knickerbocker, 

etc.,  Ins.  Co.,  1459. 
Attorney-General  v.   Life  &   Fire  Ins. 

Co.,  985,  1190,  1191,  1193. 
Attorney -General  v.  Mayor  of  Rye,  969, 

1019. 
Attorney-General  v.  Mercantile  Ins.  Co., 

660. 


to  the  foot-paging.'] 

Attorney-General  v.  Metropolitan  R.  R., 

1561,  1566. 
Attorney-General  v.  Mid.  Kent  R'y  Co., 

873. 
Attorney-General    v.    North    America, 

etc.,  Ins.  Co.,  1438,  1459. 
Attorney-General  v.  North,  etc.,  Ins.  Co., 

In  re,  1158. 
Attorney-General    v.    Petersburg,   etc., 

R.  R.  Co.,  875. 
Attorney-General  v.  Railroad  Cos.,  873, 

1513. 
Attorney-General  v.  Scott,  821,  1064. 
Attorney-General  v.  Simonton,  869. 
Attorney -General  v.  Tudor  Ice  Co.,  873. 
Attorney-General  v.  Utica  Ins.  Co.,  873, 

954,  1220. 
Attorney-General  v.  Whitvvood,  684. 
Attorney-General  v.  Wilson,  874. 
Attree  v.  Hawe,  1252. 
Attrill  v.  Huntington,  292. 
Attrill  v.  Rockaway,  etc.,  Co.,  1461. 
Atwood  v.  Dumas,  662. 
Atwood  v.  Merry  weather,  899,  945. 
Atwood  v.  Rhode  Island  Agric.  Bank, 

263,  321. 
Atwood  v.  Shenandoah,  etc.,  R.  R,  1187, 

1197,  1302. 
Auburn,  etc.,  Ass'n  v.  Hill,  113,  228. 
Auburn,  etc.,  Co.  v.  Douglass,  1592. 
Auburn,  etc.,  Works  \.  Schultz,  214,  234. 
Audenried  v.  Philadelphia  &  R  R  R, 

1599. 
Auerbach  v.  Le  Soeur  Mill  Co.,  1186. 
Augerhoefer  v.  Bradstreet  Co.,  1174. 
Augusta  v.  National  Bank,  750. 
Augusta  Bank  v.  Augusta,  135. 
Augusta  Bank  v.  Hamblet,  1079. 
Augusta,  etc.,  R  R.  v.  Kittel,  937,  1083, 

1265,  1381. 
Auld  v.  Glasgow,  etc.,  Society,  662. 
Aull  v.  Colket,  510,  781. 
Aultman  v.  Waddle,  232. 
Aultman's   Appeal,   291,   292,   298,  329, 

342,  356. 
Aurora  City  v.  West,  1231,  1236. 
Aurora,  etc.,  v.  Paddock,  995,  1133,  1261, 

1296. 
Aurora,  etc.,  Co.  v.  Holthouse,  868. 
Aurora  Nat'l  Bank  v.  Black,  1391. 


XXVI 


TABLE    OF    CASE3. 


[The  references  are 

Austin  v.  Alderman.  761. 

Austin  v.  Bank  of  England,  441 

Austin  v.  Berlin,  27ft 

Austin  v.  Boston,  760,  761,  763. 

Austin  v.  Daniels,  978,  1-109. 

Austin  v.  ( lillespie,  461,  464 

Austin  v.  Manchester,  etc.,  R'y,  1537. 

Austin's  Case,  180,  182,  106ft 

Automatic,  etc., Co.  v.  North  American, 

Australian  A.  S.  C.  Co.  v.  Mounsey, 

1261,  1262. 
Anther  v.  Auther,  105, 
Avegne  v,  I  Sifciz  ok,  390. 

Avelyn  v.  Ward,  104 
Averill  v.   1  93ft  940,  111.",. 

1149. 
Avery  v.  Bleet  Mfg.  Co,  ni2. 
Avery  v.  Ryan,  464  1089. 
Avil  v.  Alexander  Water  Co.,  512, 

r  v.   \  \  er,  7H'>. 
Ay<  rv.8  j  mour,  B28,  831. 
Ayers  i .  French,  489. 
Ayleabury  Railway  I    ■  v.  Mount,  848. 
Aynsworth  v.  Hank  of  England,  ill. 
Ayr---,  %.  I  Mitt. m.  98,  971. 
Ayresi    French,  4f  781. 

Ayr*  -  v,  Seibel,  1 127. 
Ayr..'  Case,  1 


r, 


Babbitt  v.  East,  i  ta,  Ca,  313,  806. 

Babcock  ».  B  man.  1 104 

ock  v.  Cumberland,  etc.,  Co.,  1172. 
i         cb  \.  Helena,  l  IT. 
I       sock  v.  Schuylkill,  etc.,  R  R,  100, 

1171,  1498 
Babcock  v.  Thompson,  409. 

h  v.  Pacific,  etc.,  Ca,  '.»80. 
Bache  V.  Horticultural  Soc.,  864. 
Bache  v.  Nashville,  etc.,  Soc,  877,  1168. 
Bacheller  v.  Pinkham,  l 
Bachman,  In  re.  311.  849,  33(3,  687,  692, 

694  C97. 
Backus  v.  Lebanon,  1592, 
Bacon  v.  Irvine,  1148. 
Bacon  v.  Mich.  G  R  R.  1008. 
Bacon  v.  Mississippi  Ins.  Co.,  1075,  1191. 
Bacon  v.  Robertson,  889. 


to  the  foot-paging] 

Badger  v.  American  Ins.  Co.,  1106. 
Badger  v.  Badger,  1130,  1132. 
Badger  v.  Cumberland  Bank,  1058. 

i   Lumber  Co.  v.  Marion,  etc.,  Co., 
.'.  1581 
Baeder  v.  Jenuh 

v.  Pittsburgh,  etc.,  Iron  Co., 

ley  v.  Vanderbilfc  1214. 

y  \.  Atlantic.  ,  tc.,  R  R,  1495. 

1 1  troit,  1591. 
.  1026. 
ey  v.  Smith.  659,  671. 
nail  v.  Carlton,  198,  910,  914  W& 
Bagahaw  v.  Eastern,  etc.,  I  980, 

1186,  1144  1145,  1538,  1541 
-I law  v.  Seymour,  907. 
aw,  Ex  parte,  1 
Bahia  ft  San  Fi  R*y  <'•>.,   In  re, 

\.  (ah.  rtC.E.8     .  190. 
Bailey  v.  AUanl  R  R,  I  Jo,  717. 

01 
Bailey  v.  Jirkenhead,  etc,  R'y,  165,  981 
mi. 

v  v.  Buffal  R,  R  I 

107ft 
Bailey  v.  Bui  gees,  I 
Bailey  v.  ( ihambei  lain, 
Bailey  v.  Champlain,  et  .  101, 

Bailev  v.  Citizens'  (Jus  Light  Co.,  427. 
704  70ft  95ft 

Bailey  v.  I  lark,  13. 

Bailey  v.  County  of  Buchanan,  1230. 
12: 

Bailey  v.  Foi  871. 

Bailey  v.  Hannibal,  etc.,  R  R,  366,  374. 

Bailey  v.  HoUister,  881,  629,  I 

Bailey  v.  McCauley,  10 

Bailey  v.  Phil.,  etc.,  R  R  Co,  1516. 

Bailey  v.  Pittsburg,  eta.  Ca,  25a 

Bailey  v.  Piatt,  891 

Bailey  v.  Railroad  Co..  14,  83,  704.  705, 
824 

Bailey  v.  Smith.  1225,  1  ! 

Bailey  v.  Strohecker,  582,  020. 

Bailey  v.  Universal  Provident  Life  As- 
sociation. ST. 

Bailey  v.  Valley,  etc.,  Bank,  1166. 


TABLE    OF    CASES. 


XXV 11 


[The  references  are 

Bailey's  Appeal,  862. 

Bain  v.  Globe  Ins.  Co.,  1176. 

Baiu  v.  Richmond,  etc.  R.  R,  778. 

Bainbridge  v.  Smith,  850.  855. 

Baine  v.  Whitehaven,  etc.,  R'y  Co.,  524. 

Baines  v.  Babcock  et  al.,  250,  251,  256, 

260,  266,  332,  345. 
Baird  v.  Bank  of  Washington,  986, 1057, 

1058. 
Baird  v.  Ross,  1041. 
Baird's  Case.  331. 
Bakemore    v.    Glamorganshire     Canal, 

886. 
Baker  v.  Adm'r  of  Backus,  304,  861,  865, 

878,  1155. 
Baker  v.  Atlas  Bank,  248,  302,  303,  304. 
Baker  v.  Backus,  304.  861,  865,  878,  1155. 
Baker  v.  Cotter,  1079,  1093. 
Baker  v.  Drake.  572.  574,  576,  577,  578, 

580,  588,  603.  785,  790. 
Baker  v.  First  Nat']  Bank.  762. 
Baker  v.  Harpster,  962,  1056. 
Baker  v.  Kansas,  etc.,  R  R,  1091. 
Baker  v.  Marshall,  530. 
Baker  v.  Neff,  880. 
Baker  v.  Tyute,  612. 
Baker  v.  Wasson.  384,  500,  501,  780. 
Baker  v.  Woolston,  1122. 
Baker's  Appeal,  819,  955. 
Baker's  Case.  106,  335,  1185. 
Bakersfield,  etc.,  Ass'u  ,v.  Chester,  880. 
Bakewell  v.  Board  of  Education,  891. 
Balch  v.  Hallett.  739,  740. 
Balch  v.  New  York,   etc.,  R  R  Co.,  273. 
Baldwin  v.  Bank,  1102. 
Baldwin  v.  Canfield,  425,  518,  585,  589, 

1049,  1063,  1137,  1162. 
Baldwin  v.  Commonwealth,  460. 
Baldwin  v.  Lawrence,  1144. 
Baldwin  v.  Trustees,  etc.,  1020. 
Baldwin  v.  U.  S.  Tel.  Co.,  1593. 
Bale  v.  Clelaud,  205. 
Balestier   v.   Metropolitan  Nat'l    Bank, 

1428. 
Balfour  v.  Ernest,  1191. 
Balkis,  etc.,  Co.,  Re,  517. 
Ball  v.  Gilbert,  469. 
Ballard  v.  Carmichael,  1107. 
Ballard  v.  Louisville,  etc.,  R  R,  1531. 
Balliet  v.  Brown,  955,  1141. 


to  the  foot-paging.] 

Ball  in  v.  Ferst,  684. 

Ballin  v.  J.,  etc..  Imp.  Co.,  256. 

Ballou  v.  Farnam,  1319. 

Ballou's  Appeal,  1465. 

Balsh  v.  Hyham,  328. 

Ballston  Spa  Bank  v.  Marine  Bank,  258. 

Baltimore  v.  Baltimore  &  O.  R  R  Co., 

1535. 
Baltimore  v.  City  Passenger  R  Co.,  755, 

769. 
Baltimore  v.  Connellsville,  etc.,  R'y  Co., 

869. 
Baltimore  City,  etc.,  R  R  Co.  v.  Sewell, 

782,  787,  790,  791. 
Baltimore,  etc.,  Co.  v.  Hambleton,  100, 

101,  240,  386. 

Baltimore,  etc.,  Co.  v.  Interstate,  etc., 

Co.,  730. 
Baltimore,  etc.,  R.  R.  Co.  v.  Fifth  Bap. 

Ch.,  2,  1009,  1167. 
Baltimore,  etc.,  R.  R  Co.  v.  Glenn,  244. 
Baltimore,  etc.,  R  R   v.  Marshall  Co., 

878,  885. 
Baltimore,  etc.,  R  R  Co.  v.  Pumphrey, 
•      122. 

Baltimore,  etc.,  R  R  v.  Quigley,  1010. 
Baltimore,  etc.  R'y  Co.  v.  Sewall,  101, 

102,  517. 

Baltimore,  etc.,  R  R  v.  Wheeling,  1165. 
Baltimore,   etc.,   R    R    Co.  v.   Wight's 

Adm'r,  1544. 
Baltimore,  etc.,  Turnpike  Co.  v.  Barnes, 

243. 
Baltimore  &  H.  de  G.  T.  Co.  v.  Union  R 

R.  Co.,  1529,  1530. 
Baltimore  &  O.  R.  R  v.  Cannon,  956. 
Baltimore  &  O.  R  R  Co.  v.  Cary,  1001. 
Baltimore  &  O.  R  R  Co.  v.  Ford,  1543. 
Baltimore  &  O.  R  R  Co.  v.  Gallahue, 

1165,  1544. 
Baltimore  &  O.  R.  R  Co.  v.  Noell,  1544. 
Baltimore  &  O.  R  R  Co.  v.  Wightman, 

1544. 
Baltimore  &  P.  S.  Co.  v.  Brown,  1532, 

1533. 
Baltimore  &  P.  R  Co.  v.  Fifth  Bapt.  Ch., 

1006. 
Baltimore  Retort,  etc.,  Co.  v.  Mali,  413. 
Baltimore  &  S.  R  R  Co.  v.  Compton. 

1526. 


XXV1U 


TABLE    OF    CASES. 


[The  references  are 

Baltimore  &  S.  R  R  Co.  v.  Nesbit,  1942, 
Baltimore  &  Y.  T.  R  v.  Boone,  1010. 
Baltzen  v.  Nicolay,  404. 
Bancroft  v.  Wilmington,  etc.,  1095. 
Banet  v.  Alton,  etc.,  R  R  Co.,  113,  158, 

168,  0:31. 
Bangor,  etc.,  Co.  v.  Robinson,  510,  528. 
Bangor,  etc.,  R  R  Ca  v.  Smith,  G35,  G4U, 
888,  107'  i. 

Bangor,  etc.,  Slate  Ca,  Be,  '■''•'■*■ 

Bangs  v.  Mcintosh,  1 170. 

Banigan  v.  Bard,  861,  • 

Bank  v.  Bryce,  591. 

Bank  v.  Bui sham,  :::'". 

Bank  v.  City  of  Charlotte,  688,  G39. 

Bank  v.  Concord,  150. 

Bank  r.  <  treason,  1 109. 

Bank  v.  Flout  Ca,  987,  108L 

Bank  v.  < Iridley,  G 17. 

Bank  v.  1  l.n  i  [son,  581. 

B  ink  v.  Sooner,  l  108. 

Bank  v.  Kennedy,  861. 

Bank  v.  Lanier,  180,  18  70t 

Bank  v.  McLeod,  1872,  1 1 

Bank  v.  Richardson,  688,  B10, 

Bank  v.  Trenbolm,  591. 

Bank  Commission!  ra  r.  Bank  el  Bn  it, 

-I'.io.  1051.    1055. 

Bank  I  lommiasionera  r.  Bank  of  Buffalo, 

866,  107ft 
Bank,  eta,  v.  GrattschUck,  109 
Hank,  eta,  v.  Town,  eta,  150, 
Bank  of   Africa  v.  Salisbury,  eta,  I 

605. 
Bank  of  America  ▼.  McNeil,  517, 696, 697, 

899,  780. 

Bank   of    Attica   v.  Mannf..  ink, 

H7.  686,  688,  691. 
Bank  of  Mtica  v.  Pottier,  eta,  Co,  H 
Bank  of  Augusta  v.  Earle,  817, 997,  I 
Bank  of  Australasia  v.  Nias,  996. 
Bank  of  Australia  v.  Breillat,  H1- 
Hank  of  B.  Falls  v.  Rutland,  i  ta,  B.  R 

Ca,  1168. 
Bank  of  Batavia  v.  N.  X    i  to,  R  R  i 

545. 
Bank  of  Bethel  v.  raliMni.pi.'  Bank,  881. 
Bank  of  Bramwell  v.  County  Court  of 

Mercer  County,  76L 
Bank  of  British  Col.  v.  Page,  100ft 


to  the  foot-paging] 

Bank  of  British  N.  A.  v.  Barling,  1181. 
Bank  of  California  v.  Collins,  315. 
Bank  of  Cape  Fear  v.  Edwards.  1 
Bank  of  Chenango  v.  Brown,  689. 
Bank  of  Chillicothe  v.  Dodge.  999,  1193. 
Bank  of  Chillicothe  v.  Swayne.  988. 
Bank  of  Circleville  v.  Renick,  881. 
Bank  of  Columbia  v.  Patterson's  Adm'r, 

107ft 
Bank  of  Columbus  v.  Patterson,  10 
Bank  of  Commerce  r.  New  York,  14, 

'.  760. 
Bank  of  Commerce  v.  Rutland,   eta, 

R  R  Ca,  117:'.. 
Bank  of  <  "omnierct  "s  Appeal.  "        I    - 

Bank  of  Edwardsi  ills  v.  Sim|  son,  n  I 
Bank  gland  r.  I. mm.  444 

ok  of  England  v.  Moffat,  144. 
ik  of  England  \    Parsons,  444 
ok  of  1  "it  Madison  r.  Aid.  n.  66, 1141. 
Bank  of  <■  Patchin  Bank,  106 

1108,  :  ;i. 

Bank        I        rgia  \.  Savannah.  1 

Bank  of  Hin  luBtan,  In  re,  1157. 

ok  of  Holly    3]  l'ms.ii     I 

Bank  of  Ireland  r.  Trustees  of  I 

(hanti 

Bank  of  Jamaica  v.  J<  it.  reon,  1164 
Bank  of  Kentucky  r.  Schuylkill  Bank. 

p.  .iik  •  nworth  v.  llmr 

■  k  of  Uttte  Fork  v.  lid  arthy,  1080. 
Bank    I  I    "don  v.  Terrell,  911 
Bank  of  Louisville    r.    Cray,    180,    184, 
718. 

Bank  of  Foui-ville  v.  Young,  B 

Bank  of  Lyons  T.Demmon,  914, 485,1* 
Bank  of  Manchester  w.  All.  n,  B87. 
Bank  of  Marietta  v.  Pindall,  1173. 
Bank  of  Metropolis  ».  Guttschlick, 
Bank  of  Metropolis  v.  Jom  b,  1075,  1086. 
Bank  of  Michigan  v.  Cray, 
Bank  of  Michigan  w.  Nil  99ft 

Bank  of  Michigan     v.     Williams,     11GG, 
1173. 

Bank  of  Middlebury  t.  Edgerton,  1501, 

1537. 
Bank  of  MiddlebUTJ  v-  Rutland,  etc..  R 
i; .  1064,  1098. 


TABLE    OF    CASES. 


XXIX 


f The  references  are 

Bank  of  Miss.  v.  Duncan.  889. 

Bank  of  Monroe  v.  Gifford,  1050. 

Bank  of  Montgomery  v.  Reese,  386,  789, 
791. 

Bank  of  Montreal  v.  Bathune,  320. 

Bank  of  Montreal  v.  Chicago,  etc.,  R.  R., 
1455. 

Bank  of  Montreal  v.  Potts,  etc.,  Co.,  941, 
1263. 

Bank  of  Montreal  v.  Sweney,  437. 

Bank  of  Montreal  v.  Thayer,  1455. 

Bank  of  N.   A.  v.  Chicago,  etc.,  R.  R. 
Co.,  1020. 

Bank  of  North  Am.  v.  Rindge,  295. 

Bank  of  Old  Dominion  v.  McVeigh,  628. 

Bank  of  Oldtown  v.  Houlton,  18. 

Bank  of  Omaha  v.  Douglas  County,  760. 

Bank    of     Pennsylvania    v.    Common- 
wealth, 627. 

Bank  of  Pennsylvania  v.  Gries,  274 

Bank  of  Pennsylvania  v.  Reed,  1086. 

Bank  of  Pittsburgh  v.  Whitehead,  1118. 

Bank  of  Poughkeepsie  v.  Ibbotson,  251, 
272,  282,  283,  284,  288,  298,  304. 

Bank  of  Redemption  v.  Boston,  766. 

Bank  of  Republic  v.  Couuty  of  Hamil- 
ton, 752,  772. 

Bank  of  Rome  v.  Rome,  136,  147,  153. 

Bank  of  Rome  v.  Village  of  Rome,  153. 

Bank  of  St.  Mary's  v.  Mumford,  1116. 

Bank  of  St.  Mary's  v.  St.  John,  215,  729, 
1059. 

Bank  of  Sing  Sing,  In  re,  302. 

Bank  of  South  Australia  v.  Abrahams, 
158,  163,  1253. 

Bank  of  South  Carolina  v.  Humphreys, 
1122. 

Bank  of  State  v.  Bank  of  Cape  Fear, 
1517. 

Bank  of  Switzerland  v.  Bank  of  Turkey, 
859. 

Bank  of  Toledo  v.  International  Bank, 
881. 

Bank    of    United   States    v.  Common- 
wealth, 877. 

Bank  of  United  States  v.  Dallam,  244, 
250,  254,  255,  288. 

Bank  of  United   Statea  v.  Dandridge, 
1086,  1094,  1108. 

Bank  of  United  States  v.  Davis,  1119. 


to  the  foot-paging.] 

Bank  of  United  States  v.  Deveraux,  2, 

1020,  1947. 
Bank   of   United  States  v.  Dunn,  1075, 

1086. 
Bank   of  United  States  v.  Owens,  988, 

999. 
Bank  of  United  States  v.  Planters'  Bank, 

1179. 
Bank  of  Utica  v.  Hilliard,  683. 
Bank  of  Utica  v.  Smalley,   19,   518,  687, 

689,694,699,708,  1018,  1106. 
Bank  of  Vergenues  v.   Warren,    1099, 

1100. 
Bank  of  Virginia  v.  Adams,  250.  253. 
Bank  of  Virginia  v.  Craig,  441.  503. 
Bank  of  Watertown  v.  Watertown,  666. 
Bank  of  Waterville  v.  Belster,  1166. 
Bank  of  Wilmington  v.  Wollastou,  1022. 
Bank  of  Wooster  v.  Stevens,  263. 
Bank  of  Yolo  v.  Weaver,  305,  1068. 
Bank  Tax  Case,  760. 
Bankers',  etc.,  Tel.  Co.  v.  Bankers',  etc., 

Tel.  Co.,  1395. 
Bankhead  v.  Brown,  1526. 
Baukright  v.  Liverpool,  L.  &  G.  Ins.  Co., 

1175. 
Banks  v.  Gay,  etc.,  Co.,  1178. 
Banks  v.  Judah,  957,  1133. 
Banks  v.  Poitiaux,  993,  1094. 
Bannatyne  v.  Direct,  etc.,  Co.,  392. 
Banner  v.  Lowe,  743. 
Banque,   etc.,  v.  Brown,  199,  202,  916, 

1200,  1201. 
Baptist   Church  v.  Brooklyn   Ins.    Co., 

1113. 
Baptist  Church  v.  Mulford,  1093,  1095. 
Baptist  Church,  Re,  1015. 
Baptist  House  v.  Webb,  864,  877,  1069. 
Barber  v.  Andover,  1529. 
Barber,  etc.,  Co.  v.  New  Orleans,  775. 
Barber's  Case,  851. 

Barbour  v.  National  Exch.  Bank,  1480. 
Barclay  v.  Culver,  590. 
Barclay  v.  Quicksilver  M.  Co.,  955. 
Barclay  v.  Talman,  250,  863. 
Barclay  v.  Wainewright,  741,  742. 
Barclay,  Ex  parte,  663. 
Bard  v.  Banigan,  362,  390. 
Bard  v.  Chamberlain,  987. 
Bard  v.  Poole,  997,  999. 


XXX 


TARLK    OF    CAS1  5. 


[The  references  are  to  the  foot-paying.] 


Bardstown,  etc.,  Co.  v.  Rodman,  632. 
Bardstown,  etc..  R.  R  v.  Metcalfe,  1262, 

1206,  1294,  181& 
Bardwell  v.  Sheffield,  etc.,  Co,,  I 
Barbate  v.  Shortridge,  347,  Hs.  1107. 
Barge's  I  !aae,  159. 
Baring  v.  Dix,  659,  671. 
Barings  v.  Dabney,  990,  1948. 
Barington  v.  Pittsburgh  ft  Steubenville 

R  R  (',,..  121. 
Barker  v.  Mechanics',  etc..  Ins.  Co..  linn. 

11  in). 
Barker  v,  Rutland  &  Washington  R  R 

Co.. 
Barker  v.  Stead,  10 
Barker.  In  re,  821,  - 
Barksdale  v.  Finnej .  W 
Barling  v.  Bank  ol    British  N.  A..  885, 

iooa 

Barlow  v.  Chicago,  etc.,  I.'.  1*..  1581. 
Barnard  r.  Ba<  khaus,  186,  »<"•'».  171,  474, 

475,  177. 
Barnard  v.  Hawks,  182,  584 
Barnard  v.  Vermont.  1 1    .  K.  I'. 

.   878,  718,  710. 
Barndollar  v.  I  >>•  Boia,  670. 
Bamed  v.  Hamilton,  158,  785,  3 
Barned's  Banking  Co.,  Re,  425. 
Barnes  v.  Atchison,  184  l  12. 
Barnes  v.    Brown.  42,    54,    150,  458,  459, 

786,  788,  81 1.  B45,  904 
Barnes  v.  Chicago,  etc,  RR,  1201, 1469. 
Barnes  v.  Hall.  608,  755. 
Barnes  v.  Lacon,  181. 
Barnes  v.   Mobile,  ete.,  B    R   Co..   1177. 

1201. 
Barnes  v.  Morgan,  fil2. 
Bames  v.  Ontario  Bank,  108'),  1106, 1190. 

1192. 
Barnes  v.  Perine,  111. 
Barnes  v.  Selligman,  459. 
Barnes  v.  Stoddard,  993. 
Barnes  v.  Suddard,  999. 
Barnes  v.  Trenton,  etc.,  Co.,  1117. 
Bar  net's,  etc.,  Co.,  In  re.  683. 
Baruett  v.  Chicago,  etc.,  R  R  Co.,  1171. 

1176. 
Barnett  v.  Lambert,  1087. 
Barnett  v.  South,  etc.,  K'y,  1112. 
Barnett's  Case,  64,  818,  2 10,  241. 


Barney  v.  Joshua  Stubba,  1462. 

Barney  v.  Keokuk,  1560. 

Barney  v.  Stale.  756, 

Barnstead  v.  Empire  Min.  Co.,  16. 

Baron  v.  Kin^s  Mountain  Mining  Co., 

1<  99,  1107. 
Baron  v.  Mining  r<>.  1107. 
Baron  De  Beville's  Case,  46. 
Barr  v,  King,  1 175. 

v.  New  York,  etc..  R  R.  58,  62, 

904,  980,  944  H26,  1138,  1158,   1210, 

lv 
Barr  v,  Pittsburgh  Plate  G.  Co.,  985,  945, 

1126,  115a 
Barre  National  Bank  v.  Bingham   Mfg. 

30. 
Barret,  in  re,  if 

Barrett  r.  Alton,  eta,  R  R.  Co..  684 
Barretl  v.  American,  etc.,  <  '<>..  1177. 
Barrett  ^.  Blunt  l1 
Barrett  v.  Byde,  W 
Bai  rett  v.  Mead,  469. 
Barrett'i  I 

Barrick  v.  Austin,  l1  B6. 
Barri<  k  v.  Oifford,  2£  850 

Barrington  v.  Miaa  C.  R.  R.  Co.,  218 
Barrin  cton  \.  Pittsburgh  ft  S.  R.  B 

166,  199. 
Barrington  v.  Washington  Bank, 
Barron  v,  Baltimore,  l 
Barron  v.  Burnside,  1001,  IS  - 
Ban.. n  ?.  Paine,  266,  21 
Barrow  v.  Nashvilli .  i  te.,  T.  I  kx,  98 
Barrow,  eta,  I  kx,  R 
Barrowcliffe  v.  Cummii  >-'. 

1  '..ii  row 's  I  a-.-.  80. 
Bai  ry  v.  Broach,  v">8. 
Barry  v.  Calder,  i 
Barry  v.  Croskey,  190,  119.  469. 
Barry  v.  MerchantB'  Exchange  Ca,  18, 

718,  721,  985,  991,   995.   1094,    1! 

1186,  11  v9.  1261. 
Barry   v.    Missouri,   etc.,  R'y,  1240,  1341, 

1242,  1825,  1826,  1848 
Barstow  v.  Savage  Min.  Co..  510,  545. 
Bartemeyer  v.  Iowa,  1949. 
Barter  v.  Wheeler.  1819. 
Bartholomew   v.   Bentley,  20,  79.  731, 

849.  850. 
Bartlettv.  Drew.  259.  729.  731.  782. 


TABLE    OF    CASES. 


XXXI 


[Tlie  references  are 

Bartlett  v.  Keim,  1436,  1447. 

Bartlett  v.  Kinsley,  1049. 

Bartlett  v.  Mystic,  etc.  Corp.,  928. 

Bartlett  v.  Norwich,  etc.,  R  R.  Co.,  1510. 

Bartlett  v.  P.  C.  &  St.  L.  R'y,  1536. 

Bartlett  v.  Peutland,  250. 

Bartlett  v.  Smith,  473,  475. 

Bartley  v.  Bartley,  684 

Barton  v.  Cocke,  404. 

Barton  v.  Barbour,  1434. 

Barton  v.  Enterprise,  etc.,  Ass'n,  858. 

Barton  v.  London,  etc.,  R'y,  443,  508. 

Barton  v.  North,  etc.,  R'y  Co.,  440,  507. 

Barton  v.  Port  Jackson,  etc.,  Co.,    418, 

421,  986,  1124 
Barton,  Re,  683. 
Barton's  Case,  173. 
Barton's  Estate,  434. 
Barton's  Trust,  In  re,  741. 
Barttel  v.  Header,  143. 
Barwick  v.  English  Joint-stock  Bank, 

205,  1007. 
Bason  v.  Min.  Co.,  1102. 
Bass  v.  Chicago  &  N.  W.  R'y  Co.,  1011. 
Bass  v.  Roanoke,  etc.,  Co.,  1579. 
Bassett  v.  Monte  Christo,  etc.,  Co.,  1059, 

1293. 
Bassett  v.  Moote,  etc.,  Co.,  919,  1301. 
Bassett  v.  St.  Albans  Hotel  Co.,  271,  283. 
Bassford  v.  Blakesley,  681. 
Basshor  v.  Dressel,  875. 
Basshor  v.  Forbes,  276. 
Batard  v.  Hawes,  1038. 
Batchelder  v.   Council,   etc.,  Co.,  1283, 

1337. 
Bateman  v.  Mid- Wales  R'y  Co.,  1191. 
Bateman  v.  Service,  291,  292,  318. 
Bateman  v.  Western,  etc.,  Co.,  1004. 
Bates  v.  Androscoggin,  etc,  E.  R.,  362, 

374,  376. 
Bates  v.  Bank  of  Alabama,  983,  1068, 

1095. 
Bates  v.  Great  Western  Telegraph  Co., 

15,  57. 
Bates  v.  Keith,  etc.,  Co.,  1087. 
Bates  v.  Lewis.  189. 
Bates  v.  McKinley,  710,  741,  742. 
Bates  v.  N.  Y.  Cent.  R  R,  1098. 
Bates  v.  New  York  Insurance  Co.,  686, 

691,  700,  717. 


to  the  foot-paging.'] 

Bates  v.  Wiles,  790. 

Bates  v.  Wilson,  7,  311.  455.  1039. 

Bates  County  v.  Winters,  151,  155. 

Bath  v.  Caton,  1033. 

Bath's  Case,  201. 

Battelle  v.  Northwestern,  etc.,  Co.,  917, 

1046,  1126. 
Batterson  v.  Cincinnati,  etc.,  R'y,  962. 
Batties'  Case,  357. 
Battle  v.  McArthur,  1390. 
Baughman  v.  National,  etc,  Co.,  1182. 
Baumgarten  v.  Nichols,  848. 
Bauuatyne  v.  Direct,  etc,  Co.,  379.  . 

Bauton  v.  Dry  Dock,  etc,  Co.,  160. 
Baxendale  v.  East  Co.'s  R'y.  1520. 
Baxendale  v.  London  &  S.  W.  R'y,  1521. 
Baxter  v.  Moses,  250. 
Bay  City  v.  State  Treasurer,  135. 
Bay,  etc.,  Ass'n  v.  Williams,  1069. 
Bayard  v.  Farmers'  &  Mechanics'  Bank, 

435,  439,  526. 
Bayard  v.  Hoffman,  467. 
Baylan  v.  Huguet,  590. 
Bayless  v.  Or  me,  1053,  1155. 
Bayley  v.  Wilkins,  566,  579,  580. 
Bay  1  iff e  v.  Butter wortb,  567,  579. 
Bayliss  v.  Lafayette,  M.  &  B.  R  R  Co., 

902,  932,  1402. 
Bayliss  v.  Swift,  250.  280. 
Beach  v.  Cooper,  948,  1157. 
Beach  v.  Fulton  Bank,  983,  1009. 
Beach  v.  Hazard,  221. 
Beach  v.  Miller,  938,  939,  1055. 
Beach  v.  Smith,  35,  221. 
Beadles  v.  McElrath,  473. 
Beadleston  v.  Knapp,  1311. 
Beal  v.  Chase.  949. 
Beale  v.  Mouls,  1036. 
Beale  v.  Railway  Co.,  1010. 
Beals  v.  111.,  etc.,  R.  R,  1221,  1272,  1307. 
Bean  v.  American  L.  &  T.  Co.,  495,  500, 

503,  530,  846,  1477. 
Bean  v.  Bowen,  652. 
Beard  v.  Union  &  A.  Pub.  Co.,  1002. 
Beardsley  v.  Beardsley,  432,  453. 
Beardsley  v.  Hotchkiss,  107. 
Beardsley  v.  Johnson,  266,  798,  807,  810, 

853,  1164 
Beardsley  v.  Smith,  133. 
Beaston  v.  Farmers'  Bank,  1019,  117a 


XXXll 


TABLE    OF    CASES. 


[The  references  are 

Beattie  v.  Carolina,  etc..  R  R.  1531. 

Bcattie  v.  Lord  Ebury,  975,  977. 

Beatty  v.  Marin-  Ins.  •''>..  HOG. 

Beatty  v.  Northwest,  eta,  Co..  914 

I      ttys  v.  Solon,  219,  I 

B  aujolais  Wine  Co..  In  re,  8G2. 

Beaumon-  v.  Meredith.  661. 

Beavan  v.  r»  a\an,  743* 

Becher  v.  Wells  Flouring  Mill  Co,  547, 

Beck  v.  Ashuel  t.  <•  <•..  Ca,  1164 

Beck  v.  Kantorowick,  913,  914 

.!?«•  k  v.  McGillis,  408. 

Becl  et  v.  Dire*  tors,<  Us.,  HIT.  1156,1601, 

l 565. 
1  '■•  cket  v.  UniontowD,  etc.,  18800,6,811 
Becketl  v.  Bouston,  37,  8S 
Beckford  v.  Wade,  II 
Beckitt  v.  Bilbraugh,  103,  460,  I6& 
I      kman  v.  I  [endei  son,  etc.,  R'y, 
Beckwith   v.  Burroughs,  467,  517, 

614 
1 U  ckwitfa  v.  Rochester  Iron,  etc,  ('<>..  971 
•  B  •'  kwith  v.  Trusl  .  1336, 

B  ckwith  v.  Windsor,  109 
B  dford  v.  Bagshaw,  207,  187. 
I  sdford   County   v.  Nashville,  CL  ft 

Louu  R  R  Ca,88,  101,216,718,716. 
Bedford,  etc.,  R'y  v.  Stanley,  1047. 
Bedford  R  R  Co.  v.  Bowser,   131,  178, 

313,  898,  640,  1133. 
Beeclier  v.  I  tacey,  1348. 
Beecher  v,  Marqu<  tte  &  Pac  R  1£  Co., 

1864 
Beecher  v.  s  thieffelin,  1 153. 
Beecher  v.  Wells,  .  980. 

Beekman   v.   Budson,    etc.,   R'y,    1834 

1837,  1841,  1846,  L349. 
Beekman  v.  Baratoga  &  S.  R  R  ' 

1518,  1534 
Beene  v.  Cabawba,  etc.,  R  R  Co.,  111. 

118,  174  1018 
Beer  Co.  v.  Massachusetts,  1949. 
Beers  v.  Bridgeport  Spring  Co.,  713,  714, 

715,  781,  737. 
Beers  v.  New  York  L.  Ins,  Co..  926.  988. 
Beers  v.  Phoenix  Glass  Co.,  1055,  1059, 

1185,  1193 
Beers  v.  Waterbury,  279. 
Beeson  v.  Lang,  975,  1319. 


to  the  foot-paging.] 

Beliler  v.  German  Hut  F.  Ins.  Co.,  1003. 

Belcher  v.Willeox,  299,  300. 

Belcher's,  etc.,  Co.  v.  St.  Louis,  eta,  Co., 

970.  1599. 
Belden  v.  Burke,  1138,  1200,  1210,  1229, 

1331. 
Belding  v.  Floyd,  977.  1588. 
Belfast,  eta,  R  R  Co.  v.  Belfast,  360, 

865,  866,  368,  869,  B78,  733,  " 
Belfast,  eta,  R  R  Ca  v.  Crooks,  145, 

153,  236. 
Belfast,  eta,  R  R  Ca  v.  CottreU,  116, 

Belfast  ft   Moosehead  Lake  K'y  Co.  v. 

Moore,  116,  119. 
Belknap  v.  Boston  ft  Maine  R  R.  1011. 
Belknap  v.  North,  eta,  Ins.  Ca,  1141, 

1587. 
Bell  v.  Chicago,  eta,  R  R  1888,  1885. 
Bell  •■.  Donahue,  II 
Bell  v.  Farmers',  1 1    .  Bank,  448, 
Bell  v.  Francis,  I 
Bell  v.  Hull.  19, 

Bell  v.  Indianapolis,  •  I  ..  R  R.  1147. 
Bell  v.  Lafferty, 
Bell  v.   PeniL,  eta,  R  R,  1131,  1497, 

151 
Bell  v.  Railroad  Oo,  18L  150. 
Bell  Broa,  Re,  I 
Bell's  Appeal,  l!  148, 

Bell's  Ca 

R  ll'a  -  to,  R  K.  v.  Christy,  1047. 
Bell's  Cap  R  R  v.  Pennsylvania,  77". 

19 
Bell  Telephone  Ca  v.  Commonwealth, 

1696. 
Bellairsv.  Tuck 

Belleville  8av.  Bank  v.  Winslow,  1082. 
Bellona  <  Sompanj  's  ( lase,  1051. 
Bellows  v.  Ballowel),  etc..  Bank,  1015. 
Bellows  v.  Todd,  l<  59. 
Belmont  v.  Coleman,  267,  296. 
Belmont  v.  Erie  R'j  359,  1142, 

1155,  nsa 

Belmont,  etc..  Co.  v.  Columbia,  eta,  Co., 
1158. 

Belmont  Nail  Co.  v.  Columbia,  etc.,  Co., 

1412. 
Belo  v.  Com'rsof  Forsyth,  756,  753. 
Belo  v.  Fuller,  100a 


TABLE    OF    CASKS. 


XXX1U 


[The  references  are 

Beloit  v.  Morgan,  132. 

Belton  v.  Hatch,  1025. 

Belton,  etc.,  Co.  v.  Sanders,  223. 

Beman  v.  Rufiford,  1139,  1144, 1502, 1509, 

1540. 
Bend  v.  Susquehanna  Bridge  Co.,  343. 
Benedict  v.   Columbus,   etc.,   Co.,    971, 

1586. 
Benedict  v.  Goit,  1590. 
Benedict  v.  Lansing,  1091. 
Benedict  v. 'St  Joseph,  etc.,  R  R,  1347. 
Benedict  v.  St.  P.,  etc.,  R  R,  1407. 
Benedict  v.  Western    U.    T.   Co.,    1143, 

1595. 
Benesch  v.  John,  etc.,  Ins.  Co.,  1109, 1167. 
Beneville  v.  Whalen,  1458. 
Bengley  v.  Wheeler,  922, 1144,  1146. 
Benjamin  v.  Elmira,  etc.,  R.  R,  1302, 

1348,  1383. 
Bennett  v.  Austin,  591. 
Bennett  v.  Maryland,  1093,  1115. 
Bennett  v.  St  Louis,  etc.,  Co.,  923. 
Bennett,  Ex  parte,  358. 
Bennett's  Case,  337,  358,  415. 
Bennington  v.  Park,  137. 
Bennison,  Re,  436. 
Benoist  v.  Carondelet  1095. 
Benoist  v.  Inhabitants,  etc.,  1190. 
Bensinger,   etc.,    Co.   v.    National,    etc., 

Reg.  Co.,  1181. 
Benson  v.  Albany,  135. 
Benson  v.  Hea thorn,  910,  913,  916,  925. 
Benson.  Ex  parte,  1520. 
Bent  v.  Hart  13,  20,  418. 
Bent  v.  Priest,  906. 
Bent  v.  Proest,  1587. 
Bentinck  v.  The  London,  etc.,  Bank,  572. 
Bentliff  v.  London,  etc.,  Corp.,  1179. 
Benton  v.  Ward,  493. 
Benwood  Iron  Works  v.   Hutchinson, 

1176. 
Bercich  v.  Marye,  510,  784,  785,  788,  791. 
Beresford,  Ex  parte,  177. 
Berford  v.  New  York,  etc.,  Co.,  728. 
Bergen  v.  Porpoise,  etc.,  Co.,  308,  988, 

989,  1217,  1264. 
Bergman  v.  St.  Paul,  etc.,  Assoc,  392, 

1023. 
Berks,  etc.,  R  R    Co.  v.  Myers,    1017, 
1099,  1101. 
c 


to  the  foot-paging.] 

Berlin  v.  Eddy,  590. 

Berliner  v.  Waterloo,  138. 

Bernard  v.  Vermont,  etc.,  R,  R  Co.,  377. 

Bernard's  Case,  190,  346. 

Bernards  Township  v.  Morrison,  135. 

Berney  v.  Tax  Collector,  760. 

Berney  Nat'l  Bank  v.  Pinckard,  621. 

Berrian  v.  Methodist  Soc,  1176. 

Berridge  v.  Abernethy,  296,  1042. 

Berry  v.  Brett,  1130. 

Berry  v.  Cross,  1053. 

Berry  v.  Yates,  104,  226,  238,  426,  434, 

1586. 
Berryman  v.  Cincinnati  S.  R'y,  123. 
Bertram  v.  Godfrey,  564. 
Bery  v.  Marietta,  etc.,  R  R.  Co.,  245. 
Bescoby  v.  Pack,  408. 
Besley,  Ex  parte,  87,  92.  1037. 
Best  v.  Davis  Sewing  Machine  Co.,  1231. 
Bestor  v.  Wathen,  905. 
Best's  Case,  97. 

Bethel  &  Hanover  T.  Co.  v.  Bean,  171. 
Bethlehem  Iron  Co.   v.  Phil.,  etc.,  R'y, 

1358. 
Bethune  v.  Kennedy,  406. 

Betts  v.  De  Vitre,  102. 

Bevans  v.  Dingman,  etc.,  683. 

Beveridge  v.  Hewitt,  471,  472,  473,  474, 
475,  477. 

Beveridge  v.  New  York  Elevated  R'y 
Co.,  721,  1052,  1249,  1497,  1505. 

Bewley  v.  Equitable  Life  Assurance  Soc, 
1141,  1587. 

Bibb  v.  Montgomery,  etc.,  Works,  1196. 

Bickford  v.  Grand  Junction,  etc.,  R'y, 
1267,  1268,  1269,  1270. 

Bickley  v.  Schlag,  63,  257,  258. 

Biddle  v.  Bayard,  510,  781. 

Biddle's  Appeal,  386,  738,  744. 

Bidstrup  v.  Thompson,  584,  618,  846. 

Bidwell  v.  Pittsburgh,  etc.,  R'y  Co.,  322. 

Biederman  v.  Stone,  567,  579. 

Bigelow  v.  Benedict,  472,  562. 

Bigelow  v.  Gregory,  6,  308,  309. 

Bigelovv,  In  re,  690,  697. 

Bigelow,  In  the  Matter  of,  693. 

Biggart  v.  City  of  Glasgow  Bank,  106. 

Bigg's  Case,  182. 

Bigler  v.  Waller,  1287. 

Biglin  v.  Friendship  Ass'n,  In  re,  51 L 


XXXIV 


TABLE    OF    CASES. 


[The  references  are 

Bill   v.    Boston   Union   Telegraph    Co., 

931. 
Bill  v.  Donohue,  1146. 
Bill  v.  New   Albany,  eta,  R   R,   1307, 

1826,  1828,  1844,  1868,  1464 
Bill  v    I  167. 

Bill  v.  Shibley,  I 

Bill  v.  Western  Union  Tel  Co.,  1149. 
Billinger  v.  Bentley,  1104. 
Billings  v.  Aspen,  .  1116, 

Billings  v.  ]• 

867. 
Billings  v.  Trssk,  878,  1121,  1! 
Bingaman  v.  Hickman,  664, 
Bingham  v.  Rushii 
Bingbam  v.  Weidenwax,  8f 
Bin-ham,  lfat(  Bl. 

bamton  v.   I  mton,  eta,  R'y, 

161 
Bingbamton  B 

Bill!; 

Binney'a  Appeal,  B 

Birch  v.  i  '•  79. 

Birch's  I 
Bird  v.  Bird' 
161 

Bird  v.  Cilv 

Bird  v.  Chic  i  -•.  L  ft  N.  R  R  I 
Bird  v.  I  :91. 

Bird  v.  Haydon,  88 
Birdaal]  v.  Daren]  .  1Q01. 

Birdsall  v.  Russell,  111 
Birkenhead,  el  ■..  i;'y  Ca  v.  POcber 

Birkenhead  L  ft  C  li'y  Co.  v.  Webster, 
167. 

Birmingham  v.  Gallagher,  C70. 

Birmingham  v.  Sheridan,  I 

Birmingham,  Bristol  ft  Thames  Junc- 
tion R'y  Ca  v.  White,  681,  I 

Birmingham,  etc.,  Co.  v.  Mutual  L.  & 
T.  Ca,  884 

Birmingham,  eta,  K'y  Co.  v.  Locke.  176, 
17'.',  182,  847,  324 

Birmingham,  eta,  R'y  Co.,  In  re, 
682.  1416. 

Birmingham,  Ex  parte.  1261. 

Birmingham  Fire  Ins.  Ca  v.  Com 

Birmingham  Nat  Bank  v.  Moser,  861, 
803,  304. 


to  the  foot-pagtng.] 

Birmingham   Nat.  Bank   v.  Roden,  26, 

101.  5! 
Bischoffsheim  v.  Brown,  661 
!.  112,  II 
v.  Johnson,  18 
Bishop  v.  American  Preservers  Co.,  650. 
ainerd,  687, 1488,  1507,1508, 
1644 

■be  Compel 

P  v.  Ths  Balkk  etc..  C 

>0. 
rough  T.   Mortlock, 

I 

Bl. 
Bank,  1085. 
11  v.  Kanl 

•hern  &  N.  I.  R 

■ 

I 

I  Spring  Vail 

1        t   v.   Kentucky   B  ition 

Bittinger  v.  Bell,  I 

Bjorngaard  et  al  v.   Qoodhne  County 

t  al..  945,  11! 
Black  v.  Delaware, 

S96, 

Black  v.  Homersham,  710,  711. 

Black  v.  11  1144  H68. 

Black  v.  Bhreve,  11 

Black  v.  Wanes!  1687 

Black  v.  Zachai 

Black's  10. 

k.  In  i 

Black  R  Ihion  R  R  Co.  v.  Clarke. 

220.  88 

Black  ft  White  Smith's  Society  v.  Van- 
dyke, 1025,  1026. 

Blackburn  v.  Selma,  etc.,  R  R  Co.. 
1182,  1542.  1548. 

Blackburn's 

Blackman  v.  Central  R  R.etc.  I 

Blackahaw  v.  Rogers,  411. 


TABLE    OF    CASES. 


xxxr 


[The  references  are 

Blackshire  v.  Iowa,  etc.,  Co.,  1100. 

Blackstock  v.  N.  Y.  &  E.  R  R  Co.,  1522. 

Blackstone  v.  Blackstone,  405,  410,  776. 

Blagen  v.  Thompson,  454,  1559. 

Blain  v.  Agar,  1041. 

Blain  v.  Pacific  Ex.  Co.,  1112. 

Blair  v.  Buttolph,  189,  195. 

Blair  v.  Compton,  008,  G10. 

Blair  v.  Massey,  684. 

Blair  v.  Perpetual  Ins.  Co.,  983,  997. 
Blair  v.  Reading,  1417. 

Blair  v.  St.  Louis,  etc.,  R  R,  421,  964, 
1204,  1227,  1355,  1392,  1393,  1396, 
1397,  1399.  1400,  1402,  1409,  1420, 
1432,  1459,  1484. 

Blair  v.  Walker.  934.  1341,  1393. 

Blaisdell  v.  Bohr,  506,  507. 

Blake  v.  Bay! 

Blake  v.  Brown.  237. 

Blake  v.  Buffalo  Creek  R.  R  Co.,  934. 

Blake  v.  Griswold,  73,  74,  1122. 

Blake  v.  Hinkle,  250. 

Blake  v.  Holley,  87& 

Blake  v.  Portsmouth,  etc.,  R  R  Co.,  861, 

889. 
Blake  v.  Rich,  1531. 
Blake  v.  Traders'  Nat  Bank,  436. 
Blake  v.  "Wheeler,  853. 
Blake's  Case,  193,  195,  201. 
Blake,  Ex  parte.  212. 
Blakeley's  Case,  331. 
Blakely,  etc.,  Co.,  In  re,  1197.  1256. 
Blakeman  v.  Puget  Sound  Iron  Co.,  622, 
Blaker  v.  Herts,  etc.,  Co.,  1598. 
Blalock  v.  Kernersville.  etc.,  Co.,  417,  990. 
Blanc  v.  Paymaster  Mining  Co.,  961. 
Blanchard  v.  Dedman  Gas  Co.,  547,  623. 
Blanchard  v.  Dow.  814 
Blanchard  v.  Kaull,  309. 
Blanco  v.  Navarro,  481. 
Bland  v.  Crowley,  1038. 
Blandford  v.  School  District,  1058. 
Blann  v.  Bell.  409. 
Blashfield  v.  Empire,  etc.,  Co.,  1596. 
Blatchford  v.  Ross,  631,  923,  927,  1072, 

1144,  1154. 
Blatchford  v.  N.  Y.   &  N.  H.  R  R,  724. 
Blen  v.  Bear,  etc.,  Co.,  1075. 
Blewett  v.  Front  St  Ry.  1559. 
Blewitt  v.  Roberts,  410. 


to  the  foot-paging.] 

Bligh  v.  Brent,  21. 

Blindell  v.  Hagan,  650. 

Bliss  v.  Anderson,  1539. 

Bliss  v.  Kaweah,  etc.,  Co.,  1075,  1100. 

Bliss  v.  Matteson,  1471. 

Block  v.  Atchison,  etc.,  R  R  Co.,  1175, 

1178. 
Block  v.  Commissioners,  146. 
Block  v.  Fitchburg  R  R,  967,  1534 
Block  v.  Merchants',  etc.,  Co.,  1579. 
Blodgett  v.  Adams,  1091. 
Blodgett  v.  Morrill,  189,  213. 
Blood  v.  Marcuse,  1083. 
Bloodgood  v.  Kain,  714 
Bloodgood   v.  Mohawk,  etc.,  R.  R  Co., 

138,  139. 
Bloom  v.  Pond's,  etc.,  Co.,  1070. 
Bloomer   v.  Union   Coal  &  I.  Co.,  1254 

1368. 
Bloomfield,  etc.,  Gaslight  Co.  v.  Calkins, 

1584,  1585. 
Bloomfield.  etc.,  R  Co.  v.  Richardson, 

1527,  1584 
Bloomfield  R  R.  v.  Van  Slike,  144a 
Blossburg,  etc.,  R.  R  Co.  v.  Tioga  R  R 

Co.,  1020,  1512. 
Blossom  v.  Milwaukee,  etc.,  R  R,  1356, 

1357,  1358. 
Blossom  v.  Railroad,  1358. 
Blouin  v.  Liquidators,  etc.,  5S5,  586,  600. 
Bloxam  v.  Metropolitan  R'y  Co.,  723,  728, 

980,  1132,  1142. 
Bloxam's  Case,  97. 
Bluck  v.  Mullalue,  462, 
Bluehill  Academy  v.  Witham,  1042. 
Bluraenthal  v.  Brainerd,  1433,  1457. 
Blundell  v.  Winsor,  663. 
Blunt  v.  Walker.  34,  86. 
Bly  v.  Second  National  Bank,  984 
Blyth  v.  Carpenter,  785,  790. 
Birth's  Case,  239. 
Board   of  Bartholomew  Co.  v.  Bright 

134 
Board  of  Com'rs  v.  Cottingham,  151. 
Board  of  Com'rs  r.  Davis,  765. 
Board  of  Com'rs  v.  Elston,  760. 
Board  of  Com'rs  v.  Lafayette,  etc.,  R  R 

Co.,  1151. 
Board  of  Com'rs,  etc.,  v.  Indianapolis, 

etc.,  Co.,  1584 


XXXVI 


TABLE    OF    CASES. 


[The  references  are 

Board  of  Corn'rs  of  T.  Co.  v.  Reynolds, 

431,  480. 
Board  of  L.  v.  New  Orleans  Water-works 

Co.,  533. 
Board  of  Supervisors  v.  Mineral  Point 

R.  R,  130G.  13 is. 
Board  of  Sup  (rvisors  v.  Randolph,  137. 
Board  of  Tippecanoe  Co.  v.  Lafayette, 

etc.,  R.  R.  Co.,   2,  1150,  1491,  1504, 

1  .")39. 
Board  of  Trade  Tel.  Co.  v.  Barnett,  1594. 
Boardman  v.  Cotter,  I 
Boardman  v.  Gaillard, 
Boardman  v.  Lake  Shore,  etc,   R.  R 

Co..  93,  861,  866,  867,  374,  875,  876, 

711,  716,  1180,  1173,  1807,  L545. 
Boatmen's  Bis.  Co.  v.  Able,  501,  517. 
Bockee  v.  Hathorn,  1388,  1284 
Bocock's  Ex'rs  v.  Alleghany,  etc.,  Co., 

1091. 

Iley  v.  Goodrich,  990. 
Bodley  v.  Reynolds,  791. 
Bod  well  v.  Eastman,  868. 
Bodwin,  etc.,  I  !a,  In  re,  CGI. 
Boehm  v.  Lies.  453. 
]  •■  eppler  v.  Menowq,  160. 
Bogardus  v.  Rosendale  Mfg.  Co.,  869, 960. 
Bogardus  v.  Trinity  Church,  99G. 
Boggs  v.  Adger,  484 
Boggs  v.  Brown,  1468. 

gs  v.  Olcott,  87,  90,  239. 
Bohannan  v.  Binns,  877. 
Bohlen's  Estate.  485,  140,  441. 
Bohm  v.  Loewer's,  etc.,  Co.,  1109. 
Bohmer  v.  City  Bank,  887,  G89. 
Bohn  v.  Brown,  878,  897. 
Bohn  Manuf.  Co.  v.  Lewis.  126. 
Boisgerard  v.  New  York  Banking  Co., 

666,  1017,  1097,  1108. 
Bolen  v.  Crosby,  298. 
Bolles  v.  Brimfield,  112. 
Boiling  v.  Le  Grand,  313. 
Bolton  v.  Liverpool,  674. 
Bolton  v.  Madden,  si  i. 
Bolton  v.  The  Natal  Land,  etc.,  Co.,  726. 
Bolz  v.  Bidder,  73 
Bommer    v.    American,    etc.,    Co.,    888, 

1046. 
Bonaparte  v.  Baltimore,  etc.,  R  R,  883, 
1558. 


to  the  foot-paying.] 

Bonaparte  v.  Camden  &  A.  R  R,  1524, 

1525,  1526. 
Bond  v.  Appleton,  284,  292,  349. 
Bond  v.  Central  Bank,  984. 
Bond  v.  Mount  Hope  Iron  Co.,  524,  780. 
Bond  v.  State,  1402. 
Bond  v.  Terrell,  etc.,  Co.,  983. 
Bond  v.  Wabash,  etc.,  By,  1521. 
Bondholders,   etc.,   R   R,   In    re,  1299, 

1800. 
Bone  v.  Canal  Co.,  993. 
Bonewitz  v.  Van  Wert  Co.   Bank,  259, 

860,  884 
Bouham  v.  Bonham.  745. 
Bonnardet  v.  Taylor.  683,  683,  684. 
Bonner  v.  City  of  Now  Orleans,  1249. 
Bonnifield  v.  Bidwell,  I 

iy  v.  Drew,  <;71. 
Booe  v.  Junction  B.  II.,  688,  1 190. 
Boo^hi'i-\.  Life  Assoc,  of  America,  1010. 

k<  r  v.  Y  iing,  1067. 
Booker,    l'..\   parte,    16,    885,  640,  1157, 

1845. 

oe  v.  ( litizens1  Bank.  656. 

i man   v.    Atlantic  &    Bacific  R  R 

Co..  684 
Boos1  Appeal,  7. 

Boot,  etc.,  Co.  v.  Dunsmore,  1072. 
Boot  A:  Shoe  Co.  v.  Hart,  38,85. 
Booth  v,  Bunce,  965. 
Booth  v.  Campbell,  272. 
Booth  v.  Clark,  1488,  1127. 

ill  v.  Kiel. ling,  570. 
Booth  v.  Robinson,  426,  931. 
Booth  v.  Smith,  181. 
Booth  v.  Wonderiy,  819. 
Borland  v.  Haven,  284,  295,  298,  339,  353, 

940,  1095. 
Borland  v.  Stokes,  781. 
Borough  v.  Frederick,  1187. 
Borough  of  Millvale's  Appeal,  1541. 
Borton  v.  Dunbar,  408. 
Bosanquet  v.  Shortridge,  847,  848,  1064. 
Bosher  v.  Richmond,  etc.,  Co.,  193.  808, 

198. 
Bosley  v.  National,  etc.,  Co.,  202,  208. 
Bostock  v.  Blakeney,  486,  712. 
Boston  &  Albany  R  R.  Co.  v.  Pearson, 

666,  667,  668,  670. 
Boston  &  A.  R.  R  Co.,  Matter  of,  1538. 


TABLE    OF    CASES. 


XXXV11 


[The  references  are  to  the  foot-paging.] 

Boston  &  M.  R  R.  Co.  v.  Lowell  &  L. 

R  R  Co.,  1529. 
Boston,  B.  &  G.  R  R  Co.  v.  Wellington, 

224. 
Boston,  C.  &  M.  R  R  v.  Gilmore,  1374. 
Boston,  C.  &  M  R   R   v.  State,   1012, 

1524. 
Boston  Electric  Co.  v.  Electric,  etc.,  Co., 

1178,  1182. 
Boston,  etc.,  Co.  v.  Ansell,  906. 
Boston,  etc.,  Co.  v.  Bankers',    etc.,    Co., 
426,  1208,  1209, 1214, 1222, 1365, 1383, 
13S6,  1595. 
Boston,  etc.,  Co.  v.  Barton,  1070. 
Boston,  etc.,  R  R  v.  Boston,  etc.,  R  R., 

1498,  1503,  1505. 
Boston,  etc.,  R  R  v.  Coffin,    1313,    1380. 
Boston,  etc.,  R  R  Co.  v.  Commonwealth, 

707,  769. 
Boston,  etc.,  R  R  Co.'  v.  New  York  & 
N.  E.  R  R  Co.,  956,  1130,  1131, 1133, 
1500,  1506. 
Boston,  etc.,  R  R  Co.  v.  Richardson,  385, 

506,  791. 
Boston,  etc.,  R  R  Co.  v.  Wellington,  35, 

87,  91,  116, 174,  224. 
Boston,  etc.,  R.  R.  Co.,  Re,  1529. 
Boston,  etc.,  R  R  Corp.  v.  Salem,  etc., 

R.  R  Co.,  1532,  1591. 
Boston  Glass  Co.  v.  Langdon,  862,  863, 

864. 
Boston  Loan  Co.  v.  Boston,  776. 
Boston  Mfg.  Co.  v.  Commonwealth,  749. 
Boston  Music  Hall  v.  Cory,  447,  623. 
Boston  Water-power   Co.  v.    Boston   & 

W.  R  R  Co.,  1592. 
Bostwick  v.  Fire  Department  of  Detroit, 

1026. 
Bothamley  v.  Shersan,  407. 
Bottomley's  Case,  163,  1066. 
Botts  v.  Simpsonville,  etc.,  Co.,  1148, 1493, 

1590. 
Bou,  etc.,  Co.  v.  Standard,  etc.,  Ins.  Co., 

878. 
Bouch,  In  re,  743. 
Bouchaud  v.  Dias,  94. 
Bouche  v.  Sproule,  742. 
Boulden  v.  Estey,  etc.,  Co.,  1004. 
Bouldin  v.  Bull,  1165. 
Boullemet,  Succession  of,  440. 


Boulter  v.  Feplow,  1038. 

Boulton  Carbon  Co.  t.  Mills,  66,  79,  80, 

241,  299. 
Bou  1  ware  v.  Davis,  1004.  1427. 
Bound  v.  South  Carolina  R'y.  1284, 1310, 

1337,  1357.  135S.  1399,  1403,  1458. 
Bourne  v.  Freeth,  1040. 
Bouton  v.  Dement,  34,  249,  263. 
Boutwell  v.  Townsend,  273. 
Bow  v.  Allenstown,  887. 
Bowdell  v.  The  Farmers'  &  Merchants' 
National   Bank  of  Baltimore,  329, 
345. 
Bowden  v.  Johnson,  356. 
Bowdcn  v.  Santos,  356. 
Bowditch  v.  N.  E.,  etc.,  Ins.  Co.,  984. 
Bowen  v.  Brecon   R'y,  1237,  1255,  1256, 

1334,  1410. 
Bowen  v.  Bull,  661. 
Bowen  v.  Carolina,  etc.,  R.  R,  928. 
Bowen  v.  First  Nat.  Bank,  1175. 
Bowen  v.  Kuehn,  165. 
Bowers  v.  Hechtman,  1100,  1103. 
Bowery  Bank  Case.  20. 
Bowick  v.  Miller,  1069. 
Bowker  v.  Pierce,  435,  740. 
Bowlby  v.  Bell,  567,  579. 
Bowling  Green,  etc.,  R.  R  Co.  v.  War- 
ren Co.,  146. 
Bowman  v.  Chicago,  etc.,  R'y,  1517, 1947. 
Bowman  v.  Wathan.  1132. 
Bowring  v.  Shepherd,  354,  580. 
Bowron,In  re,  96. 
Bowyer  v.  Anderson,  1581. 
Box's  Trusts,  Re,  743,  744. 
Boyce  v.  Montauk,  etc.,  Co.,  1100,  1130, 

1265. 
Boyce  v.  St.  Louis,  1000,  1001. 
Boyce  v.  Trustees,  etc.,  882. 
Boyd  v.  Ches.  &  Ohio  Canal,  1163,  1174, 

1365. 
Boyd  v.   Conshohocken  Worsted  Mills, 

709. 
Boyd  v.  Hall,  284,  286,  299,  300. 
Boyd  v.  Hanson,  475. 
Boyd  v.  Peach  Bottom  R'y  Co.,  120,  121, 

221. 
Boyd  v.  Rockport  Steam  Cotton  Mills, 

547,  623. 
Boyd  v.  Sims,  1151. 


XX  XV  111 


TABLE    OF 


[The  reference*  are 

Boyer  v.  Boyei 

Boy kin 

Boylan  v.  Huguer,  790, 

Boylnu  Hull  Colliery  Co,  Be,  I 

.  R'y,  I0I8. 
Bo 

Boytioll  v. 

□  v.  Ai  72. 

oton  v. 

Boyuton  v.  Lynn.  etc..  Co.,  li 

f,  1!1  \. 

Brace  v.  Or 
Bracher   v. 
12. 

:  1". 
•  ••  lT 
Bradberry  v.  Ban 
lhury  1 

k  v.  Phil.,  Marlton 
r 

•  .  Han 
rd  v.  79  .  1017. 

1   Banking   Ca   v. 
■    i 
Bradfoi  ;:.  17.  v.  N.  Y 

lv 
Bradford  Navigation  Ca,  Tn  re,  861. 
v.   Boston.  Manufai 

IK 
Bradley  v.  Ballard,  1185,  11 

Bradley  v.  I  R.  R.  1 

Bradley  * 

Bradley  v.  I  rtli,  21. 

Bradley  v.  Tllii 

Bradley  v.  198. 

Bradley  v.  etc.,  Co.,  086,  1 

Bradley  v.  1  N.  H.  17.  B 

16 
Bradley  v.  I  rn  P  R'y,  1525. 

Bradley  v.  P 
Bradley  v. 
Bradley  v.  South. 
Bradley  v.  Wi 
Bradley,   etc.,   Co.    v.    South    Pub.    Ca, 

1042. 
Bra dner,  In  re,  150. 


to  thefoot-pnging.} 

Bradshaw,  E.\  parte,  1251 
Bradstreet  v.  Bank  of  Rutland,  1061 

: 

Brady  v.  I  d,  106a 

iy  v.  M 
Brady  v.  Butlan  I  1  R  R 

.  36. 
m  v.  Merchants1  N.t'l  Bank,  911. 

Brain,  rd  v.  N  rkft   II.  17.  R  Ca, 

12  1281. 

I 

I 

I 

rt  of 
i 

roch- 

B  ra- 
nd v.  II  171. 
'                                 .  die,  etc.,  R  R  Ca, 
126 

r.  711. 

>n,  864 
adt  v.  1  k,  490. 

Branham  v.  Record, 
Bran  -  t  K 

n  v.  Winter,  i 
Bran  >nian  R'y  C 

Brant  v.  El, 

Wortl  A 

v.  \.  Y.  , !...  R  v.  ,  1828,  1 
Brauser  v.  New  :  .  [na  I  '<>..  1020. 

ard  v.  Cincinnati,  eta,  17.  R..  W 
.  v.  Farwell  70. 

'a  A'lm'r  v.  Seligman'a  Adna'r, 
'    1  tiusville  &  F.  R  R. 


rABLE    OF    CAS]  3. 


XXXIX 


[The  references  are  to  the  foot-paging.] 


Breitung  v.  Lindauer,  630. 

Brernan,  etc.,  Bank  v.  Branch,  etc.,  Bank, 

966. 
Brennan  v.  Tracy,  1008,  1010,  1012. 
Brent  v.  Bank  of  Washington,  6S7,  691, 

692,  693,  695,  696,  717. 
Brent  v.  State,  875. 
Breese  v.  U.  S.  Tel.  Co.,  1593. 
Bressler  v.  Wayne  County,  764,  7C6. 
Brewer  v.  Boston  Theatre,  943,  1149. 
Brewer  v.  Michigan  Salt  Ass'n,  731,  732. 
Brewer  v.  Stone,  126. 
Brewer  v.  Watson,  674. 
Brewer  Brick  Co.  v.  Brewer,  138,  139. 
Brewers'  Fire  Ins.  Co.  v.  Burger,  94, 187, 

188. 
Brewster  v.  Hartley,  343,  583,  585,  587, 

830,  839. 
Brewster  v.  Hatch,  203,  204,  911,  914,  910. 
Brewster  v.  Lathrop,  711. 
Brewster  v.  Sime,  437,  594. 
Brewster  v.  Van  Liew,  786. 
Brewster  v.  Wakefield,  1236. 
Briar,  etc.,  Co.  v.  Atlas  Works,  881. 
Brice  v.  Munro,  250. 
Brick  v.  Brick, 
Brickley  v.  Edwards,  878. 
Bridge  Proprietors  v.  Hoboken  Co.,  1576, 

1942. 
Bridgeford  v.  Hall,  1017. 
Bridgeport  v.  Housatonic  R  R  Co.,  133. 
Bridgeport    Bank    v.    New   York,    etc., 

R  R  Co.,  497,  498,  516,  517,  519,  54G. 
Bridgeport  City  Bank  v.  Empire  Stone 

D.  Co.,  1243.  1244,  1247. 
Bridgeport  Savings  Bank  v.  Eldredge, 

1078. 
Bridger's  Case,  37,  189,  213. 
Bridgeton  v.  Bennett,  1095. 
Bridgewater  Iron  Co.  v.  Lissberger,  622. 
Bridgewater  Nav.  Co.,  Re,  362,  379. 
Bridgman  v.  City  of  Keokuk,  21,  749. 
Bridgwater,  etc.,  Co.,  Re,  731. 
Bridport  Old  Brewery  Co.,  In  re,  801. 
Brien  v.  Harriman,  659,  671. 
Briggs  v.  Cape  Cod,  etc.,  Co.,  875,  885. 
Briggs  v.  Cornwell,  300,  124& 
Briggs  v.  Horse  R  R,  1563. 
Briggs  v.  Massey,  550. 
Briggs  v.  Penniman,  272,  282,  494,  495. 


Briggs  v.  Spaulding,  854, 1028,  1030, 1031, 

1429. 
Briggs  v.  Waldron,  353. 
Bri.-gs,  Ex  parte,  195,  207. 
Brigham  v.  Mead,  27,  342,  343,  346,  354, 

469,  514,  584 
Bright  v.  Farmers',  etc.,  Co.,  1600. 
Bright  v.  HuttoD,  1037. 
Bright  v.  Lord,  711. 
Bright  v.  Metairis,  etc.,  Assoc,  1078. 
Brighfs  Case,  1037. 
Brighton  Arcade  Co.  v.  Dowling,  240. 
Brighton,  etc.,  Ry,  Re,  366. 
Brightwell  v.  Mallory.  20,  447,  609. 
Brill  v.  AVest  End  R  R,  1365. 
Brinckerhoff  v.  Bostwick,  S73, 1027, 1029, 

1132,  1135,  1144,  1150. 
Brine  v.  Insurance  Co.,  1346. 
Brinham  v.  Wellersburg  Coal  Co.,  269, 

279,  2b3,  305.  306. 
Brinkerhoff  v.  Brown,  2 
Brinkly  v,  Hambleton,  355. 
Brinley  v.  Grou,  744. 
Brinley  v.  Mann,  1096,  1098. 
Brisbane  v.   Delaware,  etc.,  R  R   Co., 

498,  708,  709,  7 
Briscoe  v.  Southern  Can.  R'y,  1493,  1536. 
Briseuden  v.  Chamberlain,  14, 
Bristol  v.  Chicago,  etc.,  R  R  Co.,  1020. 
Bristol  v.  Sanford,  278. 
Bristol,  etc.,  Ry  Co.,  Re,  366. 
Bristol   Milling,   etc.,  Co.    v.    Probasco, 

306. 
Bristol,  etc.,  Bank  v.  Keary,  10^4. 
Bristol,  etc.,  Ry,  In  re,  1466. 
British   American   Land   Co.   v.   Ames, 

1173. 
British    &    American     Telegraph    Co., 

In  re,  88. 
British  Assurance  Co.  v.  Brown,  1106. 
British  Columbia,  Bank  of,  v.  Page,  1002. 
British,  etc.,  Co.  v.  Comm'rs,  1251. 
British,  etc.,  Co.,  Re,  53,  1139. 
British,  etc.,  Life  Assurance,  Re,  1031. 
British,  etc.,  Telegraph  Co.  v.  Colson,  96. 
British  Farmers*  Pure  Linseed  Cake  Co., 

Re,  82L 
British  Provident  Life  Ass'n,  Re,   164, 

813,  849,  1139,  1362. 
British  S.  P.  B.  Co.,  Re,  50. 


xl 


TAUr.I.    "I     CASES. 


[The  reference*  are 

British  Sugar   Refining  Co.,  In   re,  166. 

802,  805. 
Briton,  etc.,  Ass'n  v.  Jones,  163,  806. 
Brittain  v.  Allen,  19. 
Brittain  v.  NewlanJ,  1018. 
Brittain,  Ex  parte,  1037. 
Brittania,  etc.,  Assoc,  Re,  332. 
Britton  v.  Green  Bay,  etc.,  Co.,  159 
Broadbent  v.  Farley,  781. 
Broadbont  v.  Johnson,  93. 
Broadway  Bank  v.  McElrath, 

519,  585,  617. 
Brobst  v.  Brock,  1354 
Brocaw  v.  Board  of  Commissioners,  1 1". 
Brocavv  v.  Gibson  Co..  134,  151. 
Brock  Dist  Council  v.  Bowen,  TUT. 
Brockenl>rou»h  v.  James  River,  etc.,  Co., 

170. 
Brockway  v.  Allen,  1017,  1106. 
Brockway  v.  Inn-.  278. 
Brockway  v.  Ireland,  72,  73. 
Brodie  v.  McCabe,  181. 
Brokaw  v.  New  Jersey  R  &  T.  Co.. 

100(5.  iooa 

Bromley  v.  Elliot,  277. 
Bromley  v.  Smith,  1111. 
Bromley,  In  re,  7  1 1. 
Bronson  v.  La  Crosse  R  R  Co.. 

1165,    1214,    1216,    1231,   1072.    1349, 

1851,  1458. 
Bronson  v.   Railroad,    1847,   1849,    1851, 

1356. 
Bronson  v.   Wilmington,  etc.,  Ins.  Co., 

306. 
Brooklyn  C.  &  J.  R.  I.\  I  kx  v.  Brooklyn 

C.  R  R.  Co.,  1530,  155  1565, 

1566,  1568. 
Brooklyn,  etc..  Co.  v.  City.  - 
Brooklyn,  etc.,  R.  R.  v.  Strong,  396. 
Brooklyn,  etc.,  R  R  Co.,  In  re,  B76,  B8 

884. 
Brooklyn,   etc.,   R   R,  Matter  of,    1  I'.'S 

1504,  1557. 
Brooklyn  Life  Ins.  Co.  v.  Bledsoe.  1005. 
Brookman  v.  Rothschild,  566. 
Brooks  v.  Dick,  1476. 
Brooks  v.  N.  Y..  etc..  R  R  Co..  11*°,. 
Brooks  v.  Railway.  1890. 
Brooks  v.  Vermont  Central    R   R,  1313. 

1316,1326, 1327. 1841,  1349,  1859,  1474. 


tn  the  foot-paging.] 

Brookville  it  G.  T.  Co.  v.  McCarthy.  231. 
Brookville  Ins.  Co.  v. 
Brotherhood's  C         180, 11 
Bronghton  v.  Manchester,  etc.,  Works, 

1191,  11 
Brower  v.  Baucus,  1272. 
Brower  v.  ( '■  itheal  677. 

seer  v.  I 
Brower  v.  ]'  R  R  Co..  98,  105. 

d  v.  Adams,  522,  "17.  E 
Brown  v.  Al  7a 

■ 
Brown  v.  Black, 

■.  n  v.  Brown,  I 
Brown  v.  Bull  EL  R   ^^-.  Wl 

114a 

Brown  \.  !'■ 

mi  v.  Calumet.  ■  :  ..  B,; 
Brown  v.  <  amp' 
r.!..\\  D  v.  (  '!.:  R'y,  IB 

■ 
minium  ealtli,  E 

Brown  v.  Dibble,  I 

Brown  v. 

Brown  v.  Duluth.    eta,    R.J      ~"      1187, 

1188,  1212. 
Brown  v.  Dupk 

wn  v.  Eastern  - 
Brown  v.  Farmi  1    1097. 

Brown  v.  Fairmonnt  Mil  68L 

Brown  v.  Finn.  I 

Brown  v.  Florida  Southern  R'y  Co. 

Brown  v.  French.  ' 

Brown  v.  Hitch*  J86,  292,  350, 

n  v.  lb.lt.  I 
Brown  v.  Howard  Ins.  < 
Brown  v.  Killan,  98 
Brown  v.  Lake  Superior  Iron  Co..  1411, 

1412. 
Brown  v.  La  Trinidad,  1048,  II 
Brown  v.  Law  b  >n,  786. 
Brown  v.  Lehigh,  etc.,  Cot,  704,  7'  ! 
Brown  v.  Lunt,  1057. 

\n  v.  Mayor,  et<X,  [I 
Brown  v.  M.  s.  &  L  R'y,  r 


TABLE    OF    CASKS. 


xli 


[The  references  are 

Brown  v.  McGuire,  411. 

Brown  v.  New   Bedford  Inst   for  Sav„ 

600. 
Brown  v.  N.  Y.,  etc.,  R  R.  1440. 
Brown  v.  O'Connell,  1057, 
Brown  v.  Orr.  1141. 
Browu.v.  Pacific  Mail,  815,  823,  830,  832, 

833,  84  8. 
Brown  v.  Phelps,  469. 
Brown  v.  President,  etc..  1517. 
Brown  v.  Republican,  etc.,  Mines,  S04, 

924.  1172,  1479.. 
Brown  v.  Rosedale  St.  R'y,  1447. 
Brown  v.  Runals,  598. 
Brown  v.  Smith.  517. 
Brown  v.  Somerset.  1092. 
Brown  v.  Sj>   .    rs,  175. 
Brown  v.  Stoerkel,  661. 
Brown  v.  Toledo,  etc.,  R  R..  1442. 
Brown  v.  Union  Ins.  Co.,  252,855. 
Brown  v.  Vandyke,  933. 
Brown  v.  Wabash  R'y,  1482. 
Brown  v.  Ward,  601. 
Brown  v.  Winnissimmet  Co.,  972,  10S4, 

1093. 
Brown's  Case,  44.  88,  1032. 
Brown.  F.x  parte  359,  1446,  1462. 
Brown,  Petition  of.  741. 
Brown  &  Bros.  v.  Brown,  1077. 
Browne  v.  Black,  359. 
Browne  v.  Collins,  742,  745. 
Browne  v.  Monmouthshire  R'y  &  Canal 

Co..  726.  728. 
Brownell  v.  Town  of  Greenwich,  136. 
Browning  v.   Camden  &  W.  R  R  Co., 

1524. 
Browning  v.  Great,  etc..  Co..  1046. 
Browning  v.  Hinkle,  82,  1090,  1113. 
Browning  v.  Mullins.  1262,  1590. 
Brownloe  v.  Campbell.  196. 
Brownlee  v.  Ohio.  etc..  R.  R  Co.,  89,  92, 

114,  1S8.  198. 
Brownson  v.  Chapman,  464,  568. 
Broyles  v.  McCoy,  325. 
Bruas'  Appeal,  469.  471. 
Bruce  v.  Lord,  1105. 
Bruce  v.  Nickerson,  206. 
Bruce  v.  Piatt.  854,  863. 
Bruce  v.  Smith.  451.  456.  547. 
Bruff  v.  Mali,  395.  398.  399. 


to  the  foot-paying.'] 

Bruffett  v.  Great  Western  R  R,  863, 

1275,  1480. 
Brum  v.  Merchants',  etc..  In?.  Co..  963. 
Brumley  v.  Westchester,  etc.,  Soc,  1146. 

1165. 
Brundage  v.  Brundage,  16,  704,  710,  711, 

714,  743. 
Brundage  v.  Monumental,  etc.,  Min.  Co., 

259.  290. 
Brundred  v.  Rice.  951.  975.  1520. 
Brunswick,  etc.,  R.  R.  v.  Hughes,  1320. 
Brunswick,  etc..  R'y,  In  re,  1523. 
Brunton's  Claim.  Re.  1255, 
Bruschke  v.  Der  Nor  J,  etc.,  Verein,  1145. 
Brush  v.  Fisher.  1548. 
Brush  Electric  Co.  v.  Brush,  etc.,  Co..  947. 
Bryan  v.  Baldwin.  5GG,  574,  604,  606,  607, 

790. 
Bryan  v.  Board,  etc.,  641. 
Bryan  v.  Leu-is,  470. 
Bryant  v.  Goodnow,  806. 
Bryant  v.  Telegraph  Co.,  1593. 
Bryon  v.  Carter,  6S6,  6S8,  690.  691. 
Bryson  v.  Raynor,  598,  605,  606,  607,  784. 
Bryson  v.  Warwick,  etc.,  Co.,  1145,  1502. 
Buchan,  Ex  parte,  681. 
Buchan's  Case,  332. 
Buchanan  v.  Litchfield,  144. 
Buchanan  v.  Meisser,  300. 
Bucher  v.  Dillsburg,  etc.,  R.  R  Co.,  89, 

100,  188. 
Buck  v.  Buck,  663. 

Buck  v.  Seymour,  1364,  1383,  1488,  1505. 
Buck,  etc..  Co.  v.  Lehigh,  etc.,  Co.,  865. 
Buckeridge  v.  Ingram,  22. 
Buckeye,  etc.,  Co.  v.  Harxey,  648,  835. 
Buckfield,  etc..  R  R  Co.  v.  Irish.  116. 
Buckland  v.  Adams  Exp.  Co.,  1579. 
Buckley  v.  Briggs,  1190,  1193,  1196. 
Buckhn  v.  Bucklin,  652. 
Buckmaster  v.  Consumers'  Ice  Co.,  532. 
Buckner  v.  Hart,  1557,  1567. 
Bucksport  &  Bangor  R.  R.  Co.  v.  Buck, 

119.  224.  230.  632.  806. 
Bucksport   &  Bangor  R.   R.  Co.  v.  In- 
habitants of  Brewer,  119,  120,  128, 

152 
Budd  v.  Monroe,  437.  462,  532,  850. 
Budd  v.  Multnomah  St.   R.    R  Co.,  162, 

164,  166.  173.  781.  783,  7S6. 


xlii 


TABLE    OF    CASES. 


[The  references  are 

Budd  v.  New  York,  1515,  1000,  1950. 

Budd's  Case,  3G8. 

Buell  v.  Buckingham,  918,  990,995, 1065. 

Buell  v.  Com'rs  of  Fayetteville,  702. 

Buenos  Ayres,  etc.,  Co.,  Re,  3GG,  957. 

Buenz  v.  Cook,  272,  321. 

Buffalo  &  Allegany  R  R  Co.  v.  Cary, 

233.  308. 
Buffalo  &  N.  Y.  G  R  R  Co.  v.  Brainerd, 

1524,  1526. 
Buffalo,  etc.,  v.  Hatch,  234 
Buffalo,  etc.,  Co.  v.  Delaware,  etc.,  R  R, 

1517. 
Buffalo,  etc.,  Institute  v.  Bitter,  1103. 
Buffalo,  i  I  ..   !'.   l:.  Co.  v.  Buffalo. 

R  R.  Co.,  1514,  1570. 
Buffalo,  eta,  I:.  R.  I  !a  v.  Clark,  92,  11& 
Buffalo,  eta,  R.  K.  Co.  v.  Dudley 

111,  118,  174,  176,  L92, 
Buffalo,  eta,  K.  R,  I 

97,  118,  237. 
Buff.  R  R  Ca  v.  II 

Bull'.  R.  I  o.   v.  Lain) 

Buffalo,  etc.,  R  R  Co.  v.  1 
Buffalo,  eta,  R'y  Co.  v.  New  Yi 

R  R  Co.,  879. 
Buffalo  Grape  Sugar  Ca  v.  AJbei 

51 
Buffalo  Lubricating  Oil  Co.  v.  Stan 

Oil  Co.,  1009. 
Buffalo,  Matter  oi   Lee'a  Bank  of,  ' 
Bufflngton  v.  Bardon,  805,  1042. 
Buffit  v.  Troy  &  Boston  U.  1 
Buford  \.  Keokuk  Northern  Line  Packet 

Co.,  958,  11".:;. 
Bugg,  Ex  parte, 
Bugg'sCa  18a 

Bulkley  v.  Beg,  etc.,  Co.,  1148. 
Bulkley  v.  Bri  ..  1094. 

Bulkley  v.  Derby  Fishing  Ca,  1092,  1098, 

1106. 
Bulkley  v.  Whitcomb,  299,  300,  935. 
Bull  v.  Douglas,  785,  7s7.  791. 
Bullard  v.  Bank,  688,  701. 
Bullard  v.  Bell,  284,  289,  80& 
Bullard  V.  Kinney,  G68. 
Bullard  v.  Nantucket  Bank,  1018. 
Bullock  v.  Bullock.  486. 
Bullock  v.  Chapman,  859. 


to  the  foot-paging.] 

Bullock  v.  Consumers',  etc.,  Co..  1112. 
Bullock  v.  Falmouth.  88,  111,  609. 
Bullock  v.  Kilgour,  296. 
Bulmei'-  331. 

Bulow  v.  city  of  Charleston,  700. 
Bult  v.  Worrell,  1191. 
Bumgardner  \.  L  avitt,  4 
Buncombe,  etc.,  Commissioners  v.  ] 

m  I,  1512. 

Buncombe  Turnpike  Co.  v.  M 

Bundy  v.  t 

rackson, 

: 

Bunn's  X7. 

Im'r  v.  Camden,  et<  .,  1,'.  K., 

Bui 

I 
Bur<  h  \.  Ti 

I 

1216. 

(  I         K'y, 
15" 

Bur  ham  v.  Savii  k.  1018. 

Bui!.  Ham,  751,  3 

Bin!  SU. 

Burke 

Burke  v.  Smith.  181,  177.°: 

Burker  v.  Lj  udon,  I 

Burkinahaw  v.  Nichols,  31,  81,  - 

Bui  kilt  v.  Tayl. 

Burleigh  v.  Ford,  II 

Burlingame  \.  1  !07. 

Burh  of,  v.  Burlington  "W 

Ca,  819. 

Burlington,  .  v.  Palmer,  91. 

Burlington,  -  ta,  R  R  v.  Chicago  Lum- 
ber Co..  1G 

Burlington,  i  ta,  R  B,  v.  Y,  rry,  1894. 

Burlington,  eta,    R   R   Ca   v.  White, 

Burlington,  etc..  Ky  v.  Dey,  1514 
Burlington,  eta,  R'y    ^.  Simmons,  1856. 


TABLE    OF    OASES. 


xliii 


[The  references  are 

Burlington  &  Missouri  River  R  R.  Co.* 

v.  Boestler,  126,  128. 
Burlington's  Case,  106. 
Burlinson's  Case,  836. 
Burmester  v.  Norn's,  1185,  1186. 
Burmingham  v.  Sheridan,  461,  462. 
Burmpe  v.   Haskins  Steam-engine  Co., 

272. 
Burnes  v.  Atchison,  1156. 
Burnes  v.  Pennell,   347,    479,    496,    734, 

1049. 
Burnham  v.    Bowen,    1315,    1359,    1399, 

1400,  1402. 
Burnham  v.  San  F.  &  Co.,  184. 
Burns  v.  Beck,  223,  227,  241,  324,  930. 
Burns  v.  Commencement,  etc.,  Co.,  924. 
Burns  v.  Lawrie's  Trustees,  692. 
Buruside  v.  Dayrell,  1036,  1041. 
Burnsville,  etc.,  Co.  v.  State,  531. 
Burr  v.  Charitan  Co..  147. 
Burr  v.  McDonald,  1053,  1058. 
Burr  v.  Sherwood,  709. 
Burr  v.  Wilcox,  14,  24,  20,  27,  107,  164, 

239,  301,  332. 
Burrall  v.  Bushwick  R   R.   Co.,   13,  20, 

515,  520,  532,  7S4,  785,  889. 
Burrill  v.  Boardman,  996. 
Burrill  v.  Calendar,  etc.,  Co.,  927,  928. 
Burrill  v.  NahantBank,  1072,  1093,  1100. 
Burroughs  v.  Burroughs,  3. 
Burroughs  v.  Commissioners,  1236. 
Burroughs  v.  North  Carolina  R.  R.  Co., 

16,  711. 
Burrows  v.  Smith,  28,  98,  99,  102,  122, 

125,  240. 
Burt  v.  Batavia  Paper  Mfg.  Co.,  1114. 
Burt  v.  British,  etc.,  Ass'n,  1137. 
Burt  v.  Dutcher,  789. 
Burt  v.  Farrar,  95,  212. 
Burt  v.  Rattle,  371,  1261. 
Burtis  v.  Buffalo  &  S.  L.  R  R,  1533. 
Burton  v.  Burley,  1081. 
Burton's  Appeal,  995. 
Burton,  etc.,  Co.,  In  re,  684. 
Burton  &  Saddlers'  Co.,  684. 
Busbee  v.  Freeman,  741. 
Busey  v.  Hooper,  15,  214,  798,  1137. 
Bush  v.  Buckingham,  940. 
Bush  v.  Johnson,  1490. 
Bush's  Case,  27. 


to  the  foot-paging.] 

Bushel  v.  Commonwealth,  etc.,  Ins.  Co., 

1020,  1175. 
Bushnell  v.  Beloit,  137. 
Bushnell  v.  Consolidated,  etc.  Co.,  312. 
Bushnell  v.  Park  Bros.  &  Co.,  060,  1182. 
Bustros  v.  White,  682. 
Butcher  v.  Dillsburg  &  M.  R.  R  Co., 

221. 
Butchers',  etc.,  Bank  v.  McDonald,  878. 
Butchers'  Union   Co.  v.   Crescent  City 

Co.,  1944.  1949. 
Butler  v.  Aspinwall,  228. 
Butler  v.  Cumpston,  105,  328,  336,  355. 
Butler  v.  Dunham,  133. 
Butler  v.  Duprat,  1084. 
Butler  v.  Eaton,  239. 
.  Butler  v.  Edgerton,  1207. 
Butler  v.  Finck,  568. 
Butler  v.  Glen  Cove  Starch  Co.,  511,  704 
Butler  v.  Glens,  etc.,  R.  R.,  19. 
Butler  v.  Myer,  1207. 
Butler  v.  Poole,  243,  302. 
Butler  v.  Rahm,  1238,   1273,  1281,  1293, 

1296,  1297,  1300.  1383. 
Butler  v.  Watkins,  1007. 
Butler  University  v.  Scoonover,  91. 
But  man  v.  Howell,  586,  602. 
Butt  v.  Monteaux,  1041. 
Butte  Hardware  Co.  v.  Wallace,  321. 
Butterfield  v.  Beardsley,  667,  672. 
Butterfield  v.  Corning,  1467. 
Butterfield  v.  Cowing,  1131. 
Butterfield  v.  Spencer,  667. 
Butterfield  v.  Town  of  Ontario,  1237. 
Butternuts  &  Oxford   Turnpike  Co.  v. 

North,  122. 
Butterworth  v.  Kennedy,  5S9. 
Butterworth  v.  O'Brien,  732. 
Button  v.  American  Tract  Soc,  1019. 
Button  v.  Hoffman,  1050,  1051. 
Buttrick  v.  Nashua,  etc.,  R.  R,  623,  1063, 

1118. 
Butts  v.  Burnett,  576,  597,  604,  781.   ' 
Butts  v.  Wood,  926. 
Butz  v.  Muscatine,  142. 
Buxton  v.  Lister,  460. 
Bwlch-y-plwm  Lead  M.  Co.  v.  Baynes, 

201,  210. 
Byam  v.  Beckford,  666. 
By  bee  v.  Oregon,  etc.,  R  R,  884. 


xliv 


TABLE    OF    CASES. 


[The  references  are 

Byers  v.  Beattie,  474. 

Byers  v.  Franklin  Coal  Co.,  "51. 

Byers  v.  Rollins,  390,  400,  841, 1145, 1148. 

Byrne  v.  New  York,  etc,  Co.,  859. 

Byrne    v.   Union   Bank    of    Louisiana, 

686. 
Bywaters  v.  Paris,  etc.,  R'y,  233,  883. 

c. 

Cable  v.  McCune,  278,  293. 

Cable  R'y,  Re.  887. 

( labot  &  W.  S.  B.  v.  Chapin,  226. 

Cacbar,  Re\  195. 

Cadet t  v.  Earle,  409. 

Cady  v.  Potter,  501,  528. 

Cady  v.  Smith,  I 

Cagill  v.  Woolbridge,  1427. 

Cagney,  Tn  re,  840. 

Cagwiu  v.  Town  of  Hancock,  136,   1  10. 

149. 
Cahall  v.  Citizens',  etc.,  Ass'n,  880. 
Cahill  v.  Bigger,  1015,  1016. 
Cahill  v.  Kalamazoo  Ins.  Co.,  863,  1021, 

1058,  1065. 
Calm  v.  W.  U.  Tel.  Co.,  57a 
Cahoon  v.  Bank  of  Utica,  598. 
Cain  v.  Pullen,  680. 
Cairo,  etc.,  R.  R.  v.  Fackney,  1! 
Cairo,  etc.,  R  R  Co.  v.  Mahoney,  1089. 
Cairo,  etc.,  R  R  Co.  v.  Sparta,  187,  143. 
Cake  v.  Pottsville  Bank,  1077. 
Calder,  etc.,  Nav.  Co.  v.  Pilling,  102a 
Calderwood  v.  McRae,  175. 
Caldicott  v.  Grifliths,  601. 
Caldwell  v.  Burke  Co.,  136. 

Caldwell  v.  Nat'l  Mohawk  Bank,  10S5. 

Caldwell  v.  New  Jersey  Steamboat  <  ... 
1011. 

Caledonian,  etc.,  Co.  v.  Curror,  1031. 

Caledonian,  etc.,  R'y  v.  Helensburg,  etc., 
1044,  1541. 

Caledonian,  etc.,  R'y  v.  Magistrates,  etc., 
1044. 

Caledonian  R'y  v.  Solway  R'y,  15:',s. 

Caley  v.  Phila.  &   Chester  County  R.  R. 
Co.,  120,  121,  12-2.  133,   187,  235,  635. 

Calhoun  v.  Lanaux,  1434. 

Calhoun  v.  Memphis,  eta,  R  R,  1385. 

Calhoun  v.  Millard,  136. 


to  the  foot-paging."] 

Calhoun  v.  Paducah   &    M.    R   R    Co.. 

1381. 
Calhoun  v.  St.  Louis,  etc.,  R'y,  1402,  1 !  I 

1451,  1155. 
Calhoun  v.  Steam  Ferry  Boat,  etc.,  25a 
California  v.  Central  Paa  Kailroad  Co., 

Ill 
California  v.  Pacific  R  R  Co.,  2,  776. 
California,  etc.,   Co.  v.   Alta,    etc.,  Co.. 

15) 
California,  etc.,  Co.  v.  Russell.  226. 
California,  etc..  I  bafer,  114. 

California,  eta,  Hotel  Co.  v.  Calender, 

Calisher1 

kins  v.  Atkinson,  2 
illahan  v.  Louisville  &  N.  R  •  ',,.,  1513. 

lanan  v.  Wind  II. 

Callao  Bis.  I  •  .  Re, 

Callaway,  el  I     ,      •  '•  1  "'35. 

Callender  v.  Painesville,  i  i  ..  R  R,  882. 

Calvert  et  aL  v.  state  1568. 

( 'ah  in  v.  Williai 

Can.  v.  Westchester  R  R  Co.,  821. 

Camblos  v.  Phil,  eta,  R  R  Co,  9S0. 

1142,  15ia 
Cambrian  R'y,  I  1 166,  141 

Cambridge  v.  Cambridge  R  R,  1572. 
Cambridge  Water-works  v.  Somerville 

Dy(  .-<».  -.'90. 

i  "anidt  n  v.  1 ».  -i  cm  us.  251. 
( iamden  v.  Mayhev 
Camden  v.  Stuart,  57,  67. 
Camden,  eta,  Assoa  v.  Jones,  516. 
Camden,  eta,  R  R  v.  Briggs,  1516. 
Camden,  eta,  R  R  v.  Elkins,  832,  833, 

834,835,  114a 
Camden,  etc..  R  R  v.    May's    Landing, 

eta,  R  R.  974,  1496,  1504,  1605. 
Camden  Rolling-Mil]  Co.  v.  Swede  Iron 

Co..  1175.  1176. 
Came  v.  Brigham,  266.  296,  1160. 
Cameron   v.   Durkheim,   478,  502,   575, 

787.  791. 
( lameron  v.  Havemeyer,  017. 
( lameron  v.  Seaman,  85a 
Cameron  v.  Tome,  123a 
(  animai  k  v.  Lewis,  158a 
Cammeyer   v.   United,   etc.,   Churches, 

849,  1064. 


TABLE    OF    CASKS. 


xly 


[The  references  are 

Camp  v.  Barney,  1433,  1456,  1457. 
Camp  v.  Byrne,  795. 
Camp  v.  Taylor,  1029. 
Camp  v.  W.  U.  Tel.  Co.,  1593. 
Campbell   v.    American,   etc.,   Co.,  362, 

365,  533,  589,  1137. 
Campbell  v.  Argenta,  etc.,  Co.,  805,  1108, 

1265. 
Campbell  v.  Cypress,     etc.,     Cemetery, 

906,  1216,  1224. 
Campbell  v.  Dulutb,  etc.,  R'y,  1180. 
Campbell  v.  Fleming,  492. 
Campbell  v.  James,  1099. 
Campbell  v.  Kenosba,  132. 
Campbell  v.  London,  etc.,  R'y.  367. 
Campbell  v.  Marietta,  etc.,  R.  R,  1519. 
Campbell  v.  Miss.  Union  Bank,  863. 
Campbell  v.  Morgan,  26,  44,  55. 
Campbell  v.  Paris,  etc.,  R.  R  Co.,  131. 
Campbell  v.  Parker,  604. 
Campbell  v.  Pope,  1095. 
Campbell  v.  Poultney,  831,  843. 
Campbell  v.  Railroad    Co.,    1313,     1322, 

1328,  1329,  1354. 
Campbell  v.  Richardson,  468. 
Campbell  v.  Texas,  etc.,  R  R,  1292, 1339, 

1348,  1363,  1386. 
Campbell  v.  Trustees,  1091. 
Campbell  v.  Woodstock,  584. 
Campbell  v.  Wright,  565,  574. 
Campbell's  Case,  936,  1205. 
Campbell,  etc.,  Co.  v.  Hering,  1003. 
Canada  Southern    R'y  Co.  v.  Gebhard, 

999,  1466,  1479,  1944. 
Canal  Bridge  v.  Gordon,  1092,  1093. 
Canal  Co.  v.  Railroad  Co.,  887,  1543. 
Canal,  etc.,  Co.  v.  St.  Charles,  etc.,  Co., 

1555. 
Canal,  etc.,  R  R.  v.  Crescent,  etc.,  R  R, 

1570. 
Canal,  etc.,  R.  R.  v.  Orleans  R  R,  1570. 
Canal  St,  etc.,  Co.  v.  Paas,  877. 
Canandaigua  Academy  v.  McKechine, 

1165. 
Candee  v.  Pennsylvania  R  R  Co.,  1532, 

1533. 
Candy  v.  Globe  Rubber  Co.,  1007. 
Canfield  v.  Minn.,  etc.,  Ass'n,  604. 
Cannon  v.  Bryce,  477. 
Cannon  v.  New  Orleans,  1599.  , 


to  the  foot-paging.] 

Cannon  v.  Trask,  165,  799,  811,  843. 

Cantillon  v.  Dubuque,  etc.,  R.  R  Co.,  156. 

Cape  v.  Dodd,  580. 

Cape  Breton  Co.,  In  re,  442.  913,  916. 

Cape,  etc..  Co.,  In  re,  828,  842. 

Cape  Fear,  Bank  of,  v.  Edwards,  759. 

Capel  v.  Sims,  etc.,  Co.,  195,  915. 

Cape's   Executor's  Case,   344,   352,  353, 

355. 
Capital,   etc.,   Co.    v.  Charter,  etc.,  Co., 

1585. 
Capital,   etc.,   Ins.  Co.,  Re,  8S5. 
Capper,  Ex  parte,  1037. 
Capper's  Case,  107,  333,  358. 
Cappin  v.  Greenlees,  418. 
Cappur  v.  Harris,  460. 
Capron  v.  Capron,  743. 
Capron  v.  Stout,  274. 
Capron  v.  Thompson,  576,  578. 
Caraher  v.  Royal  Ins.  Co.,  921. 
Card  v.  Carr,  1071. 
Cardiff,  etc.,  Bank,  Re,  1033. 
Cardot  v.  Barney,  1456. 
Carew  v.  White,  679. 
Carew's  Estate  Act,  In  re,  1118. 
Carey  v.  Brown,  1314. 
Carey  v.  Cin.  &  Chicago  R.  R.  Co.,  210, 

880,  882. 
Carey  v.  Des  Moines,  etc.,  Co.,  1042. 
Carey  v.  Houston,  etc.,   R'y,   933,   1128, 

1337,  1338,  1343,  1472,  1473. 
Cargill  v.  Bower,  205,  487,  976. 
Carli  v.  Stillwater,  etc.,  Co.,  1562. 
Carling,  Ex  parte,  209,  491. 
Carling's  Case,  46,  78,  83. 
Carlisle  v.  Cahawba  &  Marion  R  R  Co., 

168. 
Carlisle  v.  Evansville,  Ind.  &  C.  S.  R  R 

Co.,  188. 
Carlisle  v.  Saginaw,  etc.,  92,  110. 
Carlisle  v.  Southeastern  R'y,  728. 
Carlisle  v.   Terre  Haute    &    Richmond 

R.  R  Co.,  633. 
Carmichael's  Case,  1036. 
Carmody  v.  Powers,  1047. 
Carnaghan  v.  Exporters',  etc.,  Co.,  854, 

864. 
Carnatic,  Nabob  of,  v.  East  India  Co., 

291. 
Carnegie,  etc.,  Co.  v.  Hulbert,  1180. 


xlvi 


TABLE    OF    0A8ES. 


[The  references  are 

Carolina  Nat'l    Bank,   Ex   parte,    1197. 

1449. 
Carothers  v.  Alexander,  1077 
Carpenter  v.  Black  Hawk,  etc.,  Min.  Co., 

1200,    1261,    12G2,   1208,    1273,    1277. 

1300,  1321. 
Carpenter  v.  Canal  Co.,'l324,  1382. 
Carpenter  v.  Catlin.  1474. 
Carpenter  v.  Dan  forth,  431. 
Carpenter  v.  Fains  worth,  1104. 
Carpenter  v.  Longan,  122^. 
Carpenter  v.  Marine  Bank,  ! 

288. 
Carpenter  v.  N.  Y.  &  N.  IX  R  R,  724 
Carpenter  v.  Rommel,  12 
Carpenter  v.  Westinghouse     Air-brake 

Co.,  11  i 
Carr  v.  Chartiere  Coal  C 
Carr  v.  Commercial  Bank,  1170. 
Carr  v.  Hinchliff,  570l 
Carr  v.  Iglehart,  822, 
Carr  v.  Lancashire,  etc.,  R'y,  r 
Carr  v.  Le   Fevre,   88,   84   48,   64, 

1230,  1231. 
Carr  v.  Rischer, 
Carriage  Co.,  Re,  909. 
Carriage,  etc.,  Assoc,  In  re,  90S. 
Carrick's  <  !ase,  1037. 
i  Earrier  v.  Concord  R  R,  1 195,  13 
Carrol  v.  Green,  801,  802,  808,  304. 
can-oil  v.  Campbell,  1582. 
Carroll  v.  Cone,  716. 
Carroll  v.  East  St.  Louis,  1000. 
Carroll  v.  Mullanphy  Savings  Bank,  .~>17, 

r,i7.  cor,.  688,  691,699,  I 
Carroll  v.  St.  Johns,  etc.,  II 
Carroll  County  v.  Smith,  ill.  lie,  us, 

152 
Carron  Iron  Co  v.  McClaren,  1174 
Carrugi  v.  Atlantic,  etc.,  Ca,  1110. 
Carson  v.  Antic-  Mining  Co.,  I 
(arson  v.  Central  R  R,  1561. 
Carson  v.  Iowa,  etc.,  Co..  603,  605,  1148. 
Carson,  etc.,  Bank  v.  Carson,  etc..  Co., 

970. 
Cartan  v.  Father  Mathew,  i,  tv. 

173. 
Carter  v.  Ford,  1028. 
Carter  v.  Ford  Plate  Glass  Co.,  1159,  1 172. 
Carter  v.  Good,  443. 


to  the  foot-paging.] 

Carter  v.  Howe  Machine  Co.,  1007,  1008, 

1009,  1010. 
Carter  v.  Manuf.  Nat'l  Bank,  445,  Q 
Carter  v.  Taggart,  i 

Carter  v.  Union   Printing  Co.  et  al.,  216. 
Carter  et  al.   v.   Rome,    etc.,  Co.   et  al., 

189 

tmell'aC  1       "      >7L 

Cartwrigbt  v.  Dickinson,  102.  213. 

r  v.   Braintree  Ml  19,  271. 

v.  Mann: 
Can  v.  Hulme,  I 

16. 
Caryl  v.  McElrath,  1 
v.  Bank.  521,  « 
I 

990. 
v.  Kelly,  1" 
1         •    M   :   hand,  1 118. 
I 

-v  [man,  1016,  1090. 

iit  Ifobilier, 

',  5 1 . 

-7. 
v.  Dillon,  186,  140. 

v.  Ottai  1141.    1146. 

154 
v.  Pittsburgh,   Va  arleston 

K'>  '.  124,  127.  171. 

.id  v.  \\.  inmau 

II  v.  Lexis  .  797,  804. 

( !astellan  v.  Hi 
Castello  v.  city  Bank  of  Albany,  606. 

107. 
Castle  v.  Belfast,  etc.,  Co..  107a 

„•  v.  Lewis.  1066,  IS 
Castleman  v.  Holm  339,  350. 

veil  v.  Putnam.  571,  572,  576,  590. 
<  iatawba,  etc,  I  k*  v.  Flow  ere,  l ! 
Catch  pole  v.  Ambergate,  etc.,  B'j 

17s.  179 

i  \.  Ei  i  rleigb,  I 
Caterham   K*y   v.   Loudon  &  Brighton 

R'y,  151 
Gates  v.  Sparkman.  460,   181,  917. 


TABLE    OF    CASES. 


xlvii 


Catlett  v.  Starr,  1100. 

Catlin  v.  Eagle  Bank,  990. 

Catlin  v.  Green.  384. 

Catskill  Bank  v.  Gray,  9G7. 

Caulkins  v.  Memphis,  etc.,  Co.,  529,  745. 

Causland  v.  Davis,  781. 

Cave  v.  Cave,  1115. 

Caylus  v.  New  York,  etc.,  R  R  Co.,  1199, 

1200. 
Cayuga,  etc.,  v.  Kyle,  90,  233. 
Cayuga  B.  Co.  v.  Magee,  1576. 
Cayuga  R'y  v.  Niles,  1381. 
Cazeaux  v.  Mali,  398,  478,  486. 
Cecil,  Matter  of,  822. 
Cecil  National    Bank    v.    Watsontown 

Bank,  097,  099. 
Cedar,  etc.,  Co.  v.  Cedar,  etc.,  Co.,  1163. 
Cedar,  etc.,  Ins.  Co.  v.  Butler,  208. 
Ceeder  v.  Load,  etc.,  Co.,  1088. 
Cefu  Cilcen  Min.  Co.,  In  re,  1192. 
Cent.,  etc.,  Co.  v.  Hartshorn,  1166. 
Centennial  Board  of  Finance,  In  re,  892. 
Central  Agricultural,  etc.,  Assoc,  v.  Ala- 
bama Gold  Life,  etc.,  Co.,  231,  282, 

356,  629. 
Central  Bank  v.  Empire  Stone  D.  Co., 

1243.  1244,  1247. 
Central  Bridge  Co.  v.  Lowell,  1592. 
Central  City  Sav.  Bank  v.  Walker,  325. 
Central  Democratic  Ass'n,  Re,  7. 
Central,  etc.,  Assoc,  v.  James,  453. 
Central,  etc.,  Bank  v.  Levin,  1117. 
Central,  etc.,  Bank  v.  Walker,  1126. 
Central,  etc.,  Co.  v.  Chatham,  1089. 
Central,  etc.,  Co.  v.  Smitha,  1537. 
Central,  etc.,  Co.  v.  State,  1596. 
Central,  etc.,  Co.  of  N.  Y.  v.  Chicago, 

etc.,  Co.,  1392. 
Central,  etc.,  Co.  of  New  York  v.  United 

States,  etc.,  Co.,  1338. 
Central,  etc.,  Ins.  Co.  v.  Callaghan,  1047. 
Central,  etc.,  R  R  v.  Morris,  1530. 
Central,  etc.,  R  R.  Co.  v.  Twenty,  etc., 

R'y  Co..  677,  875. 
Central,  etc.,  R.  R  Co.  v.  Twenty-third, 

etc.,  R.  R  Co.,  877,  1499. 
Central,  etc.,  Tel.  Co.  v.  Bradbury,  1593. 
Central  Gold  Mining  Co.   v.  Piatt,  991, 

1207,  1261,  1300. 
Central  Mills  Co.  v.  Hart,  1319. 


[The  references  are  to  the  foot-paging.] 

Central  Nat.  Bank  v.  Hazard,  1343,  1455, 


1481. 
Central  Nat.  Bank  v.  United  States,  703, 

713,  762. 
Central  Nat.  Bank  v.  White,  681,  684. 
Central  Nat.  Bank  v.  Willistou,  023. 
Central  Nebraska,  etc.,  Bank  v.  Wilder, 

588,  708. 
Central  Ohio  Salt  Co.  v.  Guthrie,  648. 
Central  Park,  Matter  of,  1527. 
Central  Pr.  Co.  v.  Clements,  232,  235. 
Central  R  Rv.  Central  Trust  Co.,  1337, 

1355. 
Central  R  R  v.  Collins,  422,    631,    983, 

1142.  1521,  1538. 
Central  R  R  v.  Georgia,  etc.,  Co.,   773, 

1171,  1545. 
Central  R.  R  v.  Smith,  1534. 
Central   R    R.   v.  Twenty-third  St.  R., 

682. 
Central  R.  R.  &  BaukingCo.  v.  Atlantic, 

etc.,  R.  R  Co.,  7S9. 
Central  R  R.  &  Banking  Co.  v.  Ward, 

512. 
Central  R  R,  etc.,  Co.  v.  Claghorn,  15. 
Central  R  R.,  etc.,  v.  Papot,  713. 
Central  R,  R,  etc.,   Co.   v.   Pettus,    961, 

1158,  1309. 
Central  R  R  Co.   of    L.   I.,  Matter  of, 

1530. 
Central  R  R.  Co.  of  N.  J.  v.  Pennsylvania 

R.  R.  Co.,  422. 
Central  T.  Co.  v.  East  Tenn.,  etc.,  R  R, 

1345.  1398,  1460. 
Central  T.  Co.  v.  Florida,  etc.,  Co.,  1345. 
Central    T.    Co.   v.    Kneeland,    10,  1362, 

1364,  1380,  1383,  1384,  1387. 
Central  T.  Co.  v.  Marietta,   etc.,  R  R, 

933,  1375,  1441,  1442,  1444. 
Central  T.  Co.  v.  Ohio,  etc.,  R  R,  1372, 

1378,  1379,  1439. 
Central  T.  Co.  v.  St.  Louis,  etc.,  R'y,  1391, 

1399,  1435,  1447,  1542. 
Central  T.  Co.  v.  Tappan,  1451. 
Central  T.  Co.  v.  Texas,  etc.,  R'y,  1288, 

1290,  1353,  1389,  1390,  1391,  1421. 
Central  Trans.  Co.  v.  Pullman's  Car  Co., 

6,  648,  974,  1500,  1600. 
Central  Trust  Co.  v.  Grant,  etc.,  Works, 

1357. 


xlviii 


TABLE    OF    CASES. 


[The  references  are 

Central  Trust  Co.  v.  New  York  City,  etc., 
R  R,  1209,  1217,  133G,  1394,  1451. 

Central  Trust  Co.  v.  Richmond,  etc.,  Co., 
1392. 

Central  Trust  Co.  v.  Seasonwood,  1453. 

Central  Trust  Co.  v.  Sheffield,  etc.,   R'y, 
1391,  1451. 

Central  Trust  Co.  v.  Sloan,  1391,  1482. 

Central  Trust  Co.  v.  Wabash,  etc.,  R'y, 
932,  1277,  130S,  1339.  1846,  1850,  1859, 
1393,    1397,    1898,    1401,    1409.    111'. 
112(i,    1433,    1440,    1111.    1112.    ]■ 
llll.  1445,  1458,  M.V.i.  1481. 

Central  Turnpike  Co.  v.  Valentini  . 

Cerl  i in  Stockholders  of  Cal.  Nat' I  Bank, 

In  re,  304. 
Chafee  v.  Sprague,  452. 
Ohaffev.  Ludeling,  809,  825. 
Chaffee  v.  Middlesex  R  R, 
Chaffee  v.  Quidnick  < '"..  1 125. 
Chaffee  v.  Rutland  R  R  Co.,  860, 

868,  869,  873,  702,  703,  71-  -'08. 

Chaffee  County  \.  Potter,  184. 
Chaffin  v.  Cummings,  87,  807,  S 
Chafford  v.  Board  of  Supervisors,  1020. 
Chagrin,  etc.,  P.  R  Co.  v.  Cane,  L589. 
Chamberlain  v.  Bromberg,  262,  988 
Chamberlain  v.  Burlington,  184 
Chamberlain  v.  Chamberlain,  994,  1001. 
Chamberlain  v.  Conn.,  etc.,  R  R,  1300, 

133G,  1852. 
Chamberlain  v.  Greenleaf,  572,  578,  577, 

592.  598. 
Chamberlain  v.  Huguenot,  etc.,  271 

7:55,  1167. 
Chamberlain   v.    Mammoth,    etc.,    Co., 

1164.  1167. 
Chamberlain  v.  Pacific,  etc.,  Co.,  928. 
Chamberlain  v.  Painesville  &  Hudson 

R  R  Co.,  119,  120,  123,  128,  2 IS.  797, 

806. 
Chamberlain  v.  Rochester,  etc.,  Co.,  1414. 
Chamberlain  v.  St  Paul,  etc.,  R  R,  1276. 
Chambers  v.  City  of  St  Louis,  993. 
Chambers  v.  Falkner,  9S3. 
Chambers  v.  Manchester,  etc.,  R'y  Co., 

1253. 
Chambersburg   Ins.  Co.   v.  Smith,  845, 

524,  698. 


to  the  foot-paging.] 

Champagnie,  In  re,  1216. 

Champion  v.  Memphis,  etc.,  R  R  Co.. 

633,  639. 
Chandler  v.  Bacon.  79,  909,  915,  1147. 
('handler  v.  Braiuard,  667. 
Chandler  v.  Brown,  217,  262,  263,  306. 
Chandler  v.  Hoag,  853, 
Chandler  v.  Keith,  161,  260,  262,  i 
Chandler  v.  Monmouth  Bank,  925. 
Chandler  v.  Northern  Cross  R  R  Co., 

289,  245. 
Chandler  v.  Siddle,  5,  261,  1427. 

Chandler's  1 1. 

Chapln  v.  ( lambria,  etc.,  i  kx,  II 
Chapin  v.  First,  etc.,  Boc,  665. 
Chapin  v.  Merchants'  Nat  Bank,  421. 
Chapin  V.  School  District,  96S,  1 
Chapin  v.  Sullivan  R  R.  Co..  1531. 
( lhapin  v.  Thompson,  1 126. 
Chapin  v.  Vermont  etc.,  R   R,   1202, 

1 222. 
Chapleo   v,   Brunswick    Building  Soc., 

118 
Chaplin  v.  Clarke.  103.  1041. 
Chapman  v.  Barney,  066,  1183. 
<  ftapman  v.  Brook 
Chapman  \.  City  Council,  439. 
Chapman  v.  Comstock,  985. 
( lhapman  v.  I  k>ray,  i 
Chapman  v.  Douglas  County,  1153. 
Chapman  v.  Gat  -    139. 

Chapman  v.  Mad  River  &  Lake  Erie  R 

R  Co..  119. 
Chapman  v.  New   Orleans    Gas    Light 

etc.,  Co.,  529,  619. 
•  hapman  v.  Phoenix  Nat'l  Bank,  512. 
Chapman  v.  Pittsburg,  etc.,  R  R,  1381. 
Chapman  v.  Porter,  94,  960,  966. 
(  ha]  man  v.  Railroad  Co.,  205. 
Chapman  v.  Reynolds,  408. 
Chapman  v.  Shepherd,  357,  567,  579. 
Chapman's  Case.  97. 
Chapman  &  Barker's  Case,  109,  327,  330, 

336. 
Chappel  v.  Skinner,  781. 
Chappell's  Case,  448,  358. 
Charitable  Association  v.  Baldwin,  1019, 

1058. 
Charitable   Corporation    v.  Sutton,  898, 

1031. 


TABLE    OF    CASES. 


xlix 


[The  references  are 

Charity  Hospital  v.  New  Orleans,  etc., 

Co.,  1545,  1547. 
Charles  River    Bridge   Co.   v.   Warren 

Bridge,  875,  1577.  1941. 
Charleston  v.  People's  Nat'l  Bank.  761. 
Charleston  Ins.  &  Trust  Co.  v.  Sebring, 

922,  1144. 
Charlick  v.  Flush,  etc.,  R.  R,  674. 
Charlotte,   etc.,  R.   R.   v.   Gibbes,  1515, 

1950. 
Charlotte,  etc.,  R  R.  Co.  t.  Blakely,  92, 

114,219. 
Charlton   v.   Newcastle,  etc.,  Co.,  1139, 

1502,  1510. 
Charter  Oak  Ins.  Co.  v.  Sawyer,  1005. 
Chartiers  R'y  v.  Hodgens,  235,  884,  1271, 

1483,  1524,  1559. 
Chase  v.  Burritt,  412. 
Chase  v.  Curtis,  278,  292,  293,  296. 
Chase  v.  East  Tennessee,  etc.,  Railroad 

Co.,  Ill,  172,  1025. 
Chase  v.  Hibernia  Nat.  Bank,  430. 
Chase  v.  Lord,  14,  271,  285,  304,  321,  331. 
Chase  v.  Sycamore  &  Courtland  R.  R 

Co.,  126,  128. 
Chase  v.  Tuttle,  1062,  1260. 
Chase  v.  Vanderbilt,  367,  373,  712.  1145, 

1146. 
Chnsis,  etc.,  Co.  v.  Baston,  etc.,  Co.  878. 
Chatauqua  County  Bank  v.  Risley.  992. 

1423. 
Chater  v.  San   Francisco  S.  F.  Co.,  102, 

113,  456,  461. 
Chattanooga,  etc.,  R.  R.  v.  Liddell,  1111. 
Chatteroi  R'y  Co.  v.  Kinner,  1524. 
Cheale  v.  Ken  ward,  355.  451,  460. 
Chedworth  v.  Edwards,  784. 
Cheeney  v.  Lafayette,  etc.,  R'y  Co.,  926. 
Cheever  v.  Meyer,  619,  622. 
Cheever  v.  Rutland,  etc.,  R.  R,  1409. 
Cheltenham  &  G.W.  N.  R'y  Co.  v.  Daniel, 

87,  518. 
Chemical,  etc.,  Bank  v.  Wagner.  1083. 
Chemical  Nat.  Bank  v.  Armstrong,  595, 

1082. 
Chemical  Nat,  Bank  v.  Colwell,  521,  852, 

854. 
Chemical  Nat.  Bank    v.    Kohner,    1078, 

1085. 
Chenango  Bridge  Co.  v.  Paige,  316. 
D 


to  the  foot-paging.] 

Chenango  County  Ins.  Co.,  In  the  Mat- 
ter of  the,  812,  840. 

Chenango,  etc.,  Co.  v.  Lewis,  1070. 

Chenango,  etc.,  Ins.  Co.,  Re,  812,  840. 

Chenango  Ins.  Co.,  Matter  of,  1058. 

Cheraw  &  Chester  R.  R.  Co.  v.  Garland, 
158,  225. 

Cheraw  &  C.  R.  R  Co.  v.  White,  223. 

Cherokee  Iron  Co.  v.  Jones,  968. 

Cherokee  Nation  v.  Kansas  R'y,  1526. 

Cherry  v.  Colonial  Bank,  977. 

Cherry  v.  Frost,  547,  593,  594. 

Chesapeake  &  Ohio  Canal  Co.  v.  Balti- 
more &  Ohio  R  R.  Co.,  858,  863,  875, 
877. 

Chesapeake  &  Ohio  R'y  Co.  v.  Miller, 
773,  774,  1483. 

Chesapeake  &  O.  R.  R  Co.  v.  Paine,  22, . 
612,  614,  616,  624. 

Chesapeake  &  O.  R.  R  Co.  v.  Virginia, 
773,  774. 

Chesapeake,  etc.,  Co.  v.  Blair,  1223, 1226, 
1232. 

Chesapeake,  etc.,  R.  R,  Co.  v.  Griest,  962. . 

Chesapeake,  etc.,  Tel.  Co.  v.  Baltimore, 
etc.,  Tel.  Co.,  1596. 

Cheshire  Banking  Co.,  Re,  331. 

Cheshire,  etc.,  Telephone  Co.  v.  State,  757. 

Chesley  v.  Cummings,  239. 

Chesley  v.  Pierce,  350,  353. 

Chesnut  v.  Pennell,  266,  297. 

Chesnut  Hill  Turnpike  v.  Rutter,  1009, 
1093. 

Chester  Glass  Co.  v.  Dewey,  27,  87,  100, 
239,  972. 

Chesterfield  Colliery  Co.  v.  Black,  917. 

Chetlain  v.  Republic  Life  Ins.  Co.,  235, 
416.  1157. 

Chew  v.  Bank  of  Baltimore,  430,  518. 

Chew  v.  Henrietta,  etc.,  Co.,  1091,  1215, 
1230. 

Chewacla,  etc.,  v.  Dismukes,  970,  973. 

Chicago  v.  Evans,  1564. 

Chicago  v.  Hall,  305. 

Chicago  &  Alton  R  R  v.  Chicago,  V.  & 
W.  Coal  Co.,  1513. 

Chicago  &  Alton  R  R  v.  People.  1513, 
1515,  1519. 

Chicago  &  Grand  Trunk  R'y  v.  Well- 
man,  1950. 


1 


TABLE    OF    CAS 


[The  references  are 

Chicago  &  I.  R  R  Co.  v.  Davis,  1006. 
Chicago  &  N.  W.   R'y  Co.  v.   Auditor- 
General,  770. 
Chicago  &  N.  W.  R  R  Co.  v.  Williams, 

1009. 
Chicago  Bldg.  Soc.  v.  Crowell,  972,  1085. 
Chicago,  B.  &  Q.  R  Co.  v.  Lewis,  993. 
Chicago,  B.  &  Q.  R  Co.  v.  McGiuuis. 

235. 
Chicago,  etc.,  v.  Mallory,  Ml.  : 
( hicago,  etc.,  <  son,  1  116. 

Chicago,  etc.,  Co.  v.  People's,  eta,  Co.. 

r,n. 
Chicago,  etc.,  In-.  Co.  v.  Needles,  866. 
Chicago,  etc.,  Land   Co.     v.    Peck, 
1199.    1227,    1251,    1805,    1818, 
1855,  1859,  1892,  1898,  1  171. 
Chica^M.   etc.,  R'j     v.  Auditor-!  '••  i 

1542. 
Chicago,  etc,  R'y  v.   u.-rs  1489,  l 
chi.;,-...  1 1-..  l:'y  v.  ('In.  ago  Bank 
Chicago,  etc.,  i;>  v.  (  rane,  155 
Chicago,  etc,  l;>  v.  Da 
Chicago,  etc.,  R'j    v.  1>.  nv.  r,  «  t  ..  R  I:.. 

150ft 
Chicago,  etc.,  R'j  v.  Dey,  1514,  1515. 
Chicago,  .tc.  R'y  v.  Freeman,  140 
Chicago,  etc.,  R'y  v.  Kansas    City,  eta, 

R  R,  1569. 
Chicago,  etc.,  R'y  v.   Keokuk,  eta, 

1424 
Chicago,  etc..  R'y  v.  Loewenthal,   1218, 

1229,  1887,  1882,  1581. 
Chicago,  '■('■..  R'y  v.  Miller,  1 
Chicago,  etc.,  R'y  v.    Minnesota,    1514, 

icon. 
Chicago,  etc.,  R'y  v.  People,  152 
Chicago,  etc.,  R'y  v.  Kid  Grande,  etc..  R 

h\.  1508,  1509,  1510. 
Chicago,  etc..  R'y  v.  Turni  r,  1  - 
Chicago,  etc..  R'y  v.  Onion  Pac  R'y.  10, 

801,  1050.  1509. 
Chicago,   etc.,    R'j    v.   Wellman,   1514, 

1515. 
Chicago,  etc.,  R  K.  Co.  v.  Auditor-Gen- 
eral, 1513. 
Chicago,  etc.,  R  R  Co.  v.    Aurora,    133, 

147,  151. 
Chicago,    etc.,    R    R    Co.  v.    Board    of 
Corn'rs,  1492,  1507. 


to  the  foot-paging.] 

(  hicago,  etc.,  R  R  Co.  v.  Coleman,  1074 
Chicago,  etc.,  R.  R  Co.  v.  Davis,  1009. 
Chicago,  etc.,  R  R  Co.  v.  Fosdick,  1283, 
!85,    1290,    1820    1322,   1336,   1338, 
134s,  1855,  1856,  1857. 
Chicago,  etc.,  R.  R  Co.  v.  Guff.  y.  757. 
Chicago,  etc.,  R  R  Co.  v.   James,    1064, 

30 
Chicago,  etc..  R  R.  I  '...  v.  KeiseL  1018. 

..  etc.,  i;.  R  i  ••.  v.  B 
« 'hi  .  R  i:.  c,..  v.  [.••wis,  uoo. 

Chi  ■■  v.  M.  &   A.  R 

.  1531. 

.:.  R  i  ...  v.  Man 
( '!,  • .  R  R  »  !o.  v.  Minn.,  etc.,  R 

I:.  Co.,  1548. 

.  etc.,  I.'.  1-'.  I  kx  v.  "il. 

Chi<  .  l.'.  l:.  i      ■    I'    pie,  r>i9. 

(  l,  Pinckney,  1 1". 

Chic  I  r.  I'm.-.'.  1548, 

(  hi.  a  i:.  R  <    .  v.  Pulln 

Co.,  10 

!:.  R  i   •.  v.  Putnam,  150, 

156,  15 
fhi  .  I:,  i:.  c  ..  \.  Pyne,  IS 

Chicago,  etc.,  R  R  Co.  v.  R  R  Corn'rs, 

1515. 
Chica  .  R  R  Co.  v.  -  152, 

Chicago,  ■  t.-..  l:   R  ■  ...  v.  Smith,  II 
Chic  .  R  R  Co,  9.  Tow  nof  1 

1." . 

Chic  R    R  <  ...   v.   Union, 

.  1890. 
Chit  .  R  R  Co.  v.  Wilson,  r 

Chicago    Hansom,    •  \.   Y.  rkes, 

946,  111 
Chicago   Life*  Ins.  Co.  v.  Auditor.   868. 

1589. 
Chicago  Life  In<.  Co,  v.  Needles,  1586. 
Chicago,  M.  &  St.   P.   R'y  v.  Minnesota, 

1949. 
Chica-.-.  P.  &  s.  R  R  v.  President,  etc, 

of  Town  of  Marseilles,  416. 
Chicago,  R  I.  &  Pac  R  R  i'o.  v.  Town 

of  Lake,  1526,  L529. 
Chicago    R'y,    etc,    Co.    v.   Merchants' 

Bank,  I 
Chickaming  v.  Carpi  nt«  r,  185,  156. 
Chickering,  In  re,  1825,  1828,  1353. 


TABLE    OF   CASES. 


li 


[The  references  are 

Chicot  Co.  v.  Lewis,  147,  149. 

Child  v.  Boston,  etc.,  Iron  Works,  277. 

Child  v.  Coffin,  331,  349,  629,  632,  810. 

Child  v.  Hudson  Bay  Co.,  687. 

Child  v.  Hugg,  596.  599. 

Child  v.  Morley,  567. 

Child  v.  N.  Y.,  etc.,  R  R,  1234,  1250, 
1471,  1474. 

Childs  v.  Digby,  615. 

Childs  v.  Harris  Mfg.  Co.,  1176. 

Childs  v.  Hurd,  309. 

Childs  v.  Smith,  233,  452,  1038. 

Chillas  v.  Snyder,  470. 

Chillicothe,   etc.,  R  R  Co.  v.  Brunswick, 
135. 

Chilton  v.  Brooks,  1017. 

China,  Imp.  Bank  of,  v.  Bank  of  Hindu- 
stan, 802. 

China  Steamship  &  Coal  Co.,  In  re,  158. 

Chincleclamanch,  etc.,  Co.  v.  Common- 
wealth, 869,  883. 

Chinnock's  Case,  358. 

Chippendale,  Ex  parte,  328,  329,  665. 

Chippewa,  etc.,  Ry  v.  Chicago,  etc.,  R'y, 
969. 

Chisholm  Bros.  v.  Forney,  66,  248. 

Chittenden  v.  Brewster,  1344 

Chittenden  v.  Thaunhauser,  73. 

Choat  v.  Yeates,  410. 

Choisserv.  People,  142. 

Chollette  v.  Omaha,  etc.,  R  R  Co.,  1536. 

Chorley,  Ex  parte,  1214,  1216. 

Choteau  v.  Allen,  592,  593,  604,  607, 1092, 
1097. 

Chouteau  v.  Dean,  31,  178,  248. 

Chouteau  Ins.  Co.  v.  Floyd,  164, 189,  217, 
245. 

Chouteau  Ins.  Co.  v.  Holmes,  1062. 

Chouteau  Spring  Co.  v.  Harris,  346,  356, 
447,  517,  523,  524. 

Christ  Church  v.  Philadelphia,  628. 

Christensen  v.  Colby,  242,  244,  300. 

Christensen  v.  Eno,  13,  56,  59,  255,  294, 
1205. 

Christensen  sr.  111.,  etc.,  Co.,  1205. 
'   Christensen  v.  Quintard,  58,  59,  244. 

Christian  v.  American,  etc.,  Co.,  1005. 

Christian  v.  Atlantic,   etc.,  R    R,    584, 
1276. 

Christian  v.  Bowman,  311. 


to  the  foot-paging. 1 

Christian,  etc.,  Co.,  Matter  of,  1435. 
Christian,  etc.,  Court  v.  Smith,  134. 
Christian  Union  v.  Yount,  999.  1000. 
Christian  University    v.    Jordan,    1092, 

1093. 
Christie  v.  Gage,  1097. 
Christie  v.  Missouri  P.  Ry,  1518. 
Christmas  v.  Biddle,  615. 
Christmas  v.  Russell,  1365. 
Chubb  v.  Upton,  56,  207,  209,  223,  233, 

249,  261,  265,  390. 
Church  v.  Kelsey,  1944. 
Church  v.  Sterling,  18,  935,  1085,  1093. 
Church  of  Redemption  v.  Grace  Church, 

996. 
Church  of  St.  Mary's,  635. 
Churchill  v.  Bank  of  England,  444. 
Chj'nowetlrs  Case,  357. 
Ciancimino,  In  re,  674. 
Cicotte  v.  Anciaux,  1154. 
Cincinnati  v.  Walker,  137. 
Cincinnati  City  v.  Morgan,  1277,  1278. 
Cincinnati,  etc.,   R'y  v.   Citizens'   Nat'l 

Bank,  400. 
Cincinnati,  etc.,  R'y  v.  City,  etc.,  Assoc, 

1563. 
Cincinnati,  etc.,  R  R.  v.  Clifford,  885. 
Cincinnati,  etc.,  R  R  Co.  v.  Clinton  Co., 

136. 
Cincinnati,  etc.,  R.  R.  Co.  v.  Cole,  635. 
Cincinnati,  etc.,  R.  R  Co.  v.  Duckworth, 

1155. 
Cincinnati,  etc.,  R  R  Co.  v.  Harter,  1100. 
Cincinnati,  etc.,  R.  R.  Co.  v.  Sloan,  1417, 

1462. 
Cincinnati,  etc.,  R  R  Co.  v.  Smith,  1557. 
Cincinnati,  etc.,  St  R'y  v.  Village  Com'rs, 

1549,  1590. 
Cincinnati,   etc.,   St.   R'y  v.  Village  of 

Cumminsville,  1561. 
Cincinnati,  H.  &  D.  R  R  v.  Pontius,  1534. 
Cincinnati,  Ind.  &  Chicago  R.  R.  Co.  v. 

Clarkson,  33,  34. 
Cincinnati  Mutual,  etc.,  Co.  v.  Rosenthal, 

998,  1002,  1005. 
Cincinnati,  Union  &  Ft  Wayne  R  R  Co. 

v.  Pearce,  26,  187,  189,  999. 
Circleville,  Bank  of,  v.  Renick,  881. 
Citizens'  Bank  v.  Board  of  Assessors,  3, 

773. 


lii 


TABLE    OF    CASES. 


[The  references  are 

Citizens"  Bldg.,  etc.,  Assoc,  v.  Coriell,  1032. 
Citizens'  Coach  Co.  v.  Camden,  etc.,  R. 

R  Co.,  1553,  1570. 
Citizens',  etc.,  Bank  v.  Blakesley,  1085. 
Citizens',  etc.,  Co.  v.  Bridgport,  etc.,  Co., 

1599. 
Citizens',  etc.,  Co.  v.  El  wood,  1583. 
Citizens',  etc.,  Co.  v.  Gillispie,   161,  257, 

34a 

Citizens',  etc.,  Co.  v.  Parry,  159a 
Citizens',  etc.,  Co.  v.  Sands,  1580. 
Citizens'  Ins.  Co.  v.  Sortwell,  166. 
Citizens'   Mutual  Fire  Ins.  Co.    v.  Sort- 
well.  798,  816. 
Citizens"  Mutual  Ins.  Co.  v.  Lott.  711. 
Citizens'  Nat'l  Bank  v.  Elliott.  928. 
<  itizens'  St.  R'y  v.  Bobbins,  445,  501. 
Citizens'  St.  R'y  Co.  v.  Jones.  1556 
Citizens'  St,  R.  Co.  v.  Memphis,  3,  1546, 

1551. 
City  t.  Larason,  1237.  1239,  1240. 
City  Bank  v.  Bangs,  528. 
City  Bank  v.  Perkins,  1085. 
City  Bank  of  Baltv.  Bateman,  1110, 1111. 
City  Bank  of  Columbus  v.  Beach,  1191. 
City  Bank  of  Columbus  v.  Bruce, 

418,   121. 
City  Bank  of  Macon  v.  Bartlett,  207. 
City  Bank,  Re.  1252. 
City  Council,  etc.,  v.  Montgomery,  etc., 

Co.,  131. 
city,  etc.,  Bank  v.  Houldsworth,  322. 
City,  etc..  Bank,  In  re,  ! 
City,  etc,  Ins.  Co.  v.  Carrugi,  1171. 
City,  etc.,  Ins.  Co.  v.  Olmstead,  462m 
City,  etc.,  R'y  Co.  v.  Mayor.  1571. 
City  Hotel  v.  Dickinson,   116,   174.  229, 

2114,  973. 
City  Nat'l  Bank  v.  National  Park  Bank, 

1070. 
City  Nat'l  Bank  v.  Paducah,     764,    765, 

767. 
City  Nat'l  Bank  v.  Phelps,  1015. 
City  of  Atchison  v.  Butcher,  134. 
City  of  Atlanta  v.  Gate  City,  888. 
City  of  A'tlauta  v.  Grant,  1388. 
City  of  Aurora  v.  West,  133,  139.  141. 
City  of  Bath  v.  Miller,  1363,  1367. 
City  of  Binghamton    v.      Biughamton, 

etc.,  R'y,  1553. 


to  the  foot-paging.] 

<  ity  of  Boston  v.  Beal,  702. 

City  of  Brenham  v.  Brenham,  etc.,  Co., 

1597. 
City  of  Brooklyn  v.  Brooklyn,  etc.,  R  R, 

157a 
City  of  Buffalo.  Matter  of,  1521. 
City  of  Buffalo,  Re,  15 
City  of  Burlington  v.  Burlington  St  R*y, 

1566. 
City  of  Burlington  v.  Burlington  "Water 

Co.,  219,  1598 
City  of  Chicago  v.  Cameron,  1129,  1131, 

1115.  H49,  1215.  1540, 
City  of  Chicago  v.  Evans,     1550,     1565, 

1572. 
City  of  Chicago  v.  Jones,  385. 
City  of  «  olumbus  v.  street    R    R    Co., 

157a 

City  of  Council  Bluffs  v.  Kansas  I 

St  J.  &C.  B.  R.  K..  1516. 
City  of  Covington    v.    Covington,   etc., 

Co..  632,  61  l.  887,  I 
City  <>f  Davenport  v.  Miss.,  etc.,  R  R, 

'  1201. 
City  of  Davenport  v.  P  etc.,  Co., 

1094 
City  of  Denver  v.  Mull.  n.  B81. 
City  of  Detroit  v.  Detroit  &  F.  Plank- 
road  Co.,  1575,  1591. 
City  of  Detroit  v.  Detroit  Street  R'y,  891, 

1551.  1555.  L575,  1591. 
City  of  Detroit  v.  Fort  Wayne,  etc.,  R'y, 

1572,  1578 
City  of  Elizabeth  v.  Force,  1198. 
City  of  Evansville  v.  Hall,  749,  750. 
City  of  Goldsboro  v.  Moffett,  1596. 
City  of  Indianapolis  v.  Indianapolis,  etc., 

Co.,  1585. 
City  of  Indianapolis  v.  Vajen,  765. 
City  of  Jefferson ville  v.  Patterson,  1237. 
City  of  Jonesboro   v.  Cairo,  etc.,  R  R 

Co.,  131. 
City  of  Kansas  v.  Hannibal,  etc.,  R  R 

Co.,  1098.1102. 
City  of  Kenosha  v.  Lamson,  132. 
City  of  Kuoxville  v.  Knoxville.etc.  RR, 

636,  964,  1194.  1501.  1503.  1500.  1507. 
City  of  Lexington  v.  Butler,  1240. 
City  of  Louisville  v.  President,  etc.,  634, 

810,  1517. 


TABLE    OF    CASES. 


liii 


City  of  Lowell  v.  Morse,  1019. 
City  of  Lynchburg  v.  Slaughter,  131. 
City  of  Memphis  v.  Ensley,  756. 
City  of  Memphis  v.  Farrington,  758. 
City  of  Newport  v.  Newport,  etc.,  Co., 

1583,  1585. 
City  of  New  York  v.  Third  Ave.  R  R, 

1574. 
City  of  Ohio  v.  Cleveland,  etc.,  R.  R  Co., 

377,378,707,711,  715. 
City  of  Ottawa  v.  Carey,  131. 
City  of  Pekin  v.  Reynolds,  1237. 
City  of  Philadelphia  v.  Ridge  Ave.  R  R. 

Co.,  14,  1573. 
City  of  Reading  v.  Consumers'  Gas  Co., 

1585. 
City  of  Richmond  v.  Daniel,  753. 
City  of  Richmond  v.  Richmond  &  Dan- 
ville R  R  Co.,  771,  772. 
City  of  Richmond  v.  Scott,  766. 
City  of  Rochester  v.  Bronson,  1155. 
City  of  Rushville  v.  Rushville,  etc.,  Co., 

1583,  1585. 
City  of  San  Francisco  v.  Mackey,  756. 
City  of  St.  Louis  v.  St.  Louis  R  R.,  957, 

1571,  1585. 
City  of  St.  Louis  v.  Shields,  879. 
City  of  San  Antonio  v.  Lane,  1237. 
City  of  Utica  v.  Churchill,  760. 
City  of  Wheeling    v.    Baltimore,    1162, 

1544. 
City  of  Wheeling  v.  Mayor  of  Baltimore, 

1162,  1544. 
City  of  Wilkes  Barre  v.  Wyoming,  etc., 

Soc,  1279. 
City  Sav.  Bank  v.  Whittle,  669. 
City  Terminus  Hotel,  In  re,  330,  338. 
Claflin  v.  Farmers'   &  Citizens'   Bank, 

1192. 
Claflin  v.  McDermott,  250. 
Claflin  v.  South  Carolina  R.  R.,  937,  1195, 

1197,  1200,  1205,  1234,  1321. 
Clancy  v.  Onondago  Fine  Salt,  etc.,  Co., 

647. 
Clapp  v.  Astor,  712,  743. 
Clapp  v.  Cedar  Co.,  134. 
Clapp  v.  City  of  Burlington,  7C2, 
Clapp  v.  City  of  Spokane,  1304,  1574. 
Clapp  v.  Peterson,  416,  419,  729. 
Clapp  v.  Wright,  300. 


[The  references  are  to  the  foot -paging] 

Claremont  Bridge  v.  Royal,  999. 

Claren  v.  Franciscus,  250. 

Clark  v.  American  Coal  Co.,  52,  545,  907, 


925,  1138,  1143. 
Clark  v.  Atkins,  408. 
Clark  v.  Barnard,  184,  1543,  1544. 
Clark  v.  Bever,  57,  58,  66. 
Clark  v.  Brockway,  1430. 
Clark  v.  City  of  Janesville,  1233. 
Clark  v.  Continental  Improvement  Co., 

36,  87,  90.  239. 
Clark  v.  Crickfield  Union,  1096. 
Clark  v.  Des  Moines,  138,  139. 
Clark  v.  Edgar,  490. 
Clark  v.  Farmers"   Mfg.  Co.,  1057,  1007, 

1070,  1095,  1097,  1099,  1189,  1190. 
Clark  v.  Farrington,  33,  34,  35,  87,  239, 

986. 
Clark  v.  Flint,  461. 
Clark  v.  Foss,  468,  476,  477. 
Clark  v.  Gibson,  469. 
Clark  v.  Gordon,  1097. 
Clark  v.  Iowa  City,  1231,  1240. 
Clark  v.  Janesville,  137,  138. 
Clark  v.  Jones,  312,  669,  1167. 
Clark  v.  Leathers,  139. 
Clark  v.  Meigs,  564,  576. 
Clark  v.  Middleton,  1005. 
Clark  v.  MonongahelaNav.  Co.,  221,  632. 
Clark  v.  Myers,  279,  305. 
Clark  v.  Piuney,  7S8. 
Clark  v.  Reed,  668. 
Clark  v.  Reyburn,  1315. 

Clark  v.  San  Francisco,  1146. 

Clark  v.  South  Metropolitan  Gas  Co., 
442. 

Clark  v.  Sparhawk,  603. 

Clark  v.  Titcomb,  982,  1185,  1261,  1263. 

Clark  v.  Town  of  Easton,  1058. 

Clark  v.  Trust  Co.,  1320. 

Clark  v.  Turner,  400. 

Clark,  In  re,  1392. 

Clarke  v.  Central  R.  R,  etc.,  316,  318, 
422,  427,  650,  826,  833,  835,  838,  846, 
1257,  1301,  1416,  1419,  1449. 

Clarke  v.  Dickson,  203,  209. 

Clarke  v.  Hancock  Co.,  145. 

Clarke  v.  Hart,  173.  177,  178. 

Clarke  v.  Imperial  Gas-light.  &  C.  Co., 
969. 


liv 


TABLE    OF    CASES. 


[T7ie  references  are 

Clarke  v.  Le  Cren,  1024. 

Clarke  v.  Lincolu  Lumber  Co.,' 53. 

( llarke  v.  Omaha,  etc.,  R  R,  1495,  1504, 

1589. 
Clarke  v.  Potter  County,  1017. 
Clarke  v.  Rochester,  135. 
Clarke  v.  Thomas.  230,  2G2,  390. 
Clarke,  Ex  parte,  36,  76,  1036. 
'  i:, ike's  Case,  908. 
(  larkson  v.  Clarkson,  707,  739,  743. 
(  larkson  v.  Hudson  River  R  R  Co.,  3. 

<  larkson  v.  Snider,  593. 

I  Hay  v.  Hast,  etc,  R  R,  1369. 
(  lay  v.  Hawkins,  187. 
(  lay  Co.  v.  Society  for  Savings,  133. 
Clayton  v.  <  Iresham,  7  1 1. 
Clayton  v.  Ore,  etc.,  ( '".,  66. 
t  learv.  Newcastle*  D.  R.  R  Co.,  'J  15. 
Clearwater  v.  Meredith,  i 
1545. 

Clegg  v.   Hamilton  Co., 

Cleghorn  v.  N.  Y.  Central  &  EL  R  R 

..  1011. 
Clem  v.  Newcastle  iV.  lianville  R  R  Co., 

L89,  197. 
(  llemens  v.  Clemens,  994 

<  ilement  v.  <  !ity  of  Lathrop,  1017. 
Clements  v.  Bower,  1041,  1187. 
Clements  v.  Todd.  1041. 

Clemshire  v.  Boone,  etc.,  Hank,  90,316, 

is:', 
Cleveland  v.  Burnham,  95,  164,  350,  800. 
Cleveland  v.  Marine  Bank,  251. 
Cleveland  &  Bl  \l.  RCo,  v.  Bobbins,  199, 

584. 
Cleveland  &  P.  R  R  Co.  v.  Speer.  1534, 

59,  1548. 
ciev. .land,  etc.,  Co,  v.  Courier  Co.,  967. 
Cleveland,  etc.,  Ca  v.  Crawford.  71.  905. 
Cleveland,  etc.,  Co.  v.  Prewitt,  1547. 
Cleveland,  etc,  Co  v.  Taylor.  805,  860. 
Cleveland,  etc..  Co.  v.    Texas,    etc,     R'y 

Co..  65,  81. 
Cleveland,  etc.,  R'y  v.Closser,1511,  15ia 
Cleveland,  etc,  R  RCo.  v.  Robbins,70a 
Cleveland  Iron  I  la  v.  Bnnor,  189,  1196. 
Cleveland  Rolling   M.  Co.  v.  Crawford, 

1217. 
clews  v.  Bardon,  1083 
Clews  v.  Brunswick,  etc.,  R  R,  1276. 


to  the  foot-paging] 

Clews  v.  Woodstock,  etc.,  Co.,  1179. 
Clifford  v.  Taylor,  679. 
Clifton,  etc.,  Co.  v.  Randall.  664. 
Clinch  v.  Financial  Co.,  634,  681,  967, 

1151,.1503. 
Cliquot's  Champagne,  7-7. 
(  live  v.  Clive,  711,  711.  712. 
Close  v.  Glen  wood  Cemetery,  629,  637, 

-.  880,  1944 
Cloutman  v.  l'iko.  1053. 
Clow  v.  Brown,  03. 
Clowes  v.  BrettelL  3! 
Clubb  v.  Davidson.  903. 
(  'lute  v.  Loveland,  661. 
Clyde  v.  Richmond,  eta,  Ca,  1311. 

de  v.  l: 
Coal  Co.  v.  Blatchford,  1311.  182 

,1,  etc.,  Co..  In  re,  913 

d.lale  ( ',  ial  ( 'o.  v.  Nat'l,  etc..  Bank,  966. 
Coalfield  Coal  Co,  v.  Peck,  8 
Coatee  v.  London   &   S.  \V.  R'y  Co.,  506. 
Coatee  v.  Nottingham,  etc.,  B*j  Co,  866, 

8*3 1. 
Coatee  v.  Nottingham  Water-works  Co., 

v.  DonnelL  990,  991,  1085. 

te  v.  Elliott,  1170. 
Cobb  v.  Kant,  71 
Cobb  v.  PrelL  474 
Coburn  v.  Cedar,  eta,  Ca,  910. 
( '..l.mn  v.  Omepi  I  <0  Ige,  1 1 ' » 1- 

lir.in  v.  American  <  >pera  Co.,  289. 

bran  v.  <  Jochran,  407. 
( lochran  v.  <  teean,  eta,  940. 

hran  v.  <  Icean  Drj  dock  Co.,  729. 

man  v.  Wiechers,  2 
i  lochrane  v.  <  !hamb 
Cock  v.  Bailey,  70,  I 

Cockburn  v.  Onion  Bank,  075,  677,  682. 
<  iockburn's  (  laee,  1 15. 
Cockerel  v.  Aucompe,  661. 

cerell  v.  Van   Diemen'a    Land    Co., 

181.  18 
Cocker's  I  ase,  1588. 
Cocksedge  v.  Metropolitan,  etc.,  Ass'n, 

209. 
Coddington  v.  Gilbert.  1201. 
Coddington  v.  Railroad,  36,  1330. 
Codman   v.  Vermont,  etc.,  R  R,  1217, 

1248,  1501,  1504. 


TABLE    OF    CASES. 


lv 


[The  references  are 

Coe  v.  Columbus,  etc.,  R.  R,  1206,  1273, 

1274,  1296,  1308,  1314,  1383.  1435. 
Coe  v.  Del.,  L.  &  W.  R.  R,  1387. 
Coe  v.  East,  etc.,  R.  R.,  35,  65,  70,  856, 

930,  943,  1199,  1206,  1210,  1211,  1218, 

1221,  1222,  1265,  1353,  1396. 
Coe  v.  Galion,  etc.,  R.  R,  1313. 
Coe  v.  Johnson,  1262,  1300. 
Coe  v.  Knox,  etc.,  Bank,  1374,  1436. 
Coe  v.  McBrown,  1300,  1383,  1346,  1364. 
Coe  v.  N.  J.  Mid.  R'y,  1279,  1293,  1294, 

1295,    1296,    1297,    1310,    1349,    1352, 

1373,  1391,  1451, 1461. 
Coe  v.  Peacock,  1317. 
Coey  v.  Belfast,  etc.,  R'y,  368,  376,  712, 

715. 
Coffin  v.  Chattanoooga,  etc.,  Co.,  1181, 

1341. 
Coffin  v.  Chicago  &  N.,  etc.,  Co.,  602. 
Coffin  v.  Collins,  93,  88S. 
Coffin  v.  Rausdall,  31,  47,  63. 
Coffin  v.  Reynolds,  273. 
Coffin  v.  Rich,  271,  321,  628,  630. 
Coghlan  v.  South  Car.  R  R,  1237. 
Cogswell  v.  Bull,  1148,  1151. 
Cogswell  v.  Cogswell,  745. 
Coheco  Bank  v.  Haskell,  1112. 
Cohen  v.  Gvvynn,  438,  529,  667. 
Cohen  v.  Wilkinson,  1523,  1540. 
Cohn  v.  Bank  of  St.  Joseph,  448. 
Colin  v.  Borst,  661. 
Coil  v.  Pittsburgh  College,  198. 
Coit  v.  Campbell,  1132. 
Coit  v.  North  Car.  Gold  Amal.   Co.,  47, 

60,  64,  72. 
Colborne,  Ex  parte,  1252. 
Colchester,  Mayor  &  Commonalty  of,  v. 

Lotten,  1220. 
Colderwood  v.  McCrea,  473. 
Coldicott  v.  Griffiths.  661. 
Cole  v.  Butler.  300,  305. 
Cole  v.  Cassidy,  490. 
Cole  v.  Joliet  Opera  House  Co.,  171. 
Cole  v.  Knickerbocker,  etc.,  Ins.  Co.,  860. 

1141. 
Cole  v.  La  Grange,  139. 
Cole  v.  Millerton,  etc.,  Co.,  964. 
Cole  v.  Milmine,  470. 
Cole  v.  Ryan,  112,  342,  357,  447. 
Coleman  v.  Colemau,  309. 


to  the  foot  paging.] 

Coleman  v.  Columbia  Oil  Co.,  417,  710. 
Coleman  v.  Eastern   Counties   R'y    Co., 

1246. 
Coleman  v.  San  Rafael  T.  R  Co.,  994. 
Coleman  v.  Second  Ave.,  etc.,  R.  R,  916, 

1550. 
Coleman  v.  Spencer,  102,  547,  621. 
Coleman  v.  White,   257,   258,    259,    286, 

288,  289,  290. 
Coles  v.  Bank  of  England,  508,  780. 
Coles  v.  Bristowe,  579. 
Coles  v.  Kennedy,  194. 
Colfax  Hotel  Co.  v.  Lyon,  88. 
Colgate  v.  Compagnie,  etc.,  683. 
Colglazier  v.  Louisville,  N.  A.  &  C.  R  R 

Co.,  1542. 
Colket  v.  Ellis,  576,  580. 
Collamer  v.  Day,  469. 
Colleuder  v.  Dinsmore,  1537. 
Colles  v.  Iron  City,  etc.,  Co.,  971. 
Collier  v.  Collier,  409,  745. 
Collier  v.  Morgan's,  etc.,  R  R,  1164. 
Collier  v.  Sq"uire,  408. 
Collingwood  v.  Berkeley,  1035. 
Collins  v.  Bradbury,  1228. 
Collins  v.  Central  Bank,  etc.,  1320. 
Collins  v.  Chicago,  760. 
Collins  v.  City  &  County  Bank,  209. 
Collins  v.  Godfrey,  924. 
Collins  v.  Lowry,  782. 
Collins  v.  Yates,  681. 
Collins'  Claim,  1064. 
Colman  v.  Eastern,  etc.,  R'y,  1142. 
Colman  v.  West,  etc.,  Co.,  1078. 
Colonial  Bank  v.  Cady,  549. 
Colonial  Bank  v.  Hepworth,  485,  519. 
Colonial  Bank  v.  Willan.  1108. 
Colonial,  etc.,  Co.   v.  Hutchinson,   etc., 

Co.,  1163. 
Colonial,  etc.,  Corp.,  In  re,  1235. 
Colorado,  etc.,  R'y  v.  Union,  etc.,  R'y, 

1530. 
Colorado,  etc.,  Works  v.  Sierra,  etc.,  Co., 

1004,  1163. 
Colquhoun  v.   Courtenay,  358,  359,  432. 
Colt  v.  Barnes,  1276,  1277. 
Colt  v.  Clapp,  109,  469. 
Colt  v.  Gold  Amal.  Co.,  392. 
Colt  v.  Ives,  622. 
Colt  v.  Netterville,  460,  464. 


lvi 


TABLE    OF    CASES. 


[Tlie  references  are 

< !olt  v.  Owens,  576,  578,  785,  786,  790. 
Colt  v.  Woollaston,  103,  480,  1041. 
Col  ton  v.  Ross,  1152. 
Colton  v.  Stanford,  431,  480. 
Coltness  Iron  Co.  v.  Black, 
Columbia  Bank  v.  Gospel,  etc.,  Church, 

1063,  1078,  1083. 
Columbia  Bank  v.  Patterson,  1093,  1094, 

1095. 
Columbia  Bank's  Appeal.  391. 
Columbia  Elec.  Co.  v.  Dixon,  233,  j:!'.». 

483,  878. 
Columbia,  etc..  Co.  v.  Meier,  816. 
Columbia  Nat.  Bank,  Appeal  of,  805; 
Columbian  Bank,  In  re,  419. 
Columbian  Ins.  Co.,  Matter  of,  1460, 
Columbine  v.  Cbichester,  462,  168. 
Columbus  Buggy  Co.  \    Qrav< 
I  lolumbus,  etc..  R'y  v.  Braden,  1880, 
( lolumbus,  eta,  R  j  v.  Lanier,  1210. 
Columbus,  1 1 ■■..   i;.  R  v.  Burke,  19, 

948,  1140,  1209,  1220,  L222. 
Columbus,  eta,  1;.   R  (  ...  v.  [ndianapo- 

lis.  eta,  R  R.  Co.,  1510. 
Columbus,  etc.,  It    R,    \.    Powell,    968, 

1190. 
Columbus  Ins.  Co.  v.  Walsh,  to02,    1005. 
Col ville's  Case.  212,  218 
Colvin  v.  Williams.  464 
Comanche  County  \.  Lewis,  188,  874 
Combination  Trust    *  ".    v.   W< 

1268 
Combs  v.  A-rie.  Ditch  L\\,  H'.OO. 
Combs  v.  Smith,  1398. 
Comeau  v.  Guild  Farm  oil  (\\,  617. 
Comet,  etc..  Co.  v.  Frost,  1164 
Comfort  v.  Leland,  166. 
Comius  v.  ( loe,  ISO. 
Commercial  Bank  v.  City  of   lola.  188, 

139. 
Commercial  Bank  7.  Cunningham,  1119. 
Commercial  Bank  v.  French,  1017,  1102. 
Commercial  Bank  v.  Great  Western  R'y, 

1186. 
Commercial  Bank  v.  Kortright,  516,  517. 

521,  586,  6!  i!  i. 
Commercial    Bank    v.    Lock  wood, 

963. 
Commercial   Bank   v.  Newport  Manuf. 

Co.,  1185,1190. 


to  the  foot-paging] 

Commercial  Bank  v.  Nolan,  98 

Commercial  Bank  v.  State,  866,868,875, 
1517. 

Commercial  Bank  v.  Ten  Eyck.  1029. 
imercial  Bank,  eta,  v.  Pfeiffer,  878, 
1166. 

Commercial  Bank,  etc..  Re.  11 

mercial  Bank  of  Buffalo    v.    Kort- 
right, 586,  I 
imercial  Dank  of  In. Ha.  Iu  re,  861. 

<  lommercial  B  amnion, 
Commercial   Natfl  Bank  v.  Durcb.  419. 

1229,  lllo. 
Commercial    Natl    Bank    v.    Farmers', 

(  omro  srford  v.  William  in  re. 

<  "ii  .  AspinwalL  1 . 

imissi n  v.  Atlantic  &  N.  I  '.  1,'.  R 

1185,   1261. 
C mi-  \.  Baltimore,  eta,  R.  R 

...  in;. 

(  '(.mini-  \.   I.,  in' 

( '.•nun  v.  Mill 

i    Thayer,  1 1 15. 
(  k>mmissioi  .  v.  Boll 

Coiim, i-  .  v.     Bockner, 

t  'oiiimi-  eta,  Ca, 

Commission!  v.  Holyoke  Water- 

pOM     :    I 

Commission!  .  ?.  Northern,  etc., 

.  1585. 
Commissioi  •  re,  i  ta,  v.  Thayer,  115. 

Commissioners  of  ('raven    v.    Atlantic, 
.  R  R.,  liv:'..  1206. 

( bmmissioni  rawford  Co.  v.  Louis- 

ville, etc..  R.  R  Co.,  184 

Commissioners  <.f  Johnson    Count]   v. 
Thayer,  1808. 

Commission!  re  of  Knox  Co.  v.  Nichols, 
186. 

Commissioners  of  Rice  County  v.  Cm 
/.,ns'  Nat')  Hank.  '. 

Commonwealth  v.  Allegheny  Co.,  187, 
8,  1577. 

Commonwealth  v.  American  B.  T.  Ok, 
775. 

Commonwealth  v.  Arrison,  836. 


TABLE    OF    CASES. 


lvii 


[The  references  are  to  the  foot-paging.] 


Commonwealth  v.  Bakeman,  887,  1167. 
Commonwealth  v.  Bonsall,  638. 
Commonwealth  v.  Boston,  1594 
Commonwealth  v.  Boston  &  Albany  R 

R  Co.,  19,  84,  421. 
Commonwealth  v.  Bried,  868. 
Commonwealth  v.  Bringhurst,  820. 
Commonwealth  v.  Brush,  etc.,  Co.,  768, 

769,  773. 
Commonwealth  v.  Central   Bridge  Co., 

1012. 
Commonwealth  v.  Central  Pass  R'y,  49, 

65,  1275,  1484,  1566. 
Commonwealth  v.  Central  T.    Co.,  394, 

703,  768,  769. 
Commonwealth  v.  Chesapeake   &  Ohio 

R  R  Co.,  770. 
Commonwealth  v.  Chesapeake,  etc.,  Ca- 
nal Co.,  1199,  1201,  1223,  1231,  1234, 
1235,  1236,  1239,  1251. 
Commonwealth  v.  Cleveland,  etc.,  R  R, 

707. 
Commonwealth  v.  Cochituate  Bank,  303, 

304,  628. 
Commonwealth  v.  Cooper,  566. 
Commonwealth   v.    Commercial  Bank, 

866. 
Commonwealth  v.  Covington,  etc.,  Co., 

1577. 
Commonwealth  v.  Cullen,  640,  856,  863, 

1051. 
Commonwealth  v.  Dalzell,  823,  827. 
Commonwealth  v.  Delaware,  etc.,  Canal 

Co.,  770,  871,  1578. 
Commonwealth,  etc.,  Ins.  Co.  v.  Dunson, 

1020. 
Commonwealth  v.  Eastern  R  R,  1523. 
Commonwealth  v.  Emigrant,  etc.,  Bank, 

1198. 
Commonwealth  v.  Erie  &  N.  E.  R  R, 

771,  1524,  1527,  1529. 
Commonwealth  v.  Essex  Co.,  638. 
Commonwealth  v.  Farmers',  etc.,  Bank, 

868. 
Commonwealth  v.  Fayette  R  R  Co.,  771. 
Commonwealth  v.  Fitchburg  R  R  Co., 

867. 
Commonwealth  v.  German  Society,  1025. 
Commonwealth  v.  Gill,    810,    836,    843, 
1021. 


Commonwealth  v.  Gloucester,  etc.,  Ferry 

Co.,  776. 
Commonwealth  v.  Graham,  836. 
Commonwealth  v.  Hamilton  Mfg.   Co., 

748,  1517. 
Commonwealth    v.    Intoxicating    Liq- 
uors, 1517. 
Commonwealth  v.  Keim,  799. 
Commonwealth  v.  Lintsman,  819. 
Commonwealth  v.  Lykens   Water    Co., 

883,  1599. 
Commonwealth  v.  Mahoning,  etc.,  Co., 

773. 
Commonwealth  v.  McWilliams,  137. 
Commonwealth  v.  Milton,  776,  988. 
Commonwealth  v.  Nashville,    etc.,    Co., 

773. 
Commonwealth  v.  New   York,   etc.,  R 

Co.,  42,).  750,  775,  992,  993,  1000. 
Commonwealth  v.  Nickerson,  6, 815, 818. 
Commonwealth  v.  Northern,    etc.,    Co., 

773. 
Commonwealth  v.  Oliver,  1026. 
Commonwealth  v,  Penn.  Co.,  768. 
Commonwealth  v.  Perkins,  137. 
Commonwealth  v.  Phil.,  etc.,  R  R,  769, 

1590. 
Commonwealth  v.  Philanthropic   Soc, 

1026. 
Commonwealth  v.  Phcenix  Iron  Co.,  673. 

674,  675,  677,  1019. 
Commonwealth  v.  Pike  Beneficial  So- 
ciety, 1025,  1026. 
Commonwealth  v.  Pittsburg,  etc.,  P.  R, 
137,  142,  153,  156,  703,  707,  769,  868, 
886,  1542. 
Commonwealth  v.  Proprietors  of  New 

Bedford  Bridge,  1011.  1524. 
Commonwealth  v.  Pulaski,  etc.,    Ass'n, 

1012. 
Commonwealth  v.  Runk,  1456. 
Commonwealth  v.  St.  Bernard  Coal  Co., 

757. 
Commonwealth  v.  St.    Mary's    Church, 

1106. 
Commonwealth     v.    St.    Patrick    Soc, 

1026. 
Commonwealth  v.  Smith,  644,  797,  836, 
1187,   1188,   1193,    1194,    1262,    1266, 
1272,  1275. 


Lviii 


TABLE    01    CAS 


[Tlie  references  are 

Commonwealth  v.  Standard  Oil  Co.. 
Commonwealth    v.   Susquehanna,    etc., 

R  R.,  110S,  12  21. 

Commonwealth  v.  Temple,  loTO. 
Commonwealth  v.  Tenth,  etc;,  Co.,  866, 

1275. 
Commonwealth  v.  Texas  &  Pac.  R  R 

Co.,  776. 
Commonwealth  v.  Tuckermai 
Commonwealth  v.  Union  I 
Common  wealtli  v.  I'd  inn  1 
Commonwealth  v.  B.  R», 

1011. 
( k>mm  mwealth  v.  Watmouth, 
Commonwealth  v.  Western  Union  Tel 

Co.,  776 
( k)mmonwealth  v.  W. 

Commonwealth    v.    v.  ham, 

1065. 
Commonwealth  v.  Wilkinson,  15  I 
Commonwealth  v.  Woelj 
1021,  1 

umonwealth  v.  Wood,  tvl. 
tnmonwealtb  v.  Wynuu 
mmonwealth,   '. 
( iommonwealth 

I    imraonwealth  of  Kentucky  v.  Lo 
ville  Bridg 
nao  \.  P(  it  Henry  Iron  Co.,  1 11 
Compton  v.  Cbek 

71 -J.  815,  II 
Compton  v.  Rsilv 
1547. 
mpton  v.  Wabash,  etc.,  R'j 
v.  Bach  ii:  m.  I 
v.  IV  dei  ickson,  1 1 
.  omstock,  Re, 

nit  v.  N.;tu  oal,  etc.,  Co,  101. 
Hunt  v.  Reed,  5 
I  tenant  v.  Seneca  Co.  Bank.  647, 
699. 
nit  v.  Van  Schaick,  OCT 

nard  v.  Atlanta* 
Concord  v.  Portsmouth   Savings  Bank, 
188,  140,  152. 
■  cord  v.  Robinson,  133. 
Concord,  etc.,  R  K.   v.   Porsaith,  1519, 
1520. 


to  the  foot-pagin'jl 

Concord  R  R  Co.  v.  G  re, 
Condit  v.  Ki: 

•    v.  Dunham.  45 
Cone'  v.  Ruse 

ngdon  v.  Winsor,  94 
Conger  v.  N.  Y..  etc,  R.  B.,  15881 

;  C  hurch,  Matter  of,  882. 
.  v.  Pen 

J       V. 

:. 
v.  Raili 
ikey  v.  Bond,  51 
klio  \.  I'm 
oklin  v.  -  ■.■  ii.il  Bank,  688, 

■ 

i    ■  j  I 
I.\   I.'..  1181, 
R    K.   I 
116,  171.  1- 

' 

B*y  Co, 

' 
v.  llilh'  r,  781,  I 

: 

Mutual 

1141,  1  i 
I  Henry  Iron  I  1017, 

lated  Assoc  v.  A  regno,  123 

.Co, 
■.  1115,  1141,  1264,  1412. 

| 
.  1581. 

Consolidated  S.  Co.  v.  I 
1177. 

v.    \".  u:,'].  8ft 
!   V.    I'll  .111". 

tinople,  96. 

■tigress,  etc.. 


TABLE    OF    CASES. 


lix 


[The  references  are 

Consumers'  Gas,  etc.,  Co.  v.  Harless,  1584 
Continental   NatT    Bank  v.    Eliot  Nat'l 

Bank,  24.  513.  585,  586,  618. 
Continental  Tel.  Co.  v.  Nelson,  50.  63,  78. 
Contoocook  Valley  R.  R  Co.  v.  Barker, 


Conver's  Case,  276. 

Converse  v.  Dimock,  1149. 

Converse  v.  Hood.  973. 

Converse  v.  Michigan  Dairy  Co.,  1229, 

1348. 
Converse  v.  Norwich  &   N.  Y.  Trans. 

Co.,  1532,  1533. 
Conway  v.  John,  fill.  621. 
Conway,  Ex  parte,  990. 
Conwell  v.  Town  of  Connersville,  750. 
Conyngham's  Appeal,  598,  603,  605,  784 
Cook  v.  Berlin  Woolen  M.  Co.,  92a 
Cook  v.  Champlain,  etc.,  Co.,  1183. 
Cook  v.  Chicago,  etc.,  R  R,  1520. 
Cook  v.  Chittenden,  215. 
Cook  v.  City  of  Burlington,  749,  756. 
Cook  v.  Detroit,  etc.,  R  R,  963,  1480. 
Cook  v.  Gray.  654' 
Cook  v.  Hager,  1020. 
Cook  v.  Manuf g  Co.,  139. 
Cook  v.  Rome  Brick  Co.,  1004. 
Cook  v.  Sherman,  906,  986. 
Cook  v.  Ward.  107:1.. 

Cooke  v.  Hallett.  613. 

Cooke  v.  State,  1090. 

Cooke  v.  State  Nat'l  Bank,  1183,  1185. 

Cookney's  Case,  88. 

Coolidge  v.  Goddard,  55. 

Coon  v.  Plymouth,  etc.,  Co.,  866. 

Cooper  v.  Canal  Co.,  608. 

Cooper  v.  Corbin,  777,  1263,  1373,  1479. 

Cooper  v.  Curtis,  1058. 

Cooper  v.  Frederick,  393,  630. 

Cooper  v.  Griffin,  618. 

Cooper  v.  Lampeter,  1073. 

Cooper  v.  Neil.  474. 

Cooper  v.  N.  Y.,  etc.,  R  B.  Co..  1089. 

Cooper  v.  Swamp,  etc.,  Co..  531. 

Cooper  v.  Town  of  Thompson,  1232. 

Cooper  v.  Welb.  1041. 

Cooper  Mfg.  Co.  v.  Ferguson,  1003, 1946, 
1947. 

Coopers  v.  Wolf,  1364,  13S3,  1389. 

Cope,  Ex  parte,  277. 


to  the  foot-paging.] 

Copeland  v.  Copeland,  22. 
Copeland  v.  C.  Gas  Co.,  955. 
Copeland  v.  Johnson,  etc.,  Co.,  926. 
Copeland  v.  Memphis,   etc.,   R   R   Co., 

1543. 
Copes  v.  Charleston,  137. 
Copley  v.  Grover  &  Baker  Co.,   1007, 

1010. 
Copp  v.  Lamb,  795. 
Coppage  v.  Hutton,  89. 
Coppell  v.  Holhns,  1468. 
Copper  Miners  v.  Fox,  972,  1097. 
Coquard  v.  St.  Louis,  etc.,  Co.,  392. 
Coquard  v.  Wernse,  432.  449. 
Corbet  v.  Underwood,  580. 
Corbett  v.  Twenty-third,  etc.,  B'y,  1570. 
Corbett  v.  Woodward,  940,  1060,  1075. 
Corcoran  v.  Chesapeake,  etc.,  Co.,  1237, 

1306,  1317. 
Corcoran  v.  Snow  C.  Co.,  1083,  1117. 
Cordova,  etc..  Co.  v.  Long,  1188,  1195. 
Cordova,  etc.,  Co.,  Be,  201. 
Corey  v.  Long,  1459. 
Corey  v.  Wadsworth,  938. 
Cork,  etc.,  B*y  Co.  v.  Cazenove,  107,  334. 
Cork,  etc..  R'y.  In  re,  1185,  1187,  1252 

Cormac  v.  Western,  etc..  Co.,  347. 

Corn  Exchange  Bank  v.  Blye,  593. 

Corn  Ex.  Bank  v.  Cumberland  Coal  Co., 
1065.  1072,  1106. 

Corn  Ex.  Bank  v.  Nassau  Bank,  580. 

Cornell  v.  Clark,  936. 

Cornell  v.  Hay,  193. 

Cornell  v.  Hickens,  34. 

Cornell  v.  Springs  Co..  993. 

Cornell  v.  Utica,  etc.,  R  R,  1475. 

Cornell,  Appeal  of,  126,  226,  243,  258,  261. 

Cornell's  Case,  429. 

Cornell  University  v.  Fiske,  996. 

Cornick   v.  Richards,  585,  588,  602,   618. 

Corning  v.  McCullough,  285,  286,  292, 
301,  303. 

Corning  v.  Roosevelt,  458. 

Corning,  In  re,  650. 

Cornwall,  etc.,  Co.  v.  Bennett,  1070. 

Corrigan  v.  Trenton,  etc.,  Co.,  1098. 

Corry  v.  Londonderry,  etc.,  B'y,  366,  372, 

374,  376,  723. 
Corser  v.  Hale  et  al.,  458. 
Corser  v.  Russell,  1461,  1482. 


lx 


TABLE    OF    CASKS. 


[The  references  are 

Cortclyou  v.  Lansing,  596,  788. 

Cortes  Co.  v.  Thaunhauser,  912. 

Cortis  v.  Kent,  etc.,  Co.,  1020. 

Corwith  v.  Culver,  187,  190. 

Cory  v.  Lee,  312. 

Cory,  etc.,  Soc.  v.  Beatty,  660. 

Costa  M.  R  Co.  v.  Moss,  1526. 

Costa  Rica  v.  Erlanger,  683. 

Cost-book  Company  Case,  056. 

Costello's  Case,  334, 358,  359. 

Cotheal  v.  Brown-,  677,679. 

Cottage,  etc..  Church  v.  Kendall,  9& 

Cottam  v.   Eastern    Counties   R*y   Co., 
440,501.  506,  507. 

Cotting  v.  N.  V..  etc.,  i:.  R,  369, 374, 

Cottle,  Ex  pnrtc  1<>:;7. 

Cotton  v.  Atlas  Nat  Bank,  589. 

Cotton  v.  Leon  ( !o.,  1  '■*>'■). 

Cotton  v.  The  Imperial,  etc.,  Corpora- 
tion, '.'5  7.  1023 

Cottrell  v.  Tenney,  1136. 

Coulter  v.  Roberl  on,  889. 

Coulter  v.  Trustees'  W<  stern,  etc.,  Semi- 
nary, 1018. 

Counselman  v.  Hitchcock,  1952. 
int  Palen's  Case,  lis.  179. 

County  v.  Brinton,  137. 

( 'ounty  v.  Moultrie,  1 11. 

County  Courl  v.  Baltimore  ft  O.  R  1.'.. 
423,  '.Ml.  1062,  11H5,  1548. 

County  Coram'rs  v.  Annapolis,  758,  759. 

County  Comm'rs  v.  farmers'  Nat.  Bank, 

7  5i'.. 
County   Comm'rs    v.    Woodstock    [ron 

Co.,  772. 
County  Comm'rs  Case,  1 180. 
County,  eta,  v.  Foster,  ill. 
County,  eta,  v.  Gillett,  141. 
County,  etc.,  v.  Locomotive,  etc.,  156. 
County,  etc.,  v.  Nicolay,  141. 
County,  etc.,  Co.,  In  re.  1058 
County    Marine    Ins.   Co.,   In    re,    728, 

735. 
County  of  Alleghany  v.  Cleveland,  etc., 

R.  R,  1544. 
County  of  Armstrong  v.  Brinton,  153. 
County  of  Bates  v.  Winters.  147. 
County  of  Beaver   v.   Armstrong.   1236, 

1239. 
County  of  Bruce  v.  Cromar,  1019. 


to  the  foot  paging.] 

County  of  Calloway  v.  Foster,  142. 
County  of  Cass  v.  Gillett,  1 12.  I 
County  of  <  ass  v.  Johnson,  148,  149. 
County  of  Cass  v.  Jordon,  1  Is1. 
County  of  Clay  v.  Society    for  Savings, 

1  12. 
County  of  Crawford     v.    Pittsburgh    ft 

R  I;.  I  a    23a 
County  of  Daviess  v.  Buidekoper,  ' 
County  of  Drummond  v.  S.  E.  R'y,  1512. 
County  of  Henry  v.  Nicolay,  156. 
( 'ounty  of  Jasper  v.  Ballon,  1 1 1.  145. 
County  of  Lackawanna   v.   First    Nat'l 

Bank,  756. 
County  oi  Lancaster  v.  Cheraw,  eta,  I.'. 

h\.  187. 
(  ounty  of  Leavenworth  v.  t  !hi< 

RR,  932,  1246,  1358,  1494,  IS 
County  of  Macon  v.  Shores,  140,  IS 
County  of  Morgan    v.   Allen,    151.  848, 

t  'ounty  t.f  Moultrie  v.  Fairfield,  ill. 

( 'ounty  of  Moulta  i''  v.  Rockingham  'I'm 
at  Savin-.  Bank,  140,  1 12.  150, 
1948. 

County  of  Ralls  v.  Douglass,  112.147. 

i  ounty  of  Randolph  v.  Post,  l  II. 

County  of  Ray  v.  Vansycle,  1 1".  1 12. 

i  ounty  of  Richland  v.  P<  ople,  1 16. 

•  ounty  of  San  Mateo  v.  Southern  Pa- 
cific R  R  Ca,  9,  1020. 

<  ounty  of  Schuyler  v.  Thomas,  140,  156. 

County  ot  Scotland  v.  Thomas,  140,  1  12, 
155. 

( 'ounty  of  Silver  Bow  v.  Davis,  766. 

County  of  Stevens,  In  re,  77  l. 

County  of  Tazewell  v.  Farmers',  etc., 
Trust  Ca,  983,  1150. 

County  of  Tipton  V.  Locomotive  Works, 
156. 

County  of  Todd  v.  St  Paul,  etc.,  R'y 
Co..  771. 

( 'ounty  of  Washington  v.  Estate  of  Jef- 
ferson, In  re,  658 

County  of  Wilson  v.  National  Bank, 
137,  1183. 

Coupland  v.  Challis,  1040. 

Courtois  v.  Harrison.  288 

Courtright  v.  Deeds.  26,  234. 

Cousland  v.  Davis.  582. 


TABLE    OF    CASES. 


lxi 


[TJie  references  are  to  the  foot-paging.] 


Covell  v.  Loud,  572,  573. 

Covert  v.  Rogers,  19,  804,  999,  1061. 

Covey  v.  Pittsburg,  etc.,  R  R,  1364, 1373, 

1374. 
Covington  v.  Bridge  Co.,  364. 
Covington  v.  Covington,  etc.,  Co.,  640, 

1550,  1574. 
Covington,  etc.,  Bank  v.  Covington,  765. 
Covington,  etc.,  Bridge  Co.  v.  Mayer, 

796,  1542. 
Covington,  etc.,  Bridge  Co.  v.  Sargent, 

364. 
Covington,    etc.,   Bridge  Co.   v.    South 

Covington,  etc.,  R'y  Co.,  1568,  1577. 
Covington,  etc..  Co.  v.  Keith,  1523. 
Covington,  etc.,  Co.  v.  Mayer,  1542. 
Covington,   etc.,   Co.   v.  Sanford,    1546, 

1591. 
Covington,  etc.,  Co.  v.  Shepherd,  1171, 

1388,  1411,  1576,  1948. 
Covington,  etc.,  R  R.   Co.   v.  Bowler's 

Ex'rs,  921,  1133. 
Cowardin   v.    Universal   Life  Ins.    Co., 

1171. 
Cowden  v.  Pacific  Coast  S.  S.  Co.,  1599. 
Tow-drey  v.  Galveston,  etc.,  R  R,  1309, 

1310,  1357,  1437,  1446. 
Cowdrey  v.  Railroad,  1419,   1437,  1438, 

1439,  1458,  14G0,  1461. 
Cowell  v.  Colorado,  etc.,  Co.,  875,  880. 
Cowell  v.  Springs  Co.,  999. 
Cowles  v.  Cromwell,  342. 
Cowles  v.  Mercer  County,  1948. 
Cowles  v.  Whitman,  461. 
Cowley,  etc.,  Co.,  Re,  693. 
Cowling  v.  Cowling,  408. 
Cox  v.  Bodfisb,  660. 
Cox  v.  Hickman,  654 
Cox  v.  Midland,  etc.,  R  R  Co.,  1089. 
Cox  v.  Stokes,  1475. 
Cox  v.  Volkert,  1430. 
Cox,  Ex  parte,  1253. 
Cox's  Case,  108,  339,  340,  358. 
Coxe  v.  Hart,  1144. 
Coxon  v.  Gorst,  731,  894. 
Coy  v.  Jones,  294. 
Coyle  v.  Ball,  etc.,  R  R.  Co.,  1112. 
Coyote,  etc.,  Co.  v.  Ruble,  720. 
Cozad  v.  McKee,  730. 
Cozart  v.  Georgia,  etc.,  R  R,  1247. 


Crabtree  v.  St.  Paul,  etc.,  Co.,  1056. 
Craft  v.  McConoughy,  644. 
Craft  v.  South  Boston  R  R,  1083. 
Craft  v.  Tuttle,  750,  762. 
Cragg  v.  Riggs,  739. 
Cragg  v.  Taylor,  612. 
Cragie  v.  Hadley,  1007,  1115. 
Craig  v.  Continental  Ins.  Co.,  1115. 
Craig  v.  First  Presbyterian  Church,  815, 

816,  820,  841. 
Craig  v.  Gregg,  1027,  1136. 
Craig  v.  Phillips,  912. 
Craig  v.  Rochester,  etc.,  R  R  Co.,  1561. 
Craig  v.  Town  of  Andes,  136,  148. 
Craig  Medicine  Co.  v.  Merchants'  Bank, 

1064,  1066,  1087,  1088. 
Cram  v.  Bangor,  etc.,  1065. 
Cramer  v.  Bird,  721,  861. 
Crampton  v.  Varna  R'y  Co.,  1096. 
Crandall  v.  Lincoln,  331,  333,  336,  337, 

385,  419. 
Crandall  v.  State  of  Nevada,  1945. 
Crane  Bros.,  etc.,  Co.  v.  Adams,  929. 

Cravens  v.  Eagle,  etc.,  Co..  126,  234. 
Craw  v.  Easterly.  852,  853. 
Crawford  v.  Branch  Bank,  etc.,  1942. 

Crawford  v.  Dox,  500,  745. 

Crawford  v.  Fisher,  527. 

Crawford  v.  Gross,  664. 

Crawford  v.  Longstreet,  994,  1094,  1591. 

Crawford  v.  Northeastern,  etc.,  R'y  Co., 
360,  366,  369,  374. 

Crawford  v.  Provincial  Ins.  Co.,  518,  522, 
531. 

Crawford  v.  Rohrer,  47,  63,  64,  161,  248, 
255,  261. 

Crawford  v.  Spencer,  477. 

Crawford  R  R  Co.  v.  Lacey,  232. 

Crawshay  v.  Soutter,  1471. 

Crease  v.*Babcock,  257,  258,  272,  286,  290, 
304,  324,  329,  353,  417,  861.  886. 

Credit  Co.  v.  Arkansas,  etc.,  R  R,  920, 
1127,  1290,  1306,  1330,  1336,  1450. 

Credit  Co.  v.  Howe,  1244. 

Credit  Co.  v.  Webster,  684. 

Credit  Co  of  Ireland  v.  Fermoy,  415. 

Credit  Foncier  of  England,  In  re,  630. 

Credit  Mobilier  v.  Commonwealth,  651, 
656. 

Creed  v.  Commercial  Bank,  988. 


lxii 


TABLE    OF    CASES. 


[The  references  are 

Creek  v.  State,  836. 

Cregin  v.  Brooklyn,  etc.,  R  R  Co..  19. 
Crenshaw  v.  Ullman,  881. 
Crescent  City  R  Co.  v.  City  of  New  Or- 
leans et  al.,  703. 
Crescent,  etc.,  Co.  v.  Deblieux,  585. 
Crescent,  etc.,  Co.  v.  Flanner,  919. 
Cresson's  Appeal,  1019. 
Creswell  v.  Lanahan,  1092.  1108. 
Creswell  v.  Oberly,  825. 
Creyke's  Case,  176. 
Crick raer's  Case.  77,  82. 
Cridge's  Appeal,  590,  599. 
Cridland  v.  De  Mauley,  1041. 
Crockerv.  Crane,  97.  B8,  820. 
Crocker  v.  <  Srocker,  184 
Crocker  v.  Old  Colony  R  R  Co..  445. 
Crocker  v.  Whitney,  '■■ 
Crocket  v.  young,  1085. 
Croft  v.  Bunster,  12 
Croft  v.  Lumpkin,  etc.,  Mm.  < 
Cromwell  v.  American,  etc.  Co.,  5 
Cromwell  v.  County  of  Sac,  1208,  1214, 

1224,  1226,  1286,  I  - 
Crook  v.  Jewett,  1157. 
Crooked,  etc.,  Co.  v.  Kenka  Nav.  Co., 

916. 
Crooks  v.  State,  132,  156,  163. 
Crosby  v.  Hanover,  1592. 
Crosby  v.  New  London,  etc,  R  R  Co., 

1236,  1239. 
Crosby  v.  Lillie,  922. 
Crosby  Lumber  Co.  v.  Smith,  966. 
Cross  v.  Eureka,  etc.,  Co.,  600,  709, 
Cross  v.  Fisher,  1189. 
Cross  v.  Jackson.  668,  669, 
Cross  v.  Peach  Bottom  K'y  Co.,  628,  632, 

636. 
Cross  v.  Phenix  Bank,  6-7,  094.  007. 
Cross  v.  Pincknoy  ville,  etc,  Co.,  113,313. 
Cross  v.  Sackett,  54.  80,  480,  486. 
Cross  v.  West  Virginia,   etc.,    Co.,   820, 

836,  853,  1023. 
Cross  v.  Williams,  661. 
Cross'  Case,  41 1. 
Grossman  v.  Penrose  Ferry  Bridge  Co., 

190. 
Croton  T.  Co.  v.  Ryder,  1592. 
Crouch   v.    Credit   Fonder,    1223,   1255 
1256. 


to  the  foot-paging.] 

Crow  v.  Greene,  325.  1038,  1040. 
Crowder  et  al.    v.    Town    of    Sullivan 

et  al.,  811, 1580. 
Crowell  v.  Jackson,  481,  975. 
Crown,  etc,  Bank.  I  '.  1157. 

Crowtber  v.  Thorley,  655. 
Croyden  Hospital  v.  Fairly,  1019. 
Crubb  v.  Miller.  457. 
Cruikshank  v.  Fourth  Nat'l  Bank.  1182. 
Croll  v.  Dodson,  464 
(  frumlish  v.  Shenandoah,  etc.,  R  R  Co., 

1182,  1172. 
Crump  v.  Thurber,  462,  E 
dump  v.  1".  S.  Min.  Co..   191,   192,   1075, 

ma 

<  'rum's  Appeal,  871. 

Cruae  v.  Paine,  I,  56ft 

Crutcher  v.  Commonwealth,  1580. 

Crutcher  v.  Kentucky,  777,  1947. 

Crutcher'e  Adrn'r  v.  Bedford,  994, 

Crutchfield  v.  Mutual,* 

Cucullu  v.  Union   Ii 

( 'ml  or  <  luddee  v.  Rutl 

( luddon  v.  Eastw  i<  k,  l 

Culberteon  v.  Wabash  Nav.  Co.,  16. 

Cullen  v.  Thorn]  son,  :- 

Culp  per  A.        B  c,  v.  Diggea,  1017. 

Culver  v.  Fort  Edward,  149. 

Culver  v.Reno    Real    Estate   Co.,  373, 

lv 
Culver  v.  Sanford,  I 
Culver  v.  Third  National  Bank,  280.284, 

Culver  v.  Wilkinson,  590. 
Cumberland  v.  BCagruder,  1 12. 
Cumberland  Coal  Cav.  Sherman,  821, 

3,  945,  1127. 
Cumberland,  etc,  Ca  v.  IToffman,  etc, 

Co..  1172. 
Cumberland,  etc,  Ca  v.  Paresle,  937. 
Cumberland,   etc,   Corp.    v.    Portland, 

101ft 
Cumberland,  etc..  Co.  v.  Turner,  1171. 
(. 'umbei  land,  etc.,  R  R  Co.  v.  Barren  Co., 

151. 
Cumberland  Valley  R.  R  Ca  v.  Baab, 

12:1. 
Cuming  v.  Bosuell.  742. 
Cummer  v.  K>  nt.  682. 
i  lummlng  v.  Prescott,  20,  584,  85a 


TABLE    OF    CASES. 


lxiii 


[The  references  are 

Cummings  v.  Cummings,  430. 
Cummings  v.  Merchants'  Nat'l  Bank  of 

Toledo.  764.  7(56,  767. 
Cummings  v.  Webster,  1024. 
Cumnock   v.  Institution  for  Sav.,  596, 

782. 
Cunningham    v.   Alabama,   etc.,   Trust 

Co.,  687,  691,  692. 
Cunningham  v.  City  of  Glasgow,  327. 
Cunningham  v.  Edgefield  &  Ky.  R  R 

Co.,  191,  198,  199. 
Cunningham  v.   Massena,   etc.,   R    R, 

1081,  1396. 
Cunningham  v.  Pell,  1144,  1172. 
Cunningham  v.  Pittsburgh,   etc.,   R.  R. 

Co.,  377. 
Cunningham  v.  Third,  etc.,  Bank  of  Au- 
gusta, 477. 
Cunningham's  Appeal,  387. 
Curien  v.  Santini,  839.  862. 
Curling  v.  Chalklen,  1057. 
Curran  v.  State,  154. 
Curran  v.  State  of  Arkansas,  248,  729, 

731,  889,  1942. 
Currie  v.  Mut  Assoc.  Soc,  634. 
Currie  v.  White,  452,  710,  711. 
Currie's  Case,  64,  78. 
Currier  v.  Lebanon  Slate  Co.,  337,  382, 

419. 
Currier  v.  Marietta  &  Cin.  R   R  Co., 

1524,  1525. 
Currier  v.  New  York,  West  Shore,  etc., 

R  R  Co.,  903,  1141,  1150. 
Curry  v.  Scott,   105,   364,   386,  387,  530, 

632. 
Curry  v.  Woodward,  16,   160,  243,  252, 

255,  261,  715,  889. 
Curry  Hotel  Co.  v.  Mullins,  229. 
Curtis  v.  County  of  Butler,  132,  153. 
Curtis  v.  Harlow,  350. 
Curtis  v.  Leavitt,  1072,  1082,  1107,  1115, 

1185.  1190,  1207,  1261,  1263,  13C8. 
Curtis  v.  Piedmont,  etc.,  Co.,  1107. 
Curtis  v.  Steever,  429,  612,  613. 
Curtis  v.  Watson,  1050. 
Curtis  v.  Whipple.  139. 
Curtis'  Case.  107,  333,  359 
Curtis,  In  re,  739. 
Curtiss  v.  Hurd,  481. 
Curzon  v.  African  Co.,  1169. 


to  the  foot-paging.] 

Cushman  v.  Bonfield,  1468. 

Cushman  v.  Brownlee,  889 

Cushman  v.  Hayes,  603. 

Cushman  v.  Root,  470,  572. 

Cushman  v.  Shepard,  288. 

Cushman  v.  Smith,  1525. 

Cushman  v.  Thayer  Mfg.  Co.,  461,  498, 

517,  525,  532,  547. 
Custar  v.  Titusville  Gas  &  Water  Co., 

189,  191. 
Custer  v.  Tompkins  County  Bank,  1120. 
Cutbill  v.  Kingdom,  802. 
Cuthbert  v.  Cuthbert,  406. 
Cutler  v.  Estate  of  Thomas,  670. 
Cutler  v.  North,  etc.,  R'y,  1537. 
Outright  v.  Stanford,  250. 
Cutter  v.  Estate  of  Thomas,  668. 
Cutting  v.  Damerel,  262,  278,  345,  351, 

519,  524. 
Cutting  v.  Florida,  etc.,  Co.,  1351,  1438, 

1511. 
Cutting,  Ex  parte,  1161. 
Cuykendall  v.  Corning,  278,  279. 
Cuykendall  v.  Miles,  289,  293. 

D. 

Dabney  v.  State,  etc.,  990. 

Dabney  v.  Stevens,  1075,  1081. 

Dade  Coal  Co.  v.  Haslett,  326. 

Daft  v.  Daft,  etc.,  Co.,  1137. 

Daggett  v.  Davis,  780,  781,  782,  792. 

Dahl  v.  Montana  Copper  Co.,  1003. 

Dails  v.  Lloyd,  566. 

Daland  v.  Williams,  739. 

Dale  v.  Donaldson,  etc.,  Co.,  1089. 

Dale  v.  Grant,  1161. 

Dale  v.  Hayes,  742. 

Dale,  etc.,  Co.,  Limited,  Re,  929,  1047. 

Dale,  etc.,  Line,  Re,  925. 

Dallas  v.  Railroad  Co.,  1174. 

Dallas  County  v.  McKensie,  141. 

Dallas,  etc.,  Mills  v.  Clancy,  237,  239. 

Dallemand  v.  Odd  Fellows',  etc.,  Bank, 

228. 
Daloret  v.  Rothschild,  460. 
Dal  ton  v.  Midland  R'y  Co.,  105,  506,  507, 

528,  715,  717. 
Dal  ton  &  Morgan  town  R.  R  Co.  v.  Mc- 

Daniel,  161,  254,  255,  257. 


Ixiv 


TABLE    OF    CA- 


[The  refcre-ices  are 

Daly  v.  Georgia,  etc..  R.  R,  1563. 

Daly  v.  National  Life  Ins.  Co.,  998,  1171, 

1588,  1950. 
Daly  v.  Thompson,  39"  S5,  780. 

Damarin  v.  Huron,  etc.,  Co..  1263. 
Dana  v.  Bank  of  St  Paul,  1108. 
Dana  v.  Bank  of  United  States.  955,  990, 

1049. 
Dana  v.  Brown,  686. 
Danbury  &  Norwalk  R  R  Co.  v.  Wilson, 

91,  109,  112,  167,   170,   176,  282,  I 

640. 
Dane  v.  Dane  Mfg.  Co..  271,  804,  881. 
Dane  v.  Young,  285,  846,  K 

Danforth  v.  Allen,  668. 

Danforth  v.  Penny,  818 

Daniell  v.  OlT.  Managers  of  Bank,  S 

Daniell  v.  Royal  British  Bank,  524 

Daniell.  Ex  part.'.  12.  II,  46. 

Dan iell's  Case.  887,  858,  115. 

Daniels  v.  Hart,  1266,  181ft 

Dannemeyer   v.    Coleman,    1131, 
1159. 

Danville  v.  Montpelier,  etc.,  R.  R  Co., 
150. 

Danville,  etc,  Co.  v.  Tommy,  1116. 

Danville,  etc.,    P.  Co.  v.  Stat  . 

Danville.  Matter  of  the  Bank  of.  666. 

Danville  Seminary  v.  Mott»  891,  10 

Darby  v.  Wright.   1 

1»'  \ i <  y  v.  Tain  ir.  etc.,  K'y,  106a 

Dardauelle.  et  •..  R'y  v.  Shinn,  i 

Darling  v.  Boston,  eta,  R.  \l,  r 

Darlington,  etc,  Co,  Be,  :<'>. 

Darnall  v.  Lyon,  164 

Darnell  v.  Dickens,  1100. 

Darnell  v.  State.  866. 

Darsl  r.  Gale,  1085,  1186,  120.1. 1263. 1272. 

Dartmouth  College  v.  Woodward,  1,  626, 
771. 

Dartmouth  College  Case,  635,  1576. 

Dater  v.  Troy,  etc.,  R  R  Co.,  1009. 

Dauchy  v.  Brown.  250,  271,  280,  888 

Dauphiu  &  Lafayette   R'y  Co.  v.  Ken- 
nedy, 771.  772. 

Davenport  v.  Dows.  747.  1144. 

Davenport  v.  Kleinschmi.lt.   1597. 

Davenport  v.  Mississippi  &  Missouri  R 
R  Co.,  753,  770. 


to  the '  foot-paying. ] 

Davenport  v.  Receivers,  1444.  1446.1456. 
Davenport  Bank  v.  Davenport,  763. 
Davey  v.  Pern ber ton.  6 
David's  Trusts,  Re,  : 
Davidson  v.  Bridgeport,  1058. 
Davidson  v.  Grange,  10 
Davidson  v.  New  Orleans.  1949. 
Davidson  v.  1!  on-  y  < '. >..  I! 
Davidson  v.  Rankin,  24:1.  271.  2^0.  285, 

Davidson  v.  Seymour.  915. 
Davidson  v.  Tulloch,  19:1.  488,  7-5. 
Davidson  v.  Westchester,  etc.,  Co.,  321, 

1200.  1888,  15-1. 
Davids.  .1-0.  818 

Darvii  a  v.  Fowler,  408,  404,  405. 
Davies  v.  New  Y  t  Co.,  1081. 

IS  .  1886 

Davis  v.  Bank  <>r'  England,  508,  508,  516, 

Bank  of  River  Rafain,985, 1193. 
Davis  v.  Barb  r,  1 17.  25.".. 
Da\ 

Davis  v.  (  ain'.-  l'x'r,  406. 
Davis  v.  Cook,  1188 

v.  County  of  Yuba,  1 S 
Davis  v.  Davis.  * 

is  v.  Duncan.  1448,  1456,  1463. 
Davis  v.  England.  1105. 
Davis  v.  Esses  Baptist  Society. 

881,845. 
-  e.  Gemmell,  936,  1131,  1150,  1159. 

Ill 
Davi.-  v.  Gray,  278,  1428,  1429. 
Davis  v.  Gwynne,  564 
Davis  v.  Haycock.  854  570.  .".TO. 
Davis  v.  Jackson.  740. 
Davis  v.  Mayor,    etc.,    1169.    1550,    1553. 

1 555. 
Davis  v.  Memphis,  etc..  R'y  Co.,  889,  890, 

891,  927.  990.  1078 
Davis  v.  Montgomery,  etc,  Co.,  66.  70, 

1045,  1193.  1205. 
Davis  v.  Old  Colony  R  R  Co.,  1247. 
Davie  v.  I  tewell,  791. 
Davis  v.  Proprii  I  ..  370.  II 

Davis  v.  Rock.  etc..  Co..  935. 
Davis  v.  Rockingham    Investment  Co., 

1087. 


TABLE    OF    CASKS. 


lxv 


[TJie  references  are 

Davis  v.  Shafer,  117,  669,  1041. 

Davis  v.  Stevens,  339,  356. 

Davis  v.  Tuseumbia,  C.  &  D.RR.  Co., 

1526. 
Davis  v.  U.  S.,  etc.,  Co.,  829,  835,  1156. 
Davis  v.  Weed,  331,  351. 
Davis'  Case,  1187. 
Davis,  Ex  parte,  338. 
Davis,  etc.,  Co.  v.  Best,  984,  985,  1080. 
Davis,  etc.,  Co.  v.  Davis,  etc.,   Co.,  950, 

1114. 
Davis,  etc.,  Wheel    Co.   v.    Davis,   etc., 

Wagon  Co.,  1119. 
Davison  v.  Davis,  456. 
Davison  v.  Gillies,  724,  72a 
Davison  v.  Holden,  66S. 
Dawes  v.  North  River  Ins.  Co.,  1106. 
Dawes  v.  Ship,  639. 
Dawes'  Case,  177. 
Dawkins  v.  Antrobus,  1026. 
Dawson  v.  Gaskoin,  408. 
Dawson  v.  Kittle,  580. 
Dawson  v.  Insurance  Co.,  387. 
Dawson  v.  Morrison,  1036,  1037. 
Day  v.  American  Tel.  &  Cable  Co.,  506. 
Day  v.  Day,  337,  745. 
Day  v.  Holmes,  577,  580,  587,  588. 
Day  v.  Ogdensburgh,  etc.,  R.  R  Co.,  884, 

997,  1240,  1242,  1497,  1503,  1504. 
Day  v.  Perkins,  788. 
Day  v.  Postal  Tel.  Co.,  951,  1422,  1443. 
Day  v.  Spiral,  etc.  Co.,  973. 
Day  v.  Vinson,  274. 
Day  v.  Worcester,  etc.,  R.  R,  384. 
Dayton  v.  Borst,  111,   113,  255,  262,  263. 
Dayton  v.  Warne,  1105. 
Dayton  &  Cincinnati  R  R  Co.  v.  Hatch, 

34,  122,  128,  129,  631. 
Dayton,  etc.,  Co.  v.  Coy,  114. 
Dayton,  etc.,  R  R.  Co.  v.  Hatch,  660. 
Dayton  Nat'l  Bank  v.  Merchants'  Nat'l 

Bank,  581. 
Deaderick  v.  Wilson,  260,  431,  673. 
Deaf  &  Mute  Inst  v.  Norwood,  1019. 
Dean  v.  Bennett,  1026. 
Dean  v.  Biggs,  252,  263,  1362. 
Dean  v.  De  Wolf,  273. 
Dean  v.  Mace,  281,  295. 
Dean  v.  Sullivan  R  R  Co.,  1531. 
Bean  v.  Whiton,  283. 
E 


to  the  foot-paging.] 

Dean  v.  Whitory,  284. 

Dean  and  Chapter  of  Femes,  Case  of,  821. 

Deane  v.  Test,  406. 

Deansville   Cemetery,    Matter   of,  1526, 

1527. 
Dearborn,  etc.,  Co.  v.  Augustine,   1003. 
De  Betz's  Petition,  1309. 
De  Bost  v.  Albert  P.  Co.,  1076. 
De  Camp  v.  Alward,  863,  989. 
De  Camp  v.  Dobbins,  993,  994,  118& 
Decatur,  etc.,  Co.  v.  Neal,  821. 
De  Caumont  v.  Bogert,  412. 
Decker  v.  Evansville,  etc.,  Co.,  1579. 
Decker  v.  Gardner,  8C0,  1411, 1413,  143L 
Decker  v.  Gutta  Percha,  etc.,  Co.,  1089. 
Decker  v.  Hughes,  133,  141. 
De  Cordova  v.  Barn  urn,  573,  602. 
Dedham  Bank  v.  Chickeriug,  1092,  1093. 
Dedham  Inst.  v.  Slack,  1084. 
De  Duvigne's  Case,  908. 
Deems  v.  Albany,  etc.,  Line,  670. 
De  Forth  v.  Wisconsin,  etc.,  R  R  Co., 

150. 
De  Gendre  v.  Kent,  711,  745. 
De  Graaf  v.  Thompson,  1367. 
De  Graaf  v.  Wyckoff,  1239. 
De  Graff  v.  American  Thread  Co.,  971, 

1108,  1245. 
De  Graffenried  v.  Brunswick,  etc..  R  R, 

1434. 
Dehon  v.  Foster,  1425. 
De  La  Cuesta  v.  Insurance  Co.,  388. 
Delacy  v.  Neuse  River  Nav.  Co.,  1025. 
Delafield  v.  State  of  Illinois,  580. 
Delamater  v.  Miller,  716. 
Delamater's  Estate,  408,  413. 
Deland  v.  Williams,  707. 
Delaney  v.  Van  Aulen,  745. 
Delanney  v.  Strickland,  661. 
Delano  v.  Butler,  299,  390,  391. 
Delano  v.  Case,  1141. 
Delano  v.  Trustees,  etc.,  1069. 
Delaware  &  Atlantic  R  R  Co.  v.  Irick, 

1019. 
Delaware  &  R  C.  Co.  v.  Camden,  1529. 
Delaware  Canal  Co.  v.  Penn.  Coal  Co., 

852,  1057,  1058,  1578,  1579. 
Delaware  Canal  Co.  v.  Sanson],  174,  342. 
Delaware,  etc.,   Co.   v.  Commonwealth, 

777. 


Ixvi 


TABLE    OF    CAsf-. 


[The  references  are 

Delaware,  etc.,  R  R  Co.  v.  Central,  etc., 

Co..  1600,  1601. 
Delaware,  etc.,  R  R  Co.  v.  ErieR'y,  1415. 
Delaware,  etc,  R  R  Co.  v.  Irick.  19.  634. 
Delaware,  etc,  R  R  Co.  v.  Oxford  Iron 

Co.,  701. 
Delaware,  etc.,  R   R   Co.   v.  Rowland. 

Delaware  R  R  Co.  v.  Tharp,  631.  Bffl 
Delaware  Railroad  Tax,  627.   747. 

771.  772.  77::.  774.  1946. 
Delevan  v.  Simonson,  576. 
De  Lisle  v.  Hodges,  410. 
Deller  v.  Staten  bland,  etc.  Club, 
Delta,  etc,  Co.  v.  William-!.  lu90. 
Demarestv.  Flack.  310.  314.  317.  896 

887. 
Deming  v.  Bail' 
Deming  v.  Bull.  386,  349. 
Deming  v.  Darling, 
Deming  v.  Pdlestoo,  - 
Deming  v.  Williams.  413. 
Demings  v.  Supreme  Lodge,  1108. 
Dempsey  v.  Harm. 
Den  v.  Vreelandt,  1100. 
Denham  &  Co..  In  re,  206.  7 
Denike  v.  New  York,  eta,  Co,  B58,  859. 
Denney  v.  Cleveland,  etc..  R  R.  K 
Dennis  v.  Kennedy,  667,  EI70,  671.  919. 
Dennis  v.  Superior  Court,  892. 
Dennison.  Ex  parte,  590,  B 
Denniston  v.  Chicago,  etc.  R  R.  1408, 
I  >.  nnistoun  v.  New  York,  etc,  R  R  Co.. 

1644 
Denny  v.  Lyon.  594 
Denny,  etc.,  Co.  v.  s.-hram.  223. 
Densmore  v.  Central  R  R  Co..  1142. 
Densmore  v.  Red  Wing,  etc.,  Co.,  878. 
Densmore  Oil  Co.  v.  Densmore,  15,  849, 

sua 

Dent  v.  Holbrook,  3 

Dent  v.  London  Tramways  Co.,  373.  374, 

718,  719. 
Dent  v.  Nickalls,  .r>63.  580. 
Dent  v.  North,  etc.,  Co..  1088. 
Dent"-  Case,  77. 

Denton  v.  International  Co..  1179. 
Denton  v.  Jackson.  2. 
Denton  v.  Livingston.  22.  60S. 
Denton  v.  Macneil,  195,  208 


to  the  foot-paging.] 

Denver   &   R    G.  R'y   v.    Harris.  1006, 

1008,  1010. 
Denver  &  R  T.  R  R  v.  United  States 

T.  Co.,  1805, 
Denver,   etc.,   Co.   v.  Union,  etc,    R'y, 

1530. 
Denver,  etc.,  R'y  v.  Barsaloux,  1566. 
Denver,  etc..  R'y  v.  Bourne,  1563, 
Denver,  etc..  R  R  Co.  v.  Atchison,  etc, 

R  R  Co..  151L 
DeP  % «        SI   358 

De  Peyster  v.  American   Fire  Ins.  Cc, 

De  I  v.  Beckman,  656. 

-it  Hank  v.  Barrett)  42:..  641.  1090, 
•.  1471.  149a 
Deposit  Life  A.   Co.  v.  Ayscough. 

810. 
Derbj  w.  Yale,  1 

Derby  Turnpike  Co.  v.  Parks,  1591. 
Dp  Ribeyre  v.  Barclay.  584 
DerricksoD  v.  Smith.  29a 

.  \    Peek.  904 
1 1.  Rui  ign<  'a  ( 
De  Ruyt<  r  ».  St  Pi 
De  Rnyter  v.  Trustees,  etc, 

..  Wood,  1131.  1152. 
Deadoity,  Ex  parte,  830,  841. 
D  sdoity,  Re,  ^39. 

t...  K'y  v.  I><s  Moines,  etc.. 

R'y.  IN 
Des  Moines,  etc.,  R  R  v.  Wabash,   etc. 

R'y.  1 

Moines  Gas  Co.  v.  West,  1187,  1222. 
■7.  1405. 
Des  Moines  Valley  R  R  Co.   v.  GrafT. 

198,  195. 
De  Sobry  v.  Nicholson,  1189, 
Despar  v.    Continental,   etc..   Co.    1174. 

1175. 
Despatch  Line  v.  Bellamy  Mfg.  Co.,  20, 

1057,  1089.  1093,  1095. 
Dester  v.  Ross,  1465. 
Detroit  v.  Detroit,  etc.,  R'y,  1304 
Detroit  v.  Detroit  &  Howell  Plankroad 

...  635,  889. 
Detroit  v.  Jack.son,  1058,  1093,  1095. 
Detroit  v.  Mutual     Gaslight    Co.,    1969, 

1968,  1584 
Detroit  City  R'v  v.  Mills.  1563.  1567. 


TABLE    OF    CASES. 


Ixvii 


[77ic  references  are 

Detroit  Daily    Post    Co.    v.    McArthur, 

1008,  1010. 
Detroit,  etc..  Bank  v.  Detroit,  etc.,  Yer- 

ein,  670. 
Detroit,  etc.,  Co.  v.  Board  of  Assessors, 

768. 
Detroit,  L.  &  L.  ML  R.  R.  Co.  v.  Starnes, 

125. 
Detroit  St  R'ys  v.  Guthard,  772. 
Detweiler  v.  Breckenkamp.  173. 
Detwiler  v.    Commonwealth,   818,   821, 

842,  849,  851. 
Devala  Prov.  G.  M.  Co.,  In  re,  210. 
Development  Co.  v.  Railway  Co.,  476. 
Devendorf  v.  Beardsley,  1113,  1170. 
Devlin  v.  Pike.  789. 
Devoe  v.  Ithaca,  etc.,  R.  R.  Co.,  1170. 
Devon,  etc..  Ry  Co.,  Re,  366,  1466,  1478. 
De\^ees  v.  Miller,  468. 
Dewey  v.  St.  Albans  Trust  Co.,  271,  323. 
Dewey  v.    Toledo,   etc.,    R'y,  424,  1191, 

1494. 
Dewing  v.  Perdicaris,  400.  512. 1028, 1159. 
De  Witt  v.  Hastings,  233,  313,  314,  1167. 
De  Witt  v.  Walton.  1103,  1105. 
De  Witt,  etc.,  Co.  v.  N.  J.,  etc.,  Co.,  647. 
De  Wolf  v.  Mallett's  Adm'r,  1163. 
De  Wolf  v.  Manuf.  Co.,  989. 
Dexter  &  Mason  P.   R  Co.  v.  Millerd, 

111,  168,  169. 
Dexter,  Horton   &   Co.   v.    Long,  1294, 

1295. 
Dexterville,  etc.,  v.  Receiver,  In  re,  1398. 
Dey  v.  Holmes,  565. 
De  Zeng  v.  Beekman.  1097. 
Dial  v.  Yalley,  etc.,  Assoc,  1069. 
Diamond,  etc.,  Co.  v.  Todd,  452,  528. 
Diamond  Match  Co.  v.  Powers,  674,  997. 
Diamond  Match  Co.  v.  Roeber,  647. 
Dias  v.  Merle,  679. 
Dick  v.  Balch,  94 
Dick  v.  Struthers,  1423.  1431. 
Dickerson's  Appeal,  412. 
Dickey  v.  Maine  Tel.  Co.,  1594. 
Dickinson  v.  Central  Nat  Bank,  24,  430, 

518,  586,  696. 
Dickinson   v.    Chamber   of  Commerce, 

1025. 
Dickinson  v.  Gay,  580. 
Dickinson  v.  Lilwal.  565. 


to  the  foot-paging. .] 

Dickinson  v.  Yalpy,  1040,  1191. 

Dickinson's  Appeal.  434. 

Dickson  v.  Great,  etc.,  R'y,  1537. 

Dickson  v.  Yalentine,  582. 

Dickson's  Executor  v.  Thomas,  469.  471, 

473. 
Diggle  v.  London  R'y  Co.,  1096. 
Dill  v.  Wabash  Yalley  R.  R  Co.,  187. 
Dillard  v.  Central,  etc.,  Iron  Co.,  1177. 
Diller  v.  Brubaker,  601. 
Dillon  v.  Barnard,  1395,  1396. 
Diman  v.  Providence,  etc.,  R  R.  Co.,  90. 
Dimick  v.  Register,  962. 
Dimpfel  v.  Ohio  &  M.  R'y  Co.,  1143, 1261. 
Dingham  v.  People,  1517.  • 
Dingwell  v.  Askew,  411. 
Dinns  v.  Prop,  of  Grand  Junction  Canal, 

19. 
Dinsmore  v.   Racine,  etc.,  R  R,  1380, 

1386. 
Direct,  etc.,  Co.,  Re,  393. 
Direct  W.  S.  Cable  Co.  v.  Dominion  Tel. 

Co.,  1173. 
Directors,  etc.,  of  Central  Ry  v.  Kisch, 

191,  194,  197,  200,  208. 
Disborough  v.  Outcalt,  609. 
Discount  Co.  v.  Brown,  974. 
Dispatch   Line   of  Packets  v.   Bellamy 

Mfg.  Co.,  849,  1057,  1061. 
Diven  v.  Lee,  271,  283. 
Diven  v.  Phelps.  299. 
Diversey  v.  Smith,  293. 
Dix  v.  Shaver,  122. 
Dixon  v.  Evans,  177,  217. 
Dixon's  Case,  212. 
Dixon,  Ex  parte,  347. 
Dixon  County  v.  Field,  132,  135. 
Doak  v.  Bank  of  the  State,  582,  597. 
Doane  v.  King,  481. 
Dobbins  v.  Walton,  697. 
Dobson  v.  Simon  ton,  893. 
Dobson,  Ex  parte,  518. 
Dockery  v.  Miller,  985. 
Dodd  v.  Hills,  438,  549. 
Dodd  v.  Wilkinson.  9^4. 
Dodd  v.  Winship,  740. 
Dodds,  Re,  549. 

Dodge  v.  City  of  Council  Bluffs,  1528. 
Dodge  v.  County  of  Platte,  136,  140. 
Dodge  v.  Lawson,  595. 


lxviii 


TABLE   OF    CASES. 


[The  references  are 

Dodge  v.  Minnesota,  etc.,  Slate  Roofing 

Co.,  284. 
Dodge  v.  Woolsey,  G2G,  747, 771,  899,  969, 

1135,  1161,  1942. 
Dodgson  v.  Scott,  349. 
Dodgson's  Case,  190. 
Doe  v.  St.  Helen's  R'y,  1256,  1334. 
Doe  v.  Tainere,  1090. 
Doe  ex  rel.  Maiden  v.  Miller,  1019. 
Doerubeclier  v.  Columbia,  etc.,  Co.,  204, 

1000. 
Domau's  Case,  1  ."588. 
Donahue  v.  McCosh,  453. 
Donald  v.  Suckling,  581,  592,  594. 
Donaldson  v.-Gillet,  484,  550. 
Dongan's  Case,  1508,  1545. 
Dounell    v.    Lewis   Co.    Savings    Bank, 

1085,  1185. 
Donnell    v.    Wyckoff,  " 
Donoghue  v.  Indiana,  eta,  R'y,  105ft 
Donohue  v.  M  triposa,  etc.,  Co.,  1101. 
Donovan  v.  Finn,  609. 
Donworth  v.  Coolbaugh,  -J' 
Dooloy  v.  Cheshire  class  Co.,  882. 
Dooley  v.  Walcott,  B 
Doolittle  v.  Marsh,  078. 
Doolittle,  In  re,  1 187. 
Doon  Township  v.  Cummins,  134 
Door  v.  ( leary, 
Doran  v.  Eaton,  491. 
Dorcmus  v.   Dutch  Reformed   Church, 

105a 

Dorisou  v.  Westbroofc,  4G0. 

Dorman  v.  Jacksonville  ft  A.  P.  R  Co., 

237,  238. 
Dormitzer  v.  Illinois,  etc.,   Bridge  Co., 

73?. 
Dorris  v.  French,  87,  233,  236,  239,  845, 

202. 
Dorris  v.  Sweeney,  884,  0:59. 
Dorsey  Harvester  Rake  Co.   v.   Marsh, 

972. 
Dorsheimer  v.  Glenn,  90,  244 
Doss  v.  Missouri,  K.  ft  T.  R  R,  1010. 
Doty  v.  First  Nat.  Bank  of  Larimore, 

448,  534,  018. 
Doty  v.  Michigan  C.  R  R  Co.,  1177. 
Douchy  v.  Brown,  349,  356. 
Doud  v.  Bank,  117. 
Daugall  v.  Gardiner,  1160. 


to  the  foot-paging.] 

Dougan's  Case.  634.  957. 

Dougherty  v.  Hunter,  10S0. 

Doughty  v.  Somerville  &  E.  R  R  Co, 

1524. 
Douglas  v.  Congrevc,  23,  407. 
Douglas  v.  Ireland,  ?2. 
Douglas  v.  Merceles,  785,  786. 
Douglas  v.  Phenix  Ins.  Co.,  15S3. 
Douglas  v.  Richmond,  etc.,  R  R,  1145. 
Douglas  v.  Smith,  '. 
Douglass   v.    Branch    Bank    at  Mobile, 

1017. 
Douglass  v.  Chatham,  133. 
Douglass  v.  Cline,  1401,  1440. 
Douglass  v.  Craft,  789. 
Douglass  v.  Douglass,  407. 
Douglass  v.  Merchants'  Ins.  Co.,  1053. 
Douglass  v.  President,  etc.,  1 
Douglass,  Town  of,  v.  Niantic  Savings 

Tank.  150. 
Dousman  r.  Wisconsin  &  Lake  Superior, 

etc.,  O  -89. 

Dovey's  A  |  3. 

Dow  v.  Beidelman,  1518,  1919. 

Dow  v.  Gould  ft  Curry  Silver  Mining  Co., 

129.  157.  709. 
Dow  v.  Memphis  eta,  R  R,  1280.  1289. 

1808,  1818, 1317, 1840, 1847,1887,188ft 

1400,  1405. 
Dowel]  v.  Sheehan,  210. 
Dowd  v.  Wisconsin,  eta,  R  R.  Co.,  1151. 
Dowd  v.  Stephenson,  1077. 
Dowling  v.  Hudson,  1417. 
Downer's  Adm'r  v.  Zanesrille  Bank,  C89, 

692,  693. 
Downes  v.  Ship,  195,  1130. 
Dowuie  v.  Hoover,  1G4. 
Dowuie  v.  White.  188,  213. 
Downing  v.  Marshall,  Ml,  992,  994,  99G. 
Downing  v.  Mt.  Washington,  etc.,  1585. 
Downing  v.  Potts,  178,  813,  821.  825,  841. 
Downing  v.  Whittier,  599. 
Dows  v.  City  of  Chicago,  767. 
Dows  v.  Napier.  883. 
Doyle  v.  Continental  Life  Ins.  Co.,  998, 

1001,  1917.  194ft 
Doyle  v.  Mizner,  883,  1001. 
Doyle  v.  Muntz,  1137. 
Doyle  v.  San  Diego.  880,  116a 
Doyle,  Ex  parte,  :'.:'>  1. 


TABLE    OF    CASES. 


hrix 


[The  references  are 

Dozier  v.  Thornton,  285. 

Drake  v.  Flewillen,  1105. 

Draper  v.  Beadle,  72. 

Draper  v.  Manchester,   etc.,   R   R   Co., 

683,  684. 
Diaper  v.  Moss,  etc.,  Co.,  1104. 
Draper  v.  Springport,  145. 
Drinkwater  v.  Falconer,  404. 
Drinkwater  v.  Portland  Marine  R'y,  250, 

280,  294. 
Driscoll  v.  West  Bradley,    etc.,   Manuf. 

Co.,  686,  688,  689,  691. 
Droitwich  Patent  Salt  Co.  v.  Curzon,  381, 

394. 
Dron field  Silkstone  Coal  Co.,  Re,  46,  212, 

213,216. 
Drover  v.  Evans,  109. 
Drum  Slate  Quarry  Co.,  Re,  908,  909. 
Drummond  Tobacco  Co.  v.  Randle,  1014. 
Drummond's  Case.  31,  36. 
Drury  v.  Cross,  601,  932,  1218,  1221, 1272. 
Drybutter  v.  Bartholomew.  22. 
Dryden  v.  Kellogg,  251,  278,  281,  286. 
Duanesburgh  v.  Jenkins,  136,  147. 
Dublin  &  Wicklow   Ry  Co.    v.    Black, 

107,  334.  428. 
Dubois  v.  Delaware,  etc.,  Co.,  1095,  1105. 
Dubois  v.  Sistare,  597. 
Dubois  v.  Thompson,  568,  781. 
Du  Bois.  etc.,  R'y  v.  Buffalo,  etc.,  R'y, 

1563,  1565. 
Dubuque  Co.  v.  Dubque,  etc.,  R  R  Co., 

134. 
Ducarry  v.  Gill,  1065. 
Ducat  v.  Chicago,  997,  998,  1002,  1947. 
Duce,  Ex  parte,  822. 
Ducios  v.  Benner,  739. 
Ducket  v.  Grover,  1145. 
Duckworth  v.  Roach,  293. 
Dudley  v.  Collier,  1005. 
Dudley  v.  Congregation,  etc.,  1109,  1264. 
Dudley  v.  Gould.  500,  606,  616. 
Dudley  v.  Kentucky  High  School,  814, 

1065. 
Dudley  v.  Price's  Adm'r,  731,  733. 
Duff  v.  Maguire,  668. 
Duffield  v.  Barnum,  etc.,  Works,  209. 
Duffy  v.  Mutual  Brewing  Co.,  679. 
Dufour  v.  Stacey,  1581. 
Duggan  v.  Colorado,  etc.,  Co.,  880. 


to  the  foot-paging] 

Duguid  v.  Edwards,  580. 

Duke  v.  Andrews,  1040. 

Duke  v.  Cahawba  Nav.  Co.,  517. 

Duke  v.  Diver.  1040. 

Duke  v.  Forbes,  1040. 

Duke  v.  Markham,  856,  1063,  1294 

Duke's  Case,  416. 

Duluth  v.  Duluth,  etc.,  Co.,  159a 

Dummer  v.  Corporation,  etc.,  683. 

Dummer  v.  Pitcher,  413. 

Duncan  v.  Atlantic,   etc.,   R.    R,    1308, 

1356,  1357,  1400. 
Duncan  v.  Jaudan,  435,  439,  593. 
Duncan  v.  Jones.  666. 
Duncan  v.  Hill,  580. 
Duncan  v.  Luntley,  396. 
Duncan  v.  Maryland  Svgs.  Inst,  983. 
Duncan  v.  Mobile,  etc.,  R.  R,  1221,  1233, 

1233.  1234,  1316,  1468,  1472,  147a 
Duncomb  v.  New  York,  etc.,  R  R,  593, 

594.  935.  937,  1195.  1216,  126a 
Duncuft  v.  Albrecht.  460,  464. 
Dundas  v.  Dutens,  609. 
Dundee,  etc.,  Co.  v.  Cooper,  880. 
Dundee,  etc.,  Co.  v.  Nixon,  1004 
Dunham  v.  Cincinnati,  P.,  etc.,  R'y  Cou, 

1233,  1382,  1394. 
Dunham  v.  Earl,  1383. 
Dunham  v.  Isett,  12G9,  1367,  136a 
Dunkerson,  In  re,  687,  701. 
Dunkle  v.  Renick,  987. 
Dunlop  v.  Dunlop,  693,  697. 
Dunlop  v.  Patterson,  etc.,  Ins.  Co.,  1421, 

1424,  1432. 
Dunlop,  Re.  700. 
Dunman  v.  Strother,  46a 
Dunn  v.  Bell,  476. 
Dunn  v.  Com.  Bank  of  Buffalo,  515,  52a 

699. 
Dunn  v.  Rector,  etc..  of  Church,  1096. 
Dunn  v.  St.    Andrew's    Church,     109a 

1094,  1095,  1096. 
Dunn  v.  Star,  etc.,  Ins.  Co.,  521,  617. 
Dunn's  Adm'r  v.  Kyle's  Adm'r,  1031. 
Dunne  v.  English,  916. 
Dunnebroge    Mining    Co.    v.    Ailment, 

881. 
Dunnovan  v.  Green,  133,  149. 
Dunphy  v.  Travelers',  etc.,  Ass'n,  1131, 

1147,  1151. 


lxx 


TAI1LE    OF    CASES. 


[The  references  are 

Dunstan  v.  Imperial,    etc.,  Co.,  16,   924, 

1024. 
Dunston  v.  Hoptonie  Co.,  260. 
Dupee  v.  Boston  Water-power  Co.,  417, 

419,  972,  995. 
Du  Pont  v.  Bushong,  1238. 
Du  Pont  v.  Northern  Pac.  R  R  Co.,  919, 

1142,  1238,  1269,  1270. 
Du  Pont  v.  Tilden,  63,  82. 
Duquesne  Club  v.  Pennsylvania  Bank, 

1173. 
Durant  v.  Burt,  469,  475,  567. 
Duranty's  Case,  192,  203,  205. 
Durar  v.  Insurance  Co.,  1085,  1093. 
Durfee  v.  Old   Colony,  etc.,  R  R  Co., 

637,  814,  1493,  1504,  1508. 
Durfee  v.  Peoria,  etc.,  R'y,  1532. 
Durgin  v.  American  Exp.  Co.,  L579. 
Durham  v.  Man.,  etc.,  Co.,  532. 
Durham's  Case,  276. 
Durham,  etc.,  Co.  v.  Chid',  669. 
Durkee  v.  Board  of  Liquidation,  111. 
Dutch    West  India   Co.    v.    Hennquez, 

291. 
Dutch  West  India  Co.   v.  Van    Moses, 

1016. 
Dutcher  v.  Importers   &  Traders,  etc., 

991. 
Dutcher  v.  Marine  Nat  Bank,  278. 
Dutchess  Cotton  Manufactory  v.  Davis, 

111,  113,  232,  1166. 
Dutchess,   etc.,    Ins.    Co.    v.    Hachfield, 

1198,  1226. 
Dutchess,  etc.,  R  R  Co.  v.  Mabbett.  89, 

233 
Dutenhofer  v.  Adirondack  Ry,  1476. 
Dutton  v.  Connecticut  Bank,  523,  547. 

621. 
Dutton  v.  Ives,  1229. 
Dutton  v.  Marsh,  1106. 
Duverger  v.  Fellows,  663. 
Dvvight  v.  Boston,  750. 
Dwight  v.  Smith,  1303,  1330. 
Dwyer  v.  Fuller,  485. 
Dyer  v.  Osborne,  22,  750. 
Dyer  v.  Tuskaloosa,  etc.,  Co.,  1577. 
Dyer  v.  Walker,  877. 
Dykers  v.  Allen,  573,  590,  591. 
Dykers  v.  Townsend,  470. 


to  the  foot-paging. .] 


E. 


E.  &  P.  Dis.  v.  Cecil,  1521. 

Eagan  v.  Clasbey,  453. 

Eagle  v.  Beard,  155. 

Eagle,  etc,,  Co.  v.  Miller,  1168. 

Eagle  Iron  Works,  Re,  19. 

Eaglesfield  v.  Marquis  of  Londonderry, 

102,  205,  302,  977,  1189. 
Eakright  v.  The  Logansport,  etc.,  R  R 

Co.,  89.  90,  162, 168,  188. 
Eales  v.  Cumberland,  etc.,  Co.,  925. 
Earaee  v.  Doris,  288,  289,  80S, 
Earl  of  Lindsay  v.  Great  Northern  R'y, 

1045. 
Earl  of  Shrewsbury  v.  North  Staff ord- 

Bhire  R'y  Co.,  952,  1044,  1045,  1540. 
Earl  Powlet  v.  Herbert,  185. 
Early  &  Lane's  Appeal,  417. 
Earp  v.  Lloyd,  <i79. 
Earp'a  Appeal,  707,  788. 
Earp's  "Will,  744 
East  Alabama  R'y  v.  Doe,  1512. 
East  Anglian  R'y  v.  Eastern,  eta,  R'y, 

1502. 
East  Boston,  etc.,  R  R  v.  Eastern  R  R, 

1269. 
East  Boston,  etc.,  R  R  v.  Hubbard,  1270. 
East,  etc.,  Church  v.  Froislie,  877. 
East,  etc.,  Co.  v.  Brown,  107'.». 
East,  etc.,  Co.  v.  Dennis,  510. 
East,  etc.,  Co.  v.  Merry  weather,  945. 
East,  etc.,  Co.,  Re,  1478. 
East,  etc.,  R  R  Co.  v.  Lighthouse,  33. 
East,  etc.,  R  R  v.  State,  869. 
East  Gloucestershire  R'y  Co.  v.  Bartholo- 
mew, 27,  220,  524. 
East  Hartford  v.  Hartford  Bridge  Co., 

1582. 
East  Lincoln,  Town  of,  v.    Davenport, 

155. 
East  Line,  etc.,  R  R  v.  State,  872,  1501, 

1505. 
East  New  York,  etc.,  R  R  Co.  v.  Elmore, 

99,  716,  935. 
East  Oakland  v.  Skinner,  131. 
East  1'.  Hotel  Co.  v.  West,  2:V2. 
East  River  Bank  v.  Hoyt,  1111. 


TABLE    OF   CASES. 


lxxi 


[The  references  are  to  the  foot-paging.] 


East  Rome,  etc.,  Co.  v.  Nagle,  1540. 
East  Tennessee,  etc.,  R  R  v.  Atlanta, 

etc.,  R.  R,  1180,  1342,   1412,   1421, 

1422, 
East  Tennessee,  etc.,  R'y  v.  Frazier,  1270, 

1390. 
East  Tennessee,  etc.,  R  R  Co.  v.  Gam- 
mon, 112,  187,  190,  814. 
Eest  Tennessee,  etc.,  Co.  v.  Gaskell,  877. 
East  Tennessee,  etc.,  R  R  Co.  v.  Gray- 
son, 1135,  1146. 
East  Tennessee,  V.  &  G  R  Co.  v.  Pick- 

erd,  771,  772. 
East.  &  West,  etc.,  Co.  v.  Littledale,  527. 
East  &  West,  etc.,  R'y  Co.,  Re,  366. 
Easterly  v.  Barber,'  293,  852. 
Eastern  v.  German  Am.  Bank,  1358. 
Eastern  Counties  R'y  Co.  v.  Hawkes, 

992,  994. 
Eastern,  etc.,  Bank  v.   St   Johnsbury, 

etc.,  R  R,  1249. 
Eastern,  etc.,  Bank  v.  Vermont  Nat'l 

Bank,  982. 
Eastern,  etc.,  Co.  v.  Regina,  866,  885. 
Eastern,  etc.,  Co.  v.  Vaughan,  1167. 
Eastern,  etc.,  Co.,   Re,   707,    1378,    1440, 

1513. 
Eastern,  etc.,  R'y  v.  Hawkes,  1045. 
Eastern,  etc.,  R'y  Co.,  Re,  1271. 
Eastern  Plank  Road  Co.  v.  Vaugban,  6, 

113.  178,  220. 
Eastern  R  R  Co.  v.  Benedict,  465,  779, 

785,  787. 
Eastern  R  R  Co.  v.  Boston  &  M.  R  R 

Co.,  1529. 
Eastham  v.  Blackburn  R'y  Co.,  1019. 
Eastman  v.  Crosby,  242,  306. 
Eastman  v.  Fiske,  456,  547. 
Easton  v.  German- American  Bank,  601, 

606,  1471. 
Easton  v.  Hodges,  591. 
Easton  v.  Houston,  etc.,  R'y,  1398,  1459. 
Easton  v.  London,  etc.,  Bank,  485,  516. 
Easun  v.  Buckeye  Brewing  Co.,  959. 
Eaton  v.  Aspinwall,  232. 
Eaton  v.  Pacific,  etc.,  Bank,  390,  392. 
Eaton  v.  St  Louis,  etc.,  Co.,  1175,  1178. 
Eaton,  etc.,  R   R  v.  Hunt,   1290,  1344, 

1542,  1545. 
Ebbett's  Case,  106,  334. 


Ebbinghousen  v.  Worth  Club,  661. 
Ebbw  Vale  Steel,  Iron  &  Coal  Co.,  In  re, 

392. 
Eby  v.  Guest,  417,  617. 
Eby  v.  Northern  P.  R  R,  1174,  1182. 
Echstein  v.  Downing,  461. 
Eckfeld's  Estate,  402,  404,  406. 
Eclipse  Tow-boat  Co.  v.  Pontchartrain 

R  R,  1511,  1519. 
Eddy  v.  Lafayette,  1435. 
Eddy  v.  People,  146. 
Eddy  v.  Powell,  1457. 
Eden  v.  Ridsdales,  etc.,  Co.,  907. 
Edgar  v.  Knapp,  1038. 
Edgell  v.  McLoughlin,  468. 
Edgerly  v.  Emerson,  1061,  1069. 
Edgerton  v.  Electric,  etc.,  Co.,  51. 
Edgington  v.  Fitzmaurice,  196,  198,  204. 
Edinboro  Academy  v.  Robinson,  113. 
Edinburgh,  etc.,  R'y  Co.  v.  Hebblewhite, 

169,  175. 
Edinburgh,  etc.,  R'y  Co.  v.  Philip,  886. 
Edison  v.  Gilliland,  485,  903. 
Edison,  etc.,  Co.  v.  Farmington,  etc.,  Co., 

1580. 
Edison,  etc.,  Co.,  v.  New  Haven,  etc.,  Co., 

890. 
Edmonds  v.  Blaina  Furnaces  Co.,  1251, 

1252,  1253. 
Edmondson  v.  Crosthwaite,  742. 
Edrington  v.  Pridham,  1428. 
Edward  v.  Fairbanks,  995. 
Edwards  v.  Beugnot,  613. 
Edwards  v.  Bringier  Sugar  Extracting 

Co.,  33. 
Edwards  v.  Cameron's    Coalbrook    R, 

1102,  1106. 
Edwards  v.  Denver,  etc.,  R  R,  770. 
Edwards  v.  Edwards,  1422. 
Edwards  v.  Fargo,  etc.,  R'y,  928. 
Edwards  v.  Grand  Junction   R'y,  1044, 

1045. 
Edwards  v.  Hall,  21. 
Edwards  v.  Hoeffinghoff,  475. 
Edwards  v.  Marcy,  1302. 
Edwards  v.  Midland  R'y,  1007. 
Edwards  v.  Shrewsbury,  etc.,  Co.,  981. 
Edwards  v.  Sonoma  Valley  Bank,  525, 

782. 
Edwards  v.  Williamson,  136. 


lxxii 


TABLE    OF    CASES. 


[TTie  references  are 

Eells  v.  Johann,  1365,  1513. 

Eells  v.  St  Louis,  etc.,  R'y,  1536. 

Eels  v.  American,  etc.,  Co.,  1596. 

Egbert  v.  Kimberly,  312. 

Ehle  v.  Ciiittenango  Bank,  706. 

Ehrgott  v.  Bridge  Manufactory,  1191, 
1246. 

Ehrman  v.  Teutonic  Ins.  Co.,  1005,  1178. 

Ehrman,  etc.,  King  v.  National  M.  &  E. 
Co..  1005. 

Eichbaum  v.  City  of  Cbicago  Grain  Ele- 
vators, 364. 

Eichels  v.  Evansville,  etc.,  St  R'y  Co., 
1551. 

Eicbolz  v.  Fox,  785. 

Eidman  v.  Bowman,  385,  386,  387,  388, 
1048. 

Eighmie  v.  T;iylor,  187,  183. 

Einstein  v.  Roseufield,  1154 

Eisfield  v.  Ken  worth,  310.  t 

Elder  v.  New  Zealand  L  I.  Co.,  220. 

Elder  Bank  v.  Ottawa,  984 

Eld  red  v.  Bell  Tel.  Co..  1047. 

Eldridge  v.  Smith,  1880,  1881. 

Electric  Imp.  Co.  v.  San  Francisco,  1581. 

Electric  Limiting  Co.  v.  Underground 
Light  Co.,  15s:>,. 

Electric  R'y  v.  Com.  Council,  1571. 

Elems  v.  Ogle,  1070. 

Eley  v.  Positive,  etc.,  1043,  1044. 

Elizabetb  City  Academy  v.  Lindsey, 
877,  105^. 

Elizabetbtown  G.  L  Co.  v.  Green,  49, 
877,  884. 

Elizabetbtown  &  P.  R  R  v.  Elizabeth- 
town,  772.  77.-..  77C. 

Elkhart,  etc.,  Co.  v.  Ellis,  1433. 

Elkington  &  Co.  v.  Hurter,  1189. 

Elkington's  Case,  37. 

Elkius  v.  Camden  &  Atlantic  R  R  Co., 
369,  374,  422,  S32,  1139,  1142. 

Ellerman  v.  Chicago  Junction,  etc.,  Co. 
et  al.,  3,  427,  645,  960,  980,  1160, 
1246. 

Elliot  v.  Abbot  1063. 

Elliott  v.  Fair  Haven,  etc.,  R  R,  1561. 

Elliott  v.  Richardson,  844. 

Ellis  v.  Am.  Tel.  Co.,  159a 

Ellia  v.  Andrews,  479. 

Ellis  v.  Barfield,  742. 


to  the  foot-paging] 

Ellis  v.  Boston,   etc.,    R  R,   1301.    1316, 

1346, 1360, 1367.  1368, 1396, 1400. 1458. 
Ellis  v.  Eden,  409. 
Ellis  v.  Howe,  etc..  Co.,  1085. 
Ellis  v.  Indianapolis,  etc.,  R  R,  1447. 
Ellis  v.  Marshall,  838. 
Ellis  v.  Nortbern,  etc.,  R  R  137. 
Ellis  v.  Proprietors  of  Essex  Merrimack 

Bridge,  87,  Ml,  709,  743. 
Ellis  v.  Pulsifer,  1101. 
Ellis  v.  Scbmoeck,  665. 
Ellis  v.  Ward,  927.  923,  1132, 
Ellis'  Appeal,  51 
Ellison  v.  Bignold,  063. 
Ellison  v.  Mobile  &  O.  R  R  Co.,  121,  188, 

197.  248. 
Ellsworth  v.  Cole,  470. 
Ellsworth  v.  Curtis.  1110. 
Ellsworth  v.  New  York,  etc.,  R   R.  712. 
Ellsworth  v.  St  Louis,  etc.,  R  R  Co., 

998,  1192,  1206,  1211. 
Ellsworth,  etc.,  Co.  v.  Faunce,  817,  1057. 
Elmira,  eta,  Co.  v.  Erie  R'y,  1397. 
Elston  v.  Pisgott  999.  1002. 
Flwell  v.  Dodge,  1092.  1102. 
Elwell  v.  Fosdick.  1300,  1314. 
Elwell  v.  Grand   St,  etc.,   R   R.,    1296, 

1384. 
Elwes  v.  Causton,  410. 
Ely  v.  Sprague,  10,  713. 
Elysvillc  Mfg.  Co.  v.  Okisko  Co..   1068, 

100r.. 
Elyton,   etc.,   Co.   v.  Birmingham,  etc., 

Co.,  70. 
Emhrey  v.  Jemison,  109.  477. 
Emerson   v.    Auburn,   etc.,   R    R   Co., 

1176. 
Emerson  v.  Com.,  1597. 
Emerson  v.  European,  dtc,  R'y,  1367. 
Emerson  v.  McCormick,  etc.,  Co.,  1174. 
Emerson  v.  N.  Y.,  etc.,  R  R,  1131,  1500, 

1506. 
Emerson  v.  Providence,  etc.,  Co.,  1092. 
Emery  v.  Evansville,   etc.,    R    R    Co^ 

1166. 
Emery  v.  Ohio  Candle  Co.,  64a 
Emery  v.  Wason,  409,  745. 
Enilen  v.  Lehigh,  etc.,  Co.,  1235. 
Emma  Silver  Min.  Co.  v.  Grant,  911.  913, 

913,  914.  1157,  1159. 


TABLE    OF    CASES. 


Ixxiii 


[The  references  are 

Emma  Silver  Min.  Co.  v.  Lewis,  193, 908, 

911,  915. 
Emma  Silver  Mining  Co.'s  Case,  681. 
Emmerson's  Case,  359. 
Emmert  v.  Smith,  258,  300. 
Emmet  v.  Reed,  1085. 
Em  mitt  v.  Springfield,  J.&P.RR.  Co., 

228. 
Emmons  v.  Davis,  etc.,  Co.,  20,  1414. 
Empire  v.  Darlington,  147,  155. 
Empire  Assurance  Co.,  In  re,  88,  1259, 

1545. 
Empire  City  Bank,  Matter  of,  272,  300, 

329,. 336,  353,  629. 
Empire,  etc.,  Co.,  Re,  1478. 
Empire  Mfg.  Co.  v.  Stuart,  879. 
Empire  Mills  v.    Alston,  etc.,  Co.,   309, 

320. 
Empire  R  R'y  Appeal,  676,  678. 
Employers',   etc.,  Corp.  v.   Employers', 

etc.,  Co.,  1014. 
Empress  Engineering  Co.,  The,  Re,  1043. 
Enders  v.  Board  of  Public  Works,  785, 

787. 
Enfield  v.  Jordan,  141. 
Enfield  Toll  Bridge  Co.  v.  Conn.  River 

Co.,  863,  875,  1592. 
Enfield  Toll  B.  Co.  v.  Hartford  &  N.  H. 

R.  R  Co.,  1577,  1592. 
Engel  v.  The  South,  etc.,  Co.,  1423. 
Engelke  v.  Schlender,  767. 
England  v.  Dearborn,  1051,  1076. 
England's  Ex'rs  v.  Beatty,  etc.,  Co.,  928. 
Englefield  Colliery  Co.,  Re,  908. 
English  v.  Chicot  Co.,  133. 
English,   etc.,   Trust,  The,  v.   Brunton, 

1253. 
Episcopal,  etc.,  Society  v.  Needham,  etc., 

Church,  1094. 
Eppes  v.  Mississippi,  Gainesville  &  Tus- 
caloosa R  R  Co.,  36,  168,  181,  640. 
Eppright  v.  Nickerson,  264, 1102. 
Equitable  Trust  Co.  v.  Fisher,  1222, 1312, 

1320. 
Equity  Gas-light  Co.,  Re,  872. 
Erickson  v.  Nesmith,  256,  259,  260,  269, 

283,  285,  286,  289,  293,  294,  305. 
Ericsson  v.  Brown,  273,  274. 
Erie  &  Northeast  R  R  v.  Casey,   627, 
886,  890. 


to  the  foot-paging.] 


Erie  City  J.  Wks.  v.  Barber,  1007. 
Erie,  etc.,  Co.  v.  Brown,  120,  221. 
Erie,  etc.,  R'y  Co.  v.  Patrick,  332. 
Erie,  etc.,  R.  R  Co.  v.  Owen.  92. 
Erie  R'y  Co.  v.  Delaware,  etc.,  R.  R  Co., 

1527. 
Erie  R'y  Co.  v.  New  Jersey,  778. 
Erie  R'y  Co.  v.  State,  319. 
Erie  R'y  Co.  v.  Vanderbilt.  948,  1158. 
Erlanger   v.    New   Sombrero    Co.,   910, 

912,  913,  915. 
Ernest  v.  Croysdill,  1132. 
Ernest  v.  Nicholls,  931,  1065. 
Erskine  v.  Lowenstein,  81. 
Erskine  v.  Peck,  213,  216. 
Ervin  v.  Oregon  R'y   &   Nav.    Co.,   680, 
684,  956,  1136,  1142,  1147,  1159,  1172, 
1176. 
Erwin  v.  Davenport,  Receiver,  1457. 
Erwin  v.  Oldman,  609. 
Eschweiler  v.  Stowell,  1150. 
Eslava  v.  Ames,  etc.,  Co.,  1020. 
Esmond  v.  Bullard,  278,  296. 
Esparto  Trading  Co.,  212. 

Esser  v.  Linderman,  575. 

Essex  Bridge  Co.  v.  Tuttle,  113,  116,  169. 

Essex  Turnpike  Co.  v.  Collins,  110,  115, 
1068,  1092,  1095. 

Estabrook,  Ex  parte,  1190,  1243,  1244. 

Estabrook,  In  re,  1192. 

Estate  of  Prime,  739. 

Estate  of  Woodruff,  739. 

Estell    v.   Kuightstown    &     Middleton 
Turnpike  Co.,  159. 

Estes  v.  Belford,  1176,  1178. 

Etting  v.  Bank  of  the  U.  S.,  1008. 

Eureka  Co.  v.  Bailey  Co.,  1088,  1095. 

Eureka,  etc.,  Co.  v.  Richmond,  etc.,  Co.. 
12,  997. 

Eureka  Ins.  Co.  v.  Parks,  1005. 

European  Bank,  In  re,  342. 

European  Central  R'y  Co.,  In  re,  394. 

European,  etc.,  R'y  Co.  v.  Poor,  901,  90& 

European,  etc.,  Society,  In  re,  861. 

Eustace  v.  Dublin  T.  C.  R'y  Co.,  525. 

Euston's  Estate,  In  re,  752. 

Evangelical,  etc.,  Home  v.  Buffalo,  eta, 
Assoc,  1578. 

Evans  v.  Boston,  etc  ,  Co.  et  al.,  802. 
Evans  v.  Boston  Heating  Co.,  1601. 


lxxiv 


TABLE    OF    CA 


[The  references  are 

Evans  v.  Brandon,  1027,  1028,  1159. 
Evans  v.  Coventry,  268,  324, 331,  414,  415, 

734,  1141,  1587. 
Evans  v.  Dillingham,  1434. 
Evans  v.  Hughes  County,  1581. 
Evans  v.  Jones,  410. 
Evans  v.  Lee,  1100. 
Evans  v.  Osgood,  797. 
Evans  v.  Philadelphia  Club,  1005. 
Evana  v.  Smallcombe,  180,215,814,  1125, 

1128. 
Evans  v.  Trip,  404. 
Evans  v.  Wain,  580. 
Evans  v.  Wood,  866,  570. 
Evans'  Case,  97. 
Evansville  v.  Hall,  749,  76ft 
Evansville  Bank  v.  Britton,  704. 
Evansville,  etc.,  R  R  Co.  v.  Dunn,    128. 
Evansville,  eta,  H  R.  Ca  v.  Evansville, 

133,  148,  15::.  2 
Evansville,  etc.,  R  R.  <'...  v.  Frank,  1461, 
Evansville,  etc.,  R  R  Ca  v.  Shearer,  123, 

126. 
Evansville,  Indianapolis  &  C.  S.  R,   R, 

Co.  v.  Posey,  isa 

Evansville  National    Bank  v.  Metropol- 

itan  National  Hank,  688,  701. 
Evansville  R    R    <'<>.   v.    Androsi" 

Mills.  1684 
Evarts  v.  Eillingworth  Mfg.  Ca,  86a 
Evening   Journal    Asso.  v.   MeHermott. 

1008. 
Evens  v.  Monet.  61 1. 
Everett  v.  Coffin,  716. 
Everett  v.  Smith.  816. 
Everett  v.  United  States,  1086,  100:!. 
Everhart  v.   West  Chester,   etc.,   R  R 

Co.,  221,  356.  364.  631,  689. 
Everingham  v.  Meighan,  17~>. 
Bvcritt  v.  Automatic,  etc,  Co.,  701. 
Everitt  v.  Knapp,  177. 
Everitt's  A-ppeal,  766. 
Evershed  v.  London  &  N.  W.  R'y.  151'.). 

1621. 
Evertson  v.  National  Bank,    lilts,   1826, 

1231,  1232,  1286. 
Ewing  v.  Medlock,  661,  671. 
Ewing  v.  Robinson,  1166. 
Excelsior  Co.,  Re,  631. 
Excelsior,  etc.,  Co.  v.  Pierce,  724. 


to  tlie  foot-paging.} 

Excelsior  G.  B.  Co.  v.  Stayner,  221. 

Excelsior  Petroleum  Co.  v.  Lacey,  392, 
733. 

Exchange  Banking  Co.,  In  re,  735. 

Exchange,  etc.,  Co.,  Re,  892. 

Exchange  Nat'l  Bank  v.  Hastings,  878, 
1165. 

Exehange  Nat'l  Bank  v.  Miller,  765. 

Executors  of  Gihnore  v.  Bank  of  Cin- 
cinnati, 341. 

Exeter  Bank  v.  Rodgers,  1008. 

Exeter  &  »'.  R'y  Co.  v.  Puller.  9*0. 

Exhall,  etc.,  Co..  In  re,  1809. 

Ex-Mission,  etc.,  Co.  v.  Flash,  814,  1129. 

Exmonth  Docks  Co.,  In  re,  861. 

Exposition,  eta,  R'y  v.  Canal,  etc.,  R'y, 

Expi  68,  1580. 

Expr<  38  Ca  v.  Caldwell,  16 
Express  Ca  v.  Kountze  Bros.,  1948. 

1 :  n  | .i « — .  ( 'o.  v.  Railroad,  139T 

•nan  v.  Ki ieckhans,  66. 
Eyi  -.  114. 

Eyster  v.  Centennial  Board  of  Finance. 


F. 


Factage  Parisien,  Re,  861. 

Factors',  etc..  Insurance  Ca  v.  Harbor, 

etc.,  Co.,  660. 
Factors'  &  T.  Ins.  Co.  v.  Marine  D.  D.  & 

s.  Co..  498,  499,  686,  1117. 
Fadnesa  v.  Braunborg,  *::7. 
Faikney  v.  Kevnous,  474. 
Fairbank  v.  Merchants',  etc.,  Bank,  588, 

711. 
Fairbanks  v.  Farwell,  264. 
Fairfield  v.  County  of  Gallatin,  140,  141, 

1944. 
Fairfield  v.  Phillips,  430. 
Fairfield  County  Turnpike  Co.  v.  Thorp, 

162,  167,  170,  1058,  1110,  1118. 
Fairfield  Sav.  Bank  v.  Chase,  1114,  1115, 

1118. 
Falioner  v.  Buffalo,  etc.,  R  R  Co.,  141, 

150,  153. 
Falconer  v.  Campbell,  666. 
Fales  v.  Roberts,  1366. 
Falk  v.  Moebs,  1105. 


TABLE    OF    CASES. 


lxxv 


[The  references  are 

Fall,  etc.,  Bank  v.  Sturtevant,  1116. 
Fall  River  Iron  Works  v.  Old  Colony  R. 

R.  Co.,  632.  810. 
Fall  River  Nat'l  Bank  v.  Slade,  603. 
Fallon  v.  Railroad  Co.,  461. 
Falmouth,  etc.,  Co.  v.  Shawhan,  244. 
Faneuil,  etc.,  Bank  v.  Bank  of  Brighton, 

985,  1086. 
Fanning  v.  Gregoire,  1582. 
Fanning  v.  Insurance  Co.,  88. 
Fanning  v.  Osborne,  1527,  1557. 
Fargo  v.  Louisville,  New  Albany  &  Chi- 
cago R'y  Co.,  666. 
Fargo  v.  Michigan,  777,  1946. 
Fargo  v.  Redfield,  1580. 
Fariera  v.  Gabell,  471,  472,  473,  475,  476, 

477. 
Faris  v.  Reynolds,  148. 
Farley  v.  Kittson,  1470. 
Farlow  v.  Lea,  1428. 
Farmer  v.  National  Life  Assoc,  1178. 
Farmers'  &  Citizens'    Bank  v.   Payne, 

1119. 
Farmers'  Bank  v.  Chester,  1058. 
Farmers'  Bank  v.  Gettinger,  1543. 
Farmers'  Bank  v.  McKee,  1113,  1118. 
Farmers'  Bank,  etc.,  v.  Beaston,  1422. 
Farmers'  Bank  of  Md.  v.  Iglehart,  687, 

693,  695,  700. 
Farmers'  Bank  of  Maryland    Case,   690, 

695,  696. 
Farmers',  etc.,  Bank  v.  Butchers',  etc., 

Bank,  1090. 
Farmers',  etc.,  Bank  v.  Colby,  1104. 
Farmers',  etc.,  Bank  v.  Empire,  etc.,  Co., 

1083,  1247. 
Farmers',  etc.,  Bank  v.  Haight,  1102. 
Farmers',  etc.,  Bank  v.    Kimball,     etc., 

Co.,  1120. 
Farmers',  etc.,  Bank  v.  Troy,  etc.,  Bank, 

1166. 
Farmers',  etc.,  Bank  v.  Wasson,  686,  687, 

1022. 
Farmers',  etc.,  Co.  v.  Bankers',  etc.,  Co., 

1355. 
Farmers',  etc.,  Co.  v.  Burlington,      etc., 

R'y,  1359. 
Farmers',  etc.,  Co.  v.  Chicago,  829. 
Farmers',  etc.,  Co.  v.  Cincinnati,  etc.,  R. 
R.  Co.,  1393. 


to  the  foot -paging. \ 

Farmers',  etc.,  Co.  v.  Clowes,  982. 
Farmers',  etc.,  Co.  v.  Farmers',  etc.,  Co., 

1014. 
Farmers',  etc.,  Co.  v.  Floyd,  220,  324,  975. 
Farmers',  etc.,  Co.  v.  Kimball,  960. 
Farmers',  etc.,  Co.  v.  Toledo,     etc.,    Co., 

957,  964,  1227. 
Farmers',  etc.,  Ins.  Co.  v.  Chase,  1071. 
Farmers',  etc.,  Ins.  Co.  v.  Harrah,  998. 
Farmers',  etc.,  Ins.  Co.  v.  Needles,  1427. 
Farmers',  etc.,   Nat.    Bank    v.   Dearing, 

1175,  1950,  1951. 
Farmers',  etc.,  Nat.  Bank  v.  Rogers,  601. 
Farmers',  etc.,  T.    Co.    v.    Bankers'   Tel. 

Co.,  132& 
Farmers',  etc.,  T.    Co.   v.    Canada,    etc., 

R'y,  1390. 
Farmers',  etc.,  T.    Co.   v.    Chicago,   etc., 

R'y,  1051. 
Farmers',  etc.,  T.  Co.   v.  Green,  etc.,  R. 

R,  1204,  1330. 
Farmers',  etc.,  T.   Co.  v.   Missouri,  etc., 

R'y,  961,  1318,  1465. 
Farmers',  etc.,  T.  Co.  v.  Newman,  1393. 
Farmers',  etc.,  T.  Co.  v.  Petitioners,  1452, 
Farmers',  etc.,  T.  Co.  v.  Pine  Bluff,  etc., 

R'y,  1227. 
Farmers'  L.  &  T.  Co.  v.  Ansonia,  1572. 
Farmers'  L.  &  T.  Co.  v.  Bank  of  Racine, 

1363. 
Farmers'  L  &  T.  Co.   v.    Bankers',  etc., 
Tel.  Co.,  1283,  1287,  1289,  1290,  1320, 
1344,  1345,  1475. 
Farmers'  L.  &  T.  Co.  v.  Carroll,  1108. 
Farmers'  L  &  T.  Co.  v.  Cary,  1369. 
Farmers'  L  &  T.  Co.  v.  Central    R.    R., 
1326,    1356,    1357,   1358,    1456,    1459, 
1460,  1462,  1482. 
Farmers'  L  &  T.  Co.  v.    Chicago,    etc., 
R'y,  846,  1284,  1289,  1290,  1301,  1323, 
1346,  1407,  1442,  1480. 
Farmers'  L.  &  T.    Co.    v.    Commercial 

Bank,  1363. 
Farmers'  L.  &  T.  Co.  v.  Fisher,  1385. 
Farmers'  L.  &  T.  Co.  v.  Goodyears,  etc., 

1013. 
Farmers'  L.  &  T.  Co.  v.  Grape,  etc.,  Co., 

1453. 
Farmers'  L.  &  T.  Co.  v.  Green  Bay,  etc., 
R.  R.,  1329.  1347,  1400,  1470,  1473. 


lxx\  i 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.] 


Farmers'  L.  &  T.  Co.  v.  Harmony  F.  & 

M.  T.  Co..  1000. 
Farmers'  L.  &  T.  Co.  v.  Hendrickson, 

1261,  1370. 
Farmers'  L.  &  T.  Co.  v.  Houston,  etc., 

iry.  134a 

Farmers'  L.  &  T.  Co.  v.  Hughes, 657,  1309, 

1311. 
Farmers'  L.  &  T.  Co.  v.  Kansas  City. 

etc.,  R  R,  1306,   1328,    1369,   1400, 

14  I,  1455. 

Farmers'  L.  &  T.  Co.  v.  L.  C,  etc.,  R'y, 

1396 
Farmers'  L.  &  T.  Co.  v.  Long  Beach 

Co.,  ISC"). 
Farmers'  L.  &  T.  Co.  v.  McHenry,  1329. 
Farmers'  L.  ft  T.  C  v.  Mclfini 
Farmers'  L.  &  T.  Co.  v.  Newman,  1389, 

1859. 
Farmers'  L  ft  T.  Co.  v.  New  Rochelle, 

eta,  R'y,  1894,  1571. 
Farmers'  I-  ft  T.  ( !a  v.  Oregon,  etc,  R'y, 

1264,  107?.  133a 
Farmers'  L  ft  T.  Co.  v.  Perry,  982.  9&j. 
Farmers'  L  ft  T.  Co.  v.  Baa  I  I  go,  i  to, 

st.  R'y  Co  945,  1126, 

1195,  1196,  1222,  1272,  1847,  U 
Farmers'  L.  ft  T.  Co.  v.  St.  Joseph,   etc., 

R'y  C<...  1371,  1878,  1495,  U 
Farmers'  L,  &  T,  Co.  v.  Stone,  151 
Farmers'  L.  ft  T.  Co.  v.  Toledo,  etc.,  I 

1196,  1485. 

Farmers'  L.  &  T.  Co.  v.  Vicksburg,  etc.. 
R  R,  1891,  1401. 

Farmers'  ft  11  Bank  v.  Downey,  900. 

Fanners'  ft  M    Bank  v.  Nelson,  219. 

Farmers'  &   M.   Bank   v.  WaBBOn, 
517. 

Farmers'  ft  M.  Bank  v.  Wayman,  440. 

Fanners'  ft    Manufacturers'     Bank      v. 
Haight,  10 

Farmers'  ft  Mechanics'  Bank  v.  Cham- 
plain  Transportation  Co..  Is.  417. 

Farmers'  &  Bier.   Ins.    Co.    v.    Harrah, 
1002 

Farmers'  Nat'l  Bank  v.  Cooke.  762,   767. 

Farmers'  Nat'l  Bank  v.  Hannon,  117. 
Farmers'  Nat'l  Bankv.McElhinny.1182. 

Farmers'  Nat'l  Bank  v.  Sultan,  etc,  Co., 
1244. 


Farmers'  Nat'l  Gold    Bank    v.    Wilson. 

022. 
Farmington  Academy  v.  Allen,  1094. 
Farmington  Savings  Bauk  v.   Fall,  986. 
Farnam  v.  Brooks,  1182. 
Farnham  v.  Benedict,  l  ^81 

Fainsworth  v.  Lime  Rock  R   R,  3,  87 ». 

887,  1520. 
Farnsworth  v.  Minnesota,  etc.,    R    R. 
:    1270. 
irth  v.  Robbins,  216,  420,  US 
Farnaworth  r.  Western,  e 

lOi 
Farnaworth  t.  W<  >~ 

Farnam  «    Ballard,  eta,  Machine  8aop 

S,  1100. 
Faroum  r.  ]  .  •  1544 

Farnam  r.  Pali 
Fai  rat  r.  .  -  Limited,  917. 

I   .11  111     v.    1 

ar  v.  Walker,  208,  210. 
FarreU  r.  Win  R  Bv.  1561 

FarreU  Foundry  c.  Dart,  11 

Fan  nut.  .n  v.  South  Boston  R  R,  390. 

Fai  i  ington  v.  '!"■  □  ;  "'6, 

:.  1948. 
I'anior  v.  N\u-  England,  etc..  Co.,  1004 
Farrow  v.  Bn  ii  . 

Farwcll  v.  Houghton  Copper,  etc.,  830, 
1001. 

Farwcll  v.  Tweddle, 

Path  v.  Ton  R'y,  157L 

Fatman  v.  Lobach.  648,  588,  584 
I'aul.ls  v.  Yates,  814,  848 
Faulkner  r.  Hebard,  4^7. 
Faull  v.  Alaska,  etc.,   Mining  Co., 

">. 
Faore,  etc..  Co.  v.  Bhillapart,  178,  1006. 
Faun  Re,  878. 

Favill  r.  Bhehan,  48L 
Fawcett  v.  Charles.  102.1 
Fawcett  r.  Laurie,  714,  715,  728,  1144 
Faxton  r.  M<  I  ai  ter,  '• ' 

•l. 
Fay  v.  Nobl(  L084,  1087,  1109,  1185. 

Fay  v.  Wheeler,  46 
rnside  ft  Dean'e 
Lther  v.  Lee,  etc., Co.,  O.'iG. 
Featherstone  v.  Cooke,  981. 
Fechheimer  v.  Nat.  Ex.  Bank,  417. 


TABLE    OF    CASES. 


lxxvii 


[The  references  are 

Fee  v.  Gas  Company,  1493,  1507,  1546. 

Felgate's  Case,  183,  190. 

Felt  v.  Heye,  593.  596. 

Felton  v.  Dean,  1581. 

Felton  v.  McClane,  1077. 

Felton  v.  Potomac,  etc.,  Ins.  Co.,  1366. 

Fenlon  v.  Dempsey,  684. 

Fenn  v.  Curtis,  487. 

Fenn's  Case,  665. 

Fenton  v.  Hughes,  683. 

Fenwick's  Case,  328,  339,  340. 

Ferguson  v.  Gill,  73. 

Ferguson  v.  Paschall,  461. 

Ferguson  v.  Soden,  997. 

Ferguson  v.  Wilson,    99,    100,    101,   462 

1145. 
Ferrin  v.  My  rick,  054. 
Ferri3  v.  Ludlow,  381,  393. 
Ferris  v.  Strong,  859. 
Ferris  v.  Thaw,  309. 
Ferris.  In  re,  1328. 
Fertilizing  Co.  v.  Hyde  Park,  1943. 
Ffooks  v.  Southwestern   R'y,   53,  1139, 

1142,  1539. 
Fidelity,  etc..  Co.  v.  Glover,  435. 
Fidelity,  etc.,  Co.  v.  Mobile  St.  R'y  Co., 

1351,  1358,  1568. 
Fidelity,  etc.,  Co.    v.  Shenandoah,  etc., 
RR..   1100.   1163.  1204,   1305,  1307, 
1345,  1375,  1373.  1403.  1455,  1465. 
Fidelity,  etc.,  Co.  v.  West  Pa.  R  R,  1187. 

1234. 
Fidelity  Ins.,  T.,  etc.,  Co.  v.  Niven,  1173. 
Fidelity  Trust  Company's  Appeal,  405, 

407. 
Field  v.  Chicago,  etc..  R  R,  1537. 
Field  v.  Cooks,  308. 
Field  v.  Field,  815. 
Field  v.  Haines,  293. 
Field  v  Kinnear,  579. 
Field  v.  Lelan,  577,  78,6. 
Field  v.  Pierce,  20,  322. 
Field  v.  Ripley,  1417. 
Field  v.  Schieffelin,  441. 
Field  v.  Union  Box  Co.,  924. 
Fielden  v.  Lancashire,  etc.,  R'y,  363. 
Fiery  v.  Emmert,  258. 
Fietsam  v.  Hay,  5. 

Fifth    Avenue    Bank    v.   Forty-second 
Street,  396. 


to  the  foot-paging. \ 


Bank    v.   First   NatT 


Pittsburg,  etc.,  R 


Fifth,   etc.,   Sav. 
Bank,  1084. 
Fifth  Natfl  Bank  v.  Navassa.  etc.,  Co., 

1079. 
Fifth  Nat'l  Bank  v. 

R.  1461. 
Fifty,  etc.,  Bonds,  In  re,  1195,  1419. 
Filder  v.  London,  etc.,  R'y  Co.,  1142. 
Filli  v.  Delaware,  etc.,  R.  R..  1179. 
Finance  Co..  etc.,  v.  Charleston,  etc.,  R 
R,  1398.  1399,  1400,  1401,  1402,  1418, 
1419,  1444. 
.  Financial  Corporation,  Re.  394. 
Finch  v.  Riverside,  etc.,  R'y.  903,  1551, 

1559. 
Finch  v.  Ullmann,  881 
Fine  v.  Hornaby,  464. 
Finlay  v.  Lindsay.  681. 
Finley  Shoe,  etc.,  Co.  v.  Kurtz.  101,  385, 

856. 
Finn  v.  Brown,  88,  354,  501,  729.  730. 
Finnegan  v.  Knights,  etc.,   Ass'n.  314, 

315. 
Finney's  Appeal,  585.  601.  606,  617. 
Firbank's  Ex'rs  v.  Humphreys,  1189. 
Fire  Department  v.  Noble.  998.  1001. 
Firemen's  Ins.  Co.,  Ex  parte.  530. 
First  Baptist  Church  s:  Branliam,  Sher- 
iff, 8S1. 
First,  etc.,  Bank  v.  North,  etc.,  Co..  938. 
First,  etc.,  Bank  v.  Salem,  416,  417. 
First  Municipality  of  N.   O.  v.  Orleans 

Theater  Co.,  234. 
First  Nat.  Bank  v.  Almy,  324. 
First  Nat.  Bank  v.  Anderson.  1117. 
First  Nat  Bank  v.  Arlington,  150. 
First  Nat.  Bank  v.  Armstrong.  1042. 
First  Nat.  Bank  v.  Bennett,  1074. 
First  Nat  Bank  v.  Breneman.  1507. 
First  Nat.  Bank  v.  Burch.  1176. 
First  Nat  Bank  v.  Christopher.  1119. 
First  Nat.  Bank  v.  Concord,  147.  150. 
First  Nat.  Bank  v.  Council  Bluffs,    etc., 

Co.,  1083. 
First  Nat  Bank  v.  County  Com'rs,  1224. 
First  Nat  Bank  v.  Davies,  310,  313. 
First  Nat.  Bank  v.  Dorset.  149. 
First  Nat.  Bank  v.  Douglas  County,  760. 
First  Nat  Bank  v.  Drake,  923.  1126. 
First  Nat  Bank  v.  Dunbar.  10S5. 


lxxviii 


TABLE    OF    CASES. 


[The  references  are 

First   Nat    Bank  v.  Fancher,  714.  755, 

760. 
First  Nat  Bank  v.  Fisher.  76a 
First  Nat  Bank  v.  Fricke,  1082,  1117. 
First  Nat  Bank  v.  Gifford.  27,  192,  342, 

346,  498,  514,  518,  523.  584. 
First  Nat  Bank  v.  Greene.  244. 
First  Nat.  Bank  v.  Gustin,  etc.,  Co.,  50, 

65,  66. 
First  Nat.  Bank  v.  Hartford,  689. 
First  Nat.  Bank  v.  Hartford,    etc.,    Ins. 

Co.,  687. 
First  Nat  Bank  v.  Hcndrie,  123. 
First  Nat.  Bank  v.  Herbert,  761. 
First  Nat.  Bank  v.  Hoch.  563, 1075. 
v, 


Hogan,  1083. 
Hurford. 


First  Nat.  Bank 

Firet  Nat.  Bank  v. 

First  Nat  Bank  v.  Kreig,  761. 

First  Nat  Bank  v.  Lanion.  855. 

First  Nat.  Bank  v.  Lindsay,  '>>'. 

First  Nat.  Bank  v.  Loghed,  1119. 

First  Nat.  Bank  v.  Lucas,  '■'~~.  1075 

First  Nat.  ! '.ink  v.   National   Exch  I 
Bank.  104,  125,  1161. 

First  Nat.  Bank  v.  OBkaloosa,  472,  178. 

First  Nat.  Bank  v.  Peterborough.  70~>. 

First  Nat.  Bank  v.  Portland,  eta,  R  R, 
1439. 

First  Nat.  Bank  v.  Trier.  293. 

First  Nat.  Bank  v.  Reed,  902. 

First  Nat  Bank  v.  Richmond,  762. 

First  Nat  Bank  v.  Root.  68 

First  Nat  Bank  v.  St  Joseph,  766, 

First  Nat  Bank  v.  Salem,  eta,  <  Sa,  1206, 

First  Nat  Bank  v.  She-Id.  1356,  18 

First  Nat.  Bank  v.  Sherbourne,  1117. 

First  Nat.  Bank  v.  Smith.  258,  754,  762. 

First  Nat.  Bank  v.  Strong;  *.»T<». 

First  Nat  Bank  v.  Taliaferro,  439. 

First  Nat  Bank  v.  Tisdale,     1069,    1074, 
1121,  1122. 

First  Nat  Bank  v.  Waters.  763. 

First  Nat  Bank,  etc.,  v.  McDonald,  etc., 
Co.,  989. 

First  Nat  Bank  of  Albia  v.  City  Coun- 
cil of  Albia,  761. 

First  Nat  Bank  of  Davenport  v.  Davies, 
316. 

First  Nat  Bank  of  Hannibal  v.  Mere- 
dith, 767. 


to  the  foot-paging.] 

First  Nat.  Bank  of  Hannibal  v.  Smith. 
732. 

First    Nat    Bank    of    Garrettsville    v. 
Greene,  251. 

First    Nat.   Bank  of   Hartford  v    Hart- 
ford, etc  Ins.  Co..  695,  69 

First  Nat.  Bank  of  Lyons  v.  Oskal    - 
Packing  Co..  475. 

First   Nat.    Bank    of    New    Orleans   v. 
Bohne.  1183. 

First  Nat.  Bank  of  St  Johnsbury  v.  Con- 
cord. 137. 

First  Nat.  Bank  of  Toledo  v.  Treasurer, 
767. 

First  Nat,  etc.,  Bank  v.  North,  etc.,  Co.. 
1080. 

First  Nat,  etc.  v.  Wolcott,  1  to, 

First  Nat  Ins.   Co.    v.    Salisbury.    1280, 
1290,  1807, 1815,  1817,  1322,  1824,  1840. 

First  Parish  v.  Cole.  891,  892,  '.»'.»<;.  1019. 

Firet  Parish  in  Sudbury  v.  Stearns,  M". 

First  Presbyterian    Church  of    Harris- 
burg,  1016. 
r  v.  Mi".  &  Tenn.  R  R.  Co.,  219. 

Fish  v.  Budlong,  431. 

Fish  v.  Keinpton,  570 

Fish  v.  Nebraska,  etc.,  Co.,  893. 

Fish  v.  N.  Y..  etc..  Paper  Co.,  1238. 

Fishback  v.  Citizens1  St.  R.  h\.  1414. 

Fisher  v.  Andrews,  1150,  1151. 

Fisher  v.  Brown.  485,  51  ~>96,  782, 

785.  7-7.  790 

Fisher  v.  Bush,  449,  828,  847,8 

Fisher  v.  Essex  Bank,  21.  22,  518,  517 

Fisher  v.  Evansville,  etc..  R  R  Co.,  123, 
168. 

Fisher  v.  Fisher,  600. 

Fisher  v.  Jones,  522,  621. 

Fisher  v.  Keane,  1026. 

Fisher  v.  Marvin,  351. 

Fisher  v.  Metropolitan  El.  R'y,  1499. 

Fisher  v.  Murdock.  985,  1117. 

Fisher  v.  N.  Y.  < '..  etc..  R  R,  1498. 

Fisher  v.  Otis.  1229. 

Fisher  v.  Price.  470. 

Fisher  v.  Seligman.  56,  61,  353,  587. 

Fisher.  Ex  parte,  10. 

Fisher's  Case,  37. 

Fishkill  Savings,  etc.,  v.  National  Bank. 
1006. 


TABLE    OF    CASES. 


lxxix 


[The  references  are 

Fisk  v.  Chicago  &  Rock  Island  R  R 

Co.,  44,  55,  1172,  1543. 
Fisk  v.  Kenosha,  137. 
Fisk  v.  Patton,  664,  995. 
Fisk  v.  Potter,  1387. 
Fisk  v.  Union  Pacific  Railroad  Co.,  1141, 

1948. 
Fiske  v.  Carr,  621,  622. 
Fister  v.  La  Rue,  1093. 
Fitch  v.  Lewiston,  etc.,  Co..  1099. 
Fitch  v.  Poplar,  etc.,  Co.,  224. 
Fitch  v.  Wetherbee,  370. 
Fitchburg  R.  R  v.  Gage,  1519. 
Fitchburg  R.  R.  v.  Grand,  etc.,  Co.,  1516. 
Fitchburg  Sav.   Bank    v.    Torrey,   517, 

588. 
Fitchett  v.   North    Penn.    R    R,    1226, 

1237. 
Fitzgerald  v.  Evans,  1359. 
Fitzgerald  v.  Grand  Trunk  R.  R,  1520. 
Fitzgerald  v.  Missouri   P.    R'y,    10,   424, 

951,  1050,  1542,  1548. 
Fitzgerald  Con.  Co.  v.  Fitzgerald,  929, 

938,  1079,  1179. 
Fitzhugh  v.  Bank  of  Shepherdville,  686, 

699. 
Fitzhugh  v.  Franco,  etc.,  Co.,  1081. 
Fitzpatrick  v.  Dispatch,  69,  84. 
Fitzpatrick  v.  Woodruff,  465. 
Fitzroy,  etc.,  Co.,  In  re,  95,  915,  1131. 
Flagg  v.  Baldwin,  468,  473,  475,  477. 
Flagg  v.  Gilpin,  475. 
Flagg  v.  Manhattan  R'y  Co.,  930,   1506. 
Flagg  v.  Metropolitan  R'y  Co.,  1052. 
Flagler  Co.  v.  Flagler,  53,  78. 
Flanagan  v.  Great  Western  R'y  Co.,  462, 

916. 
Flash  v.  Connecticut,  281,  283,  288,  292. 
Fleckner  v.  Bank  of  U.  S.,  983,  1095. 
Fleeson  v.  Savage  S.  M.  Co.,  19. 
Fleet  v.  Murton,  580. 
Fleming  v.  Northampton  Nat  Bank,  589. 
Fleming  v.  Soutter,  1360. 
Flemyng  v.  Hector,  661. 
Fletcher  v.  Dickinson,  596. 
Fletcher  v.  Marshall,  565. 
Fletcher  v.  McGill,  100. 
Fletcher  v.  New  York,  etc.,  Ins.  Co.,  998, 

1588. 
Fletcher  v.  Rutland,  etc.,  R  R,  1312. 


to  the  foot-paging.] 

Fletcher,  Ex  parte,  212. 

Fletzell  v.  Chicago,  etc.,  R.  R  Co.,  1164. 

Flinn  v.  Bagley,  43,  50,  56,  57. 

Flint  v.  Clinton  Co.,  989,  1100. 

Flint  v.  Pierce,  322,  1023. 

Flint,  etc..  Plank-road  Co.  v.  Woodhull, 

886. 
Flint,  etc.,  R'y  Co.  v.  Dewey,  902. 
Flitcroft's  Case,  727,  734,  735,  974,  1132. 
Florence,  etc.,  Co.,  In  re,  1254. 
Florida  v.  Florida,  etc.,  R  R.  1276. 
Florida  v.  Jacksonville,  etc.,  R.  R,  1155, 

1416. 
Florida,  etc.,  Co.  v.  Murrill,  455,  493. 
Florida,  etc.,  R.  R  v.  Varnedge,  1111. 
Flour  City  Nat.  Bank  v.  Wechselberg, 

286. 
Floyd  v.  Perrin,  137. 
Floyd  Acceptances,  The.  1192. 
Fluker  et  al.  v.  Emporia  City  R'y  Co., 

1155. 
Flynn  v.  Hudson,  etc.,  R  R  Co.,  1177. 
Fobes  v.  Rome,  etc.,  R  R,  1562. 
Fogg  v.  Blair,  57,  62,  69,  75,   964,    1210, 

1397. 
Fogg  v.  Boston,  etc.,  R  R.  Co.,  1008. 
Fogg  v.  Griffin,  1007. 
Fogg  v.  Sidwell,  628. 
Folger  v.  Chase,  861. 
Folger  v.  Columbian  Ins.   Co.,  859,  865. 
Follett  v.  Field,  859. 
Foil's  Appeal,  463. 
Fonnereau  v.  Payntz,  407. 
Foot  v.  Worth ington,  710. 
Foote  v.  Cunard  Min.  Co.,  1149. 
Foote  v.  Glenn,  264. 
Foote  v.  Linck,  747,  1135. 
Foote  v.  Mount  Pleasant,  151. 
Foote,  Appellant,  407,  743. 
Forbes  v.  Memphis,  etc.,  R.  R  Co.,  21, 

933,  1156,  1328. 
Forbes  v.  San  Rafael,  etc.,  Co.,  1265. 
Forbes  v.  Whitlock,  1161. 
Forbes'  Case.  36. 
Force  v.  City  of  Elizabeth,  1226. 
Ford  v.  Easthampton,  etc.,  Co.,  715. 
Ford  v.  Ford,  410. 
Fordyce  v.  Beecher,  14631 
Fordyce  v.  Dixon,  14C2. 
Fordyce  v.  Withers,  1435. 


Ixxx 


TABLE    OF    CASES. 


[The  references  are 

Foreman  v.  Bigelow,  31,  34,  81,  82. 
Forepaugh  v.  Del.,  etc.,  K.  R,  1537. 
Forest  v.  Dean  Coal  Co.,  1033. 
Forest  v.  Manchester  S.  &  L.  R*y  Co., 

1535. 
Forest,  etc.,  Min.  Co.,  In  re,  1031. 
Forrest  v.  Ehves,  782,  788,  790. 
Forrest  v.  Luddington,  1276. 
Forrest  v.    Manchester,    etc,   R'y    Co., 

1142. 
Forrester  v.  Bill,  1036. 
Forrester  v.  Boardman,  580. 
Fort   Edward,  etc.,  Co.   v.  Payne,  111, 

110,  122,  174. 
Fort    Madison,    etc.,    Co.    v.    Bataviau 

Bank,  621. 
Fort  Payne  Furnace  Co.  v.  Fort  Payne, 

etc.,  Co.  et  al.,  1354. 
Fort  Wayne,  etc.,  Co.  v.   Maumee,  etc., 

Co.,  1592. 
Fort  Wayne,  etc..  R  R  v.  Mellett,  1433, 

1431. 
Fort    Worth,  etc.,  Co.    v.    Bettson,  966, 

1081. 
Fort  Worth,  etc.,  R'y  v.  Queen,  etc.,  R'y, 

1550. 
Fovtenbury  v.  State.  470. 
Fosdick  v.  Car  Co..  1412,  1145. 
Fosdick  v.  Goshen,  136. 
Fosdick  v.  Greene,  782,  788,  791. 
Fosdick  v.  Perrysburg,  136.  140.  142. 
Fosdick  v.  Schall,  1369,  1370,  1375,  1399, 

1442,  1445.  1470. 
Fosdick  v.  Slurges,  44,  51.  55,  479. 
Foss  v.  Harbottle,  799,  898.  946,  980, 1148, 

1156. 
Foster    v.    Chesapeake,    etc.,   R'y.    154, 

1343,  1501. 
Foster  v.  Essex  Bank,  779,  861,  893,  1094. 
Foster  v.  Kansas,  1949. 
Foster  v.  Kenosha,  137. 
Foster  v.  Mackinnon,  90. 
Foster  v.  Mansfield,  etc.,  R  R.,  1128, 1131, 

1246,  1330,  1351,  1352,  1354. 
Foster  v.  Ohio,  etc.,  Co.,  1084. 
Foster  v.  Oxford  R  R,  920. 
Foster  v.  Potter,  583,  608,  612,  613,  624, 

699. 
Foster  v.  Pray,  667. 
Foster  v.  Seymour,  53. 


to  the  foot-paging.] 

Foster  v.  Townsend,  1170. 
Foster  v.  White.  676. 
Fothergill's  Case,  36,  77. 
Fougeray  v.  Cord  et  al.,  721.  902. 
Foulke  v.  San  Diego,  etc,  R'y  Co.,  1107. 
Fountain  Ferry,  etc.,  Ca  v.  Jewell,  237, 

859. 
Fountaine  v.  Carmarthen,  etc,  Co.,  1108, 

1186,  1253.  1254,  1255. 
Fountaine  v.  Tyler,  405. 
Four  Mile  V.  R  R  Co.  v.  Bailey,  65.  837. 
Fourth  Nat  Bank  v.  Francklyn,  251,  880, 

281,  292,  295. 
Foushee  v.  Grigsby,  274. 
Fowle  \.  Ward,  590,  598,  003,  789. 
Fowler  v.  Ludwig,  345.  353. 
Fowler  v.  New   York   Gold    Exchange 

Bank,  568,  7^7.  79?. 
Fowler  v.  Pittsburgh,  etc..  R.  R.  1368. 
Fowler  v.  Robinson,  279,  299. 
Fowler's  Petition.  1  I 
Fox  v.  Allensville  C.  S.  &  V.  T.  Co.,  166. 

167.  171,  838,  812. 
Fox  v.  Carr,  409. 

Fox  v.  Clifton,  109.  225,  338,  1040. 
Fox  v.  Horah,  889. 
Fox  v.  Northern  Liberties,  1093. 
Fox  v.  Seal,  JS86,  1390. 
Fox  v.  Western  Pa.  R  R  Co.,  1525. 
Fox,  Ex  parte,  1507. 
Fox,  In  the  Matter  of,  1020. 
Fox's  Case,  201.  212.  35ft 
Frames  v.  The  Bulfoutein,  etc,  Co.,  930. 
France  v.  Clark,  550,  591. 
Francis  v.  New  York  &  B.  El.  R  R  Ca, 

207,  413,  494. 
Francklyn  v.  Sprague,  966. 
Franco,  etc.,  Co.  v.  Bousselet,  383. 
Franco-Texas  Land  Co.  v.  Laigle,  796. 
Frank  v.  Bingham,  1436. 
Frank  v.  Denver,  etc.,  R'y,   1376.    i:57S, 

1387,  1441,  1444. 
Frank  v.  Edison,  etc.,  Co.,  120a 
Frank  v.  Morrison,  262. 
Frank  v.  N.  Y.,  etc.,  R  R.,  1480. 
Frank  ford,  etc.,  Pass.  R'y  Co.  v.  Phila- 
delphia. 1574. 
Frankfort  Hank  v.  Johnson,  969,  1161. 
Franklin  v.  Bank  of  England,  444,  741. 
Franklin  v.  Twogood,  880. 


TABLE    OF    CASES. 


lxxxi 


[Tlie  references  are 

Franklin  Bank    v.    Commercial    Bank, 

425. 
Franklin  Bank  v.  Cooper,  861. 
Franklin  Branch  Bank  v.  State  of  Ohio, 

1942. 
Franklin  Bridge  Co.  v.  Wood,  2. 
Franklin  Co.  v.  Lewiston  Bank,  104,  425. 
Franklin,  etc.,  v.  Deposit  Bank,  772. 
Franklin,  etc.,  Co.  v.  White,  115,  175. 
Franklin,  etc.,  Ins.  Co.  v.  Hart,  1048. 
Franklin,  etc.,  Ins.  Co.  v.  Jenkins,    978. 
Franklin  Glass  Co.  v.  Alexander,  174. 
Franklin  Savings  Bank  v.  Bridges,  242. 
Franklin  Savings    Bank    v.    Fatzinger, 

161. 
Frank's  Oil  Co.  v.  McCleary,  342. 
Fraser  v.  Charleston,  514,  515,  548,  586, 

617. 
Fraser  v.  Ritchie,  417,  419. 
Fraser  v.  Whalley,  834. 
Fray  lor  v.  Sonora  Min.  Co.,  925. 
Frayser's  Adra'r  v.  Richmond,  etc.,  R.  R., 

1367. 
Frazer  v.  Siebern,  755,  757,  764. 
Frazier  v.  East  Tenn.,  etc.,  R  R,  1483. 
Frazier  v.  Wilcox,  997. 
Fredenhall  v.  Taylor,  668. 
Frederick  v.  Augusta,  138,  139. 
Fredericks  v.  Pennsylvania  Canal  Co., 

818,  1128. 
Free  Schools  v.  Flint,  323. 
Freedman's  Sav.  Co.  v.  Shepherd,  1366. 
Freehold,  etc.,  Assoc,  v.  Brown,  887. 
Freeholders  v.  State  Bank,  20,  1419. 
Freeland  v.  Hastings,  139. 
Freeland  v.  McCullough,  250,   271,   292, 

303,  351. 
Freeman  v.  Harwood,  183,  606,  781,  782, 

787,  790. 
Freeman  v.  Howe,  1374. 
Freeman  v.  Machias  Water,  etc.,  795. 
Freeman  v.  Mack,  126. 
Freeman  v.  Ottawa,  etc.,  Assoc,  177. 
Freeman  v.  Winchester,  174,  254. 
Freeman's  Assignee  v.  Stine,  56.  924. 
Freeman's  National  Bank  v.  Smith,  803. 
Fremont  v.  Stone,  450,  845. 
French  v.  Braintree  Mfg.  Co.,  1527. 
French  v.  Currier,  434. 
French  v.  Donohue,  967. 
F 


to  the  foot-paging.] 

French  v.  First  Nat'l  Bank,  683. 

French  v.  Fitch,  481. 

French  v.  Fuller,  717. 

French  v.  O'Brien,  1024 

French  v.  Sanger,  464. 

French  v.  Teschemaker,  276,  321. 

Frenkel  v.  Hudson,  34. 

Freon  v.  Carriage  Co.,  531,  786. 

Fresno,  etc.,  Co.  v.  Warner.  879. 

Frick  v.  Mercer  County,  144. 

Friedlander  v.  Slaughter-house  Co.,  500, 

619. 
Friedman  v.  Gold,  etc.,  Tel.  Co.,  1593. 
Friend  v.  Powers,  289. 
Fries  v.  Southern  Penn.  R  R,  1382. 
Friezen  v.  Allemania,  etc.,  Ins.  Co.,  1183. 
Fripp  v.  Chard  R'y,  1410,  1419. 
Frits  v.  Muck,  661. 
Fritts  v.  Palmer,  994. 
Fromm  v.  Sierra  Nevada  Silver  Min.  Co., 

789,  791. 
Frost  v.  Clarkson,  470,  472. 
Frost  v.  Domestic  Sewing  M.  Co.,  1008, 

1088. 
Frost  v.  Frosthurg  Coal  Co.,  308,  880. 
Frost  v.  Inhabitants,  etc.,  1046. 
Frost  v.  Shackleford,  654. 
Frost  v.  Stokes,  587. 
Frost  v.  Walker,  662,  667,  668. 
Frost,  etc.,  Co.  v.  Foster,  978. 
Frostburg  Bldg.  Ass'n  v.  Stark,  1156. 
Frostburg,  etc.,  Assoc,  v.  Bruce,  1102. 
Frothingham  v.  Barney,  671,   672,   889, 

891,  958. 
Frothingham  v.  Broadway,  etc.,   R.    R. 

Co.,  1143. 
Frowd,  Ex  parte,  192. 
Frue  v.  Houghton,  461. 
Fry  v.  Lexington,  etc.,  R.  R  Co..  87, 109, 

"  111,  112,  222,  629,  633. 
Fry,  In  re,  671. 
Fry's  Ex'rs  v.  Lexington,  etc.,  R   P., 

1493. 
Five  v.  Tucker,  983,  1193. 
Fryeburg  Canal  Co.  v.  Frye,  1059. 
Fuld  v.  Burr  Brewing  Co.,  1246. 
Fulgam  v.  Macon  &  B.  R  R  Co.,  239, 

240. 
Fulkerson  v.  Chitty,  408. 
Fuller  v.  Dame,  844,  905. 


Ixxxii 


TABLE    07    CAS 


[The  references  are 

Fuller  v.  Ledden.  2S3.  285. 

Fuller  v.  Roue,  312,  314. 

Fullerton  v.  Mobley,  602. 

Fulton  Bank  v.  Benedict,  1118. 

Fulton  Bank  v.  N.   Y.,  etc.,   Canal   Co., 

107(5.  1119,  1165. 
Furdonjee's  Case,  3   - 
Furley  v.  Hydes,  74~>. 
Furman  v.  Nichol,  1042. 
Furnis8  v.  Gilchrist  &  Co.,  1185. 
Fyfe  v.  Swabey,  4."j 5. 
Fyfe's  Case,  34a 


G. 


Gadsden  v.  Lance,  465. 
Gadsden  v.  Woodward,  293. 
Gaff  v.  Flesher,  21". 
G afford  v.  American,  etc..  Co., 

e  v.  Newmarket  R'y  <  !a,  1540. 
Gainsford  v.  ( Sarroll, 7 
Gale  v.  Troy,  eta,  B   l: 
Galena,  etc..  R.  R.  Ca  v.  I. 
.RE  v.  Menzii 
Galena  Iron  Co.  v.  Km.       238 

gher  v.  Jones,  564,  7  — 
Gallery  v.  Nat  Ex.  Bank.  1 
Gallini  v.  Noble,  I 
Calloway  v.  Hamilton.  Ill 
Gait's  Ex'rs  v.  Swain.  124. 

Galvaniz  ■  i  u    o  Co.  v.  Westoby,  225. 

Galveston  City  Co.  v.  Sibley,  51L 
Galveston,  etc.,  R'y  v.  Johnson,  1547. 
Galveston,  etc.,  R'y  v.  Si  ite,  884 

Galveston,  etc..    R'y    Co.    v.    Galveston, 
etc..  R'y  Co.,  1" 

Galveston,  H.  &  S.  A.  R'y  Co.  v.  Dona- 
hoe,  1011. 

Galveston  Hotel  Co.  v.  Eolton,  B 

Galveston  R  R.  v.  Cowdrey,  1059,  1200, 
1231,    1268,    1293,    1300.    1322, 
1369,  I  i,  1394. 

Gamble  v.  Queeus,  etc.,  Co.,  74,  944.  1205. 

Games  v.  Robb,  134. 

Gamewell,  etc.,  Co.  v.  Mayor,  G83. 

Gam  well  v.  Pomeroy,  I 

Gano  v.  Chicago  &  N.  W.  R'y  Co.,  1192. 

Gans  v.  Switzer,  274. 

Garden  Gully,  etc.,  Co.  v.  McLister,  162. 
177,  178,  179,  180,  83a 


to  the  foot-paging.] 

iner  v.  Pollard.  1028,  113*5. 
Gardiner  v.  Victoi  115. 

Iner  v.  But 

Iner  v.  C.  B.  K  '65. 

Gardner  v 
Gardner  v.  1 

Gardner  v.  Frunatte,  SOL 
Gardner  v.  Ham  r>29. 

1588 
Gardner  v.  B 

Gardner  \.  1  .   I-  y   ' 

141".  : 

Garrard  v.  1 : 

118 

Dillon       I    II  \L  IL  Co..  214. 
51,  245. 
Garrett  v.  K 

Cai: 

ille,    1  f,  t. 

251. 

I 
Garrison  v.  Ho* 

Garten  Mfc 

ixweU,  313. 
II. 

II. 
Gashwiler  v.  V.  IB,  1063 

cell  v.  Beard,  I 
skell  v.  < 
(ill  v.  Dodl 
Light  <  ...  v.  Hayni 
Gas  Light.  v.  Terrell,  v 

3qoet  v.  ity  B.  < 

-  v.  New  York.  • 

mi  ricnn  Ex.  Nat  Bank 
Catch  v.  Fitch.   . 

Gates  v.  etc.,  R  B  .   1816, 

141 

Cat-s  v.  Natl,  '  •  554. 

Gatling  Gun.  Re.  :.7 

Gatzmei  v.  Philadelphia,  etc.,  R.  R., 


TABLE    OF    CASES. 


Lxxxiii 


[Tne  references  (ire 

Gauch  v.  Harrison.  299. 

Gaudy  v.   Ban-it.  654. 

Gaus  v.  Reimensnyder,  93. 

Gauss,  etc.,  Co.  v.  St  Louis,  etc.,  R'y, 

156:1 
Gavenstine's  Appeal,  933,  1141,  1165. 
Gaw  v.  Bennett  474. 
Gay  et  al.  v.  Brierfield,  etc.,    Co.  et  al., 

1841. 
Gay  Mfg.  Co.  v.  Gittings,  1246. 
Gaylord  v.  Fort  Wayne,  etc.,  R  R  Co., 

665. 
Gee  v.  Alabama  L  &  T.  Co.,  9S3. 
Gee  v.  Moss.  490. 

Geismer  v.  L  S.  &  M.  S.  R  R.  Co.,  1522. 
Gel  poke  v.  Blake,  1-7.  188,214,21ft 
Gelpcke  v.  Dubuque,  131,  132,  123& 
Gemmel  v.  Davis,  6S6.  700,  7:      118. 
General  Auction,  etc,  Co.  v.  Smith.  1263. 
General   Estates  Co..  In   re,   1190,   lltS. 

122  4.  IS 
General,  etc..  Co.,  In  re,  1106.  1261. 
General  Exchange  Bank  v.  Horner.  906. 

neral  Exchange  Bank.  In  re,  692. 
General  Ins.  Co.  v.  U.  S.  Ins.  Co..  1117. 
General  Lying-in  Hosp.  v.  Knight,  1019. 
General  South,  etc..  Co..  In  re.  1281,127ft 
Genesee.  Bank    of.    v.    Patchin     Bank, 

1085,  1103.  1243.  1244. 
Genesee  Mutual   Ins.   Co.  v.   Westman, 

320. 
Genesee  Sav.  Bank  v.  Mich.   Barge  Co.. 

1191    1192. 
Genet  v.  Howland,  597.  603.  604.  605. 
Genin  v.  Isaacsen,  407.  564 
Genoa,  Town  of.  v.  Woodruff,  1237. 
Gent  v.  Mfg..  etc..  Co..  1042. 
George  v.  Oxford,  etc..  146. 
George  v.  St  Louis,  etc..  R'y.  I     - 
George,  etc..  Co.,  In  re,  988. 
Georgetown  College  v.  Brown.  967. 
Georgetown,  Union  Bank  of,   v.  Laird. 

689. 

Georgia  v.  Atlantic,  etc..  R  R.  1394 
Georgia,  Bank  of.  v.  Savannah.  750. 
Georgia  Co.  v.  Castleberry.  1042. 
Georgia  R  R  v.  Smith.  1513.  1515. 
Georgia  R  R  Co.  v.  Hart.  19. 
Gerard  v.  McCormick,  437. 
Gerard  v.  Penswick,  679. 


to  the  foot-paging.] 
Gere  v.  N.  Y.  Central,   etc..   R.  R,  149ft 


1505. 
Gerhard  v.  Bates.  199.  47S.  486,  4-7. 
German  Bank  v.  Franklin  Co.,  143. 
German  Date  Cor..  Re.  862 
German,  etc..  Inst.  v.  Jacoby.  1187. 
German  Land   Association  v.   Scholler, 

665. 
German  Sav.  Bank  v.  Wulfekuhler,  4   - 
German  Security  Bank  v.  Jefferson,  C87, 

696. 
German  Union  B.  Ass'n  v.  Sendmeyer. 

516.  519.  534. 
Germantown.  etc..  R'y  Co.  v.  Fitler.  161, 

177.  178    184    S4S    .55.261.  264. 
Germantown.  etc..  R'y  Co.  et  al.  v.  Citi- 
zens', etc.,  R'y  Co..  1556. 
Germantown  Ins.  Co.  t.  Dhein,  984. 
Germicide  Co..  Matter  of.  823. 
Gernsheim  v.  Olcott  1476. 
Gerry.  Re  Accounting  of,  745. 
Getty  v.  Barnes,  etc.,  1088. 
Getty  v.  Devlin.  914. 
Gever  v.  Western  Ins.  Co..  CS7,  693. 
Gheen  v.  Johnson.  476.  568 
Giant  P.  Co.  v.  Oregon,  etc..  R'y.  1391. 
Gibbes  v.  Greenville,    etc..   R  R,   120 

1276.  1277,  1310,  1419. 
Gibbons  v.  Ellis.  117.  22ft 

bons  v.  Grinsel,  103.  246.260. 
Gibbons  v.  Mahon,  20.  707.  740. 
Gibbons  v.  Mobile,  etc..  R  R.  Co..  133. 
Gibbs  v.  Baltimore  Gas  Co..  158  I 

-  v.  Davis.  282,  285. 
Gibbs  v.  Queen  Ins.  Co.,  1178. 
Gibbs'  Case.  1185 
Gibert  v.  Washington,  etc..  R.  R-  1204. 

1233.  1236,  1310.  1339.  1367,  1439. 
Gibson  v.  American  L,  etc.,  Co.. 

1311. 
Gibson  v.  Columbia  &  N.  R  T.  &  B.  Co., 

Gibson  v.  Crick.  571,  580. 

s  »n  v.  Manofrs,  etc.,  Co..  11  rft 
Gibson  v.  Martin.  1417. 
Gibson  v.  Mason,  135,  1527 

Gibson  v.  McCall.  666. 

Gibson   v.   Richmond,   etc.,   R    R.   589, 

590.  827. 
Gibson  v.  Stevens,  658. 


lxxxiv 


TABLE    OF    CAS     - 


[Tlie  references  are 

Gibson  v.  Trowbridge,  etc.,  Co.,  938. 

Gibson's  Case,  190. 

Gibson,  Assignee  of  Evans,  v.  Hudson's 

Bay  Co.,  680, 
Gibson  County  v.    Pullman,   etc.,    Co., 

na 

Giddings  v.  Sears.  579. 

Giesy  v.  Cincinnati.  Wil  &  Z.  R  R  Co.. 

1535,  1531. 
Gilford  v.  Car  hill,  490. 
Gifford  v.  Livingston,  666. 
Gifford  v.  New  Jersey  R  R  Co.,  16, 

814,1130,  1139. 
Gifford  v.  Rockett,  1017. 
Gifford  v.  Thompson,  739,  740,  '■ 
Gihon  v.  Belleville,  etc..  Co..  i860. 
Gilbert  v.  Gouger,  472. 
Gilbert  v.  Bole,  998 
Gilbert  v.  Manchester  Iron  Munuf.  Co., 

19,  517. 
Gilbert  v.  Nantucket  Bank.  101 
Gilbert  v.  New  Zealand  In-.  Co.,  I 
Gilbert  v.  Sykes,  LI 
Gilbert's  Case,  165,  358  859,  481,  448. 
Gilbert,  Matter  of.  966. 
Gilbert  El.  R  R  Co..  ::. 
Gilbroughv.  Norfolk,  etc.,  R  R.  1224, 

1226.  1227.  1232. 
Gilchrist  v.  Helena,  etc..  R  R.  211.  256, 

bin:;. 
Giles  v.  Corn  foot.  1037. 
Giles  v.  Hutt.  17(5.  179. 
Giles  v.  Smith.  277. 
Gilfillan  v.  Mawhinney,  210. 
GilHllan  v.  Union  Cana!  Co.,  1406,  1479. 

1944. 
Gilkey  v.  Paine,  739. 
Gill  v.  Balis,  189,  217,  248. 
Gill  v.  Bnrley,  741. 
Gill  v.  Kentucky,  etc.,  Co.,  87,  111,  113. 

232.  997. 
(lill  v.  New  York  Cab  Co.,  923. 
G ill's  Case,  240. 
Gillan  v.  Morrison,  329. 
Gillespie  v.  Commercial,  etc.,  Ins.  Co., 

1178,  158a 
Gillespie  v.  Gaston,  751. 
Gillett  v.  Bate,  610. 
Gillett  v.  Bowen,  450,  947. 
Gillett  v.  Missouri  V.  R  Co.,  1010. 


to  the  foot-iiaging.] 

Gillett  v.  Moody.  24«.  420,  421.  606. 

Gillett  v.  Peppercorne,  566. 

Gillett  v.  Phillips.  666,  1107. 

Gillett  v.  Whiting.  571.  578, 

Gillig  v.  Barrett.  907. 

Gillis  v.  Bailey.  1071. 

Gilman  v.  Des  Moines.  eta,  R  P..  1309. 

Gilman  v.  Illinois,    etc..    Tel.    Co,    1885, 

1366. 
Gilman  v.  Ketcham,  1425. 
Gilman  v.  New  Orleans,  etc..   Ry.  1199. 

1215.  1248,  1251.  1276,  1828,  1882, 
Gilman  v.  Philadelphia,  1945. 
Gilman  v.  Second  Nat.  Hank.  1117. 
Gilman  v.  Sheboygan,  188,  '■">■■'.  1 18 
Gilman.  Peoria   &  Spring.   P.  R.   Co.  v. 

;..  44,  55.  902,  948,  1127. 
Gilmer  v.  Lime,  etc.,  <  <>..  1" 
Gilmer  v,  Morris,  5) 
Gilmore  v.  Woodcock,  469. 
Gilpin  v.  Bowel!  59 
( lilson  v.  1  feyton,  1 
Gindrat  v.  Dane,  1141,  l  ■ 
Gin/,  v.  Stumph,  586. 
<  lirard  v.  Philadelphia,  1015. 
Girard,  i  ta,  T.  I  r,  nil. 

Given'e  Appeal,  510. 
Given'a  Case,  912 

sner  v.  Anheuser,  eta,  Assoc.,  1557. 
Glaize  v.  South  Carolina  R  R.  769,  1177. 
Glamorganshire  Banking  Co..  Re,  6sl. 
Glamorganshire  Iron,  etc.,  Co.  v.  Irvine, 

Glasier  ^.  Rolls.  204,  489. 

Glass  v.  Hop...  184 

Glass  v.  Tipton,  eta,  Co..  1018,  1017. 

jscott  v.  ( topper,  eta,  Co.,  683. 
Gleason  v.  McKay,  670 
Gleaves  v.  Brick,  etc.,  Co..  B87. 
Glen  v.  Breard.  314. 
Glen  Iron  Works.  Re,  50. 
Glenn  v.  Abell.  240. 
Glenn  v.  Clabaugh,  24. 
Glenn  v.  Dodge.  160. 
Glenn  v.  Dorsheimer,  161.  244 
Glenn  v.  Foote.  243.  312. 
Glenn  v.  Garth,  115,  340. 
Glenn  v.  Hateh.it.  214. 
Glenn  v.  Howard,  168,  243. 
Glenn  v.  Lancaster.  254.  257. 


TABLE    OF    CASES. 


lxxxv 


[The  references  are 

Glenn  v.  Liggett.  94.  164.  243. 

Glenn  v.  Macon,  243. 

Glenn  v.  Marbury,  243.  264,  1430. 

Glenn  v.  McAllister's  Ex'rs,  94,  244. 

Glenn  v.  Orr,  96.  2:34.  1167. 

Glenn  v.  Priest.  243,  244. 

Glenn  v.  San  pie,  160. 

Glenn  v.  Saxton,  160,  161.  244,  261. 

Glenn  v.  Scott.  337.  342. 

Glenn  v.  Soule,  243,  1310. 

Glenn  v.  Springs.  266. 

Glenn  v.  Sumner.  254. 

Glenn  v.  Williams,  160,  243,  259,  261. 

Glen  wood  Co..  Re.  7. 

Globe,  etc.,  Assoc,  Matter  of,  1"). 

Globe  Refining  Co.,  In  re,  672. 

Gloninger  v.  Pittsburg,  etc.,  R.  R,  1194. 

1205.  1217.  1269.  1274 
Gloucester  Bank  v.  Salem  Bank.  1094, 
Gloucester,  etc..  Co.  v.  Russia,  etc.,  Co.. 

644. 
Gloucester  Ferry  Co.   v.  Pennsylvania. 

1946. 
Godbold  v.  Branch  Bank  923. 
Goddard  v.  Grand  Trunk  R"y  of   CaD., 

1011. 
Goddard  v.  Stockman.  148. 
Godden  v.  Kimmeil.  1132. 
Goddin  v.  Crump.  137. 
Godfrey  v.  Pell.  781. 

Godfrey  v.  Terry,  301.  302. 

Godwin  v.  "Whitehead,  1310. 

Goedone  Co.,  Re.  53. 

Goesele  v.  Bimeler,  665. 

Goff  v.  Flesher,  215. 

Goff  v.  Hawkeye  Pump   &  W.  M.  Co., 
53.  190. 

Goff  v.  Winchester  College.  114. 

Goforth  v.  Rutherford,  etc.,  Co..  136. 

Gogebic  Inv.  Co.  v.  Iron,  etc.,  Co..  75. 

Gold  v.  Clyne.  S93. 

Gold  Co.,  Re,  46. 

Gold.  etc..  Co.  v.  National   Bank,   1092, 
1117. 

Gold  Mining  Co.  v.  National  Bank,  420. 
983,  984. 

Golden  v.  Morning  News.  1179. 

Golden,  etc,  Co,  v.  Joshua,  etc.,  Works, 
308.  882L 

Goldengate  M.  Co.  v.  Superior  Court,  1 169. 


to  the  foot-paging.] 

Guldschmidt  v.  Jones,  579. 

Goldsmith  v.  Great  E  Ry,  1537. 

Goldsmith  v.  Home  Ins.  Co.,  998. 

Goldsmith  v.  Swift,  739,  744. 

Gooch,  Re.  412. 

Gooch's  Case,  335. 

Good  v.  Daland.  646,  969. 

Good  v.  Elliott.  468. 

Good  Hope  Co.  v.   R*y,  etc,   Co.,  1175, 

117a 

Gooday  v.   Colchester,   etc..   E'y,  1045. 

1094. 
Goodbar  v.  City  Nat'l  Bank.  701. 
Goodin  v.  Cincinnati,  etc..  R  R  Co.,  1133. 
Goodin  v.  Evans,  34.  640. 
Goodlad  v.  Burnett.  407. 
Goodlet  v.  Louisville  R.  R.  Co.,  1544. 
Goodloe  v.  Godley,  1114.  1115. 
Goodman  v.  Cincinnati,  etc.,  R,  R..  1336. 

1337. 
Goodman  v.  Jedidjah  Lodge,  661. 
Goodnow  v.  Oakey,  1100. 
Goodrich  v.  Dorman.  73. 
Goodrich  v.  Reynolds.  34.  171. 
Goodsell  v.  Western,  etc.  Tel.   Co.. 
Goodson"s  Claim.  336.  438. 
Goodspeed  v.  East  Haddam  Bank.  1006. 

1007,  1109. 
Goodwin  v.  American    National    Bank, 

44?,.  44H.  57^. 
Goodwin  v.  Colorado,  etc.  Co..  1178, 
Goodwin  v.  Evans.  601.  634.  640. 
Goodwin  v.  Hardy.  16.  702,  71". 
Goodwin  v.  McGehee.  248.  729. 
Goodwin  v.  Ottawa  &  P.  R'y  Co.,  531. 
Goodwin  v.  Roberts.  28.  1223. 
Goodwin  v.  Union,  etc.  Co.,  1089. 
Goodwin,  etc..  Co.,  Appeal  of.  461,  717. 
Goodyear  v.  Phelps.  077. 
Goodyear,  etc.,  Co.  v.  Caduc.  1162, 
Goodyear,  etc.  Co.  v.  George.  1054. 
Goodyear    Rubber    Co.    v.    George    D. 

Scott  Co.  et  ah,  939. 
Goodyear    Rubber    Co.    v.    Goodyears, 

etc.  Co..  1013.  1014. 
Gorder   v.   Plattsmouth.   etc,    Co.,  937, 

1100. 
Gordillo  v.  Weguelin.  1235. 
Gordon  v.  Appeal  Tax  Court,  628,  758. 

1941. 


lxxxvi 


TABLE    OF    CA 


[The  references  are 

Gordon  v.  Duff.  404,  405. 

Gordon  v.  Jennings,  274. 

Gordon  v.  Parker,  457. 

Gordon  v.  Preston,   15,   1099,1263,1295. 

Gordon  v.  Sea  Fire  Ins.  Co.,  277.  1187. 

Gordon  v.  Winchester,  etc.,  Assoc,  987. 

Cordon's  Case,  347. 

Gordon's  Ex'rs  v.  Mayor,  etc.,  750,  765, 

759. 
Gordon's  Ex'rs  v.  Richmond,  etc.  R  R. 

362.  865,  866,  369.  371,  370,  705;  707. 
Gorge's  Appeal.  765. 
Gorgier  v.  Milville,  1228 
Gorham  v.  Campbell,  S13. 
( rorham  v.  <  lilson,  '•»  16. 
Gorman  v.  Guardian  Sav.  Bank,  1058 
(human  v.  Pacific  R.  R,  1515. 
Gorrisen's  ( !ase,  91. 
Goshen  v.  Dotterill,  88,  1"7. 
Goshen,  etc.,  Co  v.  Ilmtin.  LI 2,  118,  171. 
Goshorn  v.  <  mio  <  Jounty,  I 
Goshorn  v.  Supervisors,  1544 
(Joss  v.  Hampton,  591,  598,  594 
(loss  v.  Phillips.  608. 
Goss,  etc.,  Mfg.  Co.  v.  People,  610. 
Gott  v.  Cook.  652. 
Cott  v.  Dinsmore,  668. 
Gottberg   v.  United  States   Nat  Rank, 

143,  595 
Gottfried  v.  Miller,  609,  948,  1094 
Gould  v.  Cayuga,  eta,  Bank,  1158 
Gould  v.  Farmers'    Loan   &   Trust   Co., 

598,  594.  505. 
Gould  v.  Head.  526,  588  649,  657. 
Gould  v.  Little  Rock,  etc.,  R'y,  941, 
Gould  v.  Norfolk,  etc.,  Co.,  1070. 
Gould  v.  Oneonta,  185,  101.  176. 
Gould  v.  Seney,  1476. 
t  tould  v.  Town  of  Sterling,  147,  154 
Could  v.  Trask,  574,  608 
Goulding  v.  Clark,  799. 
Goundie  v.  Northampton  Water  Co.,  993. 
Gourand  v.  Edison,  etc.,  Co.,  680. 
Gouthwaite,  Ex  parte,  831. 
Gouthwaite's  Case,  331. 
Government  S.  I.  Co.  v.  Dempsey,  240. 
Governors  of  King's  College  v.  McDou- 

ald,  1103. 
Gover's  Case,  910. 
Gowan's  Appeal,  815.  816. 


to  the  foot-paging.] 

Gowen  v.  Penol>scot  R  R  Co.,  1517. 

Gower's  Case,  177.  179,  198,  107.  352. 

Grady's  Case,  337,  415. 

Graff  v.  Bonnett,  652,  658. 

Graff  v.  Pittsburg,  etc.,  R  R  Co.,  95, 189, 

342,  1122. 
( Iraffam  v.  Burgess 
Grafius  v.  Land  Ca,  1109. 
( rrafton  v.  (Jnion  1  ■•  rry  <  ><..  B9 
Graham  v.  Atlantic  etc.  I  a,  1807. 
Graham  v.  Birkenhead,  eta,  Ca,  1180. 
Graham  v.  Boston,  eta,  R,  R.  I     .  795, 

796,  B56,  982,   1180,  1160,  1218,  1273, 

1815,  1541,  1547. 
Graham  v.  Firsl  Natl  Bank  of  Norfolk, 

( i-raham  w.  Houghton,  166. 

Graham  v.  1 1  ■  y,  1050 

Graham  \.  National  Bank,  I 

Graham  v.  Raili  919,  989,  1864* 

1855. 
( Iraham  v.  St.  Joseph,  751. 
Graham  \.  Van  Diemen's  Land  Co.,  179, 

182,  802. 
cram's  Case,  i' 
<  .i.imi  \    Stebbins,  470 
Granbv  Ca  v.  Richards,  818 
Grand,  i  ta,  R  R.  Ca  r.  II.  i-  I.  1561. 
.1  Gulf  Bank  *.   Archer,  nos,  987, 

988. 
Grand  Junction,  etc.,  R'y  ▼.  Bickford, 

1269. 
( '.rand  Lodge  v.  Farnham,  B 
Grand  Lodge  ol  Ala.  v.  Waddill,  988 
Grand   Rapids,  eta,   Ca  v.   Cincinnati, 

eta,  Co..  17.  787,907,  '.'17.  1050,  1077. 
Grand  Rapids,  eta,  v.  Grand,  eta,  R  .R, 

In  re,  1529. 
Grand  Rapids,  etc.,  Co.  v.  Grand  Rapids, 

eta,  ^o..  1581. 
(hand  Rapids,  etc..   R    R    v.    Sanders, 

1195;    1214.    1298,    1221.    1225.    1226. 

1282. 
Grand  Rapids  Savings  Bank  v.  Warren, 

177,  386,  292,  296,  BOO,  801. 
Grand  River  B.  Co.  v.  Rollins.  1048. 
Grand  Tower,  etc.,  Co.  v.  Ullman.  1319. 
Grand  Trunk,  etc.,  R'y  Co.  v.   Brodie, 

108 
Granger  v.  Bassett,  16,  743,744. 


TABLE    OF    CASES. 


lxxxvii 


[The  references  are 

Granger  v.  Grubb,  807.  815,  836. 
Granger  .Cases.  1941.  1949. 
Granger,  etc..  Co.  v.  Vinson,  108,  332. 
Grangers"  Ins.  Co.  v.  Turner,  206. 
Grangers'  Life,  etc.,  Ins.  Co.  v.  Kamper, 

6,  381,  393. 
Granite  Rooting  Co.  v.  Michael,  49,  158, 

168. 
Grant  v.  Attrill,  431,  480. 
Grant  v.  Courter,  135. 
Grant  v.  East,  etc.,  Co.,  70,  1329. 
Grant  v.  Hamilton,  468. 
Grant  v.  Henry,  etc..  Coal  Co..  992. 
Grant  v.  Mechanics'  Bank,  689,  692,  695. 
Grant  v.  Phcenix  Ins.  Co.,  1356. 
Grant  v.  United,  etc.,  R'y,  930. 
Granville  Charitable  Ass'n  v.  Baldwin, 

1038. 
Grape  Co.  v.  Small.  104G,  1082. 
Grass  v.  U.  S.,  etc.,  Co..  1268. 
Gratwiek'-s  Trusts,  409. 
Gratz  v.  Pennsylvania  R.  R.,   1500.  1507. 
Gratz  v.  Redd,  174,  722,  723,  729,  731,  734. 
Gravely  v.  Commonwealth,  634. 
Gravenstine's  Appeal,  1412. 
Graves  v.  Mono,  etc.,  Co.,  825,  929,  937, 

945. 
Graville  v.  N.  Y.,  etc.,  R.  R.  Co.,  1121. 
Gray  v.  Chaplin,  1125,  1130. 
Gray  v.  Coffin,  269,  271,  305,  321,  331, 

629,  632.  810. 
Gray  v.  Davis,  1427,  1429. 
Gray  v.  De  Castro,  etc.,  Co.,  647. 
Gray  v.  Fox,  434. 
Gray  v.  Lewis,  899,  1431. 
Gray  v.  Lynch,  435. 
Gray  v.  Monongahela  Nav.  Co.,  168,  634, 

1018. 
Gray  v.  National  St.  Co..  962. 
Gray  v.  New  York,  etc.,  Co.,  955,  1153. 
Gray  v.  North  River,  etc.,  Co.,  647. 
Gray  v.  Oxuard,  etc.,  Co.,  647. 
Gray    v.  Portland  Bank,  3S2,  386,  387, 

388,  530,  780. 
Gray  v.  Quicksilver  Min.  Co.,  1178,1179. 
Gray  v.  Robbins,  482. 
Gray  v.  State.  154. 
Gray's  Case,  343. 

Grayson  v.  Willonghby,  276,  1588. 
Grayville,  etc.,  R,  R  Co.  v.  Burnes,  1111. 


to  the  foot-paging.] 

Great  Barrington  v.  County  Com'rs,  750. 
Great  Eastern  R'y  Co.  v.  Turner,  416. 
Great  Falls  &  C.  R.  R.  Co.  v.  Copp,  321. 
Great  Falls  Mfg.  Co.  v.  Fernald,  1527. 
Great  Luxembourg  R'y  Co.  v.  Maguay, 

916. 
Great  North,  etc.,  R'y  Co.   v.  Kennedy, 

175,  176,  183. 
Great  North  of  Eng.  R'y  Co.  v.  Biddulph. 

166,  693. 
Great  Northern,  etc.,  Min.  Co.,  Re,  861, 

1064,  1068. 
Great  Northern  R'y  Co.  v.  Eastern  Coun- 
ties R'y  Co.,  422,  1502. 
Great  Western,  etc.,  Co.,  Re,  911. 
Great  Western  R'y  v.  McCarthy,  1537. 
Great  Western  R'y  Co.  v.  Metropolitan 

R'y  Co.,  424. 
Great  Western  R'y  Co.  v.  Miller,  1010. 
Great  Western  R'y  Co.  v.   Oxford,    etc., 

R'y  Co.,  1133. 
Great  Western  R'y  Co.  v.  Preston,  etc., 

R'y,  1509. 
Great  Western  R'y  Co.  v.  Queen,  886. 
Great  Western  R'y  Co.  v.  Rushout,  1137, 

1508. 
Great  Western  R'y  Co.  v.  Sutton,   1520. 

1521. 
Great  Western  Tel.  Co.  v.  Buruham,  165. 
Great  Western  Tel.  Co.  v.  Gray,  56,  160. 

243. 
Great  Western  Tel.  Co.  v.  Purdy,  242. 
Great  Wheal  Polgroath,  In  re,  91 L 
Greaves  v.  Gouge.  1148. 
Greeley  v.  Provident,  etc.,   Bank,    1417. 

1459. 
Greeley  v.  Smith,  893. 
Green  v.  Abietine,  etc.,  Co.,  53,  100,  184. 

323. 
Green  v.  African   Methodist  Epia  Soc, 

1C25. 
Gre'en  v.  Barrett,  103,  1041. 
Green  v.  Beck  man,  303,  321. 
Green  v.  Biddle,  629. 
Green  v.  Brookins,  465. 
Green  v.  Cady,  1058. 
Green  v.  Hugo,  1055. 
Green  v.  Merchants'  Ins.  Co.,  1123. 
Green  v   Seymour,  985,  987. 
Green  v.  Tacoma,  1565. 


lxxxviii 


TABLE    OF    CASES. 


[77ie  references  are 

Green  v.  Walkill  Nat'l  Bank,  143(5. 

Green  v.  Wallis,  etc.,  Works,  1433. 

Green  v.  Weave]-.  509. 

Green,  In  re,  473.  475,  050. 

Green   Bay  &  M.    R.    R   Co.   v.  Union 

Steamboat  Co..  1245. 
Green  County  v.  Conness,  1545. 
Creen  Mount.  &  S.  L.  T.  Co.  v.  Bulla, 

520,  521.  531. 
Greenbrier,  etc.,  Co.  v.  Ward, 
Greenbrier,  etc.,  Exposition    v.    Rodes, 

039. 
Greene  v.  Dispean,  585,  599. 
Greene  v.  Smith,  71 1. 
Greene  v.  Walton,  877. 
Greenfield,  etc.,  Bank  v.  Simons,  919. 
Greenleaf  v.  Ludington,  500. 
Greenleaf  v.  Moody,  580. 
Greenleaf  v.  Railroad,  928. 
Greenpoint  Sugar  Co.  v.  Whitin,  1284 
Greensboro,  etc.,  •  '<>.  \.  Stratton,  92 
Greenville  &   Columbia   R.    R.    Co,    \. 

Coleman,  207,  226,  631. 
Greenville  etc.  !:.  El. Co.  \.  Cathcart,  17  I. 
Greenville,  etc.,  R  R  ( !o.  v.  I  loleman,  B24 
Greenville,  etr..  K.  R   Co.   v.   Johnson, 

632,  810. 
Greenville  &  ('.  R  R  Ca  v.  Woodsides, 

220. 
Greenwich  v.   Easton    &    A.  R  R 

1530. 
Greenwood  v.  Freight  Co.,  027,  747,  8S6, 

1135,  1555,  1944 
Greenwood's  Case.  276,  277,  668. 
Greer  v.  Chartiers  R  R  Ca,  95. 
Gregg  v.  Mass.  Medical  Society,  1025. 
<  rregory  v.  German  Bank-,  680. 
Gregory  v.  Hatchett,  947. 
Gregory  v.  Lamb,  213. 
Gregory  v.  New   York,  etc.,  R  R   Co., 

1172. 

Gregory  v.  Patchett,   1130,    1133.    1144, 

1149. 
Gregory  v.  Wendell,  409,  471,  476,  574 
Gregory's  Ex.  v.  Trustees,  *90. 
Grenada  Co.  v.  Brogden,  140.  141,  795 
Gresham  v.  Island,  etc.,  Bank,  534,  1101. 

1466. 
Grew  v.  Breed,  327,  329,  331,  1170. 
Grey,  In  re,  411. 


to  the  foot-paging.] 

I  ley  v.  Barnes.  293. 
Gridley  r.  Lafayette,  etc.,  R'y  Co.,  92a 
Grier  v.  Hazard.  1058. 
Griffen  v.  Ashville,  etc..  Co.,  1165. 
( rriflin  v.  [Beverley,  1087, 
Giiffin  v.  Kentucky  Ins.  Co.,  3. 
( rriflin  v.  Mac-mi  (  kranty,  12 
Griffith  v.  Chicago,  etc.,  R  R,  107".. 
Griffith  v.  Green,  8 

Griffith  v.  Jewett,  117.  149,  823,  840,  848. 
Griffith  v.  Mangam,  J" 
Griffith  v.  Pagi 
Griffith  v.  Peat 
Griffith  v.  S  ara,  1 7 7. 
Griffith  v.  Watson,  75a 

$8  v,  I  My,  464 
( irinii  -  \ .  I  [arrison,  994 

■idle  v.  Stone,  ■.' 
Grisell  v.  Bristow< .  ;9. 

-  wood,  Ex  pari 
Griss  II,  \'.\  parte,  1252,  1254 
i  Irissell'e  I  toe,  158,  240,  211. 
Griswold  v.  Hazard,  1 1 
Griswold  v.  Seligman,  B7,  ,  330, 

687. 

<  Iriswold  v.  Tru  -..  1 13. 
Gri              v.  Blane,  169,  I  i 
Grofl  v.  Bird-in-hand  T.  Ca,  1590. 
( trogen  \.  « looke,  609. 

Hilt,  242,  871,  2 

-  \.  Onil 
( Irosse  Isle  I  totel  ( 'o.  v.  L'Anson's  Ex'rs, 

158,  171. 
GroverA   Baker  s.  M.  Ca  v.  Missouri 

Pac.  R'y  Ca,  U 

<  Irubb  v.  Mahoning  Nav.  Ca,  11 
Qrubbev.  Vicksburg  &  Brunswick  R. 

R  Ca,  168. 
Gr.uberv.  Washington  &  J.  R  R  Co., 

978,  1008. 
Gruman  v.  Smith.  :,; 
Grund  v.  Tucker,  266,  267,  284  286. 
Grundy  v.  Pine,  etc.,  Ca,  928, 
Gryines  v.  Home.  413,  547, 
Guadalupe,  et  -..  Ass'n  v.  West,  828. 
Guago  Iron  Co.  v.  Dawson.  1178. 
Guarantee,  etc.,  Ca  v.  Weil,  190. 
Guaranty  Trusts  Ca  v.  Green  Cove  R 

R,,  1290. 
Gue  v.  Tide-water  Canal  Co.,  608,  1578. 


TABLE    OF    CASES. 


lxxxix 


[77ie  references  are 

Guernsey  v.  Burlington,  1527. 

Guernsey  v.  Cook,  450,  844. 

Guest  v.  Lower,  etc.,  Co.,  1392. 

Guest  v.  Worcester  R  R  Co..  46. 

Guild  v.  Parker,  420. 

Guilford  v.  Minn.,  etc.,  Ry,  1199,  1233, 

1302. 
Guilford  v.  Western  U.  Tel.  Co..  511. 
Guin  v.  New  England,  etc.,  Co.,  1004. 
Guinn  v.  Iowa  Cent  Ry  Co.,  1183. 
Guinness  v.  Land  Corporation,  6,  28,  369. 
Guirney  v.  St.  Paul,  etc.,  Ry,  1168. 
Gulf,  etc.,  Ry  v.  James,  1088. 
Gulf,  etc.,  Ry  v.  Morris.  1050,  1501,  1504. 
Gulf,  etc.,  Ry  v.  Newell,  1480. 
Gulf,  etc.,  Ry  v.  Trawick,  1536. 
Gulf,  etc ,  Ry  Co.  v.  Neely,  215. 
Gulf,  etc.,  Ry  Co.  v.  State,  1512. 
Gulf,  etc.,  R  R  v.  Ricker,  1547. 
Gulf,  etc.,  R  R  v.  Vaughn,  1534. 
Gulick  v.  Markham,  484. 
Gulliver  v.  Adams  Exp.  Co.,  1579. 
Gun  makers  v.  Fell,  1024. 
Gunn  v.  Central  R  R  &B.  Co.,  967,  1007, 

1534. 
Gunn  v.  London,  etc.,  Ins.  Co.,  1045. 
Gunn  v.  Plant,  1393. 
Gunn  v.  White,  etc.,  Co.,  1004. 
Gunn's  Case,  96. 
Guuterman  v.  People,  872,  1581. 
Gunther  v.  James,  etc.,  Co.,  1068. 
Gurney  v.  Atlantic,  etc.,  Ry  Co.,  274. 
Gustard*s  Case.  525. 
Guthrie  v.  Guthrie's  Executor,  315. 
Gutzeil  v.  Pennie,  1101. 
Guy  v.  Baltimore,  1946. 

H. 

Haacke  v.  Knights,  etc.,  Cluh,  878. 

Haag  v.  Board,  etc.,  1017. 

Habenicht  v.  Lissak,  661. 

Habertson's  Case,  165. 

Habicht  v.  Pemberton,  671. 

Hackensack  Water  Co.  v.  De  Kay,  880, 
1058,  1108,  1109,  1187,  1223,  1229, 
1261,  1262,  1313,  1314,  1322,  1324, 
1339,   1482. 

Hackett  v.  Ottawa,  146. 

Hackettstown  v.  Swackhamer,  1185. 


to  the  foot-paging.] 

Hackney  v.  Allegheny  Ins.  Co.,  1113. 

Hadden  v.  Spader,  467.  609. 

Hadden's  Will,  In  re,  404. 

Had  ley  v.  Freed  man's,  etc.,  Bank,  997, 
1171,  1950. 

Hadley  v.  Russell,  256,  259,  269,  290,  305. 

Hafer  v.  New  York,  etc.,  R  R,  821,  844, 
846. 

Hagan  v.  Providence  &  W.  R  Co.,  1011. 

Hagar  v.  Union  National  Bank,  691,  701, 
716,  717. 

Hager  v.  Bassett,  232. 

Hager  v.  Cleveland,  228,  272,  343,  351. 

Hager  v.  King,  464. 

Hager  v.  Thompson,  480. 

Hagerman  v.  Empire  Slate  Co.,  1002. 

Hagerstrom  Road  Co.  v.  Creeger,  1019. 

Hagg  v.  Maguire,  S50. 

Hagg  v.  Snaith,  580. 

Hague  v.  Dandeson,  691. 

Halm,  Appeal  of,  125,  226. 

Hahneman,  etc.,  Co.  v.  Beebe,  1173. 

Haig  v.  Swiney.  409. 

Haight  v.  Day.  98,  830. 

Haight  v.  Morris  Aqueduct,  1165. 

Haight  v.  Railroad  Co.,  755. 

Haight  v.  Sahler,  1093,  1104. 

Hain  v.  North  W.  G.  R  Co.,  222. 

Hakim's  Case,  357. 

Haldeman  v.  Ainslie,  59,  269. 

Hale  v.  Burlington,  etc.,  R.  R,  1391. 

Hale  v.  Continental  Life  Ins.  Co.,  1165. 

Hale  v.  Duncan,  1433. 

Hale  v.  Frost,  1399. 

Hale  v.  Nashua,  etc..  R  R,  1310,  1322, 
1325,  1352,  1397,  1450. 

Hale  v.  Republican   River  Bridge  Co., 
712. 

Hale  v.  Sanborn,  222. 

Hale  v.  Walker,  330. 

Hale,  Ex  parte,  207. 

Haley  v.  Reid,  612. 

Halford  v.  Cameron's  Coalbrook  R,  1106, 
1107. 

Halifax,  etc.,  Co.  v.  Francklyn,  1060. 

Halket  v.  Merchant  Traders',  etc.,  Asso- 
ciation, 276. 

Hall  v.  Astoria,  etc.,  Co.,  1156. 
Hall  v.  Auburn  T.  Co.,  1243. 
Hall  v.  Brooklyn  El.  R  R,  51. 


TABLE    OF    CASES. 


\The  references  are 


Hall  v.  Carey,  U 

Hall  v.  Connell,  • 

Hall  v.  Mobil  .  eta,  R  R  Co.,  1111. 

Hall  v.  Old.  T.  L.  Mm.  Co.,  309. 

Hall   v.  Rose  Hill  &   E.  Road  Co.,  501, 

715. 
Hall  v.  Selma  &  Tenn.  R  R  Co..  219, 

238. 
Hall  v.  Sullivan  R  R,  1266.  1268,  1275, 

1289,  1314,  131 
Hall  v.  Tanner,  •  tc,  Co.,  318. 
Hall  v.  UuiU  d  Stat  -   [ns.  Ca,  167,  170, 

262,  343,  517,  692,  693,  694,697. 
Hall  v.  Vermont, etc,  R  R<  ....  '.'-'t.  1048. 
Hall,  Ex  part.'.  109,  331,  346,  9 
Hall,  etc.,  R'y.  Re,  1254 
Hall's   Case,  97,  171  16,  1036,  1037. 

Hall  Mfg.  Co.  v.American  R'y, 

972 
Halladay  v.  Elliott,  659. 
Hallam  v.  Indian. .la  Hotel  O     '    J 
1  [allenbeck  v.  Halm.  I 
Hallett  v.  Dowdall,  277. 
Halliday  v.  Holgate,  592. 
Hallowell  v.  Blackstone,  etc,  Bank,  5 
Hallow.  II,  etc,  Bank   v.  Hamlin,   1< 

107.1 
Hallows  v.  Ferraie,  194,  195,  000,  203,210. 
Hallstead  v.  Curtis,  812,  669. 
Halsey  v.  A.ckerman,  I 
Halsey  v.  McLean,  292,  293 
Halsey  v.  Rapid   Transit    R'y  Co.,  1563, 

1567. 
Halsey,  etc,  Co  v.  Donovan,  2221 
Halstead  v.  Dodge,  26. 
Halsted  v.  Meeker's  Ex'rs,  434 
Halwerson  v.  Cole,  580 
Hambletoo  v.  Central  O.  R  R  Co.,  508. 
Hanibleton  v.  Glenn,  017,  243,  250,  266, 

343 
Hambro  v.  Hull,  etc..  Co.,  1586. 
Hamell  v.  Chicago,  etc,  R  R,  373 
Haraer  v.  Hathaway,  789. 
Hamer,  etc.,  Co.,  Re,  1062. 
Hauler's  Devisee's  Case,  331. 
Hamilton  v.  Austin.  1 
Hamilton  v.  Accessory,    etc.,   Co.,   8S9, 

Hamilton  v.  Clarion,  etc.,  Co.,  223,  230, 
231,  243,  250,  260,  261,  269,  1500. 


to  the  foot-paging] 

Hamilton  v.  Dennis.  1098. 

Hamilton  v.  Grand  Rapids  &  Ind.  R  R 

Ca,  16a 
Hamilton  v.  Grangers'  L.  &  H  Ins.  Co., 

'..  046. 
Hamilton  v.  Keith,  1513. 
Hamilton  v.   Lycoming  Ins.   Co.,  1094, 

1096. 
Hamilton  v.  McLaughlin,  1097. 
Hamilton  v,  Newcastle  &  D.  R  R  Co., 

1190. 
Hamilton  v.  N.  Y..  etc..  R  R.  1550 
Hamilton   v.    Savannah,    etc,    Ry.   423, 

:.  1039. 
Hamilton  v.  Smith.  10  - 
Hamilton  Colli  -  S     wart,  111. 

Hamilton  (  ...  v.  Massachusetts,  748. 
Bamilton,  ••   v.    Hamilton  City, 

158*  1584 
Hamilton,  etc,  Ca   v.    Iowa,  etc.,  Co., 

li. 
Hamilton,  etc,  Ca    v.    Rice, 

111.  112,  224,  23ft 
Hamilton,  etc,  In-  Ca  v.  Hobart,629, 

649,  1588. 
Hamilton  Nat'l  Bank  v.  Halsted,  58 
Hamilton's   Windsor  Water-works,   In 
1252,  1254 

Hamlin  v.  EuiO|  .,  R'y,  '• 

Hamlin  v.  .hi  raid.  1373 

Hamlin  v.  Kassafi  r,  1056,  I 
Hamlin  v.  Meadville,  148. 
Hamra  v.  Drew,  LOS 
Hammett  v.  Little  Rock  &  N.  R  R. 

I.  236. 
Hammock  v.  Loan   &  Trust  Co.,  1346, 

1  :;:•-'.  1417. 
Hammond  v.  Hastings,  545,  689,  1013 
Hammond  v.  Hudson    River,  etc,  Co, 

255. 
Hammond  v.  Shepard,  1016,  1017. 
Hammond  v.  Straus,  E 
Hammond's  Appeal,  936. 
Hampson  v.  Price's,  etc,  Co.,  969. 
Hampson  v.  Weare,  265,  296. 
Hamsher  v.  Hamsher,  U96. 
Hamtayne  v.  Bourne,  1W>. 
Hancock  v.  Holbrook,  858,  963.  1131. 
Hancock  v.  Louisville,   etc,   R   R.   154, 

829,  1493,  1505. 


TABLE    OF    CASKS. 


XCJ 


[The  references  are 

Hancock  v.  Toledo,  etc,  R  R  Co.,  1471, 

1480. 
Hand  v.  Cole,  27:5. 
Hand  v.  Dexter,  1155. 
Hand  v.  Savannah,  etc.,  R  R,  1234, 1277, 

1444,  1453. 
Hand  Gold  Mining  Co.  v.  Parker,  1527. 
Handley  v.  Russell,  269. 
Handley  v.  Stutz.  40,  57,  59,  60,  233,  240, 

250,  257,  391,  796,  804,  807, 1070, 1205. 
Handrahan    v.    Cheshire    lion   Works, 

296. 
Handy  v.   Cleveland,   etc.,  R  R,  1438, 

1462. 
Handy  v.  Draper,  250,  281,  283,  301,  302, 

304. 
Hankey  v.  Hammond,  654 
Hanks  v.  Drake,  574,  604. 
Hanley  v.  Balch,  946.  1 136. 
Hanna  v.  Cin.  &  Fort  Wayne  R  R  Co., 

632,  1490. 
Hanna  v.  International  Petroleum  Co., 

1173. 
Hannah  v.  The  Moberly  Bank,  252.  253. 
Hannerty   v.    Standard,    etc.,   Co.,   919, 

934.  1150. 
Hannibal  v.  Fountleroy,  149. 
Hannibal  &  St.  Joseph  R  R  Co.  v.  St. 

Joseph,  771. 
Haunibal   &  St   Joseph    R    R    Co.   v. 

Shacklett.  13.  756,  758. 
Hannibal  R  C.  &  P.  P.  R  Co.  v.  Meni- 
fee. 234. 
Hanover,  etc.,  Co.  v.  Ashland,  etc.,  Co.. 

1112. 
Hanover  Junction  &;  Susquehanna  R  R 

Co.  v.  Haldeman,  122,  123,  127,  221, 

224,  232. 
Hanson  v.  Doukersley,  286,  298. 
Hanson  v.  Eichstaedt,  674. 
Hanson  v.  Vernon,  132. 
Harben  v.  Phillips,  821,  822,  842. 
Harcum  v.  Hudnall,  709. 
Hardenbergh  v.  Bacon,  479,  481,  590. 
Hardenburgh   v.    Farmers',  etc.,  Bank, 

98,  798,  807,  811,  813. 
Hardesty  v.  Pyle,  1375. 
Hardin  v.  Iowa,  etc.,  Co.,  1060, 1079,  1396. 
Hardin  County  v.  Louisville,  etc.,  R  R, 

83,  389. 


to  the  foot-paging.] 

Harding   v.    Chicago   &  A.   R    R  Co., 

1171. 
Harding  v.  Rockford,  etc..  146. 
Harding  v.  Yandewater,  1061. 
Hardman  v.  Sage,  282,  298,  302. 
Hardou  v.  Newton,  859,  942,  97:). 
Hards  v.  Platte,  etc.,  Co.,  228. 
Hardware  Co.  v.  Phalen,  805. 
Hardy  v.  Merriweather,  34,  198,237,983, 

1193. 
Hare  v.    London,    etc.,   R'y   Co.,    1146, 

1511. 
Hare  v.  Waring,  456. 
Hare's  Case,  201. 
Harger    v.    McCullough,    285,  286,    298, 

822. 
Harkness   v.    Manhattan   R*y   Co.,  930, 

1052.  1506. 
Harlaud  v.  Bankers',  etc.,  Tel.  Co.,  1347, 

142S,  1431. 
Harlem,  etc.,  Canal  Co.  v.  Seixas,  113, 

174.  181.  227. 
Harlem  Canal  Co.  v.  Spear,  227. 
Harman's  Case.  1588. 
Harmon  v.  Columbia,  etc.,  R  R,  1530. 
Harmon  v.  Page,  255. 
Harmstead   v.    Washington    Fire,   etc., 

Co..  1026. 
Harpending  v.    Munson,   920,    933,  937, 

1153,  1470. 
Harper  v.  Raymond,  667,  847. 
Harper  v.  Union  Mfg.  Co.,  280,  289. 
Harpold  v.  Stobart,  306,  349,  353. 
Hariell  v.  Mexico,  etc.,  Co.,  G24. 
Harrington  v.  District,  etc.,  1064. 
Harrington  v.  First  Nat'l  Bank,  1053. 
Harrington  v.  Plainview,  147. 
Harris  v.  American  Bible  Soc,  994. 
Harris  v.  Davis,  1475. 
Harris  v.  First  Parish  in  Dorchester,  256, 

289. 
Harris  v.  McGregor,  309. 
Harris  v.  Mississippi,  etc.,  R.  R  Co.,  863, 

868. 
Harris  v.  Muskingum  Mfg.  Co.,  862, 1049. 
Harris  v.  Xesbit,  864. 
Harris  v.  Norvell,  273. 
Harris  v.  Piatt,  481. 
Harris  v.  Pry  or,  575. 
Harris  v.  Pullman,  250. 


XC11 


TABLE    OF    CASES. 


[The  references  are 

Harris  v.  San  Francisco,  etc.,  707. 

Harris  v.  Stevens,  711. 

Harris  v.  Thompson,  990. 

Harris  v.  Tumbridge,  469,  472,  562,  565, 

575,  577,  787,  790. 
Harris,  Appeal  of,  584,  786. 
Harris'  Case,. 96,  1072. 
Harrisburg  Bank  v.  Tyler,  1113. 
Harrisburg,  etc.,  R  R,  Appeal  of,  1307. 
Harrison  v.  Aunapolis,  etc.,  R  R,  1296. 
Harrison  v.  Arkansas,  etc.,  R  R,  50. 
Harrison  v.  Harrison,  430,  653. 
Harrison  v.  Heathorn,  87,  207,  663. 
Harrison  v.  Mexican  R'y  Co.,  361,  363, 

366,  712. 
Harrison  v.  Pryse,  529. 
Harrison  v.  Union  Pac.  R'y  Co.,  50,  121"). 
Harrison  v.  Vines,  20. 
Harrison  v.  Williams,  682,  684. 
Harrison.  Ex  parte,  1254. 
Harrison's  Case,  357. 
Harrod  v.  Hamer,  21 1.  309. 
Harselman  v.  Japanese,  etc.,  Co.,  864. 
Harshinan  v.  Bates  Co.,  149,  156. 
Harshman  v.  Knox  County.  111. 
Hart  v.  Barney,  etc.,  Co.,  1372,  1375. 
Hart  v.  Boston,  H.  &  E.  R  R  Co.,  1512. 
Hart  v.  Chicago,  etc.,  R'y,  1536. 
Hart  v.  Clarke,  66."). 
Hart  v.  Eastern,  etc.,  R'y,  1255. 
Hart  v.  Frantino,   etc.,  Gold    Min.    Co., 

499,  501,  529. 
Hart  v.  Lauman,  38. 
Hart  v.  New  Orleans,  etc.,  R  R,  18. 
Hart  v.  St  Charles  St  R  R  Co.,  387, 

388. 
Hart  v.  Ten  Eyck,  436,  601. 
Hart,  Re,  474. 
Hart's  Case,  107,  334,  996. 
Harter  v.  Eltzroth,  482. 
Harter  v.  Kernochan,  140,  156. 
Hartford  &  New  Haven  R   R  Co.  v. 

Croswell,  633,  954.  1538. 
Hartford  &  N.  H.  R  R  Co.  v.  Kennedy, 

15,  113,  174,  176. 
Hartford  &  N.  H.  R  R  Co.  v.  N.  Y.  & 

N.  H.  R  R  Co.,  1521. 
Hartford  Bank  v.  Hart,  1110,  1113. 
Hartford,  eta,  Ins.  Co.  v.  Inhabitants, 

1020. 


to  the  foot-paging."] 

Hartford,  etc.,  R  R  Co.  v.  Boorman, 

343. 
Hartford,  etc.,  R  R  Co.  v.  New  York, 

etc.,  R  R  Co.,  1510,  1537. 
Hartford  Fire  Ins.  Co.  v.  Doyle,  1001. 
Hartga  v.  Bank  of  England,  444. 
Hartley  v.  Allen,  741,  743. 
Hartley's  Case,  2ia 
Hartnian  v.  Ins.   Co.  of  Valley  of  Va., 

306. 
Hartman  Steel  Co.'s  Appeal,  1557. 
Bartranffs  Estate.  In  re,  602. 
Hartridge  v.  Rockwell,  383,  387,  417. 
Harts  v.  Ilrown.  '.<^K 
Ham  v.  Harvey,  MO,  8 
Hai  vanl  College  v.  Aiimry.  431,  739,  710. 
Harvard  College  v.  Boston,  996. 
Harvey  v.  I  Tough,  665. 
Harvey  v.  Collett,  1041. 
Harvey  v.  HI.  Mid.  R'y.  1517. 
I [arvey  v.  M<  rrill,  571. 
Harvey  v.  Thomas,  1527. 
Harvey  v.  West  Sale,  etc.,  Co.,  1112. 
Harwood  v.  Railroad  Co.,  931, 1130,1330. 
llarwood's  Cat 

I  [asbrouck  v.  Vandervoort  583,  588,  598, 

784 
Hascall  v.  Life,  e^c,,  Ass'n,  1017,  1087, 

1104, 
Hasenntter  v.  Kirchhoffer.  879. 
Haskell  v.  Worthington,  200,  222. 
Basking  v.  Nicholls.  405. 

II  a  ski  us  v.  Harding,  283. 
Haskius  v.  Warren,  580. 
Haslam  v.  Adams  Exp.  Co.,  1579. 
Haslett  v.  Wotherspoon,  324. 
Hassall  v.  Wilcox,  1393. 

Hassell  v.  Merchant    Traders'    Associa- 
tion, 277. 
Hasselman  v.  Japanese,  etc.,  Co.,  1017. 
Hasselman  v.  U.  S.,  etc.,  Co.,  880. 
Hassler  v.  Phila.  Musical  Ass'n,  1026. 
Hastings  v.  Blue  Hill,  etc.,  Corp'n,  515. 
Ha>tmgs  v.  Drew.  296,  729,  731,  889. 
Hat  B.  Co.  v.  Eiclimeyer,  etc.,  955. 
Hatch  v.  Attrill.  73. 
Hatch  v.  Barr,  1096. 
Hatch  v.  Burroughs,  280,  284.  292. 
Hatch  v.  Chicago,  etc.,  R  R,  1135,  1145, 

1154,  usa 


TABLE    OF    CASES. 


XClll 


[T7ie  references  are 

Hatch  v.  Cincinnati,  etc.,  R  R.  Co.,  1578. 
Hatch  v.  City   Bank   of    New   Orleans, 

677. 
Hatch  v.  Coddington,  1079. 
Hatch  v.  Dana,  160,  161, 162,  254,  255,  258, 

259,  260,  261,  288. 
Hatch  v.  Douglas,  468,  473,  567,  572. 
Hatch  v.  Spooner,  483,  491. 
Hatcher  v.  Toledo,  etc..  R  R,  1480. 
Hatten  v.  Russell,  438. 
Hattersley  v.  Earl  Selburne,  1156. 
Hatton,  Ex  parte,  358. 
Haugen  v.  Albina,  etc.,  Co.,  1596. 
Haun  v.  Mulberry  &  Jefferson  G.  R.  Co., 

167. 

Hauseman  v.  Building  Assoc,  1118. 
Havana  Gold  Mining  Co.,  In  re,  862. 
Havemeyer  v.  Havemeyer,  423,  449,  450, 

843,  847. 
Havemeyer  v.  Iowa  Co.,  132. 
Havemeyer  v.  Superior  Court,  643,  891, 

892. 
Haven  v.  Adams.  1099. 
Haven  v.  Emery,  1398. 
Haven  v.  Grand  Junction  R.  R   &    D. 
Co.,  1098,  1231.  1232,  1235, 1316, 1359. 
Haven  v.  New  Hampshire  Asylum,  1067, 

1070. 
Haven,  etc.,  Co.,  In  re,  821. 
Hawbeach,  etc.,  Co.  v.  Teague,  1058. 
Hawes  v.  Anglo-Saxon   Petroleum  Co., 

266,  272,  296. 
Hawes  v.  Gas  Consumers',  etc.,  Co.,  503, 

528. 
Hawes  v.  Oakland,  899,  1135,  1143. 
Hawkins  v.  Carroll  Co.,  148. 
Hawkins  v.  Furnace  Co.,  303. 
Hawkins  v.  Glenn,  243,  265,  345. 
Hawkins  v.  Maltby,  355,  570. 
Hawkins  v.  Mansfield  Gold  Mining  Co., 

102. 
Hawkins  v.  Miss.  &  Tenn.  R.  R  Co.,  639. 
Hawkins  v.  Municipal  Council,  etc.,  of 

Bruce,  1019. 
Hawley  v.  Bibb,  471,  1225. 
Hawley  t.  Brumagim,  26. 
Hawley  v.  Cramer,  566. 
Hawley  v.  Fairbanks,  144. 
Hawley  v.  Kansas,  etc.,  Coal  Co.  et  al., 
1520. 


to  the  foot-paging.] 

Hawley  v.  Upton,  56,  89,  90,  94,  111,  239. 

Hawley's  Case,  88. 

Hawtayne  v.  Bourne,  1091. 

Hawthorne  v.  Calef,  629,  1942. 

Haxtum  v.  Bishop,  98S. 

Hay  t.  Palmer,  743. 

Hay  v.  The  Coliver  Co.,  1527. 

Hay's  Case.  908. 

Haydel  v.  Hurck,  745. 

Hayden  v.  Androscoggin,  1173. 

Hayden  v.  Bates  Mfg.  Co..  1182. 

Hayden  v.  Davis,  984,  1193. 

Hayden  v.  Middlesex  Turnpike  Co.,  779, 

"  1049,  1055,  1092,  1095,  1096. 
Haydon  v.  Atlanta  Cotton  Factory,  31, 


Haydon  v.  Official,   etc.,    Co.,   921,   956, 

958. 
Hayes  v.  Brotzman,  1426,  1431. 
Hayes  v.  Franklin,  etc.,  Co.,  182. 
Hayes  v.  Hayes,  404,  410. 
Hayes  v.  Holly  Springs,  140,  141. 
Hayes  v.  Shoemaker,  346. 
Hayne  v.  Beauchamp,  219. 
Haynes  v.  Brown,  87,  96,  239,  281,  1122. 
Haynes  v.  Hunnewell.  1105. 
Haynes  v.  Palmer,  342. 
Hays  v.  Commonwealth,  818,  819. 
Hays,  v.  Dowes,  136. 
Hays  v.  Gal  ion  Gas  L.  &  C.  Co.,  1185, 

1186,  1263,  1301,  1313. 
Hays  v.  Houston  &  G.  N.  R  R.  Co.,  1006, 

1010. 
Hays  v.  Lycoming,  252. 
Hays  v.  Ottawa,  etc.,  R.  R  Co.,  235,  639, 

1489,  1507. 
Hays  v.  Pennsylvania  Co.,  1520,  1521. 
Hays  v.  Pittsburgh,  etc.,  R.  R.  Co.,  95, 

*  166,  167. 
Hayter  v.  Tucker,  665. 
Hayward  v.  Lincoln  Lumber  Co.,  1156. 
Hay  ward  v.  National  Bank.  606. 
Hayward  v.  Pilgrim  Soc,  1093,  1113. 
Haywood  v.  Lincoln  Lumber   Co.,  939, 

1156. 
Haywood  &  Pittsborough  Plank-road  Co. 

v.  Bryan,  822. 
Haywood,  etc.,  R  R  Co.  v.  Bryan,  33, 

129,  218. 
Hayworth  v.  Junction  R  R  Co.,  640. 


XC1V 


TABLE    "1     CA.S     - 


[Tlie  references  are  to  the  foot-paying.] 


Hazard  v.  Dillon.  658, 

Hazard  v.  Durant,  1073,  1132.  1148,  1150. 

Hazard  v.  Nat  Ex.  Bank.  6 

Hazard  v.  Vermont,    etc..    R.    R.    1194, 

1268,  1270.  1501. 
Hazeltine  v.  Belfast,  etc..  R  R  Co. 

374,  72:5. 
Hazelton,  etc.,  Co.  v.  HazeltoD.  etc..  Co., 

660,  9-1 9.  1014. 
Hazen  v.  Boston  &  It  R  R.  V 
Hazen  v.  Union  Bank  of  Tenn< — e,  628 
Hazleburst  v.  Savannah,  eta,  EL  EL,  388, 

422 
Hazleton  Coal   <  lo.  v.  Megan  1 
Heacock  v.  Sherman,  277. 
Bead  v.  Amoskeag  Mfg.  Co.,  1949, 
Head  v.  Providence  1j  .'.  1106. 

Head  v.  Tattersell,  918 
Head's  Case.  852. 
Beald  v.  Owen,  310,  IK 
1  [(  alt  y  v.  Lovei  idge,  451. 
Health  Com'ra  v.  Mauran, 
Heard  v.  I  Sty  of  Brooklyn,  89  i 
Heard  v,  Eldridge,  789,  Tin. 
II.  ard  v.  Talbot,  B77. 

it  v.  State  Bank,  I ' ' 
Heaston  v.  Cincinnati,  eta,   EL   EL  Co., 

118  181,  889,  1168,  1167. 
Heath  v.  Barmore,  889. 
Heath  \.  Erie  R'y  Ca,  (186,  llll,  1145, 

1151. 
Heath  v.  Griswold,  ' 

1  [eath  v.  Mah y, 

Heath  v.  Missouri,  etc.,  R'y,  1 1K 
Heath  v.  Silverthorn  Lead  Mining,  etc.. 

Co.,  795,  B27,  888,  I  i 
Heathcote  v.  North  Staffordshire    R'y 

Ca,  1508. 
Hebb's  Case,  96,  97. 
Heck  v.  Bulkley,784 
11,  cks  v.  Burns,  281, 
Hedge  &  Home's  Appeal,  659,  G67. 
Hedges  v,  Harpur,  410. 
Heebner  v.  (have.  27 1. 
Heffner  v.  Brown  11.  1105. 
Heffron  v.  Detroit  City  Railway,  1570. 
Heggie  v.  Building,  etc.,  Assoc,  214,  420. 

1161. 
Height  v.  Railroad.  1282. 
Heiins,  etc,  Co.  v.  Flannery,  970. 


1 1 1  i i : i _r  v.  Manufacturing  Co.,  311,  ST 

Heinman  v.  Hardie,  469 

Heinsheimer  v.    Dayton,    etc.,    R    R, 

1407. 
Heintzelman    v.    Druids',  etc.,    Assoc, 

1021. 
Hele,  Appeal  of,  7:^9. 
Helm  v.  Swiggett,  148,  584,  547,  698,694 
Heman  v.  Britton,  431,  ! 
Hemenway  v.  Hemenway,  I  I  740, 

7  It. 
Hemmii  ddick,  :?27. 1  & 

Hemphill's  App<  al,  184 
Hendee  v.  Pinto  rton,  l ■    -        - 
Henderann  v.  B  ink,  969. 

lerson  w.  Bank  of  Austral 

818 

I        R'y  Ca,  890, 

1531,  1545,  1532,  1' 
H(  oderson  r.  Ja<  ka  >n  <  k>onty,  155. 
Henderson  v.  Lacoo,  102,  191,  198, 

IV 

11.  nderson  v.  Midland  R'y  <  io.  lOltt 

I  rson  v.  ( )gden  <  iiy  R'y,  1551, 
•    ■     ilroad  Ca,  198,  - 
d  r.  R03  .1  I  •!  itbh  Bank, 

52 1. 

in  v.  S  ind<  rson,  84  L 
Henderson  v.  Walker,  1891,  141 
1  lenders  »n  v.  Wheatnn, 
Hendere  a,  \  \  \  \r\ 

lerson    Brid  v.    IB  nderson 

City.  19 
Henderson  Bridj 

1547 
Henderson,  eta,  Assoc,  v.  Johnson,  178 
Henderson   &    Nashville   R    EL   Ca   v. 

1  •  aveJl,  118,  1- 

dricks  v.  Ja  I  '•>..  i  n. 

I  [endi  i  ikaon  r.  I  '•••  ow, 
Hendrix  v.  Academy  of  Music,  ls7.  222. 
Hendaon  v.  Spaulding,  227. 
Heness 

Henippling  v.  Burr,  4*0.  603. 
Henklev.  Salem  Mi_-.  Ca,  880,881. 
Henkle  v.  Town  of  Keota,  719. 
Hennebi  rger  v.  Mather,  455. 
Hennessy  v.  Griggs,  966, 
Hennessey's  Es'rsCase,  885,  :347. 
Henning  v.  Planters'  Ins.  Co.,  1174. 


TABLE    OF    CASKS. 


XCV 


[The  references  are 

Henuing  v.  U.  S.  Ins.  Co..  1094. 
Henning  v.  Western  U.  T.  Co.,  1181. 
Henriques   v.    Dutch   West    India    Co., 

879,  1166,  1173. 
Henry  v.    Dubuque   &  Pac.  R  R  Co., 

1531. 
Henry  v.  Great  Northern  R'y  Co.,  360, 

361,  36G.  374. 
Henry  v.  Jackson,  663,  1024 
Henry  v.  Jeanes,  1499. 
Henry  v.  Jennes,  1161. 
Henry  v.  Rutland|  etc.,  R  R  Co..  925. 
Henry  v.  Travelers'    Ins.    Co..  598,   682, 

9sa 

Henry  v.  Vermilion   <Xr    Ashland    R   R. 

Co..  32,  160,  188,  218  255,  261,  265. 
Henry,  etc.,  Co.  v.  Northern  Bank,  1111. 
Henry,  etc..  Re.  1256. 
Hepburn  v.  Exchange,  etc.,  Co.,  393. 
Hepburn  v.  School  Directors,  763,  766. 
Hepburn  v.  Skerving,  \"~. 
Hepworth  v.  Onion  Ferry  Co.,  893. 
Herand  v.  Leaf,  976,  1040. 
Held  et  al.  v.  Thompson,  466. 
Herdegen  v.  Cotzhausen,  699. 
Hereford  &  Co..  In  re.  910. 
Heritage  v.  Paine.  563. 
Heritage's  Case.  347. 
Herkimer  v.  McGregor,  412. 
Herkimer  Co.  Bank  v.  Furman,  279. 
Herkimer,  etc..  Co.  v.  Small,  174,  17.1. 
Heme  Bay  Water-works  Co.,  Re,  1254. 
Heroy  v.  Kerr,  991. 
Herries  v.  Piatt.  298. 
Herries  v.  Wesley,  89. 
Herring  v.  N.  Y..  etc..  R  R,  1C35,  1351, 

1362 
Henlich  v.  McDonald,  784. 
Herrman  v.  Maxwell,  5S8. 
Herron  v.  Vance.  861. 
Herschlield  v.  Clark.  684. 
Hersey  v.  Veazie.  1137,  1148. 
Hersh  v.  Northern,  etc.,  P.  R..  1519. 
Hershfield  v.  Rocky,  etc.,  Tel.  Co..  1596. 
Hershire  v.  First  Nat'l  Bank.  754. 
Hervey  v.  111.  Mid.  R'y.  965.   1130.   1204. 

1225.    1227.    1265.    1295.    1297,  1301. 

1401,  1410,  1417.  1453.  1490. 
Hervey  v.  R,  I.  Locomotive  Works,  1372. 

1376. 


to  the  font-paging.'] 

Heryford  v.  Davis.  1370. 

Heseltme  v.  Siggers.  464. 

Hess  v.  Ran.  562.  575. 

Hess  v.  Werts,  277. 

Hester  v.  Memphis  &  Charleston  R  R, 

Co.,  631.  63^ 
Hestonville,    etc.,  R.   R.   Co.  v.  Shields, 

607. 
Heuer  v.  Carmichael.  275.  310. 
Heusser  v.  Continental,   etc.,    Ins.  Co., 

714. 
Hewett  v.  Price,  470. 
Hewitt  v.  Pioneer-Press  Co..  1008, 
Hewitt  v.  Swift.  977,  1008.  1033. 
Heymann  v.  European  Central  R'y  Co., 

197.  200,  205,  207.  208. 
Hiatt  v.  Griswold,  330,  587. 
Hibbert  v.  Mackinnon,  461. 
Hihhlewliite  v.  McMorine.  464.  470,  517. 
Hibernia,  etc.,  Assoc,  v.  McGrath,  1033. 
Hibernia  Ins.  Co.  v.  New  Orleans,  etc., 

Co.,  963. 
Hibernia  Ins.  Co.  v.  St.  Louis,  etc.,  Co., 

963. 
Hibernia  Nat.  Bank  v.  Lacombe,  1173. 
Hibernia  Turnpike  Co.    v.    Henderson, 

22!. 
Hicheus  v.  Congreve.  910,  914. 
Hickling  v.  Wilson.  56,  230,  255. 
Hickory  v.  Ellery,  133. 
Hickory  Farm  Oil  Co.  v.  Buffalo,  N.  Y. 

&  P.  R.  Co..  992,  993. 
Hide  v.  Holmes.  677. 
Higgins  v.  Crouse,  493. 
Higgins  v.  Hopkins.  1036. 
Higgins,  In  re,  1436. 
Higgs  v.  Assam  Tea  Co.,  698.  700. 
Higgs  v.  Northern,  etc.,  Co.,  1256. 
Higg's  Case.  359. 
High  v.  Berret,  792. 
Highland  Turnpike  Co.  v.  McKean,  113, 

220. 
Hightower  v.  Mustian.  255.  990. 
Hightower  v.  Thornton,  13,  174.244.248, 

255,  889 
Hildyard  v.  South  Sea  Co.,  506. 
Hiles  \.  Case.  1398. 
Hill   v.    Atoka,   etc..  Co.,  213,  533,  548, 

709,  715. 
Hill  v.  Beach,  291,  319. 


XCV1 


TABLE    OF    CASES. 


[The  references  are 

Hill  v.  Beebe,  602. 

Hill  v.  Burlington,  etc.,  R  R,  1534. 

Hill  v.  Commissioners  of  Forsyth  Co., 

136. 
Hill  v.  Finigan,  599. 
Hill  v.  Frazier,  734,  735.  936. 
Hill  v.  Glasgow  R  R,  634,  1135. 
Hill  v.  Great  Western  R  Co.,  679,  634. 
Hill  v.  Jewett,  397. 
Hill  v.  Lane,  202,  492. 
Hill  v.  Manchester,  etc.,  Co.,  084,  1083, 

109*.  1100.  1122. 
Hill  v.  Manchester  Water-works,  1106. 
Hill  v.  Memphis,  153. 
Hill  v.  Merchants'  Ins.  Co..  100,  353. 
Hill  v.  Newichawanick  Co.,  588,710.711. 

714. 
Hill  v.  New  Orleans,  O.   &  G.  W.  R  R 

Co..  1010. 
Hill  v.  Nishit.  168,  424,  920,  1491. 
Hill  v.  PI  til  p.  682. 

Hill  v.  Pine  River  Bank,  429,  525,  689, 
698,  779. 
i  Hill  v.  Reed,  163,  988 
Hill  v.  Rockingham  Bank,  411. 
Hill  v.  Silver.  214. 
Hill  v.  Smith,  453. 
Hill  v.  Southvvick,  459. 
Hill  v.  Spencer,  27::. 
Hill  v.  Western    Vermont    R    R    Co., 

1525. 
Hill  v.  Wilson,  483. 
Hill's  Case,  338,  348,  432,  1185. 
Hill,  etc.,  Co.  v.  Stetler,  324. 
Hill  Manufacturing  Co.  v.  Boston  &  B. 

R  R  Co.,  1533,  158& 
Hiller  v.  Allegheny  Mutual  Ins.  Co..  240. 
Hiller  v.  Burlington,  etc.,  R  R  Co.,  1170. 
] lilies  v.  Parish,  833,  834,  922,  1060. 
Hilliard  v.  Goold,  1093. 
Hillier  v.  Allegheny  Mutual  Ins.  Co.,  300. 
Hills  v.  Bannister.  1106. 
Hills  v.  Exchange  Bank,  764, 
Hills  v.  Parker,  1436. 
Hills  v.  Rodgers,  104. 
Hillyer  v.  Overman,  etc.,  Co.,  1111. 
Hilton  v.  Eckersley,  651. 
Hinchman  v.  Lincoln,  465. 
Hinchman  v.  Taterson   II.    R    R    Co., 
1560. 


to  the  foot-paging.] 

Hinckley  v.  Hildersleeve.  1503. 
Hinckley  v.  Oilman,    etc.,   R  R,  1350, 

1400. 
Hinckley  v.  Pfister.   52,    528,   598.   709, 

828,859,  1137,  1196. 
Hinckley  v.    Merchants'     Nat'l     Bank. 

1283. 
Hinckley  v.  N.  Y.  C.  &  H.  R  R,  1537. 
Hinckley  v.  Railroad,  1460. 
Hinds  v.  Canandaigua,  etc.,  R  R  Co.. 

38a 

11  inkle  v.  Camden,  etc.,  Co.,  1390. 

Hinkley  v.  Blether.  07 1. 

Bipple  v.  Fire,  etc..  Co.,  250,  200.  290. 

Birschel,  Ex  parte,  1040, 

Birschl  v.  J.  P.,  etc.,  Co.,  11*1. 

Bireh  v.Jon.  ~.  1027,  11  3& 

Hirsh  v.  Norton,  3 H>. 

Hiss  v.  Baltimore,  etc..  P.  R*y  Co..  1501. 

Bitchcock  v.  Galveston  W.  Co.,  154,614, 

71-1. 
Bitchcock  v.  McElrath,  786, 
Hitchcock  v.  U.  s.  Bank,  B99. 
Bitchcock  et  al  v.  Barrett  et  aL,  84% 

1158. 
Bitching  v.  Kilkenny  R'y  Co.,  104a 
Hit",  etc.,  <'<•..  Appeal  of.  37. 
Bixon  v.  Pixley,  564 
Boadley  v.  County  <'<>m'rs.  070. 
Hoadley  v.  County,  etc,  "f  Essex,  2. 
I  i   ag  v.  Lamout.  285,  1094,  1095,  1111. 

land  v.  Bell,  93 
Hoagland  v.  Cin.  &  V.  W.  R  P.  Co.,224, 
Hoagland  v.  Hannibal  &  St.  J.  R  R.. 

l  :.:;.->. 
Hoard  v.  Chesapeake,  etc..  R'y,  963, 1480. 
Hoard  v.  Wilcox.  388,  385. 
Hoar  .  837,  118ft 

Hobart  v.  Gould,  300. 
Hobart  v.  Johnson.  336. 
Hobart  v.  Milwaukee,   etc.,    R   R    Co., 

1561. 
Hobart  v.  Supervisors,  147. 
Hobbs  v.  McLean,  133a 
Hobbs  v.  Wayet,  745. 
Hobbs  v.  Western  Nat'l  Bank,  442. 
Hoboken  Building,  etc.,  Assoc,  v.  Martin, 

863,  1019. 
Hoby  &  Co.,  Lim.,  v.  Birch,  241. 
Hockett  v.  State,  1596. 


TABLE    OF    CASES. 


XCV11 


[The  references  are 

Hodder  v.  Kentucky,  etc.,  R'y,  1203, 1290, 

1293,  1295,  13S3,  1384. 
Hodges  v.  New   Eng.    Screw   Co.,   427, 

1029. 
Hodges  v.  Silver  Hill  Min.  Co.,  251,  256, 

269. 
Hodges  v.  Paquett,  927. 
Hodges  v.  Planters'  Bank,  687,  697,  700. 
Hodges  v.  Eutland,  etc.,  R.  R.  Co.,  925, 

1075. 
Hodge's  Appeal,  1199. 
Hodges  Distillery  Co.,  In  re,  889. 
Hodges,  etc.,  Co.,  In  re,  892. 
Hodges'  Ex'r  v.  First  Nat'l  Bank.  1075. 
Hodgkinson  v.  Kelly,  570,  579. 
Hodgkinson  v.  National  Co.,  215,  236. 
Hodgman  v.  St.  Paul,  etc.,  R,  R.  Co.,  152, 
Hodgson  v.  Cheever,  292. 
Hodgson  v.  Duluth,  etc.,  R.  R,  795, 1148. 
Hodgson  v.  Earl  Powis,  1538. 
Hodsdon  v.  Copeland,  891,  947. 
Hodson  v.  Tea  Co.,  1254. 
Hoey  v.  Coleman,  667. 
Hoey  v.  Henderson,  634. 
Hoff  v.  Jasper  County,  143. 
Hoffman  v.  Bank?,  1005. 
Hoffman  v.  Livingston,  567. 
Hoffman  Steam  Coal  Co.  v.  Cumberland 

Coal  Co.,  902,  918,  1127. 
Hoge  v.  Railway  Co.,  771. 
Hogg's  Appeal,  258. 
Holbert  v.  St.  Louis,.  K  C.  &  N  R.  Co., 

1000,  1528. 
Holbrook  v.  Basset.  1185. 
Holbrook   v.   Fauquier,   etc.,   Turnpike 

Co.,  26,  398. 
Holbrook  v.  New  Jersey  Zinc   Co.,   24, 

438,  498,  502,  503,  519,  547. 
Holbrook  v.  St,  Paul  Fire  &  M.  Ins.  Co., 

308. 
Holcomb  v.  Managers,  etc.,  Bridge  Co., 

1065. 
Holden  v.  Hoyt,  1069. 
Holden  v.  Metropolitan,  etc.,  Bank,  428, 

784,  1083. 
Holden  v.  N.  Y.  &  Erie  Bank,  1115. 
Holden  v.  Upton,  1084. 
Holder  v.  Lafayette,  etc.,  R'y  Co.,  923. 
Hole's  Case,  1037. 
Holgate  v.  Oregon  P.  R'y,  1177. 
G 


to  the  foot-paging.] 

Holladay  v.  Elliott,  104. 

Holland  v.  Cheshire  R'y,  367,  1474. 

Holland  v.  Dickson,  680. 

Holland  v.  Heyman,  299,  936. 

Holland  v.  Lewiston,  etc.,  Bank.  927. 

Hollenbeck  v.  Donnell,  1409. 

Holliday  v.  Elliott,  671. 

Hollingshead  v.  Woodward,  213,  251,  303,. 

707. 
Hollingsworth  v.  City  of  Detroit,  1236. 
Hollins  v.  St.  Paul,  etc.,  R.  R,  52,  1138,. 

1465. 
Hollis  v.  Allen,  741. 

Hollis  v.  Drew  Theological  Sem.,  3,  1000. 
Hollister  v.  Hollister  Bank,  300. 
Hollister  v.  Stewart,    1235,    1285,    1293, 

1303,  1395,  1464. 
Hollister  Bank,  Matter  of,  284. 
Hollman  v.  Williamsport,  etc.,  Co.,  98. 
Holloday  v.  Patterson,  906. 
Hollwey's  Case,  337. 
Holly  Mfg.  Co.  v.  New  Chester,  etc.,  Co.,. 

70,  1120,  1246,  1392. 
Holly  Springs,  Bank  of,  v.  Pinson,  687, 

688,  689,  698. 
Holmau  v.  Norfolk  Bank,  1113. 
Holman  v.  State,  48,  866. 
Holmes  v.  Gilliland,  313. 
Holmes  v.  Higgins,  1038. 
Holmes  v.  Holmes,  etc.,  Co.,  959, 1014. 
Holmes  v.  Mead,  652,  653,  665. 
Holmes  v.  Moffat,  490. 
Holmes  v.  New   Castle,   etc.,    Co.,    730, 

1127. 
Holmes  v.  New-Castle-upon-Tyne  Abat- 
toir Co.,  59.  393. 
Holmes  v.  Old  Colony  R  R,  Co.,  967. 
Holmes  v.  Sherwood,  255,  257,  259,  260, 

261,  269. 
Holmes  v.  Turner's,  etc.,  Co.,  1079. 
Holmes'  Case,  394. 
Holmes,  Ex  parte,  421,  826,  827,  830,  839, 

1164 
Holmes,    Booth     &    Hay  dens    v.    The 

Holmes,  etc.,  Co.,  1013. 
Holmes,  etc.,  v.  Willard,  976,  1244. 
Holmes,  etc.,  Co.  v.  Holmes,  etc.,  Co., 

426. 
Holmes,  etc.,  Co.  v.  Morse,  459. 
Holroyd  v.  Marshall,  127a 


XCV1U 


TAULE    OF    CAS 


[The  references  are  to  the  foot-paging.] 


Holt  v.  Bennett  941. 

Holt  v.  Jex, 

Holt  v.  W  infield,  1104 

Holt's  Case,  190.  337. 

Hoi  ton  v.  Bangor.  750L 

Holton  v.  New  Castle,  etc.,  R'y.  114E 

Holyoke  v.  McMmtry.  B 9 

Holyoke  Bank   v.    Burnham,    329,   353, 

357. 
Holyoke  Bank  v.  Goodman  Paper  Mf& 

Co..  . 
Holyoki  Lyman,  1943. 

Home  Assoc.  Matter  of,  1368,  1412,11" 
Home  Ins.  Co.  v.  Board,  eta,  701. 
Home  Ins  Buckley; 

Home  Ina  '    •.  v.  « 'ity  '  ouncil,  1**43. 
Home  1  v.  Daw 

Home  Ins.  Co.  v.  N.w    York.    761,    " 

195a 

Home  Ins.  <  Swigert,  776, 

Home  Nat  Bank  v.  Waterman's  1 

117. 
Home  of   the  Friendless  v.  Rouse,  771, 

1942. 
Home  Stock  Ins.  Co.  v.  Sherman.    219. 

.    .        -      J4. 
Homer>ha,n  v.  Wolverhampton  Wat-  r- 

works,  1<»96. 
Honold  v.  Mey 
Bood  v.  McNanghtoo,  345,  H 

B 1  v.  N  kftN.  H.B.  R.  1" 

Hooker  v.  Eagle  Bank.  l'»77. 
Hooker  v.  Utiea  ft  II  L  R  Co..  890. 
Hooker  v.  Vandewater,  '546. 
Hoole  v.  Great  Western  R'y   ( 

727.  788,  1142.  1144. 
Hooper  v.  Rossiter,  741. 
Hooper  v.  Wells,  Fargo  &  Co..  1"~ 
Hoopes  v.  Auburn,  etc..  Co.,  1 . 
Hoosac,  et  ..  Donat,  1131. 

Hoover  v.  Montclair,  etc..  R'y.  14-30. 
Hopcroft  v.  Parker.  103a 
Hope  v.  International     Financial    Soc, 

414. 
Hope  v.  Lawrence.  564,  791. 
Hope  v.  Salt  Co..  980, 
Hope  Ins.  Co.  v.  Beck  man.  635.  640. 
Hope  Ins.  Co.  v.  Koeller.  635,  640. 
Hope  Ins.  Co.  v.  Perkins.  I 
Hopkins  v.  Connel,  1398,  1456. 


Hopkins  v.  Gallatin,  etc..  989.  1099. 

Hopkins  v.  Mehaffy,  11 

Hopkins  v.  Roseelare    Lead    Co.,    1050. 

1051. 
Hopkins  v.  St  Paul.  etc..  R  R,  1480. 
Hopkins  v.  Win 
Hopkins  v.  Worcester,  etc..  Canal,  1204, 

1410. 
Hopkins'  Appeal.  942. 
Hopkic's  Trusts.  In  re.  741.  743. 
]{■  pkinson  v.  Exeter,  1 
Hopkinson  v.  Marquis  >>f  Exeter,  661. 
Hopper  v.  1  .1 103. 

Hopi-i  v.  -  1. 

Hoppin  v.  Boffoj      - 
Hopeon  v.  / 

Borbur  Inre.fi 

Horn  v.  Chi    i 
Horn  v.  Horn,  I 

Horn,  et  Ryan,  1088,  1136. 

Horn  Bilver  Mining  Co.  v.  New  fork, 

1 
Horna.lay  v.  Ind  ft    111.  Central    R  R.. 

1 
Home  v.  B.  M.  B.  li.  Oa,  1548. 

11  one  v.  ( . 

Home  ft  Holland,  1 

lb. me.  In  re.  1854 

Homeck's  Exec  t.  American  Bible  Soc., 
1019. 

Horner  v.  Cart 

Horaor  v.  Henning,  1 1  - 

Horsley  v.  Bell. 

ton  v.  Baptist  Choi 

Hort<>n  v.  Morg  "  *0. 

Horton  v.  Thompson,  136,  158. 

Horton  v.  W  -    I  B5L 

Hort's  Case.  I58fi 

Hosack  v.    College  of  Physicia 
1110. 

Hosack  v.  Sogers,  1170. 

Hospes  v.    Northwestern,   etc.,   Co., 
217. 

Hostrup  v.  Madison  City.  1  I 

Hotchin  v.  Kent.  11 

Hotehkks  v.  Brainerd.  etc.,  Co.. 

Hotchkiss  v.  National  Bank.  1224. 

Hotel  Co.  v.  Wade.  937.  1321.  1323. 
1327. 

Hotham  v.  Sutton.  23,  407. 


etc.. 


ta:  li  ,;z,5. 


~T\t  referemce*  are  to  tike  foot-paging.] 

Houldsworth  v.  City  of  Glasgow  Bank, 

205,  206,  353. 
Houldsworth  v.  Evans.   180,  81-*,   1138, 

113a 

Housatonic  Bark  v.  Martin,  1114 
Hoase  v.  Cooper.  1 
Household  :•.  v.  Grant,  96L 

Houston  v.  Jefferson  College.  640,  858. 
Houston,  et      B     v.  Bremond.  337     -  i 
Houston,  etc.  R  R  v.  Bust,  15191 
Houston,  etc..  R  R  v.  Stanley,  963. 
Houston  ft  7  VanAlstyne. 

SOL 
Hovelman  v.  K 

1553,  1558,  156L  1564,  1565. 
Hovey  v.  MagilL  1104. 
Hovey  v.  Ten  Broeck.  2  i 
How  v.  Starkweather,  38 
Howard  v.  Bank  of  Eng..  429. 
Howard  v.  Glen        1,2  ■.261. 

Howard  v.  Kay.  409. 
Howard  v.  Kentucky,  etcu  Ins.  Co    255 
Howard  v.  La  Crosse.  etc  R  R,  141 L 
Howard  v.  Milwaukee,  etc  1 394. 

Howard  v.  Rai.  ,  1393. 

Howard's  Case,  I 
Howard  Co.  v.  Booneville,  156. 
Howard  Ca  v.  P:Idock  14L 
Bow  beach,  el  v.  Teazue.  163.  226. 

Howbr;  -itrin,  1030. 

How  aey.  1087,  1028,  1150,  1159. 

Howe  v.  Bemis,  603. 

Howe  v.  Dead,  1154 

Howe  v.  Freeman.  1268,  138 

Howe  v.  Keiler,  1099. 

Howi       SI  \  608,  610. 

Howe  v.  Van  Schai 

H;  f,  968. 

How  110S 

Ho*  -  .938. 

Howe  Machine  (  -  lliOS. 

ell  v.  Cassopubs 
Howell  v.  Chicago  &  Northwestern  I 

~    :  7. 7:> 

Howell  v.  Harv  -37L 

ril  v.  Manglesdorf,  29L 
ell  v.  Roberts,  5 

Howell  v.  V.    -  ^    133^ 

1.-57. 


Hower  v.  Weiss  \,  598,  599. 

Howland  v.  Edwards,  160. 
Howland  v.  M 

Howie::       :  >30L 

;  Hoylake  By  Co_  In  re,  343,  G  ! 
Hoyle  v.  Plarteburg.  ete,  R  RCa. 

1371,  1373.  1374 
Hoyle  v.  Baflroad  Co,  902. 

Amer.  Ex.  Bank,  681. 
Hoyt  v.  Bridgewafcer,  eta,  Cou  849,  1093. 
Hoyt  v.  Bunker,  280. 
Hoyt  t.  Chicago,  ete,  E    I        "16. 
Hoyt  v.  Latham,  1128,  IS 
Hoyt  v.  Malone,  1154. 
He  Sfa  eldon,  1067, 10TL 

Hoyt  v.  Thompson,   1023,   1065,    1071, 

1099. 1100,  1440. 
Hub  Publishing  Co.  v.  Richardson.  1035. 
Hubbard  Jiperdown  U^K  1063, 

1158. 
Hubbard  v.  ChappeL  880. 
Hubbard  t.  Johnson  Come : 
Hubbard  -  York  <£  H  R  R  R 

187,  IS       1831. 
Hubbard  ^re,  196,  203,  205. 

~ .    ssf .  : 

Hubbell  v.  Blandy.  573.  79L 
Hubbell  t.  Drexei  I         "     90,  591. 
HubbeU  v.  Meigs.  S3.  4v  793,1183, 

Hubbell  v.  Syracuse,  etc-  Worl-    1283 

Hubbersry  v.  Manchester.  etc_  B 

691 
Hubbuck  v.  Helms,  1355. 
Huddersfield  Canal  Co.  v.  Buckley,  341, 

Hudson  v.  Carman.  851   B88 

Hudson  v. 

Hudson  v.  Spaulding.  324,  1038. 

H-  "s . n.  f::..   J  :    -   7    -  -  r.  i.i 

Hudson,  etc  Tel  Cc  :ervliet;  etc 

3,  1567. 
Huey  t.  Macon  County,  1240. 
Hugh  v.  McBae,  14 
Hu^  ua 

Hughes  v.  Antietam       _       x,  11L 

16v   174, 181 198,  813,  314  381 

1167. 
:i  ■_'.  —  ■•■        es:er.  e::  .  ?.  v    :"•;-: 
aicago,etr.  J9. 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.] 


Hughes  v.  Com'rs,  154. 
Hughes  v.  India,  etc.,  Co.,  328. 
Hughes  v.  Northern   Pac.  R'y  Co.,  885, 

1182,  1948. 
Hughes  v.  Oregonian  R'y  Co.,  252. 
Hughes  v.  Parker,  798,  837. 
Hughes  v.  Vermont  Copper  Mining  Co., 

528,  721,  783. 
Hughes-Hallett  v.  Indian,  etc.,  Co.,  329. 
Huguenot  Bank  v.  Studwell,  855. 
Huidekoper  v.  Dallas  County,  143. 
Huidekoper  v.  Locomotive  Works,  1 1 12, 

1445. 
Huiskamp  v.  West,  1475. 
Huiskamp  v.  Wise.  604. 
Hulett's  Case.  1216. 
Hull  v.  Burtis,  283. 
Hull  v.  Glover,  1074, 
Hull  man  v.  Honcomp,  837. 
Humber  Iron-works  Co.,  104. 
Humberstone  v.  Chase.  1 1 1. 
Humbert  v.  Trinity  Church,  990. 
Humble  v.  Langston,  354 
Humble  v.  Mitchell,  22,  404. 
Humboldt,  etc.,  Ass'n  v.  Stevens  et  al., 

387,  838. 
Humby's  Case,  852 
Hume  v.  Commercial  Bank,  109. 
Hume  v.  Winyah  &  \Y.  Canal  Co., 
Humeston  v.  Tel.  Co.,  458. 
Hummell  v.  Bank  of  Monroe,  1116. 
Humphrey  v.  Merriam,  482. 
Humphrey  v.  Patrons'  Mercantile,  etc., 

1186. 
Humphrey  v.  People,  1121. 
Humphreys  v.  Allen,  1452. 
Humphreys  v.  Humphreys,  410. 
Humphreys  v.  McKissock,  17,  584,  1050, 

1362. 
Humphreys  v.  Moouey,  309,  313. 
Humphreys  v.  Newport,  etc.,  C5.,  1177. 
Humphreys   v.   New  York,  etc.,  R   R. 

1378. 
Humphreys  v.  Pegues,  771,  1943. 
Humphreys  v.  St.  Louis,  etc.,  R'y,  1378, 

1490,  1494,  1505. 
Hun  v.  Cary,  1032. 
Hun  v.  Van  Dyck,  1153. 
Hundleston  v.  Gouldsbury,  407. 
H'unnewell  v.  Duxbury,  77,  482, 


Hunt,  Appellant,  434. 

Hunt  v.  Bullock.  1363,  1366,   1370,  1373. 

Hunt  v.  Columbian  Ins.  Co.,  1424. 

Hunt  v.  Gunn,  102. 

Hunt  v.  Hamilton,  155. 

Hunt  v.  Hewitt,  682. 

Hunt  v.  Kansas  &  M.  B.  Co.,  221,  202. 

Hunt,  In  re,  468. 

Hunt's  Case,  908. 

Hunter  v.   International  R'y,  eta,  Co., 

1178. 
Hunter  v.  Roberts,  etc.,  Co.,  718,  719. 
1  I  hunt's  Appeal.  751. 
Hunterdon  Bank  v.  Nassau  Bank,  017. 
Hunting  v.  Downer,  483. 
Huntington  v.  Attrill,  73,  74.  271,  298, 

1087,  1121. 
Huntington  v.  Mather,  582. 
Huntington  v.  Palmar,  747.  11 
Huntington  v.  Sav.  Hank,  11. 
Huntington,  etc.,  Coal  Co.  v.   English, 

\  788,  79tt 
Hunton    v.    Equitable  Life,   etc.,  Sac., 

L587. 
Hurbert   v.   Mechanics'    Bldg.  &  Loan 

Ass'n, 
Kurd  v.  City  of  Elizabeth,  1427. 
Hurd  v.  Green,  97a 
Hurd  v.  Tallman.  379. 
Hurlbert  v.  Carter,  163. 
Burlbertv.  Root.  163. 
Hurlbut  v.  Marshall.  810,  1141. 
Hurlbutv.  Tayl.  r,  3 
Hurst  v.  Coe,  860. 
Hurt  v.  Hamilton,  147. 
Hurt  v.  Balisbury,  B89. 
II use  v.  Ames,  1082. 
Huss  v.  Ran,  472. 
Hussey  v.  Crickitt.  468. 
Hussey  v.  King,  977,  1006,  1009.  1010. 
Hussey  v.  Manuf.  &  Mech.  Bank,  534, 

686. 
Hussey  Mfg.  Co.  v.  Deering,  1176. 
Hussner  v.  Brooklyn,  etc.,   R    R    Co., 

1562. 
Huston,  Appeal  of,  451. 
Hutchins  v.  Bynum,  1099. 
Hutchins  v.  New  Eng.  Coal  Mining  Co., 

292. 
Hutchins  v.  Smith,  113. 


TABLE    OF    CASES. 


CI 


[The  references  are 

Hutchins  v.  State  Bank,  22. 

Hutchins'  Adm'r  v.  State  Bank,  44"). 

Hutchinson  v.  Chicago,  etc.,  R'y,  1537. 

Hutchinson  v.  Green,  955,  988,  989,  1052. 

Hutchinson  v.  Lawrence,  1025. 

Hutchinson  v.  Surrey,  etc.,  Ass'n,  1044. 

Hutchinson,  etc.,  R.  R.  v.  Fox,  134. 

Huth  v.  Humboldt,  668. 

Hutton  v.  Scarborough,  etc.,  Co.,  362. 

Hutton  v.  Thompson,  1040. 

Hutton  v.  Upfield,  1037. 

Hutton  v.  West.,  etc.,  R'y  Co.,  924 

Hutt's  Case,  684. 

Hutzler  v.  Lord,  354. 

Huylar  v.  Cragin  Cattle  Co.,  673,  677, 

'  680. 
Hyam's  Case,  358. 

Hyatt  v.  Allen,  13,  376,  702,  711,  739,  743. 
Hyatt  v.  Argenti,  604. 
Hyatt  v.  McMahon,  1015. 
Hyatt  v.  Swivel,  467. 
Hybart  v.  Parker,  664. 
Hyde  v.  Holmes,  684. 
Hyde  v.  Sodus  Point  R  R.,  1454. 
Hyde  Park  Gas  Co.  v.  Kerber,  1155. 
Hydes,   etc.,   Co.   v.    Davidson   County, 

1590. 
Hylaud  v.  Central  Iron,  etc.,  Co.,  756. 
Hyman  v.  Coleman,  302. 

r. 

Iasigi  v.  Chicago,  B.  &  Q.  R  R.  Co.,  532. 
Ide  v.  Conn.,  etc.,  R.  R,  1202,  1223,  1230. 
Ide  v.  Passumpsic,  etc.,  R.  R.,  1230. 
Ihmsen's  Appeal,  434. 
Illinois  Central  R.  R.  v.  Chicago,  etc.,  R. 

R.,  1531. 
Illinois  Central  R.  R  v.  Copeland,  1533. 
Illinois  Central  R  R.  v.  Mattoon,  773. 
Illinois  Central  R  R.  v.   People,    1489, 

1513,  1514,  1522. 
Illinois  Co.  v.  Hough,  923. 
Illinois,  etc.,  v.  Barnett,  156. 
Illinois,  etc.,  Canal  v.  Chicago,  etc.,  R. 

R.  Co.,  1529,  1578,  1598. 
Illinois,  etc.,  Co.  v.  Pearson,  1014. 
Illinois  Grand  Trunk  R   R  Co.  v.  Cook, 

234,  633,  1489. 
Illinois  Ins.  Co.  v.  Marseilles  Mfg.  Co.,  19. 


to  the  foot-paging.'] 

Illinois  Mid.  R'y  Co.  v.  Supervisors,  etc., 

235. 
Illinois  River  R.  R.  Co.  v.  Beers,  635. 
Illinois  River  R.  R.  Co.  v.  Zimmer,  112, 

168,  218,  224,  631,  632. 
Imboden  v.  Etowah,  etc.,  Min.  Co.,  881, 

1112. 
Imlay  v.  Union  Branch  R.  R  Co..  1525. 
Imperial   Bank   of    China   v.    Bank   of 

Hindustan,  802. 
Imperial,  etc.,  Assoc,  v.  Newry,  etc.,  R'y, 

1255. 
Imperial,  etc.,  Co.  v.  Coleman,  906,  917, 

948,  1145. 
Imperial,  etc.,  Co.,  Re,  911,  1223. 
Imperial  Gas  Co.  v.  Clarke,  683,  684. 
Imperial  Hotel   Co.  v.    Hampson,   901, 

1053,  1154. 
Imperial  Land  Co.,  In  re,  1256. 
Importers',  etc.,  Exchange,  Matter    of, 

860. 
Importing,  etc.,  Co.  v.  Locke,  878. 
Improvement  Fund  v.  Jacksonville,  etc., 

R.,  1276. 
Ince  Hall  Rolling  Mills  Co.,  Re.  46. 
Inchbald  v.  Western  Coffee  Co.,  565,  567. 
Independence,  etc.,  Co.    v.    Burlington, 

etc.,  R  R.,  1534. 
Independent  Assurance  Co.,  In  re,  277. 
Independent,  etc.,  Aid  v.  Paine,  879. 
Independent  Ins.  Co.,  Re,  861. 
Inderwick  v.  Snell,  1053. 
India  Bagging  Association  v.  Kock,  644. 
India  Mutual  Ins.  Co.  v.  Worcester,  etc., 

R.  R.,  384,  1546. 
Indian   River   Steamboat    Co.   v.    East 

Coast  Transp.  Co.,  1488,  1599. 
Indian,  etc.,  Co.,  In  re,  822,  840. 
Indiana  v.  American  Express  Co.,  778. 
Indiana,  etc.,  Co.,  In  re,  821. 
Indiana,  etc.,  R.  R.  Co.  v.  Attica,  134. 
Indiana,  etc.,  R.  R.  v.  Larrew,  1391. 
Indiana,  State  of,  v.  Woram,  971,  1020. 

1245. 
Indianapolis  Cable   St  R'y  v.  Citizens'. 

St.  R'y,  1556. 
Indianapolis,  City  of,  v.  Vajen,  765. 
Indianapolis,  etc.,  Co.  v.  Jones,  963. 
Indianapolis,  etc.,  Co.  v.  St.  Louis,  etc., 
R  R.  Co.,  1089. 


Cll 


TABLE    OF    CA- 


[TJie  references  are 

Indianapolis,  etc.,  R  R.  v.  Ervin,  1521. 
Indianapolis,   etc.,   R.  R    v.  Hyde. 

1073. 
Indianapolis,  etc,  R  R    v.  Jones,  1490, 

L547. 
Indianapolis,  etc.,  R.  R  v.  Morganstown, 

1100. 
Indianapolis,  etc.,  R  R.  v.  Kay.  1485. 
[ndiaoapolis  F.  &  Min.  Co.  v.  Herkimer, 

2:54.  309. 
Indianapolis  &  St  L.  R.  EL  I  '".  v.  Juut- 

gen.  1522 
IndianolaR  R  v.  Fryer,  968. 
Ind's  Case,  827,  880,  836,  524 
Ingalls  v.  Byers,  L382. 
Ingalls  v.  Coir.  299,  805. 
Inglehart  v.  Thousand,  etc.,  Hotel 

918,  936. 
Inglis  v.  Great  North.  R  L75. 

Ingraham  v.  Taylor.  566 
[ngraham  v.  Terry,  898 
Enhabitante,  etc.,  ^.  N.  5  ETy,  1517. 

Inhabitants,  etc.,  v.  Port  1.'-  ading  l>'.  B, 

1568 
Inhabitants,  etc,  v,  Wedgewood,  1167. 
Inhabitants,  etc.,  of  *  rlouci  Bter  v.  I 

1019. 
Inhabitant-,  etc.,  of  Salem  ▼. String,  1019, 
Inhabitants  of  Middleton  v.  M<  '  Sormick, 

L019. 
Inhabitants  of  Norton  \.  I todg 
Inhabitants  of  Waldoborough  v,  BLnox, 

etc,  B  Ca  el  al..  L498 
Innes  v.  Lansing,  1158,  1159. 
Ennes  v.  Mitchell,  HO. 
Inness  v.  Sayer,  109. 
Inns,  etc.,  Co.,  In  re,  1205. 
Inns  of  Court  Hotel  Co.,  1  - 
Enstone  v.  Frankfort,  etc,  Co.,  118  174, 

176. 
Insurance  Oc  v.  Brum's  Assignee,  1827. 
Insurance  Co.  v.  Francis,  1182. 
Insurance  Co.  v.  Jenkins.  974 
Insurance  Co.  v.  McCain.  1088,  109 
Insurance  Co.  v.  Morse,  1001,  1948 
Insurance  Ca  v.  The  «'C.   D.  Jr.."  117::. 
Inter-Mountain  P.  Co.  v.  Jack,  846. 
International  Bank  v.  Monteath,  '■ 
International,  etc.,  Ass'n  v.  Walker,  148, 
174,  228,  246. 


/..  the  foot  paging.] 

International.  >.   v.     McMorran, 

1117. 
International.  '.    v.    Union,    I 

I 
International,  etc,  I  a,  Be,  v 
International,   etc,  B   B    Ca   v.    Bre- 

inoii.l.  1130. 
International,  etc  R.  B  ( Sa  v.  Moody, 

15! 
International,  etc,  B'y  v.  Ormond,  Mt7. 
Int.  rnational,  etc,  B'y  v.  si  869, 

International,  etc,  B  B  \.  Taylor,  1501. 
International,  etc,  S  1.  Com'rs,  1020. 
Internationa]   T.  tnb  rnational, 

■  .  1018 
I  I  ommiesion  v.  B. 

ft  0.  B  1:..  19 
Int-  to,  B'j  v.  Early,  1564 

Interstate  Ti  L  <  !o  *.  Baltimore  ft  « '.  T. 
:.  1051 
tmenl  I  a  v.  Ohio,  •  t- ..  B  B, 

1 189,  !  I 
Iowa  Barb,  etc .  Wire  Ca  r.  Southern 

Barbed  WireCa,  I 
Iowa,  etc,   t   .    \.   American,  1 

1114. 

Iowa,  1  tc,  B  B  Ca  *.  Perkins,  89 

167,  224 
[owa  I  .wiii  1.  117. 

Ireland  \  ■  Turnpifo 

;i. 
Irish  Pi    '  l       r.  Phillips,  0 
Iron  City  Bank  v.  City  of  Pittsburgh, 

Iron  Mountain  Hank  •>.  Mercantile  Rank, 

;.  nun. 

Iron  Mountain,   etc,   B    B  v.   ,I..liuson, 

189 
Iron  B  B  Ca  \.  Fink,  5 
Iron  B'y  v.  Lawrence,  etc,  <  a,  14,  1514 
Irons  v.  Manufacturers'  Nat  Bank,  296, 

801.  858  990,  1141 
Irrigation  ( !a  of  France,  In  re,  - 
In  ine  v.  Forb  I  r0. 

Irvine  v.  Lumberman's  l'>ai.k.  E 
En  ine  v.  Nastn  ille  B'y,  1585. 
In  ine  v.  Turnpike  Co  .  681. 

Irvine  v.  Union.  ,  tc,  Bank,  1109,  1182 

Irvine  v.  Union  Bank  of  Australia 


TABLE    OF    CASES. 


cm 


[Tfie  references  are 

Irving  v.  Houstoun,  741. 

Irwin  v.  Bailey,  1074. 

Irwin  v.  Oregon  R.  &  Nav.  Co.,  946. 

Irwin  v.  Williar,  467, 469,  472,  474, 475. 

Isaac  v.  Clarke,  588. 

Isham  v.  Bennington     Iron    Co.,    1049, 

1099,  1108. 
Isham  v.  Buckingham,  342,  345,  524. 
Isham  v.  Post,  399. 
Island,  etc.,  Bank  v.  Sachtleben,  963. 
Isle,  etc.,  Co.  v.  Sec'y  of  State,  315,  1005. 
Isle  of  Wight  R'y  Co.  v.  Tahourdin,  799, 

1053. 
Isle  Royale,  etc.,  Corp.  v.  Sec'y  of  State, 

1003. 
Ithaca   Gas-light   Co.   v.   Treman,    933, 

1139. 
Ittinger  v.  Persian,  etc.,  Co.,  1324,  1325. 
Ives  v.  Can  by,  402,  410. 
Ives  v.  Smith,  1049,  1127,  1171, 1172, 1200, 

1512,  1541. 
Ives  v.  Sterling,  113. 
Ives,  In  re,  454,  603. 


Jack  v.  Naher,  187. 

Jackson  v.  Bank  of  Marietta,  1166. 

Jackson  v.  Brown,  1263. 

Jackson  v.  Campbell,  1084. 

Jackson  v.  Cassidy,  662. 

Jackson  v.  Cocker,  102,  463. 

Jackson  v.  Foote,  475. 

Jackson  v.  Hampden,  800,  803. 

Jackson  v.  Hathaway,  1531. 

Jackson  v.  Hayner,  90. 

Jackson  v.  Ludeling,     920,     1153,    1167, 

1325,  1329. 
Jackson  v.  McLean,  902,  1218. 
Jackson  v.  Meek,  298,  351. 
Jackson  v.  Munster  Bank,  799,  1032. 
Jackson  v.  New   York,   etc.,  R.  R.  Co., 

925. 
Jackson  v.  Newark  Plank-road  Co.,  712, 

715. 
Jackson  v.  Plumbe,  1166. 
Jackson  v.  Pratt,  1100. 
Jackson  v.  Rutland,  etc.,  B.  R.  Co.,  1531. 
Jackson  v.  Second  Ave.  R.  R.  Co..  1008. 
Jackson  v.  Sligo  Mfg.  Co..  82,  343,  352. 


to  the  foot  paging.] 

Jackson  v.  Traer.  35,  65,  66,  248. 

Jackson  v.  Turquand,  195,  332. 

Jackson  v.  Twenty-third  St.  R'y  Co.,  412. 

Jackson  v.  Vicksburg,  etc.,  R.  R.,  1198. 

Jackson  v.  Walsh,  638,  810. 

Jackson  v.  York,  etc.,  R.  R.,  1232,  1236. 

Jackson,  In  re,  23. 

Jackson  County  v.  Brush,  150. 

Jackson,  etc.,    Co.    v.    Burlington,    etc., 

R.  R.  Co.,  1135, 1236, 1327,  1346, 1355. 
Jackson,  etc.,  H.  R  R.  Co.  v.  Interstate, 

etc.,  R'y,  1555. 
Jackson,  etc.,  Ins.  Co.,  In  re,  869. 
Jackson  Marine  Ins.  Co.,  Re,  864. 
Jacksouport  v.  Watson,  133,  139. 
Jacksonville,  etc.,  R.  R.  Co.  v.  Virden, 

146. 
Jacobs  v.  Miller,  450,  845. 
Jacobson  v.  Allen,  278. 
Jacobus   v.    Monongahela,    etc.,    Bank, 

611. 
Jacoby  v.  Stephenson,  etc.,  Co.,  1465. 
Jacques  v.  Chambers,  403. 
Jagger  Iron   Co.    v.    Walker,    298,  301, 

351. 
Jamaica,  Bank  of,  v.  Jefferson,  1166. 
James  v.  Cincinnati,  etc.,  R  R  Co.,  98, 

240. 
James  v.  Cowing,  1467. 
James  v.  Eve,  46. 
James  v.  May,  328,  355. 
James  v.  May  rant,  654. 
James  v.  Milwaukee,  138. 
James  v.  Railroad    Co.,    932,   936,  1219, 

1221,  1388,  1469. 
James  v.  St.  Louis,  etc.,  R'y,  1003. 
James  v.  Woodruff,  889,  892.      • 
Jameson  v.  Coldwell,  905. 
Jameson  v.  People,  887. 
Jamison  v.  Harbert,  344. 
Jausen  v.  Otto,  etc.,  Co.,  1083. 
Jarrett  v.  Kennedy,  206,  210. 
Jarvis  v.  Manhattan  Beach  Co.,  397. 
Jarvis  v.  Rogers,  585,  592,  594,  780. 
Jasper,  County  of,  v.  Ballou,  144,  145. 
Jaudon  v.  National  City  Bank,  435,  437, 

439. 
Jay  v.  St.  Louis,  1531. 
Jay  Bridge  Co.  v.  Woodman,  1023. 
Javcox  v.  Cameron.  571. 


CIV 


TABLE    OF    CASES. 


Jeans  v.  Pittsburgh,  etc.,  R*y,  946. 
Jeans,  Appeal  of,  397,  604 
Jefferson  v.  Burford,  421. 
Jefferson  v.  Hale,  786. 
Jefferson  v.  Hewitt,  198. 
Jefferson  Bank  v.  Skelley,  771. 
Jefferson  Branch  Bank  v.  Skelly,  1942. 
Jeffersonville,  City  of,  v.  Patterson,  1237. 
Jeffersonville,  etc.,  R  R.  v.  Hendricks, 

1490,  1547. 
Jeffersonville  R.  R  Co.  v.  Rogers,  1007, 

1009,  1011. 
Jeffrey  v.  Moran,  1478. 
Jeffreys  v.  Jeffreys,  331,  406. 
Jeffries  v.  Lawrence,  141. 
Jefts  v.  York,  1105. 
Jemison  v.  Citizens',  etc.,  Bank,  969. 
Jenkins  v.  Andover,  139. 
Jenkins  v.  Charleston,  75  L 
Jenkins  v.  Fo%vler,  408. 
Jenkins  v.  Jenkins,  1157. 
Jenkins  v.  Union  Turnpike  <  o.,  320. 
Jennings  v.  Baddeley,  571,  659. 
Jennings  v.  Bank  of  Cat.,  090. 
Jennings  v.  Braughton,  200,  210. 
Jennings  v.  Hammond,  650. 
Jennings  v.  Phil.,  etc.,  R  R,  1423. 
Jennings,  Re.  226. 

Jennison  v.  Citizens'  Sav.  Bank,  475. 
Jermain  v.  Lake  Shore,  etc.,  R   R  Co., 

20,  23,  376,  710,  714,  715. 
Jernian  v.  Benton,  630. 
Jerome  v.  McCarter,   1197,    1272.    1347. 

1350,  1357,  1434,  1450. 
Jersey  City  v.  City  of  Hudson,  1598. 
Jersey  City,  etc.,  H.  R.  R  Co.  v.  Jersey 

City  &  B.  R  R  Co.,  1569. 
Jersey  City  Gas  Co.  v.  Dwight,  49,  866, 

1584. 
Jersey  City  Gas  Light  Co.  v.  Jersey  I  !ity, 

752,  757. 
Jersey  City  Gas  Light  Co.  v.  United  G., 

etc.,  Co.,  769. 
Jervis  v.  Wolferston,  328. 
Jessamine  County  v.  Swigert's  Adm'r, 

144. 
Jessopp  v.  Lutwyche,  47  I. 
Jessopp's  Case,  357. 
Jessup  v.  Bridge,  1368.  1383. 
Jessup  v.  Crruegie,  291,  292,  310,  313,  316. 


[The  references  are  to  the  foot-paging.] 

Jessup  v.  City  Bank,  1075,  1294,  1323. 


Jessup  v.  III.  Cent.  R.  R.,  942, 1129,  1350, 

1492,  1505. 
Jessup  v.  111.,  etc.,  R  R,  424. 
Jesup  v.  Wabash,  etc.,  Ry.  1344,  1481. 
Jewell  v.  Rock  Riser,  etc.,   Co.,  87,  90, 

2:  :s 
Jewett  v.  Bradford,  etc.,  Co.,  533. 
Jewett  v.  Lawrenceburgh  &  I".  M.  R.  R 

Co..  123.  126,  127. 
Jewett  v.  Valley  R"y  Co.,  191,  213,  221, 

Jobling,  Ex  parte,  89. 

John  v.  Cincinnati,  etc.,  R  R  Co.,  134, 

llo. 
John  v.  Farmers',  etc,  Bank,  ^77. 
John  Morley,  etc,  <  'a.  v,  Barras,  887. 

Johns  v.  Johns,  '.'1. 

Johnson  v.  Ala,  etc,  ( '•'..  1088. 
Johu-oii  v.  Albany,   etc.,  R   R  Co.,  26, 

178,  17'.',  289,  2fl. 
Johnson  v.  Armstrong,  1077. 
Johnson  \.  Bridgewater  lion  Mfsr.  Co., 

712.  743. 
Johnson  v.  Brooks,  450,  155. 
Johnson  v.  Bush,  1100. 
Johnson  v.  Commonwealth,  758 
Johnson  v.  Consol.  Silv.  Mill.  Co.,  lis). 
Johnson  v.  County  of  Stark,  1232,  1236, 

1239. 
Johnson  v.  Crawfordsville   R    R.    Co., 

162,  108,  190. 
Johnson  v.  Crow.  628,  1582. 
Johnson  v.  dimming,  594. 
Johnson  v.  Dexter,  601. 
Johnson  v.  Elizabeth,  etc.,  Ass'n,  880. 
Johnson  v.  Fall,  468 
Johnson  v.  Gallagher,  885. 
Johnson  v.  Georgia,  etc.,  R  R.  Co.,  119. 
Johnson  v.  Goslett,  656,  664. 
Johnson  v.  Hanover,  etc.,  Bank,  1166. 
Johnson  v.  Hudson  River  R.  R  Co.,  3, 

629. 
Johnson  v.  Johnson,  407,  741. 
Johnson  v.  Jones,  814. 
Johnson  v.  Kessler,  321. 
Johnson  v.  Kirby,  5,  450,  4S0,  532,   785, 

947. 
Johnson  v.  Laflin,  262,  337,  359,  415,  419, 

420,  431,  448,  518,  525,  699,  729. 


TABLE    OF    CASES. 


CV 


[The  references  are 

Johnson  v.  Lyttle's  Iron   Agency,    178, 

181. 

Johnson  v.  Markle  Paper  Co.,  256. 

Johnson  v.  Mulry,  465,  565. 

Johnson  v.  New  York  &  Erie  R.  R.  Co., 

34. 
Johnson  v.  Pensacola  &  Ga.  R.  R.  Co., 

187,  631,  1518. 
Johnson  v.  Railroad,  1520,  1521,  1599. 
Johnson  v.  Russell,  468. 
Johnson  v.  St.  Louis  Dispatch  Co.,  1008. 
Johnson  v.  Shortridge,  1116. 
Johnson  v.  Somerville  Dyeing  Co.,  266, 

329. 
Johnson  v.  Southwestern  Railroad  Bk., 

357. 
Johnson  v.  Stark,  145. 
Johnson  v.  Sullivan,  81,  216. 
Johnson  v.  Underhill,  353.  354,  518,  547. 
Johnson  v.  Wabash,  etc.,  Co.,  95,  214. 
Johnson,  Ex  parte,  856. 
Johnson.  In  re,  654. 
Johnson  County,  Com'rs  of,  v.  Thayer, 

1308. 
Johnson,  etc.,  Co.   v.   North,   etc.,   Co., 
685. 

Johnston  v.  Chicago,  etc.,  R  R,  1525. 

Johnston  v.  Crawley,  888,  1097,  1098. 

Johnston  v.  Elizabeth,  etc.,  Ass'n,  1112. 

Johnston  v.  Goslett,  225. 

Johnston  v.  Jones,  797,  804,  824,  837,  838, 
851,  1053,1063,  1154. 

Johnston  v.  Renton,  506.  507,  508. 

Johnston  v.  Riddle,  1369. 

Johnston  v.  Talley,  892. 

Johnston  v.  Trask,  466. 

Johnston's  Appeal,  1584. 

Joint-stock  Coal  Co.,  In  re,  861. 

Joint-stock  Discount  Co.  v.  Brown,  104, 
426,  1029,  1033. 

Joint-stock  Discouut  Co.'s  Case,  681,  684. 

Joint-stoek  Discount  Co.,  In  re,  448. 

Jones  v.  Andrews,  679. 

Jones  v.  Arkansas.  M.  &  A.  Co.,  919. 

Jones  v.  Atchison,  etc.,  R.  R.,  436. 

Jones  v.  Bank  of  Leadville,  859. 

Jones  v.  Bank  of  Tennessee,  878. 

Jones  v.  Barlow.  293,  298. 

Jones  v.  Bolles,  494. 

Jones  v.  Boston  Mill  Corp'n,  1170. 


to  the  foot-paging.] 

Jones  v.  Brinley,  23,  783. 

Jones  v.  Canada,  etc.,  R'y,  1466. 

Jones  v.  Cincinnati,  etc.,  Co.,  87S. 

Jones  v.  Davis,  13,  20,  751. 

Jones  v.  Dawson,  654. 

Jones  v.  Fitchburg  Ry,  1228. 

Jones  v.  Guaranty  &IndemityCo.,  1262, 

1271. 
Jones  v.  Habersham,  993,  996. 
Jones  v.  Harrison,  1041. 
Jones  v.  Hurlburt,  147. 
Jones  v.  Jarman,  256,  288,  321. 
Jones  v.  Johnson,  924,  1031. 
Jones  v.  Keen,  1459. 
Jones  v.  Kent,  454,  711. 
Jones  v.  Kokomo,  etc.,  Assoc,  880. 
Jones  v.  Latham,  622. 
Jones  v.  Littledale,  570.  t 

Jones  v.  Marks,  564,  568. 
Jones  v.  Milton,  etc.,  Co.,  109. 
Jones  v.  Milton  &  Rushville  Turnpike, 
805. 

Jones  v.  Morrison,  386,  707,  923,  926. 

Jones  v.  Newhall,  461. 

Jones  v.  Ogle,  742,  743. 

Jones  v.  Peppercorne,  568. 

Jones  v.  Scudder,  450,  844. 

Jones  v.  Seligman,  654,  1318. 

Jones  v.  Sisson,  169. 

Jones  v.  Smith,  1005. 

Jones  v.  Terre  Haute,  etc.,  R.  R  Co.,  16. 
27,  383,  708.  709,  710,  712,  713,  715. 

Jones  v.  Victoria,  etc.,  Co.,  1067. 

Jones  v.  Wiltberger,  299,  305. 

Jones  v.  Woolley,  1103. 

Jones'  Case,  34,  36. 

Jones,  Ex  parte,  177. 

Jones  &  Cleveland  R.  R  Co.  v.  Robbins. 
708. 

Jones,  etc.,  Co.  v.  Commonwealth,  756. 

Jones,  etc.,  Co..  Re,  57. 

Jonesboro,  City  of,  v.  Cairo,  etc.,  R.  R. 
Co.,  131. 

Jordan  v.  Alabama  G.  S.  R.  R.  Co.,  1010. 

Jordan  v.  Hayue,  134. 

Jordan  v.  Wells,  1447. 

Joseph  v.  Davis,  240,  252. 

Josephs  v.  Pebrer,  663. 
Joslyn  v.   Pacific  Mail  Steamship  Co., 
632,  637. 


CVL 


TABLE    OF    CASES. 


[The  references  are 

Joslyn  v.  St  Paul,  etc.,  Co.,  495.  503. 

Jourdan  v.  Long  I.  R.  R.,  1055,  1511. 

Journalists'  Fund,  In  re,  T. 

Joy  v.  Jackson,  etc.,  Co.,  632,  810. 

Joy  v.  St  Louis,  1120,  1509. 

Judah  v.  American,  etc.,  Co.,   110,  1G4, 

813,  797. 
Judson   v.  Rossie  Galena   Co.,  255,  350, 

1170. 
Juker  v.  Commonwealth,  1021. 
Juker  v.  Fisher,  1022. 
Julia,  etc.,  Assoc,  v.  Bell  Tel.  Co.,  1594 
Junction,  etc.,  Co.  v.  Williamsport, 

Co.,  1566. 
Junction  Railroad  v.  Bank  of  Ashland, 

12015,  l'JnT. 
Junction  R  R.  v.  Cleneay,  1201,  1281. 
Junction  R  R  Ca  v.  Reeve, 84,  124,  1068. 
Junkins  v.  Union,  etc.,  District,  1078. 
Justh  v.  Holliday,  478,  177. 

K. 

K.iliii  v.  Walton,  177. 

Kain  v.  Smith,  1484,  1)57. 

Kain  v.  Texas  Pacific  Railroad  Ca,  104a 

Kaiser  v.  Lawrence  S.  Hank,  809. 

Kalamazoo,  etc.,  Co.  v.  McAlister,  1112. 

Kalamazoo,  etc.,  Co.  v.  Sootsma,  1521. 

Kalbfleisch  v.  Kalbfleisch,  L440. 

Kampf  v.  Jones,  105. 

Kanawha,  etc.  t.  '<>.  v.  Kanawha,  eta,  <  Jo., 

S75. 
Kane  v.  Bloodgoo.l.  7 in,  715. 
Kankakee  v.  .Ktna  Life  In-.  ( '"..  I'm. 
Kansas  City,  etc,  R.  R  v.  Richmond  T., 

134. 
Kansas  City  Hotel  v.  Bauer,  863,  864 
Kansas  City  Hotel  »'<>.  v.  Harris,  :S90. 
Kansas  City  Hotel  Co.  v.  Hunt.  233.390. 
Kansas,  City  of,  v.  Hannibal,  etc.,  R  R 

Co.,  1098,  1102. 
Kansas  Con.  Co.  v.  Topeka,  etc.,  R  R, 

:)7. 
Kansas,  etc.,  Co.  v.  Central  Bank,  1088. 
Kansas,  etc.,  R  R.  v.  Daughtry,  1180 
Kansas,  etc.,  R.  R.  v.  Interstate,  eta,  Co., 

1179. 
Kansas,  etc.,  R  R  v.  Topeka,  1172. 
Kansas,  etc.,  R'y  v.  Fitzgerald,  1140. 


to  the  foot-paging.] 

Kansas,  etc,,  R'y  v.  Pay  no.  15s?. 
Kansas,  etc.,  R'y  v.  Smith.  1546. 
Kansas  Pac,  R'y  v.  Mower.  1515. 
Kansas  Pac.  R'y  v.  Searle.  14  17. 
Kansas  Pac.  R'y  t.  Wood,  1391 
Kappner  v.  St.  Lonis,  eta,  R.  EL,  1218. 
Karnes  v.  Rochester,  etc.,  R  R  Co.,  719, 

720,  901.  l: 
Karuth-  <  .!-■.  8a 
Katama,  eta,  Ca  v.  Jernegan,  116. 
Katowa  Land  Co.  r.  Holley,  116,  233. 
Katzenberger  v.  Aberdeen,  ill. 
Kavey  v.  An, axon  Ins.  Co..  1091,  1588. 
Kean    v.  Johnson,   I  8,   966;  1189, 

1496,  1506. 
Ke.ii  ney  v.  Andrews,  1021 
Keasley  v.  Codd,  660. 
K<  ating  v.  .1.  Stove,  -  to,  Co..  610. 
K  i  bland  v.  Menasha,  etc.,  Ca,  1089, 
Keeler  v.  Brooklyn  El  R  R,  L167. 
Is..  Ii  i  \.  Frost,  1064 
Ke  I-  v.  Van  Reuth,  B80. 
K(  ene1    i  17,  848. 

Keeney  v.  Globe  Mill  Ca,  148,  715. 
K..  ].  v.  Mich.,   L   s..  eta,  R.  R,  1342, 

1105. 

Keine  \.  Kent,  1 19. 

Keith  v.  Clark.  194& 
Keith  v.  Globe  In-.  Co..  ni5. 
K«  ith  eta,  <  ■■.  v.  Bingham,  K'97. 
Kelk's  Case,  178,  177.  180 
Keller  v.  Eureka,  eta,  <  !a,  512. 
Keller  v.  Johnson,  128. 

Keller  v.  Me(  anley.  154a 

Keller  v.  Swartz,  451. 

Keller   V.    WeSt,    I* 

Kelley  v.  Mayor  of  Brooklyn.  1106. 
Kellej  v.  Mariposa  Land  a-  Mining  Ca, 

'.i57. 
Kelley  v.  Milan.  181 
Kelley  v.  Miss .  etc..  R.  R  Co.,  932, 1163. 
Kelley  v.  Munson,  570. 
Kelley  v.  Newburyport,  etc.,  R  R.  Co., 

879,  904.  1127. 
Kelley  v.  Owens  et  al..  195. 
Kelley  v.  Receiver.  In  re,   1396. 
Kelley  v.  Trustei  s,  etc.,  L!  67. 

Kelley  v.  Upton,  452. 

Kellinger  v.  Forty-second,  etc.,  R.   R, 
1562 


TABLE    OF    CASES. 


CVll 


iTIie  references  are 

Kellock  v.  Enthoven,  354,  355. 
Kellogg  Bridge   Co.  v.   United  States, 

667. 
Kellogg  v.  Larkin,  643. 
Kellogg  v.  StockwelL.  23,  345,  354,  547. 
Kellogg  v.  Union  Co.,  877. 
Kelly  v.  Calhoun,  1102. 
Kelly  v.  Mariposa,  etc.,  Co.,  1157. 
Kelly  v.  Neshanic,  etc.  Co.,  1415. 
Kelly  v.  People's  Trans.  Co..  991,  993. 
Kelly  v.  Trustees,  etc.,  R.  R,  1266,  1267, 

1293,  1294,  1406. 
Kelly,  In  re,  1277,  1400. 
Kelsey  v.  National  Bank,  1086. 
Kelsey  v.  National  Bank  of  Crawford 

Co.,  1539. 
Kelsey  v.  Northern  Light  Oil  Co.,  189, 

192. 
Kelsey  v.  Pfaudler,  etc.,  Co.,  679,  680. 
Kelsey  v.  Sargent,  924,  926,  1150,  1151. 
Kemp  v.  Westbrook,  598. 
Kempson  v.  Saunders.  102,  103. 
Kendall  v.  Bishop,  1264,  1294. 
Kendall  v.  Kendall,  408. 
Kendig  v.  Dean,  462,  532. 
Kentield  v.  Latham,  574,  575. 
Kenkel  v.  Macgill,  403. 
Kenicott  v.  Supervisors,  131. 
Kennard  v.  Cass  County,  1239. 
Kennebec  &  P.  R.  R.  Co.  v.  Jarvis,  224; 

229,  239. 
Kennebec    &    Portland    R.    R.    Co.   v. 

Waters,  187. 
Kennebec  Co.  v.  Augusta  Ins.,  etc.,  Co., 

997. 
Kennebec,  etc.,  R.  R.  Co.  v.  Kendall,  116, 

173,  176,  323,  1022. 
Kennebec,  etc.,  R.  R.  Co.  v.  Palmer,  112. 
Kennebec,  etc.,  R.   R.  Co.   v.  Portland, 

etc.,  R.  R  Co.,  933,  1267,  1268,  1294, 

1316,  1317,  1380. 
Kennedy  v.  Baltimore    Ins.    Co.,    1094, 

1095. 
Kennedy  v.  Benson,  491. 
Kennedy  v.  California,  etc.,  Bank,  285. 
Kennedy  v.  Chicago,  etc.,  R.  R,  680. 
Kennedy  v.  Gibson,  287,  861,  1183,  1948. 
Kennedy  v.  Indianapolis,    etc.,    R.    R, 

1446,  1456. 
Kennedy  v.  McLellan,  315. 


to  the  foot-paging.} 

Kennedy  v.  Neary,  etc.,  R'y,  609,  755. 
Kennedy  v.  Panama,  N.  Z.  &  A.  R  M. 

Co.,  198. 
Kennedy  v.  Porter,  432. 
Kennedy  v.  Railroad  Co.,  679. 
Kenner  v.  Manuf.  Co.,  1106. 
Kennicott    v.    Supervisors,    etc.,    1227, 

1228. 
Kenosha,  City  of,  v.  Lamson,  132. 
Kenosha,  Rockford  &  Rock  Island  R  R 

Co.  v.  Marsh,  636,  637. 
Kent  v.  Freehold,  etc.,  Co.,  209,  913. 
Kect  v.  Ginter,  785,  789. 
Kent  v.  Jackson,  862,  1027. 
Kent  v.  Lake  Superior,   etc.,   Co.,  1329, 

1452. 
Kent  v.  Miltenberger,  468,  475. 
Kent  v.  New  York,  etc.,  R.  R  Co.,  273. 
Kent  v.  Quicksilver  Mining  Co.,  5,  20,  53, 
361,  362,  363,  399,  1022,   1124,  1125, 
1185,  1190. 
Kent,  Ex  parte,  241. 
Kent's  Adrn'r  v.  Deposit  Bank,  430. 
Kent  Benefit,  etc.,  Soc,  In  re,  994. 
Kent  County,  etc.,   Soc.    v.  Houseman, 

855,  857,  867. 
Kenton   County  Court   v.    Bank    Lick 

Turnp.  Co.,  635,  640. 
Kenton  Furnace   Co.    v.  McAlpine,   58, 

717,  803,  805,  829. 
Kenton  Ins.  Co.  v.  Bowman,  690,  698. 
Kentucky  v.  St.  Paul,  etc.,  R  R.,  1450. 
Kentucky,  Bank  of,  v.  Schuylkill  Bank, 

395.' 
Kentucky,  Commonwealth  of,  v.  Louis- 
ville Bridge  Co.,  872. 
Kentucky  Railroad  Tax  Cases,  1949. 
Kentucky  Seminary  v.  Wallace,  1017. 
Kentucky  Union    R'y   Co.   v.   Bourbon 

Co.,  142. 
Keogh  v.  McManus,  1461. 
Keokuk,  etc.,  R  R    v.  County  Court, 

etc.,  774. 
Keppel's  Adm.  v.  Petersburg  R  R.,  512, 

706,  714,  716. 
Kerchner  v.  Gettys,  451,  457,  849,  853, 

997. 
Kerigan  v.  Southern,  etc.,  R.  R.,  1534. 
Kermode  v.  Macdonald,  408,  410. 
Kern  v.  Day,  427,  618,  853. 


CV1U 


TABLE    OF    CASKS. 


[Tlie  references  are 

Kernaghan  v.  Williams,  971. 

Kernochan,  In  re,  711,  739. 

Kernochen  v.  Murray,  453. 

Kerr  v.  Chicago,  etc.,  Ass'n,  252. 

Kerr  v.  Dougherty,  996. 

Kerr  v.  Little,  1444. 

Kerr  v.  Middlesex  Hospital,  410. 

Kerr.  Matter  of,  1568. 

Kerridge  v.  Hesse,  1035. 

Kerrison  v.  Stewart,  1314 

Kersey,  etc.,  Co.  v.  Oil,  etc.,  R  R.  1062. 

Kessler  v.  Continental,  etc.,  I '" -.  B5a 

Kessler  v.  New  York  Central  R  R,  1583. 

Ketchani  v.  Duncan.  1198,  1234. 

Ketchum  v.  Mobile,  etc..  R  R,  1311. 

Ketchum  v.  Pacific  R  R,  1276. 

Ketch um  v.  St.  Louis,  1276,  12*; 

Key  City,  The,  1547. 

Keyes  v.  Bradley,  482. 

Keylinge's  ( !ase,  441. 

Keyser  r.  Hit/.  335,  836,  354 

Keyser  v.  McKissam,  1059. 

Keystone  Bridge  Co.  v.  Met 'henry.  81. 

Kid  v.  .Mitchell,  :• 

Kid  willy,  etc.,  Co.  v.  Roby,  118.  214 

Kiley  v.  Western  U.  Tel  Co.,  159a 

Kilgore  v.  Bulkley,  1106. 

Kilgore  v.  Smith,  1002 

Killer  v.  Johnson,  188,  199. 

Killingsworth   v.    Portland    Trnst   Co.. 
1097. 

Killmer  v.  Hobart,  L434 

Killmer  v.  N.  Y.  C.  &  II.  R  P.  R,  1518, 
1518. 

Kilner  v.  Baxter,  114,  1035. 

Kil  pa  trick  v.  Penrose,  etc.,  Co.,  927. 

Kil vert's  Trusts,  In  re,  1019. 

Kimball  v.    Atchison,   etc,   R    R,    428, 
1  194  1505. 

Kimball  v.  Billings,  510. 

Kimball  v.  Goodburn,  1413,  1418. 

Kimball  v.  Ives.  1141,  1429. 

Kimball  v.  Lakewood,  135. 

Kimball  v.  Reding.  434 

Kimball  v.  St.  Louis,  etc.,  R'y  Co.,  1171. 

Kimball  v.  Union  Water  Co.,  530. 

Kimber  v.  Barber.  432,  576. 

Kimberly  v.  Arms,  43. 

Kimmel  v.  Geeting,  1136. 

Kimmel  v.  Stoner,  1136. 


to  the  foot-paging.] 

Kimpson  v.  Saunders,  0G3. 

Kincaid  v.  Dwindle,  251,  273,  281,  297, 

864 
Kincaid's  Case.  195,  208. 
Kindberg  v.  Mudgett,  854 
Kinder  v.  Taylor,  663. 
Kinealy  v.   St.    Louis,   etc.,   R   R    Co., 

1558. 
Kingv.  Accumulation,  etc.,  Assurance 

Co.,  277. 
King  v.  Amery,  ' 

King  v.  Aahwell,  1021.  1024 
King  v.  Bank  of  England,  530,  675.  718, 

.i.  780. 
King  v.  Barnes.  432,  529,  829,  951,  116$ 

1  111. 
King  v.  Bedford  Level,  1056,  1058. 
Bang  v.  ( Ihetwynd,  - 
King  v.  Churchwardi  as,  etc.,  783. 
King  v.  ( ity  of  Madison,  '. 
King  v.  Clear,  675,  678. 
King  v.  <  !oppei,  22 
King  \.  Corporation  of  Bedford  Level, 

1057. 
King  v.  Doaue,  488. 
King  v.  Duncan,  801,  303,  350. 
King  v.  Dupine,  609. 
King  v.  Elliott, 
King  v.  K.llett.  710,  743. 
King  v.  Gray,  863. 
King  v.  Bill,  800. 
King  v.  Hughes,  88a 
King  v.  Ilwaco  By.  etc..  Co.,  1015. 
King  v.  Inhabitant-.  I  tc.,  1124 
King  v.  Katherine  Dock  Co.,  161,  254. 
King  v.  London  Assurance  Co.,  580, 675. 
King  v.  Marshall,  161.  1862. 
King  v.  Mayo,  1061. 
King  v.  Merchant.-'  Ex.  Ins.  Co.,  1299. 
King  v.  Merchants'  Exch.  Co.,  1261. 
King  v.  Men-ham  Tailors'  Co.,  677. 
King  v.  Ohio,  etc.,  R'y.  370,  1436. 
King  v.  Paterson,  etc.,  R  R  Co.,  714,  715, 

716,  717. 
King  v.  Proprietors    of    the    Wilts.    & 

Berks.  Canal  Nav.,  67a 
King  v.  Sarria,  8ia 
King  v.  Severn  &  Wye'  R'y,  1522. 
King  v.  Talbot,  434. 
King  v.  Texas,  606. 


TABLE    OF    CASES. 


C1X 


[Tlie  references  are 

King  v.  Theodorick,  802,  806. 

King  v.  Travannion,  682. 

King  v.  Trevenen,  814. 

King  v.  Wilson,  134. 

King  v.  Winstanley,  22. 

King's  Case,  108,  175,  180,  327,  328,  339, 

340,  357. 
Kingman  v.  Rome,  etc.,  R.  R.  Co.,  1142, 

1143. 
Kingman  v.  Spurr,  667,  847. 
Kings  Bridge,   etc.,    Co.    v.   Plymouth, 

etc.,  Co.,  1083. 
Kings  College,  Governors  of,  v.  McDon- 
ald, 1103. 
Kings  County  El.  R'y  Co..  Re,  883. 
Kings  County,  etc.,  R.  R,  Matter  of,  1555. 
Kingsbury  v.  Kirwin,  469,  579. 
Kingsbury  v.  Ledyard,  1057,  1059. 
Kingsford  v.   Great  Western   R'y   Co., 

684. 
Kingsley  v.  First  Nat'l  Bank,  1168. 
Kingsley  v.  New  Eng.,  etc.,  Co..  1024, 

1109. 
Kinkier  v.  Jurica,  975. 
Kiumouth  v.  Brigham,  434. 
Kinney  v.  Crocker,  1432,  1433,  1446. 
Kintrea's  Case,  358. 
Kiuzie  v.  Chicago,#  1096. 
Kip  v.  Monroe,  457. 
Kip,  In  re,  18,  1110. 
Kirby  v.  Potter,  404. 
Kirk  v.  Bell,  1066. 
Kirk  v.  Nowill,  173. 
Kirkland  v.  Dinsmore,  1537. 
Kirklank  t.  Menasha,  etc.,  Co.,  1091. 

Kirkpatrick  v.  Bonsall,  468,  471,  473,  474. 

Kirksey  v.  Florida,  etc.,  Co.,  113,    174, 
229. 

Kirkstall  Brewery  Co.,  In  re,  393. 

Kisch  v.  Central  R'y  of  Venezuela,  195, 
200. 

Kirschmann  v.  Lediard.  1039. 

Kishacoquillas  Centre  Co.  v.  McCanahy, 
188,  207,  232. 

Kissam  v.  Anderson,  568,  1116. 

Kisterbock's  Appeal,  735. 

Kitchen  v.  St.  Louis,  etc.,  R'y  Co.,  921, 
1130,  1133,  1469. 

Kittow  v.  Liskeard  Union,  664. 

Klaus,  In  re,  447. 


to  the  foot-paging.] 

Kleeman  v.  Frisbee,  1225,  1229. 

Klein  v.  Alton,  etc.,  R.  R.  Co.,  113,  174, 

219. 
Klein  v.  Jewett,  1418,  1446. 
Kline  v.  Bank  of  Tescott.  1104. 
Klinfs  v.  Supreme,  etc.,  of  Iron  Hall, 

1417,  1421. 
Klopp  v.  Creston  City,  etc.,  Co.,  1176. 
Klopp  v.  Lebanon  Bank,  694,  700. 
Kluht's  Case,  106,  336. 
Knapp  v.  Railroad,  1311,  1318,  1327. 
Knapp  v.  Williams,  22. 
Kneeland  v.  American  L.  &  T.  Co.,  1357, 

1376,  1441,  1445. 
Kneeland  v.  Foundry,  etc.,  Works,  1445. 
Kneeland  v.  Lawrence,  1214. 
Kneeland  v.  Luce,  1452,  1453. 
Knight  v.  Cambers,  474. 
Knight  v.  Fitch,  474. 
Knight  v.  Norris,  274. 
Knight  v.  Old  National  Bank,  687,  701. 
Knight  v.  Wilmington,  etc..  R.  R,  1224. 
Knight's  Case.  175,  178, 179, 180,  181, 182. 
Knightley,  Ex  parte,  213. 
Knoop  v.  Bohmrich.  190,  1162. 
Knott  v.  Raleigh,  etc.,  R  R,  1534. 

Knott  v.  Southern,etc,  Ins.  Co.,  1178. 

Knowles  v.  Duffy,  73. 

Knowles  v.  Scott,  1456. 

Knowlton  v.  Ackley,  256,  271,  283,  863. 

Knowlton  v.  Congress,  etc.,  Co.,  51,  53, 
74,  400. 

Knowlton  v.  Fitch,  472,  562,  566. 

Knox  v.  Baldwin,  293,  303. 

Knox  v.  Bank  of  U.  S.,  999. 

Knox  v.  Childersburg  L.  Co.,  34,  70,  235. 

Knox  v.  Hayman,  205. 

Knox  v.  Protection  Ins.  Co.,  1020. 

Knox  County  v.  Aspinwall,  132,  137. 

Knox  County  Commissioners  v.  Nichols, 
136. 

Knoxville  v.  Knoxville,  etc.,  R  R.,  964, 
1194. 

Knoxville  v.  Railroad  Co.,  633,  636. 

Kobogum  v.  Jackson  Iron  Co.,  33,  101, 
216,  713,  716. 

Koch  v.  North,  etc.,  R'y,  874,  1549,  1556, 
1560,  1562,  1563. 

Koehler  v.  Black  River  Falls  Iron  Co., 
901,  931,  937,  1096,  1101. 


ex 


TABLE    OF    CASE-. 


[77ie  references  are 

Koehler  v.  Brown.  GG1. 

Koehler  t.  Dodge,  1118. 

Koehler  v.  Sanders,  1015. 

Koehler.  Ex  parte,  1514. 

Koenig  v.  Chicago,  etc.,  R  R,  10,  1538 

Kohl  v.  Lilienthal,  959,  960. 

Kohn  v.  Lucas,  253. 

Kolflf  v.  St.  Paul,  etc.,  Exchange,  645. 

Kollman's  Carriage  Co.  v.  Beresford.  '-212. 

Koons  v.  First  Nat  Bank,  598,  784 

Koons  v.  Martin.  269. 

Kortright  v.  Buffalo  Commercial  Bank, 

519,  699,  779,  780. 
Koshkonong  v.  Burton,  1240. 
Kouutz  v.  Gates.  150. 
Kraft  v.  Freeman,  1080. 
Kramer  v.  Arthurs,  668. 

Kramer  v.  Cleveland  &  P.  R  R  Co..  1524 
Krause  v.  Malaga,  etc.,  Co., 
Krause  v.  Setley,  470. 
Krauser  v.  Rnckel,  273,  874 
Krebs  v.  Carlisle  Bank,  880,  893. 

Kreiger  v.  Shelby  R  R  Co.,  154 

Krider  v.  Trustees,  etc.,  108 

Kropholder  v.  St  Paul,  etc.,  R'y,   1329, 
1473. 

Krtiger  v.  Audrews. 

Krumhhaar  v.  Griffiths.  431,  480. 

Kruse  v.  Dusenbury,  319. 

Krutz  v.  Paola  Town  Co.,  30a 

Kryger  v.  Andrews,  481. 

Kryger  v.  Railway,  etc.,  Mfg.  I 

Kuehner  v.  City  of  Freeport,  157}. 

Kuhn  v.  McAllister,  491,  780,  785. 

Kuhns  v.  Westmoreland  Sank,  694. 

Kullman  v.  Greenebaum.  597. 

Kuukelman  v.  Rentchler,  268.  299. 

Kuykendall  v.  Draper,  303. 

Kyle  v.  Fayetteville,  761. 

Kyle  v.  Laurens  R  R,  1533. 

Kyle  v.  Mayor,  etc..  763. 

Kyle  v.  Montgomery,  613. 

Kynaston  v.  East  India  Co.,  674. 


La  Banque  d'Hochelaga  v.  Murray,  S72, 
La  Crosse  R  R  Bridge.  1439. 
La  Farge  v.  Exchange,  etc.,  Ins.,  Co., 
1020. 


to  the  foot-paging.] 

La  Farge  v.  La  Farge  Fire  Ins.  Co.,  684. 
La  Farge  Fire  Ins.  Co.  v.  Bell,  1119. 
La  Fayette  v.  Cox.  131. 
La  Fayette,  etc.,  Corp.  v.  Ryland,  212. 
La  Grange  v.  State  Treasurer.  1135,  1154. 
La  Grange  &  M.  P.  R  Co.  v.  Mays.   189. 
La  Grange  &  Memphis    R    R    Co.     v. 

Rainey,  858,  B63,  B75. 
Lacey  v.  Hill.  575,  576,  579. 
Lacharme  v.  Quartz.  •.  683,  1169. 

Lackawanna,  County   of,  v.  First  Nat 

Bank.  756. 
Lackland  v.  North  Ma  R.  R  Co.,  1534 
Lacombe  v.  Forstall's  Sons, 
Ladd  v.  Cartwright  889,  306. 
I -i.l.l  v.  Chotard,  1581. 
Ladd  v.  Southern,  etc..  Co.,  1601. 
Lad;  Bryan  15. 

Lady  Henlocb  v.  River  Dee  Co..  11-7. 
Ladywell,  eta,  Ca  v.  Brook  911 

Lafayt  tte  Bank  v.  ink,  1085. 

tyette  <  '•■.  v.  Neely,  1148,  1161. 
Lafayette,  eta,  R'y  v,  Cheeney,  934 
Lafayette  1>  .   French,  998,  1018, 

111 
Lafayette,   Mun  ..  R    R  Co.  v. 

Geiger,  184  HO. 
Lafayette  Savings   Bank   r,   St.  Louis 

Stoneware  Ca,  1191,  1348,  1244. 
Lafferty  v.  Lafferty,  833, 
Lafond  v.  Deems,  661,  671,  ' 

c  v.  Metropolitan,  eta,  R'y,  1563. 
Lail  v.  Mt  Sterling  I  ,  R  I  kx,  883. 
Laing  v.  Burley,  348. 
Lain;,'  v.  Reed,  1  ls5. 
Like  v.  Argyle,  1036,  1040 
Lake  Erie,  etc.,  R  R.  v.  Griffin,  963.  1  Wl 
Lake,  etc.,  R  R  Ca  v.  Cincinnati,  etc., 

R'y  Ca,  1531. 
Lake  Ontario.  Auburn  &  N.  Y.  R  R  Co. 

v.  Mason,  111,  112,  113,  159,  168,  170, 

174.  181,314  830 
Lake  Ontario,  etc..  Bank   v.  Onondaga 

Bank,  859. 
Lake  Ontario  Shore  R  R  v.  Curtiss,  114, 

133. 
Lake  Shore,  etc.,  Bank  v.  Butter,  etc.,  Co., 

noa 

Lake  Shore  &  M.  S.  R  R  Co.  v.  Bennett, 

1522, 


TABLE    OF   CASES. 


CXI 


[The  references  are 

Lake  Shore  R'y  v.  Cincinnati,  etc.,  R'y, 

1516. 
Lake  Superior  Building  Assoc,  v.  Thomp- 
son, 1018. 
Lake  Superior  Iron  Co.  v.  Drexel.  57,  66, 

72,  418. 
Lake  View  v.  Rose  Hill  Cemetery  Co., 

1517. 
Lakeside,  etc.,  Co.  v.  Crane,  882. 
Lallande  t.  Prescott,  584. 
Lamar  v.  Micou,  435,  441. 
Lamar  Insurance  Co.  v.  Gulick,  259. 
Lamb  v.  Anderson,  152. 
Lamb  v.  Bowser,  1005. 
Lamb  v.  Burlington,  etc.,  145. 
Lamb  v.  Cecil,  989. 
Lamb  v.  Lamb,  998. 
Lamb  v.  Pannell,  989. 
Lamb  v.  San  Pedro,  etc.,  Co.,  1153. 
Lambert  v.  Lambert,  406,  742. 
Lambert  v.  Neuchatel  Asphalte  Co.,  724. 
Lambert  v.  Northern,  etc.,  R'y  Co.,  929. 
I^ambertson  v.  Van  Boskerk,  572,  588. 
Lamm  v.  Port  Deposit  Homestead,  etc., 

1008. 
Lamoille,  etc.,  R.  R.  Co.  v.  Fairfield,  131. 
Lamphear  v.  Buckingham,  1319. 
Lamson,  etc.,  Co.  v.  Russell,  1099. 
Lancashire  Co.  v.  Greatorex,  682. 
Lancashire  R'y  v.  Gidlow,  1521. 
Lancaster,  Ex  parte,  822. 
Lancaster    Canal    Navigation    Co.,    Ex 

parte,  21,  22. 
Lancaster,  etc.,  R'y  Co.  v.  Northwestern 

R'y  Co.,  1511. 
Lance's  Appeal,  1525. 
Land  v.  Coffin  an,  992,  993. 
Land  Co.  v.  Bushnell,  993. 
Land  Credit  Co.  v.  Lord  Fermoy,  973, 

1031. 
Land  Credit  Co.,  In  re.  1109,  1192. 
Land    Grant  R'y  &   T.   Co.    v.    Coffey 

County,  320,  997. 
Lander  v.  Logan,  324. 
Lander  v.  Tillia,  253. 
Landers    v.   Frank,   etc.,    Church,    813, 

1107. 
Landes  v.  Globe,  etc.,  Co.,  1136. 
Landheim  v.  White,  661. 
Landis  v.  Saxton,  894,  1132. 


to  the  foot-paging.] 

Landis  v.  Western  Pa.  R.  R,  1474. 
Lane  v.  Boston,  etc..  R.  R.  Co.,  1112. 
Lane  v.  Brainerd,  91,   118,   119,  107.  227, 

807,  1061. 
Lane  v.  Broughman,  1365. 
Lane  v.  Harris,  250,  280,  284,  286,  299. 
Lane  v.  Loughran,  741. 
Lane  v.  Lutz,  1373. 
Lane  v:  Morris,  278,  284,  303. 
Lane  v.  Weymouth  School  District,  1160. 
Lane  v.  Young.  347. 
Lane's  Case,  337,  385. 
Lang  v.  Dougherty,  16. 
Lang  v.  Pennsylvania  Ins.  Co.,  241. 
Lang,  etc.,  Co.  v.  Ross,  923. 
Langam  v.  Iowa  &  Minn.  Con.  Co.,  313, 

316. 
Langdon  v.  Branch,  423. 
Langdon  v.  Fogg,  53,  78,  79,  1146. 
Langdon  v.  Hillside,  etc.,  Co.,  1162. 
Langdon  v.  N.  Y.,  etc.,  R.  R,  1518,  1522. 
Langdon  v.  Vermont,  etc.,  R.  R,  1420, 

1463. 
Langford  v.  Ottumwa  Water-power  Co., 

252. 
Langley  v.  Boston  &  M.  R,  R,  1493. 
Langley  v.  Little,  632,  810. 
Langsdale  v.  Ronton,  1069. 
Langston  v.  South  Carolina  R.  R,  1223, 

1230,  1231,  1235,  1236. 
Langton  v.  Waite,  570,  590,  592,  596. 
Lankershim,  etc.,  Co.  v.  Herberger,  174, 

697. 
Lankester's  Case,  358. 
Lanyon  v.  Smith,  665. 
Lare  v.  Westmoreland,  etc.,  Co.,  492. 
Laren  v.  Franciscus,  356. 
Larkin,  Ex  parte,  935. 
Larned  v.  Beal,  311. 
Larrabee  v.  Badger,  785. 
Larrabee  v.  Baldwin,  267.  285,  286,  297, 

350,  351. 
Larsen  v.  James,  294. 
Larwell   v.    Hanover    Sav.   Fund  Soc, 

1185. 
Larymer  v.  Smith,  473. 
Lasher  v.  Stimson,  1003. 
Latham  v.  Houston,  etc.,  1105. 
Lathrop  v.  Commercial  Bank  of  Scioto, 

987,  991,  999,  1058,  1095,  1173. 


cxn 


TABLE    OF    CASES. 


[The  references  are 

Latlirop  v.  Junction  R  R,  1510,  1521. 
Lathrop  v.  Kneeland,  98,  268,  381. 
Lathrpp  v.  McBurney,  609. 
Lathrop  v.  Union  Pac.  R'y  Co.,  1174. 
Latimer  v.  Eddy,  859,  1152. 
Latimer  v.  Union  Pacific  Ry,  1175. 
Latourctte  v.  Clark,  1< »G9. 
Latrobe  v.  Western  Tel.  Co.,  890. 
Lauderdale  Co.  v.  Fargason,  137. 
Laudman  v.  Entwistle,  277,  1036. 
Lauferty  v.  Wheeler,  -309. 
Lauman  v.  Lebanon  Valley  R.  R.  Co.. 
629,   633,   640,   858,   956,    958,    1500, 
1508. 
Laurel  Fork,  etc.,  R  R  Co.  v.  Weal  Va.. 

etc.,  Co.,  1513. 
Lavasseur  v.  Mason  and  Barry,  1428. 
Law  v.  Conn.,  etc.,  R  R,  1048. 
Law  Guarantee,   etc.,   Soc.  v.  Bank   of 

England,  531. 
Lawe's  Case,  337. 
Lawler  v.  Burt.  292,  398,  801. 
Lawler  v.  Rosebrook,  296. 

Lawnda  v.  Lawnds,  109. 

Lawrence  v.  Fox.  1832. 
Lawrence  v.  Gebbard,  1055. 
Lawrence  v.  Greenwich    Fire  Ins.   Co., 
855,859,  981,  1156. 

Lawrence  v.  Holmes,  etc.,  1118. 

Lawrence  v.  Lawrence.  1226, 

Lawrence  v.  Maxwell.  57::.  592,  600. 

Lawrence  v.  Morgan's,  etc.,    S.   S.    Co., 
1513. 

Lawrence  v.  Nelsor   240,300. 

Lawrence's  Case,  195. 

Lawrence,  Ex  parte,  208. 

Lawrence,  etc.,  Co.   v.  Rockbridge  Co., 
1412. 

Lawrenceville,  etc.,  Co.  v.  Parker,  982. 

Lawson  v.  Milwaukee,   etc.,   R,    R   Co., 
137.  147. 

Lawson  v.  Stanley,  1137. 

Lawton  v.  Kittredge,  470. 

Laxon  &  Co.,  Re,  334. 

Lay  v.  Austin,  1104. 

Laybourn  v.  Seymour,  1430. 

Layng  v.  A.  French,  etc.,  Co.,  426. 

Le  Blanc.  Matter  of,  714,  1369. 

Le  Cray  v.  Eastman,  590. 

LEngle  v.  Florida,  etc.,  R  R.  1463. 


to  the  foot-paging.] 

Le  Roy  v.  Globe  Ins.  Co.,  714,  716,  727. 

LeWarnev.  Meyer,  53,  310,  Hi 

Lea  v.  American  Atlantic,  etc.,  Canal 

Co.,  863. 
Leach  v.  Fobes,  460. 
Leach  v.  People,  1057. 
Leake  v.  City  of  Philadelphia,  1573. 
Leake  v.  Watson,  569. 
Lean  v.  Lean.  712. 
Learned  v.  Burlington.  142. 
Leasure  v.  Union,  etc.,  Ins.  Co.,  1178 
Leatherman  v.  Times  Co.,  1164. 
Leathers  v.  Janney,  589,  980,  959. 
Leathers  v.  Shipbuilders'  Dank,  1436. 
Leavenworth  v.  Hunt.  1 
Leavenworth  v.  Norton,  142. 
Leavenworth   County   v.   Chicago,   etc.. 
R  R,  932,  1127.  1246,  1353,  1494. 
enworth  County  v.  Miller,  181, 134, 
137,  141. 
Leavenworth,  etc.,  R  R  Co.  v.  Douglas 

Co..  134,  115. 
Leavett  v.  Pell,  34 

Leavitt   v.  Blatchford,  666,  1190,  1193, 

1201. 
Leavitt  v.  Fisher.  515,  519,  527. 

Leavitt  v.  Oxford,  etc., Co., 822, 1005, 1070. 

Leavitt  v.  Palmer,  984 

L  avitt  v.  Tyl<  r,  666. 

Leavitt  v.  Yates,  666,  985,  1055,  101 

Leazure  v.  Hillegas,  992,  993,  1100. 

Lebanon,  etc..  Co.  v.  Adair,  1059. 

Lebanon  Savings  Dank  v.  Hollenback, 
999. 

Lechmere  Dank  v.  Doynton,  796. 

Ledwick  v.  McKim.  119s.  1221. 

Lee  v.  Citizens'  Nat  Dank,  499,  602,  614. 
688,  701. 

Lee  v.  Granger.  128. 

Lee  v.  Neuchatel  Asphalte  Co.,  725. 

Lee  v.  Pittsburg   Coal  &  Mining    Co., 
1078. 

Lee  v.  Pittsburgh,  etc.,  Co.,  1092. 

Lee  v.  St  urges,  751. 

Lee  County  v.  Rogers,  132. 

Lee's  Dank  of  Buffalo,  Matter  of,  629. 

Lee's  Dank  of  Buffalo,  Re,  629,  887. 

Leech  v.  Harris,  661,  1025. 

Leed    &    Evensburg    Turnpike    Co.   v. 
Phillips,  633. 


TABLE    OF   CASES. 


CX111 


[The  references  are 

Leeds,  etc.,  R'y  Co.  v.  Fearnley,  107. 

Leeke's  Case,  908. 

Lefevre  v.  Lefevre,  3. 

Lefray  v.  Gore,  1036,  1038. 

Legendre  v.  New  Orleans,  etc.,  Ass'n, 

674,  676. 
Leggett  v.  Bank  of  Sing  Sing,  687,  688, 

692,  693. 
Leggett  v.  New  Jersey,    M.  &  B.    Co., 

1075,  1100,  1101. 
Legrand  v.   Hampden-Sidney   College, 

1095. 
Legrand  v.  Manhattan,  etc.,  Assoc,  930. 
Lehigh  v.  Lehigh,  etc.,  Co.,  1020. 
Lehigh   Bridge  Co.  v.  Lehigh   Coal  & 

Navigation  Co.,  863. 
Lehigh  Coal,  etc.,  Co.  v.  Central  R  R, 

1412. 
Lehigh,  etc.,  Co.  v.  Central  R  R,  1242, 

1438,  1439,  1476. 
Lehigh,  etc.,  Co.  v.  Commonwealth,  769. 
Lehigh,  etc.,  R  R  v.  Orange,  etc.,  Co., 

1598. 
Lehigh,  etc.,  R'y  Co.'s  Appeal,  14,  1186, 

1187. 
Lehigh  Valley  Coal  Co.  v.  Hamblen,  1013. 
Lehigh  Valley  R  R   v.   Pennsylvania, 

777,  1947. 
Lehigh  Valley  R  R  Co.  v.  McFarlan, 

1524. 
Lehigh  Water  Co.  v.  Easton,  1944. 
Lehigh  Water  Co.'s  Appeal,  1597. 
Lehman  v.  Feld,  475. 
Lehman  v.  Glenn,  94,  243,  266. 
Lehman  v.  Semple,  94,  243. 
Lehman  v.  Strassberger,  472,  475. 
Lehman  v.  Tallassee,  etc.,  Co.,  1195, 1223, 

1227,  1261,  1352,  1370,  1401,  1406. 
Leibke  v.  Knapp,  188. 
Leifchild's  Case,  327,  972. 
Leigh  ton  v.  Campbell,  275,  277. 
Leighty  v.  Pres.  of  S.  &  W.  T.  Co.,  221. 
Leinkauf  v.  Caiman,  1094. 
Leitch  v.  Wells,  429,  442,  502,  503,  545, 

547,  586,  744. 
Leland  v.  Hayden,  417,  739,  740. 
Leloup  v.  Mobile,  1947. 
Lemon  v.  Pullman  P.  Car  Co.,  1600. 
Lenawee,  etc.,  Bank  v.  City  of  Adrian, 
757. 


to  the  foot-paging.] 

Lennox,  etc.,  Co.,  Re,  209. 

Leo  v.  Union  Pacific  R  R  Co.,  814, 1143, 

1149,  1152,  1263. 
Leominster,  etc.,  Co.  v.  Shrewsbury,  etc., 

R'y,  1044. 
Leonard  v.  Burlington,  etc.,  Ass'n,  1087. 
Leonard  v.  Davenport,  665. 
Leonard  v.  Poole,  449. 
Leonard  v.  Spencer,  16. 
Leonard  v.  Washburn,  1178,  1588. 
Leonardsville  Bank  v.  Willard,  233,  878, 

879,  1167. 
Leonberger  v.  Rowse,  755. 
Lepage  Co.  v.  Russia,  etc.,  Co.,  949. 
Lesher  v.  Karshner,  125,  237. 
Leslie  v.  Lorillard,  646,  952,  969, 974,  982, 

1148,  1512. 
Lessassier  v.  Kennedy,  355. 
Lesseps  v.  Architects'  Co.,  173,  180. 
Lester  v.  Buel,  470. 
Lester  v.  Howard  Bank,  986. 
Lester  v.  Webb,  1055,  1084. 
Levering  v.  Mayor,  etc.,  1095,  1099. 
Levi  v.  Lynn,  etc.,  R  R,  1571. 
Levick's  Case,  97. 

Levisee  v.  Shreveport,  etc.,  R.  R  Co.,  925. 

Levita's  Case,  97. 

Levy  v.  Abercorris,  etc.,  Co.,  1251,  1252, 
1253. 

Levy  v.  Loeb,  565,  578. 

Levy  v.  Mutual  L.  Ins.  Co.,  1587. 

Lewey's  Island  R  R  Co.  v.  Bolton,  178, 
181,  182,  222,  226. 

Lewis  v.  Bank  of  Kentucky,  1166,  1172. 

Lewis  v.  Barbour  Co.,  133. 

Lewis  v.  Brainard,  673,  674,  675,  680. 

Lewis  v.  Chicago,  etc.,  R'y,  1548. 

Lewis  v.  City  of  Shreveport,  131. 

Lewis  v.  Clarendon,  138,  156. 

Lewis  v.  Coates,  466. 

Lewis  v.  Glenn,  93,  243,  988. 

Lewis  v.  Graham,  585,  596,  603,  604,  605, 
606. 

Lewis  v.  Hartford  Mfg.  Co.,  1296. 

Lewis  v.  Meier,  61,  903,  1006. 

Lewis  v.  Montgomery,  1189. 

Lewis  v.  Mott,  592. 

Lewis  v.  New  York,  etc.,  Iron  Co.,  52. 

Lewis  v.  Robertson,  248. 

Lewis  v.  Ryder,  303. 


CXIV 


TABLE    OF    CASES. 


[The  references  are 

Lewis  v.  St.    Albans,    etc.,   Works,  948, 

1146. 
Lewis  v.  St  Charles  Co.,  272. 
Lewis  v.  Seifert,  1434. 
Lewis  v.  Tilton,  668. 
Lewis  v.  Wilson,  661. 
Lewis'  Case,  167,  925. 
Lex  v.  Potters,  611. 
Lexington,  etc.,  R    R    Co.    v.   Bridges, 

735. 
Lexington,  etc.,   R   R   Co.    v.   Staples, 

181. 
Lexington  Life,  etc.,   Ins.   Co.   v.   1 

726,  729,  732,  733. 
Lexington  &  West  Cambridge  R  R  Co. 
v.  Chandler,  170,  181,  188,  884,  030. 
Libbey  v.  Hodgdon,  1176. 
Libby  v.  Ahrens,  668 
Libby  v.  Tobey.  74,  863,  -'76,  343. 
Liberman  v.  Chicago,  etc.,  R  R.  1549. 
Liberty  Female  College  Associati"ii    v. 

Watkins,  278. 
Licensed,  etc.,  Ass'n,  Re,  29. 
Liebke  v.  Knapp,  33. 
Liebscher  v.  Kraus,  1104. 
Life  Association  of  America  v.  Fassett, 

889,  893. 
Life  Assoc,  In  re,  1366. 
Life,  etc.,  Ins.  Co.  v.  Mechanic,  etc.,  Co., 

983,  1074,  1185. 
Ligare  v.  City  of  Chicago,  1565. 
Liggett  v.  Glenn,  94,  86,  1843,  148a 
Liggett  v.  Ladd,  670. 
Lighte  v.  Everett  Ins.  Co.,  1166. 
Lightfoot  v.  Creed,  489. 
Lighthall,  etc.  Co..  Matter  of,  812.  821. 
Lightner's  Appeal,  586. 
Ligonier  Valley  R   R   Co.  v.  Williams. 

121. 
Lillard  v.  Porter,  1163. 
Lilley  v.  Rankin,  477. 
Lily  v.  Com' is.  760. 
Lima  Gas  Co.  v.  Lima,  1585. 
Lime  Rock  Bank  v.  Macomber.  1093. 
Limerick  Academy  v.  Davis,  1094. 
Lincoln  v.  Cambria  Iron  Co.,  147. 
Lincoln  v.  Wright,  170. 
Lincoln  Comity  v.  Liming,  135. 
Lincoln,  etc.,  Bank  v.  Richardson,  861, 
887. 


to  the  foot-paging!] 

Lincoln  Nat'l  Bank  v.  Portland,  1477. 

Linder  v.  Carpenter.  905. 

Lindsay  v.  Gladstone,  684. 

Lindsay  v.  Hyatt.  301.  304. 

Lindsay,  etc.  Co.  v.  Hurd,  912,  913,  915. 

Lindsi  y.  Earl  of,  v.  Great  Northern  R'y, 

101"). 
Lindsley  v.  Simonds.  250,  30& 
Lingard  v.  Bromley,  1159. 
Ling'-r.  l'.x  part''.  191. 
Lingle  v.  National  Ins.  Co.,  299,  936. 
Linnard,  Appeal  of. 
Lion,  etc..  In-.  Co  v.  Tucker,  B88. 
Lion  ■  ■  Broadway,  <  I 

Lioii  \.  Rowse,  761,  ~^'>. 

Lippetl  v.  American  Wood  Paper  Co., 

616,  6243. 
Lippincott  v.  Pans,  1 11,  145. 
Lippincott    v.    Si iaw  Carriage   C 

•.  84a 

Liquidators,  etc.,  v.  Douglas,  1088. 
Liquidators  of  the  British  Nation  Life 

Assurance  Assi  h  iatioi  .  B  "'$6. 

Liahman'e  I  him.  164,  11 
List  v.  Wheeling,  ill. 
Litchfield  v.  White,  10 
Litchfii  Id's 
Litchfield  Bank  v.  Church,  189.  807,818, 

•:\\>  ;.  no:. 

Litchfield  Bank  v.  Peck,  210. 
Litchfield  Iron  Co.  v.  Bennett,  1056. 
Liter  r.  Ozokerite  Mia  G  . 
Littell  v.  Scranton  Gas  ft  Water 

Little  v.  Barker,  687,  50a 

Little  v.  Dusenberry,  1 1"»7. 
Little  v.  O'Brien,  846,  984 

Little  Miami,  etc.,    R.   R.   Co  v.  Dayton, 
1589. 

Little  Rock.  Bank  of.  v.  Mc<  arthy,  1060. 
Little  Rock,  etc.,  R'y  v.  Hanniford,  1516. 
Little   Rock,   etc.,    R'y  v.    Huntington, 

1240,  1202. 
Little  Rock,  etc.,  R'y  Co.  v.   Page,  940, 

1365,  1385. 
Little  Rock,  etc.,  R  R  v.  Perry,  1043. 
Littledale.  Ex  parte,  693. 
Littlefield  v.  Fitchburg  R  Co.,  1515. 
Littleton  Manuf.  Co.  v.  Parker,  222. 
Litzenberg  v.  Jarvis,  etc.,  1399. 


TABLE    OF    CASES. 


CXV 


[The  references  are  to  the  foot-paging.] 


Live-stock  Assoc,  etc.,  v.  Levy,  647. 

Livermore  v.  Bushnell,  449. 

Liverpool,  etc.,  Ass'n,  Re,  227,  1030,  1033, 

1073. 
Liverpool,  etc.,  Co.  v.  Phenix,  etc.,  Co., 

1536. 
Liverpool  Ins.  Co.  v.  Massachusetts,  321, 

666,  775,  997,  1945,  1947. 
Livesey  v.  Omaha  Hotel,  222,  229. 
Livingston  v.  Lynch,  626,  668,  670,  814, 

856,  954. 
Livingston  v.  Pittsburg,  etc.,  R,  R.  Co., 

105. 
Livingston  v.  Rogers,  93. 
Livingston  Co.  v.  Hannibal  &  St   J.  R. 

R  Co.,  771. 
Livingston  County  v.  Portsmouth  Bank, 

155. 
Lloyd  v.  Loaring,  670. 
Lloyd  v.  Preston,  65,  67,  340,  1211. 
Lloyd  v.  Wagner,  1234. 
Lloyd,  Ex  parte,  1047. 
Loan  Ass'n  v.  Stonemetz,  923,  924. 
Loan  Ass'n  v.  Topeka,  138,  139. 
Loaners'  Bank  v.  Jacoby,  879. 
Locke  v.  Yenables,  741,  745. 
Lockhart  v.   Craig  St   R'y    Co.,    1560, 

156a 
Lockhart  v.  Little  Rock,  etc.,  R  R,  1483. 
Lockhart  v.  Van   Alstyne,    16,  361,  369, 

374,  378,  702,  721. 
Lockport  v.  Weston,  14,  751. 
Lock  wood  v.  Brantly,  599. 
Lockwood  v.  Mechanics'  National  Bank, 

547,  687,  701,  853,  1065. 
Lockwood  v.  Thunder,  etc.,  Co.,  1054. 
Loder  v.  N.  Y.,  etc.,  R  R.  1388. 
Lodge  v.   Philadelphia  &   W.     B.  Co., 

1525. 
Logan  v.  Earl  of  Courtown,  104 
Logan  v.  McAllister,  888. 
Logan  v.  Vernon,  etc.,  R.  R,  867. 
Logan  v.  Western,  etc.,  R  R,  893. 
Logan  County  Bank  v.  Townsend,  969, 

973. 
Lohman  v.  New  York,  etc.,  R.  R  Co., 

383,  1058,  1070. 
Lollande  v.  Ingram,  585. 
Lombard,  etc.,  R'y  Co.  v.  Christian,  1111. 
Lombardo  v.  Case,  580. 


Londesborough  v.  Somerville,  744.  745. 
London  v.  City  of  Wilmington,  747. 
London  v.  Lynn,  1018. 
London  Assurance  Co. 's  Case,  1120. 
London,  Bank  of,  v.  Terrell,  911. 
London  &  B.  R'y  Co.  v.  Fairclough.  175, 

178,  343,  345,  347. 
London  &  C.  Ins.  Co.  v.  Redgrave.   225. 
London,  etc.,  Assoc,  v.  Clarke,  448. 
London,  etc.,  Assoc,  v.  Kelk,  1130. 
London,  etc.,  Assoc,  v.  London,  etc.,  Life 

Ins.  Co.,  1014. 
London,  etc.,  Assoc,  v.  Wrexham,  etc., 

R'y  Co.,  366,  1466,  1478. 
London,  etc.,  Bank  v.  Simmons,  1223. 
London,  etc.,  Co.  v.  Central  T.  Co.,  493. 
London,  etc.,  Co.  v.  London,  etc.,  Bank, 

494,  1226. 
London,  etc.,  Co.,  Re,  46,  97,  414,  442.  801, 

958,  1236. 
London,  etc.,  R'y  v.  Freeman,  347. 
London,  etc.,  R'y  v.  McMichael.  167, 1 108. 
London,  etc.,  R'y  Co.    v.    London,    etc., 

R'y  Co.,  1502. 
London  Financial  Ass'n  v.  Kelk,  28. 
London  India  Rubber  Co.,  In    re,  379, 

862. 
London  &  Mercantile  Discount  Co.,  In 

re,  862. 
London  &  N.  W.  R'y  v.  Evershed,  1519, 

1521. 
London  &  Prov.  Consol.  Coal  Co.,  Re, 

212. 
London  &  Staffordshire  Fire  Ins.  Co.,  Re, 

207. 
London  Suburban  Bank,  In  re,  861. 
Londonslager  v.  Benton,  1374. 
Long  v.  City  of  Duluth,  1597. 
Long  v.  Daugherty,  990. 
Long  v.  Long,  999. 
Long  v.  Georgia,  etc.,  R'y,  881. 
Long  v.  New  London,  133. 
Long  v.  Penn.  Ins.  Co.,  240. 
Long  v.  Stewart,  436. 
Long  Branch,  etc.,  R.  R  v.  Sneden,  1415. 
Long  Branch,  etc.,  R.  R,  Matter  of,  1415. 
Long  Island,   etc.,   Co.    v.  Terbell.  929, 

930. 
Long  Island  R  R  Co.,  Matter  of.  173. 

804,  825,  826,  839,  840,  841. 


CXV1 


TABLE    OF    CASES. 


Long  Island  T.  Co.  v.  Terbell,  928. 
Lonsdale  Iron  Co.  v.  Porneroy  Iron  Co., 

339. 
Longdale's  Settlement  Trusts,  409. 
Longley  v.  Boston  &  Maine  R  R,  1530. 
Longley  v.  Little,  302,  349. 
Longley  v.  Stage  Line  Co.,  16. 
Longmont,  etc.,  Co.  v.  Coffman,  1063. 
Loomis  v.  Davenport,  etc.,  R  R,  1387. 
Loom  is  v.  Eagle  Bank,  1119. 
Lord  v.  Brooks,  739. 
Lord  v.  Governor,  etc.,  of  Copper  Mines, 

899. 
Lord  v.  Hutzler,  354. 
Lord  v.  Yonkers,  etc.,  Co.,  1200,  1300. 
Lord  Belhaven's  Case,  ITT,  212,  217. 
Lord  Londesborough's  Case,  976. 
Lord  Talbot's  Case,  277. 
Lordell  v.  Stowcll,  789. 
Lorillard   v.   Clyde,   43,   51,  1046,    1251, 

1517. 
Loring  v.  Brodie,  437,  439,  1116. 
Loring  v.  Salisbury  Mills,  417,  440. 
Loring  v.  U.  S,  etc.,  Co.,  991. 
Loring  v.  Woodward,  404. 
Losse  v.  Bullard,  278,  864. 
Lothrop  v.  Stedman,  627,  868,  886,  889, 

892,  1141. 
Lou  bat  v.  Le  Roy,  661. 
Lough  v.  Outti bridge,  768,  1599. 
Loughborough  v.  MFNevin,  596. 
Louis  Hosp.  Ass'n  v.  Williams'   Adni.. 

1019. 
Louisiana  v.  American  Cotton  Oil  Tru>t, 

653. 
Louisiana  v.  Bank  of  Louisiana,  719. 
Louisiana  v.  Taylor,  141,  112. 
Louisiana  v.  "Wood,  1153. 
Louisiana  Ins.  Co.  v.  Gordon,  345. 
Louisiana  Paper  Co.  v.  Waples,  255,  861. 
Louisiana  State  Bank  v.  Senecal,  1119. 
Louisville  v.  Savings  Bank.  140,  141.  142. 
Louisville,  Bank  of,  v.  Gray,  430,    184, 

716. 
Louisville,  City  of,  v.  President,  etc.,  634, 

810. 
Louisville  City  Ry  v.  Louisville.  1571. 
Louisville,  C.  &  C.  R  R  Co.  v.  Latson, 

1170,  1173,  1948. 
Louisville,  etc.,  Co.  v.  Barbour,  757. 


[The  references  are  to  the  foot-paging] 

Louisville,  eta,  Co.  v.  Eisenman,  1051. 
Louisville,  etc.,  R  R  v.  Boney,  963,  1512, 


1516. 
Louisville,  etc.,  R  R  v.  Cauble,  1435. 
Louisville,  etc.,  R  R  v.  Commonwealth, 

134,  770,  7?-!. 
Louisville,  etc.,  R  R  v.    County    Court, 

137. 
Louisville,  etc.,  R  R  v.  Gilbert,  1" 
Louisville,  etc.,  R  R  v.  Letson,  2,  1948. 
Louisville,  etc..  R  R  v.    Literary,     etc.. 

97D,  1064. 
Louisville,  etc.,  R  R  v.  Louisville  City 

Ry.  1556. 
Louisville,  etc.,  R  R  v.  KisBissippi,  1047. 
Louisville,  etc,  R  R  v.  State,  746. 
Louisville,  etc.,  R  R  v.  Tennessee,  148. 
Louisville,  etc,  R  R  v.  Palmer,  1483, 

1941. 
Louisville,  etc,    R   R    v.    Wilson,   274, 

1857,  1  (59. 
Louisville,  etc.,  T.  R  Co.  v.  Ballard.  628, 
Louisville,  etc.,    Turnpike  Co.    v.    M.  n- 

wether,  170.  181. 
Louisville  Gas  Co.  v.  Citizens'  Gas  <  '•>.. 

1944 
Louisville  ft  N.  R    R  Co.  v.  Common- 

wealth,  1012. 
Louisi  ill-'  &  N.  R  R  Co.  v.  Palmer,  771. 
Louisville  ft  N.  R  R  Co.  v.  State,    1012. 
Louisville  ft  N.  R.  R  v.  Tenn.  R  R  Co., 

1513. 
Louisville  A:  Nash.  R.  R  Co.  v.  Thomp- 
son, isa 
Louisville,  Second  National  Bank  <>f,   v. 

National  State  Bank  of  New  Jersey, 

70L 
Louisville    Transfer    Co.    v.    American 

District  Telephone  Co.,  1596. 
Louisville  Underwriters,  In  re,  1180. 
Louisville  Water  Co.    v.  Clark,  3,   638, 

773.  1945. 
Love  v.  Harvey,  469. 
Lovejoy  V.  Michels.  645. 
Loveland  v.  Alvord,  etc.,  Co.,  621. 
Lovell  v.  Mi  not,  434,  740. 
Lovett  v.  German     Reformed    Church. 

1057. 
Lovett  v.  Steam,  etc,  Assoc,  1099,  1100, 

1102. 


TABLE    OF    CASES. 


CXV11 


[The  references  are 

Loving  v.  Marsh,  1341. 

Low  v.  Buchanan,  2S8,  289. 

Low  v.  Central  Pac.  R  R,  1247. 

Low  v.  Connecticut  &  R  R  R,  1538. 

Low  v.  Studebaker,  189. 

Lowe  v.  Edgefield  &  K.  R  R  Co.,  118, 

124. 
Lowe  v.  Thomas,  23,  407. 
Lowe's  Case,  348, 
Lowell  v.  Boston,  138,  139. 
Lowell,  City  of,  v.  Morse,  1019. 
Lowndes  v.  Garnett,  etc.,  Co.,  902,  1185. 
Lowne  v.  American  Fire  Ins.  Co.,  714. 
Lowry  v.  Chicago,  etc.,  R  R,  1518. 
Lowry  v.  Commercial  &  Farmers'  Bank 

of  Baltimore,  442,  444,  547,  586. 
Lowry  v.  Dillman,  476,  477. 
Lowry  v.  Inman,  251,  271,  283,  291,  292, 

294,  323. 
Lowten  v.  Colchester,  1170. 
Luard's  Case,  105,  106,  336. 
Lubbock  v.  British  Bank,  etc.,  726. 
Lubricating  Oil  Co.  v.  Standard  Oil  Co., 

205. 
Lucas  v.  Bank  of  Darien,  1119. 
Lucas  v.  Bank  of  Georgia,  1173. 
Lucas  v.  Beach,  1038. 
Lucas  v.  Pitney,  982,  1185,  1190. 
Lucas  v.  White,  etc.,  Co.,  1246,  1248. 
Lucas  v.  White  Line  Transfer  Co.,  1243. 
Luce  v.  Manchester,  etc.,  R  R  Co.,  442. 
Ludlam's  Estate,  405,  411. 
Ludlow  v.  Hurd,  1364,  1383. 
Luffman  v.  Hay,  564. 
Luling  v.  Atlantic  Mutual  Ins.  Co.,  712, 

.  713. 
Lum  v.  Robertson,  889. 
Lumbard  v.  Aldrich,  999. 
Lumbard  v.  Stearns,  1527. 
Lumpkin  t.  Jones,  875. 
Lumsden's  Case,  106,  334,  428. 
Lund  v.  Wheaton,  etc.,  Co.,  617. 
Lund's  Case,  358. 
Lung  Chung  v.  Northern  Pac.  R'y  Co., 

1179,  1183. 
Lungren  v.  Penned,  913. 
Luse  v.  Isthmus,  etc.,  Ry  Co.,  1075. 
Lyceum  v.  Ellis,  1205. 
Lycoming  Count}'  v.  Gamble,  751. 
Lycoming  F.  Ins.  Co.  v.  Longley,    1173. 


to  the  foot-paging .] 

Lycoming  F.  Ins.  Co.  v.  Wheelock,  1005. 
Lyde  v.  Eastern  Bengal  R'y  Co.,  1534. 
Lydney,  etc.,  Co.  v.  Bird,  911,  913,  914, 

915. 
Lyman  v.  Boston,  etc.,  R  R   Co.,  1516. 
Lyman  v.  Central  Vt.  R.  R..  1433,  1446. 
Lynch  v.  Eastern,  etc..  R  R  Co.,  156. 
Lynch  v.  Macdonald,  598. 
Lynch  v.  Metropolitan  E.  R  Co.,  1009. 
Lynchburg.  City  of,  v.  Slaughter,  131. 
Lynde  v.  County,  1098,  1203. 
Lyndeborough  Glass  Co.  v.  Mass.  Glass 

Co.,  972,  1093. 
Lyndon  Mill  Co.  v.  Lyndon,  etc.,  Inst., 

1064,  1074.  1114. 
Lyne  v.  Siesfield,  474. 
Lyneborough,.etc,  Co.  v.  Mass.,  etc.,  Co., 

1089. 
Lynn    v.    Freemansburg,    etc.,   Assoc, 

1022. 
Lyon  v.  American,  etc.,  Co.,  678. 
Lyon  v.  Culbertson,  469,  472. 
Lyon  v.  Denison,  612,  660. 
Lyon  v.  Ewings,  34. 
Lyon  v.  Jerome,  1071,  1073. 
Lyons  v.  Hodgen,  470. 
Lyons  v.  Munson,  146. 
Lyons  v.  Orange,   etc.,   R.   R    Co.,   635, 

888. 
Lyons'  Case,  225. 
Lyons,  Bank  of,  v.  Demmon,  214,   465, 

1086. 
Lyons,  First  Nat.  Bank  of,  v.  Oskaloosa 

Packing  Co.,  475, 
Lyons,  Town  of,  v.  Chamberlain,  136. 
Lyster's  Case,  180,  1065. 

M. 

Maas  v.  Missouri,  etc.,   R'y,    1197.   1198, 

1226,  1302. 
MacDougall  v.  Gardiner,  799,  814,  815, 

899. 
MacGregor  v.  Dover,  etc..  R'y.  1038. 
MacKellar,  etc.,  Co.  v.  Commonwealth, 

751. 
MacNaughton  v.  Osgood,  926. 
Macalister  v.  Maryland,  1277. 
Macalister's  Adm'r  v.  Maryland,  1367. 
Macauly  v.  Robinson,  175,  177. 


CX  7111 


TABLE    OF    CASES. 


[The  references  are 

MacdonaU  v.  Trojan,  etc..  Co.,  966. 
Macdougall   v.    Jersey  Imperial    Hotel 

Co.,  728. 
Macedon  &  B.  P.  R  Co.  v.  Lapham,  234. 
Macedon  &  Bristol  Plank  Road  Ca  v. 

Snediker,  122. 
Machinists'  Bank  v.  Dean,  667. 
Machinists'  National  Bank  v.  Field,  384, 

505,  509. 
Mack  v.  De  Bardelaben,  etc.,  Co.,  796, 

843,  1151. 
Mack,  Appeal  of,  128.  242. 
Mackay  v.  Bank  of  New  Brunswick 
Mackay  v.  Commercial  Bank,  etc..   191, 

1007. 
Mackintosh  v.  Flint,  etc.,  R  R. 

1170. 
Maekley's  Case,  96.  9 
Maclae  v.  Sutherland,  I 
Maclaren  v.  Stainton,  742. 
Macon  v.  Western  R  R.  1 

n  &  AuguM  i   EL   R  Co.  v.  Y 

163,  166,  168,  171.  175.  176,  183,  215. 

>n,  County  of,  v.  Shores,  l  - 
Macon,  etc.,  R  R  v.  Georgia,  eta,  R  R, 

1245, 1251, 1387,  1388,  1313,  1830, 1336. 
Macon,  etc.,  R  R  v.  Parker,  1414. 
Macon,  etc.,  R  R  v.  Stain; 
Macon,  Mayor,   etc.,   of,   v.    First   Nat'l 

Bank,  760. 
Macuee  v.  Persian,  etc..  Corp.,  8,  316,  970. 
Maddick  v.  Marshall,  1036. 
Maddox  v.  Graham.  134 
Madison  &  I.  R  R  Co.  v.  Norwich  Sav- 
ings Soc,  1191,  1245.  1249. 
Madison  Ave.,  etc.,   Church  v.  Baptist 

Ch.,  etc.,  815,  996,  115:;. 
Madison  Co.  v.  People,  133. 
Madison  County  v.  Priestly,  19 
Madison  County    Court    v.    Richmond, 

etc.,  R.  R  Co.,  152. 
Madison,  etc.,  Co.  v.  Watertown,  etc., 

Co.,  !>S2.  1245,  1591. 
Madrid  Bank  v.  Pelly,  908. 
Maeuhaut  v.  New  Orleans,  143. 
Magdaleua,  etc.,  Co.,  In  re,  1130. 
Magdalena  Steam   Nav.  Co.  v.  Johnson, 

Re,  1186. 
Magee  v.  Atkinson,  570,  577. 
Magee  v.  Badger,  34. 


to  the  foot-paging.] 

Magee  v.  Genesea  Acad.,  859. 

e  v.  Mokclumne  Hill  C.  &  M.  Co., 

1185,  1190. 

il  v.    Kauffman,    1068,    1094,    1110, 

1111. 
Magnin  v.  Dirsmore.  1537. 
Magnus  v.  ^u.enslaud,  etc.,  Bank, 

ruder  v.  Cotot  n.  880,  853,  857. 
Maguire  v.  Board  of  Revenue,  762. 
Maguire'e  Case,  847,  " 
Magwood  v.  Patterson,  6 
Magwood  v.  P.  R  Bank,  440. 
Mahan  v.  Wood,  102.  190,  63a 
Maliey  v.  Adams.  805,  206. 
Mahon  v.  Macy, 
Mahoney    v.  Atlantic  &  St   L   R  R, 

1588. 
Mahoney  v.  East,  etc..  Co.,  1 
Mahoney  v.  Spring, 
Mahoney  Mm.  C  .   ■     B  mm  tt.  '.»17. 
Main  v.  Mil 

Main,  etc.,  i  !o.  v.  Lotspeich, 
Maine  v.  Grand  Trunk.  1 t'-..  K'y,  777, 

111  17. 
Maine  Stage  Co.  v.  Longley,  1095. 
Maitland  .  854,  1086,  1078. 

Makins  v.  Percy  Ibotson  &  Sons,  1 113. 
Malecek  v.  Tower,  etc.,  R  R.  1112. 
Malleck  v.  Tower  Grove  &  L.  R'y  Co., 

1011. 
Mallett  v.  Uncle  Sam  G.   &  S.   M.   Co., 

in:,7. 
Mallorie'a  Ca 

Mai  lory  v.  Hanover,  etc.,  Works,  648. 
Mallory  v.  Mallory,  etc.,  Co.,  926. 
Mai  lory  v.  Russell,  685. 
Mallory  v.  West  Shore,  etc.,  R  R,  I 

1302. 
Malloy  v.  Mallett,  889. 
Malone  v.  Crescent  etc.,  Co.,  1100. 
Maltby  v.  Northwestern,  etc.,  R  R  Ca, 

105,  232. 
Mai  thy  v.  Reading  &  Columbia  R  R  Co., 

755,  770.  1201. 
Mammoth  Copperopolis  of  Utah,  In  re, 

733.  735. 
Manchester,  etc.,  Case,  330. 
Manchester,  etc.,  R  R  v.  Concord  R  R, 

1406,  1505. 
Manchester,  etc..  R  R  v.  Flak,  1071. 


TABLE    OF   CASES. 


CX1X 


[The  references  are 

Manchester,  etc.,  R'y  v.  Brown,  1185. 
Manchester,  etc.,  R'y  v.  Denaby,etc.,Co., 

1522. 
Manchester,   etc.,    R'y,   Re,   1410,   1411, 

1419. 
Manchester,   etc.,  Works    v.  Truesdale, 

1400. 
Manderson   v.  Commercial   Bank,  972, 

973,  1106,  1125. 
Mandeville  v.  Riggs,  277,  670. 
Mandion  v.  Fireman's  Ins.  Co.,  356. 
Mandlebaum  v.  North  Am.  Min.  Co.,  396, 

511,  546. 
Mangels  v.  Donau,  etc.,  Co.,  1327. 
Mangels  v.  Grand  Collier  Dock  Co.,  189. 
Manhattan  Bank  v.  Walker,  439,  595. 
Manhattan  Beach   Co.  v.  Harned,  396, 

398. 
Manhattan  Co.  v.  Lydig,  1090. 
Manhattan,  etc.,  Co.  v.  Dayton,  etc.,  Co. 

1586. 
Manhattan  H.  Co.  v.  Boland,  1133, 1294 
Manhattan    Hardware    Co.   v.   Phelan, 

1108,  1140,  1186. 
Manhattan  R  R  Co.  v.  New  York  EL  R 

R  Co.,  1159. 
Manhattan  R'y  Co.  v.  N.  Y.  El.  Co.,  930. 
Manheim,  etc.,  Co.  v.  Arndt,  633. 
Manistee,  etc.,  Co.  v.  Union,  etc.,  Bank, 

103. 
Manisty's  Case,  177. 
Manlove  v.  Burger.  1431. 
Mann  v.  Butler.  672. 
Mann  v.  Chandler,  1104 
Mann  v.  Cooke,  56,  174,  176,  189,  263. 
Mann  v.  Currie,  82,  176,  332. 
Mann  v.  Edinburgh,  etc.,  Co.,  914 
Mann  v.  Pentz,  159,  161,  255,   257,  258, 

259,  261,  262. 
Mann  v.  People,  977. 
Mann  v.  Williams,  453. 
Mann's  Case,  333,  358,  359. 
Manneck,  etc.,  Co.  v.  Manneck,  1156. 
Manning  v.  Norfolk,   etc.,  R  R,  1232, 

1237. 
Manning  v.  Quicksilver  Mining  Co.,  376, 

708,  711,  714 
Manns  v.  Brookville  National  Bank,  22, 

583,  613. 
Manserge  v.  Campbell,  410. 


to  the  foot-paging.] 

Mansfield  &  New  Lisbon  R  R.  Co.  v. 

Smith,  124 
Mansfield,  Coldwater  &  Lake  Mich.  R.  R 

Co.  v.  Stout,  123,  124,  234 
Mansfield,  etc.,  R  R  Co.  v.  Brown,  123, 

1499,  1507. 
Mansfield  Iron  Works  v.  Willcox.  283, 

285. 
Manufacturers',  etc.,  Bank  v.  O'Reilly. 

932. 
Manufacturers'   Nat'l   Bank   v.    Baack, 

1183,  1948. 
Manufacturing    Company   v.    Bradley, 

280. 
Manville  v.  Belden  Mining  Co.,   1109, 

1186. 
Manville   v.   Edgar,  292. 
Manville  v.   Karst,  299. 
Many  v.  Beekman   Iron  Co.,   683,   1103, 

1146. 
Mapes  v.  Second  Nat'l  Bank,  1112. 
Mapes  v.  Scott,  987,  993. 
Mape's  Estate,  In  re,  413. 
Mappier  v.  Mortimer,  303. 
Marbury  v.  Ehlen,  440. 
March  v.  Atlanta,  etc.,  R.  R.,  1306. 
March  v.  Eastern  R.  R  Co.,  479,  641,  710, 

948,  1144,  1246,  1495, 1504,  1540. 
Marchaud  v.  Loan,  etc.,  Assoc,  1048. 
Marcy  v.  Clark,  286,  356,  357. 
Mare  v.  Charles,  1105. 
Maria  Anna,  etc.,  Coal  &  Coke  Co.,  Re, 

338. 
Marie  v.  Garrison,  821,  822,  1144,  1475. 
Marietta  &  Cin.  R.  R  Co.  v.  Elliott,  633, 

634 
Marietta,  Bank  of,  v.  Pindall,  1173. 
Marin  Mansions  Co.,  Re,  1252,  1253. 
Marine  Bank  v.  Ogden,  967. 
Marine   Bank,    etc.,  v.  Clements,    1076, 

1080. 
Marine  Bank  of  Baltimore  v.  Biays,  715, 

1018. 
Marine  &F.LB.  Co.  v.  Jauncey,  1173. 
Marine  M.  Co.,  Re,  164,  1362. 
Mariners'  Bank  v.  Sewall,  860. 
Marino's  Case,  348. 
Marion  County  v.  Harvey  Co.,  155. 
Marion  Savings  Bank  v.  Dunkin,  986. 
Market,  etc.,  Bank  v.  Stump,  971. 


cxx 


TABLE    OF    CASES. 


[The  reference*  are 

Market  Nat  Bank  v.  Pacific  Nat.  Bank, 
1175. 

Market  St  R'y  v.  Central  R'y,  1551. 

Markey  v.  Langley,  1320. 

Markham  v.  Jaudon,  572,  574,  576,  588, 
603,  789. 

Markoe  v.  Hartranft,  750 

Mark  well's  Case,  1037. 

Marlborough  Branch    R  R  Co.   v.  Ar- 
nold. 94,  227. 

Marlborough   Mfg.   Co.    v.    Smith.   345, 
347,  522,  547,  631. 

Marlor  v.  Texas,  etc.,  R'y.  1  238,  1 2 10,  1 2  13. 

Marquette,  etc.,  R  R.  Co.  v.  Taft  1089. 

Marquis  of  Abercorn's  Case,  89. 

Marryatt  v.  Bank  of  England,  444. 

Marseilles  Extension  R'y  Co.,  Re,  414, 
1120. 

Marsh  v.  Burroughs,  159,  160,  166.  171, 
255,  257,  259,  260,  261,  266,  268,  269. 

Marsh  v.  Burley,  1868. 

Marsh  v.  Fairbury,  etc.,  R  R  Co.,  1539. 

Marsh  v.  Fulton  Co.,  131.  156. 

Marsh  v.  Keating,  505,  576,  783. 

Marsh  v.  Stone,  505. 

Marshall  v.  Baltimore  &  Ohio  R  R  Co., 
1171,  1538,  1539,  1948. 

Marshall  v.  Farmers',  etc..  Bank.  1032. 

Marshall  v.  Glamorgan  Iron  &  Coal  Co., 
214. 

Marshall  v.  Golden  Fleece,  etc.,  Co.,  184 

Marshall  v.  Loveless,  670. 

Marshall  v.  National,  etc..  Bank  of  Eng- 
land, 485. 

Marshall  v.  Queensborough,  1068. 

Marshall  v.  Thurston,  475,  477. 

Marshall  v.  Western,   etc.,    R    R,    154, 
963,  1484. 

Marshall,  etc.,  Co.  v.  Killian,  189,  249. 

Marson  v.  Deither,  239,  261. 

Marten  v.  Gibbon,  567,  715. 

Martens  v.  International,  etc.,  Soc,  1174. 

Martin  v.  Central,  etc.,  R  R.,  1018. 

Martin  v.  Continental  Railway  Co.,  955, 
1500,  1506. 

Martin  v.  Fewell,  309,  325. 

Martin  v.  Hill,  483,  494. 

Martin  v.  Merriweather,  1238. 

Martin  v.  Mobile  &  O.  R  R  Co.,  615, 
997,  1544. 


to  the  foot-paging.] 

Martin  v.  Niagara,  etc.,  Mfg.    Co.,  1056, 

1080.    1081,   1082,    1109,    1110,    1244, 

1248,  1261,  1265. 
Martin  v.  Pensacola  R  R  Co.,  126,  639, 

640. 
Martin  v.  Second,  etc.,  R'y  Co.,  1558. 
Martin  v.  Sedgwick,  484. 
Martin    v.    Somerville,    etc.,    Co.,    1227, 

1324,  1338,  1476. 
Martin  v.  Walton,  1122. 
Martin  v.  Webb,  1086.  1116. 
Martin  v.  Williams.  676. 
Martin  v.  Zellerbach,  964. 
Martin's  Estate,  466. 
Martin.  Matter  of,  070. 
Martindale  v.  Wilson,  etc.,  Co.,  92$. 
Martinius  v.  Helmuth,  527. 
Martino  v.  Commerce,  etc.,  Co.,  1024. 
Martinsburg,  etc.,   R  R   v.  March,  1548. 
Marye  v.  Strouse,  560.  567. 
Maryland,  Farmers"  Hank  of,  v.  Iglchart, 

687. 
Maryland  Fire  Ins.  Co.    v.   Dalrymple, 

004,  606,  781,  782. 
Marysville.  etc.,  Co.  v.  Johnson,  113. 
Marysville,  etc.,  Co.  v.  Munson,  890. 
Marzette's  Case,  415. 
Mashur  v.  St.  Louis,  etc.,  R  R  Co.,  1534. 
Masoinberd's  Settlements,  Re,  486. 
Mason  v.  Alexander.   287,   290,   350,  356. 
Mason  v.  Cronk.  976,  1251. 
Mason  v.  Davol  Mills,  386. 
Mason  v.  Decker,  465. 
Mason  v.  Harris.  900,  915.  1115.  1149. 
Mason  v.  New   York  Silk,  etc.,  Co.,  279. 
Mason  v.  Pewabic  Min.  Co.,  '.HO.  958. 
Mason  v.  York,  etc..   R.  R.   1202,    1271, 

1299,  1322. 
Masonic,  etc.pAssoc.  v.  Channell,  187, 228. 
Masonic,  etc.,  Co.  v.  Sharpe,  736. 
Massachusetts  v.  Western    U.  Tel.   Co., 

777. 
Massachusetts,  etc.,  Can.  Co.  v.  Cherokee, 

144. 
Massachusetts,  etc.,  Ins.  Co.  v.  Chicago, 

etc.,  R  R,  1325,  1329.  1343.  1460. 
Massachusetts  Iron  Co.  v.  Hooper.  686. 
Massey  v.  Bldg.  Ass'n,  878. 
Masters  v.  Rossie  Lead  Min.  Co.,  257.  269, 

288,  305,  1146. 


TABLE    OF   CASES. 


CXXI 


[The  references  are 

Master's  Case,  342,  357,  358,  448. 
Masterton  v.  Boyce,  455. 
Mather  v.  Eureka,  etc.,  Co.,  929. 
Mathews  v.  Theological  Seminary,  997. 
Mathez  v.  Neidig,  255,  279.  283,  299,  300. 
Mathis  v.  Pridham,  70,  120,  122,  210,  240, 

241,  243,  248,  256,  265. 
Matson  v.  Alley,  1074. 
Matthewman's  Case,  Mrs.,  105,  106. 
Matthews  v.  Albert,  240,  269,  272,   284, 

288,  300,  305,  330. 
Matthews  v.  Associated  Press,  662,  1023. 
Matthews  v.  Cady,  456. 
Matthews  v.  Coe,  790. 
Matthews  v.  Dubuque  Mattress  Co.,  1105. 
Matthews  v.  Great  Northern,   etc.,   R'y 

Co.,  366,  374,  375. 
Matthews  v.  Hoagland,  413. 
Matthews  v.  Massachusetts  Nat'l  Bank, 

504,  505,  517,  519,  548,  1085. 
Matthews  v.  Murchison,  423,  1311,  1331, 
1471. 

Matthews  v.  Patterson,  274. 

Matthews  v.  Skinner,  987. 

Matthews  v.  Theological  Seminary,  998. 

Matthews  v.  Trustees.  853. 

Mattingly  v.  Roach,  433,  459. 

Mattison  v.  Demarest,  1158. 

Maturin  v.  Tredinnick,  482,  495,  913. 

Maund   v.   Monmouthshire    Canal   Co., 
1009. 

Mauney  v.  High  School  Mfg.  Co.,  1018. 

Maunsell  v.  Midland  Great  Western  R'y 
Co.,  104,  422,  1508, 1538. 

Maupin  v.  Virginia,  etc.,  Co.,  1091. 

Maustin  v.  Durgin,  661. 

Maux,  etc.,  Co.  v.  Branegan,  923. 

Maxted  v.  Fowler,  479,  488,  787. 

Maxted  v.  Norris,  569. 

Maxted  v.  Paine,  563,  569,  579. 

Maxton  v.  Gheen,  472,  473. 

Maxwell  v.  Atchison,  etc.,  R.  R,  1179. 

Maxwell  v.  Dulwich  College,  1068. 

Maxwell  v.  Port  Tennaut  Co.,  462. 

Maxwell's  Case,  323. 

Maxwell's  Trusts,  In  re,  743. 

May  v.  Block,  295. 

May  v.  Grave,  408. 

May  v.  Memphis  Branch  R  R  Co.,  229, 
246. 


to  the  foot-paging.'] 

May  v.  Printup,  1342,  1416. 

Maybin  v.  Kirby,  500,  589. 

Mayer  v.  Child,  465. 

Mayer  v.  Denver,  etc.,  R  R,  1137,  1138, 

1146. 
Mayer  v.  Fort  Wayne,  etc.,  Co..  1481. 
Mayers  v.  Manhattan  Bank,  316. 
Mayers  v.  York  &  Cumberland  R  R  Co., 

37. 
Mayhew  v.  West  Va.,  etc.,  Co.,  1359. 
Mayhew's  Case,  344,  348,  665. 
Mayle  v.  Landers,  1147. 
Maynard  v.  Board,  etc.,  820. 
Maynard  v.  Bond,  142,?. 
Maynard  v.  Eaton,  358. 
Maynard  v.  Fireman's  Fund  I.  Co.,  1008. 
Maynard  v.  Lumberman's    Nat'l  Bank, 

601. 
Maynard  v.  Tilden,  599. 
Maynard's  Case,  34,  36.  77. 
Mayo  v.  Knowlton,  485, 494, 495, 566,  590. 
Mayo  v.  Moritz,  654. 
Mayor  v.  Baltimore  &  O.  R  R  Co.,  423, 

1493,  1505. 
Mayor  v.  Burgesses,  1017. 
Mayor  v.  Wylie,  1107. 
Mayor  &  Commonalty  of  Colchester  v. 

Lotten,  1220. 
Mayor,  etc.,  v.  Bailey,  1009. 
Mayor,  etc.,  v.  Dry    Dock,    etc.,    R    R, 

1571. 
Mayor,  etc.,  v.  Houston,  etc.,  R'y  Co., 

1554,  1555,  1556,  1558,  1566. 
Mayor,  etc.,  v.  Inman,  931. 
Mayor,  etc.,  v.  Knoxville,    etc.,    R     R, 

1268. 
Mayor,  etc.,  v.  N.  Y.   &  Staten  I.,  etc.. 

Co.,  1169. 
Mayor,  etc.,  v.  Norfolk  R'y  Co.,  1540. 
Mayor,  etc.,  v.  Norwich,  etc.,  R  R,  628. 
Mayor,  etc.,  v.  Tenth  Nat'l  Bank,  1118. 
Mayor,  etc.,  v.  Third  Ave.  R  R,  1574. 
Mayor,  etc.,  v.  Troy,  etc.,  R  E.,  1552. 
Mayor,  etc.,  v.  Twenty,  etc.,  R  R  Co., 

772,  887,  1575. 
Mayor,  etc.,  v.  Vernon,  etc.,  Co.,  1592. 
Mayor,  etc.,  of  Baltimore  v.  Baltimore, 

etc.,  R'y  Co.,  753,  759. 
Mayor,  etc.,  of  Baltimore  v.  Ketchum, 
506,  507. 


CXX11 


TABLE    OF    CASES. 


[The  references  are 

Mayor,  etc.,  of  Baltimore  v.  Pittsburgh  I 

&  Connellsville  R  R  Co.,  886. 
Mayor,  etc.,  of  City  of  Houston  v.  Hous- 
ton, etc.,  Co.,  883. 
Mayor,  etc.,  of  Macon  v.  First  Nat'l  Bank, 

760. 
Mayor,  etc.,  of  Worcester  v.  Norwich  & 

Worcester  R  R  Co.,  637. 
Mayor  of  Southampton   v.  Graves,  677, 

681.  682. 
Mayor  of  Stafford  v.  Bolton,  1018. 
Mays  v.  Foster,  1051. 
Maysville  Turnpike  Co.  v.  How,   1091. 
M  Aden  v.  Commissioners,  etc.,  766, 
McAleer  v.  McMurray, 
M.  Allen  v.  Woodcock, 
McAllister  v.  Indianapolis   &   ('in.  R  R 

Co.,  190. 
McAllister  v.  Kuhn,  491,  78 
McAllisfc  r  v.  Plant.  v:<^.  1966,  L269,  1810, 

1818 
McArthur  v.  Montclair  K'y.  1 1 
McArthur  v.  Seaforth,  678,  788. 
McArthur  v.  Times,  etc.,  Co.,  1045. 
McAuley  v.  Billenger,  118. 
McAuley  v.  Columbus,  etc.,  K'y.  875. 
McAuley  v.  York  Mining  Co.,  L8,  . 
McAvity  v.  Lincoln,  etc.,  Co,  B 
McBee  v.  Marietta,  etc.,  K'y.  l 
McBride  v.  Grand,  etc.,  Co,  U8L 
McBride  v.  Hardin  County.  155. 
McBride  v.  Porter.  614 
McBurney  v.  Martin.  571,  ->72,  588. 
McCabe  v.  Goodfellow,  609. 
McCabe  v,  O'Connor,  93. 
McCall  v.  Byram   Mfg.    Co.,  853,    1057, 

1058,  1059,  1164. 
McCall  v.  California,  1947. 
McCall  v.  Town  of  Hancock,  149. 
McCallie  v.  Chattanooga,  147. 
McCallie  v.  Walton,  988. 
McCallion  v.  Hibernia,  etc.,  Soc,  661. 
MoCallum  v.  Purssell,  etc.,  Co.,  1057. 
McCalmont  v.  Phil.,  etc.,  R  R  Co.,  1267, 

1272. 
McCandless  v.  Richmond,  etc.,  Co..  1517, 

1546. 
McCann  v.  First  Nat  Bank,  392,  393. 
McCargo  v.  Crutcher,  682. 
McCartee  v.  Orphan  Asylum  Soc,  991, 
995. 


to  the  foot-paging.) 

i 

McCarthy  v.  Gould,  609. 

McCarthy  v.  Lavasche,  232,  254,  283, 390. 

McCarthy  v.  Peake,  1417. 

McCarty  v.  Selinsgrove,  etc,,  R  R,  168, 

187. 
Md  'laren  v.  Franciscus,  280,  349. 
McClaury  v.  Hart,  1062. 
Md   lean  v.  Stuve,  47".. 
McClellan  v.  Detroit,  etc.,  Works.   966, 

1076,  1244. 
McClellan  v.  Scott,  193.  195,  800,  208. 
McClelland  v.  Norfolk,  etc.,  R  R.   1224. 

1282,   1286. 
McClellan.!  v.  Whiteley.  89,  109. 
M  Clinch  v.  Bturgis,  313. 
Md  luet  v.  Manchester,  etc.,  R  R,  1  198, 

1583 
Md  lure    v.    People's    Freight   K'y    Co., 

129,  187,  040. 
McCIure  v.  Township  of  Oxford,   181, 

146. 
M<  <  lluakey  v.  ( !romwell,  81 
M<  I  !omb  v.  Barcelona,  etc.,  Ass'n,  i">.  '.»i. 

1079,  1265. 
M.i  tomb  v.  •  Ihicago,  etc.,  R  B 
Md  oinl.  v.  (  (edit  Mobilier  of  Am< 

etc,  91,  10.-). 
McComb  v.  Weaver,  11 

nahy  v.  Centre  &   Kkto  Turnpike 
R  Co.,  188. 
McConihy  v.  Wright,  890. 
McConnell  v.  Ha  mm,  138,  139. 
McConnell  v.  Pedigo,  1541. 
Mn  ord  v.  Ohio  &  Miss.  R  R  Co.,  240. 
McCord,  etc.,  Co.  v.  Glen.  878. 
McCormick  v.  Great  Bend,  etc.,  Co.,  113, 

846. 
Met  ormick  v.  Parry,  1268. 
McCormick  v.  Penn.  Central  R  R  Co., 

lis::. 
McCourry  v.  Suydam.  547. 
McCoy  v.   Cincinnati,   eta,   R   R   Co., 

1178. 
McCoy  v.  Farmer,  889. 
McCoy  v.  Washington  County,  1282. 
McCracken  v.  Mclutyre,  82. 
McCray  v.  Junction  R  R  Co.,  633,  1490, 

1507. 
McCready  v.  Rumsey,  344,  688,  689.  692, 

693,  695. 
McCrosky  v.  Ladd,  1098. 


TABLE    OF    CASES. 


CXX111 


[The  references  are 

McCulloch  v.  Norwood,  893. 

McCulloch  t.  Smith,  1015. 

McCulloch  v.  State  of  Maryland,  2,  760, 

1950. 
McCullough  v.  Merchants',  etc.,  Co.,  20, 

1419. 
McCullough  v.  Moss,  285,  296,  350,  1049, 

1076. 
McCullough  v.  Talledega  Ins.  Co.,  1094. 
McCully  v.  Pittsburgh,  etc.,  R.  R  Co., 

109,  112,  207,  233,  237.  238,  242. 
McCune  Min.  Co.  v.  Adams,  230. 
McCurdy  v.  Meyers,  958. 
McCurdy's    Appeal,    1293,    1295,     1301, 

1323,  1335. 
McCurry  v.  Suydam,  522. 
McDaniels  v.  Flower  Brook  Mfg.  Co., 

589,  803,  807,  811.  1098,  1099. 
McDermott  v.  Dongan,  245. 
McDermott  v.  Hannibal,  1113. 
McDermott  v.  Harrison,  213,  488. 
McDonald  v.  Chisholm,  1074,  1080,  1100. 
McDonald  v.  Houghton,  1539. 
McDonald  v.  McKinnon,  1214. 
McDonald  v.  Ross-Lew  in,  264,  1430. 
McDonald  v.  State,  1516. 
McDonnell  v.  Alabama,   etc.,  Ins.  Co., 

272,  275,  276,  280,  282,  303,  304,  630. 
McDonnell  v.  Grand  Canal  Co.,  1143, 1508. 
McDonough  v.  Bank,  1046. 
McDonough  v.  Phelps,  174,  263,  291,  292. 
McDonough  v.  Webster,  469. 
McDougall  v.  Gardiner,  980,  1149. 
McDougall  v.  Jersey,  etc,  Co.,  225,  226, 

722. 
McDowall  v.  Sheehan,  279,  304,  354,  849, 

852,  925. 
McDowell  v.  Bank  of  Wilmington,  687, 

693. 
McDowell  v.  Chicago  Steel  Works,  599, 

604. 
McDowell  v.  Grand  Canal  Co.,  1503. 
McDowell  v.  N.  Y.,  etc.,  R  R,  929. 
McDowell  v.  Rutherford,  etc.,  Co.,  136. 
McDowell's  Appeal,  586. 
McDuffee  v.  Portland,  etc.,  R  R,  1519, 

1520,  1521. 
McElhenny's  Appeal,  913. 
McElrath  v.  Pittsburgh,  etc.,  R  R,  1213, 
1215,  1224,  1306,  1321,  1335.  1345. 


to  the  foot-paging.] 

McElrath,  In  re,  1440. 
McElroy  v.  Carmichael,  468. 
McElroy  v.  Continental  R'y,  1177. 
McElwee,  etc.,  Co.  v.  Trowbridge.  966. 
McEuen  v.  West  London  Wharves,  220, 

345,  352. 
McEwan  v.  Woods,  568,  579. 
McEwan  v.  Campbell,  1036. 
McEwen  t.  Montgomery,  etc.,  Co.,  1115. 
McFadden  v.  May's  Landing  &  E.  H.  C. 

R  Co.,  1143,  1284,  1289,  1323,  1324.  • 
McFall  v.  McKeesport.  etc.,  Co.,  453. 
McFareon  v.  Triton,  233. 
McFarland  v.  Triton  Ins.  Co..  879. 
McFarlin  v.  Triton  Ins.  Co.,  986. 
McFerran  v.  Jones,  609. 
McGary  v.  People,  1016.  1017. 
MeGarzell  v.  Hazelton  Coal  Co.,  1058. 
McGeary's  Appeal.  444. 
McGinness  v.  Adriatic  Mills,  1112,  Ilia 
McGinnis  v.  Smythe,  574. 
McGinty  v.  Athol,  etc.,  Co.,  796,  805. 
McGoon  v.  Scales,  860. 
McGourkey  v.  Toledo,  etc.,  R'y,  903,  905, 

1357,  1378,  1386. 
MeGraw  v.  Cornell  University.  996. 
McGraw  v.  Memphis,  etc.,  R  R.,  1369. 
McGreary  v.  Chandler,  670. 
McGregor  v.  Covington,  etc.,  R  B.,  1207. 
McGregor  v.  Erie  R'y  Co.,  1171,  1542. 
McGregor  v.  Home  Ins.  Co.,  379. 
McGrew  v.  City  Produce  Exchange,  316, 

472,  476. 
McGuffey  v.  Humes,  786,  790. 
McGuire  v.  Evans,  405. 
McHenry  v.  Duffield,  1104. 
McHenry  v.  Jewett,  784,  828,  831. 
McHenry  v.  N.  Y.,  etc.,  R  R,  1149,  1407, 

1417. 
McHenry's  Petition,  1329. 
Mcllcse  v.  Wheeler,  87,  91,  93,  109,  110, 

232,  283,  285. 
Mcllhenny  v.  Binz,  1068. 
Mcllrath  v.  Suwre,  1366. 
Mclndoe  v.  City  of  St.  Louis,  993. 
Mclntire  v.  Blakeley,  600. 
Mcintosh  v.  Flint,  etc.,  R  R  Co.,  365, 

372,  376,  682, 
Mclntyre  v.  McLane  D.  Ass'n,  234. 
Mclntyre  v.  Preston,  982,  1103. 


CXX1V 


TABLE   OF   CASES. 


[The  references  are 

Mclntyre  v.  Trustees,  etc.,  683. 
Mclntyre  v.  UnioD  College,  1146. 
Mclntyre    Poor    School    v.    Zanesville 

Canal,  etc.,  Co.,  858. 
Mclver  v.  Robinson,  761,  765. 
McKane  v.  Adams,  662. 
McKay  v.  Beard,  888. 
McKay's  Case,  908,  915. 
McKee  v.  Grand  Rapids,  etc..  Ry.  1203, 

1275,  1294,  1560. 
McKee  v.  Vernon  County,  1199,  1231. 
McKee  v.  Wilmington,  etc.,  R  R,  1577. 
McKeen  v.  County  of  Northampton,  750. 
McKeesick  v.  Seymour,  etc..  Co.,  390. 
McKeever  v.  Daily.  15s. 
McKelvey  v.  Crockett.  252. 
McKenney  v.  Diamond,  etc.,  Assoc,  1028, 

1083. 
McKenney  v.  Haines,  780,  782,  785,  788, 

790. 
McKensey  v.  Edwards,  1105. 
McKenzie  v.  Kitt ridge.  842. 
McKeon  v.  Kearney,  666. 
McKiernan  v.  Lusgan,  1087. 
McKim  v.  Glenn,  882,  842. 
McKim  v.  Bibbard,  486. 
McKim  v.  Odom.  2.  12,  683,  116ft 
McKinney  v.  O.  &  M.  R  R.,  I486, 
McKusick  v.   Seymour,   etc.,   Co.,    702. 

730,  960. 
McLanahan  v.  North  River  Bridge  Co., 

1194. 
McLane  v.  King,  921,  1896. 
McLaue  v.  Placerville,  etc.,  R  R,  1300, 

1309,  1317,  1320,  1441,  1458. 
McLaren  v.  First  Nat'l  Bank,  1081. 
McLaren  v.  Franciscus,  357. 
McLaren  v.  Pennington.  886,  889. 
McLaughlin  v.  Chad  well,  762,  766. 
McLaughlin  v.  Detroit,  etc.,  R   R   Co., 

87,  378,  1130. 
McLean  v.  Eastman,  731,  732. 
McLean  v.  Lafayette  Bank,  693,  987. 
McLean,  Matter  of,  768. 
McLendon  v.  Commissioners,  1236,  1237. 
McMahon  v.  Macy,  267.  296,  330. 
McMahon  v.  Morrison,  1515.  1547. 
McMahon  v.  New  York,  etc.,  R   R   Co., 

36. 
McMahon  v.  Second  Ave.  R  R,  1571. 


to  the  foot-paging.] 

McMahon  v.  The    North,    etc.,    Works, 

1255. 
McMahon,  In  re,  763,  766. 
McManus  v.  Lancashire,  etc.,  R'y.   1537. 
M<  Master  v.  Davidson,  350,  351,  362. 
M<  Masters  v.  Reed's  Ex'ra,   1105,   1190, 

1193. 
McMillan  v.  Carson,  104. 
McMillan  v.  Maysville  &  Lexington  R. 

R  Co.,  119,  122. 
McMillen  v.  Boyles.  134. 
McMillen  v.  Lee  Co.,  134. 
McMill'a  Case.  209. 

MrMinnville,  etc.,  R  R  v.  Huggins,  1  188. 
McMullen  v.  Maysville  &  Lex  R  R  Co., 

286. 
McMullin  v.  Leitch,  1502. 
McMullin'a  Appeal.  1136. 
McMurray  \.  Moran,  1200. 
McMurray  v.   Northern,  etc.,  R'y  Co., 

1151. 
McMurrich  v.  Bond  Head  Harbor  Co., 

521,  686,  782,  787,  791. 
McMurtry     v.    Montgomery,   etc.,    Co., 

I860,  1855. 
McNab  v.  McNab,  etc.,  Co..  719,926,982. 
McNaughton  v.  McLean,  610. 
McNeal  V.  Mechanics',  etc.,  Assoc,  608, 

755. 
McNeeley  v.  Woodruff,  799.  830,  840,  841. 
McNeil  v.  Boston  Cham,  of  Com.,  1073. 
McNeil  v.  Chicago  City  R'y,  1558 
McNeil  v.  Tenth  National  Bank.  483,  516, 

517,  519,  545,  547,  548,  571,  573,  583 

598,  601,  699. 
McNeish  v.  Hulless  Oat  Co.,  672. 
McNichol  v.  United  States,  etc.,  Agency, 

1176. 
McNulta  v.  Lockridge,  1446,  1456,  1462. 
McPherson  v.  Cox,  1811. 
McPherson  v.  Foster,  952. 
McQueen  v.  Middletown,  etc,  Co.,  1175. 
McRea  v.  Russell,  219. 
McRoberte  v.  Washburne,  1582. 
McVeagh  v.  Chicago,  755. 
McVeigh  v.  Loomis,  765. 
McVicker  v.  American  Opera  Co.,  961. 
McVicker  v.  Cone,  308,  1041. 
McVicker  v.  Ross,  671. 
McWhorter  v.  Lewis,  1104. 


TABLE    OF    CASES. 


CXXV 


[The  references  are 

Mead  v.  Burin,  200. 
Mead  v.  Keelev,  233,  1092,  1185,  1190. 
Mead  v.  New  York,  etc.,  R.  R,  875,  1270. 
Meadow  Dam  Co.  v.  Gray,  232,  323. 
Meads  v.  Merchants'  Bank,  1090. 
Meads  v.  Walker,  98. 
Meads  v.  "Wandell,  1577. 
Mealey  v.  Nickerson,  1136. 
Means  v.  Rees,  481. 
Means  v.  Swormstedt,  1104. 
Mean's  Appeal,  262,  271,  280. 
Mears  v.  Moulton,  670. 
Meason's  Estate,  22. 
Measure  v.  Carleton,  405. 
Mechanics'  Bank,  etc.,  v.  Bank  of  Co- 
lumbia, 1102,  1108. 
Mechanics'  Bank   v.  Mechanics'  Bank, 

691. 
Mechanics'  Bank  v.  Merchants'  Bank, 

687,  695. 
Mechanics'  Bank   v.  Meriden    Agency, 

104. 
Mechanics'  Bank  v.  New  York,  etc.,  R 

R  Co.,  23,  381,  384,  395,  545,  547. 
Mechanics'  Bank  v.  Richards,  527. 
Mechanics'  Bank  v.  Schaumberg,    1117. 
Mechanics'  Bank  v.  Seton,  440,  461,  525, 

532,  1118. 
Mechanics'  Bank  v.  Smith,  1022.  1109. 
Mechanics'  Bank  v.  Thomas,  757. 
Mechanics'  Banking  Ass'n  v.  Mariposa 

Co.,  523. 
Mechanics'  Banking  Ass'n  v.  New  York 

&  S.  White  Lead  Co.,  1192,  1244. 
Mechanics'  B.  &  L.  Association  v.  Con- 
over,  582,  585,  613. 
Mechanics',  etc.,  Assoc,  v.  King,  180, 696. 
Mechanics',  etc.,  Bank   v.   Burnett,  etc., 

Co..  1056,  1058. 
Mechanics',  etc.,  Co.   v.    Hall,    116,    174, 

175. 
Mechanics',  etc.,  Ass'n,  Appeal  of,  708. 
Mechanics'  Nat'l   Bank    of  Newark    v. 

Burnet  Mfg.  Co.,  837. 
Mechanics'  Soc,  In  re,  875. 
Medberry  v.  Short,  1105. 
Medbury  v.  N.  Y,  etc.,  R  R  Co.,   1109. 
Medder  v.  Norton,  1132. 
Medical,  etc.,   Soc.    v.   Weatherly,   800, 
1025. 


to  the  foot-paging] 

Medical  Inst.  v.  Patterson,  2. 
Medill  v.  Collier,  314. 
Medler  v.  Albuquerque,  114. 
Medomak  Bank  v.  Curtis,  1086,  1093. 
Medway  Cotton  Mf'y  v.   Adams,  1016, 

1017,  1018. 
Meed  v.  Keeler,  1059. 
Meehan  v.  Sharp,  459. 
Meeker  v.  Sprague,  1335,  1433. 
Meeker  v.  Winthrop  Iron  Co.,  815,  943, 

947,  1158. 
Mege's  Case,  48,  64. 

Megibben's  Adm'rs  v.  Perin,  461,  1051. 
Meier  v.  Kansas,  etc.,  R'y,  1419,  1420. 
Meints  v.  East  St.  Louis,  etc.,  Co.,  252. 
Meisser  v.  Thompson,  279. 
Melchert  v.  American  U.  Tel.  Co.,  469, 

475. 
Melendy  v.  Barbour,  1433,  1446,  1447. 
Melendy  v.  Keen,  195. 
Melhado  v.  Hamilton,  363. 
Melhado  v.  Porto,  etc.,  Co.,  1045,  1046. 
Melledge  v.  Boston  Iron  Co.,  1016,  1017, 

1068. 
Mellen  v.  Moline,  etc.,  Works,  1141,  1272. 
Mellen  v.  Town  of  Lansing,  152. 
Melvin  v.  Lamar  Ins.  Co.,  189,  213,  215, 

330,  587. 
Melvin  v.  Lisenby,  149. 
Memphis  v.  Adams,  1099. 
Memphis  Branch  R  R  Co.  v.  Sullivan, 

222,  229,  238,  631,  633,  640. 
Memphis  City  v.  Dean,  1148,  1158,  1161. 
Memphis,  City  of,  v.  Ensley,  756. 
Memphis,  City  of,  v.  Farrington,  758. 
Memphis,  etc.,  Co.  v.  Grayson,  1126,  1158. 
Memphis,  etc.,  Co.  v.  Memphis,  etc.,  R. 

R,  1246,  1248. 
Memphis,  etc.,  R  R  v.  Alabama,  1542, 

1544. 
Memphis,  etc.,  R  R  Co.  v.  Dow,  69. 
Memphis,  etc.,  Co.  v.  Williamson,  1161. 
Memphis,  etc.,  R'y  v.  Striugfellow,  1447. 
Memphis,  etc.,  R  R  v.  Railroad  Com" is. 

1274,  1275. 
Memphis,  etc.,  R  R  v.  State,  1296,  1348. 
Memphis,  etc.,  R  R  v.  Wood,  424,  834, 

1148. 
Memphis,   Kan.    &    Col.    R.    R    Co.    v. 
Thompson,  125,  126,  151. 


(XXVI 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.] 


Merchants'  Bank  v.  Petersburg,  etc..  R 

R.  186ft 
Merchants'  Bank  v.  Rudolf,  112L 
Merchant-'    Bank  v.    Slioti- 

692.  717. 
M.  i.  bants'  Bank  v.  State  Bank,  1085, 

1092,   ll'.'l. 
Merchants'  Hank  of  Canada  v.  Living- 
Mi  i  bants'  Bank  of  New  Haven  v.  1 
.  Merchants,  <t  ■ .  r.  B  inkof  England,  " 


Memphis  &  L  R  Co.  v.  Dow.  1185,  1186, 

1193, 1204, 1208, 1211. 1202.  1266,  1270, 

1305,  1308,  1309.  1810. 
Memphis  &  Little   Rock   R.    R   Co,    w. 

Berry,  77 1. 
Memphis  R  R  Co.  v.  Com'rs,  77::.   l  I-::. 
Menachov.  Ward,  1520,  1599. 
Menasha  v.  Hazard,  145,  15ft 
Menasha  v.  Milwaukee,  etc.,  R  R.  968, 

lisn. 

Mendelsohn    v.    Anaheim   Lighter  Co., 

1010,  1011. 
Mend^nl. all  v.  West  Chester,  eta,  R  R,     Merchants',  eta,  Bank  v.  Detroit,  i 


1335,  1337. 
Mendenhall,  Re.  607. 
Mendham  v.  Losey,  lOfl 
Menierv.  Hooper's  TeL  Works,  '.»16. 
Menster's  Case,  195. 
Mentz,  Town  uf,  v.  Cook,  136. 
Mercantile  Bank  v.  New  York 

766. 
Mercantile  Co.,  In  re,  727. 
Mercantile  Statement  Co.  v.  Kneel, 

689. 
Mi  nantilr  Trust  Co.  v.  Kanawha 

R'y,  1846,  1421,  1451,  1465. 
Mercantile  T.  I  kx  v.  Lamoille,  etc.,  B,  R., 

1322,  1326. 
Mercantile  T.  Co.  v.  Missouri  R'y,   1290, 
1308,   1885,   1889,    1842,    1848,    1851, 
1405,    1408,   1421,    1489, 
Mercantile  T.  Co.  v.  Pittsburg,  etc  R 

R.  1841. 
Mercantile  T.  Co.  v.  Portland,  etc,  R 

R,  1812,  1825. 
Mercantile   T.   Co.   v.   Texas,    etc.,    R*y, 

1304,  1514,  1515. 
Mercantile  T.  Co.  v.  Zan.svillr,  etc.,  R'y, 

1213. 
Mercer  County  v.  Hacket,  182,  1202, 1214. 
Mercer  Co.  v.  Pittsburgh,  eta,  148.  150. 
Merchants'  Bank  v.  Central  Bank,  1< 

1093,  1107. 
Merchants'  Bank  v.  Chandler,  207,  290. 
Merchants'  Bank  v.  Cook,  582,  589. 
Merchants'  Bank  v.  Heard.  SG3. 
Merchants'  Bank  v.  Goddin,  1098. 
Merchants'  Bank  v.  Livingston,  699. 
Merchants'  Bank  v.  Marine  Bank,  1112, 

ma 


Works,  1087. 

I   .  Bank  r.  Norths 

Mi  n  bants*,  •  tc  .  Bank  r.  Ri<  b  ird 

501,  517,  518 
Mi  rchants',  ink  v.  Stone,  81& 

Merchants',  eta,  Ca  v.  BU 
Merchants',  eta,  Ca  v,  31    un- 

it Ca,  1120 

bants*, 
Merchants',  ne  ^.    ■  i    * 

1147,  1148. 
Merchants',  eta,  Natl  Bankr.  Commi  i 

cial,  eta,  Ca,  I 
Mi  rchants'  Fund  assoa,  Appeal  of,  71 
Merchants'  ManoX  I  -.   v.   Grand,  eta, 

R'y,  111 

bants'  Mut.  Ina  Ca  v.  Brower,  609, 

612 

bants'  Nat?!  Bank  v.   Chattanooga 

Can.  Ca,  1418. 
Merchants' Nafl  Bank  v.  dark,  1105. 
Merchants'  Nat'l  Bank  v.  Qaslin,  B 
Merchants'    Nat'l    Hank    v.    Hall. 

600. 
Merchants'    Nat'l    Bank    v.  Pendleton, 

Bit 
Merchants'  Nat'l  Bank  v.  Robison,  100. 

Meredith's  7ft 

Mi  riden  Tool  Ca  v.  Morgan,  881. 

Merrick  v.  Brainerd,  317. 

Merrick  v.  Burlington  &  W.  P.  R  Co., 

1096,  noa 

Merrick  V.  Peru  Coal  Co..  927. 
Merrick  v.  Reynolds,  882, 
Merrick  v.  Van  Santvoord,  317,  319. 
1171. 


TABLE    OF   CASE8. 


CXXV11 


[The  references  are 

Merrick,  etc.,  Co.  v.  Philadelphia,  etc., 

Co.,  110. 
Merrill  v.  Beaver,  235,  401. 
Merrill  v.  Call,  448. 
Merrill  v.  Consumers'  Coal  Co..  1081. 
Merrill  v.  Farmers'  L.  &  T.  Co.,  1303. 
Merrill  v.  Gamble,  401. 
Merrill  v.  Suffolk  Bank,  266,  296,  893. 
Merrimac  Mining  Co.  v.  Bagley,  176,  343. 
Merrimac  Mining  Co.  v.  Levy,   102,  111, 

342,  343. 
Merrimau  v.  Magivennis,  313. 
Merritt  v.  Lambert,  1108. 
Merritt  v.  Reid,  302. 
Merry  v.  Nickalls,  563. 
Merryman  v.  Carroll,  etc.,  Co.,  859. 
Merwin  v.  Hamilton,  567. 
Messchaert  v.  Kennedy,  1322. 
Messenger  v.  Pennsylvania  R  R,  1520, 

1521. 
Messersmith   v.  Sharon   Savings   Bank, 

342. 
Metcalf  v.  First  Parish,  406. 
Metcalf  v.  Williams,  485. 
Metcalf  s  Case,  908. 
Methodist  Chapel  v.  Herrick,  1067. 
Methodist  Church  v.  Remington,  992. 
Methodist,  etc.,  Church  v.  Pickett,  232, 

882. 
M.  E.  Patterson  Memorial  Church,  Re,  7. 
Metropolis  Bank  v.  Or  me,  1018. 
Metropolis,  Bank  of,  v.  Guttschlick.  1093. 
Metropolis,  Bank  of,  v.  Jones,  1055,  1075, 

1086,  1113. 
Metropolitan  Bank  v.  Godfrey,  999. 
Metropolitan  Bank  v.  Heiron,  915,  1131. 
Metropolitan  City   R'y    Co.   v.    Chicago 

W.  D.  R'y  Co.,  1529. 
Metropolitan  Co.  v.  Hawkins,  681. 
Metropolitan,  etc.,  Ass'n,  Re,  195. 
Metropolitan,  etc.,  Bank  v.  St  Louis,  etc., 

Co.,  447. 
Metropolitan,  etc.,  Co.  v.  Domestic,  etc., 

Co.,  931,  1062,  1072,  1073. 
Metropolitan,  etc.,  R  R  Co.  v.  Manhat- 
tan, etc.,  R  R,  1505. 
Metropolitan,  etc.,  R'y  v.  Kneeland,  927. 
Metropolitan,  etc.,  R'y    Co.   v.   Manhat- 
tan, etc.,  R'y  Co.,  1048,  1052,  1153. 
Metropolitan,  etc.,  T.  Co.,  Matter  of,  888. 


to  the  foot-paging.'] 

Metropolitan   Grain,  etc.,  Exchange   v. 

Chicago  Board,  1600. 
Metropolitan  R'y  Co.  v.  Manhattan  R'y 

Co.,  930. 
Metropolitan  R.  R  Co.  v.  Quincy  R  R 

Co.,  1568. 
Metropolitan  Sav.  Bank  v.  Mayor,  etc, 

of  Baltimore,  506. 
Metropolitan  Trust  Co.  v.  N.  Y.,  etc.,  R 

R.  1249,  1332. 
Metropolitan    T.    Co.   v.   Pennsylvania, 

etc.,  R  R,  1296. 
Metropolitan  T.  Co.  v.  Tonawauda,  etc., 

R.  R,  1350,  1351,  1402,  1451.  1452. 
Metz   v.    Buffalo,  etc.,  R    R    Co.,  1274, 

1482. 
Metzner  v.  Bauer,  1427. 
Mexican,  etc.,  Co.   v.   Mexican,  etc.,  Co., 

854,  1154. 
Mexican  Gulf,  etc.,  R  R  Co.  v.  Viavant, 

89,  174. 
Meyer  v.  Blair,  465. 
Meyer  v.  Hornby,  1390. 
Meyer  v.  Construction  Co.,  1390. 
Meyer  v.  Johnston,  1273, 1274,  1301,  1371, 
1381,    1384,    1409,    1439,    1453,   1487, 
1546. 
Meyer  v.  Staten  Island  R'y  Co.,  946. 
Meyer  v.  The  City  of  Muscatine,  132, 153. 
Meyers  v.  Scott,  713,  892,  1146. 
Miami  Exporting  Co.  v.  Clark,  98S. 
Michaud  v.  Girod,  902,  916. 
Michener  v.  Payson,  210. 
Michigan  Air  Line  R'y  Co.  v.  Barnes,  19. 
Michigan  Bldg.,  etc.,  Assoc,  v.  McDevitt, 

662. 
Michigan,  etc.,  R  R  v.  Burrows,  1521. 
Michigan,  etc.,  R  R  v.  Chicago,  etc.,  R 

R,  1372,  1373. 
Michigan  Ins.  Bank  v.  Eldred,  1166. 
Michigan  State  Bank  v.  Gardner,  861. 
Mickey  v.  Stratton,  1100. 
Mickles  v.  Rochester  City  Bank,  702, 837, 

839,  864,  920. 
Middlebrook  v.   Merchants"  Bank,  442, 

532. 
Middlebrooks   v.   Springfield,   etc.,  Ins. 

Co.,  1174. 
Middleport  v.  JEtna  Ins.  Co.,  141. 
Middlesex  Bank  v.  Minot,  607. 


CXXV111 


TABLE    OF    OASES. 


[Tlie  references  are 

Middlesex,  etc.,  v.  Davis,  887. 
Middlesex,  etc.,  Bank  v.  Hirsch,  etc.,  Co., 

1087. 
Middlesex  R  R  Co.  v.  Boston,  etc.,  R 

R  Co.,  955,  1494. 
Middlesex    Turnpike     Corporation     v. 

Locke,  633. 
Middlesex    Turnpike     Corporation     v. 

Swan,  246,  322,  633. 
Middletown  v.  Boston,  etc.,  R  R,  366, 

1479,  1506. 
Middletown  v.  N.  J.,  etc.,  R  R,  1415. 
Middletown  Bank  v.    Magill,    285,    305, 

.349. 
Midland,  etc.,  Co.,  Re,  47,  77. 
Midland,  etc.,  R'y  Co.    v.   Gordon,   345, 

348,  366. 
Midland  R'y  v.  Great  Western  R'y,  1502. 
Midland  R'y  v.  Loan,  etc.,  Co.,  601. 
Midland  R'y  Co.    v.    London,  etc.,  R'y, 

1510. 
Midland  R'y  Co.  v.  Taylor.  504,  506. 
Midland  R'y  Co.  v.  Wilcox,  1391. 
Miers  v.  Zanesville  &   Maysville  Turn- 
pike Co.,  255,  857,  305. 
Mihills,  etc.,  Co.  v.  Camp.  1117. 
Milan,  Tax-payers  of,  v.  Tennessee,  etc., 

R  R  Co.,  137. 
Milbank  v.  N.  Y.,  etc.,  R  R,  424,  835. 
Miles  v.  Bough,  169,  170,  814. 
Miles  v.  New  Zealand,  etc.,  Co.,  693,  700. 
Milford,   etc.,   Turnpike   Co.   v.    Brush, 

1017. 
Milhau  v.  Sharp,  1550,  1552.  1554.  1555. 
Millard  v.  Bailey.  403. 
Millard  v.  Burley,  1362. 
Millard  v.  St    Francis,   etc.,    Academy, 

1190. 
Millaudon  v.  New  Orleans,  etc.,  R  R 

Co.,  269. 
Mill  Dam  Foundry  v.   Hovey,  119,  277, 

350,  1098,  1100. 
MUlen  v.  Guerrard,  740,  743. 
Miller  v.  American,  etc.,  Co.,  971,  1586. 
Miller  v.  Barber,  203,  210,  478,  490,  491, 

792. 
Miller  v.  Bradish,  391,  722,  727. 
Miller  v.  Chance,  1261. 
Miller  v.  Curtiss,  478. 
Miller  v.  Eastern,  etc.,  Min.  Co.,  1182. 


to  the  foot-paging.] 

Miller  v.  English,  811. 

Miller  v.  Ewer,  795. 

Miller  v.  Ferry,  612. 

Miller  v.  First,  etc.,  Bank,  763. 

Miller  v.  Great  Republic  Ins.  Co.,  342, 

356,  357. 
Miller  v.  Hanover  June.  &  Sus.  R  R 

Co.,  187.  188. 
Miller  v.  Heilbron,  765. 
Miller  v.  Houston,  etc.,  Co.,  602. 
Miller  v.  Illinois  Cent  R  R  Co.,  386,  389, 

704. 
Miller  v.  111.,  etc..  R  R,  1117. 
Miller  v.  Lancaster,  963. 
Miller  v.  Little,  404. 
Miller  v.  Maloney,  164. 
Miller  v.  Marion,  272. 
Miller  v.  Miller.  407. 
Miller  v.  Murray.  828,  1149. 
Miller  v.  Newberg,  etc,  <'<>..  90 
Miller  v.  N.  Y..  etc.,  R  R.  1193,  1230. 
Miller  v.  Peabody  Bank,  343. 
Miller  v.  Pino.  etc..  Co.,  1166. 
Miller  v.  Pittsburgh  &  Connellsvill.'  R. 

R.  Co.,  119,  236,  377,  378. 
Miller  v.  Porter,  992. 
Miller  v.  Preston,  190. 
Miller  v.  Ratterman.  361.  365,  368.    369, 

370,  371,  842,  11S7,  1250. 
Miller  v.  Roach,  1104. 
Miller  v.  Rutland,  etc.,  R  R  Co.,  1096, 

1226,   1231,    1233,   1266,    1295,    1807, 

1370,  1371,  1476. 
Miller  v.  Second  I.  B.  Ass'n,  215. 
Miller  v.  State,  637,  1943. 
Miller  v.  Town  of  Berlin,  1232,  1239. 
Miller  v.  Wheeler,  etc.,  Co.,  1180,  1188. 
Miller  v.  White,  267,  296,  301. 
Miller  v.  Wild   Cat,   etc.,  Co.,  Ill,    112. 

113,  114,  163,  188.  192,  239. 
Miller,  Appeal  of,  216. 
Miller's  Adm'r  v.    Norfolk,   etc.,  R  R. 

1177. 
Miller's  Case,  160. 
Miller's  Dale.  In  re,  390. 
Milliken  v.  Dehon,  575,  604,  605. 
Millikin  v.  Whitehouse,  265,  295,  351. 
Millish,  Ex  parte.  969. 
Mills  v.  Central  R.  R.  Co.,  637.  640,  1130, 

1496.  1504,  1506,  1508.  v 


TABLE    OF    CASES. 


CXX1X 


[The  references  are  to  the  foot-paging.'] 


Mills  v.  Hoffman,  434. 

Mills  v.  Hurd,  658,  672,  955,  1147,  1379. 

Mills  v.  Northern    R'y,    369,    960,    1136, 

1141. 
Mills  v.  Northern    Railway    of    Buenos 

Ayres  Co.,  723,  726,  727,  728. 
Mills  v.  Scott,  257,  263,  289. 
Mills  v.  Stewart,  175,  176,  177,  248. 
Mills  v.  Town  of  Jefferson.  1236. 
Mills  v.  Western  Bank,  985. 
Milner  v.  Pensacola,  149. 
Milnor  v.  New  York  &  N.  H.  R  R,  997, 

1533,  1544. 
Milroy  v.  Lord,  463. 
Milroy  v.  Spurr  Mountain  Iron  Mining 

Co.,  284,  290. 
Miltenberger  v.   Logansport,   etc.,   R'y, 

1350,  1399,  1443,  1450,  1452. 
Mil  vain  v.  Mather,  258. 
Milwaukee  &  Northern  111.  R  R  Co.  y. 

Field,  123. 
Milwaukee  &  St.   R   R'y  Co.  v.   Arms, 

1010. 
Milwaukee,  etc.,  Co.  v.  City  of  Milwau- 
kee, 768. 
Milwaukee,  etc.,  Co.  v.  Field,  378. 
Milwaukee,  etc.,  Ins.  Co.  v.  Sentinel  Co., 

1430. 
Milwaukee,  etc.,  R'y    v.     Brooks,     etc., 

Works,  1443. 
Milwaukee,  etc.,  R.  R  v.  Milwaukee,  etc., 

R.  R,  1342,  1364. 
Milwaukee,  etc.,  R  R  v.  Soutter,   1356, 

1406,  1463. 
Miner  v.  Beekman,  599. 
Miner  v.  Belle  Isle  Ice  Co.,  720,  860,  927, 

1129,  1133,  1156. 
Miner  v.*  New  York  C,  etc.,  R  R,  890, 

1532,  1545. 
Mineral,  etc.,  R  R  Co.  v.  Keefe,  1020. 
Mineral  Water,  etc.,  Co.  v.  Booth,  650. 
Miners'  Bank  v.  United  States,  886. 
Miners'  Ditch  Co.  v.  Zellerbach,952,955, 

995,  1099. 
Mining  Co.  v.  Anglo,  etc.,   Bank,    1057, 

1080.  . 
Miuing  Co.  v.  Mining  Co.,  962. 
Minn.  Co.  v.  St.  Paul  Co.,  1272,  1371. 
Mian.,  etc.,  Co.  v.  Davis,  113,  188. 
Minn.,  etc.,  Co.  v.  Denslow,  233,  318. 
1 


Minn.,  etc.,  Mfg.  Co.  v.  Langdon,  278. 
Minneapolis,  etc.,  Co.  v.  Betcher,  600. 
Minneapolis,  etc.,  Co.  v.  Crevier,  113. 
Minneapolis,  etc.,  R'y  Co.  v.    Beckwith, 

1949. 
Minneapolis,  etc.,  R'y  v.  Emmons,  1950. 
Minneapolis,  etc.,  R'y  v.  Minnesota,  1949. 
Minneapolis  R'y  v.  Minnesota,  1514. 
Minnehaha,  etc.,  Ass'n  of  Minneapolis  v. 

Legg,  173, 182,  213. 
Minnesota  &  St  L.  R'y  Co.  v.  Bassett, 

218. 
Minnesota  Assoc,  v.  Can  field,  607. 
Minnesota  C.  R'y  Co.  v.  Morgan,  580. 
Minnesota,   etc.,   Co.   v.   Langdon,   732, 

1429. 
Minnesota  Harvester  Works  v.  Libbj', 

239. 
Minnesota,  State  of,  v.  Young,  140. 
Minnesota  T.  Co.  v.  Clark,  1081. 
Minor  v.  Mechanics'  Bank  of  Alexandria, 

189,  213,  224,  1058. 
Minot  v.  Boston  Asylum,  1019. 
Minot  v.  Curtis,  1016. 
Minot  v.  Paine,  16,  702,  707.  739. 
Minot  v.  Philadelphia,    Wilmington    & 

B.  R  R  Co.,  778. 
Minot  v.  Railroad  Co.,  753,  755. 
Mintzer  v.  County  of  Montgomery,  762. 
Mississippi,  etc.,  R.  R   Co.  v.  Camdon, 

133. 
Mississippi,  etc.,  R  R  Co  v.  Cromwell, 

611,  620. 
Mississippi,  etc,  R  R  Co.  v.  Gaster,  170, 

181,  1166. 
Mississippi,  etc.,  R  R  Co.  v.  Harris,  109. 

246. 
Mississippi,  O.  &  R.  R  R  Co.  v.  Cross. 

187,  188,  234,  235,  634. 
Mississippi  R  R.  Cases,  1514. 
Mississippi  R'y  Co.  v.  McDonald.  1524. 
Mississippi  Val.  Co.  v.  Chicago,  etc.,  R 

R,  1380,  1384,  1423. 
Mississippi  Valley,  etc.,   R'y   v.   United 

States  Express  Co.,  1368. 
Missouri,   etc.,   Co.    v.   Reinhard,    1000, 

10G0. 
Missouri,  etc.,  R.  R.  v.  Richards,  928. 
Missouri,    etc.,   R'y   Co.    v.    Richmond, 
1003. 


cxxx 


TABLE    OF    CASES. 


[Hie  references  are 

Missouri,  K.  &  T.  v.  Texas  &  St.  L.  R'y 

Co.,  1543. 
Missouri  Pacific  Railway  Co.  v.  Hanes, 

1949. 
Missouri  Pacific  Railway  Co.  v.  Mackey, 

1949. 
Missouri  Pacific  R'y  Co.  v.  Taggard,  123, 

127. 
Missouri  Pacific  R'y  Co.  v.  Texas,  etc., 

R'y,  1444.  1511. 
Missouri  R'y  Co.  v.  Mackey,  1517. 
Missouri  River,  F.  S.  &  G.  R  Co.  v.  Com'rs 

of  Miami  Co.,  1101. 
Mitchell  v.  Amador,  etc.,  Co.,  1385. 
Mitchell  v.  Beckman,  18,  27,  91,  111,  240, 

302,  304. 
Mitchell  v.  Burlington,  132. 
Mitchell  v.  Byrne,  795. 
Mitchell  v.  Cline,  995. 
Mitchell  v.  Deeds,  879.  1079. 
Mitchell  v.  Hartley,  472. 
Mitchell  v.  Hotchkiss.  293. 
Mitchell  v.  Newhall,  579. 
Mitchell  v.  Reed,  934. 
Mitchell  v.  Reynolds,  G51. 
Mitchell  v.  RoraeRR.Co.,  218,  983, 1110. 

1113. 
Mitchell  v.  Rubber,  etc..  Co.,  680. 
Mitchell  v.  Union,  etc.,  Co.,  1098. 
Mitchell  v.  Vermont  Copper  Mining  Co., 
1G7,  178,  179,  181,  182,  183,  795,  1077. 
Mitchell  v.  Wedderburn,  452. 
Mitchell's  Case,  107,  327,  328,  334,  358, 

428. 
Mix  v.  Andes  Ins.  Co.,  1179. 
Mixer's  Case,  190,  205,  206,  209. 
Mobile  &  Cedar  Point  R  R.  Co.  v.  Tal- 

man,  12fi9.  1278. 
Mobile  &  Ohio  R.  R  v.  Franks,  1534. 
Mobile  &  Ohio  R.  R  v.  Moseley,  771. 
Mobile  &  Ohio  R  R  v.  State,  858,  859. 
Mobile  &  Spring  Hill  R  R  Co.  v.  Ken- 
nedy, 771,  772. 
Mobile,  etc.,  Co  v.  Nicholas,  849. 
Mobile,  etc.,  R'y  v.  Humphries,  440,  1477. 
Mobile,  etc.,  R'y  v.  Steiner,  1516,  1519. 
Mobile,  etc.,  R  R  v.  Cogsbill,  1112. 
Mobile,  etc.,  R  R  v.  Davis,  1462. 
Mobile,  etc.,  R  R.  Co.  v.  State,  1516. 
Mobile,  etc.,  R  R  Co.  v.  Yandal,  110. 


to  the  foot-paging.] 

Mobile  Mutual  Ins.  Co.  v.  Cull'om,  447, 

692.  699. 
Mobley  v.  Morgan.  458,  845. 
Moch  v.  Virginia,  etc.,  Co.,   1175.  1178, 

1183,  1588. 
Moers  v.  Reading,  187. 
Moffat  v.  Window,  479.  494. 
Moffatt  v.  Farquhar,  447.  418.  526,  824, 

843,  844. 
Moffett  v.  Goldsborough,  1598. 
Mogridge's  Case.  124. 
Mogul  Steamship  Co.  v.  McOrogor,  650, 

1599. 
Mohawk  &  Hudson  R  R  Co.,  Matter  of, 

812,  81  !.  836,  829,  105a 
Mohawk  Bridge  Co.  v.  Utica.  etc..  R  R. 

Co..  1576. 
Mohawk,  etc.,  R  R  v.  Niles.  1533. 
Mohr  v.  Micsen,  475. 
Mohr  v.  Mmn.,  etc.,  Co.,  298,  315. 
Moies  v.  Spragne,  285,  286, 
Mokelumne  Hill,  etc..  Co.  v.  Woodbury, 

is,  871,  8ia 
Mollett  v.  Robinson,  579. 
Molson'a  Bank  v.  Board  man,  340. 
Monadnock  R  R  v.  Felt  125. 
Monadnock  R.  R.  Co.  v.  Petersboro,  etc., 

1  is. 
M'>neypenny  v.  Sixth  Ave.  R  R.  1565. 
Monk  v.  Graham,  505. 
Monmouth   Mut.   F.   Ins.   Co.  v.  Lowell, 

163. 
Monomoi  Great  Beach  v.  Rogers,  1098. 
Monongahela,  etc.,  Co.  v.  United  States, 

1579. 
Monongahela  Nav.  Co.  v.  Coon.  636. 
Monongahela  Nav.  Co.  v.  United  States, 

194a 

Monopolies,  Case  of,  650.  651. 

Monroe  v.  Fort  W.  &  S.  R  R  Co.,  222, 

232. 
Monroe  v.  Peck,  567. 
Monroe  v.  Smeiley.  468. 
Monroe,  Bank  of,  v.  Gifford,  1050. 
Monsseaux   v.   Urquhart,  822,  829,  830, 

841. 
Montana,  etc.,  R'y  v.  Helena,  etc.,  R  R, 

1531. 
Montgomery  v.  Everleigh.  654. 
Montgomery  v.  Exchange  Bank,  1122. 


TABLE    OF    CASES. 


CXXX1 


[The  references  are 

Montgomery  v.  Forbes,  318. 
Montgomery  v.  Merrill,  886. 
Montgomery's  Appeal,  1565. 
Montgomery,  etc.,  R.  R  v.  Boring,  963. 
Montgomery,  etc.,  Soc.  v.  Francis,  1237. 
Montgomery  R  R.  Co.  v.  Hurst,  879, 1070. 
Montgomery  S.  R'y  Co.  v.  Matthews,  191, 

198,  210. 
Montgomery  Web  Co.  v.  Dienelt,  961. 
Montpelier  &  Wells  River  R.  R  Co.  v. 

Langdon,  125. 
Monument     National    Bank    v.    Globe 

Works,  1191,  1244. 
Mooar  v.  Walker,  624. 
Moodalay  v.  Morton,  683. 
Moodie  v.  Seventh   Nat  Bank,  484,  548. 
Moody  v.  Caulk,  785. 
Moor  v.  Anglo-Italian  Bank,  1254. 
Moore  v.  American,  etc.,  Co.,  443,  595. 
Moore  v.  Baker,  781. 
Moore  v.  Bank  of  Commerce,  447,  698. 
Moore  v.  Boyd,  303. 
Moore  v.  Brink,  660. 
Moore  v.  Brooklyn,  etc.,  R  R.,  865. 
Moore  v.  Campbell,  127. 
Moore  v.  Chicago  &  St.   P.   R    R  Co., 

1001,  1543. 
Moore  v.  Conhara,  594. 
Moore  v.  Fitchburg  R  R  Co.,  977,  1008. 
Moore  v.  Freeman's  Nat.  Bank,  1177. 
Moore  v.  Garwood,  1040. 
Moore  v.  Gennett,  614,  615. 
Moore  v.  H.  Gaus  &  Co.,  1085. 
Moore  v.  Hammond,  1061,  1062. 
Moore  v.  Hudson  R  R  R  Co.,  38,  456. 
Moore  v.  Jones,  329,  343. 
Moore  v.  Lent,  275. 
Moore  v.  McLaren,  357. 
Moore  v.  Marshalltown,    etc.,    Co.,    522, 

610,  622. 
Moore  v.  Metropolitan  Nat'l  Bank,  467, 

548. 
Moore  v.  Moore,  413. 
Moore  v.  N.  J.,  etc.,  Co.,  184. 
Moore  v.  North,  etc.,  Bank,  549. 
Moore  v.  Rector,  etc.,  1065. 
Moore  v.  Robertson,  189,  210,  49a 
Moore  v.  Schoppert,  877. 
Moore  v.  Silver,  etc.,  Co.,  1129, 1137, 1151, 

1152,  1171. 


to  the  foot-paging.] 

Moore  v.  Taylor,  1548. 

Moore  v.  Williams,  488. 

Moore,  etc.,  Co.  v.  Towers,  etc.,  Co.,  949, 

1042. 
Moorehouse  v.  Crangle,  467. 
Moores  v.  Citizens'  Nat.  Bank,  396.  498. 
Moore's  Heirs  v.  Moore,  991. 
Moran    v.    Alvas,   etc.,   Co.,    856,    1157, 

1412. 
Moran  v.  Lydecker,  1439,  1527. 
Moran  v.  Pittsburgh,  etc.,  R'y,  946,  1331, 

1364. 
Mordecai  v.  Pearl,  476. 
Morehead  v.  Western  N.  C.  R.  R  Co.,  621. 
Moreland  v.  State  Bank,  1108. 
Morelock   v.    Westminster    Water   Co., 

1051. 
Morely  v.  Bird,  405. 
Mores  v.  Conham,  592. 
Morford  v.  Farmers'   Bank,   etc.,  1243, 

1244 
Morgan  v.  Bank  of  North  America,  690. 
Morgan  v.  Donovan,     881,     1380,     1385, 

1535. 
Morgan  v.  East  Tenn.,  etc.R  R,  1181. 
Morgan  v.  Great  Eastern  R'y,  712. 
Morgan  v.  Kansas,  etc..  R'y,  1243,  1323. 
Morgan  v.  Lewis,  214,  282,  418. 
Morgan  v.  Louisiana,  774,  1553. 
Morgan  v.  Morgan,  682. 
Morgan  v.  New  York,  etc.,  R  R  Co.,  248, 

257,  260,  288. 
Morgan  v.  Pebrer,  468. 
Morgan  v.  Railroad  Co.,  1148. 
Morgan  v.  Skiddy,  478,  487.  490. 
Morgan  v.  Struthers,  447,  466. 
Morgan  v.  Thames  Bank,  610. 
Morgan  v.  United  States,  1224. 
Morgan  v.  White,  1002. 
Morgan,  Ex  parte,  414. 
Morgan,  Re,  412. 

Morgan  &  Raynor  v.  Donovan.  993. 
Morgan    County   v.   Thomas,    154,    237, 

1074,  1362,  1482. 
Morgan's  Case,  337,  414,  670,  678. 
Morgan's,  etc.,  Co.   v.  Texas,  etc.,  R'y, 

1283,  1288,  1351,  1396. 
Morley  v.  Thayer,  275,  282,  283,  321. 
Mormon  Church  v.   United  States,  886, 

891,  1950. 


CXXXil 


TABLE    OF    CASES. 


[The  references  are 

Morrell  v.  Dixfield.  1110.  ' 

Morriee  v.  Hunter.  579. 

Morrill  v.  Boston,  etc.,  R  R  Co.,  1512. 

Morrill  v.  C.  T.,  etc.,  Co.,  1068. 

Morrill  v.  Noyes,  1267,   1372,  1383.  1436. 

Morrill  v.   Segar,   etc.,   Co.,    1069,    1103, 

1104,  1109. 
Morris  v.  Cannan,  355,  518. 
Morris  v.  Cheney,  164. 
Morris  v.  Conn.,  etc.,  R  R  Co.,  610. 
Morris  v.  Glenn,  342. 
Morris  v.  Johnson,  272. 
Morris  v.  Keil,  1100,  1101.  1108. 
Morris  v.  Morris  Co.,  134. 
Morris  v.  St.  Paul,   etc.,   R'y  Co.,   1015, 

1016. 
Morris  &  Essex  R  R  v.  Blair.  15*0. 
Morris  &  E.  R  R  Co.  v.  Newark,   1586. 
Morris  Canal  &  Bank.  Co.  v.  Fisher.  1231. 
Morris  Canal  &  Bank.  Co.  v.  Lewis,  1281. 
Morris  Canal  &  Bank.  Co.  v.  Nathan,  122. 

123,  127. 
Morris    Canal   Co.    v.    Townsend,    999, 

1528. 
Morris,  etc.,  R  R  Co.  v.  Central,  etc.,  R 

R,  884,  1530. 
Morris,  etc.,  R  R  Co.  v.  Green,  1113. 
Morris  Run   Coal   Co.    v.    Barclay  Coal 

Co.,  449,  648. 
Morrissey  v.  Weed,  668. 
Morrison  v.  Dorsey,  228,  1021. 
Morrison  v.  Eaton,  etc.,  R  R.  1207. 
Morrison  v.  Globe  Panorama  Co..  55,  63. 
Morrison  v.  Gold  Mountain  Mining  Co., 

102,  1043. 
Morrison  v.  Menhaden  Co.,  1417. 
Morrison,  Ex  parte,  1037. 
Morrison,  In  re,  695. 
Morrow  v.  Iron,  etc.,  Co.,  59. 
Morrow  v.  Nashville,  etc.,  Co.,  119,  1205. 
Morrow  v.  Superior  Court,  280. 
Morse  v.  Beale,  1 100. 
Morse  v.  Brainerd,  1446,  1533. 
Morse  v.  Conn.  River  R  R,  1113. 
Morse  v.  Conn.,  etc.,  R  R.  Co.,  1112. 
Morse  v.  Hagenah,  105. 
Morse  v.  Swits,  486. 
Morse  v.  Weston,  413. 
Mortimer  v.  McCallan,  470,  570. 
Morton  v.  Gramin,  615,  618. 


to  the  foot-paging.] 

Morton  v.  Metropolitan     Life    Ins.   Co., 

1010. 
Morton  v.  Mutual  Ins.  Co.,  1178,  1588. 
Morton  v.  N.   O.,  etc.,  R'y,  1197,    1199. 

1223,  1224.  1251,  1276,  1323,  1351. 
Morton  v.  Preston,  780,  782. 
Morton's  Case,  220. 
Morton  &  Bliss  v.  N.  O.  &  Selma  R'y 

Co.,  1225. 
Morton,  etc.,  Co.  v.  Selma.  etc.,  R'y,  1215. 
Morton,  etc.,  Co.  v.  Wysoug.  1021. 
Morville  v.  Great  North.  R'y,  1537. 
Moseby  v.  Burrow,  864,  s77. 
Mosely,  etc..  Co..  In  re,  1430. 
Moses  v.  Ocoee  Bank,  34,  109.  251,  381, 

393. 
Moses  v.  Scott,  846. 
Moses  v.  Thompson,  838. 

3  v.  Tompkins,  162.   179,  810,   1052, 

1056,  1066. 
Moshannon,  i  v.  Sloan,  10*4. 

MOSS  v.  Ay,  nil.  Os:..  886,  297,  971,  1069, 

1098,  1094,  11  v). 
Moss  v.  Harpath  Academy,  1185. 
Moss  v.  Livingston,  1106. 
Moes  \.  McCullough,  207.  296. 
Moss  v.  Oakley,  ..   296.  350,  351, 

119a 

Mosa  v.  Rossie  Lead  Co.,  992,  1076,  1093. 

Moss  v.  Steam  Gondola  Co.,  87. 

Moss  v.  Syers,  362,  86a 

Moss'  Appeal,  738,  714. 

Mott  v.  Danville  S.  ■in..  891. 

Mott  v.  Hicks,  1017,  1190. 

Mott  v.  Penn.  R  R  Co.,  772. 

Mott  v.  United  States  Trust  Co.,  983,  984. 

Moulin  v.  Insurance  Co.,  1174,  1175. 

Mount  Holly  L  &  M.  T.  Co.  v.  Ferrie, 

501.  519,  528,  548,  585,  593.  601. 
Mt.  Holly  Paper  Co.'s  Appeal,  397,  692, 

695. 
Mt.  Sterling,  etc.,  Co.  v.  Little,  111,  114 
Mt.  Sterling,  etc.,  Co.  v.  Looney,  1076. 
Mt.  Vernon  v.  Hovey,  134. 
Mt.  Washington    Hotel    Co.   v.    Marsh, 

1082. 
Mountain  Ferry,  etc.,  Co.  v.  Jewell,  982. 
Movius  v.  Lee,  853,  1032.  1141,  1146. 
Mowatt  v.  Castle,  etc.,  Co.,  1256. 
Mowatt  v.  Londesborough,  1041. 


TABLE    OF    CASES. 


cxxxni 


[77ie  references  are 

Mower  v.  Inhabitants  of  Leicester,  1012. 

Mower  v.  Kemp,  1275. 

Mower  v.  Staples,  632,  810. 

Mowrey  v.  Indianapolis,  etc.,  R  R  Co., 

629,  633,  636.  637,  639,  640,  85& 
Movvry  v.  Hawkins,  614. 
Mowry  v.  Indiana,  etc.,  R  R,  1492,  1508. 
Moyer  v.  Pennsylvania,  etc.,  271,  274 
Moyle  v.  Landers,  1132. 
Mozley  v.  Alston.  899,  1156. 
Mrs.  Matthewman's  Case,  105,  106,  336. 
Mudford's  Case.  240. 
Mudgett  v.  Horrell,  93,  94,  95. 
Mugler  v.  Kansas,  1949. 
Muhlenburg  v.  Philadelphia,  etc.,  R  R, 

367. 
Muir  v.  @ary  of  Glasgow  Bank,  327. 
Muir  v.  Louisville  &  P.  Canal  Co.,  1094. 
Mulhall  v.  Williams,  654. 
Mulhearn  v.  Press  Pub.  Co..  1177. 
Mullanphy  Bank  v.  Schott,937, 1069, 1100. 
Muller  v.  Boone,  1102. 
Muller  v.  Dows,  1345.  1346,  1543. 
Mulligan  v.  Mulligan,  274. 
Mulling  v.  Smith,  405. 
Mullins  v.  Smith,  403,  407. 
Mumford  v.  Hawkins,  1078,  1085. 
Mum  ma  v.  Potomac,  etc.,  248,  863,  889, 

1941. 
Mumford  v.  American  L  L  Co.,  985, 1190, 

1193. 
Munas  v.  Isle  of  Wight  Ry  Co.,  366. 
Muncy,  etc.,  Co.  v.  De  La  Green,  214. 
Muudy  v.  Davis,  464 
M  unger  v.  Jacobson.  281,  282,  300. 
Munhall  v.  Pennsylvania  R  R,  1519. 
Municipal,  etc.,  Co.  v.  Pollington,  727, 

734,  854 
Munn  v.  Barnum,  456. 
Munn  v.  Commission  Co.,  1087. 
Munn  v.  Illinois,    etc.,    Railroad,    1513, 

1514,  1600,  1948. 
Munn  v.  President,  etc.,  of  Commission 

Co.,  1190. 
Munns  v.  Isle  of  Wight  Ry,  1466. 
Munson  v.  Lyons,  144. 
Munson  v.  Syracuse,  etc.,  R  R  Co.,  915, 

920,  1041. 
Munt  v.  Shrewsbury,  etc.,  Ry  Co.,  1537, 

1544 


to  the  foot-paging.'] 

Munt's  Case,  336,  358,  415. 

Murdock  v.  Woodson,   1276.   1277,   1305, 

1306. 
Murphy  v.  Farmers'  Bank,  865. 
Murphy,  Adm'r,  v.  Holbrook,  1446,  1456. 
Murphy,  Ex  parte,  840. 
Murphy,  Re,  621. 
Murray  v.  Aiken,  etc.,  Co.,  428. 
Murray  v.  Busch,  345,  348. 
Murray  v.  Charleston,  154,  1201. 
Murray  v.  County  Com'rs,  1592. 
Murray  v.  Deyo,  1319,  1430. 
Murray  v.  Feinour,  436. 
Murray  v.  Glassee,  741,  742. 
Murray  v.  Lardner,  1222,  1226.  1227. 
Murray  v.  Nelson,  etc.,  Co.,  1075,  1076. 
Murray  v.  Stevens,  531. 
Murray  v.  Vanderbilt.  250,  1425. 
Murray  v.  Walker,  669. 
Murriam  v.  Childs,  599. 
Muscatine, 'etc.,  Co.   v.  Muscatine,   etc., 

Co.,  1094 
Muscatine,  etc.,  R  R  Co.  v.  Horton,  134. 
Muscatine  Turn  Verein  v.  Funck,  801, 

863. 
Musgrave  v.  Beckendorff,  790. 
Musgrave  v.  Buckley,  108. 
Musgrave  v.  Morrison,  87,  90,  107,  109. 
Musgrave  &  Hart's  Case,  352. 
Muskingum  Valley  T.  Co.  v.  Ward,  169, 

171,  340. 
Mussell  v.  Cooke,  464. 
Musser  v.  Fairmount,  etc.,  St.  R'y,  1552. 
Mussey  v.  Eagle  Bank,  1090. 
Mussina  v.  Goldthwaite,  932,  1151. 
Mustard  v.  Hoppers,  143. 
Mutter  v.  Eastern,  etc.,  Ry,  680. 
Mut.  Ben.  Life,  etc.,  v.  Bales,  1005. 
Mutual  Benefit  Life  Ins.  Co.  v.  Davis, 

1173. 
Mutual  Benefit  Ins.  Co.  v.  Rowood,  274. 
Mutual,  etc.,  Ins.  Co.  v.  Davis.  997. 
Mutual,  etc.,  Ins.  Co.  v.  Stokes,  887. 
Mutual  F.  Ins.  Co.  v.  Chase,  163. 
Mutual  Ins.  Co.  v.  Supervisors,  etc.,  13. 
Mutual  Life  Ins.  Co.  v.  Wilcox,  984 
Mutual   Sav.    Bank    &    Bldg.    Ass'n    v. 

Meriden  Agency  Co.,  425,  1586. 
Myatt  v.  St.  H.'len's  R'y,  1274,  1334 
Mver  v.  Car  Co.,  1376. 


CXXX1V 


TABLE    OF    CASES. 


[The  references  are 

Myer  v.  Johnston,  1383. 

Myers  v.  Croft,  993. 

Myers  v.  Door,  1171. 

Myers  v.  Hazzard,  1229. 

Myers  v.  Irwin,  321. 

Myers  v.  Johnson,  134. 

Myers  v.  Merchants'  Nat  Bank,  595, 598. 

Myers  v.  Murray,  etc.,  Co.,  1181. 

Myers  v.  Perrigal,  22. 

Myers  v.  Seeley,  56,  81,  82,  160,  255,  261. 

Myers  v.  Tobias,  474. 

Myers  v.  Union  Pac.  R'y  Co.,  118a 

Myers  v.  Valley  National  Bank,  701. 

Myers  v.  York  &  Cumberland  R  R  Co., 

1232. 
My  rick  v.  Dame,  668. 
Mysore,  etc.,  Co.,  Re,  1478. 

K 

Nabob  of  Carnatic  v.  East  India  Co.,  291. 
Nabnng  v.  Bank  of  Mobile,  582,  585,  603, 

606,  608,  613,  718,  785. 
Nagle  v.  Pacific  Wharf  Co..  621. 
Naglee  v.    Alexandria,   etc.,  R'y,   1319, 

1536. 
Najac  v.  Boston  &  Lowell  R.  R,  1533. 
Nanney  v.  Morgan.  412,  519,  549. 
Nannock  v.  Horton,  409. 
Nant-y-Glo.  etc.,  Co.  v.  Grave,  908,  915. 
Nantes  v.  Corrock,  609. 
Napa  Valley  R  R.  Co.  v.  Napa  County, 

133,  137. 
Napier  v.  Central,  etc.,  Bank,  600. 
Napier  v.  Poe,  218. 
Napier  v.  Staples,  679. 
Nappier  v.  Mortimer,  290. 
Narragausett  Bank  v.  Atlantic  Silk  Co., 

1067,  1070. 
Nash  Brick,  etc.,  Mfg.  Co.,  In  re,  1262. 
Nashua,  etc.,  R  R  Co.  v.  Boston,  etc.,  R 
R.  Co.,  1052,   1069.   1128,   1130,  1510, 
1511,  1512.  1541,  1542. 
Nashua  Lock  Co.  v.  Worcester  &  N.  R 

R,  1532,  1533. 
Nashville  Bank  v.  Petway,  863. 
Nashville  Bank  v.  Ragsdale,  608. 
Nashville  &  C.  R  Co.  v.  Scarries,  1011. 
Nashville,  etc.,   R'y    v.   Alabama,    1946, 
1949. 


to  the  foot  paging.] 

Nashville,  etc.,  R'y  v.  State,  1516. 
Nassau  Bank  v.  Campbell,  1197. 
Nassau  Bank  v.  Jones.  104,  425.  952. 
Nassau,  etc.,  Co.   v.  City   of   Brooklyn, 


Natal,  etc.,  Co.,  In  re,  1256. 

Nathan  v.  Tompkins,  799,  811.  838,  852, 

1053,  1151. 
Nathan  v.  Whillock,  262,  268,  337,  356, 

889,  892. 
Nation's  Case,  348. 
Nat.  Albany  Exch.  Bank  v.  Wells,  744, 

764, 
National  Bank  v.  Baker,  607. 
National  Bank  v.  Burkhardt  580. 
National  Bank  v.  Case,  287,380,425. 
National  Bank  v.  Colby  990. 
National  Bank  v.  Commonwealth,    748, 

7.-.:..  760,  761,  768,  Tiil.  11)51. 
National  Bank  v.  De  Bernales,  1173. 
National  Bank  v.  Drake.  825,  1064. 
National  Bank  v.  Graham,  1006. 
National  Bank  v.  (hand  Lodge,  1332. 
National    Hank    v.   Insurance  Co.,  864, 

986. 
National  Bank  v.  Kimball,  767. 
National  Hank  v.  Landon,  808. 
National  Bank    v.    Matthews,   983,   987, 

993. 
Natioual  Bank  v.  Navassa,  eta,  Co.,  1069, 

107!». 
National  Bank  v.  Norton,  1119. 
National  Bank  v.  Sprague,  966. 
National  Bank  v.  Texas,  1140. 
National  Bauk  v.  Texas,  etc.,  Co.,  227, 

815,  324,  493,  962. 
National  Bank  v.   Van   Derwerker,  667. 
National  Bauk  v.  Watsontown  Bank,  26, 

27,  521,  687,  697,  698,  699,  700. 
National  Bank  v.  Wells,  1243. 
National  Bank  v.  Whitney,  987. 
National  Bank  v.  Young,  1244. 
Natioual  Bank,  etc.,   v.   Atkinson,  1077, 

1243. 
National  Bank  of  Commerce  v.  Hunt- 
ington, 1174,  1175. 
National  Bank  of    Commerce  v.   New 

Bedford,  766. 
National  Bank  of  Commerce  v.  Shutn- 
way,  1060. 


TABLE    OF    CASES. 


cxxxv 


[Ttie  reference  are 

National  Bank  of  New  London  v.  I^ke 
S.  &  M.  S.  R.   R  Co.,  500,  613,  614. 
620,  783. 
National  Bank  of  Watertovvn  v.  London, 

667. 
National  Bank  of  Xenia  v.  Stewart,  420, 

701. 
National  Broadway  Bank  v.  Wessell,  etc., 

Co.,  941,  942. 
National  Broadway  Bank  v.  Yuengling, 

965. 
National  Com.  Bank  v.  McDonnell,  301, 

304,  329,  332,  352,  630. 
National  Com.  Bank  v.  Mobile,  754. 
National  Docks,  etc.,  R'y  v.  State,  1530. 
National,  etc.,  Bank  v.   Mechanics',  etc., 

Bank,  990. 
National,  etc.,  Co.  v.  Ballou,  252. 
National,  etc.,  Co.,  In  re,  378,  861. 
National,  etc.,  Fuel  Co.,  In  re,  199. 
National,  etc.,  Ins.  Co.  v.    Pursell,    1178, 

1588. 
National,  etc.,  Milk  Co.  v.  Brandenburgh, 

1175,  1176. 
National,  etc..  Works  v.  Oconto,  etc.,  Co., 

1196,  1206,  1596,  1598. 
National  Exchange  Co.    v.  Drew,    191, 

194,  489,  1007. 
National  Exchange  Bank  v.   Hartford. 

Prov.  &  F.  R.  R.  Co.,  1231, 1236, 1239. 
National    Exchange    Bank     v.    Peters, 

1140. 
National  Exchange  Bank  v.  Sibley,  398. 
National   Exchange   Bank  v.  Silliman, 

700. 
National  Financial  Co.,  In  re,  328,  329, 

336. 
National  Funds,  In  re,  734. 
National  Mut.  Ins.  Co.  v.  Pursell,  1002. 
National  Park  Bank  v.   German,   etc., 

Co.,  1080,  1118. 
National  Park  Bank  v.  Gunst,  1175. 
National  Park  Bank  v.   Nichols,    1183, 

1948. 
National  Park  Bank  v.  Remsen,  297. 
National  Patent  S.  F.  Co.,  Re,  1185. 
National  Pemberton  Bank  v.  Porter,  952, 

982,  986. 
National  S.  &  L.  Bank,  etc.,   v.  Mechan- 
ics', etc.,  990. 


to  the  foot-paging.] 

National  Security   Bank   v.    Cushmau, 

1119. 
National  Shoe,  etc.,  Bank  v.  Mechanics', 

etc.,  Bank,  1168. 
National  State  Bank  v.  Young,  749. 
National  Trust  Co.  v.  Murphy,  986,  999. 
National  Tube,  etc.,  Co.  v.  Gilfillan,  73. 
National  Typographic  Co.  v.  N.  Y.,  etc., 

Co.,  1181. 
National  Union  Bank  of  Watertown  v. 

London,  325. 
National  Water,  etc.,  Co.  v.  Clarkin,  993. 
Natusch  v.  Irving,  625,  954,  1586. 
Naugatuch,  etc.,  Co.  v.  Nichols,  219. 
Neal's  Appeal,  937. 
Neale  v.  Janney,  686,  688. 
Neale  v.  Turton,  1083. 
Neall  v.  Hill,  1029,  1154. 
Neath,  etc.,  Co.,  Re,  815,  1478. 
Nebraska,  etc.,  Bank  v.  Nebraska,  etc.. 

Co.,  1175,  1231,  1326,  1331. 
Nebraska  Loan  &  Trust  Co.  v.  Nine,  1014. 
Neff  v.  Wolf,  etc.,  Co.,  963. 
Negley  v.  McWood,  1042. 
Neiler  v.  Kelley,  21,  23, 596,  603,  781,  783, 

785,  790. 
Neilson  v.  Crawford,  268,  296. 
Neilson,  Appeal  of,  433. 
Neilson,  Ex  parte,  566. 
Nellis  v.  Coleman,  330. 
Nellis  Co.,  A.  C,  v.  Nellis,  984,  1125. 
Nelson  v.  Blakey,  234. 
Nelson  v.  Burrows,  1028,  1150. 
Nelson  v.  Cowing,  191. 
Nelson  v.  Eaton,  1185,  1261. 
Nelson  v.  Haywood  County,  142. 
Nelson  v.  Hubbard,  71,  805,  1196,  1206, 

1338. 
Nelson  v.  Iowa,  etc.,  R  R,  1199,  1390. 
Nelson  v.  Jenks,  1338. 
Nelson  v.  Luliug,  313,  482,  490. 
Nelson  v.  St  Nelson's  Parish,  1944. 
Nelson  v.  Vermont    &    Canada    R    R, 

1536. 
Nelson  v.  Vermont,  etc.,  R  R,  1515. 
Ne&bit  v.  Riverside  Independent  District, 

1188. 
Nesmith  v.  Washington  Bank,  517,  688, 

699. 
Ness  v.  Angas,  87,  105. 


CXXXV1 


TABLE    OF    CASES. 


Ness  v.  Armstrong,  87,  831. 

Nettles  v.  Marco,  213. 

Neuse,  etc.,  Co.    v.    Commissioners    of 

Newburgh,  1207. 
Neuse  River  Nav.  Co.  v.  Coni'rs  of  New- 

bern,  32,  153. 
Nevada,  State  of,  v.  Leete,  824. 
Nevada,  State  of,  v.  Pettinelli,  797,  708, 

807,  813,  814,  825. 
Nevada,  State  of,  v.  Wright,  799. 
Nevins  v.  Henderson,  1036. 
Nevitt  v.  Bank,  889. 

Nevitt  v.  Bank  of  Port  Gibson,  248,  801. 
New  v.  Nicoll.  05),  055. 
New  Albany  v.  Burke,  217,  1161. 
New  Albany  &  Salem  R  R.  Co.  v.  Mo- 

Cormick,  123,  124,  168.  181,  839. 
New  Albany  &  Salem  R  R  Co.  v.  Pick- 
ens, 159. 
New    Albany    &    Salem   R    R    Co.    v. 

Slaughter,  189. 
New  Albany,  etc..  R  R  v.  O'Daily,  1563. 
New  Albany,  etc.,  R  R    Co.    v.    Fields. 

112,  190,  197,  245. 
New  Albany,  L.  &  C.  P.  R  Co.  v.  Smitb, 

1231. 
New  Albany  R.  R.  Co.  v.  Grooms,   1177. 
New  Albany  R  R  Co.  v.  Tilton,  1177. 
New    Bedford,    etc..   Turnpike    Co.    v. 

Adams,  115,  171. 
New  Brunswick  &  C.  R'y  Co.  v.  Cony- 

beare,  194,  195,  1007. 
New  Brunswick,  etc.,  v.  Muggeridge,  92, 

108,  197,  200,  402. 
New  Buffalo  v.  Iron  Co.,  155. 
New  Castle  &  A.  T.  Co.  v.  Bell,  £23. 
New  Castle,  etc..  R'y  Co.  v.  New  Castle, 

etc..  R  Co.,  1 354 
New  Castle  R  R  Co.  v.  Simpson,  69, 

1153. 
New  Central  Coal  Co.  v.  St.  George's  C. 

&  I.  Co.,  1527. 
New  Cbester  Water  Co.  v.  Holly  Mfg. 

Co.,  1306,  1398. 
New  Cbile,  etc.,  Co.,  Re,  185. 
New  Clydacb,  S.  &  B.  I.  Co.,  Re,  1253. 
New  Eberhardt  Co.,  Re,  47. 
New    England     Commercial    Bank    v. 
Newport  Steam   Factory,  250,  285, 
280,  321,  331. 


[The  references  are  to  Vie  foot-pajing.] 

•New  England,  etc.,  Co.  v.  Chandler,  613. 
New  England,  etc.,  Co.  v.  De  Wolf.  1104. 
New  England,  etc.,  Co.  v.  Gay.  1102. 
New  England,  etc.,  Co.  v.  Gilbert,    etc., 

R  R  Co.,  lioo. 
New  England,  etc.,  Co.  v.  Phillips,   837. 
New  England,  etc.,  Co.  v.    Union,    etc., 

Co.,  1116. 
New  England,  etc.,  Ins.  Co.   v.    Wood- 
worth,  1178. 
New  England,  etc.,  Life  Ins.  Co.  v.  Phil- 
lips 38a 
New  England  Exp.  Co.  v.  Maine  Cent 

R  P.,  1501,  15S0. 
New  England  F.  &  M.  Co.   v.  Robinson, 

1002,   1094 
New  England  Ins  Co.  v.  De  Wolf.  1083. 
New  England  Iron  Co.   v.    N.   Y.   Loan 

I    ...  683. 
New  England  Mutual,  etc..  Ins.  Co.  v. 

Phillip-.  B30. 
New  England  R   R  Co.   v.  Rodriguos, 

l'.i7. 
New  I'n-laud  Trust  Co.  v.  Eaton,  739, 

7lo.  7  11. 
New  Hampshire,  etc,  P.  R  Co.  v.  John- 
son. 116,  171.  3 
New  Hampshire  Land  Co  v.  Tilton.  ::is. 
New  Haven  tV  i».  R  R  Co.  v.  chapman, 

224 
New  Haven,  etc.,  v.  Chatham,  146. 
New  Haven,  etc.,  Co.  v.   Hayden,  1054. 
New  Haven,  etc.,  Co.  v.  Linden  Spring 

Co.,  82,  17.  . 
New  Haven  Land  Co.  v.  Tilton,  999. 
New  Hope  Bridge  Co  v.  Phoenix  Bank, 

1093,  1110. 
New  Hope,   etc.,    Co.    v.    Poughkeepsie, 

etc.,  Co..  986. 
New  Jersey  v.  Yard,  685,  1943. 
New  Jersey  Central  R  R  Co.  v.  Mills, 

1135,  1146. 
New  Jersey,  etc.,  Bank  v.   Thorp.   1173. 
New  Jersey,  etc.,  Co.  v.  Ames,  1300. 
New  Jersey,  etc.,  R   R   v.   Jersey  City, 

775. 
New  Jersey,  etc..  R  R  Co.  v.  Strait,  163, 

107,  169,  634,  1228 
New  Jersey  &   New   York    R'y,   In   re, 
1439. 


TABLE    OF    CASES. 


CXXXV11 


[Tlie  references  are 

New  Jersey  R.  R.  Co.   v.  Long   Branch 

Comm'rs,  877. 
New  Jersey  S.  Co.  v.  Brockett,  100G. 
New  Jersey  Zinc    Co.    v.    New    Jersey 

Franklinite  Co.,  937. 
New    London    &    Brazilian     Bank     v. 

Brocklebank.  692,  700. 
New  London,  etc.,  Bank  v.  Ware,  etc., 

R.  R.,  1239.      . 
New  London,  National  Bank  of,  v.  Lake 

S.  &  M.  S.  R.  R.  Co.,  500. 
New  Mashonaland,  etc.,  Co.,  Re,  1030. 
New  Orleans  v.  Clark,  1247. 
New  Orleans  v.  Graihle,  141. 
New  Orleans  v.  Houston,   756,  758,  889, 

1944. 
New  Orleans  v.  New  Orleans,  etc.,    Co., 

1945,  1950. 
New    Orleans    v.    New    Orleans,    etc., 

Works,  773. 
New  Orleans  v.  Saving,  etc.,  Co.,  755. 
New  Orleans  Building   Co.    v.   Lawson, 

1079. 
New  Orleans  City,  etc.,  Co.    v.    City  of 

New  Orleans  et  al.,  703. 
New  Orleans  City  R.  R.  Co.  v.  Crescent 

City  R,  R  Co.,  1555. 
New  Orleans,  etc.,  Co.  v.  Briggs,  174. 
New  Orleans,  etc.,  Co.  v.  Harris,  858. 
New  Orleans,  etc.,  Co.  v.  Louisiana,  etc., 

Co..  1545. 
New  Orleans,  etc.,  Co.  v.  New  Orleans, 

770,  1574,  1945. 
New  Orleans,  etc.,  R.  R  Co.  v.  Board  of 

Assessors,  748. 
New  Orleans,  etc.,  R.  R.  Co.  v.  City  of 

New  Orleans.  1556,  1558. 
New  Orleans,  etc.,    R    R.    Co.  v.    Dela- 

more,  1266,  1269,  1559. 
New  Orleans,  etc.,  R.  R  Co.  v.  Frank,  33. 
New  Orleans,  etc.,    R.    R  Co.  v.  Harris, 

815,  1495. 
New  Orleans,  etc.,  R  R  Co.  v.   McDon- 
ald, 135. 
New  Orleans,  etc.,  R  R  Co.  v.  Miss.  Coll., 

1226. 
New  Orleans,  etc.,  R  R  Co.  v.  New  Or- 
leans, 1945. 
New  Orleans,  etc.,  R'y  v.   Parker,   1324, 
1325,  1332,  1383,  1385. 


to  the  foot-paging, ,] 


New  Orleans,  etc.,  R'y  v.  Union  T.  Co., 

1383. 
New  Orleans,  etc.,  Steamship  Co.  v.  Dry- 
dock  Co.,  104. 
New  Orleans,  F.  &  H.  S.  Co.  v.  Ocean 

Dry-dock  Co.,  426. 
New  Orleans.  First  Municipality  of,  v. 

Orleans  Theater  Co.,  234. 
New   Orleans,  First  Nat'l   Bank   of,  v. 

Bohne,  1183. 
New  Orleans  Gas  Light  Co.  v.  Bennett, 

263. 
New  Orleans  Gas  Co.  v.  Louisiana  Light 

Co.,  1582,  1584,  1944,  1945. 
New  Orleans,  J.  &  G.  N.  R.  Co.  v.  Bailey, 

1006,  1011. 
New  Orleans.  Jackson  &  Great  North- 
ern R  R  Co.  v.  Harris,  633,  634. 
New  Orleans,  Jackson  &  G.  N.  R.  Cc    , 

Hurst,  1010. 
New   Orleans  Nat'l   Banking  Ass'n    % 

Wiltz,  23,  585,  688,  699,  701. 
New  Orleans  R  R  v.  Morgan,  1325. 
New  Orleans,  St.  L.  &  C.  R,  Co.  v.  Burl 

1011. 
New  Orleans  Water-works  Co.  v.  R   .- 

ers,  1597. 
New  Sombrero  Co.  v.  Erlander,  910. 
New  York  v.  Second  Ave.  R  R,   1C    '<, 

1554,  1574. 
New  York  v.  Squire,  1950. 
New  York  African  Soc.  v.  Varick,  1017. 
New  York  Bank  Com'rs  v.  Bank  of  Buf- 
falo, 873. 
New  York  Booking  Co.,  In  re.  316. 
New  York  Cable  Co.,  In  re,  v.  Mayor,  876. 
New  York  Central  R.  R  v.  Stokes,  511. 
New  York  Central  R  R  Co.,  Matter  of, 

1525,  1526,  1528,  1529. 
New  York  Dry-dock  Co.  v.  Hicks,  999, 

1173. 
New  York  El.  R  R  Co.    v.  Manhattan 

R'y  Co.,  930! 
New  York  El.  R  R  Co.,  Matter  of,  629, 

637. 
New  York  El.  R  R  Co.,  In  re,  875. 
New  York,  etc.,   Canal  Co.   v.   Fulton 

Bank,  967. 
New  York,  etc.,  Co.  v.  Buffalo,  etc.,  Co., 
935. 


cxxxvm 


TABLE    OF    CASES. 


[The  references  are 

New  York,  etc..  Co.  v.  Parrott,  808. 
New  York,  etc.,  Co.  v.    Phoenix    Bank, 

10.").-). 
New  York,  etc..  Co..  Iu  re.  843. 
New  York,  etc.,  Exch.  v.  Board  of  Trade, 

etc.,  1600. 
New  York.,  etc.,  Mine  v.  Negaunee  Bank. 

ioe 

New  York,  etc.,  R    R    Co.    v.   Carhart, 

684. 
New  York,  etc.,  R.  R  Co.  v.  Cook.  ia 
New  York,  eta,  R  R  Co.  v.  Dixon.  In:;:;. 
New  York,  etc.,  R  R  Co.  v.  Ketchum. 

934,  1043. 
New  York,  etc.,  R  R  v.  N.  Y,   etc..  R 

R.,  1117. 
New  York,  etc..  R  R  v.  N.  Y.   N.  H., 

etc.,  R  R.  883,  884,  1488,  U 
New  York,  etc.,   R  R.   v.   N.   Y.   W.   S.. 

etc.,  R  R,  1530. 
New  York,  etc..  R  R  Co.   v.    Nickalb, 

373,  71-.  733. 
New  York,  etc.,  R.  R.  v.  Parmalee.  890. 
New  York,  etc.,  R'y  Co..  In  re,  108 
New  York,  etc.,  Soc.  v.  Varick,  1102 
New  York,  etc.,   Tel.   Co.    v.    Dryburg, 

1598. 
New   York,   etc.,    Tel.    Co.    v.    Jewett. 

1462. 
New  York,  etc..   Trust   Co.    v.    Helmer, 

984 
New  York,  etc..  Works  v.  Smith,  - 
New  York  Ex.  Co.  v.  De  Wolf,  107,   101, 

238 
New  York  Firemen's  Ins.  Co.  v.  Ely.  983, 

985,  1193. 
New  York  Firemen's  Ins.  Co.  v.  Sturges, 

983,  9S7. 
New  York  Guaranty  Co.   v.   Memphis, 

1331. 
New  York  &  H.  R  R  Co.  v.  Forty-sec- 
ond St.  &  G.  S.  F.  R  R  Co..  1330. 
New  York  &  H.  R  R  Co.  v.  Kip.  1534, 

1526. 
New  York  &  H.  R  R.  R   Co.   v.  New 

York.  1093. 
New  York  &  H.  R  R  R  Co.,  Matter  of, 

1535,  1526,  1584. 
New  York  &  N.  E.  R  R.  v.  N.  Y.,  N.  H„ 

etc.,  R  R,  8S1. 


to  the  foot-paging.] 

New  York  ft  New  Haven  R  R  v.  Schuy- 
ler, 381,  394.  395,  399,  497,  498,  547, 
1006.  lOW 

New  Y<  i  k  ft  O.  M.  R  R  Co.  v,  Yan  Horn, 
221. 

York,  H.  &  N.  R  R  Co.  v.  Boston, 
H.  &  E.  R  R  Co..  1529. 

New  York.  II.  ft  N.  R  R  Co.  v.  Hunt, 
336,  227. 

N  u  York.  L  E  &  W.  R  R  Co.  v.  Da- 
vi. 

Newall  v.  Wiliiston.  622.  683. 

Newark  B.  Co,  \.  Newark,  751. 

Newark  City  Bank  v.  Assessor,  761. 

Newark  ■    w  ark,  7 

N<  wail<.  Town  of.  v.  Elliott.  995. 

Newberry  \.  Detroit,  etc.,  Iron  Co..  622. 

Newberry  v.  t  rarland,  i 

Newberry  v.  Robinson,  £ 

Newbold  v.  Peoria.  Ob     EL  I.'..  1804,  1154. 
Newburg  Petroleum  Co.  v.  Wears,  818, 

.  997,  i 
Newburgb  T.  Co  v.  Miller,  1592. 
Newbury  v.  Detroit,  etc.,  EL  R  I 
Newborypon  T.C  ,y    Eastern  R  R  Co., 

1539. 
Newby  v,  .tent  Fire-arms.  etc.,  Cot, 

1164,  1174. 
Newby  v.  Oregon,  etc..  R  R  Co.,   1013, 

1014,  1148,  18SL 
Newcastle,  etc,  R'y   v.   Simpson,   1391, 

1458 
Newcastle  ft  R.  R  R  Co.  v.  Peru  &  Ind 

R  R  Co..  1 
N".  wcomb  v.  Reed,  818,798. 
Newcombe  v.  Lottimer,  588. 
Newcombe,  In  i     9&     350,851. 
Newell  v.  Borden,  t 

Newell  v.  Gr.  al  W<  stern  R'y  Co.,   1174. 
Newell  v.  Miun.,  etc.,  R'y.  1562, 
Newell  v.  Smith,  1457. 
x.  well  v.  Wiliiston, 
Newell's  Appeal,  1019. 
Newlande  v.  National,  etc..  Association, 

479, 
Newling  v.  Francis,  1021. 
Newman  v.  Newman.  408. 
Newport,  etc..  Bridge   Co.  v.    Douglass, 

607,  1197,  12li4,  1308, 1314,  1368, 1397. 


TABLE    OF    CASES. 


CXXX1X 


[Tlie  re/arences  are 

Newport  Mechanics'  Manuf.  Co.  v.  Star- 
bird,  1019. 

Newry      &     Enniskillen    R'y     Co.     v. 
Coombe,  107,  334,  428. 

Newry    &   Enniskillen  R'y    Co.  v.  Ed- 
munds, 157,  171,  G93. 

Newry,  etc..  Co.  v.  Moss,  328,  330,  591. 

Newton  v.  Belcher,  1036. 

Newton  v.  Daly,  G65. 

Newton  v.  Fay.  581,  586. 

Newton  v.  Porter,  1226. 

Newton  v.  Van  Dusen.  451. 

Newton  Mfg.  Co.  v.  White.  1051. 

Newton   Hamilton  Oil   &  Gas  Co.,  Re, 
315. 

Niagara  Falls,  etc.,  R  R.  Re,  1524,  1526. 

Niagara  Ins.  Co.,  In  re,  860. 

Nicholay's  Case,  1037. 

Nicholl  v.  Eberhardt  Co..  1478. 

Nicholls  v.  Diamond,  977. 

Nichols  v.  Ann  Arbor,  etc.,  St  R'y,  876, 
1563,  1564. 

Nichols  v.  Burlington  &  Louisa  County 
Plank-road  Co.,  127,  128. 

Nichols  v.  Mase,  998,  1230,  1372,  1383. 

Nichols  v.  Nashville,  137. 

Nichols  v.  Pearce,  977. 

Nichols  v.  Scranton,  etc..  Co.,  1088. 

Nichols  v.  Somerset  &  K.  R.  R  Co.,  1525. 

Nicholson  v.  Great  West  R'y,  1518,  1519. 

Nicholson  v.  Mounsey,  1033. 

Nicholson  v.  Showalter.  19. 

Nickalls  v.  Eaton,  355,  563. 

Nickalls  v.  Merry,  333,  359,  429,  563,  579. 

Nickerson  v.  Atchison,  etc.,  R  R,   1281, 
1309. 

Nickerson  v.  English,  238,  413,  917. 

Nickerson  v.  Wheeler,  306. 

Nicolay  v.  St.  Clair  County,  143. 

Nicol's  Case,  337,  415. 

Nicoll  v.  New  York,  etc.,  R  R  Co.,  991, 
992,  996. 

Nicoll  v.  Railroad,  890. 

Nicoll's  Case,  76,  96,  196. 

Nicollet  National   Bank  v.  City  Bank, 
688. 

Nightingal  v.  Devisrne,  23,  783. 

Niles  v.  Edwards,  595. 

Nimick  v.  Mingo  Iron  Works,  292,  294. 

Nimmons  v.  Tappan,  864. 


to  the  foot-paging.] 

Nimocks  v.  Grimm,  938. 

Nines  v.  St.  Louis,  etc.,  R.  R,  1534. 

Nippenose  Mfg.  Co.  v.  Stadtou,  120,  188, 
192. 

Nisbit  v.  Macon,  etc.,  Co.,  585. 

Nissen  v.  Cramer,  18. 

Niver  v.  Niver,  781. 

Nixon  v.  Brownlaw,  639. 

Nixon  v.  Green,  349. 

Noble  v.  Collender,  188. 

Noble  v.  Turner.  618,  621. 

Noble  v.  Yincennes,  149. 

Noblesville,  etc.,  Co.  v.  Loehr,  1054 

Nockels  v.  Crosby,  103,  663,  1040, 1041. 

Noel  v.  Drake,  844, 

Noesen   v.   Town  of  Port  Washington, 
151,  633. 

Nolan  v.  Arabella,  etc.,  Co.,  178. 

Nolan  v.  Hazen,  2*5. 

Noll  v.  Dubuque,  etc.,  R  R.  1531. 

Noonan  v.  Ilsley,  782,  785,  788,  790. 

Norbury's  Case,  1037. 

Nordell  v.  Wahlstedt,  293. 

Norfolk,  etc.,  R  R  v.  Commonweal th, 
776. 

Norfolk,  etc.,  R  R  v.  Cottrell.  1177. 

Norfolk,  etc.,  R  R.  v.  Pennsylvania,  7";  7, 
1947. 

Norman  v.  Mitchell,  183,  639. 

Norrice  v.  Ayhner.  21. 

Norris  v.  Cottle,  1037. 

Norris  v.  Crocker.  294. 

Norris  v.  Harrison,  741,  742. 

Norris  v.  Irish  Land  Co.,  525,  531. 

Norris  v.  Johnson    2S4,  288. 

Norris  v.  Mayor  of  Smithville,  862. 

Norris  v.  Trustees,  etc.,  634,  810,  1517. 

Norris  v.  Wallace,  434. 

Norris  v.  AVrenshall,  292,  629. 

Nbrth  v.  Forrest,  464. 

North  v.  Phillips,  473,  475,  476,  782,  785 
7S8,  790. 

North  v.  Platte  County,  138. 

North  v.  State,  865. 

North,  Ex  parte,  199. 

North  America,  Bank  of,  v.  Rindge,  295. 

North  American  Building  Ass'n  v.  Sut- 
ton, 780,  782,  790. 

North  American  Colonial  Ass'n  v.  Bent- 
ley,  34a 


cxl 


TABLE    OF    CASE8. 


[The  references  are 

North  Australian,  etc.,  Co.,  907. 
North  Bait.,  etc.,  R'y  v.  Mayor,  1556. 
North  Bait.,  etc.,  R'y  v.  North  Ave.  R*y, 

1569. 
North  Beach,  etc.,  R  R    Co.'s  Appeal, 

1554,  1574. 
North  Car.  R.  R.  Co.  v.  Drew,  1215, 1227, 

1276.  1387.  1483,  1484. 
North  Car.  R.  R  Co.  v.  Leach,  18 ',  192. 
North,  etc.,  Ass'u  v.  Childs  et  al.,  974. 
North,  etc.,  Assoc,  v.  First  Nat'l  Bank, 

662,  1186. 
North,  etc.,  Co.  v.  Spullock.  158. 
North,  etc.,  Co.  v.  Stebbins,  970. 
North  Hallenbeagle  Mining  Co.,  In  re, 

179. 
North    Hudson,   etc,   Assoc,   v.   Childs 

et  al.,  1028,  1063. 
North  Mo.  R.  R  Co.  v.   Winkler.    119, 

123.  771,  772,  1183. 
North   Pa.,   etc.,  R  R  v.  Adams,  1236, 

1239. 
North  River  Bank  v.  Ay  mar,  1119. 
North  River  Bank.  Matter  of.  1 186. 
North  Shore  Staten  Island  Ferry  Co.,  In 

the  Matter  of.  826,  83a 
North  State,  etc.,  Co.  v.  Field,  184,  1171. 
North  W.  Distilling  Co.  v.   Brant.   1017. 
North    Ward    Nat" I    Bank    v.    City    of 

Newark,  748,  755.  765.  767. 
Northampton  v.  Easton,  eta,  R*y,  1571. 
Northampton  Bank  v.  Allen,  983. 
Northampton    Bank    v.   Pepoon,    1051, 

1055,  1071,  1092. 
Northampton   Nat'l    Bank    v.     Kidder, 

1224.  1226,  1232. 
Northeast,  etc.,  R  R  Co.,  Ex  parte,  255, 

630. 
Northeastern  R'y  Co.  v.  Jackson.  924. 
Northeastern  R  R  Co.  v.Rodrigues,  llO. 
Northern  Assam  Tea  Co.,  In  re,  698,  700, 

1254. 
Northern  Central  R.  R  v.  Com.,  1592. 
Northern,  etc.,  Co.,  The,  Re,  97. 
Northern,  etc.,  Iron  Co.  v.  Young.  934. 
Northern,  etc.,  R'y  Co.  v.  Raymond.  777. 
Northern,  etc.,  R  R.  Co.  v.  Young.  934. 
Northern  Liberties    Bank  v.    Cresson, 

1059. 
Northern  Pac.  R  R  v.  Dustin,  152a 


to  the  foot-paging.'] 

Northern  P.  R  R  Co.  v.  Roberts.  137. 
Northern  P.  R  R  Co.  v.  Territory,  1522. 
Northern  R'y  v.  Carpentier,  781. 
Northern  R.  R.  Co.  v.  Concord  &  C.  R 

R  Co..  1528. 
Northern  R  R  Co.  v.  Miller,  111,  112, 

174.  175,  625,  637,  8S6. 
Northern  Trans.  Co.  v.  Chicago,  999. 
Northey  v.  Johnson,  6G5. 
Northrop  v.  Bushnell.  56. 
Northrop  v.  Curtis  522. 
Northrup  v.  Miss.,  etc.,  Ins.  Co.,  1111. 
Northrup  v.  Newtown  &  B.  T.  Co.,  518, 

547,  708. 
Northumberland  Avenue  Hotel  Co.,  Re, 

104:!. 
Northumberland    Co.     Bank    v.    Ever, 

ioia 

Northwest  Transportation  Co.  v.  Beatty, 
84::.  944 

Northwestern,  etc.,  Packet  Co.  v.  Shaw, 
971. 

Northwestern,  eta,  Ins.  Co.  v.  Cotton, 
etc.  Co.,  75.  121U. 

Northwestern  Mutual  L  L  Co,  v.  Over- 
holt.  999,  1003. 

Norton  v.  Blinn,  476. 

Norton  v.  Bobart,  488. 

Noiton  v.  Brownsville,  143. 

Norton  v.  Dyeisburg,  168. 

Norton  v.  Florence,  etc.,  Co.,  1255. 

Norton  v.  Kellogg,  112a 

Norton  v.  Norton,  613. 

Norton  v.  Peck,  130. 

Norton  v.  Shelby  County,  150. 

Noiton  v.  Union  Trust  Co.,  68a 

Norton  v.  Wallkill,  etc..  R  R  Co.,  890. 

Norton  v.  Wis  wall,  15S1. 

Norvah.  etc.,  Co.,  In  re,  915. 

Norwegian  Titanic  Iron  Co.,  869. 

Norwich,  etc.,  Co.  v.  Hockaday,  639. 

Norwich,  etc..  Co.,  In  re.  1107. 

Norwich  Gas  L  Co.  v.  Norwich  City  G. 
Co.,  1583,  1584. 

Norwich  Ins.  Soc,  In  re,  322. 

Norwich  &  L  Navigation  v.  Theobold, 
225. 

Norwood,  Ex  parte,  1427. 

Norwood,  In  re,  893. 

Nott  v.  Clews.  53.  7a 


TABLE    OF    CASES. 


cxli 


[Tlie  references  are  to  the  foot-paging.] 


Nott  v.  Hicks,  1104. 

Nourse  v.  Prince.  590. 

Noyes  v.  Blakeman,  654. 

Noyes  v.  Marsh.  450.  461.  844. 

Noyes  v.  Rich,  1367,  1422. 

Noyes  v.  Rutland  &  Bur.  R,  R.,  1532, 
1533. 

Noyes  v.  Spaulding.  24,  456,  472,  518, 547, 
■"  590. 

Nucleus  Assoc,  v.  McElroy,  1107. 

Nugent  v.  Boston,  etc.,  R.  R.,  1536. 

Nugent  v.  Cincinnati,  Harrison  &  In- 
dianapolis S.  L.  R.  R.  Co.,  198. 

Nugent  v.  Supervisors,  145,  150,  156,639, 
1492,  1507. 

Nulton  v.  Clayton.  89,  111,  113. 

Nu thrown  v.  Thornton,  461. 

Nute  v.  Hamilton,  etc.,  Co.,  1023. 

Nutter  v.  Lexington,  etc.,  R.  R.  Co.,  390. 

Nutting  v.  Boardman,  443. 

Nutting  v.  Hill,  878. 

Nutting  v.  Thomason,  444. 

Nutting  v.  Thompson,  443. 

Nyce's  Appeal.  434. 

Nyraan  v.  Berry.  988. 

Nysewander  v.  Lowman,  459,  479. 

o. 

Oakbank  Oil  Co.  v.  Crum,  21,  713. 

Oakes  v.'  Oakes,  408,  409. 

Oakes  v.  Turquand,  8,  193,  197,  200,  209, 
353,  639. 

Oakland  R'y  v.  Keenan,  1388. 

Oakland  R.  R.  v.    Oakland,  etc.,  R.  R., 
1487,  1504,  1556. 

O'Bierne  v.  Bullis,  1332. 

O'Brien  v.  Breitonbach,  423,  450. 

O'Brien  v.  Chicago,  Rock  Island  &  Pa- 
cific R.  R.  Co.,  382. 

O'Brien  v.  Mechanics'  &  T.  Ins.  Co.,  612. 

O'Brien  v.  O'Connell,  1148. 

O'Brien  v.  Shaws,  etc.,  Co.,  1175. 

Occidental,  etc.,  Assoc,  v.  Sullivan,  178. 

Ocean  Ins.  Co.  v.  Portsmouth,  etc.,  R'y, 
1174. 

Ocean  Nat'l  Bank  v.  Carll,  1436. 

Ochiltree  v.  Railroad   Co.,  272,  392,  629, 
1943. 

O'Connor  v.  Current,  etc.,  Co.,  1392. 


O'Connor,  etc.,  Co.   v.  Coosa,  etc.,  Co., 

1140. 
O'Connor  v.  Irvine,  455,  461. 
Odd,  etc.,  Bank's  Appeal,  443. 
Odd  Fellows  v.  Bank  of  Sturgis.  1084 
Odd  Fellows,  etc.,  Co.  v.  Glazier,  116. 
Odell  v.  Odell,  991. 
O'Donald  v.  Evansville,  etc.,  R.  R.  Co., 

128,  1166. 
O'Donnell  v.  C.  R.  Johns  &  Co.,  1015. 
Oelrichs  v.  Ford,  580. 
Ogden  v.  City  of  St.  Joseph,  751. 
Ogden  v.  County  of  Daviess,  131. 
Ogden  v.  Lathrop,  591,  605. 
Ogden  v.  Murray,  923. 
Ogden  City  R'y  v.  Ogden  City,  1556. 
Ogdenshurgh  Bank  v.  Van  Rensselaer, 

1163. 
Ogdenshurgh,  etc.,  R.  R.  Co.  v.  Frost, 

105.  174,  175,  221. 
Ogdenshurgh,  etc.,  R.  R.   v.  Vermont, 

etc.,  R.  R..  867. 
Ogdenshurgh,  etc.,  R.  R.  Co.  v.  Wooley, 

34,  221. 
Ogilvie  v.  Currie,  195,  202,  208,  492. 
Ogilvie  v.  Knox  Ins.  Co.,  61,  160,  207, 

210.  253,  255,  256.  257,  259,  261. 
Ogle  v.  Knipe,  23,  408. 
Ogleshy  v.  Attrill,  165,  1160. 
O'Hare  v.  Second  National  Bank,  420, 

984. 
Ohio  v.  Fox,  418. 
Ohio  v.  Frank,  1236. 
Ohio  v.  Knoop,  625,  747. 
Ohio,  City  of,  v.  Cleveland,  etc.,  R.   R. 

Co.,  707,  711,  715. 
Ohio,  etc.,  Co.  v.  State,  848,  855. 
Ohio,  etc.,  College  v.  Higgins,  112. 
Ohio,  etc..  College  v.  Rosenthal,  377. 
Ohio,  etc.,  Missouri  Railroad  v.  Wheeler, 

1948. 
Ohio,  etc.,  R.  R.  Co.  v.  Cramer,  129,  158. 
Ohio,  etc.,  R.  R.  Co.  v.  McPherson,  1059. 
Ohio,  etc.,  R.  R.  Co.  v.  Wheeler,  2. 
Ohio,  etc.,  R'y  Co.  v.  People,    796,  849, 

1545. 
Ohio,  etc.,  Trust  Co.  v.  Debolt,  772. 
Ohio,  Ind.  &  111.  R.  R  Co.  v.  Cramer,  33. 
Ohio  Ins.  Co.  v.  Nunnemacher,  2,  386, 
389. 


cxlii 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paying.] 


Ohio  Life,  etc.,  Co.  v.  Merchants'  Ids.  & 

T.  Co.,  1539. 
Ohio  Life  Ins.  Co.  v.   Merchants'  Ins. 

Co.,  272. 
Ohio  Life  Ins.  Co.  v.  Merchants'  Ins.  & 

T.  Co.,  985. 
Ohio  Life  Ins.  &  T.  Co.,  Re,  983. 
Ohio  &  M.  Ry  v.  People,  638,  1523,  1543. 
Ohio  &  M.  R'y  v.  Russell,  1448. 
Ohio  &  M.  R  R.  v.  Anderson,  1447. 
Ohio  &  M.  R.  R.  v.  Davis,  1447. 
Ohio  &  M.  R  R.  v.  Fitch.  1435. 
Ohio  &  M.  R  R  v.  Indianapolis,  etc.,  R 

R,  1499. 
Ohio  &   M.    R.   R    v.    McPherson,  795, 

1293. 
Ohio  &  M.  R.  R  v.  Quier,  1177. 
Ohio  &  M.  R  R  v.  Weber,  14,  770,  1511 
Ohio  &  M.  R,  R  v.  Wheeler,   1511,   1511. 
OhioR.  R  v.  Dunbar,  1536. 
Oil  Creek,  etc.,  R  R  v.  Penn.  Trans.  Co., 

1541. 
O'Kell  v.  Charles,  1105. 
Olcott  v.  By  num.  1338. 
Olcott  v.  Headrick,  1462, 
Olcott  v.  Supervisors,  133,  1526. 
Olcott  v.  Tioga  R  R  Co.,  1020.  1072.  1080, 

1093,  1102,  1105.  1190,  1193,  1510. 
Old  Colony  R  R  v.  Evans,  991. 
Old  Colony  R  R.  v.  Tripp,  1541. 
Old"  Dominion,   Bank  of,   v.  McVeigh, 

628. 
Oldham  v.  Bank,  987. 
Oldknow  v.  Waiuvvright,  1067. 
Oldtown  Bank  v.  Houlton,  18,  1113. 
Oldtowu,  etc.  R  R  Co.  v.  Veazie,  227, 

229,  629,  632,  1167. 
O'Loary  v.  Board  of  Education,  1111. 
Oler  v.  Baltimore,  etc.%R.  R  Co.,  87,  99, 

219. 
Olery  v.  Brown,  661. 
Oleson  v.  Green  Bay,  eta,  137. 
Oliphant  v.  Woodburn,  etc.,  Co.,  1027. 
Oliphant  v.  Woodhaven,  etc.,  Co.  42. 
Oliver  v.  Gil  more,  649. 
Oliver  v.  Liverpool,  etc.,  Co.,  775. 
Oliver  v.  Liverpool,  etc.,  Ins.  Co.,  321, 

322. 
Oliver  v.  Liverpool  &  London   Life  & 
Fire  Ins.  Co. ,*666. 


Oliver  v.  Walter,  etc.,  Co..  1178. 
Oliver  v.  Washington  Mills,  753. 
Olney  v.  Chadsey,  1075.  1121. 
Olney  v.  Conanicut  Land  Co..  940. 
Olyphant  v.  St.   Louis,  etc..   Co.,  1350, 

1351,  1395,  1397.  1403. 
Omaha,   etc.,  R'y  v.  Wabash,  etc.,  R'y, 

1384. 
Omaha  H.  R'y  v.  Cable,  etc.,  Co.,  1556. 
O'Mahony  v.  Belmont,  1420. 
O'Meara  v.  North  American  Mining  Co., 

101,  785,  790. 
Ommaney  v.  Butcher,  408. 
O'Neal  v.  King,  125. 
Oneida  Bank  v.  Ontario  Bank,  985, 119a 
0"Neil  v.  Dry  Dock,  etc.,  R  R.,  1570. 
O'Neill  v.  Win-ham.  600,  602. 
Onondaga  Trust  &  Deposit  Co.  v.  Price, 

409,  II!.  783. 
Onslow's  Case,  88. 
Onstotl  v.  People,  1  is 
Ontario  s.ilt  Co.  v.  Merchants' Salt  Co., 

651,  ln'.is. 
Onward,  etc.,  Soc,  Re,  1  139. 
Opdyke  v.  Marble.  681,  682 
Opdyke  v.  Pacific  R  K..  1217. 
Opelika  v.  Daniel,  133. 
Opere,  Limited.  Re,  1253. 
Orange,  etc.,  R  R  v.  Fulvuy.  785. 
( >rd,  Ex  parte,  340 
On-. in  v.  Jennings,  152. 
Oregon  Cascade  R  R  Co.  v.  Baily.  1525. 

[526. 
Oregon  Central  R  R  Co.  v.  Scoggin,  210. 

223,  232 
Oregon,  etc.,  Co.  v.  Hilmers.  502. 
Oregon,  etc.,  R.  R.  v.  Forrest,  1213. 
Oregon  R'y  Co.  v.  Oregonian  R'y  Co.,  6, 

974.  1499,  1504.  1505. 
Oregon  R*y  Co.  v.  Oregon  R'y  &  Nav. 

Co.,  1016,  1065. 
Oregon  Short  Line,  etc.,  R'y  v.  Ilwaco, 

etc.,  Co.,  1599. 
Oregon  &  W.  T.  &  L  Co.  v.  Rathbun,  1002. 
Oregonian  R'y  Co.  v.  Oregon,  etc.,  Nav. 

Co.,  881,  1166. 
O'Reilly  v.  Bard,  271.  305. 
Oriental,  etc..  Ex  parte,  327. 
Oriental  Steam  Nav.  Co.  v.  Briggs,  461, 
462. 


TABLE    OF    CASES. 


CXU11 


[T7<e  references  are 

Organized  Labor  Hall  v.  Gebert,  66?. 

Orleans  v.  Piatt,  14S.~ 

(Jrmerod's  Case,  908. 

Ornisby  v.  Budd,  482. 

Ormsby  v.  Vermont  Copper  Mining  Co., 

183,  785.  790,  795,  1059. 
Ornamental  P.  W.  Co.  v.  Browne,  225. 
Oroville,  etc.,  R.  R.  v.  Supervisors,  875. 
Orpen,  Re.  415. 
Orr  v.  Bigelow,  108,  333,  447. 
Orr  v.  Bracken  County,  etc.,  636. 
Orr,  etc.,  Co.   v.  Reno  Water  Co.,  853, 

955. 
Ortigosa  v.  Brown,  517,  519,  523,  550, 

594. 
Ortt  v.  Minneapolis,  etc.,  R'y,  1534. 
Orynski  v.  Loustannan,  228. 
Osage  Valley,  etc.,  R.  R.  Co.  v.  Morgan 

County,  135. 
Osborn  v.  Crosby,  111. 
Osborn  v.  U.  S.  Bank,  1183. 
Osoorne  v.  Adams  Co.,  139. 
Osborne  v.  McAlpine,  406. 
Osborne  v.  Missouri,  etc.,  R'y  Co.,   1562, 

1563. 
Osborne  v.  Mobile,  1946. 
Osborne  v.  Monks,  921,  1130. 
Osborne  v.  Tunis,  1100. 
Osborne  v.  United    States    Bank,    1948, 

1950. 
Osborne,  Ex  parte,  1036. 
Osborne,  etc.,  Co.  v.  Croome,  853. 
Osgood  v.  Bauder,  470. 
Osgood  v.  King.  42,  65,  72,  78,  248. 
Osgood  v.  Laytin.  248,  729,  732,  733, 1429. 
Osgood  v.  Maguire,  1156,  1424. 
Osgood  v.  Manhattan  Co.,  1113. 
Osgood  v.  Ogden,  240,  1430. 
Oskaloosa  Agricultural  Works  v.  Park- 
hurst,  226. 
Ossippee  Co.  v.  Canney,  230,  232. 
Ossippee  H.  &  W.  Mfg.   Co.  v.  Canney, 

1186. 
Osterburg  v.  Union  Trust  Co.,  776,  1480, 

1481. 
Oswego,  etc.,  Bridge  Co.  v.  Fish,  1577. 
Oswego,  etc.,  Factory  v.  Dolloway,  752. 
Otis  v.  Cullum,  1198. 
•  Otis  v.  Gardner,  484,  519,  547,  586,  593. 
Otis  v.  Harrison,  986. 


to  the  foot-paging.'] 

Otis  Co.  v.  Inhabitants,  etc.,  1020. 
Otoe  County  v.  Baldwin,  147. 
Ottawa  v.  Carey,  130,  131,  139. 
Ottawa,  etc..  Co.  v.  Murray,  1296. 
Ottawa,  etc.,  R.  R.   v.   Black,  235,   1489, 

1507. 
Ottawa,  etc.,  R.  R.  Co.  v.  Hall,  99, 100. 
Ottawa  Glass  Co.  v.  McCaleb,  746,  753, 

755. 
Otter  v.  Brevoort,  42,  43,  57. 
Otto  v.  Journeymen,  etc.,  Union,  661. 
Ottoman,  etc.,  Co.  v.  Dane,  1014. 
Ottos,  etc.,  Mines,  The,  Re,  396. 
Ouachita  &  Red  R.  R.   R.  Co.  v.  Cross, 

236. 
Ouachita  &  Red  River  R.  R.  Co.  v.  Gaster, 

181. 
Overend,  etc.,  Co.  v.  Gibb,  1032. 
Overman  Wheel  Oct  v.  Pope  Mfg.  Co., 

1180,  1182. 
Overton  v.  Memphis,  etc.,  R  R.,    1155, 

1409. 
Overton  B.  Co.  v.  Taylor,  1578. 
Owen  v.  Challis,  1040. 
Owen  v.  Kellogg,  1462. 
Owen  v.  Purdy,  629,  640. 
Owen  v.  Routh,  788. 
Owen  v.  Smith,  889. 
Owen  v.  Whitaker,  837. 
Owens  v.  Hastings,  1366. 
Owens  v.  Missionary  Soc.  of  the  M.  K 

Church,  665. 
Owens,  In  re,  908. 
Owenton,  etc.,  Co.  v.  Smith,    234,  315, 

640. 
Owings  v.  Speed,  1067,  1069. 
Owsley  v.  Montgomery  &  W.  P.  R  Co., 

1009,  1010. 
Oxford,  etc.,  Society,  Re,  734. 
Oxford  Iron  Co.  v.  Spradley,  1185,  1190. 
Oxford  Turnpike  Co.  v.  Brund.  586. 
Oxford  Turnpike    Co.  v.  Bunnell,  547, 

62  L 


P. 


Pa.   R  R.  Co.   v.    Commonwealth,  423, 

424. 
Pacific  Bank  v.  De  Ro.  1016. 
Pacific,  etc.,  Co.  v.  Adler,  643. 


cxliv 


TABLE    OF   CASES. 


[TJie  references  are 

Pacific,  etc.,  Co.  v.  Western  U.  T.  Co., 

1594. 
Pacific,  etc.,  Mill    v.    Dayton,  etc.,  R'y, 

1078,  1293. 
Pacific  Express  Co.  v.  Seibert  778,  1950. 
Pacific  Nat'l  Bank  v.  Eaton,  239. 
Pacific  Nut' I  Bank  Cases.  249. 
Pacific  R.  R.  v.  Cutting.  732,  891.  892, 

1157. 
Pacific  R.  R.  v.  Hughes,  639. 
Pacific  R  R    v.   Ketchuui,    135G.  1416, 

1469. 
Pacific  R.  R.  v.  Leavenworth,  1555. 
Pacific  R.  R.  v.  Maguire,  771,  1943. 
Pacific    R.    R.     v.    Mo.    Pac.   R'y,    984, 

1126,  1133,  1135.  1543. 
Pacific  R.  R.  v.  Renshaw,  633, 
Pacific  R.  R.  v.  Seeley,  973,  993. 
Pacific  R.  R  v.  Thomas,  1089. 
Pacific  R'y  v.  Wade,  1568. 
Pacific  R.  R  Removal  Cases,  1183,  19  IS. 
Pacific  Trust  Co.  v.  Dorsey,  34,  69. 
Packard  v.  Jefferson  Co.,  146. 
Packet  Co.  v.  Aiken.  1599. 
Packet  Co.  v.  Catlettsburg,  1946. 
Packet  Co.  v.  Keokuk.  1599. 
Packet  Co.  v.  St.  Louis.  1946. 
Paddock  v.  Fletcher.  203. 
Padstow,  etc.,  Co.,  In  re.  659. 
Paducah,  etc.,  Lank  v.  Parkes,  239. 
Paducah,  etc.,  R  R  v.  Parks,  119. 
Page  v.  Austin,  400. 
Page  v.  Burnstine.  1589. 
Page  v.  Contocook  Valley  R  R  Co.,  19. 
Page  v.  Fall  River,  etc.,  R  R,  1084. 
Page  v.  Fowler,  789. 
Page  v.  Heineberg,  991. 
Page  v.  Leapingwell,  409.  410. 
Paige  v.  Smith,  1434.  144".. 
Paine  v.  Hutchinson,  355,  461,  525,  569. 
Paine  v.  Irwin.  917. 
Paine  v.  Lake  Erie,  etc.,  R  R  Co.,  902, 

963,  1490,  1547. 
Paine  v.  Stewart,  281,  284,  292,  303,   350, 

357. 
Paine  v.  Warren,  681. 
Paine  v.  Wright,  747. 
Painesville,  etc.,  R  R  Co.  v.  King,  378, 

716. 
Palfrey  v.  Paulding,  393,  630,  635,  887. 


to  the  foot-paging.] 

Palmer  v.  Clark.  1411.  14:11. 

Palmer  v.  Cypress,  etc.,  Cemetery,  923, 

U70. 
Palmer  v.  Forbes,  1296.  1317.  1366.  1370. 
Palmer     v.     George    W.     Hutchinson 

Grocery  Co.,  ! 
Palmer  v.  Hawes,  603,  111'5. 
Palmer  v.  Lawrence,  87.  113,  9S7. 
Palmer  v.  McMahon,  762. 
Palmer  v.  Pennsylvania  Co..  1176. 
Palmer  v.  Ridge  Mining  Co.,  342. 
Palmer  v.  Stephens.  1189. 
Palmer  v.  Yates,  1073. 
Palys  v.  Jewett,  1 147. 
Pana  v.  Bowler,  144,  145. 
Pana  v.  Lippincott,  1 14. 

ma,  eta,  R'y   <•<>.,  Re,    1252,   1253, 

1354,  1255,  1356,  1299. 
Panama,  etc.,  Tel.  Co.  v.  India  Rubber, 

etc.,  Co.,  903. 
Panhandle,  etc,  Bank  v.  Stevenson,  729, 

I,  1077. 
Paper  < '".  v.  Waples,  161. 
Paper  Ca's  A]. peal.  897. 
Paradi-c  v.  Farmers',  etc.,  Bank,  1424. 
Parbury'  207. 

Paris  v.  Paris,  741. 
Parish  v.  Parish,  460. 
Parish  v.  Wheeler,  1261. 1881, 1866, 1535. 
Parish,  etc..  v.  Newburyport  &  A.  Horse 

Railroad  Co..  1101. 
Park  v.  Grant  Locomotive  Works,  718, 

721,  722,  1460. 
Park  v.  Musgrave,  598. 
Park  v.  Petrol*  am  Co..  1161. 
Park  v.  Spaulding,  061. 
Park  v.  Whitney.  458 
Tark  Bros.,  etc.,  v.  Kelly,  etc..  Co.,  1107. 
Park  Nat'l   Bank  v.  German,   etc.,  Co., 

1213. 
Parke  v.  Commonwealth  Ins.  Co.,  1177. 
Parke,  etc.,  Co.  v.  Terre,  etc.,  Co.,  730, 

961. 
Parker  v.  Bernal,  420. 
Parker  v.  Browning.  1428. 
Parker  v.  Crol,  568. 
Parker  v.  Glover,  435. 
Parker  v.  Great  West.  R'y,  1521. 
Parker  v.  Kett,  1057,  1058. 
Parker  v.  Mason,  707,  728,  740. 


TABLE    OF    CASES. 


cxlv 


[The  references  are 

Parker  v.  McKenna,  922. 

Parker  v.  New  Orleans,  etc.,  R  R.,  1383, 

1385. 
Parker  v.  Nickerson,  917,  922,  935. 
Parker  v.  Northern,  etc.,  R   R  Co.,  97. 

112. 
Parker  v.  Scogin,  135. 
Parker  v.  Sun  Ins.  Co..  612,  755,  761. 
Parker  v.  Thomas,  128,  196. 
Parker  v.  Washoe  Mfg.  Co.,  1100,  1101. 
Parker  Mills  v.  Com'rs,  etc.,  776. 
Parker,  Ex  parte.  358,  359. 
Parkhurst  v.  Northern,  etc.,  R  R,  1368. 
Parkin  v.  Fry,  1038. 
Parkins  v.  Watson,  987. 
Parkinson  v.  City,  1101. 
Parks  v.  Automatic,  etc.,  Co.,  710,  712. 
Parks  v.  Evansville,  Ind.  &   Cleveland 

S.  L.  R  R  Co.,  128. 
Parks  v.  Heman,  161. 
Parmley  v.  Railroad  Cos.,  747. 
Parmley  v.  Tenth  Ward  Bank,  666. 
Parrish's  Appeal,  272,  336. 
Parrott  v.  Byers.  1136,  1137,  1151. 
Parrott  v.  City  of  Lawrence,  1577. 
Parrott  v.  Colby,  298,  351. 
Parrott  v.  Thatcher,  580. 
Parrott  v.  Worsfold,  404,  406. 
Parson  v.  Joseph.  53,  55,  1139. 
Parson's  Case,  107,  333. 
Parsons  v.  East,  etc.,  Co.,  777. 
Parsons  v.  Greenville,  etc..  R  R,  1326. 
Parsons  v.  Hays,  53. 
Parsons  v.  Jackson,  1198. 
Parsons  v.  Joseph,  1152. 
Parsons  v.  Martin,  564,  580,  780. 
Parsons  v.  Robinson.  454,  1356. 
Parsons  v.  Spooner,  1035. 
Parsons  v.  Winslow,  740. 
Partridge  v.  Badger,  93,  1058,  1084.  1185, 

1190. 
Partridge  v.  Davis,  1248. 
Partridge  v.  Forsythe,  580. 
Partridge  v.  Partridge,  406,  411. 
Paschall  v.  Whitsett,  730. 
Passaic  Bridge,  The,  1945. 
Passmore  v.  Mott,  1104. 
Patent  File  Co.,  Re,  1262. 
Patent  Paper  Mfg.  Co.,  In  re,  337. 
Paterson,  etc.,  Co.  v.  Grundy,  1567. 
J 


to  the  foot-paging.'] 

Paterson,  etc.,  R  R  v.  Mayor,  1564,  1572. 
Paton  v.  Sheppard,  743. 
Patrick  v.  Reynolds,  1036. 
Patterson  v.  Baker,  291. 
Patterson  v.  Hempfield  R  R,  1309. 
Patterson  v.  Lynde,  250,    255,   257,   281, 

282,  289,  306,  1427. 
Patterson  v.  Minn.,   etc.,   Co.,    276,   278, 

280,  285. 
Patterson  v.  Mississippi    R    R    B.    Co.. 

1527,  1600. 
Patterson  v.  Robinson,  1078. 
Patterson  v.  Syracuse  Nat'l  Bank,  1090. 
Patterson  v.  Wyomissing  Mfg.  Co.,  280,. 

284. 
Patterson,  Appeal  of.  435,  436,  473. 
Pattison  v.  Supervisors,  141. 
Pattison  v.  Syracuse  Nat'l  Bank,  973." 
Paul  v.  Baltimore,  etc.,  R  R.  1181, 1542. 
Paul  v.  Virginia,   997,   998,    1001,    1945. 

1947. 
Paulding  v.  Chrome  Steel  Co.,  991. 
Paulding  v.  Jerome,  etc.,  Co.,  941. 
Pauling  v.  London  &   N.  W.  R'y  Co., 

1096. 
Paulino  v.  Portuguese  Ben.   Ass'n,  672.. 
Paulson  v.  Van  Steen burgh,  1141. 
Pawle's  Case,  209. 
Paxon  v.  Talmage,  253. 
Paxton.  etc.,  Co.   v.  First  Nat'l   Bank, 

1046. 
Payne  v.  Baldwin,  983.  1517. 
Payne  v.  Bullard,  175,  244. 
Payne  v.  Commercial  Bank,  602.  1086. 
Payne  v.  Elliott,  21,  23.  26,  239.  780. 
Payne  v.  New  South,  etc.,  Co.,  1044. 
Payne  v.  Western  &  A  R.  R.  Co.,  1008. 
Payne's  Case,  358,  448. 
Payson  v.  Stoever,  265,  385. 
Payson  v.    Withers,   190,  245,.  291.  385, 

632,  810. 
Peabody  v.  Eastern  Methodist  Society  in 

Lynn,  665. 
Peabody  v.  Flint,  946,  1130. 
Peacock  v.  Pittsburg,  etc..  Works,  1457. 
Peake  v.  Wabash  R  R  Co.,  168,  171. 
Peale  v.  Phipps,  1433. 
Pearce  v.  Billings,  406,  407. 
Pearce  v.  Madison  &  I.   R  R   Co.,  634, 

1191,  1492,  1534 


cxlvi 


TABLE    OF    CASES. 


[The  references  are 

Pearly  v.  Smith,  743. 

Pearsall  v.  Western  U.  T.  Co.,  578,  1122, 

1593. 
Pearson  v.  Bank  of  England,  444 
Pearson  v.  Concord  R  R  Co.,  422,  427, 

932. 
Pearson  v.  London,  etc.,  Ry,  367. 
Pearson  v.  Scott,  568. 
Pearson's  Case,  217,  907,  915, 1038. 
Peavey  v.  Town,  etc.,  765. 
Peck  v.  Coalfield  Coal  Co.,  34. 
Peck  v.  Cooper,  977. 
Peck  v.  Detroit,  etc.,  Works,  1111. 
Peck  v.  Doran,  etc.,  Co.,  468,  476,  970. 
Peck  v.  Ellis,  1159. 
Peck  v.  Gurney,  486,  487,  489,  494. 
Peck  v.  Miller,  273. 
Peck  v.  New  Jersey,  etc.,  R  R,  1195. 
Peck  v.  New  York,  etc.,  Ry,  1195,  1197, 

1329,  1353. 
Peck  v.  Providence  Gas  Co.,  440,  444. 
Peckham  v.  Hendrew,  1121. 
Peckham  v.  Ketchum,  567,  580. 
Peckham  v.  Newton,  435. 
Peckham  v.  North  Parish,  1174. 
Peckham  v.  Smith,  390. 
Peckham  v.  Van  Wagenen,  712,  714,  717. 
Pedell  v.  Gwynn,  277. 
Peddicord  v.  Baltimore,  etc.,  P.  R  Ry 

Co.,  1590. 
Peebles  v.  PatapscoGuano'Co.,  205, 1006, 

1007. 
Peebles,  In  re,  692,  696. 
Peed  v.  Millikan,  134. 
Peek  v.  Derry,  196,  205,  792. 
Peek  v.  Detroit,  etc.,  Works,  1069. 
Peek  v.  Gurney,  204,  207. 
Peekskill  Plow  Works,  Matter  of,  959. 
Peel  v.  Thomas,  665. 
Peel's  Case,  196,  208. 
Peik  v.  Bank  of  America,  444. 
Peik  v.  Chicago,  etc.,  R  R,  1330. 
Peirce  v.  Jersey  W.  Co.,  225. 
Peirce  v.   New    Orleans    Building  Co., 

856. 
Peirce  v.  Somers  worth,  1175. 
Pekiu,  City  of,  v.  Reynolds,  1237. 
Pellatt's  Case,  37,  96.  97,  122. 
Pell's  Case,  34,  36,  76. 
Pelly,  Ex  parte,  908,  1157,  1159. 


to  the  foot-paging.] 

Pelton  v.  East  Cleveland  R  R,  1564 
Pelton  v.  National  Bank,  766,  767. 
Pelton  v.  Northern  Trans.  Co.,  769. 
Peltz  v.  Supreme,  etc.,  Union,  316. 
Pembina  Mining  Co.  v.    Pennsylvania, 

776,  998,  1005,  1947,  1949. 
Pender  v.  Lushiugton,  826,  843,  1143. 
Pendergast  v.  Bank   of   Stockton,   687, 

691. 
Pendergast  v.  Yandes,  273. 
Pendleton  v.  Empire,  etc.,  Co.,  929. 
Pendleton  Co.  v.  Amy,  146. 
Pendleton  Mfg.  Co.  v.  Mubanna,  37,  199 
Penfield  v.  Skinner,  001. 
Peninsular  Bank  v.  Hanmer,  1085. 
Peninsular,  etc.,  R  R  Co.  v.  Duncan,  15, 

98.  113. 
Peninsular  Iron  Co.  v.  Stone,  1135. 
Peninsular  R  R  Co.  v.  Howard,  19. 
Penn  v.  Calhoun,  1390. 
Penniman  v.  Biij^s,  261,  282. 
Pennington  v.  Baehr,  1231. 
Pennock  v.  Coe,  1238,   1261,   1374,   1382, 

1383. 
Pennoyer  v.  NefF,  1175. 
Pensyl.  Appeal  of,  435. 
Pennsylvania,    Bank    of,    v.    Common- 
wealth, 027. 
Pennsylvania,  Bank  of,  v.  Gries,  274. 
Pennsylvania  Bank   v.    Hopkins,   1141. 

1429. 
Pennsylvania  Bank  v.  Reed,  1055,  1086. 

1093. 
Pennsylvania  Co.    v.    Daudiidge,    1093, 

1534. 
Pennsylvania  Co.  v.  Ellett,  1536. 
Pennsylvania  Co.  v.  Wentz,  1516. 
Pennsylvania  Coal  Co.  v.  D.  &  H.  Canal 

Co.,  1579. 
Pennsylvania  College  Cases,  638,  1942. 
Pennsylvania  Co.,  etc.,  v.  Bauerle,  1301. 

1321. 
Pennsylvania  Co.,  etc.,  v.  Commissioners, 

757, 
Pennsylvania  Co.,  etc.,  v.  Jacksonville, 

etc.,  Co.,  1407. 
Pennsylvania  Co.,  etc.,  v.  Philadelphia 

etc.,  R  Co.,  507,  790. 
Pennsylvania,  etc.,  Co.'s  Appeal,  963. 
Pennsylvania,etc,  RCo.  v.  Harkins,  1547. 


TABLE    OF   CASES. 


cxlvii 


[The  references  are 

Pennsylvania,  etc.,  R'y  Co.  v.  Keokuk, 

etc.,  Co.,  953. 
Pennsylvania,  etc.,  R.  R.  Co.  v.  Leuflfer, 

273. 
Pennsylvania  Ins.  Co.  v.  Murphy,  668. 
Pennsylvania   Match   Co.    v.   Hapgood, 

1047. 
Pennsylvania  Mut.,   etc.,  Co.    v.  Heiss, 

1382. 
Pennsylvania  R.  R.  v.  Allegheny,  etc., 

R.  R,  1245,  1246,  1337,  1340,  1357. 
Pennsylvania  R.  R.  v.  Angel,  1009. 
Pennsylvania  R.  R  Co.  v.  Bait.  &  O.  R 

R  Co.,  1532. 
Pennsylvania  R  R  Co.  v.  Braddock,  etc., 

R'y  Co.,  1568. 
Pennsylvania     R     R     Co.    v.      Canal 

Cora'rs,  2. 
Pennsylvania  R.  R  Co.  v.  Cook,  1098. 
Pennsylvania  R.  R.  Co.  v.  Freeport,  1531. 
Pennsylvania  R  R.  Co.  v.  Miller,    627, 

1945. 
Pennsylvania  R.  R  Co.  v.  National  R'y 

Co.,  1527. 
Pennsylvania  R.  R   Co.  v.  Pemberton, 

etc..  R.  R,  1251. 
Pennsylvania  R.  R.  Co.  v.  Philadelphia, 

131,  137,  139,  140. 
Pennsylvania  R  R  Co.  v.  Riordan,  1537. 
Pennsylvania  R  R.  Co.  v.  St.  Louis,  etc., 

R  R,  6.  1246,  1490,  1491,  1504,  1505, 

1543,  1544. 
Pennsylvania  R    R    Co.    v.   Vandiver, 

1008,  1095. 
Pennsylvania  R.  R  Co.'s  Appeal,  516,  519. 
Pennsylvania  Trans.  Co.'s  Appeal,  1475, 

1480. 
Penny,  Ex  parte,  448. 
Penobscot  v.  Dunn.  1058. 
Penobscot  &  Kennebec  R.   R.    Co.   v. 

Dunn,  122, 123,  126,  167,  1167. 
Penobscot  Boom  Corp.  v.  Lamson,  863, 

877,  887. 
Penobscot,  etc.,  R.  R,  Co.  v.  Bartlett,  91, 

116,224,  230. 
Penobscot,  etc.,  R  R.  Co.  v.  Dummer, 

113,  167,  171,  227. 
Penobscot  R.  R  Co.  v.  White,  227. 
Pensacola  Tel.    Co.  v.   Western   Union 

Tel.  Co.,  1001,  1594,  1595,  1946. 


to  the  foot-paging."] 

Penticost  v.  Ley,  408. 
Pentz  v.  Citizens'  Fire,  etc.,  Co.,  173. 
Pentz  v.  Hawley,  263,  2G8. 
Pen-y-Van  Colliery  Co.,  In  re,  862. 
People  v.  Albany,  etc.,  R  R,  42, 81 1,  812, 

814,  816,  824,   829,  831,  833,  836,  837, 

839,   844,  850,  851,  867,   1012,    1061, 

1154.  1155,  1498,  1504. 
People  v.  Albany  &  Susquehanna  R  R 

Co.,  1417. 
People  v.  Albany  &  Ver.  R  R  Co.,  1522. 
People  v.  American  Bell  Tel.  Co.,  775. 
People  v.  Anderson,  etc.,  Co.,  890. 
People  v.  Assessors,  etc.,  658,  764,  767. 
People  v.  Assessors  of  Watertown,  2. 
People  v.  Atlantic,  etc.,  Ins.  Co.,  1440, 

1570. 
People  v.  Atlantic,  etc.,  R  R,  867. 
People  v.  Babcock,  1580. 
People  v.  Ballard,  49,  873,  955. 
People  v.  Bank  of  Niagara,  868. 
People  v.  Barnett,  235,  236,  1432. 
People  v.  Barrett,  144. 
People  v.  Batchellor,  135,'  137,  147,  807. 
People  v.  Beigler,  1167. 
People  v.  Blackhurst,  1099. 
People  v.  Board  of  Assessors,  705. 
People  v.  Board  of  Governors  of  Albany 

Hospital,  799. 
People  v.  Bogart,  869. 
People  v.  Boston,  etc.,  R  R    Co.,  1517, 

1523. 
People  v.  Bowen,  3,  884. 
People  v.  Bradley,  752,  764. 
People  v.  Brandis,  etc.,  Co.,  531. 
People  v.  Brewster,  986. 
People  v.  Broadway  R.  R,  867,  1558. 
People  v.  Brooklyn,   etc.,   R    R,    1275, 

1498.  1504,  1565. 
People  v.  Buffalo,  etc.,  Co.,  865. 
People  v.  Budd,  1600. 
People  v.  Cady,  674. 
People  v.  Central  R  R,  1165. 
People  v.  Chambers,  219. 
People  v.  Chapman,  148. 
People  v.  Chicago  Board  of  Trade,  1026. 
People  v.  Chicago,  etc.,  R  R,  1523. 
People  v.  Chicago  Gas  T.  Co.,  3,  7,  426, 

644,  872. 
People  v.  City  Bank,  885. 


cxlviii 


TABLE    OF    CASES. 


[The  references  are 

People  v.  Clark,  1012,  1945. 

People  v.  Clute,  851. 

People  v.  Coffey,  1572. 

People  v.  Coleman,  14.  321,  667,  6G9,  767, 

772. 
People  v.  Colorado,  etc.,  R  R,  1488,  1523. 
People  v.  Commissioners,   etc.,    14,   752, 

760,  7G1,  763,  764. 
People  v.  Conklin,  817,  1067,  1155. 
People  v.  Cook.  1274. 
People  v.  Coon,  133.  154. 
People  v.  Cornell,  674. 
People  v.  Crissey,  819. 
People  v.  Crockett,  531,  686,  687,  690. 
People  v.  Crossley,  821,  1021,  1022. 
People  v.  Cummings,  798,  799. 
People  v.  Dashaway,  869. 
People  v.  Davenport,  752. 
People  v.  De  Grauw,  863,  890. 
People  v.  Detroit,  135. 
People  v.  Detroit,  etc.,  Works,  1009. 
People  v.  Devin,  825. 
People  v.  Dispensary,  etc.,  Soc,  866. 
People  v.  Dolan,  760. 
People  v.  Dutch  er,  144. 
People  v.  Eadie,  676,  678, 
People  v.  Eastman,  770. 
People  v.  Elmore,  622. 
People  v.  England,  977. 
People  v.  Equitable  Trust  Co.,  770,  77G. 
People  v.  Erie  l,'"y.  1143. 
People  v.  Farnham,  887. 
People  v.  Ferguson,  752. 
People  v.  Fire  Assoc,  of  Plnla.,  998. 
People  v.  Fire  Underwriters,  1025,  1026. 
People  v.  Fishkill,  etc.,  Co.,  875. 
People  v.  Fleming,  817.  841. 
People  v.  Flint,  872. 
People  v.  Formosa,  1586. 
People  v.  Fort  Edward,  140. 
People  v.  Franklin,  138,  148. 
People  v.  Gilcu,  1571. 
People  v.  Goss  Mfg.  Co.,  531,  610. 
.  People  v.  Griffin,  510. 
People  v.  Gunn,  315. 
People  v.  Harp,  148. 
People  v.  Hart,  799. 
People  v.  Hatch,  149. 
People  v.  Hektograph  Co.,  862. 
People  v.  Henshaw,  135. 


to  the  foot-paging.] 

People  v.  Hillsdale,  etc.,  T.  Co.,  86a 

People  v.  Hitchcock,  150. 

People  v.  Holden,  125.  126.  152. 

People  v.  Home  Ins.  Co.,  752,  769. 

People  v.  Horn,  etc.,  Co.,  776. 

People  v.  Howard,  998,  1005. 

People  v.  Hughitt,  14a 

People  v.  Hurlburt,  144,  14a 

People  v.  Hurl  but.  130. 

People  v.  Hutton,  144 

People  v.  Improvement  Co.,  866, 868,  870. 

People  v.  Jackson,  etc.,  P.  Co.,  885. 

People  v.  John,  etc.,  Co.,  1436. 

People  v.  Justices,  1177. 

People  v.  Kankakee  Improvement  Co., 

P85. 
People  v.  Keese,  816. 
People  v.  Kenney,  819. 
People  v.  Kerr,  l.V.l. 
People  v.  Kingston,  etc.,  Co.,  875,  885. 
People  v.  Kip.  822,  825,  84%  10221 
People  v.  Knickerbocker,  eta,  Ins.  Co., 

14J 
People  v.  Lake  Shore  &  M.  S.  R  R  Co., 

676,  677,  678,  879,  680,  681. 
People  v.  Logan  County,  142.  144,  236. 
People  v.  Long  I.  R  R,  1517. 
People  v.  Los  Angeles,  etc.,  Ry,  874, 1567. 

People  v.  Louisville,  etc.,  R  R  Co.,  152, 

1522. 
People  v.  Lowe,  602,  672.  869. 
People  v.  Manhattan  Co.,  875,  1582. 
People  v.  Mauran,  996. 

People  v.  May,  1552. 

People  v.  McLane,  1400. 

People  v.  McLean.  752.  769,  776. 

People  v.  Medical  Society  of  Erie  Co., 
1025. 

People  v.  Merchants'  &  Moch.  Bank,  714. 

People  v.  Metropolitan    Ry    Co.,    1052, 
1506. 

People  v.  Milk  Exchange,  869. 

People  v.  Miller,  530. 

People  v.  Mitchell,  136. 

People  v.  Montecito,  etc.,  Co.,  871. 

People  v.  Moore,  763. 

People  v.  Morris,  130. 

People  v.  Mott,  679. 

People  v.  Mulholland,  1517. 

People  v.  Musical,  etc.,  Union,  1025. 


TABLE    OF    CASES. 


cxlix 


[The  references  are  to  the  foot-paging.'] 


People  v.  Mutual  Gas,  etc.,  Co.,  684. 

People  v.  Nash,  823. 

People  v.  National  Sav.   Bank,  49,  223, 

883,  885. 
People  v.  Nat'l  Trust  Co.,  891. 
People  v.  Nelson,  315. 
People  v.  N.  Y.  Benevolent  Soc,  1025. 
People  v.  N.  Y.  C,  etc.,  R.   R   Co.,  1012, 

1522. 
People  v.  N.  Y.  Com.  Assoc,  1026. 
People  v.  N.  Y.  Cotton    Exchange,   661, 

1026. 
People  v.  N.  Y,  etc.,  Asylum,  836,  1066. 
People  v.  N.  Y,  etc.,  Co.,  752. 
People  v.  N.  Y,  etc.,  R    R,    770,    1523, 

1546. 
People  v.  N.  Y,  L.  E.  &  W.  R.  R,  1523. 
People  v.  Newton,  1566. 
People  v.  Niagara,  666. 
People  v.  Nortli  River  S.  Rep.  Co.,  643, 

645,  657,  846,  865,  950,  967. 
People  v.  Northern  R  R.  Co.,  849,  1484. 
People  v.  Oakland  Co.  Bank,  866,  875. 
People  v.  O'Brien,  890,  1275,   1414,  1497, 

1504,  1505,  1554,  1555. 
People  v.  Oldtown,  148. 
People  v.  Oliver,  148,  149. 
People  v.  Ottawa,  etc.,  Co.,  875. 
People  v.    Pacific  Mail   Steamship    Co., 

676,  679,  682. 
People  v.  Parker  Vein  Coal  Co.,  385,  395, 

530. 
People  v.  Paton,  526,  676. 
People  v.  Peck,  148,  806,  813. 
People  v.  Pendleton,  1154. 
People  v.  Peyton,  680. 
People  v.  Phillips,  842,  1022. 
People  v.  Phoenix  Bank,  875. 
People  v.  Potter,  1017. 
People  v.  Pres.,  etc.,  891. 
People  v.  Pueblo  Co.,  133. 
People  v.  Reilly,  674. 
People  v.  Remington,  274,  603, 1436, 1443, 

1447. 
People  v.  Remington  &  Sons,  1443,  1447, 

1461. 
People  v.  Rensselaer,  etc.,  R.  R,  871. 
People  v.  Rice,  315. 
People  v.  Robinson,  825,  840. 
People  v.  Rome,  etc.,  R  R  Co*,  152, 1522. 


People  v.  Runkle,  863,  1017. 

People  v.  Saint  Francisco's  Benevolent 

Society,  1025. 
People  v.  St.  Louis,  etc.,  R'y  Co.,  676. 
People  v.  Salem,  135,  139. 
People  v.  San  Francisco  Sav.  Union,  727. 
People  v.  Sawyer,  149. 
People  v.  Schoon  maker,  1020. 
People  v.  Schurz,  1484. 
People  v.  Security,  etc.,  Co.,  1436. 
People  v.  Selfridge,  313. 
People  v.  Sheldon,  646. 
People  v.  Sherman,  1012. 
People  v.  Sierra,  etc.,  Co.,  1016. 
People  v.  Simonton,  839,  996. 
People  v.  Smith,  1526. 
People  v.  Soldiers'  Home,  771. 
People  v.  Spencer,  136. 
People  v.  Squire,  1581. 
People  v.  Stanford,  869,  871,  874 
People  v.  State  Treasurer,  141. 
People  v.  Sterling  Mfg.  Co.,  45,  50,  1022. 

People  v.  Stockton,  etc.,  R  R.  Co.,  34,  92, 
219. 

People  v.  Sturtevant,  1145,  1154,  1552. 

People  v.  Suffern,  144. 

People  v.  Third  Ave.  R  R,  1549. 

People  v.  Throop,  674,  678,  679,  682, 1022. 

People  v.  Tibbits,  822,  826,  836. 

People  v.  Town  of  Fairbury,  799. 

People  v.  Town  of  Laena,  144. 

People  v.  Town  of  Santa  Anna,  144. 

People  v.  Tuthill,  840. 

People  v.  Twaddell,  385,  805,  820,  855, 
1057. 

People  v.  Ulster,  etc.,  R  R,  871,  884. 

People  v.  United  States,  etc.,  Co.,  680. 

People  v.  Universal,  etc.,  Co.,  1443, 1461. 

People  v.  Utica  Ins.  Co.,  6,  870,  1019. 

People  v.  Van  Valkenburg,  148. 

People  v.  Wagner,  149. 

People  v.  Walker,  676,  677,  678,  1065. 

People  v.  Washington,  etc.,  Bank,  868. 

People  v.  Watertown,  666. 

People  v.  Weaver,  760,  761,  765. 

People  v.  Webster.  850. 

People  v.  Wemple,  667,  775. 

People  v.  White,  890. 

People  v.  Williamsburgh  Gas  Light  Co.s 
752,  875. 


cl 


TABLE    OF    CASES. 


[Tlie  references  are 


People  v.  Winans,  799,  1062. 

People  v.  Woodstock  T.  Co.,  866. 

People  v.  Wren,  863. 

People,  etc,  v.  Smith,  144,  148. 

People  ex  rel.  Content   v.  Metropolitan 

R'y  Co.,  930. 
People  ex  rel.  Field    v.  Northern    Pac. 
R  R  Co.,  676,  679. 
'  People  ex  rel.  Krohn  v.  Miller,  689,  699. 
People  ex  reL  Kunze  etal.  v.  Ft  Wayne 

&  E.  R'y  Co.,  1560. 
People  ex  reL  S.  Cotton  Oil  Co.  v.  Wem- 

ple.  775. 
People's  Bank  v.  Gridley,  517,  622. 
People's  Bank  v.  Kurtz,  22,  26,  395,  397, 

398,  399. 
People's  Bank   v.   St.   Anthony's,    etc., 

Church,  1063,  1074,  1076. 
People's,  etc.,  Assoc,  v.  Furey,  170,  662. 
People's,  etc.,  Co.  v.  Babinger,  95. 
People's  Ferry  Co.   v.  Balch,   113,  125, 

225. 
People's  Insurance  Co.  v.  Westcott,  802. 
People's  Mut  Ins.  Co.  v.  Westcott,   162. 
People's  Pass.  R'y  v.  Baldwin,  1566. 
People's  Pass.  R  R.  v.  Memphis,  15.")  1. 
People's  R  R  v.  Memphis  R.  R.,  1550. 
People's  R  R,  Matter  of,  1557. 
People's  Savings  Bank  v.  Collins,  879. 
Peoria,  etc.,  R'y  v.  Coal,  etc.,  Co.,  1489. 
Peoria,  etc.,  R  R  Co.  v.  Elting,  174,  631, 

632. 
Peoria,  etc.,  R  R  Co.  v.  Thompson,  69, 

1211,  1229,  1347. 
Peoria,  P.  &  I.  R  R  Co.  v.  Peoria  &  S. 

R.  R.  Co.,  1529. 
Peoria  &  Rock  Island  R  R  Co.  v.  Pres- 
ton. 222,  631. 
Pepper  v.  Chambers,  682. 
Peppercorne  v.  Clinch,  563. 
Peppin  v.  Cooper,  1057. 
Percy  v.  Millaudon,  383,  385,  1031,  1055, 

1071. 
Perdicaris   v.   Charleston  Gaslight  Co., 

400,  512. 
Perin  v.  Carey,  991. 
Perin  v.  McGibben.  458. 
Perin  v.  Parker,  575. 
Perine  v.  Grand  Lodge,  etc.,  878. 
Perkins  v.  Bradley,  1084. 


to  the  foot-paging.] 

Perkins  v.  Church.  250,  280. 
Perkins  v.  Deptford,  etc.,  Co.,  1255. 
Perkins  v.  Maysville,  etc.,  Assoc,  1008. 
Perkins  v.  Missouri,  K.  &  T.  R  R.,  1011. 
Perkins  v.  Port  Washington,  151. 
Perkins  v.  Portland,   Saco  &  P.  R  R., 

1532. 
Perkins  v.  Sanders,  224,  279,  887. 
Perkins  v.  Savage,  98,  108. 
Perkins  v.  Union,  etc.,  Co.,  114,  215. 
Perkins  v.  Washington    Ins.   Co.,   1058, 

1092,  1095,  1588. 
Perpetual  Ins.  Co.  v.  Goodfellow,  691. 
Perrin  v.  Granger,  173, 178. 
Perrine  v.  Chesapeake,  etc.,  Co..  953. 
Perrine  v.  Fireman's  Ins.  Co.,  697. 
Perry  v.  Barnett,  580. 
Perry  v.  Hale.  206,315,487. 
Perry  v.  Hoadley,  321. 
Perry  v.  Keane.  135. 
Perry  v.  Little  Rock,  etc.,  R  R,  1043. 
Perry  v.  Maxwell.  404. 
Perry  v.  Pearson,  430,  431,  483,  494,  939, 

1126. 
Perry  v.  Round,  etc ,  Assoc,  2. 
Perry  v.  Simpson,  etc.,  Co.,  1081, 1082. 
Perry  v.  Turner,  258,  272,  282,  284,  288, 

306. 
Perry  v.  Tuscaloosa,  etc,  Co.,  55, 837, 903, 

1064. 
Perry's  Case,  1032. 
Persch  v.  Quiggle,  484. 
Persch  v.  Simmons,  254. 
Person  v.  Civer,  781. 
Person  v.  Warren  R  R.  Co.,  776. 
Persse,  etc.  Works  v.  Willett,  882 
Peru  Iron  Co.,  Ex  parte,  992. 
Peruvian  Rys.  Co.,  In  re,  96,  1120,  1191. 
Peterborough,  etc.,  R  R  Co.  v.  Nashua, 

etc.,  R  R  Co.,  75,  587. 
Peters  v.  Fort  Madison,  etc.,  Co.,  963. 
Peters  v.  Foster,  279,  287. 
Peters  v.  Grim,  476. 
Peters  v.  Heywood,  783. 
Peters  v.  Lincoln,  etc.,  R  R,   190,  1495, 

1506. 
Peters  v.  Nashville  Savings  Bank,  600. 
Peters  v.  St.  Louis,  etc,  R.  R  Co.,  1516. 
Peterborough,  Bishop  of,  v.  Mortlock, 

406.      * 


TABLE    OF    CASES. 


cli 


[The  references  are 

Petersburg  Savings,  etc.,  Co.   v.  Lums- 

den,  691,  693,  694. 
Peterson  v.  Chicago,  etc.,  P.  P.,  1537. 
Peterson  v.  111.  Land  &  Loan  Co.,  419. 
Peterson  v.  New  York,  1092. 
Peterson  v.  Sinclair,  252. 
Petillon  v.  Hippie,  468. 
Petition  of  Brown,  741. 
Peto  v.  Brighton,  etc.,  R'y,  463,  1213. 
Petre  v.  Eastern,  etc.,  R'y,  1044,  1045. 
Petre  v.  Petre,  410. 
Petrie  v.  Hannay,  449,  476. 
Petrie  v.  Wright,  1C93. 
Pettibone  v.  McGraw,  290. 
Pettibone    v.   Toledo,    etc.,    R    R    Co., 

1257. 
Pettingill  v.  Androscoggin,  etc.,  R  R, 

1368. 
Pettis  v.  Atkins,  312,  667. 
Pew  v.  First  Nat'l  Bank.  929. 
Pewabic   Min.    Co.    v.   Mason,  607,  948, 

1358,  1469. 
Peychaud  v.  Love,  245. 
Pfeifer  v.  Sheboygan,  etc.,  R  R,  1382. 
Pfeiffer  v.  Lansberg,  etc.,  Co.,  924. 
Pfister  v.  Milwaukee,  etc.,  R'y  Co.,  1196, 

1322. 
Pfohl  v.  Simpson,  255,  288,  289,  305. 
Phelan  v.  Ganebin,  1434,  1435. 
Phelan  v.  Hazard,  47,  63,  64. 
Phelan  v.  State,  674. 
Phelps  v.  Elliott,  1201. 
Phelps  v.  Farmers',  etc.,  Bank,  16,  710, 

712. 
Phelps  v.  Lyle,  854. 
Phene  v.  Gillan,  328,  463. 
Phenix  Nat'l   Bank   v.   Cleveland  Co., 

1219,  1221. 
Philadelphia  v.  Contributors,   etc.,   628, 

772. 
Philadelphia  v.  Empire,  etc.,  R'y,   1551, 

1566.  1573. 
Philadelphia  &  Bait.,  etc.,  R  R  v.  John- 
son, 1230. 
Philadelphia  &  R   R  R  Co.   v.  Derby, 

1006.  1009. 
Philadelphia  &  S.  R  R  v.   Lewis,   1192, 

1193,  1194.  1208,  1214.  1215. 
Philadelphia  &  Trenton  R.  R  Co.    Case, 
1551. 


to  the  foot-paging. .] 

Philadelphia  &  West  Chester  R  R  Co. 
v.  Hickman,  33,  122,  123,  125,   126, 
166,  217,  221. 
Philadelphia  &  Wilmington  R,  R.  Co.  v. 

State,  758. 
Philadelphia,  City  of,  v.  Ridge  Ave.  R 

R  Co.,  14. 
Philadelphia,  etc.,  Co.  v.   Knight,    1236. 

1245,  1247. 
Philadelphia,  etc.,  Co.  v.  Pennsylvania. 

777. 
Philadelphia,  etc.,  Co.'s  Appeal,  628,  738, 

1569. 
Philadelphia,  etc.,  R  R  Co.  v.  Bowers. 

1513. 
Philadelphia,  etc.,  R  R  Co.  v.  Cowell,  87, 

109,  207,  716,  717. 
Philadelphia,  etc.,  R.  R.  Co.  v.  Johnson, 

1238,  1289. 
Philadelphia,   etc.,   R.   R.  Co.    v.  Love, 

1465. 
Philadelphia,  etc.,  R  R  Co.  v.  Smith. 

1236. 
Philadelphia,  etc.,  R.  R  Co.  v.  Stichter, 

1240. 
Philadelphia,  etc.,  R  R  Co.  v.  Stickler. 

1185,  1240. 
Philadelphia,  etc.,  R  R  Co.  v.  Towner, 

986. 
Philadelphia,  etc.,  R  R  Co.  v.  Woelpper, 

1238,  1364,  1383. 
Philadelphia  Fire  Assoc,  v.  New  York, 

776,  1947,  1949. 
Philadelphia  Lpan  Co.  v.  Towner,  998. 
Philadelphia  Steam  Supply  Co.  v.  City 

of  Philadelphia,  1585. 
Philadelphia  Steamship  Co.  v.  Pennsyl- 
vania, 1946. 
Philadelphia,  W.  &  B.  R,  Co.  v.  Larkin, 

1010. 
Philadelphia,  W.  &  B.  R  R  Co.  v.  Mary- 
land, 774. 
Philadelphia,  W.  &  B.  R  R  Co.  v.  Quig- 

ley,  210,  1006,  1007,  1008,  1010. 
Philadelphia,   W.    &   D.    R    R    Co.    v. 

Woelpper,  1238,  1364,  1383. 
Philes  v.  Hickies,  37. 
Pliillippi  v.  Phillippi,  1131. 
Phillips  v.  Albany,  137,  147. 
Phillips  v.  Blatchford,  663,  672. 


clii 


TABLE    OF    CASES. 


Phillips  v.  Burlington,  etc.,  Co.,  1174. 
Phillips  v.  Campbell,  1084, 1088. 
Phillips  v.  Covington  &  Cin.  Bridge  Co., 

33,  226,  327. 
Phillips  v.  Eastern   R  R  Co.,  366,  367, 

707,  722,  842,  1306. 
Phillips  v.  Ives,  468. 
Phillips  v.  Knox  County  Ins.  Co.,  18. 
Phillips  v.  Mason,  460. 
Phillips  v.  Moir,  568,  580. 
Phillips  v.  Therasson,  30S,  350,  351. 
Phillips  v.  Wickham,  820,  821,  803. 
Phillips  v.   Window,    1269,    130:,,     1870, 

1371,  1388 
Phillips  v.  Wortendyke,  077. 
Phillips  Academy  v.  King,  0 
Phillipsburgh  Bunk   v.  Lackawanna   EL 

R  Co.,  1544. 
Phiuizy  v.  Murray,  710. 
Phipps  v.  Jones,  670. 
Phipps  v.  Shai  pe,  466. 
Phoenix,  etc.,  Co.,  Re,  818,  I 
Phoenix  Foundry    v.   Ninth   River  Con. 

Co.,  U56,  1425,  1482. 
Phoenix  Ins.  Co.  v.  Commonwealth 
Phoenix  Life  Assur.  Ca'  Bl  1- 

Phoenix  Warehousing  Co  v.  Badger,  XT. 

89,  159,  187,  188  846, 

1431. 
Phosphate  of  Lime  Co.   v.    Green,   180, 

217,814,  1127. 
Phosphate  of  Lime  Co.,  Re,  163. 
Phosphate  Sewage  Co.  v.  Hartmout,  908, 

913,  914. 
Picard  v.  East  Tenn.,    etc.,    R    R 

1483. 
Pickard  v.  Pullman  Southern  Car   Co., 

1946. 
Pickering  v.  Appleby,  464. 
Pickering  v.  Cease,  470. 
Pickering  v.  Demerritt,  565,  577. 
Pickering  v.  Ilfracombe    Ry   Co.,     164. 

1362. 
Pickering  v.  Stephenson,  95 1.  115s. 
Pickering  v.  Templeton,  56, 198,  213 
Pickering's  Claim,  1102 
Pickett  v.  Abney,  865,  1068 
Pickford  v.  Grand  Junction  Ry.  1521. 
Pidgeon  v.  Burslem,  474. 
Pier  v.  George,  293. 


[The  references  art-  to  the  foot-paging.'] 

Pier  v.  II :  in  more,  293. 


Pierce  v.  Burroughs.  739. 
Pier  mmonwealth,  11,  819. 

v.  Crompton,  891,  997,  1002. 
Pierce  v.  I  >rew,  1594 
Pierce  v.  Em<  ry,  1261,  1268,   1273,  1307, 
181 

Equitable  Life  Assurance  Co., 
708 

igens,  1841. 

II. 

Pierce  v.  Kearn 

Milwaukei  traction 

.  K.  EL,  1269. 
8  \.  l'.ii  tl  'idge,    16. 

Pierce  \  .  •  I      EL  EL,  l 

m  v.    B  ink  of   Washington,   686, 
696. 
Pieraon  v.  Cronk,  91 

..I  v.  McCurdy,  ISO,  198,  1189, 1168, 
15€ 
n  v.  Morgan,  I 
Pike  w.  I  3,  I.  B.  l: 

158,  183,  165,  171,  8 
E»ike  I  ■  ■nut y  v.  Rowland,  LI 
Pillow  v,  Rob  it-.  : 
Pim's  Case,  L07,  109,  167. 
Pinch  v.  Anthony,  i 
Pine,  .  v.  Lafay<  tte,  eta,  Works, 

Pine  Grove.  Township  of,  v.  Talcott,  135. 
Pine  Rii  ■  ■  -M  idsdon,  219. 

Pinedo  \.  '  lermania,  el  190. 

Pingry  v.  Washburn,  640,  1538,  1539. 
Pinkerton  v.  Manchester,  eta,  R  RCo., 
>2,  586,  623,  779,  -    799 

Pinkett  v.  Wright,  486,  I 
1'int..  Silver  Min.  Co.,  In  re,  1130. 
Pioi  l  ".  v.  Baker,  1146 

Pioneer  Paper  Ca,  Re,  B29,  849 
1  ipe  v.  I  iateman,  661,  670,  671. 
Piqua  &   I.   EL  P.  Ca  v.  Indianapolis  & 

B.  R  R  Co.,  1510. 
Piscataqua  Bridge  v.  N.  II.  Bridge,  1576, 
Piscataqua  Ferry  Ca  v.  Jones,  174,  187, 

190,  229 
Pitcher  v.  Board  of  Trade  of  Cbi< 

661. 


TABLE    OF    CASES. 


cliii 


[The  references  are 

Pitchford  v.  Davis.  225,  228,  670. 

Pitman  v.  Kintner,  1104,  1190. 

Pitman,  Ex  parte,  1185,  1254. 

Pitot  v.  Johnson,  585,  58(5,  617,  688,   700. 

Pitt  v.  Kellogg,  1039. 

Pitts  v.  Temple,  807. 

Pittsburg  Coal  Co.  v.  Foster,  1122. 

Pittsburg  C.  Co.  v.  McMillan,  646,  647. 

Pittsburg,  etc.,  Co.  v.  Quiutrell,  1045. 

Pittsburg,  etc.,  R  R.  v.  South,  etc..  R 

R,  1516. 
Pittsburgh,  Bank  of,  v.  Whitehead,  1118. 
Pittsburgh  &  C.  R  M.  Co.  v.  Byers,  237, 

242. 
Pittsburgh  &  Connellsville  R  R  Co.  v. 

Stewart,  120,  122,  124,  128,  188. 
Pittsburgh  &  Connellsville  R  R   R  Co. 

v.  Clarke,  158,  342,  343,  687, 689,  692, 

693,  694.  699. 
Pittsburgh  &  C.  R  R  Co.  v.  Graham, 

242. 
Pittsburgh  &  C.  R   R  Co.  v.  Plummer, 

242. 
Pittsburgh  &  Lake  Erie  Railroad  Co.  v. 

Bruce,  11. 
Pittsburgh  &  Lake  Erie    R    R    Co.    v. 

Jones,  1582. 
Pittsburgh  &  Steubenville  R  R  Co.  v. 

Biggar,  119,  121. 
Pittsburgh  &  Steubenville  R  R  Co.   v. 

Wood  row,  121. 
Pittsburgh,  Cin.  &  St  L  R'y  Co.  v.  Hal- 

lowell,  1522. 
Pittsburgh,    Cin.    &  St.    L.    R'y  Co.  v. 

Kain,  1536. 
Pittsburgh,  etc.,  Co.  v.  Reese,  1075. 
Pittsburgh,  etc.,  R'y    v.   Keokuk,    etc., 

Bridge  Co.,  1489,  1500,  1503. 
Pittsburgh,  etc.,  R'y  v.    Marshall,    1350, 

1393. 
Pittsburgh,  etc.,  R'y  v.  Ruby,  1116. 
Pittsburgh,  etc..  R.  R.  Co.  v.  Allegheny 

Co.,  155,  371,  378. 
Pittsburgh,  etc.,  R  R  Co.  v.  Applegate, 

91,  93,  95,  218. 
Pittsburgh,  etc.,  R  E.  Co.  v.  Com.,  1592. 
Pittsburgh,  etc.,  R.  R  Co.  v.  Gazzam,  87, 

95,  114,  116,  633. 
Pittsburgh,  etc.,  R  R  v.  Rothschild,  932, 
.  1212,  1345,  1547. 


to  the  foot-paging.] 

Pittsburgh,  etc.,  R.  R   Co.    v.    Stewart, 

1077. 
Pittsburgh,  etc..  R.  R.  Co.'s  Appeal,  71. 

1137,  1187.  1212,  1344. 
Pittsburgh,  Ft.    W.    &  C.  R  R.  Co.  v. 

Hazen,  1522. 
Pittsburgh  Iron  Co.  v.  Otterson,  342. 
Pittsburgh  Min.  Co.  v.  Spooner,  915. 
Pitzman  v.  Freeburgh,  141. 
Pixley  v.  Boy n  ton,  470,  472. 
Pixley  v.  Roanoke,  etc.,  Co.,  873. 
Plainview,  Town  of,  v.  Winona,  etc..  R.  R 

Co.,  140. 
Planks,  etc.,  Co.  v.  Burkhard,  214. 
Planters'  Bank  v.  Sharp,  988,  1092,  1093. 
Planters'  Bank  v.  State,  868. 
Planters'  Bank  v.  Union  Bank,  985. 
Planters'  Bank  v.  Whittle,  940,  990. 
Planters'  Bank,  etc.,  v.  Bivingsville,  etc., 

Mfg.  Co..  285. 
Planters',  etc.,  Bank  v.  Andrews,  1020. 
Planters',  etc.,  Bank  v.  Padgett,  313. 
Planters',  etc.,  Co.  v.  Assessor,  770. 
Planters',  etc.,  Co.  v.  Olmstead,  1087. 
Planters'  Ins.  Co.  v.  Wicks,  963. 
Planters'  &  M.  Bank  v.  Leavens,  624. 
Planters'  &  M.  M.  Ins.  Co.  v.  Selma  Sav. 

Bank,   522,    547,  687,  688,  692,  694, 

695. 
Plaskgnaston  Tube  Co.,  46. 
Plate  Glass  Ins.  Co.  v.  Sunley,  212,  235. 
Piatt  v.  Archer,  1179. 
Piatt  v.  Ashman,  893. 
Piatt  v.  Birmingham  Axle  Co.,  501,  699, 

700,  1116. 
Piatt  v.  Hawkins,  429. 
Piatt  v.  Jones,  661. 
Piatt  v.  Philadelphia,  etc.,  Co.,  1421. 
Piatt  v.  Union  Pac.  R    R,  1266,   1267, 

1300. 
Piatt.  In  re,  861. 
Platte,  etc.,  Co.  v.  Do  well,  1579. 
Platte  Valley  Bank  v.  Harding,  881. 
Platteville,  Town  of,  v.  Galena,  etc.,  R 

R.  Co.,  151. 
Plemmons  v.  Southern  Imp.  Co.,  1163. 
Plimpton  v.  Bigelow,  20,  609,  615. 
Plitt  v.  Cox,  890. 

Plumb  v.  Bank  of  Enterprise,  346,  521. 
Plumb  v.  Campbell,  453. 


cliv 


TABLE    OF    CASES. 


[The  references  are 

Plumbe  v.  Neild,  741. 

Plymouth  v.  Painter,  1057. 

Plymouth  Bank  v.  Bank  of  Norfolk,  619, 

622,  688.      . 
Plymouth  R  R  Co.  v.  Col  well,  1578. 
Plympton  Min.  Co.  v.  Wilkins,  193. 
Pneumatic  Gas  Co.  v.  Berry,  919,  1130, 

1161. 
Pocantico.  etc.,  Co.  v.  Bird,  1597, 1598. 
Pochelu  v.  Kemper,  325. 
Pocock  v.  Reddington,  436. 
Poland  v.  Lamoille,  etc..  R  R,  1317. 
Poland  v.  Louisville,   etc.,    R  R,   1258, 

1277,  1370. 
Polar  Star  Lodge  v.  Polar  Star  Lodge, 

859,  969. 
Polhemus  v.  Fitchburg  R'y,   122^,  1540. 
Police  Jury  v.  McDonough,  134. 
Police  Jury,  etc.,  v.  Thibodaux,  etc.,  Co., 

1577. 
Pollard  v.  Bailey,  256,  257.  283, 
Pollard  v.  First  Nat'l  Bank.  711,  769. 
Pollard  v.  Maddox,  1266,  1275. 
Pollard  v.  State,  765. 
Polleys  v.  Ocean  Ins.  Co..  1110,  1113. 
Pollitz  v.  Farmers'    L    &  T.  Co.,   1307, 

1465. 
Pollock  v.  National  Bank,  506. 
Pollock  v.  Pollock,  74a 
Pollock  v.  Shultze,  930. 
Pollock  v.  Stables,  567.  579. 
Pomeroy  v.  New  York  &  N.  H.  R  R 

Co.,  1175. 
Pond  v.  Cooke,  112  I. 
Pond  v.  Framiugham,    etc.,    Co.,    1141, 

1412. 
Pond  v.  Vt.  Valley  R  R  Co.,  1135,  1151. 
Pontchartrain  R  R  v.  Heirne,  1116. 
Pontchartrain  R  R    Co.    v.    Pauldirjg, 

1029. 
Pontiac,  etc.,  Co.  v.  Hilton,  877. 
Pontius,  Matter  of,  892,  1415. 
Poock  v.  Lafayette  Bldg.  Assoc,  983. 
Poole  v.  Middleton,  447.  448,  460,  462. 
Poole  v.  West,  etc.,  Ass'n,  390,  481,  1087. 
Poole's  Case,  159,  242. 
Pooley  Hall  Colliery  Co.,  Re,  1187,  1253. 
Pope  v.  Board  of  Com'rs,  239,  1492, 1507. 
Pope  v.  Brandon,  989. 
Pope  v.  Capital  Bank,  308. 


to  the  foot-paging.] 

Pope  v.  Leonard,  260,  284,  290. 

Pope  v.  Terre  Haute,  etc.,  Co.,  1175, 1176. 

Port  v.  Russell,  902. 

Port  Edwards,  etc.,  R'y  v.  Arpin,  223, 

246,  625,  639. 
Port,  etc.,  R  R  v.  N.  Y.,  etc.,  R  R,  1499. 
Port  Huron,  etc.,  R'y   v.    Judge,    1155, 

1417. 
Port  Jervis  v.  First  Nat  Bank,  1117. 
Port  Royal,  etc..  R  R  Co.  v.  Hammond, 

1172,  1542,  154a 
Port  of  Mobile  v.  Louisville,  etc.,  R  R, 

1554. 
Porter  v.  Androscoggin  R  R  Co.,  1098. 
Porter  v.  Bank  of  Rutland,  18.  430, 1117. 
Porter  v.  Beacon,  etc.,  Co.,  159. 
Porter  v.  Buckfield  Branch  R  R  Co.,  38. 
Porter  v.  Carpenter.  120. 
Porter  v.  Park-.  568,  593. 
Porter  v.  Pittslmr-;,   etc.,   Co.,   904,  947, 

1213,  1392,  1395. 
Porter  v.  Raymond.  125,  127. 
Porter  v.  Robinson,  80S,  807,  1061. 
Porter  v.  Rock  ford,  R  I.,  etc.,  R  R  Co., 

747.  748,  Tin.  750. 
Porter  v.  Sabin,  lilt. 
Porter  v.  Sawyer,  168 
Porter  v.  Sherman,  etc.,  Co.,  310. 
Porter  v.  Vieta,    172. 
Porter  v.  Wonnser,  465,  564,  566. 
Portland  &  Oxford  Central  R.  R  Co.  v. 

Inhabitants  of  Hartford,  126,  151. 
Portland  Bank  v.  Stone,  983. 
Portland  Dry  Dock,  etc.,  Co.  v.  Trustees 

of  Portland,  862. 
Portland,  etc.,  Co.  v.  Bobb,  311,  876. 
Portland,  etc.,  Co.  v.  Spill  man,  223,  226, 

228 
Portland,  etc.,  R  R  Co.  v.  Deering,  1516. 
Portland,  etc.,  R  R  Co.  v.  Graham,   178. 
Portland,  etc.,  R  R  Co.  v.  Grand,  etc.,  R 

R,  1516. 
Portsmouth  Livery  Co.  v.  Watson,  1173. 
Portuguese,  etc.,  Mines,  Re,  1060,  1062, 

1067. 
Post  v.  Pulaski  County,  132. 
Post  v.  Simmons,  598. 
Post  v.  Supervisors,  131. 
Post  v.  Toledo,  etc.,  R  R  Co.,  295,  674, 

684. 


TABLE    OF    CASES. 


civ 


[Tlie  references  are 

Postage  Stamp,  etc.,  Co.,  Re,  909. 
Postlevvaite  v.  Port  Philip,  etc.,  Co.,  958, 

1478. 
Potomac  Mfg.  Co.  v.  Evans,  1239. 
Pott  v.  Flather,  785,  788. 
Pott  v.  Turner,  561. 
Potter  v.  Baker,  410. 
Potter  v.  Bank  of  Ithaca,  983. 
Potter  v.  Dear,  260. 

Potter  v.  N.  Y.,  etc.,  Asylum,  1078,  1085. 
Potter  v.  Rio,  etc.,  Co.,  1000. 
Potter  v.  Stevens  Machine  Co.,  279,  283. 
Potter  v.  Thornton,  991. 
Potter's  Appeal,  83,  435. 
Potteries,  etc.,  R'y  Co.  v.  Minor,  1255. 
Potteries,  etc.,  R'y  Co.,  Re,  366. 
Potterville  v.  People's  R'y,  1566. 
Potts  v.  N.  J.  Arms,  etc.,  Co..  1414,  1415. 
Potts  v.  Wallace,  159,  217,  239,  1074 
Potts  v.  Warwick,  etc.,  Canal  Co.,  1389, 

1578. 
Poughkeepsie,  Bank  of.  v.  Ibbotson,  251, 

272,  282,  283,  284,  288,  298,  304. 
Poughkeepsie,  etc.,  Co.,  Re,  1577. 
Poughkeepsie,  etc.,  R.  R  Co.  v.  Griffin, 

114,  632. 
Powell  v.  Adams,  494. 
Powell  v.  Jessopp,  467,  665. 
Powell  v.  McC&rd,  472. 
Powell  v.  Newburgh,  1093. 
Powell  v.  North  Missouri  R  R  Co.,  889, 

1545. 
Powell  v.  Oregonian   R'y,  266,  268,  278, 

303,  863. 
Powell  v.  Penn.  R  R,  1537. 
Powell  v.  Waldron,  661. 
Powell  v.  Willamette,   etc.,    R.   R    Co., 

332,  935. 
Powell's  Appeal,  587,  1262. 
Power  v.  Cassidy,  652. 
Power  v.  Conner,  1159. 
Powers  v.  Inferior  Court  of  Dougherty 

County,  133. 
Powis  v.  Harding,  209,  524. 
Powles  v.  Page,  1119. 
Prairie  Lodge  v.  Smith,  1190. 
Prall  v.  Harnil,  443. 
Prall  v.  Tilt,  412,  443,  444,  519. 
Prater's  Estate.  Re,  408. 
Pratt  v.  American  Bell  Tel.  Co.,  386,  469. 


to  the  foot-paging, ,] 

Pratt  v.  Bacon,  1159. 

Pratt  v.  Boston  &  Albany  R  R  Co.,  506, 

507. 
Pratt  v.  Dwelling,  etc.,  Ins.  Co.,  923. 
Pratt  v.  Eaton,  985,  986. 
Pratt  v.  Goswell,  681. 
Pratt  v.  Hutchinson,  663. 
Pratt  v.  Jewett,  859. 
Pratt  v.  Machinists'  Nat.  Bank,  384. 
Pratt  v.  Meriden  Co.,  680. 
Pratt  v.  Munson,  1477. 
Pratt  v.  Pratt,  720,  721. 
Pratt  v.  Short,  982,  985. 
Pratt  v.  Taunton  Copper  Mfg.  Co.,  506. 
Pratt's  Ex'r  v.  Nixon,  1293. 
Pray  v.  Mitchell,  464. 
Pray's  Appeal,  434. 

Preachers',  etc.,  Soc.  v.  Rich,  660,   1019. 
Prendergast  v.  Turton.  180,  184. 
Presbyterian  Church  v.  Cooper,  93. 
Presbyterian   Cong.   v.   Carlisle    Bank, 

525,  534,  687,  697. 
President  &  Trustees,  etc.,  v.  Thompson, 

863. 
President,  etc.,  v.  Hamilton,  877. 
President,  etc.,  v.  Myers,  1100. 
President,  etc.,  v.  People,  1012. 
President,  etc.,  v.  Weed,  1166. 
President,  etc.,  Co.  v.  Troy,  etc.,  R  R, 

1499. 
President,  etc.,    of    Franklin    Bank    v. 

Harris,  597. 
President,  etc.,  of  Port  Gibson  v.  Moore, 

889,  963. 
President,  etc.,  of  Romeo  v.  Chapman, 

1019. 
President  Union  Bridge  Co.  v.  Troy  & 

L.  R.  R  Co.,  1099. 
Press,  etc.,  Co.  v.  State  Board,  315. 
Preston  v.  Cincinnati,  etc.,  R.  R.  Co.,  65, 

277,  1211. 
Preston  v.  Cutter,  1086. 
Preston  v.  Fire,  etc.,  Co..  1179. 
Preston  v.  Grand  Collier  Dock  Co.,  x04, 

165,  189,  899,  1144. 
Preston  v.    Liver|.ool,    etc.,    R'y,    1044, 

1538. 
Preston  v.  Loughran,  937,  1432. 
Preston  v.  Melville,  741,  742. 
Preston  v.  Missouri,  etc.,  Co.,  1069. 


clvi 


TABLE    OF    CASES. 


[The  references  are 

Preston  v.  Pangbum,  615. 

Preston  v.  Preston,  1132. 

Preston  v.  Southwick,  13G5. 

Preston  Nat'l  Bank  v.  George,  etc.,  Co., 

1080. 
Prettyman  v.  Supervisors,  141,  148. 
Prettyman  v.  Tazewell  Co.,  133. 
Prewett  v.  Trimble,  431,  492. 
Price  v.  Anderson,  741,  742. 
Price  v.  Grand  Rapids  &  Iud.  R  R  Co., 

163,  1065. 
Price  v.  Great  Western,  etc.,  R'y,  1235, 

123G,  1355. 
Price  v.  Grover,  590. 
Price  v.  Minot.  461.  469. 
Price  v.  Pittsburgh,  etc.,  R  R  Co.,  100. 
Price  v.  Price,  32 
Price  v.  Reed,  600. 
Price  v.  Whitney,  353. 
Price  v.  Yates,  293. 
Price's  Appeal.  323. 
Price  &  Brown's  Case,  329. 
Pridham  v.  Weddington,  478. 
Priest  v.  Essex  Hat  Mfg.  Co.,  250,  271, 

7:55. 
Priest  v.  Gloun,  213.  214.  216.  312. 
Priest  v.  White,  54.  68,  205,  1136. 
Prime,  Estate  of,  739. 
Prime's  Estate.  In  re,  1000. 
Prince  v.  Lynch,  298. 
Prince,  etc..  Co.  v.  Prince,  etc.,  Co.,  1168. 
Prince  of  Wales  v.  Harding,  1108,  1109. 
Princess  of  Reuss  v.  Bos,  861. 
Princeton  Bank  v.  Crozer,  610. 
Princeton,  etc,  Co.  v.  First,  etc..  Bank. 

1000. 
Printing  House  v.  Trustees,  634. 
Proprietors,  etc.,  v.  Dickinson,  113. 
Proprietors,  etc.,  v.  Frye,  1072. 
Proprietors,    etc.,  v.    Inhabitants,    etc., 

1019,  1167. 
Proprietors  of  Locks,  etc.,  v.  Nashua  & 

L  R  R  Co..  1524,  1525. 
Prop,  of  N.  Bridge  v.  Story,  222. 
Prop,  of  the  Union  Lock  &  Canals  v. 

Towne,  633,  641. 
Prospect,  eta,  R  R,   Matter  of,    1498, 

1503. 
Prosper,  In  re,  664. 
Prosser  v.  First  Nat'l  Bank,  487. 


to  the  foot-paging.'] 

Protection  Life  Ins.    Co.  v.  Osgood,  82, 

338,  587,  780. 
Prothro  v.  Meriden,  etc.,  1069. 
Prouty  v.  Lake  Shore,  etc.,  R  R,  1545. 
Prouty  v.  Michigan,  etc.,  R  R  Co.,  367, 

374,  375,  376,  1172. 
Prouty  v.  Prouty,  etc.,  Co..  331,  1458. 
Providence  Bank  v.  Billings,  758,  771. 
Providence  Gas  Co.   v.   Thurber,   1554. 

1585 
Providence,  eta,  R   R  Co.  v.  Wright. 

756. 
Providence,  etc.,  R  R,  In  re,  1529. 
Provident  Inst   v.  City  of  Boston,  762. 

763. 
Provident  Inst  for  Sav.  v.  Gardiner,  757. 
Providenl  Sav.  Bank  v.  Ford,  1183. 
Provident  Savings  Institution  v.  Ja<.  k- 

son  Place  Skating  &  Bathing  Rink, 

272,  356.  tl 
Provincial  Ins.  Co.  v.  Shaw,  343. 
Provost  v.  Morgan's,  etc.,  S.  Co.,  664,  881. 
Pruyn  v.  city  of  Milwaukee,  1235. 

hand  v.  Hood.  189. 
Pugh  v.  Fail-mount,  etc.,  Co.,  1237. 
Pugh  &  Shannon's  Case,  105,  110,  340, 

358 
Pulbrook  v.  Richmond,  etc.,  Co.,  850,  853. 
Pulford  v.  Fire  Dep't  1" 
Pullan    v.   Cincinnati,  etc..   R  R.,  1270, 

]-::■■',.  1300,  1368, 1370, 1371, 1372, 1406, 

1440. 
Pullman  v.  Cincinnati,  etc.,  R  R,  1270, 

1273,  1304. 
Pullman  v.  Stebbins,  1140. 
Pullman  v.  Upton,  56,329,343,  390,  1166, 

1167. 
Pullman  Car  Co.  v.  Missouri  P.  R  R  Co., 

423.  1545. 
Pullman  Palace  Car  Co.  v.  Pennsylvania, 

777,  1947. 
Pulsford  v.  Richards,  187,  197. 
Pumptlly  v.  Green  Bay  Co.,  1528. 
Purcell  v.  British,  etc.,  Co.,  1181. 
Purchase  v.  New  York  Exchange  Bank, 

430,  502,  523.  529,  547. 
Purdy's  Case,  220. 
Purse  v.  Snaplin,  406. 
Purton  v.  New  Orleans,  etc.,  R  R  Co., 

892. 


TABLE    OF    CASKS. 


clvii 


[The  references  are 

Pusey  v.  N.  J.  R.  R.;  1208. 

Putnam   v.   City  of   Albany,    109,    121, 

248. 
Putnam  v.  Ruch,  883,  1145. 
Putnam  v.  Sweet,  834. 
Putnam,  etc.,  Bank  v.  Beal,  1429. 
Pyle  Works,  Re,  163,  937,  1271. 
Pyles  v.  Riverside,  etc.,  Co.,  989. 
Pynchon  v.  Day,  679. 
Pyrolusite,  etc.,  Co.,  In  re,  860. 

Q. 

Quad  v.  Abbett,  503. 

Quay  v.  Presidio,  etc.,  R.  R,  433,  516. 

Quebrada  R'y,  Re,  379, 

Queen  v.  Birmingham,  etc.,  R.  R,  1168. 

Queen  v.  Bradford  Navigation  Co.,  1012. 

Queen  v.  Carnatic  R.  Co.,  336. 

Queen  v.  Eastern  Counties  R'y  Co.,  886. 

Queen  v.  General  Cemetery  Co.,  523. 

Queen  v.  Grand  Junction  R'y?  1518. 

Queen  v.  Great  Northern,  etc.,  R'y  Co., 

1012. 
Queen  v.  Gurney,  496. 
Queen  v.  Lancashire,  etc.,  R'y  Co.,  886. 
Queen  v.  Ledyard,  161,  254. 
Queen  v.  Liverpool  &  M.,  etc.,  R'y  Co., 

531. 
Queen  v.  London  &  S.  W.  R'y,  1518. 
Queen  v.  Londonderry  &  Coleraine  R'y 

Co.,  157,  699. 
Queen  v.  Manchester,  1012. 
Queen  v.  Mariquita  Mining  Co.,  679. 
Queen  v.  Murch,  496. 
Queen  v.  Saddlers'  Co.,  1022. 
Queen  v.  Smith,  662. 
Queen  v.  Stewart,  496. 
Queen  v.  Undertakers    of    the     Grand 

Canal,  680. 
Queen  v.  United,  etc.,  Tel.  Co.,  1594. 
Queen  v.  Victoria  Park  Co.,  161,  254. 
Queenan  v.  Palmer,  288,  292. 
Queen's  College  v.  Sutton,  405. 
Queensburg  v.  Culver,  133,  136,  137. 
Queensland,  etc.,  Co.,  Re,  252,  1426. 
Quick  v.  Lemon,  114,  297. 
Quimby  v.  "Vermont  Central,  etc.,  1531. 
Quincey  v.  White,  449. 
Quincey  v.  Young,  449. 


to  the  foot-paging.] 

Quincy   v.    Chicago,   etc.,    R.    R.    1385, 

1555,  1560. 
Quincy  v.  Steele,  1135,   1136,  1149,  1161. 
Quincy  Bridge  Co.  v.   Adams  Co.,  748, 

1542. 
Quincy,  etc.,  Co.  v.  Hood,  1116. 
Quincy,  etc.,  R.  R  v.  Humphreys,  1399, 

1413,  1444. 
Quincy,  etc.,  R  R.  Co.  v.  Morris,  133. 
Quincy  R  R  Bridge  Co.  v.  County  of 

Adams,  770. 
Quiner  v.  Marblehead  Social  Ins.   Co., 

430,  448,  516. 


E. 


R  v.  Grimshaw,  808. 

R.  v.  Stratton,  663. 

R.  v.  Webb,  663. 

Rabe  v.  Dunlap,  641,  1129. 

Racine  County  Bank  v.  x\yers,  123.  378. 

Racine,  etc.,  Co.  v.  Joliet,  etc.,  Co.,  1114. 

Racine  &  M.  R.  R.  Co.  v.  Farmers'  Loan 

&  T.  Co.,  S79,  880,  1094,  1355,  1469. 

1542,  1545. 
Radbourn  v.  Utica,  etc.,  R  R.  1462. 
Rae  v.  Grand  Trunk  R  R.  Co.,  1001. 
Raeder  v.  Bensberg,  274. 
Rafferty  v.  Bank  of  Jersey  City,  881. 
Rafferty  v.  Central  Traction  Co.,   1560, 

1563,  1565,  1567. 
Ragan  v.  Aiken,  1519. 
Ragland  v.  Broadnax,  369. 
Ragland  v.  McFall,  940,  990. 
Rahm  v.  Bridge  Mfg.,  1246. 
Raht  v.  Attrill,  1403,  1437,  1452,  1453. 
Railroad  v.  Chamberlain,  1352. 
Railroad  v.  Fosdick,  1290. 
Railroad  v.  Howard,    1221,    1223,    1247, 

1313,  1351,  1471. 
Railroad  v.  Manufacturing     Co.,     1533, 

1534,  1536. 
Railroad  v.  Orr,  1299. 
Railroad  v.  Railroad,  49. 
Railroad  v.  Rollins,  963. 
Railroad  v.  Schutte,  1276. 
Railroad  v.  Soutter,  1204. 
Railroad  Co.  v.  Becht,  1176. 
Railroad  Co.  v.  Bradleys,  1321,  1356. 
Railroad  Co.  v.  Com'rs,  771. 


clviii 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.] 


Railroad  Co.  v.  County  of  Otoe,  132,  135. 
Railroad  Co.  v.  Falconer,  138,   143,   152, 

1944. 
Railroad  Co.  v.  Fuller,  1946. 
Railroad  Co.  v.  Gaines,  771,  1943. 
Railroad  Co.  v.  Georgia,  774,  1545,  1943. 
Railroad  Co.  v.  Harris,  1543. 
Railroad  Co.  v.  Hecht,  1943. 
Railroad  Co.  v.  Howard,  729,  995,  1245. 
Railroad  Co.  v.  Jackson,  770. 
Railroad  Co.  v.  James,  1370.  1372,  1394. 
Railroad  Co.  v.  Koontz,  1543. 
Railroad  Co.  v.  Lewis,  993. 
Railroad  Co.  v.  Maine,  638,  773. 


Railroad  Co. 
Railroad  Co. 


v. 

V. 
V. 


March,  1548. 
Maryland,  1946. 
Railroad  Co.  v.  Peniston,  1951. 
Railroad  Co.  v.  Pennsylvania,  759. 
Railroad  Co.  v.  Philadelphia,  1944. 
Railroad  Co.  v.  Richmond,  1518,  1916. 
Railroad  Co.  v.  Smith,  380,  296,  350,  368. 
Railroad  Co.  v.  Soutter,  1347. 
Railroad  Co.  v.  Tennessee,  1944. 
Railroad  Co.  v.  Vance,  770. 
Railroad  Co.  v.  White,  95. 
Railroad  Commission  Cases,   1513,  1515, 

1949. 
Railroad  Commissioners  v.  Oregon,  etc., 

Co.,  1515. 
Railroad    Commissioners  v.    Portland, 

etc.,  R  R  Co.,  2,  1516. 
Railroad  Tax  Cases,  Re,  768. 

Railway  v.  Swasey,  1356. 

Railway  Co.  v.  Allerton,  385,  634. 

Railway  Co.  v.  Ailing,  1160,  1530. 

Railway  Co.  v.  Jewett,  1416. 

Railway  Co.  v.  McCarthy,  1532,  1533. 

Railway  Co.  v.  Philadelphia,  771. 

Railway  Co.  v.  Piatt,  1533. 

Railway  Co.  v.  Sioux  City,  1572. 

Railway  Co.  v.  Sprague,  1200, 1214,  1224, 
1283. 

Railway  Co.  v.  Whitten,  1182,  1544. 

Railway  Co.  v.  Whitton's  Adm'r,  1948. 

Railway  Cos.  v.  Keokuk,  eta,  Co.,  974, 
1577. 

Railway,  etc.,  Pub.  Co.,  Re,  47. 

Railway  Light  Co.,  1031. 

Rainey  v.  Laing,  996. 

Rainey  v.  Maas,  1180. 


Raisbeck  v.  Oesterricher,  313,  865. 

Raleigh  v.  Fitzpatrick,  920. 

Raleigh,  etc.,  Co.  v.  Glendon,  etc.,  Co., 

1529. 
Raleigh,  etc.,  R  R.  Co.  v.  Connor,  755. 
Raleigh,  etc..  R.  R.  v.  Reid,  759. 
Ralls  v.  Douglass,  141,  142,  147. 
Ramsden  v.  Boston  &  A.  R  R  Co.,  1006. 

1008. 
Ramsey  v.  Erie  R'y  Co.,  383,  981, 1136. 
Ramsey  v.  Gould,  1142,  1150. 
Ramsgate,  etc.,  Co.  v.  Montefiore,  96,  97. 
Ramskill  v.  Edwards,  1160. 
Ramwell's  Case,  43,  57. 
Ranee's  Case,  733. 
Rand  v.  Hubbell,  702,  707,  739,  740. 
Rand  v.  Upper  Locks,  etc.,  Co.,  1174 
Rand  v.  White  Mountains  R.  R  Co.,  172, 

353. 
Rand  v.  Wiley.  164.  459. 
Rand  v.  Wilmington,  etc.,  R  R,  1386. 
Randall  v.  Albany  City  Nat'l  Bank,  578, 

785,  790. 
Randall  v.  Elwell,  776.  1371,  1373. 
Randall  v.  Van  Vechten.  1093, 1094, 1095, 

1105. 
Randolph  v.  Larned,  1415,  1513. 
Randolph  v.  Middleton,  1282. 
Randolph  v.  N.  J.  West  Line  R  R,  1279, 

1380. 
Randolph  v.  Quidnick,  611,  613,  620. 
Randolph  v.  State,  674. 
Randolph  v.  Wilmington,    etc.,    R    R, 

1269,  1322,  1346. 
Randolph,  County  of,  v.  Post,  141. 
Ranger  v.  Champion^  etc.,  Co.,  683, 1150, 

1155. 
Ranger  v.  Great,  etc.,  R  R  Co.,  191, 683, 

1006,  1007. 
Rankin  v.  Hop,  etc.,  Co.,  128. 
Rankin  v.  McCullough,  605,  606. 
Rankine  v.  Elliott,  262,  263. 
Ransom  v.  Citizens'  R'y,  1561,  1566. 
Ransom  v.  Stonington,  etc.,  Bank,  109S, 

1165. 
Ransome  v.  East.  Co.'s  R'y,  1519, 1520. 
Raphael  v.  Governor,  etc.,  1226. 
Raritan  R    R    Co.   v.   Delaware,  etc., 

Canal  Co.,  1527. 
Rashdall  v.  Ford,  977,  118a 


TABLE    OF    CASES. 


clix 


Ratcliffe  v.  Davis,  592,  594. 
Rathbone  v.  Parkersburg,  etc.,  Co.,  1149. 
Rathbun  v.  Northern  C.  R.  R,  1208. 
Rathbun  v.  Snow,  962,  1046,  1089,  1109, 

1110. 
Ratterman  v.  Western  U.  Tel.  Co.,  1947. 
Rawley  v.  Home,  1123. 
Rawlings  v.  Hall,  477,  509. 
Rawlins  v.  Wickham,  202. 
Ray  v.  Powers,  306,  668. 
Ray,  County  of,  v.  Vansycle,  140, 142. 
Raymond  v.  Brodbelt,  406. 
Raymond  v.  Clark,  1364,  1383. 
Raymond  v.  Leavitt,  449. 
Raymond  v.  Palmer,  606,  1129. 
Raymond  v.  San  Gabriel,  207. 
Raynell  v.  Lewis,  661. 
Read  v.  Buffum,  108. 
Read  v.  Head,  743. 
Read  v.  Jaudon,  564. 
Read  v.  Joanuon,  1253. 
Read  v.  Lambert,  573. 
Read  v.  Memphis  Gayoso  Gas  Co.,  163, 

1071. 
Reading,  etc.,  Co.  v.  Reading,  etc,, Works, 

690,  702,  703,  729,  745,  790,  1475. 
Reading  Industrial  Mfg.  Co.   v.  Graeff, 

274. 
Reading  Iron  Works,  In  re,  533. 
Reading,  Town  of,  v.  Wedder,  156. 
Ream  v.  Hamilton,  475. 
Reaveley's  Case,  107. 
Reavely,  Ex  parte,  107. 
Rece  v.  Newport,  etc.,  Co.,  1001. 
Receiver,  Matter  of,  1430. 
Receiver  of  Graham,  etc.,  Co.  v.  Spiel- 

mann  et  al.,  1429. 
Receivers  of  N.  J.,  etc.,  R'y,  1377. 
Receivers  of  Phil.  &  R  R  R,  In  re,  1411, 

1449. 
Reciprocity  Bank,  Case  of,  330,  337,  338, 

359,  421. 
Reciprocity  Bank,  Re,  105,  336,  390,  629. 
Rector,  etc.,  Christ  Church  v.  County  of 

Philadelphia,  1942. 
Republic  Ins.  Co.,  In  re,  1586. 
Red  River  B.  Co.  v.  Clarksville,  1529. 
Red  Rock  v.  Henry,  143.  151. 
Red  N.  Hotel  Co.  v.  Friedrick,  237. 
Redding  v.  Godwin,  492,  786,  792. 


[The  references  are  to  the  foot-paging.'] 

Redding  v.  Wright,  478. 


Redemption,  Bank  of,  v.  Boston,  766. 

Redfield  v.  Wickham,  1512. 

Reding  v.  Anderson,  668. 

Redington  v.  Cornwall,  302,  306. 

Redmond  v.  Dickerson,  916. 

Redmond  v.  Enfield,  etc.,  Co.,  1172,  1426. 

Redmond  v.  Hoge,  1421. 

Reed  v.  Bank  of  Newburgh,  823. 

Reed  v.  Boston  Machine  Co.,  377, 400. 

Reed  v.  Bradley,  1100,  1264. 

Reed  v.  Copeland,  413. 

Reed  v.  Hayt,  33,  35,  383,  928. 

Reed  v.  Head,  740. 

Reed  v.  Home  Savings  Bank,  1009. 

Reed  v.  Hoyt,  1062. 

Reed  v.  Jones,  831. 

Reed  v.  Myers,  1435. 

Reed  v.  Paper  Tobacco  Warehouse  Co., 

1538. 
Reed  v.  Richmond,  90,  234. 
Reed's  Appeal,  71,  1187,  1199,  1212,  1395. 
Rees  v.  Conocheaugue  Bank,  983,  1166. 
Reese  v.  Bank  of  Commerce,  687,  689. 

693,  694,  695,  696. 
Reese  v.  Bank  of  Montgomery,  386,  387, 

3S8,  713. 
Reese  v.  Fermie,  476. 
Reese  River  Silver  Min.  Co.  v.  Smith, 

193,  194,  198,  200,  201,  203,  209. 
Reeve  v.  Dennett,  479,  481. 
Reeve  v.  First  Nat'l  Bank,  1104. 
Reeves  v.  Continental  R'y  Co.,  1567. 
Reeves  v.  Sently,  1229. 
Reformed,  etc.,  Church  v.  Brown,  113. 
Reg.  v.  Gov.  Stock  Co..  821. 
Reg.  v.  Grand  Canal,  681. 
Reg.  v.  London  &  St.  Catherine's  Docks 

Co.,  681. 
Reg.  v.  The  Saddlers'  Co.,  677,  682. 
Reg.  v.  Wilts.  &  Berks.  Canal  Nav.,  676, 

678,  684. 
Regents  v.  Williams,  635,  887. 
Regents'  Canal  Iron  Works  Company 

Re,  1437. 
Regents'  Co.,  In  re,  1021, 1066, 1195, 1197, 

1205,  1206,  1256. 
Regents',  etc.,  Co.,  In  re,  1396,  1454 
Regiua  v.  Aldman,  etc.,  Ins.  Co.,  799. 
Regiua  v.  Arnaud,  1020. 


clx 


TABLE    OF    CASKS. 


[The  references  are 

Regiua  v.  Brown  et  at,  496. 

Regina  v.  Carnatic  R'y  Co.,  429,  531. 

Regina  v.  Cronmire,  568. 

Regina  v.  Esdaille,  496. 

Regina  v.  Liverpool,  etc.,  R'y,  533. 

Regina  v.  Nash.  398. 

Regina  v.  Wing,  C93. 

Rehni  v.  King.  etc..  Co.,  1091. 

Reichwald  v.  Commercial  Hotel  Co..  16. 

81,  306.  990.  1046. 
Reid  v.  Allen.  277. 
Reid  v.  Bank  of  Mobile,  1224.  1295. 
Reid  v.  Eaton  Iron  Mfg.  Co.,  727. 
Reid  v.  Eaton  town  Mfg.  Co.,  32a 
Reid  v.  Northwestern  R  R  Co.,  1170. 
Reid's  Case,  107.  33a 
Reiff    v.    Western,   etc.,   Tel.    Co.,    856, 

1142. 
Reifsnider  v.  American,  etc.,  Co.,  1179. 
Reiger  v.  Beaufort,  149. 
Reilly  v.  Oglebay,  803,  853,  919. 
Reimer  Co.  v.  Rosenberger, 
Reinach  v.  Meyer,  1465. 
Reineman  v.  Covington,  etc.,  R  R  Co., 

135. 
Reinhard  v.  Virginia,  etc.,  Co.,  311.  881. 
Reining  v.  New  York,  etc.,  R  R,  1562. 
Reis  v.  Rohde,  83a 
Reitenbaugh  v.  Ludwick,  790. 
Relfe  v.  Life  Ins.  Co..  755. 
Reuifrey  v.  Rutter,  "'Tit. 
Remington  v.  King,  81  0. 
!,'■  min-ton  v.  Samana  Bay  Co..  251. 
I;  unpert  v.  S.  C.  R'y,  1166. 
Renner  v.  Bank  of  Columbia,  580. 
Rennie  v.  Clarke,  1036. 
Renuie  v.  Wynn,  1036. 
Rennselaer  &  S.  R.  R  Co.  v.  Davis.  992, 

1524,  1525,  1526. 
Renshaw  v.  Creditors,  601. 
Rensselaer,  etc.,  Co.  v.  Barton.  113,  174, 

220. 
Rensselaer,  etc.,  R  R  v.  Miller.  1309. 
Rensselaer,  etc.,  R.  R  Co.  v.  Wetsel.  174, 

224,  23a 
Republic,  Bank  of,  v.  County  of  Hamil- 
ton, 752,  772. 
Republic  Insurance  Co.,  In  re.  235,  268, 

420. 
Republic  Life  Ins.  Co.  v.  Pollak,  756. 


to  the  foot-paging.'] 

Republic  Life  Ins,  Co.  v.  S%vigert,  217. 

264,  417. 
Reuter  v.  Electric  Tel.  Co.,  1107. 
Reuter  v.  Telegraph  Co.,  1593. 
Revere  v.  Boston,  etc.,  Co.,  749,  86a 
Rex  v.  Babb,  681. 
Rex  v.  Birmingham  Canal,  886 
Rex  v.  Buckingham.  684. 
Rex  v.  Coopers'  Co.,  1024. 
Rex  v.  Dodd.  663. 
Rex  v.  Doncaster.  802. 
Rex  v.  Gardner,  1020. 
Rex  v.  Head.  *42.  1021,  1022. 
Rex  v.  Langhorn,  800. 
Rex  v.  Miller.  1066. 
Rex  v.  Newcastle.  '''77.  681. 
Rex  v.  Spencer.  842,  1021,  1022. 
Rex  v.  Tapponden.  1021. 
Rex  v.  Town  of  Liv.-rpool.  802,  1026. 
Rex  v.  Vice-Chancellor.  1101. 
Rex  v.  West v  [02L 

Rex  v.  Worcester  Nav.  Co..  531. 
Reyburn  v.  Consumers',  etc.,  Co.,  1403. 

qell  v.  Lewis,  1037. 
Reynolds  v.    Feliciana    Steamboat    Co., 

284,  286. 
Reynolds  v.  Galliher.  etc.,  Co..  320. 
Reynolds  v.  Myers.  453.  11' 

Dolda  v.  Simpson,  971. 
Reynolds,  Widow  of,  v.  Commissioners, 

etc.,  995. 
Rezet  v.  McClellan.  602. 
Rhey   v.  Evensburg,  etc.,  Co.,  90,  108, 

114. 
Rhodes  v.  Webb,  1076. 
Rhoner  v.  First  Nat'l  Bank,  1175. 
Rhos,  etc..  Co.,  In  re,  1256. 
Ribon  v.  Railroad   Co.,  934,  1145.  1222. 

1329,  1470. 
Rice  v.  Merrimack  Hosiery  Co.,  295. 
Rice  v.  National  Bank,  E 
Rice  v.  Peninsular  Club,  1051.  1054,  1091. 
Rice  v.  Rock  Island  R  R  Co..  232,  632. 
Rice  v.  Rockefeller  et  al.,  526,  532,  533, 

647,  872. 
Rice  v.  St.  Paul,  etc.,  R  R,  1318,  1406. 
Rice's  Appeal.  947,  1195,  1270. 
Rice's  Case,  913. 

Rich  v.  State  Nat'l  Bank,  101,  1082. 
I  Richard,  etc,  Co.  v.  Brook,  929,  1042, 


TABLE    OF    CASES. 


clxi 


[Tlie  references  are  to  the.  foot-paging.} 


Richards  v.  Attleborough    Nat'l   Bank, 

1058. 
Richards  v.  Beach,  250. 
Richards  v.  Brice,  299. 
Richards  v.  Chesapeake,  etc.,  R.  R.,  1325, 

1327,  1349,  1350,  1419. 
Richards  v.  Coe,  250,  283. 
Richards  v.  Crocker,  BOO. 
Richards  v.  Donagho,  141. 
Richards    v.    Farmers',    etc.,    Institute, 

1058. 
Richards  v.  Home,  etc.,  Assoc,  97. 
Richards  v.  Kinsley,  242. 
Richards  v.  Merrimack,  etc.,  R.  R,  1092, 

1261,  1268,  1310,  1312. 
Richards  v.  New    Hampshire    Ins.   Co., 

990,  1031. 
Richards  v.  People,  1418,  1435. 
Richards  v.  Town,  763,  765. 
Richardson  v.  Abendroth,  273,  279,  329, 

353. 
Richardson  v.  Buhl,  645,  722. 
Richardson  v.  Green,  59,  936,  938,  1201. 
Richardson  v.  Kelley,  468. 
Richardson  v.  Mass.,    etc.,    Assoc,   991, 
992. 

Norfolk,  etc.,  Co.,  1392. 
Pitts,  309,  314. 
Richardson,  738,  1015. 
Sibley,  1262,  1266.  1494. 
Vermont,  etc.,  R.  R,  377, 
719.  720,  805,  1542. 
Richardson  v.  Williamson,  1189. 
Richardson's  Case,  107,  333,  340,  358. 
Richardson,  etc.,  Co.  v.  Richardson,  etc., 

Co.,  1015. 
Riche    v.   Ashbury   R'y    Carriage    Co., 

1538. 
Richelieu  Hotel  Co.  v.  International,  etc, 

Co.,  105,  112. 
Richison  v.  People,  142. 
Richland,  County  of,  v.  People.  146. 
Rich  man  v.  Manhattan  Co.,  684. 
Richmond  v.  Daniels,  750,  753. 
Richmond  v.  Irons,   287,   297,   301.    304, 

352,  356. 
Richmond  v.  Union  Steamboat  Co.,  580. 
Richmond's  Case,  177,  212,  336,  415. 
Richmond,  City  of,  v.  Richmond  &  Dan- 
ville R.  R.  Co.,  771,  772. 

K 


Richardson  v. 
Richardson  v. 
Richardson  \ 
Richardson  v 
Richardson  v 


Richmond,  City  of,  v.  Scott,  766. 
Richmond,  etc.,  Co.  v.  Clarke,  91. 
Richmond,  etc.,  Co.  v.  Middletown,  1585. 
Richmond,  etc.,  Co.  v.  Richmond,  1597. 
Richmond,  etc,  R.  R  Co.   v.  Alamance 

Co.,  749. 
Richmond,  etc.,  R.  R.  v.  Louisiana  R.  R. 

Co.,  1529,  1532,  1942. 
Richmond,  etc,  R.  R.  v.  Payne,  1537. 
Richmond,  etc.,  R.  R   v.    Snead,   1108. 

1190. 
Richmond,  etc,  R.  R.  v.  Trammel,  1515. 
Richmond  Factory  Ass'n  v.  Clarke,  234. 
Richmond  Retail   Coal   Co.,  Matter  of, 

316,  648. 
Richmondville  Mfg.  Co.  v.  Prall,  24, 524. 
Richter  v.  Frank,  466,  470. 
Richter  v.  Jerome,  1306,  1471. 
Richwald  v.  Commercial  Hotel  Co.,  863, 

1059. 
Ricker  v.  American  Loan  &  Trust  Co., 

658,  1377,  1379. 
Ricker  v.  Collins,  1547. 
Ricketts  v.  Chesapeake,  etc.,  R'y,  1536. 
Ricord  v.  Central  Pacific  R  R.  Co.,  1009, 

1539. 
Riddington  v.  Mariposa,  etc.,  Co..  1176. 
Riddle  v.  Bedford  Co.,  1057,  1059. 
Riddle  v.  Harmony  Fire,  etc.,  Co.,  1026. 
Riddle  v.  N.  Y.,  etc.,  R.  R  Co.,  1179. 
Riddle  v.  Philadelphia,  etc.,  R.  R.  Co.,  137. 
Ridenour  v.  Mayo,  309,  668. 
Rider  v.  Kidder,  412. 
Rider  v.  Morrison,  212,  356. 
Rider  v.  Tritchey,  271,  278,  356. 
Rider  v.  Vrooman,  1367. 
Rider  Life  Raft  Co.  v.  Roach,  971. 
Ridgefield  &  N.  Y.  R.  R  Co.  v.  Brush. 

123,  187,  188,  227. 
Ridgefield  &  N.  Y.  R  R  Co.  v.  Reynolds, 

128. 
Ridgely  v.  Dobson,  661. 
Ridgway  v.  Farmers'  Bank,   1055,   1185, 

1192. 
Ridley  v.  Plymouth,  1065,  1083. 
Rigdou  v.  Walcott,  495. 
Riggs  v.  Commercial,  etc.,  Ins.   Co.,   18. 
Riggs  v.  Cragg,  739. 

Riggs  v.  Penn.,  etc.,   R   R,    1215,   1225, 
1303. 


clxii 


TABLE    OF    CASES. 


[77ie  references  are 

Riggs  v.  Swann.  277.  670. 

Riker  v.  AIsop,  1468,  1475. 

Riker  v.  Campbell,  786. 

Rikhoff    v.  Brown's    Rotary,  etc,   Co., 

164.  176,  234. 
Riley  v.  Albany  Sav.  Bank,  1090. 
Riley  v.  City  of  Rochester,  994. 
Riley  v.  Packington.  1035. 
Riley  v.  Rochester,  991. 
Rinesmith  v.  People's  Freight  R'y  Co., 

187. 
Ring  v.  County  of  Johnson,  1239. 
Ringo  v.  Biscoe,  990. 
Rio  Grande,  etc.,  Co.  v.  Burns,  100,  314, 

320,  534. 
Ripley  v.  Evans,  295. 
Ripley  v.  Sampson,  271,  331. 
Risley  v.  Indianapolis,   etc.,   R    R   Co., 

903.  1076. 
Ritso's  Case.  97. 

Rittenhouse  v.  Winch.  945,  1265. 
Ritter  v.  Cushman,  576. 
Ritterband  v.  Baggett,  661,  1024. 
Rivanna  Nav.  Co.  v.  Dawsons,  418. 
River  Dun  Nav.  Co.  v.  North,  etc,  R'y 

Co.,  1154. 
Rives  v.  Dudley,  996. 
Rives  v.  Montgomery  S.  P.  R  Co.,  162, 

188,  192.  235. 
Rivington's  Case,  1588. 
Roanoke,  etc.,  Co.  v.  Kansas,  etc.,  R  R, 

1532. 
Robbins  v.  Butler,  660,  671. 
Robbins  v.  Clay.  955. 
Robbins  v.  Waldo,  671. 
Robert,  etc.,  Min.  Co.  v.   Omaha,    etc., 

1088. 
Robert's  Appeal.  413. 
Roberts  v.  Berdell  781. 
Roberts  v.  Cobb,  93. 
Roberts  v.  Demens,  etc.,  Co.,  1107. 
Roberts  v.  Easton,  1564. 
Roberts  v.  Mobile  &  O.  R  R  Co.,  126, 

167. 
Roberts'  Appeal.  C34.  671,  73a 
Roberts'  Case,  123,  12& 
Roberts,  Ex  parte.  1036.  1037. 
Robertson  v.  Bullions,  968. 
Robertson  v.  Rockford,  133,  140. 
Robey  v.  Smith,  130L 


to  the  foot-paging.] 

Robins  v.  Embry,  990. 

Robinson  v.  Addison,  406. 

Robinson  v.  Alabama,     eta,     Mfg.    Co_ 

1289.  1309,  1310. 
Robinson  v.  Atlantic,   etc.,  R   R,    1381, 

1436. 
Robinson  v.   Bank  of  Darien,  154,  261, 

299,  305. 
Robinson  v.  Beale.  417. 
Robinson  v.  Bidwell,  133,  154,  276. 
Robinson  v.  Chartered  Bank,  448. 
Robinson  v.  Dolores,  etc.,  Co.,  52,  941. 
Robinson  v.  Edinboro'  Academy,  113. 
Robinson  v.  Fitchburg,  etc.,   R    R.  Co.. 

1113. 
Robinson  v.  Hemingway,  849 
Robinson  v.  Hunt.  410. 
Robinson  v.  Hurh-y.  585,  600. 
Robinson  v.  Iron  R'y,  1472.  1475. 
Robinson  v.  Jewett,  917.  935. 
Robinson  v.  Lane,  v 
Robiuson  v.  McCracken,  905. 
Robinson  v.  Mollett.  566.  579. 
Robinson  v.  Natl  Bank,  etc.,  990. 
Robiuson  v.  Nat'l  Bank  of  New  Berne, 

58^  61  9,  Tio.  - 

Robinson  v.  N  -<Q. 

Robinson  v.  O  tc,  Co.,  1173. 

Robinson  v.  Parks  el  al.,  199.  £ 
Robin-'  n  v.  Philadelphia,  etc,  R  R.  Co., 

1470. 
Robinson  v.  Pittsburgh  &  C.  R  R  Co.. 

189,  213. 
Robinson  v.  Smith.  *99,  973. 
Robinson  v.  Spaulding,   etc.,    Co.,     173. 

609. 
Robinson's  Executor's  Case,  331. 
Robson  v.  Dodds,  114& 
Rochdale  Canal  Co.  v.  King,  1130. 
Roche  v.  Ladd,  1005. 
Rochester  v.  Alfred,  138. 
Rochester  v.  Barnes,  630. 
Rochester,  City  of,  v.  Bronson,  1155. 
Rochester,  etc.,  Co.,  Re,  818,  833. 
Rochester,  etc.,  R  R,  In  re,  104,  121. 
Rochester,  etc.,  R  R  v.  N.  Y.,  etc.,  R  R, 

1168,  1530. 
Rochester  Ins.  Co.  v.  Martin,  6. 
Rochester  Sav.  Bank   v.    Averell,    1262. 

1264 


TABLE    OF   CASES. 


clxiji 


\The  references  are 

Rochester  Water  Com'rs,  Re,  1598. 
Rock  v.  Nichols,  469.  623. 
Rock  Creek  v.  Strong,  183. 
Rock  River  Bank  v.  Sherwood,  988. 
Rockford,  etc.,  R.  R  v.    Sage,  925,  1043. 
Rockford.  etc.,  R  R  Co.  v.  Schunick,  90. 
Rockhold  v.   Canton,  etc.,  Assoc,  1587. 
Rockland,  etc.,  Co.  v.  Camden,  etc.,  Co., 

1597. 
Rockland,  etc.,  Co.  v.  Sewall,  222. 
Rockville,  etc..  Co.  v.  Van  Ness.  93,  232. 
Rockville,  etc.,  Turnpike  Co.  v.  Maxwell, 

178. 
Rockwell  v.  Elkhorn   Bank,   1108,  1185, 

1190. 
Rocky    Mountains    National    Bank    v. 

Bliss.  250.  281.  283,  295. 
Rodemacher  v.  Milwaukee,  etc.,  R  R.. 

1516. 
Rodney  v.  Southern  R  R  Assoc,  929.  930. 
Roehler  v.  Mechanics'  Aid  Society,  1025. 
Rogan  v.  Watertown.  137. 
Rogers  v.  Burlington,  132. 
Rogers  v.  Chicago,  etc.  R'y,  1226. 
Rogers  v.  Danby  Univ.  Soc,  16. 
Rogers  v.  Decker.  293. 
Rogers  v.  Gould,  467.  572. 
Rogers  v.  Haines  et  al.,  1427. 
Rogers  v.  Hastings,  etc..  R'y  Co..  925. 
Rogers  v.  Huntingdon    Bank,   687,  689, 

692,  693.  695. 
Rogers  v.  Jones,  1022. 
Rogers  v.  Lafayette,  etc.,  Works,    1144, 

1150,  1154. 
Rogers  v.  Michigan,  etc.,  R  R.,  493. 
Rogers  v.  New  York,  etc..  Land  Co.,  366, 

703.  964.  1045.  1118,  1484 
Rogers  v.  Oxford,  etc,  R'y  Co.,  1142. 
Rogers  v.  Phelps.  421.  704. 
Rogers  v.  Stevens.  017.  620. 
Rogers  v.  Van  Nortwick.  462,  495. 
Rogers  v.  Wendell.  1457. 
Rogers  v.  Wheeler,  654,  1319,  1467,  1483. 
Rogers  v.  Wiley,  574,  575. 
Roger's  Case,  97,  129. 
Rogers,  Ex  parte.  474.  1058. 
Rogers,  etc.,  Co.  v.  Union,  etc.,  Co.,  1102. 
Rogers,  etc.,  Corp.  v.  Simmons,  1003. 
Rogers,  etc.,  Works  v.  Southern  R  R, 
1245. 


to  the  foot paging. ,] 

Rogers  Locomotive,  etc.,  Works  v.  Kel- 

ley.  1235. 
Rogers  Loco.  Works  v.  Lewis,  1375. 
Roland  v.  Lancaster,  etc.  Bank.  598. 
Rolling  Mill  v.  St.  Louis,  etc.,  R  R  Co.. 

1079. 
Rollins  v.  Clay,  863,  864,  990. 
Rollins  v.  Shaver,  etc,  Co.,  420,  940,  989, 

1066. 
Roman  v.  Fry,  333,  335,  356. 
Romaine  v.  Van  Allen,  789. 
Roman  Catholic  Orphan  Asylum  v.  Em- 
mons, 408. 
Rome,  Bank  of,  v.  Rome,  136,  147. 
Rome,  Bank  of,  v.  Village  of  Rome,  153. 
Rome,  etc.,  Co.  v.  Sibert,  1358, 1382,  1402, 
Rome,  etc  ,  R.  R  v.  Ontario,  etc,  R  R, 

963. 
Rood  v.  Railway,  etc,  Ass'n,  661. 
Roosevelt  Hospital   v.  Mayor  of  N.  Y., 

775. 
Root  v.  Goddard,  1106,  1193. 
Root  v.  Great  Western  R  R,  1533. 
Root  v.  Long,  etc.,  R  R  Co.,  1518. 
Root  v.  Olcott.  10S5. 
Root  v.  Sinnock,  272,  351. 
Root  v.  Wallace.  9S5,  1106,  1193. 
Roots  v.   AViiliamson,  438,  549. 
Rorke  v.  Thomas,  301,  702,  735,  891,  960. 
Rose  v.  City  of  Bridgeport,  1236,  1237. 
Rose  v.  Foord,  459.  464. 
Rose  v.  Turnpike  Co.,  863. 
Roseboone  v.  Warner.  940. 
Rosenback    v.    Salt    Springs    .National 

Bank,  173,  68S,  701. 
Rosenburg  v.  Weekes,  763. 
Rosenfeld  v.  Einstein,  677. 
Rosenfeld  v.  Peoria,  etc.,  R'y.  1536. 
Rosenkrans  v.  Lafayette,  etc.,  R  R.  384. 
Rosenstock  v.  Tormey,  567.  579. 
Rosenthal  v.  Madison,  etc..  Co..  1016. 
Rosevelt  v.  Brown.  15.  329.  35L 
Rosewarne  v.  Billing.  474. 
Ross  v.  Bank,  etc.,  178.  245. 
Ross  v.  Borer,  410. 
Ross  v.  Chicago,  etc..  R.  R.  Co..  632. 
Ross  v.  Crockett,  1062. 
Ross  v.  Estates  Investment  Co.,  193,  191 
Ross  v.  Lafayette  &  Indianapolis  R.  R. 
Co.,  159,  167,  168. 


clxiv 


TABLE    OF    CASKS. 


[The  references  are 

Ross  v.  Ross,  624. 

Ross  v.  Sau  Antonio,  etc.,  R  R  Co.,  215. 

Ross  v.  Silver,  etc.,  Co.,  43. 

Ross  v.  Southwestern  R  R  Co.,  441,  547. 

Ross  v.  Union  Pac.  R'y  Co.,  460,  463. 

Ross,  Ex  parte,  1066. 

Rossie  Iron  Works  v.  Westbrook,  12. 

Rossiter  v.  Rossi ter.  1189. 

Rothchild  v.  Grand,  etc.,  R'y,  1165. 

Rotheram,  etc.,  Co.,  Re,  1044. 

Rothschild  v.  Grand  Trunk  R'y,  1166. 

Rothschild  v.  Rio  Grande,  etc.,  R'y,  1338, 

1546. 
Roth  well  v.  Robinson,  956,  1151. 
Rounds  v.  McCormick,  289. 
Rouudtree  v.  Smith,  468. 
Rouse  v.  Merchants*  Xat'l  Bank,  1364 
Rowe  v.  Hoagland,  537. 
Rowland  v.  Apothecai  .  1193. 

Rowland  v.  Meader  Furniture  Co.,  883, 

245. 
Rowland's  Case.  77,  83. 
Rowley,  Appeal  of,  100,  108. 
Roxbnry    v.    Central    Vt.    R     R,    1430, 

1 134. 
Royal  Bank  v.  Grand,  etc.,  R  R  Co., 

1099. 
Royal  Bank  v.  Junction,  etc.,  R  R  Co., 

1098. 
Royal  Bank,  etc.,  Co.,  1034 
Royal  Bank  of  India's  Case,   104,    339, 

425. 
Royal  Bank  of  Liverpool  v.  Grand  Junc- 
tion R  R&D.  Co.,  1101,  1180. 
Royal,   etc.,   Bank    v.   Tunjuand,  1108. 

1109. 
Royal  Exchange  Ins.  Co.  v.  Moore,  569. 
Royalton    v.    Royalton    Turnpike    Co., 

1106. 
Rozet  v.  McClellan,  600. 
Rubey  v.  Shaiu,  138. 
Ruby  v.  Abyssinian  Soc,  1092,  1113. 
Ruby,  etc.,  Co.  v.  Gurley,  1046. 
Ruchizky  v.  De  Haven,  333,  471,  473,  475, 

563. 
Ruddv.  Robinson,  917,  939,  1131. 
Rudge  v.  Bowman.  457. 
Rudolf  v.  Winters,  477. 
Rudolph  v.  Southern,  etc.,  League,  672, 
812. 


to  the  foot-paging.] 

Ruerbach  v.  La  Soeur  Mill  Co..  1094. 
Ruffin  v.  Board  of  Com'rs,  760. 
Ruffner  et  aL  v.  Welton,  etc.,  Co.  et  a!., 

1101. 
Rugely  &  Harrison  v.  Robinson,  338. 
Ruggles  v.  Brock,  209.  233.  265.  1429. 
Buggies  v.  City  of  Fond  du  Lac,  765. 
Ruggles  v.  Illinois,  1513. 
Ruland  v.  Canfield  Pub.  Co.,  1178 
Rumball  v.  Metropolitan  Bank,  88,  484 

554  i 
Rumbough  v.  Southern,  etc.,  Co.,   1 
Ruuisey  v.  Berry,  475. 
Runge  v.  Franklin,  900. 
Runyon  v.  Coster,  D!i2.  993, 997,  999,  1001. 

v.  Bromberg,  159. 
Rush's  Estate,  434. 

nville,  etc.,  '  ".  v.  Rushvule,  1066. 
Russell  v.  Allen.  I 
Russell  v.  Bristol,  116. 
Russell  v.  Bast  Anglian  R'y,  1856,  1485. 
Russell  v.  Loring,  745. 

sell  v,  Manhattan  R'y  Co.,  684. 
Russell  v.  McLellan,  313,  863,  864,  888, 

1051. 
Russell  v.  Post,  963. 
Russell  v.  Temple,  83. 
Russell  v.  Texas,  etc..  R'y.  991. 
Russell  v.  Wakefield  Water-worka  Co., 

1116.  1153,  1540. 
Russell's  Executor's  Case,  833. 
Rutherford  v.  Hill.  314. 
Rutherford  v.  Mass   M   etc.,   Ens.  Co., 

.in:,. 
Rutland  &   B.  R   Co.   v.    Proctor,   995, 

1 535. 
Rutland  &  Burlington  RR  Co.  v.  Thrall. 
163,   166,   167,   169,  171.  174,  175.  178, 
179,  181,  226,  864  ,i:!'- 
Rutland,  etc.,  Co.  v.  Marble  City,  etc,  <  '<>.. 

1581. 
Rutland,  etc.,  R  R  Co.  v.  Lincoln,  109. 
Rutland  R  R.  v.  Haven,  399,  78ft 
Rutledge,  Ex  parte,  744. 
Rutten   v.  Union   Pac.   R'y,    1808,  1330, 

1242.   1388 
Rutter  v.  Tallis,  1422. 
Ruttman  v.  Hoyt,  468 
Rutz  v.  Esler  &  R  Manuf.  Co.,  192,  238. 
Ryan  v.  Commissioners,  756. 


TABLE    OF    CASES. 


clxv 


[Tl.e  references  are 

Ryan  v.  Dunlop,  1086. 

Ryan  v.  Hays,  1447,  1482. 

Ryan  v.   Leavenworth,  etc.    R   R    Co., 

423,  710,  903,  1127. 
Ryan  v.  Martin.  1017. 
Ryan  v.  Ray,  1146. 
Ryder  v.  Alton,  etc.,  R.  R.  Co.,  102,  212, 

215,  219,  362,712,  833. 
Ryder  v.  Bush  wick  R.  R,  396,  534, 1073. 
Ryers  v.  Tuska,  465. 
Ryle  v.  Ryle,  481,  607. 
Ryman  v.  Gerlach,  484,  571. 

s. 

Sabin  v.  Bank  of  Woodstock,  433,  614, 

687,  695. 
Sabin  v.  Haylake  Ry,  1045. 
Sackett's  Harbor  Bank  v.  Blake,  242,  292. 

300. 
Sackett's  Harbor  Bank  v.  Codd,  985. 
Sacramento,  etc.,  R.  R.  v.  Superior  Ct., 

1317. 
Sadler  v.  Lee,  783,  788. 
Sadler's  Case,  106,  336,  524. 
Saddle  River  v.  Colfax,  1093. 
Safety,  etc.,  Co.  v.  Smith,  1043. 
Saffold  v.  Barnes,  190,  209. 
Safford  v.  People,  1432. 
Safford  v.  Wyckoff,  985,  1106,  1190. 
Sage  v.  Central  R  R.,  1307,  1316,  1467, 

1474,  1475. 
Sage  v.  Dilliard,  638. 
Sage  v.  Little,  etc.,  R  R,  1405. 
Sage  v.  Memphis,  etc.,  R.  R,  1340,  1368, 

1410,  1411,  1412. 
Sage  v.  Railroad,  1357. 
Sage,  Re,  676,  682,  1542. 
Saginaw,  etc.,  Co.  v.  Hamilton,  1583. 
Saginaw,  etc.,  Co.  v.  Saginaw,  1554, 1583. 
Sagory  v.  Dubois,  56,  113,  161,  174,  729. 
Sahlendecker.  Appeal  of,  241. 
Sahlgard  v.  Kennedy,  1303,  1472. 
Saint  v.  Wheeler,  etc.,  Co.,  1114. 
St.  Albans  v.  National  Car  Co.,  753,  755. 
St  Andrew's    Bay   L   Co.   v.   Mitchell, 

1095. 
St.  Cecilia  Academy  v.  Hardin,  1165. 
'  St  Charles,  etc.,  R  R  Co.  v.  Assessors, 

749. 


to  the  foot-paging.] 

St  Clair  v.  Cox,  1173,  1176. 

St  Croix  L.  Co.  v.  Mittlestadt,  111,  387, 

922. 
St.  Helen  Mill  Co..  In  re,  1063. 
St.  James  Club,  Re,  661. 
St.  James  Parish  v.  Newburyport  H.  R 

R,  1084,  1094,  1190. 
St.  John  v.  Erie  R>  Co.,  366,  368,  369, 

722. 
St  Johns  v.  Steinmetz,  1100,  1101. 
St.  John's  College  v.  Purnell,  635. 
St  Johnsbury,  First  National  Bank  of, 

v.  Concord,  137. 
St.  Joseph  v.  Saville,  1535. 
St  Joseph,  etc.,  R   R.    v.    Humphreys, 

1444. 
St.  Joseph,  etc.,    R   R.   v.   Shambaugh, 

3,  887. 
St.  Joseph,  etc..    R.    R.    v.   Smith,  1435. 
St.  Joseph,  etc.,  R.  R.  Co.  v.  Buchanan 

Co.,  135. 
St  Joseph,  etc.,  R  R.  Co.  v.  Ryan,  1539. 
St.  Joseph  Township  v.  Rogers,  148, 149. 
St.  Lawrence    Steamboat    Co.,    In    the 

Matter  of  the  Election  of,  20,  822, 

823,  827,  839,  841,  849,  850,  851. 
St.  Lawrence,  etc..  R.  R,  Matter  of,  1526. 
St.  Louis  v.  Alexander.  135,  941. 
St.  Louis  v.  Risley,  1100. 
St.  Louis  v.  Western,  etc..  Co.,  1552, 1595. 
St.  Louis,  Alton  &  C.  R.  R  Co.  v.  Dalby, 

1009. 
St.  Louis  Ass'n  v.  Hennessey,  232. 
St  Louis  &  Cedar  Rapids  R  R.  Co.  v. 

Eakins,  126. 
St.  Louis  &  San  F.  R'y  Co.  v.  Wilson, 

620. 
St.  Louis,  etc.,  Assoc,  v.  Augustin,  1072. 
St.  Louis,  etc.,  Bank  v.  Allen,  1948. 
St  Louis,  etc.,  Co.  v.  Consolidated,  etc.. 

Co.,  1178. 
St.  Louis,  etc.,  Co.  v.  Hilbert.  418. 
St  Louis,  etc.,  Co.  v.  Jackson,  913. 
St.  Louis,  etc.,  Co.  v.  Lewright  1528. 
St.  Louis,  etc.,  Co.  v.  Quinby,  977. 
St.  Louis,  etc.,  Co.  v.  Sandoval,  etc.,  Co., 

177,  1126,  1418,  1423,  1431,  1471. 
St  Louis,  etc.,  Ins.  Co.  v.  Cohen,  1175. 
St  Louis,  etc..  Loan  Association  v.  Au- 
gustin, 803. 


clxvi 


TABLE    OF    CASES. 


[The  references  are 

St  Louis,  etc.,  R'y  v.  Berry,  1545. 
St  Louis,  etc.,  R'y  v.  Knott,  1548. 
St.  Louis,  etc.,  R'y  v.  Matthews,  1391. 
St.  Louis,  etc.,  R'y  v.  Neel,  1509. 
St  Louis,  etc.,  R'y  v.  Ryan,  1514. 
St.  Louis,  etc.,  R'y  v.  Weakly,  1534. 
St.  Louis,  etc.,  R'y  v.  Whitley.  1183. 
St  Louis,  etc.,  R'y  v.  Williams,  10,  1050. 
St.  Louis,  etc.,  R.  R.  v.  Chenault,  936. 
St  Louis,  etc.,  R.  R.  v.  Cleveland,  etc., 

R'y.  1402,  1443. 
St  Louis,  etc.,  R  R  v.  Dewees,   1416, 

1531. 
St  Louis,  etc.,  R  R.  v.  Eakins,  127. 
St  Louis,  etc.,  R,  R.  v.  Foltz,  1528. 
St.  Louis,  etc.,  R  R.  v.  Grove,  1088. 
St  Louis,  etc.,  R  R  v.  Hill,  1520. 
St.  Louis,  etc.,  R  R  v.  Mathers,  1539. 
St.  Louis,  etc.,  R  R  v.  Miller.  1480. 
St  Louis,  etc.,  R  R.  v.  Terre  Haute,  etc., 

R  R,  1125,  1131,   1489,   1491,   1503, 

1504,  1505,  1506. 
St.  Louis,  etc.,  R  R  Co.  v.  Tieruan,  50, 

917,  924. 
St  Louis,  Iron  Mt  &  S.  R   R   Co.  v. 

Berry,  774. 
St  Louis,  Iron  M.,  etc.,  R.  R.  Co.  v.  Lof- 

tin,  13. 
St  Louis  Nat'l  Bank  v.  Allen,  1183. 
St.  Louis  Nat'l  Bank  v.  Papin.  751,  763, 

765. 
St  Louis  Perpetual  Ins.  Co.  v.  Goodfel- 

lovv,  517,  687,  689,  692,  693,  695.  699. 
St  Louis  R   Co.  v.   Southern   R'y  Co., 

1569. 
St.  Louis  R  R  v.  N.  W.,  etc.,  R'y,  875. 
St.  Louis  R.  R.,  etc.,  Co.  v.  Harbine,  629. 
St.  Luke's  Church  v.  Matthews,  1057. 
St.  Luke's  Church,  Re,  7. 
St.  Marylebone  Banking  Co.,  In  re,  336. 
St.  Mary's  Bank  v.  Mumford,  1116. 
St.  Mary's  Bank  v.   St   John,   275,  729, 

1058,  1059. 
St.  Mary's  Church  v.  Cagger,  635,  1068. 
St.  Mary's,  etc.,  Ass'n  v.  Lynch,  802. 
St  Nicholas,  The,  1434. 
St.  Paul  v.  Chicago,  etc.,  R'y,  1171. 
St  Paul,  etc.,  Co.  v.  Minn.,  etc.,  R.  R, 

388,  1509. 
St  Paul,  etc.,  R'y  v.  Sage,  1129. 


to  the  foot-paging.] 

St.  Paul,  etc.,  R'y  v.  Todd  County,  773. 
St  Paul,  etc.,  R  R  v.  Parcher,  1273. 
St  Paul,  etc.,  R  R  v.  Robbins,  36,  112, 

239. 
St  Paul,  etc.,  R    R    v.    United    States. 

1364. 
St.  Phillip's  Church  v.  Zion,  etc.,  Church, 

889. 
St.  Romes  v.  Cotton  Press  Co.,  441,  484. 
St  Tammany  Water-works  v.  New  Or- 
leans Water-works,  1597. 
Salaman  v.  Warner,  449.  500. 
Salem  Bank  v.  Gloucester,  969,  1094. 
Salem  Irou,  etc.,  Co.  v.  Danvers,  756. 
Salem  Mill-dam  Corp.  v.  Ropes,  110,  323, 

223,  227,  381,  394. 
Sales  v.  Bates,  327,  332,  336,  338,  352. 
Salfield  v.  Sutter,  etc.,  Co..  1055. 
Salisbury  v.  Black's  Adm'rs.  243. 
Salisbury  v.  Metropolitan  R'y  Co.,  378, 

728,  734,  735,  1112. 
Salisbury  Mills   v.   Townsend.  438,    528. 

709,  717. 
Salmon  v.   Hamborough  Co.,    245,  255, 

1169. 
Salmon  v.  Richardson,  487. 
Salomons  v.  Laing,  422,  11 17,  153a 
Saloy  v.  Hibernia,  etc.,  Bank,  485.  594. 
Salt  Company  v.  East  Saginaw,  1942. 
Salt,  etc.,  Co.  v.    Mammoth,   etc.,   Co., 

1056. 
Salt  Lake  City  v.    Hollister,  953,    1006, 

1153. 
Salt  Lake,  etc.,  Bank  v.  Golding,  760. 
Salt  Lake,  etc.,  v.  Hendrickson,  271,  295. 

321. 
Saltmarsh  v.  Planters',  etc.,  Bank,  893. 
Saltmarsh  v.  Spaulding,  319,   920,    1059, 

1265,  1293. 
Saltsman  v.  Shults,  671. 
Samainego  v.  Stiles,  251. 
Sampson  v.   Bowdoinham,    etc,    Corp., 

801,  887,  1058,  1064. 
Sampson  v.  Shaw,  449,  469. 
Samuel  v.  Holladay,  16.  932,   1021,  1061, 

1109.  1144,  1296,  1320. 
Samuels  v.  Evening  Mail,  etc.,  1010. 
San  Antonio  v.  Gould,  137. 
San  Antonio  v.  Jones,  137. 
I  San  Antonio  v.  Lane,  137,  1237. 


TABLE    OF    CASES. 


clxvii 


[The  references  are 

San  Antonio,  etc.,  Co.  v.  Busch,  1214 
San  Antonio,  etc.,  R'y  v.  Ruby,  1432. 
San  Benito,  etc.,  v.  Southern   P.   R  R 

Co.,  776. 
San  Bernardino,  etc.,  Bank  v.  Anderson, 

1105. 
San  Buenaventura  Commercial,  etc,  Co. 

v.  Vassault,  800,  801. 
San  Diego  v.  San  Diego,  etc.,  R  R  Co., 

931. 
San  Francisco  v.  Flood,  751. 
San  Francisco  v.  Fry.  751. 
San  Francisco,  City  of,  v.  Mackey.  756. 
San  Francisco,  etc..  R  R.   v.  Bee,  961, 

965. 
San  Francisco,  A.  &  S.  R  R  Co.  v.  Cald- 
well, 1527. 
San  Francisco,  etc'  Co.  v.  Pattee,  923. 
San  Joaquin,  etc.,  Co.  v.  Beecher,  113. 
San  Jose  Savings  Bank  v.  Pharis,  299. 
San  Jose,  etc.,  Bank  v.  Sierra,  etc.,  Co., 

1059. 
San  Mateo,  County  of,  v.  Southern  Pac. 

R  R  Co.,  635,  8S9,  1020. 
Sanborn  v.  Benedict,  470. 
Sanborn  v.  Lefferts,  16,  279,  853. 
Sanders  v.  Bromley,  744. 
Sanderson  v.  ^Etna,  etc.,  Co.,  216. 
Sanderson  v.  Tinkham,  etc.,  Co.,  1063. 
Sanderson's  Case.  344. 
Sanderson's  Patents   Association,  In  re, 

861. 
Sandford  v.  Handy,  191,  202, 
Sandford  v.  Norton.  1248. 
Sandford  v.  Railroad.  1142,  15S0. 
S;mdford  v.  Sinclair,  1417. 
Sandon  v.  Hooper,  1437. 
Sands  v.  Kimbark.  888, 
Sands  v.  Sanders,  181. 
Sandy,    etc..   Bank  v.  Merchants',   etc.. 

Bank.  10S6. 
Sandy  River  R.  R  Co.  v.  Stubbs.  935. 
Sanford  v.  Board  of  Supervisors,  666. 
Sanger  v.  Upton,  13,  31.  56,  80,  87,  109, 
113,  160.  210,  239,  248,  255,  261,  265, 
336. 
Sanitary,  etc..  Co..  In  re,  815. 
Santa  Clara  County  v.  Southern  Pacific 

Railroad  Co.,  768.  1949. 
Santa  Clara,  etc.,  Co.  v.  Hayes,  644. 


to  the  foot-paging.] 

Santa  Clara,  etc.,  Co.,  In  re,  850,  852. 
Santa  Cruz  R  R  Co.  v.  Schurtz.  223. 
Santa  Cruz  R  R  Co.  v.  Spreckles,  323, 

1185. 
Santa,  etc.,  Assoc,  v.  Meredith,  925.   926. 
Sanxey  v.  Iowa,  etc..  Glass  Co..  1468. 
Sappington  v.  Little  Rock,  etc..  R.  R..  963. 
Saratoga,  etc.,  Co.  v.  Hazard.  781.    1201. 
Sargent  v.  Boston  &  L.  R  R.  158 
Sargent  v.  Essex  Mfg.  Co.,  517,  623. 
Sargent  v.  Essex  11  R'y  Co.,  623,  699. 
Sargent  v.  Franklin  Ins.  Co.,  22.  430.  447, 

469,  517,  522,  525,  622.  686,  688,  691, 

717.  779,  785,  790,  1022. 
Sargent  v.  Kansas,  etc.,  R  R.  907.  1213. 
Sargent  v.  AVebster,  807,  989.  1065. 
Sargent,  Ex  parte,  449,  517,  519,  528,  550, 

591,  593,  594. 
Sauerhering  v.  Iron  Ridge,  etc.,  R  R 

Co.,  146. 
Saugatuck,  eta,  Co.  v.  Westport.  98. 
Saunders  v.  Sioux,  etc.,  Co.,  1165. 
Saunders'  Case,  327. 
Savage  v.  Ball,  65.  824. 
Savage  v.  Medbury.  160. 
Savage  v.  Russell,  1167. 
Savage  v.  Walshe,  858, 
Savage  Mfg.  Co.  v.  Armstrong.  117:;. 
Savannah,  etc..  R'y  v.  Pritchard.  1534. 
Savannah,  etc.,  R.  R  v.  Lancaster.  1099, 

1202,    1224,    1227,    1239.    1266.    1294, 

1314.  1328. 
Savannah,  etc.,  R  R  Co.  v.  Mayor,  etc., 

155L 
Savings  Ass'n  v.  O'Brien.  255.  279,  2-4. 

292.  294. 
Savings  Assoc,  v.  Topeka.  138,  139. 
Savings  Bank  v.  Bates.  989. 
Savings  Bank  v.  Creswell.  1393. 
Savings  Bank  v.  Davis,  1061,  1095.  1096. 

1099. 
Savings  Bank  v.  Hunt,  1022. 
Savings  Bank  v.  Nashua.  757. 
Savings  Bank.  etc.  v.  Caperton,  1032. 
Savings  Ins.  Co.  of  St.  Louis  v.  O'Brien, 

293. 
Sawyer  v.  Dubuque,  etc.,  Co..  957. 
Sawyer  v.  Hoag.  240.  247.  24-8.  257.  265. 
Sawyer  v.  Methodist  Ep.  Soc.  16. 
Sawyer  v.  Taggart.  473.  475. 


clxviii 


TABLE    OF    CASKS. 


[The  references  are 


Sawyer  v.  Winnegance,  etc.,  Co.,  1105. 

Saxby  v.  Easterbrook.  682. 

Saxton  v.  Texas,  etc.,  E.  R,  1098. 

Sayler  v.  Simpson,  68,  965,  1264. 

Sayles  v.  Blane,  345,  356. 

Sayles  v.  Brown,  293,  391,  392,  828. 

Sayre  v.  Glenn,  246. 

Sayward  v.  Houghton,  462. 

Scadding  v.  Lorans,  807. 

Scammon  v.  Kimball,  240. 

Scarlet  v.  Academy  of  Music,   169,  171, 

187. 
Scarth  v.  Chad  wick,  1158. 
Schaeffer  v.  Bonham,  147. 
Schaeffer  v.  Missouri,  etc.,  Co.,  87, 239. 
Schall  v.  Bowman,  141. 
Scheffer  v.  Nat.  Life  Ins.  Co.,  1183. 
Schenck  v.  Dart,  412. 
Scheuck  v.  Ingraham,  1458. 
Schenck  v.  Mercer,  etc..  boa,  ' 'o.,  1115. 
Scheneck  v.  Andrews,  47,  72. 
Schenectady,  etc.,  R  R  Co.  v.  Thatcher, 
111,  112,  170.  181,  224,  232,  343,  635, 
806. 

Schepeler  v.  Eisner,  578. 

Schermerborn  v.  Talman,  1206. 

Schetter  v.  Southern,  etc,  Co.,  1088. 

Schild  v.  Central,  etc.,  R  R,  1571. 

Schilling,  etc.,  Co.  et  al.  v.  Schneider  et 
al.,  52,  1188,  1208. 

Schillinger,  etc.,  Co.  v.  Arnot,  1166. 

Schlieder  v.  Dielman,  961. 

Schloss  v.  Montgomery,  etc.,  Co.,  224, 
234. 

Schmid  v.  New  York,  etc.,  R.  R,  1482. 

Schmidla'pp  v.  Louisiana,  etc.,  Co.,  1176. 

Schmidt  v.  Abraham,  etc.,  Lodge,  661. 

Schmidt  v.  Gunther,  671. 

Schmidt  v.  Hennepin,  etc.,  Co,  693. 

Schmidt  v.  Market,  etc.,  R'}r,  1574. 

Schneider  v.  Turner,  470. 

Schneitman  v.  Noble,  1086. 

Schoeppel  v.  Corning,  781. 

Schoharie,  etc.,  R  R,  Re,  825,  826. 

Schoharie  Valley  R   R  Case,  829,  839, 
840, 

Scholefield  v.  Redfern,  741.  743,  745. 

Scholefield's  Case,  1031. 

Scholey  v.  Central  R'y  Co.,  200,  206,  207. 
Scholfield  v.  Union  B.,  827,  828,  881. 


to  the  foot-paging.'] 

Schollenberger,  Ex  parte,  1178. 
School  District  v.  Griner,  1018,  1019. 
School  District,  etc.,  v.  Everett,  991. 
Schorestine  v.  Iseliu,  1475. 
Schrader  v.  Manuf'rs  Bank,  296. 
Schricker  v.  Ridings,  272. 
Schroeder's  Case,  33,  36,  48,  65. 
Schultz  v.  Schoolcraft,  etc.,  R  Co.,  97. 
Schumm  v.  Seymour,  1064. 
Schurr  v.  New  York,  etc.,  Co.,  970. 
Schutte  v.  Railroad,  1216. 
Schuyler  Co.,  Supervisors  of,  v.  People. 

L33 
Schuyler,  County   of,   v.   Thomas,    140, 

156. 
Schuyler's,    etc.,   Co.,   Matter  of,    1422, 

1428,  1433. 
Schwanck  v.  Morris,  207. 
Schwartz  v.  Keystone,  etc.,  Co.,  1438. 
Schwenck  v.  Nay  lor,  490. 
Scipio,  Town  of,  v.  Wright,  b5& 
Sco6eld  v.  Blackmail.  474 
Scofield  v.  L.  S.,  etc..  R'y,  1519. 
Scofield  v.  Railroad,  1631,  1599. 
Scotland  Co.  v.  Mo.,  Iowa,  etc.,  R'y  Co., 

759. 
Scott  v.  Armstrong.  1430. 
Scott  v.   Central   Railway,    etc.,    Co.   of 

Georgia,  706,  715.  716. 
Scott  v.  Clinton,  etc.,  R  R,  1315,  1372. 

Scott  v.  Colburn,  1200,  1262. 

Scott  v.  De  Peyster,  1032. 

Scott  v.  Detroit,  etc.,  Society,  316. 

Scott  v.  Dixon.  194,  486,    187. 

Scott  v.  Eagle  Fire  Ina  Co.,  721, 126,  735. 

Scott  v.  Elmore,  1423. 

Scott  v.  Embury,  1035. 

Scott  v.  Grand  Trunk  R'y  Co..  1536. 

Scott  v.  Indianapolis  Wagon  Works,  467, 
609.  611. 

Scott  v.  Izou,  652. 

Scott  v.  Middleton,  etc.,  R  R,  1068,  1081. 

Scott  v.  Pequonnock  Bank,  24,  517,  618. 

Scott  v.  Rogers,  789. 

Scott  v.  Texas,  etc.,  Co.,  1181. 

Scott  v.  Snyder,  etc.,  Co.,  194. 

Scottish  N.  E.  R'y  Co.  v.  Stewart,  886. 

Scottish  Petroleum  Co.,  Re,  201,  1066. 

Scovil  v.  Roosevelt,  739. 

Scoville  v.  Canfield,  291. 


TABLK    OF    CASES. 


clxix 


[The  references  are 


Scoville  v.  Thayer,  42,  49,  51,  5G,  58,  63, 
160,  162,  241,  244,  261,  381,  394,  395, 
400. 
Screven  v.  Clark,  1426. 
Screwman's,  etc.,  Assoc,  v.  Benson,  662. 
Scripture  v.  Francestown  Soapstoue  Co., 

500,  622. 
Scruggs  v.  Scottish,  etc.,  Co.,  1004. 
Sea  Ins.  Co.  v.  Stebbins,  1428. 
Seacord  v.  Pendleton,  311,  669. 
Seal  v.  Puget  Sound,  etc.,  Co.,  1056. 
Seale  v.  Baker,  195. 
Seaman  v.  Enterprise  Fire,  etc.,  Ins.  Co., 

18. 
Seaman  v.  Low,  480. 
Searing  v.  Searing,  709. 
Searles  v.  Jacksonville,  etc.,  R.  R.,  1321, 

1349,  1417. 
Sears  v.  Hotchkiss,  942. 
Sears  v.  Kings  County  El.  R'y  Co.,  77, 

1068. 
Searsburgh  T.  Co.  v.  Cutter,  19. 
Seaton  v.  Grant,  1139,  1142,  1158. 
Seaver  v.  Coburne,  1105. 
Seawright  v.  Payne,  32,  325,  972. 
Secombe  v.  Milwaukee,  etc.,  R.  R,  1480. 
Secombe  v.  Railroad  Co.,  1526. 
Second  Ave.  R.  R  Co.  v.  Mehrback,  1076. 
Second,  etc.,  R'y  v.  Green,  etc.,  R'y,  1568. 
Second   Nat'l   Bank   v.    Hall,    291,  313, 

317. 
Second  Nat'l  Bank  v.  Lovell,  317. 
Second  Nat'l  Bank  v.  Martin,  1097. 
Second  Nat'l  Bank  of  Louisville  v.  Nat'l 

Bank,  701. 
Secor  v.  Singleton,  747,  1159. 
Secor  v.  Toledo,  etc.,  R'y,  1436. 
Securities,  etc.,  Corporation  v.  Brighton 

Alhambra,  1449. 
Security  Co.  v.  Hartford,  14. 
Security  State  Bank  v.  Racine,  125. 
Sedalia,  Warsaw,  etc.,  R'y  Co.  v.  Abell, 

224. 
Sedalia,  W.  &  S.  R'y  Co.  v.  Wilkinson, 

214. 
Seddon  v.  Rosenbaum,  453,  465. 
Seddon  v.  Virginia,  etc.,  Co.,  203. 
Sedgwick  County  v.  Bailey,  155. 
Seeley  v.  New  York  National  Exchange 
Bank,  392,  727. 


to  the  foot -paging.] 

Seeley  v.  San  Jose,  etc.,  Co.,  1087,  1089, 

1161. 
Seeligson  v.  Brown,  613,  617. 
Seibert  v.  Lewis,  1945. 
Seibert  v.  Minneapolis,  etc.,  R'y  Co.,  1317, 

1324,  1335,  1420. 
Seighortner  v.  Weissenborn,  659,  671. 
Seiguouret  v.  Home  Ins.  Co.,  381. 
Seizer  v.  Mali,  398,  399. 
Self-Acting,  etc.,  Co..  In  re,  89. 
Seligman  v.  Rogers,  566,  787. 
Seligman  v.  St.  Louis,   etc.,   R.   R.   Co., 

614. 
Sellers  v.  Phoenix  Iron  Co.,  927. 
Selma  &  Tenn.  R  R.  Co.  v.  Roundtree, 

219. 
Selma  &  T.  R.  R.  Co.  v.  Tipton,  102,  112, 

113,  174,  214,  1058. 
Selma,  etc.,  R.  R.  Co.,  Ex  parte,  133. 
Selma,  M.  &  M.  R.  R.  Co.  v.  Anderson, 

198,  210,  222. 
Selwyn  v.  Harrison,  654. 
Semple  v.  Bank  of  British  Col.,  1002. 
Semple  v.  Glenn,  94,  243. 
Seneca  County   Bank    v.   Neass,    1115. 

1116. 
Sercomb  v.  Catlin,  1169,  1425. 
Serrell  v.  Derbyshire,  etc.,  R'y,  1103. 
Seton  v.  Slade,  1091. 
Seventh,  etc.,  Bank  v.  Shenandoah,  etc., 

R.  R,  1389,  1391,  1403. 
Sewall  v.  Boston  Water-power  Co.,  504, 

506,  508,  545. 
Sewall  v.  Brainerd,  1233. 
Sewall  v.  Chamberlain,  892. 
Sewall  v.  Eastern  R.  R.  Co.,  388. 
Sewall  v.  Lancaster  Bank,  689,  692,  695, 

781. 
Sewall,  In  re,  1233,  1239. 
Seward  v.  City  of  Rising  Sun,  22,  750, 

751. 
Sewell  v.  Cape  May,  etc.,  R  R,  1415. 
Sewell  v.  East,  etc.,  Co.,  956. 
Sewell's  Case,  385,  39Q,  394,  395. 
Spybell  v.  Nat'l  Currency  Bank,  1226. 
Seybert  v.  Pittsburgh,  132,  153. 
Seymour  v.  Bagshaw,  487. 
Seymour  v.  Bridge,  580. 
Seymour  v.  Canandaigua  &  N.  F.  R  R. 
Co.,  1381,  1388,  1384,  1386. 


dxx 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.] 


Seymour  v.  Detroit  Copper,  etc.,   Mills, 

844. 
Seymour  v.  Hendee,  584. 
Seymour  v.  Ives,  786,  790,  791. 
Seymour  v.  Sturgess,   116,  160,  161,  261, 

263,  291. 
Seymour,  In  re,  1074. 
Shaaber's  Appeal,  1181. 
Shackamason  Rank  v.  Disston,  242. 
Shackamason  Bank  v.  Dougherty,  242. 
Shackleford  v.  Dangerfield,  166, 169, 171, 

1015. 
Shackleford  v.  New  Orleans,  etc.,  R  R. 

Co.,  926. 
Shackley  v.  Fisher,  160. 
Shafer  Iron  Co.  v.  Iron,  etc.,  Judge,  1177. 
Shaffer  v.  Ilahn  et  al.,  1097. 
Shaffner  v.  Jeffries,  119. 
Shales  v.  Seigmoret,  472. 
Shalucky  v.  Field,  301. 
Shamburg  v.  Abbott,  669. 
Shamokin  Valley   R  R   v.   Livermore, 

1380,  1381,  1383. 
Sharp  v.  Warren,  671. 
Sharp's  Case,  1038. 

Sharp  &  Jenuers  Case.  1037. 

Sharpe  v.  Belles,  1104. 

Sharpe  v.  Dawes,  815,  1051. 

Sharpe  v.  National  Rank,  597,  607,  780. 

Sharpless  v.  Philadelphia,  137. 

Sharpless  v.  The  Mayor,  104,  131,  137. 

Sharpley  v.  South  &  E.  C.  R'y  Co.,  228. 

Shaughnessy  v.  Chase,  710,  712,  781,  783. 

Shaver  v.  Rear  River,  etc.,  Co.,  1089, 1093. 

Shaver  v.  Hardin,  1294. 

Shaw  v.  Rill,  1230, 1238,  1372,  1383. 

Shaw  v.  Roylan,  321. 

Shaw  v.  Campbell,  etc.,  Co.,  634,  1590. 

Shaw  v.  Clark,  1118. 

Shaw  v.  Dennis,  133. 

Shaw  v.  Fisher,  355,  461,  525. 

Shaw  v.  Holland,  458,  785,  788,  789. 

Shaw  v.  Norfolk   R.   R   Co.,   963,    1092, 
1261, 1268, 1310, 1313, 1314, 1317, 1334. 

Shaw  v.  Port  Philip  &  C.  Gold  Min.  Co., 
396. 

Shaw  v.  Quincy  Min.  Co.,  1180. 

Shaw  v.  Railroad,  1222,  1306,  1313,  1329, 
1452,  1471. 

Shaw  v.  Rowley,  355,  456,  693. 


Shaw  v.  Spencer,  437,  439,  546,  547,  580, 
593,  595. 

Shaw,  Ex  parte,  484. 

Shawhan  v.  Zinu,  1146,  1161. 

Shawmut  Rauk  v.  Pittsburgh  &  M.  R 
R  Co.,  1535. 

Shawmut  Sugar  Co.  t.  Hampden  Mut 
Ins.  Co.,  1019. 

Shay  v.  Tuolumne,  etc.,  Co.,  1049. 

Shea  v.  Mabry,  1029,  1540. 

Sheaffs  Appeal,  1368. 

Shears  v.  Jacobs,  1263. 

Sheffield  &  Manchester  R'y  Co.  v.  Wood- 
cock, 167,  518. 

Sheffield,  etc.,  v.  Woodcock,  346. 

Sheffield,  etc.,  Soc.   v.  Aizlewood,   103a 

Sheffield  Gas,  etc.,  Co.  v.  Harrison,  462, 

4d;;. 

Sheffield  Nickel  Co.  v.  Unwin,  1245. 
Shelby  v.  Chicago,  etc.,  Co.,  993. 
Shelby  v.  Hoffman,  1001. 
Shelby  Co.  Court  v.    Cumberland,   etc., 

R.  R  Co.,  134. 
Shelby,  etc.,  Co.  v.  Roard,  etc.,  769. 
Shelby  R    R,   etc..    v.    Louisville,   etc., 

R  R,  801,  802,  804. 
Shelby  ville  &  Rushville  Turnpike  Co.  t. 

Barnes,  633,  1490. 
Shelbyville  Water  Co.   v.   People,   1581, 

1597. 
Sheldon  v.  Chappell,  968. 
Sheldon,  etc.,   Co.   v.  Eichemeyer,  eta, 

Co.,  955,  989,  1130,  1133. 
Shellingtou  v.  Howland,  250,  251,  281, 

283,  303,  345,  353. 
Shelly,  Re,  586. 

Shelmerdine  v.  Welsh,  831,  846. 
Shenandoah  Valley  R  R  Co.  v.  Griffith, 

616,  691. 
Shepard  v.  Stockham,  462,  710. 
Shepherd  v.  Gillespie,  461,  569,  570. 
Shepherd  v.  Johnson,  788. 
Shepherd's  Case,  352,  448. 
Shepley  v.    Atlantic,   etc.,   R  R,   1092, 

1267,  1268,  1316,  1317. 
Sheppard  v.  Murphy,  569,  570,  580. 
Sheppard  v.  Oxenford,  663,  1041. 
Sheppard  v.  Scinde,  etc.,  R'y  Co.,  892. 
Sheridan    v.   Sheridan   Electric  L.  Co., 
906,  1157. 


TABLE    OF   CASES. 


clxxi 


[The  references  are 

Sheridan,    etc.,    Light  Co.  v.  Chatham 

Nat'l  Bank,  1071. 
Sheriff  v.  Lowndes,  634,  810,  1517. 
Sherlock  v.  Winnetka,  1205. 
Sherman  v.  American  Stove  Co.,  203. 
Sherman  v.  Beacon,  etc.,  Co.,  683,  1163. 
Sherman  v.  Clark,  399. 
Sherman  v.  Conn.  River  Bridge,  1018. 
Sherman  v.  Fitch,  1082,  1093,  1097,  1098. 
Sherman  v.  Smith,  629. 
Sherman  v.  Wells,  1579. 
Sherman,  etc.,  Co.  v.  Fletcher,  970. 
Sherman,  etc.,  Co.  v.  Morris,  7, 969, 1022, 

1080,  1100. 
Sherman,  etc.,  Co.  v.  Russell,  970. 
Sherrard  v.  Sherrard.  743. 
Sherrington's  Case,  37. 
Sherwood  v.  American  Bible  Soc,  666, 

991,  999,  1001. 
Sherwood  v.  Buffalo,  etc.,  R  R  Co.,  255, 

288. 
Sherwood  v.  Meadow  Valley  M.  Co.,  510, 

546. 
Sherwood  v.  Tradesman's   Nat'l   Bank, 

464. 
Shewalter  v.  Pierron,  993. 
Shewalter  v.  Pirner,  1099. 
Shickle  v.  Watts,  75,  87,    240,  250,  255, 

301. 
Shield,  Re,  413. 
Shields  v.  Casey,  332. 
Shields  v.  Ohio,  635,  637, 1513, 1545, 1943. 
Shillaber  v.  Robinson,  1320. 
Ship  v.  Cresskill,  195,  199,  204,  640. 
Shipley  v.  Mechanics'  Bank,  530. 
Shipley  v.  City  of  Terre  Haute,  154. 
Shipmau  v.  ^Etna  Ins.  Co.,  430,  586. 
Shipman's  Case,  346. 
Shipper  v.  Pennsylvania  R  R,  1519. 
Ship's  Case,  639. 
Shiras  v.  Evving,  1598. 
Shirk  v.  La  Fayette,  1301. 
Shockley  v.  Fisher,  263,  989. 
Shoe  &  Leather  Ass'n  v.  Bailey,  681. 
Shoemaker  v.  National  Mechanics'  Bank, 

420,  425,  984. 
Sholl  v.  German,  etc.,  Co.,  1526. 
Shorer  v.  Times,  etc.,  Co.,  1165. 
Short  v.  Med  berry,  274. 
Short  v.  Stevenson,  913. 


to  the  foot-paging.] 

Short  v.  Unangst,  856. 
Short's  Estate,  In  re,  751. 
Shorter  v.  Smith,  1529,  1592. 
Shortridge  v.  Bosanquet,  348,448. 
Shotwell  v.  Mali,  398,  399. 
Shotwell  v.  McKown,  1096. 
Showalter  v.  Laredo,  etc.,  Co.,  253,  264 
Shrewsbury,  Earl  of,  v.  North  Stafford- 
shire R'y  Co.,  952,  1044,  1045. 
Shrewsbury,  etc.,  R'y  Co.  v.  London,  etc., 

R'y  Co.,  1510. 
Shriver  v.  Stevens,  1089. 
Shropshire  v.  Behrens,  1097. 
Shropshire  Union  R'ys  &  Canal  Co.  v. 

Queen,  438,  499,  550. 
Shufeldt  v.  Carver,  628. 
Shurtleff  v.  Wiscasset,  151. 
Shurtz  v.  Schoolcraft,  etc.,  R  R  Co.,  110, 

222. 
Shute  v.  Keyser,  1168. 
Shuttleworth  v.  Greaves,  404,  409. 
Sibbald   v.  Bethlehem    Iron   Company, 

561,  565,  567. 
Sibell  v.  Remsen,  990. 
Sibley  v.  Minton,  659. 
Sibley  v.  Mobile,  133,  143. 
Sibley  v.  Perry,  406. 
Sibley  v.  Quinsigamond  Nat'l  Bank,  24, 

518,  549,  618. 
Sicardi  v.  Keystone  Oil  Co.,  940. 
Sichell,  Ex  parte,  1037. 
Sichell's  Case,  347. 
Sickels  v.  Anderson,  164. 
Sickles  v.  Richardson,  602,606,1201,1307. 
Siddall,  In  re,  655,  656. 
Sidney's  Case,  97. 
Siebe  v.  Joshua,  etc.,  Works,  1079. 
Sierra  Nevada,  etc.,  Co.  v.  Sears,  512. 
Silk  Mfg.  Co.  v.  Campbell,  1161. 
Silkstone  Fall  Colliery  Co.,  In  re,  801. 
Sillcocks  v.  Gallaudet,  578. 
Silliman  v.  Fredericksburg,  etc.,  R  R, 

884,  886,  1213,  1229,  1276. 
Silloway  v.  Columbia,  etc.,  Co.,  1174. 
Silva  v.  Metropolitan,  etc.,  Co.,  1076. 
Silver  v.  Ely,  19. 

Silver  Hook  Road  v.  Greene,  163, 1071. 
Silver  Lake  Bank  v.  North,  983,  993,  999, 

1172. 
Silverthorn  v.  Warren  R  R  Co.,  776. 


clxxii 


TABLE    OF    CASKS. 


[The  references  are 

Simkins  v.  Law,  786. 

Si  mm  v.  Anglo,  etc..  Co.,  395. 

Simmons  v.  Dent.  330. 

Simmons,  etc.,  Co.  v.  Doran,  HIT. 

Simmons  v.  Hill,  347. 

Simmons  v.  Joiut,  etc.,  Co.,  582,  789. 

Simmons  v.  London,  etc.,  Bank.  549. 

Si  mi  nons  v.  Sisson,  10.  304. 

Simmons  v.  Taylor,  1215,  1248.  1322, 1346, 

1353,  1355,  1359,  1360. 
Simmons  v.  Troy  Iron  Works.  970. 
Simmons  v.  Vallance,  406. 
Simon  v.  Anglo-American  Tel.  Co..  505. 
Simon  v.  Sevier,  etc.,  Assoc,  1060. 
Simons  v.  First  Nat'J  Lank.  987. 
Simons  v.  Southwestern  R  R  Bank.  137, 

430. 
Simons  v.  Vulcan,  etc.,  Co.,  18,  910. 
Simouson  v.  X.  Y..  etc.,  [na  Co.,  930. 
Simonson  v.  Spencer,  279,  283,  286 
Simonton  v.  Kelly,  602. 
Simonton  v.  Sibley,  658 
Simpson  v.  Denison,  633,  1245,  1502, 1508. 
Simpson  v.  Moore,  707,  739. 
Simpson  v,  Reynolds.  052. 
Simpson  v.  Taylor,  1204. 
Simpson  v.  Westminster    Palace    Hotel 

Co.,  954,  90S,  97:;. 
Simpson's  Case,  37. 
Simpson's  Claim.  1086. 
Sims  v.  Bonner.  617. 
Sims  v.  Street  Railroad  Co.,  105,  110,  922. 
Sinclair  v.  Gray,  684. 
Sinclair  v.  Wayne,  etc.,  T.  Co.,  - 
Sing  Sing,  Bank  of,  In  re,  302. 
Singer  v.  Given,  248. 
Singer  v.  St.  Louis,  etc.,  R  R..  12 15,  1296. 
Singer's  Case,  415. 
Singer,  etc.,  Co.  v.  Belgart,  1091. 
Singer,  etc.,  Co.  v.  Carpenter,  905. 
Singer,  etc.,  Co.  v.  Hardee,  1004. 
Singer  Mfg.  Co.  v.  Brown,  1002. 
Singer  Mfg.  Co.  v.  County  Com're,  770. 
Singer  Mfg.  Co.  v.  Elizabeth,  145. 
Singer  Mfg.  Co.  v.  McCollock,  1346. 
Singer  Mfg.  Co.  v.  Wright,  768. 
Singleton  v.  Southwestern  R.  R,  1536 
Sinking  Fund  Cases.  027.  029,  630,  638, 

886,  1521,  1943. 
Sinnott  v.  Chicago  &.  N.  W.  R'y,  1563. 


to  thf  foot-paging.] 

Sioux  City  St.  R'y  v.  Sioux  City,  1515, 

1572,  1573,  1945. 
Sioux  Falls  Nat'l  Bank  v.  Swenson,  76a 
Sipes  v.  Seymour,  1040. 
Sipperly  v.  Stewart.  580. 
Sistare  v.  Best.  425,  428,  562. 
Sitgreaves  v.  Farmers',  etc.,  Bank,  515. 
Sitgreaves  v.  Marsh,  601. 
Sixth  Ay,..  R  I;.  Co.  v.  Kerr,   1508. 

uess,etc,,  Co.,  Re,  1042. 
Skiddy  v.  Atlantic,  etc.,  R  R,  370,  1199. 

1204,    123::.    1278,    1313,    1328,    1349. 

1400,    1454.    1471. 
Skillman's  Estate,  In  re,  739. 
Skinner  l    <  'ity  of  London  M.   I   - 

534,  696,  792. 
Skinner  v.  Dayton,  277,  660,  668,  670. 
skinner  v.  Maxwell,  1422. 
Skinner  v.  Smith,  52,  730,  941,  956 
Skowhegan  &  A.  R.  R.  Co.  v.  Kinsman, 

223. 
Skowhegan  Bank  v.  Cutler,  348, 853,  Wl, 

621. 
Skrainka  v.  Allen,  56,  59,  729,  1205. 
Skrainka  v.  Scharringbausen,  645. 
Slack  v.  Maysville,  eta,   B.  U.  Co.,  134, 

187,  l  II.  117. 
shirk  v.  Bighgate  Archway  Co.,  985. 
slate  v.  Chamber  of  Com.,  661. 
Slate  Co.  v.  Savings  Bank,  992 
Slater  Woolen  Co.  v.  Lamb,  972 
Slater's  Case,  353,  B! 
Slatterly  v.  St  Louis,  etc..  Co.,  903,  1161. 
Slattery  v.  Schwannecke,  1115. 
Slaughter  v.  Commonwealth,  998. 
Slaught'  r-House  <  lases,  1949. 
Slaymaker  v.  Bank  of  Gettysburg,  22, 

429.  432.  008. 
Slee  v.  Bloom,  58,  177.  239.  251,  205.  267, 

279.  282,  290.  821,  858,  803,  864. 
Slee  v.  International  Bank,  448. 
Sleech  v.  Thorington,  405. 
Sleeper  v.  Goodwin,  273,  281,  289,  303, 

329,  029. 
Slemmons  v.  Thompson.  532. 
Slingsby  v.  Granger,  409. 
Slipher  v.  Earhart,  Adm'r,  126,  128,  239. 
Sloan  v.  Central  Iowa  R'y,  1482 
Sloan  v.  Pacific  R  R.,  1513 
Slocum  v.  Prov.  S.  &  G.  P.  Co.,  233. 


TABLE    OF    CASES. 


clxxiii 


[The  references  are 

Sloman  v.  Bank   of  England,    183,  504, 

506,  507. 
Small  v.  Herkimer,  etc.,    Co.,  Ill,  175, 

183,  184. 
Small  v.  Minnesota,  etc.,  Co.,  955,  1145, 

1171. 
Small  v.  Saloy,  607. 

Smallhouse  v.  Kentucky,  etc.,  Co.,  274. 
Smead  v.  Indianapolis,  P.  &  C.  R.  R.  Co., 

635,  640,  1193,  1243,  1249. 
Smelser  v.  Wayne,  etc.,  T.  Co.,  879. 
Smith  v.  Alabama,  1516,  1946. 
Smith  v.  Allison,  127. 
Smith  v.  Alvord,  998,  1059. 
Smith  v.  American  Coal  Co.,  498,    502, 

547,  617,  620,  708. 
Smith  v.  Anderson,   651,   655,  657,  659, 

901,  1078. 
Smith  v.  Baker,  429. 
Smith  v.  Bangs,  98,  99. 
Smith  v.  Bank  of  Scotland,  1093. 
Smith  v.  Bank  of  Victoria,  922. 
Smith  v.  Board,  etc.,  Co.,  1115. 
Smith  v.  Bolles,  492,  792. 
Smith  v.  Bourbon  County,  154. 
Smith  v.  Bouvier,  464,  468,  473. 
Smith  v.  Burley,  757. 
Smith  v.  Central  Plank-road    Co.,   1016, 

1018. 
Smith  v.  Chadwick,  194. 
Smith  v.  Chicago,  etc.,  R.  R,  963,  1275, 

1472,  1480. 
Smith  v.  City  of  Fond  du  Lac,  149. 
Smith  v.  Clark  County,  135. 
Smith  v.  Coale,  600. 
Smith  v.  Colorado  Fire  Ins.  Co.,  309. 
Smith  v.  Cook,  etc.,  Assoc,  1088. 
Smith  v.  Co-operative,  etc.,  Assoc,  1089. 
Smith  v.  Cork,  etc.,  R'y,  364,  373,  374, 

375. 
Smith  v.  County  of  Clark,  140,  1232. 
Smith  v.  Crescent  City,  etc,  Co.,  23, 498, 

502,  517,  617,  619. 
Smith  v.  Danzig,  853,  991. 
Smith  v.  Dorn,  1060,  1150. 
Smith  v.  Eastern  R.  R,  1367. 
Smith  v.  Erb,  1058. 
Smith  v.  Eureka  Flour  Mills  Co.,  1185, 

1190. 
Smith  v.  Exeter,  750,  752. 


to  the  foot-paging.] 

Smith  v.  Fagan,  922. 

Smith  v.  First  Nat'l  Bank,  764. 

Smith  v.  Flint,  etc,  Ry,  1433. 

Smith  v.  Florida,  etc.,  R.  R,  1215. 

Smith  v.  Forty-nine  &  Fifty -six  Quartz 

M.  Co.,  467,  582, 
Smith  v.  Gillen,  233. 
Smith  v.  Goldsworthy,  394. 
Smith  v.  Gower,  237,  863,  864. 
Smith  v.  Hallett,  163. 
Smith  v.  Heath,  567. 
Smith  v.  Heindecker,  245. 
Smith  v.  Huckabee,    256,  288,  289,   305, 

321. 
Smith  v.  Hull,  etc.,  Co.,  1092. 
Smith  v.  Hurd,  735, 1027. 
Smith  v.  111.,  etc.,  R  R,  1198. 
Smith  v.  Indiana  &  111.  R'y  Co.,  168. 
Smith  v.  Johnson,  1054,  1193.1 
Smith  v.  Lansing,  921. 
Smith  v.  Law,  807,  808,  1061,  1185,  1190. 
Smith  v.  Lawson,  1076,  1085. 
Smith  v.  Little,  1002. 
Smith  v.  Lockwood,  670. 
Smith  v.  Long,  928. 

Smith  v.  Los  Angeles,  etc.,  Assoc,  942. 
Smith,  v.  Lowell  Meeting-house,  1094. 
Smith  v.  Maine  Boys  Tunnel  Co.,  184. 
Smith  v.  Manhattan  Ins.  Co.,  1461. 
Smith  v.  McCullough,  1362. 
Smith  v.  McNamara,  1434. 
Smith  v.  Mississippi  &  Ala.  R.   R.  Co., 

878,  983. 
Smith  v.  Mutual  Life  of  N.  Y.,  1175. 
Smith  v.  Nashville,  etc.,  R  R,  428,  438, 

445. 
Smith  v.  Natchez,  etc.,  Co.,  1070. 
Smith  v.  Nelson,  1024. 
Smith  v.  New  York,  etc.,  Ins.  Co.,  955, 

991. 
Smith  v.  North  American  Min.  Co.,  384, 

529,  533. 
Smith  v.  Northampton  Bank,   608,   711. 
Smith  v.  Plank-road  Co.,  218. 
Smith  v.  Poor,  717,  780,  1028,  1159. 
Smith  v.  Prattville,  etc.,  Co.,  718,  719. 
Smith  v.  Proctor,  816. 
Smith  v.  Putnam,  923. 
Smith  v.  Rathbun,  973,  1029,  1147. 
Smith  v.  Reese  Co.,  203. 


clxxiv 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.] 
Smith  v.  Rude,  etc.,  Co.,  769. 


Smith  v.  Sac  County,  1227. 

Smith  v.  St.  Louis,  etc.,  Ins.  Co..  158a 

Smith  v.  Savin,  595,  597. 

Smith  v.  Sheeley,  880,  991,  993. 

Smith  v.  Silver  Valley  Mining  Co.,  184, 

795,  796,  888. 
Smith  v.  Skeary,  990. 
Smith  v.  Smith,  1026,  1077,  1082,  1102. 
Smith  v.  Sorby,  915. 
Smith  v.  South  Royalton  Bank,  1118. 
Smith  v.  Sowles,  93. 
Smith  v.  Standard,  etc.,  Co.,  977. 
Smith  v.  Superior  Court,  etc.,  1413. 
Smith  v.  Tallahassee     Plank-road     Co., 

169,  189,  192,  234. 
Smith  v.  Tallapoosa  County,  1238. 
Smith  v.  Thompson,  491. 
Smith  v.  Tracy,  488. 
Smith  v.  Traders'  Nat'l  Bank,  5S7,  590, 

613,  624,  786. 
Smith  v.  Virgin,  659,  668,  671. 
Smith  v.  Weed  Sewing  M.  Co.,  1172. 
Smith  v.  Wells,  1155. 
Smith  v.  W.  U.  Tel.  Co.,  1593. 
Smith  v.  Woodville,  928. 
Smith's  Appeal,  738. 
Smith's  Ex'rs  v.  Washington,  etc.,  R  R, 

.    1310. 
Smith  R  Co.  v.  McGroarty,  1264 
Smoot  v.  Heim,  612. 
Smouse  v.  Bail,  600. 
Smyth  v.  Burns,  435. 
Smyth  v.  Darley,  800,  1061. 
Smythe  v.  Scott.  1105. 
Snell  v.  Chicago,  5,  857,  874,  1489,  1590, 

1592. 
Snell's  Case,  97,  175,  177.  213,  416. 
Sniders,  etc.,  Co.  v.  Troy,  312. 
Snoddy  v.  American  Nat.  Bank,  470. 
Snook  v.  Georgia  Imp.  Co.,  639. 
Snow  v.  Alley,  451. 
Snow  v.  Boston,  etc.,  Co.,  1129. 
Snow  v.  Indiana,  etc.,  R'y,  1534. 
Snow  v.  Russell,  etc.,  Co.,  929,  1364. 
Snow  v.  Wheeler,  663,  670. 
Snow  v.  Winslow,  1452. 

Snyder  v.  Studebaker,  880. 

Snyder  v.  Tunitas,  etc.,  Co.,  417. 

Snyder's  Adm'r  v.  McComb's  Ex'r,  436 


Snyder,  etc.,  Co.,  Re,  208. 

Soby  v.  People,  470. 

Societe,  etc.,  v.  Mackintosh,  1102, 1103. 

Societe  Fonciere,  etc.,  v.  Melliken,  1180. 

Societe  Generale  de  Paris  v.  Tramways 

Union  Co.,  499,  517,  700. 
Societe  Generale    de    Paris    v.  Walker. 

500,  511,  523. 
Society,  etc.,  v.  Meyer,  7,  1026. 
Society,  etc.,  v.  New   London,    133,   147. 

149,  156. 
Society,  etc.,  v.  Town,  etc.,  1167. 
Society  of  Practical  Knowledge,  The,  v. 

Abbott,  50. 
Society  for  Propagating  Gospel  v. Young, 

1016,  1019. 
Society  for  Saviugs  v.  New  Loudon,  1223. 
Society  for  the  Visitation  of  the  Sick  v. 

M.yer,  7,  1026. 
Society  of  Italian  Union,  etc.,  v.  Monte- 

donico,  1025. 
Sodus  Bay,  etc.,  R  R  Co.  v.  Hamlin,  92. 
Sodua  Bay,  etc.,  R  R  Co.  v.  Lapham,  23(i. 
Solomans  v.  Laing,  1143,  1502. 
Solomon  v.  Pennoyer,  975. 
Solomon's  Lodge  v.  Montmoclin,  1100. 

1101. 

Solon,  Town  of,  v.  Williamsburg  Saving 

Bank,  136. 
Somerset,  etc.,  R  R  Co.  v.  Cushing,  229, 

382,  394. 
Somerset  R  R  Co.  v.  Clarke,  229. 
Somerville's  Case,  359. 
Sondheim  v.  Gilbert,  468. 
Sons  of  Progress,  In  re,  1015. 
Soper  v.  Buffalo,    etc.,   R   R  Co.,    1110. 

1113. 
Sorchan  v.  Mayo,  1420. 
Souhegan   Factory  v.  McConihe,    1018. 

1019. 
South  &  N.  A.  R  Co.  v.  Chappell,  1006. 
South  Australia,  Bank  of,  v.  Abrahams. 

158,  163,  1253. 
South  Baptist  Church  v.  Clapp,  1098. 
South  Bay  Meadow  Dam  Co.  v.  Gray. 

174,  629. 
South  Beach,  etc..  R  R,  Matter  of,  1565. 
South  Carolina  Bank  v.  Hammond,  1108. 
South  Carolina,  Bank  of,  v.  Humphreys, 

1122. 


TABLE    OF   OA8ES. 


clxxv 


[The  references  are 

South  C.  Mfg.  Co.  v.  Bank  of  S.  C,  243. 

268. 
South  Car.  R  R.  v.  People's  Sav.  Inst, 

1365. 
South  Car.  R.  R,  Matter  of,  1405. 
South  Cov.,  etc.,  R'y  v.  Gest,  1235. 
South  Cov.,  etc.,  St.  R'y  v.  Berry,  1571. 
South  Eastern  R'y  v.  Hibblewhit?,   171. 
South,  etc.,  Brewery  Co.,  Re,  361. 
Sou tli,  etc..  Co.  v.  Gray,  1167. 
South,  etc.,  Co.  v.  Muhlbach.  1096. 
South,  etc.,  Iron  Co.  v.  Shaw.  912,  914. 
South,  etc.,  R  R  v.  Paulk,  1020. 
South,  etc.,  R.  R.  Co.  v.  Morrow,  751. 
South  Georgia,  etc..  R.  R  Co.  v.   Ayres, 

235,  239,  635,  1137. 
South  Jopliu  Land  Co.  v.  Case,  912. 
South  London,  etc.,  Co.,  Re,  358. 
South  Mountain  Consol.   Min.   Co.,  Re, 

43.  239,  248. 
South  School  District  v.  Blakeslee,  802, 

807,  811,  1013,  1016. 
South  Spring,  etc.,  Co.  v.   Amador,  etc., 

Co.,  947. 
South  Staffordshire  R'y  Co.  v.  Burnside, 

182. 
South  Wales  R'y  Co.  v.  Redmond,  1006, 

1535. 
South    Yorkshire,    etc.,    Co.    v.    Great 

Northern  R'y,  1510. 
Southall  v.    British,    etc.,   Assoc,    906, 

1587. 
Southampton,  Mayor  of,  v.  Graves,  677, 

681,  6S2. 
Southampton,  etc.,  Co.  v.  Richards,  166, 

814. 
Southerland  v.  Fremont,  117. 
Southerland,  Trustee,  v.  Lake  Superior 

Ship  Canal  R  R,  1451. 
Southern  California  C.  Asso.  v.  Busta- 

mente,  1100. 
Southern  Cotton  Oil  Co.  v.  Wemple,  775. 
Southern  D.  Co.  v.   Houston,   etc.,  R'y 

Co.,  1168. 
Southern  Exp.  Co.  v.  Memphis,  etc.,  R 

R,  1580. 
Southern  Exp.  Co.  v.  Newby,  1579. 
Southern  Hotel  Co.  v.  Newman,  215. 
Southern  Kansas,  etc.,  R  R  v.  Towner, 

10,  134,  949. 


to  the  foot-paging.] 

Southern  Life  Ins.  Co.  v.  Cole,  4G5. 
Southern  Life  Ins.  Co.  v.  Lanier,  34,  219. 
Southern  Pa.  Iron  &  R  R  Co.  v.  Stevens, 

Ex'r,  631. 
Southern  Pacific  Co.  v.  Denton,  1180. 
Southern  Pacific  Railroad   Co.    v.  Cali- 
fornia, 1948. 
Southern  Pacific  R  R  v.  Doyle,  1300. 
Southern  Pacific  R'y  v.  Esquibel,  1497. 
Southern  Pacific,  etc.,  v.  Orton,  993. 
Southern  Plank-road  Co.  v.  Hixon,  1025. 
Southern  R'y  v.  Internat.  Bridge,  1519. 
Southgate  v.  Atlantic,   etc.,  R.  R.  Co., 

1088. 
Southmayd  v.  Russ,  280,  285,  286,  296, 

350. 
Southwest,  etc.,  Gas  Co.  v.  Fayette,  etc., 

Gas  Co.,  1148. 
Southwestern,  etc.,  R'y  v.  Martin,  715. 
Southwestern  R'y  Co.  v.  Papot,  423,  478, 

713. 
Southwestern  R  R  Bank  v.  Douglas, 

589. 
Southwestern  R  R  Co.  v.  Thomason,  22 

445. 
Southwick  v.  First  Nat.  Bank,  etc.,  1175. 
Southworth  v.  Owen  ton,  etc.,  Co.,  1590. 
Sowles  v.  Soule,  755. 
Sowles  v.  Witters,  299,  430. 
Sovereign,  etc.,  Co.,  The,  Re.  415. 
Sovereign,  etc.,  Ins..  Co.,  Re,  955. 
Spackman  v.  Evans,  87,   177,   180,  212, 

217,  814,  1128,  1130. 
Spackman's  Case,  177. 
Spader  v.  Mural,  etc.,  Co.,  1397. 
Spalding  v.  Bank,  etc.,  1111. 
Spalding  v.  Bank  of  Muskinghan,  988. 
Spalding  v.  Paine's  Adm'r,  583. 
Spalding  v.  Susquehanna  County  Eank, 

1113. 
Spangler  v.  Atchison,  etc.,  R.  R.,  1181. 
Spangler  v.  Ind.  &  111.  Central  R.  R  Co., 

157,  158,  167,  168,  171. 
Spargo's  Case,  32,  36.  76. 
Sparhawk  v.  Union,  etc..  R'y,  973,   1143. 
Sparhawk  v.  Yerkes,  661. 
Sparks  v.  Despatch,  etc..  Co.,  1081.  110.3. 
Sparks  v.  Lower,  etc..  Ditch  Co.,  323. 
Sparks  v.  The  Company  of  Proprietors 

of  the  Liverpool  Water-works,  184. 


clxxvi 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paying.] 


Sparks  v.  Weedon,  411. 

Sparks  v.  Woodstock,  etc.,  Co.,  312. 

Sparling  v.  Parker,  22,  665. 

Sparrow  v.  Evansville,  etc.,  R  R,  1490, 

1507. 
Spartanburg  &  A.  R  R.  Co.  v.  Ezell,  219. 
Spartanburg  &  Union  R  R.  Co.  v.  De 

Graffeureid,  123,  128. 
Spear  v.  Crawford,  15,  112.  113,  239,  994. 
Spear  v.  Grant,  248,  256,  730,  731. 
Spear  v.  Hart,  711,  714. 
Spear  v.  Ladd,  1051,  1055. 
Special  Bank  Com'rs  v.  Franklin  Inst, 

1458. 
Speigbt  v.  Gaunt,  435. 
Spellier,  etc.,  Co.  v.  Gei<;or.  1121. 
Spell ier,  etc.,  Co.  v.  Leedom,  223. 
Spence  v.   Mobile,  etc.,  Ry,  1200,  1205, 

1225,  122S.  1277.  1281,  1487. 
Spence's  Case,  332. 
Spencer  v.  Clarke  115:'.. 
Spense  v.  Iowa  Valley  Construction  Co., 

B21. 
Spering's  Appeal,  1029,  1032. 
Sperry  v.  Jobnson,  129. 
Speyer  v.  Colgate.  568,  578 
Spies  v.  Chicago,  etc.,  R.  R,  1152.  1222. 
1242,  1325. 

Spiller  v.  Paris,  etc..  Co.,  1046. 

Split  Rock  Cable  Co..  Matter  of,  1557. 

Spofford  v.  Boston,  etc.,  R  R.,  1520. 

Spokane,  etc.,  Co.    v.    City   of  Spokane, 
1574. 

Spokane,  etc.,  R'y  v.  City  of  S.  T.,  155a 

Sponsier's  Appeal,  406. 

Spooner  v.  Bay,  etc.,  261. 

Spooner  v.  Holmes,  1231.  1232,  1239. 

Spooner  v.  Phillips  et  al.,  738. 

Spotl  is  wood's  Case,  1038. 

Sprague  v.  Cocheco  Mfg.  Co.,  438,  503. 

Sprague  v.  Hartford  &  Providence  R.  R 
Co.,  1543. 

Sprague  v.  111.  River  R  R  Co.,  631,  632, 
1489,  1507. 

Sprague  v.  Smith,  1319. 

Sprague  v.  Stickney,  1368. 

Spring  v.  Bowery  Nat'l  Bank,  1431. 

Spring  Co.  v.  Knowlton,  43,  7 1. 

Spring,  etc.,  Bank  v.  Hidings,  etc.,  Co., 
1097. 


Spring,  etc.,  Works.  In  re.  313. 
Spring  Valley  Water-works  v.  Board  of 
Supervisors  of  San  Francisco,  637. 
1167. 
Spring  Valley  W.  W.  v.  Schottler,  638, 

751,  1514.  1598,  1944,  1949. 
Springfield  v.  Connecticut  R  Co.,  1528, 

1529. 
Springfield  St  R'y  Co.  v.  Sleeper,  125. 
Springfield  R'y  v.  Springfield,  1552. 
Springport  v.  Teutonia  Savings  Bank, 

186,  149. 
Spurlock  v.  Missouri  Pac.  R'y  Co.,  154, 

687,  691,  693. 
Spyker  v.  Spence,  1111. 
Squair  v.  Lookout  M.  Co.,  1128,  1150. 
Squire  v.  N.  Y.  C.  R  R,  1537. 
Stace's  Case,  37. 
Stackpole  v.  Seymour,  530. 
Stack's  Case,  20. 

Stacy  v.  Little  Rock,  etc..  \l.  R.  Co.,  31, 
82. 

Stafford  v.  American  Mills,  1170. 

Stafford  v.  Bolton,  1018. 

Stafford  v.  Horton,  407. 

Stafford  Bank  v.  Palmer,  314. 

Staffordshire,  eta,  Co.,  The,  Re,  S52. 

Stainbank  v.  Fernley,  493. 

Stainland  v.  Willott,   113. 

Stalktip  v.  National  Bank,  1077. 

Stamford  Bank  v.  Benedict.  1095. 

Stamford  Bank  v.  Ferris.  429,  612. 

Standard,  etc.  Co.,  The,  Re,  125:'-. 

Standard  Oil  Co.  v.  Scofield,  967. 

Standing  v.  Bowring.  412,  432. 

Stanhope's  Case,  173,  177,  1127. 

Stanley  v.  Chester,  etc.,  R'y,  1044. 

Stanley  v.  Cleveland,  C.  &  C.  R  R  Co., 
1510. 

Stanley  v.  Sheffield,  etc.,  Co.,  1075. 

Stanley  v.  Stanley,  353,  628,  62ft 

Stanley  v.  Supervisors,  764. 

Stanley.  Ex  parte,  163, 

Stanton  v.   Alabama,  etc.,    R   R,   Hss> 
1198,  1199,  1223,  1454,  1455,  1457. 

Stanton  v.  Allen,  646. 

Stanton  v.  Camp,  1104. 

Stanton  v.  Chadwick,  681. 
I  Stanton  v.  (.'oilier.  597. 
■  Stanton  v.  Embrey,   1327. 


TABLE    OF    CASES. 


clxxvfi 


[The  references  are  to  the  fo  yt-paginj.] 


Stanton  v.  King,  655. 

Stanton  v.  Missouri,  etc.,  R'y  Co.,  1147, 

1468. 
Stanton  v.  N.  Y..  etc.,  R.  R,  1045,  1047. 
Stanton  v.  Small,  472. 
Stanton  v.  Wilkeson,  27& 
Stanton  v.  Wilson,  113. 
Stanton  Iron  Co.,  Re,  654.  843. 
Stanwood  v.  Stanwood,  429. 
Stapleford,  etc.,  Co.,  In  re,  906. 
Staples  v.  Gould,  470. 
Star  Fire  Ins.  Co.  v.  Palmer,  606. 
Star  R  Co.  v.  Andrews,  1265. 
Starbuck  v.  Mercantile,  etc.,  Co.,  846. 
Starin  v.  Genoa,  136.  147,  153. 
Stark  v.  Burke,  251,  263. 
Stark  Bank  v.  United  States  Pottery  Co., 

1084,  1246. 
Starkweather   v.  American  Bible   Soc, 

1001. 
Starr  v.  Camden  &  Atl.  R  R  Co.,  1530. 
Starr  v.  Gregory,  etc.,  Co.,  1089. 
Starrett  v.  Rockland,  etc.,  R.  R  Co.,  114. 

State  v. ,  1537. 

State  v.  Accommodation  Bank  of  La., 

637. 
State  v.  Adams,  638,  1026. 
State  v.  American  Cotton  Oil  Trust,  49. 
State  v.  American  Express  Co.,  998. 
State  v.  American  Institute,  1024. 

State  v.  Atchison,  etc.,  R  R,  49,  71,  867, 
873,  1495,  1505. 

State  v.  Bailey,  34,  640,  866,  957,  1545. 

State  v.  Baltimore,  etc.,  Co.,  703,  707,  712, 
713,  715,  716,  718,  758,  1208. 

State  v.  Bank  of  Charleston,  875. 

State  v.  Bank  of  Maryland,  988,  1275. 

State  v.  Bank  of  S.  C,  866. 

State  v.  Barron,  864,  867,  86a 

State  v.  Bates,  996. 

State  v.  Baumgardner,  819. 

State  v.  Beck,  89,  105,  867,  1593. 

State  v.  Bell,  1559,  1564. 

State  v.  Bell  Telephone  Co.,  1019,  1596. 

State  v.  Bentley.  756,  758. 

State  v.  Bergen,  etc.,  R'y,  874. 

State  v.  Bergenthal,  676. 

State  v.  Berry,  775. 

State  v.  Bienville  Oil  Works,   677,   678, 
684. 


State  v.  Bissell,  134. 

State  v.  Bonnell,  800,  808,  837,  855. 

State  v.  Boston,  C.  &  M.  R  Co..  999. 

State  v.  Bo  wen,  3. 

State  v.  Bradford.  2. 

State  v.  Branin,  756,  758. 

State  v.  Brassfield,  148. 

State  v.  Brown,   638,    1213,    1216,    1219, 

1288. 
State  v.  Brownstown,  etc.,  Co.,  864 
State  v.  Building  Assoc,  418,  870. 
State  v.  Bull,  883,  888. 
State  v.  Butler,  426,  772,  1586. 
State  v.  Carteret  Club,  1025. 
State  v.  Catskill  Bank,  19. 
State  v.  Central,  etc.,  Assoc,  866,  1589. 
State  v.  Cent.  O.  Mut.  R  Ass'n,  309. 
State  v.  Chamber  of  Commerce,     1025, 

1026. 
State  v.  Cheraw  &  C.  R  R  Co.,  14,  867, 

531. 
State  v.  Chicago,  etc..  R'y.  1483,  1515. 
State  v.  Cincinnati,  etc.,  R  R,  867,  872, 

1520,  1583. 
State  v.  City  of  Kokomo,  149. 
State  v.  Clark,  135. 
State  v.  Cobb,    1188,    1197,    1223,    1224, 

1248,  1251. 
State  v.  Collectors,  774,  991,  992. 
State  v.  Columbia,  etc.,  Co.,  869. 
State  v.  Columbus  Gas  Co.,  1582, 1583. 
State  v.  Commercial  Bank,  866,  868,  8691 

989,  10S6. 
State  v.  Commissioners,   etc.,   136,    77L. 

774,  991,  992. 
State  v.  Comptroller,  703,  769. 
State  v.  Concord,  etc.,  R  R  Co.,  1511. 
State  v.  Conkliu,  1024. 
State  v.  Constantine,  819. 
State  v.  Corrigan    St.    R'y,    1550,   1553, 

1573. 
State  v.  Council    Bluffs,   etc,   Co.,   866, 

1582. 
State  v.  County  Court,  142,  147. 
State  v.  County  of  Babaunsee,  144. 
State  v.  Crescent  City,  etc.,  Co.,  101,  214. 
State  v.  Curtis,    1023,    1024,    1057,    1059, 

1065,  1066. 
State  v.  Dallas  Co.,  etc,  142,  147. 
State  v.  Dawson,  888. 


clxxviii 


TABLE    OF    CASES. 


State  v.  Delaware,  etc.,  Co.,  1544, 1595. 

State  v.  Dillon,  1066. 

State  v.  District  Court,  1174. 

State  v.  Duff,  1592. 

State  v.  East  Cleveland,  etc.,  R'y,  1559. 

State  v.  Edgefield,  etc.,  R  R.,  1445. 

State  v.  Egg  Harbor  City,  1596. 

State  v.  Essex  Bank,  866,  871. 

State  v.  Fagan,  816. 

State  v.  Farmers',  etc.,  Co.,  49,  1220. 

State  v.  Farrier,  852. 

State  v.  Felton,  1084.  1115. 

State  v.  Ferris,  15,  823.  825,  836.  850. 

State  v.  Fidelity,  etc.,  Co.,  872,  998. 

State  v.  First  Nat'l   Bank.  24,    531,  547, 

585,  586,  618.  621,  1012. 
State  v.  Flavell,  747. 
State  v.  Foley,  1570. 
State  v.  Fosdick,  776,  998. 
State  v.  Fourth,  etc.,  Co.,  875. 
State  v.  Fremont,  etc.,  R  R,  1515. 
State  v.  Garoutte.  15."). 
State  v.  Gas  Co..  15s:', 
State  v.  George  Medical  Soc,  1026. 
State  v.  Glenn,  1381. 
State  v.  Godwinsville,  etc.,  Co., 875, 1012. 
State  v.  Grand  Lodge,  BBS- 
State  v.  Granville  Alexandrian  Soc.,  083. 
State  v.  Great  Works  Milling  Co.,  1013. 
State  v.  Greene  County,  135,  156.817,819. 
State  v.  Greer,  819. 
State  v.  Guerrero,  530. 
State  v.  Guttenburg,  143. 
State  v.  Haight,  762. 
State  v.  Hamilton.  748,  1583. 
State  v.  Hancock  County,  150,  151. 
State  v.  Hannibal  &  St.  J.  R  R  Co.,  135, 

751,  757,  772. 
State  v.  Hare,  1589. 
State  v.  Hart,  762. 
State  v.  Hartford   &  N.    II.    R   R  Co., 

1522,  1537. 
State  v.  Haven,  507. 
State  v.  Holladay,  149,  154. 
State  v.  Home  Ins.  Co.,  756. 
State  v.  Hunton,  843. 
State  v.  Inhabitants,  etc.,  1563,  1567. 
State  v.  Iowa,  etc.,  R'y,  1483,  1492,  1504 
State  v.  Jacksonville  St.  R  R.  1551.  157:5. 
State  v.  Jefferson  Turnpike  Co.,  109,  208. 


[The  references  are  to  the  foot-paging.] 

State  v.  Jennings,  150. 


State  v.  Jersey  City,  1073,  1524. 

State  v.  Keokuk,  etc.,  R  R,  774,  1546. 

State  v.  Kile,  etc.,  Co.,  868. 

State  v.  Kingan,  867. 

State  v.  Kupersforte,  836. 

State  v.  Laclede,    etc.,    Co.,  1555,    1559, 

1583,  1585. 
State  v.  Ladies,  etc..  857. 
State  v.'Lake  City.  155. 
State  v.  Lancaster  Co.,  142. 
State  v.  Lathrop,  776,  99a 
State  v.  Leete,  547. 
State  v.  Leffingwell,  130. 
State  v.  Lehre,  98,  99,  108,  814.  836,  840. 
State  v.  Lime,  153. 
State  v.  Linn  Co.,  135. 
State  v.  Lusitanian  Portuguese  Society, 
etc..  1036. 

Stat.'  v.  Macon  County  Court,   135.  142, 
147. 

State  v.  Madison,  eta,  R'y  Co.,  B66 

st  it"  v.  Maine,  etc.,  R  R  Co.,  635. 

stat.'  v.  Marietta,  etc.,  R  R,  1460. 

state  v.  Mayhew,  758. 

Maw  v.  Mayor,  etc.,  836, 1550, 1567, 1598. 

State  v.  McBride,  *94. 1481. 

Stat.'  v.  M.Daniel,  20,  434,  834,  836,  842, 
849. 

Stat.'  v.  McGrath,  391,  1014. 

stat-  v.  Merchant,  385,  863,  864.  1545. 

State  v.  Merchants',  etc.,  Co.,  873. 

State  v.  Merchants',  etc.,  Trust  Co.,  871. 

stat.'  v.  Merchants'  Ex.,  1023. 

State  v.  Metz.  1542. 

State  v.  Mexican,  etc.,  R'y,  1363,  1383. 

State  v.  Miller,  638,  771.  1553. 

State  v.  Milwaukee,  etc.,  R'y  Co..  2,  866, 
1583. 

State  v.  Minn.,  etc.,  Co..  48.  418,  867,  868. 

State  v.  Missouri,  etc..  R'y.  1521. 

State  v.  Mobile,  etc..  R  R,  1519. 

State  v.  Montclair  R'y  Co.,  1528. 

State  v.  Moore,  871. 

State  v.  Morgan,  1266. 

State  v.  Morris  &  Essex  R  R  Co.,  771, 
1006,  1011.  1599. 

State  v.  Morristown  Fire  Ass'n,  13,  321. 

State  v.  Murfreesboro,  1012. 
I  State  v.  Nebraska  Distilling  Co.,  645. 


TABLE    OF    CASES. 


clxxix 


[77ie  references  are 

State  v.  Nebraska  Telephone  Co.,  1596. 
State  v.  Nemaha  Co.,  134. 
State  v.  N.  H.  &  N.  R  R.,  1523. 
State  v.  New  Orleans  Gas  Light  Co.,  500, 

511,  709,  866,  1363. 
State  v.  Noncannah,  etc.,  Co.,  884. 
State  v.  North  Louisiana,  etc.,  R.  R  Co., 

399,  479. 
State  v.  Northern  Central  R'y  Co.,  1368, 

1370,  1371,  1383,  1542,  1543. 
State  v.  Noyes,  887.  1516. 
State  v.  Osawakee  Township,  138,  139. 
State  v.  Overton,  1024. 
State  v.  Passaic,  etc.,  Soc,  1012,  1574. 
State  v.  Paterson  &  T.  Co.,  865. 
State  v.  Pawtucket,  etc..  Corp'n,  866. 
State  v.  Penn.,  etc.,  866,  1579. 
State  v.  People's,  etc.,  Assoc,   531,  866, 

870,  1589. 
State  v.  Petway,  759. 
State  v.  Phillips,  807. 
State  v.  Phipps,  644. 
State  v.  Pipher,  869. 
State  v.  Pittsburgh,  etc.,  Co.,  995. 

State  v.  Porter,  1063,  1065. 

State  v.  Railroad,  1521,  1523. 

State  v.  Railroad  Com'rs.  1394. 

State  v.  Railway  Co.,  867. 

State  v.  Ramsey,  751. 

State  v.  Real  Estate  Bank,  867. 

State  v.  Rice,  986. 

State  v.  Rives,  863,  889,  890,  1513. 

State  v.  Robinson,  745. 

State  v.  Roggen.  144. 

State  v.  Rohlffs,  829. 

State  v.  Rombauer,  530. 

State  v.  St.  Louis,  etc.,  Co..  530. 

State  v.  Saline,  etc.,  Court,  131. 

State  v.  Scott,  1528. 

State  v.  Scougal.  1601. 

State  v.  Seaboard,  etc.,  R  R.  769. 

State  v.  Security  Bank,  1012. 

State  v.  Seneca  Co.  Bank,  867. 

State  v.  Sherman,  275,  1275. 

State  v.  Sibley,  635,  640,  888. 

State  v.  Simmons,  763,  773. 

State  v  Sioux  City  &  P.  R  R  Co.,  1522. 

State  v.  Smith,   110,  382,  387,  421,  588, 
825,  827,  828,  830,  834.  841,  850,  1060. 

State  v.  Societe,  etc.,  869. 


to  the  foot-paging] 

State  v.  Southern  Minn.  R.  R  Co..  1523. 

State  v.  Sowerby,  872. 

State  v.  Standard,  etc.,  Assoc,  866,  1589. 

State  v.  Standard  Oil  Co.,  11,  643,  872. 

State  v.  Sullivan  Co.,  135. 

State  v.  Swearingen,  849. 

State  v.  Telephone  Co.,  1018,  1596. 

State  v.  Thomas,  755. 

State  v.  Thompson,  817. 

State  v.  Timken.  53,  531. 

State  v.  Tombeckbee  Bank,  867. 

State  v.  Town  of  Clark,  152. 

State  v.  Trenton,  1557,  1571. 

State  v.  Tudor,  821. 

State  v.  Tunis.  757. 

State  v.  Union  Township,  136. 

State  v.  United,  etc.,  R.  R,  1525. 

State  v.  Urbana  Mut.  Ins.  Co.,  985. 

State  v.  Vanderbilt,  1499,  1504,  1505. 

State  v.  Wapello,  134. 

State  v.  Warren  Foundry  &  M.  Co.,  467, 

531,  611,  613,620. 
State  v.  Washington  Social  Lib.  Co.,  983. 
State  v.  Webb,  871. 
State  v.  West,  etc.,  R'y  Co.,  867. 
State  v.  Western,  etc.,  Co.,  956. 
State  v.  Western,  etc,  Soc,  872. 
State  v.  Western  Union  Tel.  Co..  776. 
State  v.  White's,  etc.,  Co.,  865. 
State  v.  Whitesides,  137. 
State  v.  Woodruff,  etc.,  Co.,  777. 
State  Bank  v.  Bell,  1095. 
State  Bank  v.  Comegys,  1092. 
State  Bank  v.  Cox,  484. 
State  Bank  v.  Gill,  610. 
State  Bank  v.  State,  866,  889. 
State  Bank  v.  U.  S.  Pottery  Co..  1191. 
State  Bank  of  Ohio  v.  Fox,  418.  421. 
State  Bank  of  Ohio  v.  Knoop,  625,  626, 

747,  1942. 
State  Bank  of  Va.  v.  City  of  Richmond. 

748. 
State  Board  of  Agriculture  v.  Citizens' 

St.  R'y  Co.,  1247. 
State  Fire  Ins.  Co..  In  re,  276.  392.  393. 

925. 
State  Freight  Tax  Case,  1945. 
State  Ins.  Co.  v.  Gennett,  527,  528.  586, 

622. 
State  Ins.  Co.  v.  Redmond,  219. 


clxxx 


TABLE    OF    CASKS. 


[Tlie  references  are 

State  Ins.  Co.  v.  Sax,  586,  618. 
State  Ins.  Co.  v.  Waterhouse,  1177. 
State  Ins.  Co.,  In  re,  58,  630,  1587. 
State  of  Conn.  v.  New  Haven,  etc.,  Co., 

1515. 
State  of  Florida  v.  Anderson,  1251. 
State  of  Florida  v.    Jacksonville,    etc., 

R.  R.  1155,  1421. 
State  of  Indiana  v.  "VVoram,  971,  1020, 

1245. 
•  State  of  Louisiana  v.  American  Cotton 

Oil  Trust,  653. 
State  of  Louisiana  v.  Bank  of  Louisiana, 

719. 
State  of  Maryland  v.  Baltimore  &  Ohio 

R  R  Co.,  1941. 
State  of  Michigan  v.  Howard,  315. 
State  of  Minnesota  v.  Young.  140. 
State  of  Nevada  v.  Leete,  824. 
State  of  Nevada  v.   Pettinelli,   797,   79s, 

807,  813,  814,  825. 
State  of  Nevada  v.  Wright.  799. 
State  of  Ohio  v.  Bonnell,  811. 
State  of  Ohio  v.  Brice,  1053. 
State  of  Ohio  v.  Franklin  Bank  of  Co- 
lumbus. 418,  769. 
State  of  Ohio  v.  Sherman,  1515. 
State  of  Pennsylvania  v.  Wheeling,  etc.. 

Bridge  Co.,  1945. 
State  of  Tennessee  v.  Davis,  1086. 
State  of  Tennessee  v.  Whitworth,  758. 
State  Railroad  Tax  Cases,  768.  1940. 
State  Savings   Association    v.    Kellogg, 

251,  281,  282.  303. 
State  Tax  on  Foreign-held  Bonds,  Case 

of,  751.  77D.  1201.  1942. 
State  Tax  on  Railway   Gross  Receipts, 

1946. 
State  Treasurer  v.  Auditor-General.  770. 
Staten  I.  R.  T.  R  R  Co.,  Re,  221,  1525. 
Staver  v.  Flack,  432. 
Steacy  v.  Little  Rock  &  Ft.  Smith  R  R 

Co.,  81. 
Steam  Engine  Co.  v.  Hubbard.  293. 
Steam  Navigation  Co.  v.  Weed,  983. 
Steamboat  Co.  v.  McCutcheon,  991,  993. 
Steamship  Co.  v.  Railroad  Co.,  1476. 
Steamship  Co.  v.  Tugman,  1182. 
Steamship  Dock  Co.  v.  Heron's  Adm'x, 
686,  688. 


to  the  foot-paging] 

Stearic  Acid  Co.,  Re,  802. 

Stearns  v.  Allen,  1105. 

Stearns  v.  Marsh,  603. 

Stears,  Ex  parte,  853. 

Stebbins  v.  Leowolf,  470,  474. 

Stebbins  v.  Merritt,   797,    800,   803,   804, 

806,  812,  1070,  1098. 
Stebbins  v.  Phoenix   Ins.   Co.,   547,  687, 

689,  691,  692. 
Stedman  v.  Eveleth,  251,  274. 
Steele  v.  Harmer,  1191. 
Steele  v.  Oswego,  etc.,  Co.,  1102. 
Steele  v.  Sturges,  1422. 
Steel's  Case.  201. 
Steers  v.  Lashley,  477. 
Stein  v.  Bienville,  etc.,  Co.,  1597,  1945. 
Stein  v.  Howard,  09,  389. 
Stein  v.  Mayor,  etc.,  133. 
Steiner's  Appeal,  1262,  1266. 
Steinmetz  v.  Versailles  R  R  Co.,  162, 

Hi:1,. 
Stelphon  v.  Ware,  243. 
Stenton  v.  Jerome,  575,  604,  605. 
Stephens  v.  Benton,  1188. 
Stephens  v.  Bernays,  264,  287. 
Stephens  v.  De  Medina,  456. 
Stephens  v.  Follett,  346,  391,  392. 
Stephens  v.  Fox,  255,  266,  267,  296. 
Stephens  v.  James,  654. 
Stephens  v.  Overstoltz,  275.  293. 
Stephens  v.  St.  Louis,  etc.,  R  R,  1181. 
Stephenson  v.  Dawson,  405. 
Stephenson  v.  N.  Y..  etc.,  R  R  Co.,  1089. 
Stephenson  v.  Pold,  654. 
Stephenson,  Ex  parte,  46. 
Stephenson's  Case,  88. 
Sterett  v.  Denver,  etc..  R  R.  Co.,  1176, 
Sterling  v.  Jaudon,  574,  604. 
Sterling  v.  Mariette  Co.,  1113. 
Sterling  v.  Wilkinson,  412. 
Sterling's  Appeal,  1584. 
Sternberg  v.  State,  1572. 
Sternberger  v.  Bernheimer,  567. 
Sterne  v.  Wisconsin   Cent   R,  R,  1315, 

1324. 
Stetson  v.  City  Bank  of  New  Orleans, 

860,  893. 
Stetson  v.  City  of  Bangor,  749,  760. 
Stettaner  v.  New   York,   etc.,   Co.,  678, 

683. 


TABLE    OF    CASES. 


clxxxi 


[The  references  are 

Steubenville,   etc.,   R   R  Co.  v.   North 

Township,  136. 
Stevedores'  Beneficial  Association,  The, 

In  re,  7. 
Stevens  v.  Anson,  135. 
Stevens  v.  Buffalo  &  N.  Y.  R  R  Co., 

1383. 
Stevens  v.  Carpe,  etc.,  Co.,  1168. 
Stevens  v.  Corbitt,  125. 
Stevens  v.   Davison,    1021,    1156,    1501, 

1506. 
Stevens  v.  Eden  Meeting-house  Society, 

797.  798,  803. 
Stevens  v.  Erie  R'y  Co.,  1524. 
Stevens  v.  Great  W.  R'y,  1537. 
Stevens  v.  Hill.  1055,  1071. 
Stevens  v.  Hurlbut  Bank,  577,   597,  604, 

605,  780. 
Stevens  v.  Louisville,  etc.,  R.  R.,  1276. 
Stevens  v.  Mid-Hants  R'y,  1466,  1478. 
Stevens  v.  Midland,   etc.,   R'y   Co.,   366. 

1010. 
Stevens  v.  N.  Y.,  etc.,  R.  R  Co.,  1233. 
Stevens  v.   Phoenix  Ins.  Co.,  318,   1178, 

1182. 
Stevens  v.  Pratt,  987,  997. 
Stevens  v.  Rutland  &  Burlington  R  R 

Co.,  626,  627,  633,  639,  640,  1142,  1538. 
Stevens  v.  South   Devon  R'y,   364,  306, 

372,  374,  723. 
Stevens  v.  Union  T.  Co.,  1325. 
Stevens  v.  Watson,  1207,  1365, 1383, 1385. 
Stevens  v.  Wilson,  462. 
Stewards  of  M.  E.  Church  v.  Town,  188. 
Stewart  v.  Austin.  640. 
Stewart  v.  Cauty,  452,  458,  565,  577,  786. 
Stewart  v.  Chesapeake    &    Ohio    Canal 

Co.,  1242,  1325,  1409. 
Stewart  v.  Drake,  574,  575,  578. 
Stewart  v.  Dunham,  1135. 
Stewart  v.  Erie,   etc.,   Trans.   Co.,   1125, 

1133,  1511,  1533. 
Stewart  v.  Firemen's  Ins.  Co.,  445,  745. 
Stewart  v.  Garrett,  475. 
Stewart  v.  Huntington,  454,  1110,  1111. 
Stewart  v.  Huntington  Bank,  1113. 
Stewart  v.  Jones,  1513. 
Stewart  v.  Lansing,  1227. 
Stewart  v.  Lay,  262,  269,  280,  286,  288, 
305. 


to  the  foot-paying.] 

Stewart  v.  Lehigh  V.  R  R  Co.,  948,  999, 

1520. 
Stewart  v.  Mahoney  Min.  Co.,  827. 
Stewart  v.  National  Bank,  984. 
Stewart  v.  National  Union  Bank,  420. 
Stewart  v.  Polk  Co.,  134. 
Stewart  v.  Robinson,  655. 
Stewart  v.  St.  Louis,  etc.,  R  R,   65,  67, 

929,  1109,  1219. 
Stewart  v.  Schall,  475. 
Stewart  v.  Trustees  of  Hamilton  College, 

111. 
Stewart  v.  Walla  Walla,  etc.,  Co.,  342, 

522. 
Stewart,  Appeal  of,  435. 
Stewart's  Case,  177,  195,  207,  639, 1127. 
Stewart,  etc.,  Co.  v.  Missouri,  etc.,  Co., 

1392. 
Stewart's  Trustees  v.  Evans,  331. 
Stickney  v.  Stickney,  430. 
Stiles  v.  Cardiff  Steam  Nav.  Co.,  1009. 
Stiles  v.  Western  R  R.  Co.,  1113. 
Stilphen  v.  Ware,  298,  301. 
Stinchfield  v.  Little,  1096,  1105. 
Stinson  v.  Thornton,  438. 
Stivers  v.  Carmicheal,  310. 
Stock's  Case,  1037. 
Stock,  Ex  parte,  89,  849,  1036. 
Stockdale  v.  Moginn,  670. 
Stockdale  v.  South  Sea  Co.,  440. 
Stocken's  Case,  164,  176,  178. 
Stocker  v.  Wedderburn,  462. 
Stokes  v.  Detrick,  1270. 
Stockholders  v.  Board  of  Supervisors, 

754. 
Stockton  v.  Russell,  "457,  832. 
Stockton,  Att'y-Gen'l,  v.  Central  R  Co. 

of  N.  J.  et  al.,  645,  873,  1497,  1511. 
Stockton's  Case,  179. 
Stockton,  etc.,  Bank  v.  Staples,  991. 
Stockton,  etc.,  R  R.  Co.  v.  Stockton.  133. 
Stockton  Malleable  Iron  Co.,  In  re,  692. 
Stockwell  v.  St  Louis  M.  Co.,  524. 
Stoddard  v.  Shetucket  Foundry  Co.,  34, 

35,  713,  715,  717. 
Stoddert  v.  Port  Tobacco  Parish,  1051. 
Stoker  v.  Schwab,  880. 
Stokes  v.  Detrick,  955,  1100. 
Stokes  v.  Lebanon,  etc.,  Co.,  116, 174, 176. 
Stokes  v.  N.  J.,  etc.,  Co.,  1076. 


clxxxii 


TABLE    OF    CASES. 


[T7ie  references  are 

Stokes  v.  Phelps  Mission,  930. 
Stokes  v.  Scott,  134. 
Stokes  v.  Stickney.  293. 
Stokes  v.  Stokes,  598. 
Stone  v.  American  Life  Ins.  Co.,  1192. 
Stone  v.  Berkshire  Soc,  1018,  1094. 
Stone  v.  Cartright,  1033. 
Stone  v.  Chisolm,  289. 
Stone  v.  City  &  County  Bank,  209. 
Stone  v.  Framington,  864. 
Stone  v.  Great  Western  Oil  Co.,  113, 167. 
Stone  v.  Hackett,  412. 
Stone  v.  111.  Cent.  R  R  Co.,  998. 
Stone  v.  Mississippi,  1944. 
Stone  v.  Reed,  732,  960. 
Stone  v.  Wiggin,  251. 
Stoneham,  etc.,  R.  R  Co.  v.  Gould,  182, 
222. 

Stoney  v.  American  Life  Ins.  Co.,  1191. 

Stoops  v.  Greensburgh,  etc.  Co.,  232. 

storm  v.  Waddel,  609. 

Storrs  v.  Flint,  654. 

Storrs  v.  Pensacola,  etc.,  R  Co.,  1515. 

Story  v.  Furmau,  279,  286,  288,  630. 

Story  v.  Jersey,  etc.,  Co.,  639. 

Story  v.  N.  Y.  El.  R.  R,  156& 

Story  v.  Salomon,  469,  472,  562. 

Stourbridge  Canal  Co.  v.  Whaley,  1577. 

Stout  v.  Lye,  1344,  1351. 

Stout  v.  Sioux  City,  etc.,  R  R  Co.,  1171, 

151.;. 

Stout  v.  Yaeger,  etc.,  Co.,  940. 

Stout  v.  Zulick,  313. 

Stoutimore  v.  Clark,  878. 

Stover  v.  Flack,  108,  269,  330,  333, 465. 

Stow  v.  Wyse,  800-SO& 

Stowe  v.  Flagg,  2,  114. 

Stowe  v.  Reed,  709. 

Stowell  v.  Stovvell,  123. 

Stoystowu.  etc.,  Co.  v.  Craver,  1054, 1063. 

Straffon's  Case,  331,  346,  347. 

Strafford  Nat'l  Bank  v.  Dover,  765. 

Strait  v.  National  Harrow  Co.,  646,  649. 

Straker  v.  Wilson,  741. 

Strang  v.  Montgomery,  etc..  R.  R,  1481. 

Strange  v.  Houston  &  T.  C.  R   R.  Co., 
483.  497,  499. 

Strantou  Iron  &  Steel  Co..  Re,  448. 

Strasburg  v.  Echternacht,  461. 

Strasburg  R.  R.  Co.  v.  Eichteruacht,  114. 


to  the  foot-paging.] 

Stratford  v.  Jones,  576,  603. 

Stratford  &  M.  R*y  Co.  v.  Stratton,  167. 

Stratton  v.  Allen,  939. 

Stratton  v.  European,    etc.,    R'y,    1319< 

1480. 
Straus  v.  Chicago,  etc.,  Co.,  1175,  1588. 
Straus  v.  Eagle  Ins.  Co.,  983, 1190. 
Stray  v.  Russell,  570,  579. 
Street  v.  Morgan.  570. 
Streeter  v.  Sumner,  338. 
Stribling  v.  Bank  of  the  Valley,  58. 
Strick  v.  Swansea  Canal,  1519. 
Strickland  v.  Railroad  Co.,  135. 
Strickland  v.  Symons,  655. 
Stringer,  l'x  parte,  692. 
Stringer's  Case,  727,  733. 
Strohen  v.  Franklin,  etc.,  Ass'n,  662. 
Stromeyer  v.  Combes,  1145. 
Strong  v.  Brooklyn  Crosstown  R  R  Co., 

392.  39:;.  72a 
Strong  v.  McCagg,  859,  873. 
Strong  v.  Nafl,  etc.,  Ass'n,  576. 
Strong  v.  Smith.  826*  828,  839. 
Strong  v.  Southworth.  287. 
Strong  v.  Wheaton,  267,  283,    284,   292, 

397. 
Strong'a  Appeal,  361. 
Strothers  v.  Drexel,  458. 
Strout  v.  Natoma  Water  &  Min.  Co.,  586, 

621. 
Stryker  v.  Cassidy,  'J71. 
Stuart  v.  Boulware,  1158. 
Stuart  v.  Gay,  1358. 
Stuart  v.  James,  etc.,  Co.,  1332. 
Stuart  v.  Mechanics'  &  Farmers'  Bank, 

19. 
Stuart  v.  Valley  R  R  Co.,  92,  97,  215, 

219. 
Studdert  v.  Grosvenor,  821,  969. 
Studebaker,  etc.,  Co.  v.  Montgomery,  878. 
Studley,  Ex  parte,  1037. 
Stupart  v.  Arrowsmith,  862. 
Sturge  v.  Eastern  Union  R'y,  362,  366, 

374. 
Sturges  v.  Carter,  751. 
Sturges  v.  Keith,  781,  785,  786,  787,  790. 
Sturges  v.  Knapp,  1303,  1318. 
Sturges  v.  Stetson,  42,   44,   54,   55,    183, 

479. 
Sturges  v.  Vanderbilt,  855. 


TABLE    OF    CASKS. 


clxxxiii 


[Tlie  references  are 

Sturgis  v.  Board  of  Trade,  1026. 

Sturgis  v.  Crescent,  etc..  Co.,   854,   1164. 

Sturgis  v.  Vanderbilt,  731. 

Stutz  v.  Haldeman,  87. 

Stutz  v.  Handley,  58,  59,  189,  241,  246, 

251.  311.  345,  391,  804,  878. 
Stuyvesant  v.  Pearsall,  1552. 
Submarine  TeL  Co.  v.  Dickson,  1595. 
Suburban  Hotel  Co.,  In  re.  861. 
Suburban  R.  T.  Co.  v.  Mayor,  1557. 
Succession  of  Boullemet,  440. 
Sudlovv  v.  Dutch  R.  R.  Co.,  184. 
Sugden  v.  Alsbury,  742. 
Sullivan  v.  Campbell,  277,  671. 
Sullivan  v.  Metcalf,  193. 
Sullivan  v.  Portland,  etc.,  R  R,  864, 1131, 

1132,  1317,  1329. 
Sully's  Case,  1043. 
Sulphur  Springs,  etc.,  Co.  v.  St.  Louis,  etc., 

Co..  883. 
Sumbre  County  v.  National  Bank,  765. 
Summerfield  v.  Pritchard,  684. 
Summerlin  v.  Fronteriza,  etc.,  Co.,  455, 

463,  492,  1039,  1042. 
Summers  v.  Sleath,  239. 
Sumner  v.  Marcy,  104,  266,  295,  426,  972, 

983. 
Sumner  v.  Stewart,  569. 
Sumrall  v.  Mut.  Ins.  Co.,  635. 
Sumrall  v.  Sun,  etc.,  Co.,  640,  8S8. 
Sun,  etc.,  Ins.    Co.  v.    Mississippi,    etc., 

Co..  1165. 
Sunapee  v.  Eastman,  1018. 
Sunderland  Marine  Ins.  Co.  v.  Kearney, 

277. 
Sunflower  Oil  Co.  v.  Wilson,  1442. 
Supervisors  v.  Galbraith.  140,  149. 
Supervisors  v.  Kennicott,  1357. 
Supervisors  v.  Schenck,  145. 
Supervisors  v.  Stanley,  760,  764,  765,  766. 
Supervisors  v.  Wisconsin,  etc.,  R  R  Co., 

135. 
Supervisors  of  Fulton  County  v.  Missis- 
sippi &  Wabash  R.  R  Co.,  631,  633. 
Supervisors  of  Schuyler  Co.  v.  People, 

133. 
Supply,  etc.,  Co.  v.  Elliott,  621. 
Supreme  Lodge,  etc.,  v.  Knight,  1024 
Supreme  Sitting  of  the  Order  of   Iron 
Hall  v.  Baker,  1413. 


to  the  foot-paging.] 

Susquehanna  &  Bath.  T.  R  Co.  v.  Peo- 
ple, 1012, 
Susquehanna,  etc.,  Co.  v.  Bonham,  1266, 

1578. 
Susquehanna,  etc.,  Co.   v.   General   Ins. 

Co.,  1058.  1262. 
Susquehanna,  etc.,  Co.  v.  West,  etc.,  Co., 

1944. 
Susquehanna  Ins.  Co.  v.  Perrin,  1109. 
Sussex  R  R.  Co.  v.  Morris,  etc.,  R  R 

Co.,  1510 
Sutherland  v.  Lake  Superior,  etc.,  Co., 

1348,  1350. 
Sutherland  v.  Olcott,  381,  385. 
Sutliff  v.  Cleveland,  etc..  R.  R..  383. 
Sutton  v.  Bank  of  England,  523. 
Sutton  v.  Tatham,  579,  580. 
Sutton's  Case,  269. 
Suydam  v.  Jenkins,  790. 
Suydam  v.  Morris  Canal  &  B.  Co.,  983. 
Swain   v.  West  Philadelphia,   etc.,   R'y. 

397. 
Swan  v.  North  British  Aus.  Co.,  504,  506, 

508,  780. 
Swan  v.  Watertown  Ins.  Co.,  1002. 
Swan  v.  Williams,  1527. 
Swan,  etc.,  Co.  v.  Frank,  732,  857,  961. 
Swan,  Ex  parte,  504,  506,  508. 
Swann  v.  Clark,  1455. 
Swann  v.  Wright's  Ext,  1393,  1482. 
Swansea  Dock  Co.  v.  Levien,  162.  803. 
Swansea  Vale  R'y  Co.  v.  Budd,  682. 

Swartwout  v.  Michigan   Air  Line  R  R 
Co..  119,  120,  226,  231,238. 

Swasey  v.  American  Bible  Soc,  660. 

Swatara  R  R  v.  Brune,  188. 

Swazey  v.  North  Carolina  R  R,  1276. 

Swazy  v.  Choate,  etc..  Co.,  101. 

Sweatland  v.  111.,  etc.,  Tel.  Co.,  1113. 

Sweeney  v.  Bank  of  Montreal,  437. 

Sweeney  v.  Grape  Sugar  Co.,  931. 

Sweeny  v.  Sturges,  683,  1165. 

Sweet  v.  Hulbert,  132,  135. 

Sweet  v.  Morrison,  1548. 

Sweeting  v.  Pearce,  570,  580. 

Sweney  v.  Talcott,  310,  324. 

Sweny  v.  Smith,  178,  179,  182,  183. 

Swentzel  v.  Penn.  Bank,  1029. 

Swepson  v.  Bank,  etc.,  940. 

Swett  v.  Stark,  1229. 


olxxxiv 


TABLE    OF    CASES. 


[ITie  references  are 

Swift  v.  Beers,  984. 

Swift  v.  Jewsbury,  102. 

Swift  v.  Smith,  948,  1050,  1051,  1208, 
1228. 

Swift  v.  State,  67a 

Swift's,  etc.,  Works  v.  Johnson,  1423. 

Swigert,  In  re,  775. 

Swim  v.  Wilson,  510. 

Switzerland,  Bank  of,  v.  Bank  of  Tur- 
key, 859. 

Sword  v.  Wicket-sham,  880. 

Sykes  v.  Beadon,  651. 

Sykes  v.  People,  1015,  1017. 

Sykes'  Case,  159,  165,  680. 

Sylvester  v.  Downer,  1248. 

Symon's  Case,  107,  334,  359. 

Syracuse  Savings  Bank  v.  Seneca  Falls, 
148,  151. 

Syracuse  Water  Co.  v.  Syracuse,  1597. 

Syracuse,  etc.,  R.  R  Co.,  Matter  of,  53, 
840,  113$  1219. 


T. 


T..  W.  &  W.  R  R  Co.  v.  Elliott.  1521. 
Taber  v.  Chicago,  etc.,  R'y,  12S7. 
Taber  v.  Cincinnati,  L.  &  C.  R  R,  1263, 

1268. 
Tabler  v.  Sheffield,  etc.,  Co.,  1112. 
Tabor  v.  Goss,  etc.,  Co.,  280. 
Tackerson  v.  Chapin,  784 
Taft  v.  Brewster,  1106. 
Taft  v.  Chapman,  508. 
Taft  v.  Harrison,  847. 
Taft  v.  Hartford,  etc.,  R  R  Co.,  360,  361, 

868,  369,  374. 
Taft  v.  Presidio,  etc.,  Co.,  433,  499,  515, 

1114. 
Taft  v.  Ward.  294,  668. 
Taggard  v.  Curtenius,  600. 
Taggart  v.  Newport  St.  R'y  Co.,  1563. 
Taggart  v.  Western  Md.  R  R  Co.,   118, 

123,  124,  219,  234,  243,  632, 
Tahiti  Cotton  Co.,  Re,  52a 
Take's  Case,  195,  208. 
Talbot  v.  Dent.  134. 
Talbot  v.  Hudson,  1526. 
Talbot  v.  Scripps,  1148. 
Talbott  v.  Silver  Bow  Co.,  763. 
Talcott  v.  Olcott,  etc,,  Co.,  925,  929. 


to  Vie  foot -paging.] 

Talcott  v.  Pine  Grove,  135. 

Talcott  &  Co.  v.  McCormick  Harvesting 

Machine  Co.,  1175. 
Talladega   Ins.    Co.    v.    Peacock,    1085, 

1262. 
Tallassee,  etc.,  Co.,  In  re,  1367. 
Tallediga  Ins.  Co.  v.  Landers.  887. 
Tallmadge  v.  Fishkill  Iron  Co.,  242,  257, 

300. 
Tall  man  v.  Baltimore,  etc.,  R  R,  1180. 
Tallman  v.  Butler  Co.,  75a 
Talmage  v.  Pell,  104,  425,  666,  984. 
Talmage  v.  Third  Nat.  Bank.  484. 
Talman  v.  Rochester  City  Bank,  983. 
Talty  v.  Freedman's  Sav.,  etc.,  Co.,  592, 

59a 

Tama,  etc.,  Co.  v.  Hopkins,  128,  241,  243, 

254,  364. 
Tammany  Water-works  v.  New  Orleans 

Water-works,  1944. 
Tan  in T  v.  ( Iregory,  532. 
Tanner  v.  Tanner,  404 
Tanner's  Case,  1038. 
Tantum  v.  West  476.  477. 
Tappan  v.  Bailey.  668,  67ft 
Tappan  V.  Merchants'   Nat'l    Bank.   75i 

754,  762,  707. 
Tar  River,  etc.,  Co  v.  Neal,  113,  174,  231. 
Tarbell  v.  Page,  233,  -13. 
Tarbox  v.  Gorman,  1122. 
Tarlton  v.  Baker.  469. 
Tarpey  v.  Deseret  Salt  Co.,  1001. 
Tarquand  v.  Marshall.  734 
Tasker  v.  Wallace,  33,  82. 
Tatem  v.  Wright.  770.  1001. 
Tatterdell  v.  Fareham,  etc.,  Co.,  1072. 
Taunton  v.  Royal  Ins.  Co.,  1587. 
Taurine  Co.,  In  re.  357. 
Taussig  v.  Hart.  566,  572,  576,  590,  591. 
Tax  Cases,  757,  758.  759. 
Tax-payers  of  Kingston,  Ex  parte,  135. 
Tax-payers  of  Milan  v.  Tennessee,   etc., 

R  R  Co.,  137. 
Taylor  v.  Agricultural  &  M.  Assoc,  1073, 

1097,  1185. 
Taylor  v.  Albemarle,  etc.,  Co.,  1085. 
Taylor  v.  Ashton.  199. 
Taylor  v.  Atlantic,  etc.,  R'y,   1204,  1303, 

1345,  1405.  1481. 
Taylor  v.  Blair,  400. 


TABLE    OF    CASES. 


clxxxv 


['Hie  references  are 

Taylor  v.  Burlington,  etc.,  R.  R.,  1375, 

1387,  1391. 
Taylor  v.  Cheever,  602. 
Taylor  v.  Chichester,  etc.,  R'y   Co.,  952, 

953,  994.  1125,  1132. 
Taylor  v.  Columbian  Ins.  Co.,  1424. 
Taylor  v.  Coon,  117. 
Taylor  v.  Fletcher,  128. 
Taylor  v.  Grand  Trunk  R'y,  1011. 
Taylor  v.  Granite,  etc.,  Ass'n,  1176. 
Taylor  v.  Great  Indian  P.  R'y  Co.,  484, 

517,  579. 
Taylor  v.   Griswold,  798,  818,   820,  821, 

1022. 
Taylor  v.  Higgie,  1098. 
Taylor  v.  Holmes.  1148. 
Taylor  v.  Hughes,  93,  347,  414 
Taylor  v.  Hutton,  1053.  ; 

Taylor  v.  Ifill,  344.  670. 
Taylor  v.  Jones,  609. 
Taylor  v.  Ketchum,  576,  590. 
Taylor  v.  Life  Ass'n,  1426. 
Taylor  v.  Miami  Ex.  Co.,  418,  834,  1146. 
Taylor  v.  Midland  R'y  Co.,  504,  506. 
Taylor  v.  Newberne.  136. 
Taylor  v.  North,  117,  184. 
Taylor  v.  North  Star,  etc.,  Co.,  958, 1133. 
Taylor  v.  PhiL,  etc.,  R  R  Co.,  55,  799, 
"  1240,  1399,  1418,  1440,  1451. 

Taylor  v.  Solomon,  934,  1144 

Taylor  v.  South,  etc.,  R.  R.  Co.,  55,  363, 
400.  1127,  1128,  1131,  1243. 

Taylor  v.  Stray,  579. 

Taylor  v.  Taylor,  331. 

Taylor  v.  Ypsilanti,  133,  135. 

Taylor,  Ex  parte,  913. 

Taymouth  v.  Koehler,  1064,  1069. 

Tazewell,  County    of,  v.  Farmers',  etc., 
Trust  Co.,  933.  1150. 

Teachout  v.  Des  Moines,  etc.,  R'y,  1551, 
1556. 

Teachout  v.  Van  Hoesen,  480,  916. 

Teake  v.  Jackson,  665. 

Teal  v.  Walker,  1398. 

Teall  v.  Consolidated,  etc.,  Co.,  1056. 

Teasdale's  Case,  180,  213,  394,  414,  416. 

Tees  Bottle  Co.,  Re,  517. 

Teitig  v.  Boesman,  1064,  1295. 

Telegraph  Co.  v.  Davenport,  506, 508.  526. 

Telegraph  Co.  v.  Texas,  1001,  1595,  1946. 


to  the  foot-paging.] 

Telegraph  Construction  Co.,  Re.  630. 
Telford,  etc.,  Co.  v.  Gerhab,  779. 
Tempest  v.  Kilmer,  102,458,  464,  785,  78a 
Temple  v.  Lemon,  222. 
Temple  Grove  Seminary  v.  Cramer,  772, 

973. 
Templin  v.  Chicago,  etc.,  R  R,  1075. 
Ten  Broeck  v.  Winn,  etc.,  Co.,  1109. 
Tenant  v.  Dudley,  15S9. 
Tench  v.  Great  Western  R'y  Co.,  1008. 
Tennant  v.  City  of  Glasgow  Bank,  200, 

209,  353. 
Tennaut  v.  Stoney,  654. 
Tennessee  v.  Bank  of  Com.,  759. 
Tennessee  v.  Pullman  Southern  Car  Co., 

1946. 
Tennessee  Bond  Cases.  1276. 

Tennessee,  etc.,  Co.  v.  Kavanaugh,  1599. 

Tennessee,  etc.,  R  R.  v.  East  Ala.,  etc., 

R'y,  1270. 
Tenney  v.  Foote,  472,  475,  477. 

Tenney  v.  Lumber  Company,  1098,  1102. 

Tenney  v.  New  Eng.  Protection  Union, 
661. 

Tenth  Ward  Nat'l  Bank  v.  City  of  New- 
ark, 762. 

Terbell  v.  Lee,  1353.  1359,  1471. 

Terhune  v.  Midland  R.  R.,  Co.,  1146. 

Terhune  v.  Skinner,  965. 

Terrell  v.  Allison,  1349,  1359. 

Terrell  v.  Branch  Bank  of  Mobile,  1119. 

Terrell  v.  Hutton,  1045. 

Terrell  v.  Taylor,  869. 

Terrell,  In  re,  650. 

Terrell's  Case,  1047. 

Terry  v.  Anderson,  250,  251,  302,  1943. 

Terry  v.  Bank  of  Cape  Fear,   244,  300, 
306. 

Terry  v.  Birmingham,  etc.,  Bank,    607, 
685. 

Terry  v.  Calnan,  292,  301. 

Terry  v.  Eagle  Lock  Co.,  386,  387,  707. 

Terry  v.  Little,  256,  257,  284,  288,  289,  321. 

Terry  v.  McLure,  301.  302,  303.  304 

Terry  v.  Tubman,  251,  289,  301,  302. 

Texas,  etc.,  Assoc,  v.  Kerr,  662. 

Texas,  etc.,  Co.  v.  Bledsoe,  1448. 

Texas,  etc.,  Co.  v.  Bloom,  1448. 

Texas,  eta,  Mortgage  Co.  v.  Worsham, 
1182. 


clxxxvi 


TABLE    OF    CASES. 


Texas,  etc..  R'y  v.  Bailey,  1448. 

Texas,  etc.,  R'y  v.  Cox,  1432,  1433,  1435, 

145G. 
Texas,  etc.,  R'y  v.  Geiger,  1447. 
Texas,  etc.,  R'y  v.  Gentry,  787, 1067, 1210, 

1265,  1278. 
Texas,  etc.,  R'y  v.  Marlor,  1243. 
Texas,  etc.,  R'y  v.  Marshall,  152. 
Texas,  etc.,  R'y  v.  Southern  Pac.  R'y, 

644,  1511. 
Texas,  etc.,  R'y  v.  Watts,  1448. 
Texas,  etc.,  R'y  v.  White,  1448. 
Texas,  etc.,  R  R.  v.  Robards,  1538. 
Texas,  etc.,  R  R,  v.  State,  1342. 
Texas  Printing,  etc.,  Co.  v.  Smith,  102. 

103. 
Thaclier  v.  King,  275,  279,  280. 
Thacker  v.  Hardy,  469,  472,  473,  474. 
Thackrah  v.  Haas,  432. 
Thames,  etc.,  R'y  v.  Rose,  1066. 
Thames  Tunnel,  etc.,  v.  Sheldon.  15,  87. 
Thatcher  v.  Wesc  River  N.  Bank,  1018. 
Thayer  v.  Butler,  339. 
Thayer  v.  Middlesex  Ins.  Co.,  1067,  1070, 
Thayer  v.  New  England  Lithographic 

Co.,  295. 
Thayer  v.  Tyler,  1178,  1588. 
Thayer  v.  Union  Tool  Co.,  279. 
Thebus  v.  Smiley,  241,  289,  299,  300,  305, 

353. 
Thielens  v.  Dialogue,  598. 
Thigpen   v.  Mississippi,  etc.,   R.   R   Co., 

113,  124,  188. 
Third  Ave.  R.  R  Co.  v.  New  York  El. 

R.  R.  Co.,  1530. 
Third  Ave.  R.  R.  Matter  of,  1567. 
Third  Ave.   Savings   Bank   v.    Dimock, 

1261. 
Third  Nat'l  Bank  v.  Boyd,  786. 
Third    Nat'l    Bank    v.    Eastern    R    R, 

1197. 
Third  Nat'l  Bank  v.  Elliott,  919. 
Third  Nat'l  Bank  v.  Gregory,  294. 
Third  Nat'l  Bank  v.  Harrison,    472.    477, 


etc., 


1120,  1183. 
Third  Nat'l  Bank  v.  Marine 

1081. 
Thomas  v.  Brownville,  etc.,  R.  R 

1213,  1215,  1216,  1219. 
Thomas  v.  Chisholm,  10,  995. 


[The  references  are  to  the  foot-paging.'] 

Thomas  v.  City  of  Glasgow  Bank,  106, 

336. 
Thomas  v.  Citizens'  Horse  R'y,  98,  1262, 

1264,  1265,  1293.  1296. 
Thomas  v.  Clarke,  664. 
Thomas  v.  Dakin,  2,  5,  666,  1016. 
Thomas  v.  Ellmaker,  661. 
Thomas  v.  Hoblen,  1147,  1152. 
Thomas  v.  Merchants'  Bank,  1176. 
Thomas  v.  Musical,  etc.,  Union,  662. 
Thomas  v.  Mutual,  etc.,  Union,  1024. 
Thomas  v.     New   York  &  Greenwood, 

etc.,  R'y.  1212. 
Thomas  v.  Peoria,  etc.,  R'y,  931,  1441. 
Thomas  v.  Placerville,  etc.,  Co.,  1174. 
Thomas  v.  Tort  Hudson,  135. 
Thomas  v.  Railroad    Co.,  6,    1153,  1497, 

1504.   1505. 
Thomas  v.  Sternheimer,  786. 
Thoinns  v.  Sweet,  985. 
Thomas'  Case,  178,  179,  212,  331,  416. 
Thomae,  etc.,  Co.  v.  Simon.  1565. 
Thompkins  v.  Butterfield.  1088. 
Thonipkins  v.  Little     Rock,     etc.,    R'y, 

1271. 
Thompson  v.  Abbott,  963. 
Thompson  v.  Alger,  465.  470. 
Thompson  v.  Bell,  1090. 
Thorn pson  v.  Bemis,  etc..  Co.,  730. 
Thompson  v.  Brown,  653. 
Thompson  v.  Candor,  880. 
Thompson  v.  City  of  Peru,  134,  141. 
Thompson  v.  Cummings,  470. 
Thompson  v.  Erie  R  Co.,  371,  373,  375, 

682,  684,  1194. 
Thompson  v.  Greeley,  984,  1429. 
Thompson  v.  Guion,  233,  629,  63a 
Thompson  v.  Holladay,  583. 
Thompson  v.  Huron    Lumber  Co.,   894, 

990,  1264. 
Thompson  v.  Jewell.  284. 
Thompson  v.  Kelley,  136, 140. 
Thompson  v.  Lambert,  1130,  1185,  1192, 

1248,  1261. 
Thompson  v.  Lee  County,  131,  132,  147, 
Co.,  1231. 

Thompson  v.  McKee.  1086. 
Thompson  v.  Meisser,  248,  286,  299,  300. 
Thompson  v.  Moxey,  417. 
Thompson  v.  Natchez,  etc.,  Co.,  1293. 


TABLE    OF    CASES. 


clxxxvii 


[Tlie  references  are 

Thompson  v.  N.  Y.,  etc.,  R  R.  Co.,  1578. 
Thompson  v.  Page,  113. 
Thompson  v.  Patrick,  591. 
Thompson  v.  Penn.  R  R,  1563. 
Thompson  v.  People,  885. 
Thompson  v.  Perrine.  144,  1944. 
Thompson  v.  Pittston,  139. 
Thompson  v.  Reno  Savings   Bank,   109, 

110,  160,  230,  238,  243,  249,  258. 
Thompson  v.  St.  Nicholas  Nat'l  Bank, 

596,  783,  1197. 
Thompson  v.  Scott,  1433,  1447,  1456. 
Thompson  v.  Society  of  Tammany,  1025. 
Thompson  v.  Stanley,  1137. 
Thompson  v.  Swoope,  1001. 
Thompson  v.  Toland,  437,  573,  590,  591, 

594,  597,  789. 
Thompson  v.  Universal,  etc.,  Co.,  1191. 
Thompson  v.  Waters,  2,  1000,  1001. 
Thompson  v.  White,   etc.,   R.    R,    1382, 

1383,  1395. 
Thompson  v.  Williams,  1061. 
Thompson  v.  Young.  1092. 
Thompson  v.  Natchez  Water  &  Sewer 

Co.,  1409. 
Thompson's  Appeal,  738. 
Thompson's  Estate,  In  re,  738. 
Thompson,  Matter  of,  967. 
Thompson  Nat.  Bank  Cases,  337. 
Thomson  v.  Davenport,  570. 
Thomson  v.  Lee  County,  1239. 
Thomson  v.  McGregor,  1460. 
Thomson  v.  Pacific  Railroad  Co.,    1945, 

1951. 
Thomson's  Appeal,  743. 
Thomson's  Case,  37. 
Thorington  v.  Gould,  1057,  1100. 
Thorington  v.  Montgomery,  1948. 
Thornburgh  v.   Newcastle  &   Danville 

R.  R.  Co.,  187,  199. 
Thorndike  v.  Locke,  465. 
Thorne  v.  Travelers'  Ins.  Co.,  1005. 
Thornton  v.  Balcom  et  al.,  310,  H89. 
Thornton  v.  Lane,  250,  303. 
Thornton  v.  Marginal  Freight  R'y  Co., 

861. 
Thornton  v.  Nat'l  Exchange  Bank,  987. 
Thornton  v.  St.  Paul,  etc.,  R'y,  450,  455. 
Thornton  v.  Wabash  R'y  Co.,  864,  1474. 
Thoroughgood's  Case,  90. 


to  tlw  foot-paging.] 

Thorp  v.  Woodhull,  24,  33,  101,  220,  522, 

5S4. 
Thorpe  v.  Hughes,  202. 
Thorpe  v.  Rutland  &  Burlington  R'y,  626, 

1515. 
Thouron  v.  East  Tenn.,  etc.,  R'y,  932, 

1135,  1158,  1500,  1505,  1506. 
Thrasher  v.  Pike  Co.,  etc.,  R  R.  Co.,  114. 
Throop  v.  Hatch,  etc.,  Co.,  941. 
Thurber  v.  Crump,  455. 
Thurber  v.  Thompson,  73. 
Thurman  v.  Cherokee  R.  R,  1447. 
Thurn  v.  Alta  Tel.  Co.,  1593. 
Thurston  v.  Duffy,  73. 
Thweatt  v.  Bank  of  Hopkinsville,  994. 
Ticonic  Water-power  Mfg.  Co.  v.  Lang, 

109,  123,  127,  226. 
Tidewater  Co.  v.  Coster,  1526. 
Tifft  v.  Porter,  404,  406. 
Tifft  v.  Quaker,  etc.,  Bank,  1041. 
Tift,  In  re,  1168. 
Tileston  v.  Newell,  1049. 
Tilford,  etc.,  Co.  v.  Gerhab,  617. 
Tilkey  v.  Augusta,  etc.,  R  R.,  454,  906. 
Tilley  v.  County  of  Cook,  580. 
Tillinghast  v.   Troy,   etc.,   R   R.    1314, 

1322,  1328,  1340. 
Tilsonburg,  etc.,  Co.  v.  Goodrich,  92,  94, 

215. 
Timlow  v.  Philadelphia  &  Reading  Rail- 
road Co.,  11. 
Tingley  v.  Bellingham,  etc.,  Co.,,  1056, 

1097. 
Tinker  v.  Van  Dyke,  292. 
Tinkler,  In  re,  742. 
Tinsley's  Case,  475. 
Tioga  R  R  Co.  v.  Blossburg,  etc.,  R  R 

Co.,  998. 
Tippecanoe  Co.,  Board  of,  v.  Lafayette, 

etc.,  R  R  Co.,  1150. 
Tippets  v.  Walker,  22,  1105. 
Tippling  v.  Pexall,  2. 
Tipton,  County  of,  v.  Locomotive  Works, 

156. 
Tisdale  v.  Harris,  24,  464 
Titcomb  v.  Kennebec,  etc.,  Co.,  891, 1587. 
Titcomb  v.  Union  Marine  Ins.  Co.,  610, 

695. 
Titus  v.  Cairo,  etc.,  R  R  Co.,  1054,  1074, 

1075. 


clxxxviii 


TABLE    OF    CASES. 


[The  references  are 

Titus  v.  Cortelyou,  679. 
Titus  v.  Ginheimer,  1370. 
Titus  v.  Great,  etc..  Road  Co.,  395. 
Titus  v.  May  bee,  1370. 
Titus  v.  Poole,  792. 

Titus  v.  President,  etc.,  of  G.  W.  Turn- 
pike Road,  27. 
Tobacco  Pipe  Makers  v.  Woodraffe,  1022. 
Tobey  v.  Hakes,  531. 
Tobey  v.  Robinson,  42,  53,  450. 
Tobey  v.  Russell.  262. 
Tobin  v.  Western  U.  T.  Co..  159a 
Tobin.  etc..  Co.  v.  Fraser,  922. 
Tockerson  v.  Chapin,  491. 
Todd  v.  Kentucky,  etc.,  R'y  Co.,  1391. 
Todd  v.  Emly.  661. 
Todd  v.  Taft,  460. 
Todd,  County  of,  v.  St.  Paul,  etc.,  R  R. 

Co..  774. 
Tolchester,  etc.,  Co.  v.  Steintneier,  1009. 
Toledo,  Bank  of,  v.  International  Bank, 

881. 
Toledo,  etc.,  Co.  v.  Thomas.  1174 
Toledo,  etc.,  R*y  v.  Beggs,  1432. 
Toledo,  etc.,  R"y   v.    Pennsylvania    Co., 

1524. 
Toledo,  etc.,  R    R    v.    Hamilton,    1364, 

1390,  1395. 
Toledo,  etc.,  R  R  v.  Hinsdale,  126. 
Toledo,  etc.,  R.  R.  v.  Johnson,   234,   877. 
Toledo,  etc.,  R  R  Co.  v.  Prince,  1089. 
Toledo,  etc.,  R  R  Co.  v.  Rodreques,  1089. 
Toll-bridge  Co.  v.  Betsworth.  1112,  1113. 
Toll-bridge  Co.  v.  Osborn,  756.  774.  1428. 
Tolleson  v.  Peopled  Saw  Bank,  1428. 
Tom  v.  First  Society,  etc.,  1164. 
Toinbigbee  R  R  Co.  v.  Kneeland,  1173. 
Tomblin  v.  Callen,  474. 
Tome  v.  King,  1459. 
Tome  v.  Parkersbuig,    etc.,   R   R    Co., 

395,  397,  398. 
Tomkinson  v.  Balkis,  etc..  Co..  534. 
Tomkinson  v.  South,  etc.,  R'y  Co.,  1248, 

1538. 
Tomlin  v.  Tonica  &  Petersburg  R  R 

Co.,  170,  171. 
Toml.inson  v.  Branch.  770,  773,  1943. 
Tomlinson  v.  Bricklayers',  etc.,  955. 
Tomlinson  v.  Bury,  405,  407,  412. 
Tomlinson  v.  Jessup,  638,  773,  1943. 


to  the  foot-paging.'] 

Tomlinson  v.  Miller.  465. 

Tomlinson  v.  Tomlinson.  22. 

Tommey   v.    Spartanburg,   etc.,   R    R, 

1390,  1396. 
Tompkins  v.  Little  Rock,  etc.,  R'y,  1276, 

1277,  1368. 
Thompson  v.  Huron  Lumber  Co.,  1354, 

1429. 
Tonawanda,  etc.,  R  R  Co.  v.  N.  Y.  R 

R.  845,  loll. 
Toner  v.  Fulkerson,  276.  321. 
Tonic,  etc.,  R  R.  Co.  v.  Stein,  100, 188, 
Tonssig  v.  Glenn,  94. 
Tooke,  Ex  parte.  693. 
Topeka  Bridge  Co.  v.  Cummings,  222. 
Topeka,  etc.,  v.  Hale.  189.  214,  345. 
Topeka,  etc.,  v.  Martin.  109L 
Topham  v.  Greenside.  etc.,  Co.,  1251. 
Tophff  v.  McKendree,  452. 
Topouce  v.  Corinne,  etc.,  Co.,  930. 
Topping  v.  Bickford.  1095. 
Torbett  v.  Godwin.  275. 
Toronto,  etc.,  Co.  v.  Chicago,  etc.,  R  R, 

436. 
Torrey  v.  Bank  of  Orleans,  566,  923. 
Torry  v.  Baker,  856. 
Tot  ten  v.  Tison,  360,  371. 
Toucey  v.  Bo  wen,  280,  282. 
Touche    v.  Metropolitan    R'y.  etc,  Co., 

1045. 
Tourine  Co.,  In  re,  1072. 
Towar  v.  Hale,  665. 
Town  v.  Bank,  etc.,  Raisin,  862. 
Town  Council,  etc.,  v.  Elliott,  449. 
Town  of  Cicero  v.  Clifford,  1232. 
Town  of   Concord  v.  Portsmouth  Sav- 
ings Bank,  153. 
Town  of  Douglass  v.    Niantic  Savings 

Bank,  150. 
Town  of  Duanesburgh  v.  Jenkins.  147. 
Town  of  Dundas  v.  Desjardins  Canal 

Co.,  127s. 
Town    of  East   Lincoln    v.  Davenport, 

155. 
Town  of  Genoa  v.  Woodruff,  1237. 
Town  of  Lyons  v.  Chamberlain,  136. 
Town  of  Mentz  v.  Cook,  136. 
Town  of  Middletown  v.  Boston,  etc.,  R 

R,  14S8. 
Town  of  Newark  v.  Elliott,  995. 


TABLE    OF    CASES. 


clxxxix 


[Tlie  references  are 

Town  of  Plainview  v.  Winona,  etc.,  R 

R  Co.,  140. 
Town  of  Platteville  v.  Galena,  etc.,  R  R. 

Co.,  151. 
Town  of  Queensbury  v.  Culver,  133. 
Town  of  Reading  v.  Wedder,  156. 
Town  of  Scipio  v.  Wright.  133. 
Town  of  Solon  v.  Williamsburg  Savings 

Bank,  136. 
Town  of  Springfort  v.  Teutonia  Savings 

Bank.  136. 
Town  of  Windsor  v.  Hallett,  146,  150. 
Towne  v.  Rice.  1228. 
Townes  v.  Nichols,  530. 
Townsend  v.  Fulton,  etc.,  Co.,  1600. 
Townsend  v.  Goewey,  663,  668,  669. 
Townsend  v.  Gray,  970. 
Townsend  v.  Martin,  405. 
Townsend  v.  Mclver,  524.  526.  528,  531. 
Townsend  v.  U.  S.  Trust  Co.,  739. 
Townsend's  Case,  96. 
Townsend,  In  re,  822.  1526. 
Townsend,  Matter  of,  999,  1527. 
Township  of  Pine  Grove  v.  Talcott,  135. 
Tracy  v.  Guthrie,  etc.,  Soc,   1072,  1073, 

1089. 
Tracy  v.  Talmage.  421,  425.  666,  984. 
Tracy  v.  Yates,  350.  351.  352. 
Trade  Auxiliary  Co.  v.  Yickens.  981. 
Tradesmen's  Nat'l  Bank  v.  Manhattan, 

etc.,  Co.,  1077. 
Traders',  etc.,  Bank  v.  Lawrence,  etc., 

Co.,  1392. 
Traders',  etc.,  Ins.  Co.  v.  Brown,  17,  708, 

891,  1587. 
Traders'  Nat'l  Bank  v.  Lawrence  Mfg. 
Co.,  1206,  1295. 

Trafford  v.  Boehm,  433. 

Transportation  Co.  v.  Beatty,  944. 

Transportation  Co.  v.  Parkersburg,  1599, 
1946. 

Transportation  Co.  v.  Wheeling,  1946. 

Trask  v.  Jacksonville,  etc.,  R  R.,  1225. 

Trask  v.  Maguire,  747.  74& 

Trask  v.  Peekskill,  etc..  Co.,  1507. 

Trask  v.  Railroad,  1216. 

Traver  v.  Eighth  R  R  Co.,  1018. 

Travers  v.  Kansas  Pac.  R'y,  1011. 

Travers  v.  Leopold,  586. 

Travis  v.  Standard,  etc.,  Ins.  Co.,   1009. 


to  the  foot-paging.'] 

Treadwell  v.  Salisbury  Manuf.  Co.,  858, 

958. 
Treasurer  v.  Commercial  Coal  Min.  Co., 

461. 
Treat  v.  Hiles,  665. 
Tied  wen  v.  Bourne,  228,  665. 
Tregear  v.  Etiwanda,  etc..  Co.,  583. 
Tremain  v.  Guardian,  etc.,  Ins.  Co.,  1158. 
Trent  etc.,  Road  Co.  v.  Marshall,  1019. 
Trenton  Bank  v.  Haversteck.  1020. 
Trenton,  etc..  Co.  v.  Woodruff,  1116. 
Trenton  Ins.  Co.  v.  Johnson,  468. 
Trester  v.  Missouri  Pac.  R'y,  1528. 
Trevor  v.  Whitworth,  414. 
Trimmer  v.  Penn.,  etc..  R.  R  Co.,  1154. 
Trinder  v.  Trinder,  407,  408. 
Trinity  I  hurch   Wardens,  etc.,  v.  Hall, 

1015. 
Tripp  v.  Appleman.  355. 
Tripp  v.  New.  etc..  Co.,  1112. 
Tripp  v.  Northwestern  Nat'l  Bank,  988, 

1068. 
Trippe  v.  Huncheon,  296. 
Trisconi  v.  Winship,  644.  975. 
Trott  v.  Sarchett,  126,  188 
Trott  v.  Warren.  887,  1070,  1093. 
Troup's  Case,  1186. 
Trowbridge  v.  Scudder,  313. 
Troy,  etc..  R  R.  v.  Boston,  etc.,  R'y,  1498, 

1504,  1530. 
Troy,  etc..  R.  R  Co.  v.  Kerr,  94,  174,  235, 

632,  636,  863. 
Troy,  etc.,  R  R  Co.  v.   McChesney,  174, 

1058. 
Troy,  etc.,  R  R.  Co.  v.  Tibbits,    97,  114. 

120,  121.  174.  378. 
Troy,  etc.,  R  R  Co.  v.  Warren.  108.  110. 
Troy  &  Greenfield  R.  R  Co.  v.  Newton, 

36.  226.  227,  229. 
Troy  Ins.  Co.  v.  Carpenter,  1113.  1115. 
Troy  Iron  &  Nail   Factory   v.  Corning, 

661. 
Trust  Nat'l  Ins.  Co.  v.  Salisbury.  1302. 
Trustees  v.  Greenough,  1158,  1309,  1356, 

1357.  1458. 
Trustees,  etc.,  v.  Bosseiux,  1032. 
Trustees,  etc.,  v.  Flint,  1023. 
Trustees,  etc.,  v.  Gibbs.  887. 
Trustees,  etc.,  v.  Hart's  Ex'rs,  666. 
Trustees,  etc.,  v.  McKechnie,  1271,  1295. 


cxc 


TABLE    OF    CASES. 


{The  references  are 

Trustees,  etc.,  v.  Stewart,  93. 
Trustees,  etc.,  v.  Tufts,  405,  411. 
Trustees,  etc.,  in  Lerant  v.  Parks,  1019. 
Trustees  M.  E.  Church  v.  Troyon,   1018. 
Trustees  of  Canandaigua    Academy  v. 

McKechnie,  1100. 
Trustees  of  Dartmouth  Colloge  v.  Wood- 
ward, 626,  1941. 
Trustees  of  Eminence  v.  Deposit  Bank, 

762. 
Trustees  of  Free  School  v.  Flint,  323, 325. 
Trustees  of  N.  W.  College  v.  Schwalger, 

1016. 
Trustees  of  the  Louisiana  Paper  Co.  v. 

Waples,  261. 
Trustees  of  the  Presbyterian  Society  v. 

Auburn  &  Rochester  R.  Co.,  11. 
Trustees  of  the  School  District  v.  Gibbs, 

840. 
Trustees  of  Smith  Charities  v.  Connelly, 

1078. 
Trustees  of  Vernon  v.  Hills,  245. 
Trundy  v.  Hartford,  etc.,  Co.,  1054. 
Tryon  v.  White,  etc.,  Co.,  1055. 
Tuchband  v.  Chicago,  etc.,  R  R,  1176. 

1177. 
Tuckahoe  Canal  Co.  v.  Tuckahoe  R  R 

Co.,  1578. 
Tuckahoe,  etc.,  R'y  Co.  v.  Baker,  1415. 
Tucker  v.  Aiken,  749. 
Tucker  v.  Ferguson,  1943. 
Tucker  v.  Gilman,  262,  342. 
Tucker  v*  St.  Louis,  etc.,  R.  R  Co.,  1089. 
Tucker  v.  Wilson,  601. 
Tucker's  Case.  97. 

Tucker,  etc.,  Co.  v.  Fairbanks,  1106. 
Tuckerman  v.  Brown,  212. 
Tully  v.  Tranor,  789. 
Tumacacori,  In  re,  861. 
Tunesma  v.  Schuttler,  289. 
Tunis  v.  Hestouville,  etc.,  RR,  822,  828, 

838. 
Tunison  v.  Detroit,  etc.,  Co.,  1090. 
Turgeau  v.  Brady,  1416. 
Turnbull  v.  Payson,  91,  93. 
Turnbull  v.  Prentiss  Lumber  Co.,  257. 
Turner  v.  Commissioners,  etc.,  134. 
Turner  v.  Grangers'  L  &  H.  Ins.    Co.. 

209. 
Turner  v.  Hannibal,  etc.,  R  R;  1448. 


to  the  foot-jHiging.] 

Turner  v.  Indianapolis,   etc.,   R'y,  1339, 

1347,  1358,  1400,  1422,  1441. 
Turner  v.  May,  460,  463. 
Turner  v.  North  Beach  &  M.  R  R  Co., 

1010,  1011. 
Turner  v.  Ontonagon,  etc.,  Co.,  664. 
Turner  v.  Peoria,  etc.,  R.  R.,  1454. 
Turner  v.  Turner,  408. 
Turnpike  Co.  v.  Davidson  County,  1591. 
Turnpike  Co.  v.  Illinois,  890,  991,  1592. 
Turnpike  Co.  v.  McKean,  1070. 
Turnpike  Co.  v.  State,  866,  1593,  1942. 
Turquand  v.  Marshall,  1031. 
Tuscaloosa  Mfg.  Co.  v.  Cox,  981. 
Tuscaloosa,  etc.,  Co.  v.  Perry,  190. 
Tuskaloosa,  etc.,  Association   v.  Green, 

861. 
Tussand  v.  Tussand,  1015. 
Tuthill,  etc.,  Co.  v.  Shaver,  etc..  Co..  1111. 
Tuttle  v.  Michigan  Air   Line   Co.,    235, 

634,  801,  802,  803,  1494. 
Tuttle  v.  Walton,  687,  691,  695,  699. 
Tutweiler  v.  Tuscaloosa,   etc.,  Co.,  174, 

1145,  1147,  1157. 
Tweedy  v.  Bogart,  615. 
Twelfth,  etc.,  Co.  v.  Phil.,  etc.,  R.  R,  1530. 
Twelfth  Street  Market  v.  Jackson,  1064, 

1076. 
Twin  Creek,  etc.,  Co.  v.  Lancaster,  112, 

113. 
Twin  Lick  Oil  Co.  v.  Marbury,  937. 
Twycross  v.  Grant,  193,  910,  912. 
Tylee  v.  Yates,  984. 
Tyler  v.  Beecher,  1526,  1527. 
Tyler  v.  Savage,  195,  202,  482,  492. 
Tyng  v.  Clarke,  297. 
Tyng  v.  Commercial,  etc.,  Co.,  987. 
Tyrrell  v.  Bank  of  London,  906,  913. 
Tyrrell  v;  Washburn,  66S,  670. 
Tysen   v.*  Wabash   R'y,  965,  1194,  1228, 

1273,  1407,  1547. 
Tyson  v.  Mahone,  1146. 
Tyson  v.  School  Directors,  139. 

IT. 

Uline  v.  N.  Y.  C,  etc.,  R  R.  1562. 
Ulrich  v.  N.  Y„  etc.,  R  R,  1537. 
Ulster,  etc.,  Inst  v.  Fourth,  etc.,  Bank, 
433. 


TABLE    OF    CASKS. 


CXC1 


[TJic  references  are 

Ulster  R'y  v.  Banbridge  R'y,  940, 1183. 
Umsted   v.  Buskirk,    256,  257,  259,  269, 

278,  289,  290,  305. 
Uncas  National  Bank  v.  Rith,  12G9. 
Underbill  v.  Gibson.  977. 
Underbill  v.  Santa    Barbara,    etc.,    Co., 

1100,  1103.  1110,  1186.  1189. 
Underwood  v.  New  York,  etc.,  R  R  Co., 

713. 
Underwood,  etc.,  Co.  v.  Pelican,  etc.,  Co., 

1600. 
Union  Agric.  &  Stock  Ass'n  v.  Mill,  632. 
Union  Bank  v.  Geary,  1165. 
Union  Bank  v.  Jacobs,  1185,  1190. 
Union  Bank  v.  Knapp,  1070. 
Union  Bank  v.  Laird,  547,  687,  689,  692, 

693,  697. 
Union  Bauk  v.  McDonougb,  98. 
Union  Bank  v.  Owen,  19. 
Union  Bank  v.  Ridgely,  1021,  1024,  1058, 

1068.  1093.  1095,  1096. 
Union  Bank  v.  State,  753,  758. 
Union  Bank  v.  Wando  Mining  Co.,  297. 
Union  Bank,  etc..  v.  Ellicott,  955. 
Union  Bank  of  Tennessee  v.  State,  22. 
Union  Bridge  Co.  v.  Troy  &  L.  R.  R.  Co., 

1099. 
Union  Canal  Co.  v.  Gilfallan,  1479. 
Union  Canal  Co.  v.  Lloyd,  1114,  1122. 
Union  Canal  Co.  v.  Yonng,  884. 
Union  Cattle  Co.  v.  International   Trust 

Co.,  602,  1197,  1223,  1224. 
Union  Cement  Co.  v.  Noble,  1165. 
Union  Central  L  I.  Co.  v.  Tbomas.  1002. 
Union  Depot  R  Co.  v.  Southern  R'y  Co. 

et  al.,  1569. 
Union,  etc.,  Co.  v.  Jenkins,  112,  113,  174. 
Union,  etc.,  Co.  v.  Southern,  etc.,  Co.,  71, 

806,  1196,  1206,  1216, 1224,  1226,  1373. 
Union,  etc.,  Co.,  Re,  394. 
Union,  etc.,  Ins.  Co.  v.  Keyser,  1022. 
Union,  etc..  Ins.  Co.  v.   Union,  etc.,  Co., 
1239, 1283, 1336, 1352, 1360, 1410, 1417. 
Union,  etc.,  R  R  Co.  v.  East,  etc.,  R  R 

Co.,  1528. 
Union  Gold,    etc.,    Co.   v.   Rocky,    etc., 
Bank,   984,    1049,    1070,    1087,    1089, 
1098,  1100,  1101,  1185,  1186. 
Union  Hill  Company,  Ex  parte,  803. 
Union  Hill,  etc.,  Co.,  Re,  807. 


In  the  foot-paging.] 

Union  Hotel  Co.  v.  Hersoe,  101,  10",,  110, 

122,  123,  236,  632. 
Union  H.  Co.  v.'Plume,  etc.,  Co.,  970. 
Union  I.  Co.  v.  St  Louis,  etc.,  R'y,  1336. 
Union  Ins.  Co.  v.  White,  1109. 
Union  Ins.  Co.,  In  re.  799,  ^10,  816,  817. 
Union  Iron  Co.  v.  Pierce,  293,  030. 
Union  Lock  &  Canal  Co.,  Prop,   of,   v. 

Towne,  633.  641. 
Union  L.  &  T.  Co.  v.  Southern  Cal.,  etc., 

Co.,  1394,  1401,  1574. 
Union  Manuf.  Co.  v.  Pitkin,  1095. 
Union  Mutual,  etc.,  Ins.  Co.  v.  White, 

1074. 
Union  Mutual  F.  I.  Co.  v.  Keyser,  986. 
Union  M.  L.   Ins.    Co.    v.   Frear  Stone 

Manuf.  Co.,  49,  56,  189,  248. 
Union  Mut.  L.  I.  Co.  v.  McMillan,  1005. 
Union  Natl  Bank  v.  Byram,  20,  612. 
Union  Nat'l  Bank  v.  Carr,  473. 
Union  Nat'l  Bank  v.  Chicago.  767. 
Union  Nat'l  Bank  v.  Miller,  1182. 
Union  Nat'l  Bank  v.  Wheeler,  1207. 
Union  Nat'l  Bank  v.  Hunt,  420,  479. 
Union  &  P.  Bank  v.  Farrington.  587. 
Union  Pacific  R'y  v.  Chicago,  etc.,  R'y. 

804,  890,  951,  1050,  1056,  1071.  1100, 

1509. 
Union  Pacific  R'y  Co.  v.  Leavenworth, 

etc.,  R'y  Co..  1530. 
Union  Pacific  R  R.  Co.  v.  Durant,  905. 
Union  Pacific  R  R.  Co.  v.  Hall,  1522, 

1950. 
Union   Pacific  R.   R  Co.  v.    McComb, 

1182. 
Union  Pacific  R.  R.  Co.  v.  Credit  Mobilier, 

904,  931. 
Union  Pacific  R  R.  Co.  v.  Smith,  138, 

139. 
Union  Pacific  R.  R.  Co.  v.  United  States, 

726. 
Union  R  R  Co.  v.  Dull,  904/ 
Union  Rubber  Co.  v.  Hibbard.  320. 
Union  Sav.  Ass'n  v.  Seligmr.n.  330. 
Union  Screw  Co.  v.  Amer.,  etc.,  Co.,  711. 
Union  Trust  Co.  v.  Chicago,  etc.,  R  R, 

1455. 
Union  Trust  Co.  v.  111.  Mid.  R'y.  1399, 

1402.    1410,    1450,    1453,    1456.    1490, 

1505. 


cxcu 


TABLE    OF    CASES. 


[The  references  are 

Union  Trust  Co.  v.  Monticello.  etc.,  R  R, 

1233,  1234. 
Union  Trust  Co.  v.  Morrison,  1243,  1287, 

1306.  1360,  1361. 1364, 1371,  1374, 1396. 
Union  Trust  Co.  v.  N.  Y.,  etc.,  R  R.  74, 

1194.  1213,  1215,  1217.  1229,  1272. 
Union  Trust  Co.  v.  Rockford,  etc.,  R  R, 

1343. 
Union  Trust  Co.  v.  Rochester  &  Pitts- 
burgh R  R  Co.,  932.  1542,  1547. 
Union  Trust  Co.  v.  St.  Louis,  etc.,  R'y, 

1277.  1323,  1337.  1405. 
Union  Trust  Co.  v.  Souther.  1399. 
Union  Trust  Co.  v.  Southern    Nav.  Co., 

1305. 
Union  Trust  Co.  v.  Walker,  1400. 
Union  Turnpike  Co.  v.  Jenkins.  1106. 
Union  Turnpike  Co.  v.  McKean,  220. 
Union  Water    Co.    v.    Murphey's    Flat 

Flumiug  Co.,  983,  1261. 
United,  etc.,  Assoc,  v.  Benshimol,  887 
United,  etc.,  Co.  v.  Boston,  etc.,  Co..  1383. 
United  Fire  Association  v.    Bensraan. 
t  1021. 

United  Lines  Tel.  Co.  v.  Boston,  etc.,  Co., 

426.  1214. 
United  Service  Co..  In  re,  862. 
United  Soc.  v.  Eagle  Bank,  214. 
United  Society  v.  Underwood,  1031. 
United  States  v.  Amedy,  1019. 
United  States  v.  American  Bell  Tel.  Co., 

1178. 
United  States  v.  B.  &  O.  R  R  Co.,  1012. 
United  States  v.  Berry,  843. 
United  States  v.  Britton.  421,  496. 
United  States  v.  Central  Pac.  R  R,  726. 
United  States  v.  City  Bank,  etc.,  1086. 
United  States  v.  Columbian  Ins.  Co.,  830. 
United  States  v.  Cutts,  515,  518,  547,  585, 

586. 
United  States  v.  Dailaun,   244,   250,   254, 

255,  288. 
United  States  v.  Deveaux,  2. 
United  States  v.  Distillery,  17,  1012. 
United  States  v.  Fox,  1001.  1020. 
United  States  v.  Globe  Works,  731. 
United  States  v.  Insurance     Co.,     1167, 

1173. 
United  States  v.  Jefferson  Co.,  143. 
United  States  v.  Jellico,  etc.,  Co.,  650. 


to  the  foot-paging.] 

United  States  v.  Kane,  1437. 

United  States  v.  Kansas  Pac.  R  R,  726. 

United  States  v.  Knox,  304. 

United  States  v.  Louisville,'   etc.,   Canal 

Co.,  829,  1418,  1578. 
United  States  v.  Masich,  1411. 
United  States  v.  McKeldon,  800, 806.  808. 
United  States  v.  Memphis,  etc.,  R  R  Co., 

1169. 
United  States  v.  Nelson,  650. 
United  States  v.  New  Orleans,    etc.,   R. 

R.,  133,  1335.  1375,  1383,  1386,  1387. 
United  States  v.  Patterson,  650. 
United  States  v.  Planters'  Bank,  154. 
United  States  v.  Railroad   Bridge  Co., 

1529. 
United  States  v.  Railroad  Co.,  755,  758. 
United  States  v.  San  Pedro,  etc.,  Co., 

1117. 
United  States  v.  Sioux  City  &  Pac.  R. 

R,  726. 
United  States  v.  Southern  P.  R  R,  889, 

1180. 
United  States  v.  Trans-Missouri  Freight 

Assoc,  648,  1512. 
United  States  v.  Trinidad  Coal  Co.,  2, 

995. 
United  States  v.  Union  Pacific  Railroad 

Co..  874,  1277.  1522,  1948. 
United  States  v.  Vaughan,  469,  517,  548, 

617. 
United  States  v.  W.  P.  R  R  Co.,  1126. 
United  States  v.  Walters,  748,  1020. 
United  States  v.  Western  U.  Tel.  Co., 

873,  1593,  1595. 
United  States  Bank  v.  Dana,  1055. 
United  States  Bank  v.  Dandridge,  1058, 

1068,  1086,  1094,  1106. 
United  States  Bank  v.  Dunn,  1075.  10S6. 
United  States    Bank  v.  Lyon  County, 

493.  1201. 
United  States  Bank  v.  Stearns,  1166. 
United  States,   etc.,   Agency,  Matter  of, 

1015. 
United  States,  etc.,  Co.  v.  Reed,  926, 1130. 
United   States  Exp.   Co.    v.    Back  man, 

1579. 
United  States  Exp.  Co.  v.  Henderson,  685. 
United  States  Exp.  Co.  v.  Lucas,  1003. 
United  States  Ins.  Co.  v.  Shriver,  1117. 


TABLE    OF    CASKS. 


CXC111 


[27ie  references  are  to  the  foot-paging.] 


United  States  Life  Ins.  Co.   v.    Adams, 

1005. 
United  States  Mortgage  Co.  v.  Grass,  987, 

1000. 
United  States  Mortg.  Co.  v.  Sperry,  987. 
United  States  R  Stock  Co.  y.  Atlantic, 

etc.,  R  R  Co.,  931. 
United  States  Rolling-stock  Co.,  Matter 

of,  1345,  1454,  1542. 
United   States  Trust  Co.    v.   Brady,   2, 

986. 
United  States  Trust  Co.  v.  Harris,  421, 

1430. 
United  States  Trust  Co.  v.  Lee,  1000. 
United  States  Trust  Co.  v.  N.  Y..  etc., 
Ry,    859,    1399,    1402,     1408,    1421, 
1459. 
United  States  Trust  Co.  v.  United  States 

Fire  Ins.  Co..  431. 
United  States  Trust  Co.  v.  Wabash  Ry, 

1371,  1380. 
Unity  Insurance  Co.  v.  Cram,  97.  309. 
Universal,  etc.,  Co.  v.  Tabor,  256,  261. 
Universal  Stock  Exch.  v.  Stevens,  468. 
University  v.  People,  771,  1943. 
Unthank  v.  Henry  County  T.  Co.,  171. 
Upfill's  Case,  1037. 
Upper,  etc.,  Co.  v.  Whittaker,  1177. 
Upson,   etc.,    R  R   v.    Sharmon,    1488, 

1504 
Upton  v.  Burnham,  56,  239,  343,  345,  524, 

525. 
Upton  v.  Englehart,  196,  200,  210. 
Upton  v.  Hansbrough,  56,  195,  230,  248, 

265,  343. 
Upton  v.  Hubbard,  1424. 
Upton  v.  Jackson,  390,  640. 
Upton  v.  Tribilcock,  56,  61,  80,  87,  111, 

112,  189,  196,  210,  239,  265. 
Uruguay,  etc.,  Ry  Co.  In  re,  862. 
Utica  Bank  v.  Hilliard,  683. 
Utica  Bank  v.  Smalley,  19,  687,  689,  694. 

699,  708,  1166. 
Utica,  etc.,  Co.  v.  Til  man,  1167. 
Utica,  etc..  R  R  Co.  v.  Brinkerhoff,  93. 
Utica  Ins.  Co.  v.  Bloodgood,  985. 
Utica  Ins.  Co.  v.  Caldwell,  19,  985. 
Utica  Ins.  Co.  v.  Kip,  985. 
Utica  Ins.  Co.  v.  Scott,  985. 
Utley  v.  Clark-Gardiner  L  M.  Co.,  1002. 
M 


Vaca,  etc.,  R  R  v.  Mansfield,  1101. 

Vail  v.  Hamilton,  421,  830,  1264,  1272. 

Vail  v.  Jameson,  989. 

Vail  v.  Reynolds,  488,  792. 

Vail  v.  Rice,  580. 

Vale  Mills  v.  Spalding,  348. 

Valk  v.  Crandall,  34,  113. 

Vallams  v.  Fletcher,  103. 

Vallance,  Ex  parte,  22. 

Valle  v.  Ziegler,  752,  757. 

Valley  Bank   &  Savings  Institution  v. 

Sewing  Society,  864. 
Valley  Nat'l  Bank  v.  Crowell,  587. 
Valley  Ry  Co.  v.  Lake  Erie  Iron  Co., 

426. 
Valpy,  Ex  parte,  911. 
Van  Aernam  v.  Bleistein,  671,  1008. 
Van  Aernam  v.  McCune,  1008. 

Van  Allen  v.  Assessors,  20,  26,  760,  761, 
764 

Van  Allen  v.  Illinois,  etc.,  R  R  Co.,  91, 
101,  165,  383. 

Van  Allen,  In  re,  1430. 

Van  Amburgh  v.  Baker,  854 

Van  Blarcom  v.  Broadway,  585. 

Van  Blarcom  v.  Daget,  745. 

Van  Cise  v.  Merchants'  Nat'l  Bank,  622. 

Van  Cott  v.  Van  Brunt,  36,  62, 64,  65,  74. 
79,  297,  1210. 

Van  Doren  v.  Olden.  739. 

Van  Dresser  v.   Oregon,  etc.,  Nav.  Co., 
1183. 

Van  Dyck  v.  McQuade,  714.  722,  1032, 
1130. 

Van  Dyke  v.  Stout,  99. 

Van  Gestel  v.  The  Van  Gestel  Electric- 
Street  Car  Co.,  66. 

Van  Glahn  v.  De  Rosset,  861. 

Van  Hastrup  v.  Madison,  132. 

Van  Hoffman  v.  Quincy,  132,  1942. 

Van  Hook  v.  Somerville,  etc.,  Co..  1070. 

Van  Hook  v.  Whitlock,  283,  288,  304 

Van  Horn  v.  Corcoran,  309. 

Van  Home  v.  Newark,  etc.,  R'y,  1560. 

Van  Kleuren  v.  Central  R  R,  1381. 

Van  Leuven  v.  First  Nat'l  Bank,  1103. 
Van  Ness  v.  Fisher,  659,  671. 


CXCIV 


TABLE    OF    CASES. 


[The  references  are 

Van  Norman  v.  Central  Car,  etc.,  Co., 

716. 
Van  Norman  v.  Jackson  County  Circuit 

Judge,  608,  609,  611. 
Van  Pelt  v.  U.  S.,  etc.,  Co.,  255. 
Van  Riper,  Ex  parte,  291,  292. 
Van  Sandan  v.  Moore,  321,  666. 
Van  Schmidt  v.  Huntington,  858. 
Van  Slyke  v.  State,  764. 
Van  Valkenburgh  v.  Thomas ville,  etc., 

R  R  Co.,  904. 
Van  Voorhis  v.  Rea,  591. 
Van  Weel  v.  Winston,  191,   1141,  1200, 

1331,  1332. 
Van  Wickle  v.  Camden  &  A.  R  R  Co., 

1524 
Vaunatta  v.  State  Bank,  986. 
Vance  v.  Bank  of  Ind.,  1166. 
Vance  v.  Erie  R'y  Co.,  1007,  1009. 
Vance  v.  McNabb,  etc.,  Co.,  960. 
Vance  v.  Phoenix  Ins.  Co.,  1029. 
Vance  v.  Tourne,  579. 
Vandall  v.  South  Francisco  Dock  Co., 

971. 
Vandenburgh  v.  Broadway  R'y  Co.,  817, 

826,  839,  841. 
Vandenheyden  v.  Mallory,  430. 
Vanderbilt  v.  Bennett,  823,  846,  848. 
Vanderbilt  v.  Central  R  R,  1438;  1447, 

1456. 
Vanderwerker  v.  Glenn,  93,  243,  264. 

Vane  v.  Cobbald.  197,  1041. 

Vane  v.  Newcombe,  274,  1390,  1395. 

Vannemare  v.  Young,  311. 

Vansands  v.  Middlesex  County   Bank, 
547,  689,  690,  691,  695. 

Vansant  v.  Roberts,  1019. 

Van  tine  v.  Morse,  613. 

Varnum  v.  Hart,  941. 

Vatable  v.  N.  Y„  L.  E.  &  W.  R  R,  184, 
864,  1474.  1477. 

Vater  v.  Lewis,  878. 

Vaughan  v.  Wood,  598. 

Vaupell  v.  Woodward,  465,  582,  600. 

Vawter  v.  Griffin,  464. 

Vawter  v.  Ohio  &  Miss.  R  R  Co.,  239. 

Veazie  v.  Mayo,  1516. 

Veeder  v.  Baker,  293. 

Veeder  v.  Lima,  137. 

Veeder  v.  Mudgett,  249,  301,  390,  391,  392. 


to  the  foot-paging] 

Veiller  v.  Brown,  353,  356. 
Venango  Nat'l  Bank  v.  Taylor,  990. 
Venner  v.  Atchison,  etc.,  R  R  Co.,  631, 

632,  1492. 
Vennor  v.  Atchison,  etc.,  R  R,  1144. 
Vergennes,  Bank  of,  v.  Warren,  1099, 

1100. 
Vermilye  v.  Adams  Exp.  Co.,  580,  1224. 
Vermilye,  In  re  Assignment  of,  568. 
Vermilyea  v.  Fulton  Bank,  1146, 1165. 
Vermont  Central  R  R  Co.  v.  Clayes,  34, 

35,  219. 
Vermont,  etc.,  R  R  v.  Vermont  Central 
R  R,  640,  1356, 1381,  1386, 1418, 1419, 
1425,  1445,  1453,  1463,  1465,  1501. 
Vernon  v.  Hovey,  156. 
Vernon  v.  Manhattan  Co.,  1122. 
Vernon  Society  v.  Hills.  1057.    • 
Verplauck  v.  Mercantile  Ins.  Co.,  418, 

859,  1157,  1163,  1169,  1417. 
Vick  v.  La  Rochelle,  216. 
Vick  v.  Lane,  259. 
Vickers,  Ex  parte,  193. 
Vicksburg  v.  Tobin,  1946. 
Vicksburg,  etc.,   R    R    v.    McCutchen, 

1388. 
Vicksburg,  S.  &  T.  R  R  v.  McKean,  192, 

218,  234,  343. 
Victoria,  etc.,  v.  Fraser,  1088. 
Vidal  v.  Girard's  Ex'rs,  968,  994. 
Vigers  v.  Pike,  1130. 
Vilas  v.  Milwaukee,  etc.,  R'y,  1275,  1480. 
Vilas  v.  Page,  962,  1120,  1373,  1393,  1449, 

1451.  1456,  1480. 
Vilas  v.  Reynolds,  1097. 
Vinal  v.  Continental,  etc.,  Co.,  893. 
Vinas  v.  Merchants'  M.  I.  Co.,  1006, 1008. 
Vincennes  University  v.   State  of  In- 
diana, 1942. 
Vincent  v.  Bramford,  273. 
Vinton's  Appeal,  738,  744. 
Virginia,  Bank  of,  v.  Adams,  250,  253. 
Virginia,  Bank  of,  v.  Craig,  441. 
Virginia,  etc.,  Co.  v.  Hale,  683. 
Virginia,  etc.,  Co.  v.  Mercantile  T.  Co., 

1208. 
Virginia,  etc.,  Nav.  Co.  v.  United  States, 

1019. 
Virginia,    etc.,    R    R    Co.    v.    County 
Comm'rs,  etc.,  125. 


TABLE    OF    CASES. 


cxcv 


yilie  references  are 

Virginia,  etc.,  R'y  v.  Washington,  1536. 
Vivian  v.  Mortlock,  410. 
Vogler  v.  Ray,  667. 
Vollans  v.  Fletcher,  1041. 
Von  Hess  v.  Mackaye,  616,  1201. 
Von  Hoffman  v.  City  of  Quincy,  1942. 
Von  Schmidt  v.  Bourn,  782,  783. 
Von  Schmidt  v.  Huntington,  259,  671. 
Voorhees  v.  Bonesteel,  430. 
Voorheis  v.  People's,  etc.,  Co.,  1170. 
Voorhis  v.  Terhune,  610. 
Vorhees  v.  Receiver  of  Bank,  etc.,  230. 
Voris  v.  McCready,  565. 
Vose  v.  Bronson,  1188,  1313. 
Vose  v.  Cowdrey,  1474. 
Vose  v.  Grant,  248,  730,  731. 
Vose  v.  Reed,  1407. 
Vovvell  v.  Thompson,  583,  828. 
Vredenburg  v.  Behan,  314. 
Vreeland  v.  N.  J.  Stone  Co.,  87,  191,  203, 
206. 

w. 

Wabash,  etc.,  v.  Beers,  1942. 

Wabash,  etc.,  R'y  v.  Central  T.  Co.,  1336, 

1339,    1343,    1349,    1350.    1413,    1420, 

1440. 
Wabash,  etc.,  R'y  v.  Ham,     965,    1195, 

1273,  1545. 
Wabash,  etc.,  Ry  v.  Illinois,  1514, 1946. 
Wabash,  etc.,  R.  R.  v.  Jaggerman,  1536. 
Wabash,  etc.,  R  R  v.  Peyton,  1535. 
Wabash  R  Co.  v.  Dykeman,  1416. 
Waco,  etc.,  R  R  v.  Shirley,  1278. 
Waddill  v.  Alabama,  etc.,  R.  R  Co.,  983. 
Wadsworth  v.  St.  Croix  Co.,  151. 
Wadsworth  v.  Supervisors,  143. 
Wagar  v.  Stone,  1410. 
Wagenen  v.  Clark,  262. 
Wagner,  etc..  Institute  Appeal,  638,  772. 
Wagoner  v.  Loo  mis,  767. 
Wagstaff  v.  Wagstaff,  407. 
Wahlig  v.  Standard,  etc ,  Co.,  1083. 
Wainwright  v.  Weske,  494. 
Wait  v.  Mining  Co.,  1057. 
Wait  v.  Nashua,  etc.,  Assoc,  1074. 
Wait  v.  Smith,  1024 
Waite  v.  Coombes,  408. 
Waite  v.  Dowley,  76L 


to  the  foot-paging.] 

Waite  v.  Whorwood,  436. 

Wakefield  v.  Fargo,   273,   274,  333,  338, 

342. 
Wakefield  Bank  v.  Truesdall,  1085. 
Wakefield,  etc.,  Co.,  Re,  731. 
Wakeman  v.  Dalley,  324,  490. 
Walburn  v.  Chenault,  67. 
Walburn  v.  Ingilby,  663,  681,  682. 
Walden  Nat.  Bank  v.  Birch,  420. 
Waldo  v.  Chicago,  St  P.  &  F.  D.  L  R  R 

Co.,  194,  202. 
Wales  v.  Stetson,  626. 
Walker  v.  Bartlett,  354,  467,  517. 
Walker  v.  Cincinnati,  137,  140. 
Walker  v.  City  of  Springfield,  1005. 
Walker  v.  Continental     Insurance    Co., 

1170. 
Walker  v.  Grain,  257,  279. 
Walker  v.  Detroit  Transit  R'y  Co.,  26, 

428,  519,  532,  548. 
Walker  v.  Devereaux,  98,  105,  830. 
Walker  v.  Flemming,  1057. 
Walker  v.  Granite  Bank,  682,  684. 
Walker  v.  Joseph,  etc.,  Co.,  336,  412,  430. 
Walker  v.  Lewis,  272,  321. 
Walker  v.  Mackie,  409. 
Walker  v.  Mad  River,  etc.,  R'y,  981. 
Walker  v.  Milne,  22. 
Walker  v.  Mobile,  etc.,  R  R  Co.,   110, 

198,  200. 
Walker  v.  Ogden,  183,  184. 
Walker  v.  Quincey,  etc.,  R'y,  1458. 
Walker  v.  Southeastern  R'y,  1007,  1010. 
Walker  v.  Wait,  672. 
Walker  v.  Wilmington,  etc.,  R  R,  1091, 

1109. 
Walker's  Case,  352,  976. 
Wall  v.  Schneider,  472,  413. 
Wall  v.  Thomas,  650. 
Wall  v.  Tomlinsou,  429. 
Wallace  v.  Berdell,  602. 
Wallace  v.  First  Parish,  etc..  1069. 
Wallace  v.  Lincoln,    etc..     Bank.     1(130. 

1121,  1150.  1159. 
Wallace  v.  Long  Island  R  R,  931,   1499. 

1505. 
Wallace  v.  Loomis,   3,    880,    1016,    1217. 

1407,  1450. 
Wallace  v.  Townsend,  101,  214. 
Wallace  v.  Walsh,  8,  852,  855,  1063. 


CXCV1 


TABLE    OF    CASES. 


[The  references  are 

Waller  v.  Bank  of  Kentucky,  1094. 

Waller  v.  Thomas,  661. 

Wallingford  Mfg.  Co.  v.  Fox,  114, 163. 

Walls  v.  Bailey,  580. 

Wallworth  v.  Holt,  1144,  1162. 

Wain's  Assignees    v.   Bank    of    North 

America,  534,  690. 
Walnut  v.  Wade,  147, 149, 150, 1231, 1236, 

1238. 
Walradt  v.  Maynard,  716. 
Walser  v.  Seligman,  250,  251,  258. 
Walsh  v.  Barton,  1100,  1380,  1385. 
Walsh  v.  Memphis,  etc.,  R  R  Co.,  258, 

259,  289. 
Walsh  v.  Seager,  202. 
Walsh  v.  Sexton,  413. 
Walsh  v.  Stille,  437,  439. 
Walsh  v.  Trustees,  etc.,  2. 
Walsh  v.  Union  Bank,  359. 
Walstab  v.  Spottiswoode,  1040. 
Walters  v.  Anglo,  etc.,   Co.,   1414,   1418, 

1461,  1463. 
Walters  v.  Comer,  477. 
Walter's  Case,  336,  347,  524 
Walter's  Second  Case,  117,  337,  415. 
Waltham  Bank  v.  Waltham,  749. 
Walton  v.  Coe,  281. 
Walton  v.  Grand,  etc.,  Co.,  1453. 
Walton  v.  Oliver,  324. 
Walton  v.  Riley,  311,  878,  879. 
Walton  v.  Walton,  403,  404,  411. 
Walton,  Ex  parte,  524. 
Walworth  v.  Brackett,  232,  798. 
Walworth,  etc.,  Bank  v.  Farmers',  etc., 

Trust  Co.,  1075,  1082. 
Wandsworth,  etc.,  Co.  v.  Wright,  837. 
Wann  v.  W.  U.  T.  Co.,  1593. 
Wanneker  v.  Hitchcock,  826,  829. 
Wannell  v.  Kern,  482. 
Wapello  v.  B.  &  M.  R.  R  Co.,  134,  154. 
Ward  v.  Brigham,  1040. 
Ward  v.  Davidson,  926,  935,  936. 
Ward  v.  Davis,  665. 
Ward  v.  Farwell,  866,  867,  868,  1589. 
Ward  v.  Gar  fit's  Case,  348. 
Ward  v.  Griswoldville  Mfg.  Co.,  160, 161, 

229,  255,  261. 
Ward  v.  Johnson,  973,  1257. 
Ward  v.  Kitchen,  434,  435. 
Ward  v.  Londesborough,  103,  1040. 


to  the  foot-paging.] 

Ward  v.  Salem  St  R'y,  917. 

Ward  v.  Sea  Insurance  Co.,  859,  860. 

Ward  v.  SittiDgbourne,   etc.,    R'y,    728, 

729. 
Ward  v.  Society,  etc.,  858. 
Ward  v.  Southeastern  R'y  Co.,  429,  529. 
Ward  v.  Van  Duser,  567. 
Ward  v.  Vosburgh,  468,  470,  472,  474. 
Ward's  Case,  96,  97,  348,  415. 
Warde,  In  re,  436. 
Wardell  v.  Railroad  Co.,  904,  942. 
Wardell  v.  Union,  etc.,  R  R,  1216. 
Warden,  etc.,  Shrewsbury  v.  Hart,  1016. 
Wardens,  etc.,  v.  Rector,  etc.,  930. 
Wardens,  etc.,  Trinity  Ch.  v.  Hall,  1015. 
Wardens  of  Christ  Church  v.  Pope,  812. 
Warder,  etc.,  Co.  v.  Jack,  310,  970. 
Wardrobe  v.  California  Stage  Co.,  1010. 
Ware  v.  Bazemore,  1148. 
Ware  v.  Galveston  City  Company,  534 
Ware  v.  Grand,  etc.,  R'y  Co.,  639. 
Ware  v.  Hamilton,  etc.,  Co.,  1004 
Ware  v.  McCandlish,  742. 
Warfield  v.  Marshall,  etc.,  Co.,  931,  937, 

1187. 
Waring  v.  Cahawba  Co.,  16. 
Waring  v.  Mayor,  etc.,  of  Mobile,  634 
Warner  v.  Bates,  490. 
Warner  v.  Beers,  2,  666. 
Warner  v.  Callender,  256,  258,  290. 
Warner  v.  Hopkins,  1141. 
Warner  v.  Mower,  800,  801,  802,  808,  990, 

1108. 
Warner  v.  Rising,  etc.,  Co.,  1235,   1237, 

1238,  1406. 
Warner  v.  Stebbins,  965. 
Warnock  v.  Davis,  1589. 
Warr  v.  Bank  of  West  Tennessee,  990. 
Warren  v.  Brandon  Mfg.  Co.,  621. 
Warren  v.  Davenport  Fire  Ins.  Co.,  18. 
Warren  v.  Hewitt,  475. 
Warren  v.  King,  369,  370,  722. 
Warren  v.  Ocean  Ins.  Co.,  1058. 
Warren  v.  Pastlewaite,  409. 
•  Warren's  Estate,  In  re,  739. 
Warren  Mfg.  Co.  v.  ^Etna  Ins.  Co.,  1001. 
Warwick  R  R  Co.  v.  Cady,  222,  229. 
Wasatch  Min.  Co.  v.  Jennings,  901,  921, 

922. 
Waseca  Co.  Bank  v.  McKenna,  767. 


TABLE    OF    CASES. 


CXCVll 


[Tlie  references  are 

Washburn,  etc.,  Co.  v.  Bartlett,  1004. 
Washington  v.  Emory,  434,  435. 
Washington  v.  Raleigli,  etc.,  R.  R.,  1534. 
Washington  Bank  v.  Lewis,  1054,  1119. 
Washington  Bank  v.  Palmer,  18. 
Washington  Benevolent  Soc.  v.  Bacher, 

1026. 
Washington  Bridge  Co.  v.  State,  1577. 
Washington,  etc.,  R.  R  v.   Alexandria, 

etc.,  R.  R,  1311.  1320,  1468,  1469. 
Washington,  etc.,  R.  R  v.  South,  etc.,  R. 

R.,  1357, 1461. 
Washington,  etc.,  R  R,  Matter  of,  1549, 

1565. 
Washington,  etc.,   T.  Co.  v.  State,  866, 

1593. 
Washington  Ius.  Co.  v.  Price,  19. 
Washington  Turnpike  v.  Cullen,  1106. 
Washington  University  v.   Rouse,  1942. 
Wasmer  v.  Delaware,  etc.,  R.  R,  1535. 
Wasson  v.  First  Nat'l  Bank,  761,  763,  764. 
Water  Valley  Mfg.  Co.  v.  Seaman,  182, 

195,  218. 
Waterbury  v.  Merchants'  Union  Ex.  Co., 

659,  666,  670,  671,  672,  859,  1142, 1154. 
Waterbury,  In  re,  1168. 
Waterford,  W.  W.  &  B.  R'y  Co.  v.  Dal- 

biac,  225. 
Waterhouse  v.  Comer,  1437. 
Waterhouse  v.  Jamieson,  46,  81,  82. 
Waterhouse  v.  London,  etc.,  R.  R  Co., 

395,  506. 
Waterlow  v.  Sharp,  1192. 
Waterman  v.  Buckland,  469. 
Waterman  v.  Chicago,  etc.,  R.  R,  928, 

1066. 
Waterman  v.  Sprague  Mfg.  Co.,  989. 
Waterman  v.  Troy,  etc.,  R  R  Co.,  377, 

378. 
Watertown,    Bank    of,   v.   Watertown, 

666. 
Watertown,  National  Bank  of,  v.  Lon- 
don, 667. 
Waterville,  Bank  of,  v.  Belster,  1166. 
Water-works  Co.  v.  Burkhart,  1526. 
Waters  v.  Gilbert,  1070. 
Watjen  v.  Green,  159,  1193. 
Watkins  v.  Dorsetr,  609. 
Watkins  v.  Evans,  93. 
Watkins  v.  National  Bank,  860,  141  a 


to  the  foot-paging.] 

Watkins,  Ex  parte,  310. 

Watson  v.  Bennett,  1095. 

Watson  v.  Eales.  181,  344. 

Watson  v.  Earl  of  Charlemont,  205. 

Watson  v.  Miller,  570. 

Watson  v.  Spratley,  21,  22,  467,  665. 

Watson,  Ex  parte,  212. 

Watt  v.  Railroad,  1330. 

Watts  v.  Salter,  225,  1041. 

Watt's  Appeal,  972, 1029, 1131, 1133, 1263. 

Waugericu  v.  Aspell,  216. 

Waugh  v.  Beck,  477. 

Waukou,  etc.,  R  R.  Co.  v.  Dwyer,  111, 

159. 
Wausau,  etc.,  Co.  v.  Plummet,  16. 
Wayne  Pike  Co.  v.  Hammons,  927, 1150, 

1156. 
Waynesville  Nat'l  Bank  v.  Irons,  1117. 
Wear  v.  Jacksonville,  etc.,  R   R   Co., 

123,  127,  168. 
Weare  v.  Gove,  977. 

Weatherford,  etc.,  Co.  v.  Granger,  1047. 
Weaver  v.  Barden,  484,  545,  548. 
Weaver  v.  Field,  1341. 
Weaver  v.  Huntingdon,  etc.,  Coal  Co., 

611. 
Weaver  v.  Weaver,  761. 
Webb  v.  Baltimore,  etc.,  Co.,    125,  218, 

239,  465. 
Webb  v.  Burlington,  744,  751. 
Webb  v.  Challoner,  563. 
Webb  v.  Com'r  of  Heme  Bay,  985. 
Webb  v.  Earle,  366,  374. 
Webb  v.  Graniteville  Mfg.  Co.,  441. 
Webb  v.  Heine  Bay,  1107,  1254. 
Webb  v.  La  Fayette  Co.,  148. 
Webb  v.  London,  etc.,  Railway,  1038. 
Webb  v.  Ridgely,  832,  843. 
Webb  v.  Vermont,  etc..  R  R,  1322. 
Webb  v.  Weatherhead,  665. 
Webber  v.  Townley,  674. 
Weber  v.  Fickey,  27,  188,  258.  300,  524 
Webster  v.  Grand  Trunk  R'y  Co.,  780, 

784. 
Webster  v.  Hale,  404. 
Webster  v.  Sturges,  472,  475,  476. 
Webster  v.  Turner,  858,  863. 
Webster  v.  Upton,  56,  80,  111,  210,  233, 

265,  343,  353,  525. 
Webster's  Case,  180,  639. 


CXCV1U 


TABLE  OF  CASES. 


[TTie  references  are 

Weckler  v.  First  Nat'l  Bank,  563. 

Weed  v.  Little  Falls,  etc.,  Co.,  112fi. 

Weed  v.  Snow,  984,  1193. 

Weeks  v.  Love,  283,  288,  305. 

Weeks  v.  Propert,  978,  1188. 

Weeks  v.  Silver,  etc.,  Co.,  173,  184,  323. 

Week's  Case,  414. 

Weems  v.  Georgia,  etc.,  R  R.,  193,  196. 

Weetjen  v.  St.  Paul,   etc.,   R    R,    1330, 

1365. 
Weetjen  v.  Vibbard,  919,  1323. 
Wehrbauer  v.  Nashville,  etc.,  R  R,  424, 

1081. 
Wehrman  v.  Reakirt,  250,  280,  283,  286, 

352,  356. 
Weidenfeld  v.  Allegheny,    etc.,   R   R, 

1148. 
Weidenfeld  v.  Sugar,  etc.,  R  R,   1073, 

1527. 
Weidenger  v.  Spruance,  629. 
Weightman  v.  Clark,  133,  142. 
Weigley  v.  Coal  Oil  Co.,  274. 
W^ihl  v.  Atlanta,  etc.,  Co..  937,  1423. 
Weikersheim's  Case,  329,  430. 
Weinman  v.  Wilkinsburg.  etc.,  R'y  Co., 

346. 
Weir  v.  Barnett,  205,  491,  976,  1033. 
Weir  v.  Bell,  205. 

Weir  v.  St.  Paul,  S.  &  F.  R  R  Co.,  1527. 
Weismer  v.  Village  of  Douglass,  138, 139. 
Weiss  v.  Mauch  Chunk,  etc.,  Co.,  36, 113, 

274. 
Weisser  v.  Denison,  1019. 
Welch  v.  Importers',  etc.,  Bank,  15,  311, 

325,  864,  882,  904,  1067,  1140,  1265. 
Welch  v.  Old  Dominion,  etc.,  R'y,  795, 

882,  884,  955. 
Welch  v.  Post,  131. 
Welch  v.  Sage,  1224,  1225. 
Weld  v.  Barker,  466. 
Weld  v.  City  of  Bangor,  755. 
Welfiey  v.  Shenandoah,  etc.,  Co.,  1016. 
Welland  Canal  Co.  v.  Hathaway,  882. 
Weller  v.  Pace  Tobacco    Co.,   447,   533, 

617,  846. 
Wellersburg,  etc.,  Co.  v.  Hoffman,  98. 
Wellersburg,  etc.,  Co.  v.  Young,  87. 
Welles  v.  Cowles,  22. 
Welles  v.  Graves,  287. 
Welles  v.  Larrabee,  328,  330. 


to  the  foot -paging.] 

Welles  v.  Stout,  300. 

Well  man  v.  Chicago,  etc.,  R'y,  1514 

Wellman,  etc.,  v.  Ciancimino,  etc.,  Co., 

In  re,  839. 
Wellman  v.    Howland     Coal     &    Iron 

Works,  258. 
Wells  v.  Abernethy,  785. 
Wells  v.  Gates,  660,  668. 
Wells  v.  McGeoch,  478. 
Wells  v.  Monihan,  672. 
Wells  v.  Northern  Pacific  R'y,  1580. 
Wells  v.  Oregon  R'y,  etc.,  Co.,  1013,  1580. 
"Wells  v.  Pontiac  Co.,  147. 
Wells  v.  Rahway,  etc.,  Co.,  1065,  1067. 
Wells  v.  Robb,  253,  669. 
Wells  v.  Rodgers,  163,  807. 
Wells  v.  Southern,  etc.,  R'y,  274,  1390. 
Wells  v.  Supervisors,  131,  135. 
Wells  v.  Yates,  668. 
Wells,  etc.,  Co.  v.  Northern  Pac.  R'y  Co., 

315. 
Wells,  Fargo  &  Co.  v.  Welter,  564. 
Wellsborough  v.  New  York,  etc.,  R.  R 

Co.,  148. 
Wellsborough,  etc.,  P.  R  Co.  v.  Griffin, 

1274,  1482,  1483,  1590. 
Welsh  v.  First  Div.,  etc.,  R  R,  1235, 1236, 

1237. 
Welsh  v.  Plumas  Co.,  888,  1590. 
Wemple  v.   St.   Louis,   etc.,  R  R  Co., 

239. 
Wenlock  v.  River,  etc.,  Co.,  1254. 
Wentz  v.  Lowe,  309. 
West  v.  Camdon,  844. 
West  v.  Carolina,  etc.,  Ins.  Co.,  864,  877, 

1016. 
West  v.  Crawford,  113,  114,  223,  315. 
West  v.  Crawfordsville  &  A.  T.  Co.,  196. 
West  v.  Eureka,  etc.,  Co.,  1165. 
West  v.  Madison  Co.  Agric,  etc.,  1261, 

1263. 
West  v.  People,  398. 
West  v.  Wentworth,  788. 
West  v.  West  Bradby,  etc.,  Co.,  939. 
West,  Ex  parte,  200,  206. 
West  Bank  of  Scotland  &  its  Liquida- 
tors v.  Baird  and  others,  1059. 
West  Branch  Bank  v.  Armstrong,  693, 

695,  699,  700. 
West  Branch  Bank  v.  Chester,  1238, 1338. 


TABLE    OF    CASES. 


CXC1X 


[The  references  are 

West  Branch,  etc.,  Canal  Co.'s  Appeal, 

782,  787. 
West  Cornwall  v.  Moffatt,  87. 
West  Devon  Mine  Case,  681,  684. 
West  Devon,  etc.,  Mine,  In  re,  677, 683. 
West,  etc.,  Bank  v.  Ford,  1167. 
West,  etc.,  Bank  v.  Kitson,  977. 
West,  etc.,  Bank  v.  Shawnee,  etc.,  Bank, 

1086. 
West,  etc.,  Bank  v.  Thompson,  1120. 
West,  etc.,  Co.'s  Appeal,  484 
West,  etc.,  Cong.  v.  Ottesen,  798. 
West,  etc.,  Land    Co.    v.     Montgomery 

Land  Co.,  1081. 
West,  etc.,  R  v.  Mowatt,  44,  51. 
West,  etc.,  R'y  v.  Supervisors,  1943. 
West,  etc.,  Savings  Bank  v.  Ford,  879. 
West  London  Commercial  Bank  v.  Kit- 
son,  1191. 
West  London,  etc.,  Bank,  Re,  216. 
West  Nashville,   etc.,   Co.    v.   Nashville 

Sav.  Bank,  81. 
West  Philadelphia  Canal  Co.  v.  Innes, 

342,  343. 
West  River  Bridge  Co.  v.  Dix,  1528, 1529, 

1577,  1941. 
West  St.  Louis  S.  Bank  v.  Shawnee»  etc., 

Bank,  1086,  1243. 
West  Virginia    Trans.   Co.  v.  Volcanic 

Oil,  etc.,  Co.,  1600. 
Westhury  &  Sons  v.  Twigg  &  Co.,  1432. 
Westchester,  etc.,  v.  Jackson,  368,  370, 

374,  376,  715. 
Westcott  v.  Fargo,  667,  671. 
Westcott  v.  Minnesota,  etc.,  Co.,  173. 
Westerfield  v.  Radde,  1076. 
Western  Bank  v.  Baird,  852. 
Western  Bank  v.  Gilstrap,  1085. 
Western  Bank  v.  Mills,  985. 
Western  Bank  of  Scotland  v.  Addie,  191, 

194,  195,  203,  205,  207,  478,  1008. 
Western  Bank  of  Scotland  v.  Tallman, 

34,  35. 
Western    Boatmen's  Benev.    Assoc,    v. 

Kribben,  982. 
Western  Cottage  Organ  Co.  v.  Reddish, 

982. 
Western,  etc.,  Ass'n  v.  Starkey,  645. 
Western,  etc.,  Co.  v.  Cousley,  1043. 
Western,  etc.,  Co.  v.  Massachusetts,  1947. 


to  the  foot-paging.] 

Western,  etc.,  Co.  v.  Peytona,  etc.,  Coal 

Co.,  1308. 
Western,  etc.,  Co.  v.  Purnell,  210. 
Western,  etc.,  Co.  v.  Rogers,  1594 
Western,  etc.,  R  R's  Appeal,  884. 
Western,  etc.,  T.  Co.  v.  Atlantic,  etc.,  T. 

Co.,  1433,  1480. 
Western,   etc.,  Tel.    Co.  v.  Union,  etc., 

R'y  Co.,  309,  906. 
Western,  etc.,  R  R.  v.  Exposition,  etc., 

1537. 
Western  Maryland  R'y  Co.  v.  Franklin 

Bank.  1192. 
Western  Paving,   etc.,  Co.  v.  Citizens', 

etc.,  Co.  of  Ind.,  1572,  1573. 
Western  Pennsylvania  R  R  v.  Johnson, 

1382. 
Western  R.  R  Co.  v.  Avery,  243. 
Western  R  R  v.  Babcock,  1093. 
Western  R  R  Co.  v.  Bayne,  1076. 
Western  R.  R  Co.  v.  Nolan,  1324, 1331. 
Western  Transportation  Co.    v.   Scheu, 

768. 
Western  Transportation  Co.  v.  Stevens, 

769. 
Western  Union  TeL   Co.   v.   Alabama, 

777,  1947. 
Western  Union  TeL  Co.  v.  Amer.  U.  TeL 

Co.,  1594. 
Western  Union  Tel.  Co.  v.  Atlantic,  etc., 

TeL  Co.,  1481,  1594 
Western  Union  Tel.  Co.  v.  B.  &  O.  Tel. 

Co.,  1111,  1594. 
Western  Union  Tel.  Co.  v.   Burlington, 

etc.,  R'y,  1365,  1386,  1594,  1595. 
Western  Union  TeL  Co.  v.  Carew,   1593. 
Western  Union  Tel.  Co.  v.  Chicago,  etc., 

R  R,  1593. 
Western  Union  Tel.  Co.  v.  Eyser,   1006, 

1011. 
Western  Union  Tel.  Co.  v.  Lieb,  778. 
Western  Union  Tel.  Co.  v.   Mayer,    778, 

1001. 
Western  Union  Tel.   Co.    v.   Massachu- 
setts, 777. 
Western  Union  Tel.  Co.  v.  Mazer,  997. 
Western  Union  Tel.    Co.   v.   Pendleton, 

1946. 
Western  Union  Tel.  Co.  v.  Rich,  1540. 
Western  Union  TeL  Co.  v.  U.  P.  Ry,  6. 


cc 


TABLE    OF    CASES. 


[The  references  are 

Western  Union  Tel.  Co.  v.  Ward,  1593. 
Westfield  Bank  v.  Cornen,  1119. 
Westmoreland    Bank    v.     Klinesmith, 

1113. 
Weston  v.  Bear  River,  etc.,   Min.   Co., 

586,  621,  622,  699. 
Weston  v.  City  of  Charleston,  14,  759. 
Weston  v.  Columbus  Southern  R'y  Co., 

199. 
Weston  v.  Foster,  1531. 
Weston  v.  Ives,  661. 
Weston  v.  New  Guston  Co.,  959,  1478. 
Weston's  Case,  107.   333,  335,    342,  357, 

358,  359,  448,  686,  908. 
Westropp  v.  Solaman,  567,  579. 
Wetherbee  v.  Baker,  65,  77,  188,  250, 257, 

258. 
Wetmore  v.  Parker,  996. 
Wetmore  v.  St  Paul,  etc.,  R  R,  1313, 

1329,  1468,  1473,  1475. 
Wetumpka  v.  Wetumpka,  144. 
Wetumpka  &  Coosa  R.  R  Co.  v.  Bing- 
ham, 635,  888. 
Weyer  v.  Second  Nat.   Bank  of  Frank- 
lin, 22,  443,  445,  545,  547. 
Weymouth  v.  Roselius,  1341. 
Weymouth,  etc.,  Co.,  Re,  731. 
Whaley  Bridge,  etc.,  Co.  v.  Green,  910, 

912,  914. 
Wheat  v.  Bank  of  Louisville,  1075. 
Wheatcroft's  Case,  128,  213. 
Wheatland  v.  Taylor,  144. 
Wheatley  v.  Silkstone,  etc.,  Co.,  1254. 
Wheaton  v.  Rampacker,  466. 
Wheeler  v.  Faurot,  350,  351,  352,  355. 
Wheeler  v.  Friend,  468. 
Wheeler  v.  Frontier  Bank,  628. 
Wheeler  v.  Millar,  24,  87,  239,  242,  249, 

261,  266,  267,  272,  297,  300,  301. 
Wheeler  v.  Newbould,  604. 
Wheeler  v.  New  Haven,  etc.,  Co.,  425. 
Wheeler  v.  Northwestern  S.  Co.,  711. 
Wheeler  v.  Perry,  739. 
Wheeler  v.  Pullman,  etc.,  Co.,  815,  860, 

947. 
Wheeler  v.  San  Francisco  &  A.  R  R, 

1532,  1535. 
Wheeler  v.  Thayer,  264. 
Wheeler,  Matter  of,   385,  391,  812,  813, 

821,  851. 


to  the  foot-paging.'] 

Wheeler,  Re,  386. 
Wheeler,  etc.,  Co.  v.  Boyce,  1009. 
Wheeling,  City   of,  v.   Mayor  of  Balti- 
more, 1162. 
Wheeling,  etc.,  Bridge  Co.  v.  Wheeling 

Bridge  Co.,  1945. 
Wheelock  v.  Kost,  230,  330. 
Wheelock  v.  Moulton,  etc.,  22,  1049. 
Wheelwright  v.  St.  Louis,  etc.,  Co.,  1343. 
Wbelan  v.  Lynch,  564,  568,  787. 
Wheless  v.    Second    Nat'l   Bank,   1007, 

1009,  1010. 
Whelpley  v.  Erie  R'y  Co.,  401. 
Whight  v.  Shelby  R.  R  Co.,  188. 
Whipple  v.  Parker,  667. 
Whitaker  v.  Eighth,  etc.,  R.  R,  1570. 
Whitaker  v.  Grummond,  217. 
Whitaker  v.  Hartford,   etc.,   R.   R  Co., 

1236,  1237. 
Whitaker  v.  Smith,  273. 
Whitbeck  v.  Mercantile,  etc.,  Bank,  764. 
White  v.  Barber,  476. 
White  v.  Baxter,  567. 
White  v.  Blum,  254,  285. 
White  v.  Boyce,  495. 
White  v.  Brownell,  660,  661. 
White  v.  Campbell,  879,  889. 
White  v.  Carmarthen,  etc.,  R'y  Co.,  1144, 

1186. 
White  v.  Crow,  1168. 
White  v.  Drew,  465. 
White  v.  Franklin  Bank,  985,  986. 
White  v.  Geraerdt,  1170. 
White  v.  How,  1192. 
White  v.  Howard,  666,  996,  1000,  1001. 
White  v.  Keokuk,  etc.,  R  R,  1394. 
White  v.  N.  Y.,  etc.,  Soc,  Re,  822. 
White  v.  Price,   439,   443,  444,   532,  783, 

784. 
White  v.  Rankin,  339,  621. 
White  v.  Salisbury,   456,   517,    547,   579, 

785. 
White  v.  Schuyler,  461. 
White  v.  Smith,  472,  562,  577,  790. 
White  v.  State,  1020. 
White  v.  Syracuse  R.  R  Co.,  423,  635,  637. 
White  v.  Vermont  &  Mass.  R   R  Co., 

1198,  1222. 
White  v.  Westport    Cotton     Mfg.     Co., 

1092,  1095. 


TABLE    OF    CASES. 


ccl 


[The  references  are 

White  v.  Winchester,  406,  410. 
White  v.  Wood,  55,  382,  1476. 
White,  Ex  parte,  1204. 
White's  Bank    v.  Toledo  Ins.  Co.,  694, 

982. 
White's  Case,  106,  336,  348,  352. 
White's,  etc.,  Co.  v.  Davidson  County, 

875. 
White,  etc.,  Co.  v.  Pettes,  etc.,  Co.,  916, 

940. 
White,  etc.,  Co.  v.  Southwestern,  etc., 

Assoc,  1004. 
White,  etc.,  R  R.  Co.  v.  Eastman,  116. 
White,  etc.,  R  R  v.  White,  etc.,  R  R, 

864,  1222. 
White  Mts.  R  R  Co.  v.  Eastman,  174, 

188,  189,  213,  229. 
White  River  T.  Co.  v.  Vermont  Cen.  R 

R  Co.,  1591. 
White  Water  Valley  Co.  v.  Vallette.  995, 

1092,    1206,   1309,    1259,   1261,    1268, 

1278,  1300. 
Whitehall  v.  Jacobs,  67. 
Whitehall  &  R  R  R  Co.  v.  Myers,  187, 

637. 
Whitehaven,  etc.,  Co.  v.  Reed,  398. 
Whitehead  v.  Buffalo,  etc.,  R'y  Co.,  1174. 
Whitehead  v.  Vineyard,  1277,  1383. 
Whitehead  v.  Whitehead,  743. 
Whitehouse  v.  Moore,  566,  580. 
Whitehouse  v.  Sprague,  668. 
Whitehouse's  Case,  195,  208. 
Whitehouse  &  Co.,  Re,  240. 
WhiteJey's  Case,  213. 
Whitely  Partners,  In  re,  108. 
Whiteright  v.  American  Tel.  &  Cable 

Co.,  505. 
Whitesell  v.  Boston,  750. 
Whitesides  v.  Hunt,  471,  472,  473,  475. 
Whitewell  v.  Warner,  1036,  1091. 
Whitfield  v.  Southeastern  R'y  Co.,  1007, 

1008. 
Whitford  v.  Laidler,  1104. 
Whiting  v.  Hovey,  8,  988. 
Whiting  v.  N.  Y.,  etc.,  R  R,  1383. 
Whiting  v.  Sheboygan,   etc.,  R  R  Co., 

137. 
Whiting  v.  Smith,  etc.,  Co.,  1088. 
Whiting  v.  Town  of  Potter,  145. 
Whiting  v.  Union  Trust  Co.,  1099. 


to  the  foot-paging. .] 

Whiting  v.  Wellington,  1068. 
Whitley  v.  Harrison,  1019. 
Whitman  v.  Bowden,  671,  903,  1132. 
Whitman  v.  Granite  Church,  1070. 
Whitman  v.  Porter,  242. 
Whitman  v.  Proprietors,  etc.,  93,  94. 
Whitman  Gold  &  S.  M.  Co.   v.  Baker, 

999. 
Whitney  v.   Atlantic   &  St.    Lawrence 

R  R,  1535. 
Whitney  v.  Butler,  348. 
Whitney  v.  Fairbanks,  493,  1147,1150. 
Whitney  v.  Hyman,  308.  " 
Whitney  v.  Leominster  Sav.   Bank,  972. 
Whitney  v.  Madison,  748,  764. 
Whitney  v.  May,  1552. 
Whitney  v.  Mayo,  1144. 
Whitney  v.  New  York,  etc.,  R  R...  1362, 

1388,  1421. 
Whitney  v.  Page,  354. 
Whitney  v.  Peay,  1214. 
Whitney  v.  Phcenix,  739,  744 
WThitney  v.  Ragsdale,  753. 
Whitney  v.  South,  etc.,  Co.,  1091. 
Whitney  v.  Union  Trust  Co.,  1092,  1099T 

1100,  1106,  1272,  1295. 
Whitney  v.  Wyman,  311,  1046,  1104. 
Whitney  Arms  Co.  v.  Barlow,  296,  952, 

971. 
Whitney  Nat'l  Bank  v.  Parker,  765,  768. 
Whittemore  v.  Amoskeag  Nat'l  Bank, 

1144. 
Whittemore  v.  Beekman,  739. 
Whittenton  Mills  v.  Upton,  967. 
Whittlesey  v.  Delaney.  934. 
Whittlesey  v.  Frantz,  111,  1018. 
Whitwell  v.  Warner,  306,  941,  1087, 1093. 
Wichita,  etc.,  Co.  v.  State,  995. 
Wickenv.  Evans,  651. 
Wickersham  v.  Brittan,  840. 
Wickersham  v.  Chicago,  etc.,  Co.,  1116. 
Wickersham  v.  Chittenden,  854,  902,  926, 

975,  1144,  1150. 
Wickersham  v.  Murphy,  840. 
Wicks  v.  Adirondack  Co.,  1231. 
Wicks  v.  Hatch,  575,  604,  606. 
Wicks  v.  Monihan,  672. 
Widener  v.  Railroad,  1237. 
Widow  Conant  v.  Millaudon,  826,  840, 

841,  843. 


ecu 


TABLE    OF    CASES. 


[The  references  are 

Widow  of  Reynolds  v.  Commissioners, 

etc.,  995. 
Wiestling  v.  Marthim,  1587. 
Wigan  v.  Fowler,  985. 
Wigfield  v.  Potter,  651,  655. 
Wiggin  v.  Freewill  Baptist  Church,  800, 

807,  808. 
Wiggins  Ferry  Co.  v.  East  St.  Louis,  etc., 

R'y,  1551. 
Wiggins  Ferry  Co.  v.  O.  &  M.  R'y,  I509- 
Wight  v.  Shelby  R  R.  Co.,  99,  192,  197. 
Wight  v.  Springfield,  etc..  R  R.  Co.,  20, 

849. 
Wilbur  v.  Atlantic,  etc.,  R'y  Co.,  1544. 
Wilbur  v.  Lynde,  937. 
Wilbur  v.  N.  Y.,  etc.,  Co.,  1042. 
Wilbur  v.  Stockholders  of  the  Corp., 

158,  160,  254,  255,  256.  257,  258,  261. 
Wilbur  v.  Stoepel,  467,  844,  943. 
Wilby  v.  West  Cornwall  R'y  Co.,  1532. 
Wilcox  v.  Brickel,  1150. 
Wilcox  v.  Toledo,  etc.,  R  R  Co.,  879. 
Wilcox,  Ex  parte,  1067. 
Wild  v.  Bank,  1085. 
Wild  v.  Passamaquoddy  Bank,  10,  1058, 

1085. 
Wild  v.  Davenport,  654. 
Wilday  v.  Sandys,  741. 
Wilder  v.  Shea,  1368. 
Wilder  v.  Virginia,  etc.,  Co.,  1135. 
Wildey  v.  Mid-Hants  R'y  Co.,  1252, 1254 
Wildman  v.  Wildman,  22,  429. 
Wilds  v.  St  Louis,  etc.,  R  R,  1292, 1333. 
Wiles  v.  Suydam,  283,  290,  293,  303. 
Wiley  v.  Board  of  Education,  1097. 
Wiley  v.  Inhabitants,  etc.;  1070. 
Wilkes  Barre,  City  of,  v.  Wyoming,  etc., 

Soc,  1279. 
Wilkes   Barre,  etc.,  Bank    v.    City    of 

Wilkes  Barre,  14,  773. 
Wilkie  v.  Rochester,  etc.,  R'y,  1148, 1154. 
Wilkins  v.  Thorne,  184,  1172. 
Wilkinson  v.  Anglo,  etc.,  G.  M.  Co.,  96. 
Wilkinson  v.  Bauerle,  920,  939,  988,  989. 
Wilkinson  v.  Culver,  1428. 
Wdkinson  v.  Delaware,  L.  &  W.  R  R 

Co.,  1543. 
Wilkinson  v.  Dodd,  1159. 
Wilkinson  v.  Fleming,  1319. 
Wilkinson  v.  Lloyd,  456. 


to  the  foot-paging.] 

Wilkinson  v.  Providence  Bank,  530. 
Wilkinson's  Case,  195,  208. 
Willamette,  etc.,  Co.  v.  Bank,  etc.,  1269. 
Willamette,  etc.,  Co.  v.  Hatch,  1947. 
Willamette,  etc.,  Co.   v.  WTilliams,  1175. 
Willard  v.  Denise,  1114. 
Willard  v.  Gould,  1081. 
Willard  v.  Pike,  749. 
Willard  v.  White,  571,  595. 
Willcock,  Ex  parte,  589,  1065. 
Willey  v.  Parratt,  1041. 
Williams  v.  Archer,  783,  785,  789. 
Williams  v.  Bank  of  Michigan,  315,  670, 

879. 
Williams  v.  Benet,  189. 
Williams  v.  Boice,  732,  735. 
Williams  v.  Carr,  475,  476. 
Williams  v.  Cheney,  1005,  1085. 
Williams  v.  Chester,  etc.,  R  R.  Co.,,  1083. 
Williams  v.  Citizens'  R'y,  1563,  1567. 
Williams  v.  Colby,  965. 
Williams  v.  College  Corner  &  Richmond 

Gravel  Road  Co.,  680. 
Williams  v.  Colonial  Bank,  485,  519. 
Williams  v.  Cresswell,  997,  1173,  1950. 
Williams  v.  Duanesburgh,  136. 
Williams  v.  Duck  River,  etc.,  R  R  Co., 

137. 
Williams  v.  Evans,  70,  344,  454. 
Williams  v.  Fulleiton,  717. 
Williams  v.  German,  etc.,  Ins.  Co.,  1063. 
Williams  v.  Gil  man,  580. 
Williams  v.  Great  Western  R'y  Co.,  19. 
Williams  v.  Gregg,  1031. 
Williams  v.  Hall,  134. 
Williams  v.  Halliard,  1132. 
Williams  v.  Hanna,  345,  350,  457. 
Williams  v.  Hintermeister,  1168. 
Williams  v.  London,  etc.,  Bank,  549. 
Williams  v.  Lowe,  686. 
Williams  v.  McDonald,  984,  1029. 
Williams  v.  McKay,  984,  1029,  1032. 
Williams  v.  Mechanics'  Bank,  547,  586, 

618. 
Williams  v.  Meyer,  160,  243,  459. 
Williams  v.  Missouri,  K.  &  T.  R  R  Co., 

1182. 
Williams  v.  Montgomeiy,  447,  848. 
Williams  v.  Morgan,    1308,    1309,     131 4. 

1457,  1458. 


TABLE    OF    CASES. 


CC111 


[Tlie  references  are 

Williams  v.  Page,  103,  1041. 
Williams  v.  Parker,  377. 
Williams  v.  Patrons  of  Husbandry,  940. 
Williams  v.  Peel,  etc.,  Co.,  783,  788. 
Williams  v.  People,  142. 
Williams  v.  Pigott,  1036,  1037. 
Williams  v.  Planters'  Ins.  Co.,  1007, 1010. 
Williams  v.  Prince  of  Wales  Ins.  Co., 

681,  682,  684. 
Williams  v.  Reynolds,  609. 
Williams  v.  Riley,  984. 
Williams  v.  Roberts,  147. 
Williams  v.  St.  George,  etc..  Co.,  1045. 
Williams  v.  Salmond,  103,  1041. 
Williams  v.  Savage  Mfg.   Co.,  384,  418, 

421,  683. 
Williams  v.  Searcy,  69,  454. 
Williams  v.  Smith,  19. 
Williams  v.  Supervisors  of  Albany,  765. 
Williams  v.  Taylor,  66,  459. 
Williams  v.  Traphagen,  241. 
Williams  v.  Uncompabgre,  etc.,  Co.,  1103. 
Williams  v.  United  States  Trust  Co.,  604, 

605. 
Williams  v.  Western  Union  Tel.  Co.,  13, 

83,  707,  718,  722. 
Williams'  Case.  328,  339,  340,  357,  358. 
Williams,  Ex  parte,  1195,  1419. 
Williamson  v.  Kokomo,  etc.,  Ass'n,  880, 

881. 
Williamson  v.  Mason,  484,  563. 

Williamson  v.  New  Albany,  etc.,  R.  R, 
1290,  1358,  1368,  1383,  1406,  1409. 

Williamson  v.  New  Jersey  Southern 
R  R.  Co.,  583,  1203,  1328,  1370,  1383, 
1386,  1387,  1391. 

Williamson  v.  Smoot,  608. 

Williamson  v.  Wadsworth,  273. 

Williamson,  Ex  parte,  862,  1186. 

Williamson's  Adm'r  v.  Washington,  etc., 
R  R,  1370. 

Williamsport  Gas  Co.  v.  Pinkerton,  1203. 

Willink  v.  Morris  Canal  &  B.  Co.,  1384, 
1386,  1432. 

Willis  v.  Fry,  395. 

Willis  v.  Phila.,  etc.,  R  R  Co.,  395,  397. 

Willis  v.  Plaskett,  407. 

Willis  v.  St.  Paul,  etc.,  Co.,  275. 

Willis  v.  Toledo,  etc.,  R'y  Co.,  1091. 

Willis'  Appeal,  466. 


to  the  foot-paging.] 

Williston  v.  Michigan  Southern,  etc.,  R 

R.  Co.,  364,  369,  375,  728,  1172. 
Willitts  v.  Waite,  1424. 
Willmott  v.  London,  etc.,  Co.,  1251. 
Willoughby  v.  Chicago,  etc.,  Co.,  427,  645, 

1144,  1158. 
Willoughby  v.  Comstock,  604,  606,  666. 
Willoughby,  Re,  742. 
Wills  v.  Fisher,  452. 
Wills  v.  Murray,  524,  1061,  1063. 
Wilmer  v.  Atlanta,  etc.,  R'y,  1321,  1324, 

1337,  1341,  1346,  1405. 
Wilmer  v.  Atlantic,  etc.,    R     R,     1283, 

1315,  1324. 
Wilmington,    Bank    of,    v.    Wollaston, 

1022. 
Wilmington  C.  &  R  R.  R  Co.  v.  Thomp- 
son, 231. 
Wilmington,  etc.,  R.  R  v.  Alsbrook,  771, 

774. 
Wilmington,  etc.,  R  R.  v.  Downward, 

963. 
Wilmington  R  R  Co.  v.  Reid,  626,  747, 

758,  759,  771,  774,  1274,  1942. 
Wilson     v.    Academy    of    Music,    821, 

1021. 
Wilson  v.  Atlantic,  etc.,  R  R  Co.,  500, 

532. 
Wilson  v.  Baker,  1018. 
Wilson  v.  Bank    of    Montgomery    Co., 

386,  389. 
Wilson  v.  Barney,  1461. 
Wilson  v.  Blackbird  Creek  M  Co.,  1524. 
Wilson  v.  Boyce,  1277,  1380. 
Wilson  v.  Brownsmith,  406. 
Wilson  v.  California,  etc.,  Co.,  260,  1164. 
Wilson  v.  Cancadia,  144. 
Wilson  v.  Curzon,  1038. 
Wilson  v.  Furness  R'y  Co.,  1540. 
Wilson  v.  Gaines,  774. 
Wilson  v.  Harman,  743. 
Wilson  v.  Keating,  461,  463. 
Wilson  v.  Kings,  etc.,  R  R,  1045,  1090. 
Wilson  v.  Little,  23,  583,  585,  586,  603, 

604,  605,  789. 
Wilson  v.  Maddison,  409. 
Wilson  v.  Martin,  etc.,  Co.,  1176. 
Wilson  v.  Matthews,  78S. 
Wilson  v.  Meiers,  972. 
Wilson  v.  Metropolitan,  eta,  R'y,  1078. 


CO  IV 


TABLE    OF    CASES. 


[The  references  are 

Wilson  v.  Pittsburgh,  et 
Wilson  v.  Pi  r.tral  Br 

358   -  - 

Wilson  v.  ;      te    -~>6. 
Wilson  v.  Bt  Louis,  etc..  R.  R. 

-  ilamani 
Wilsou  ■     -         nlaub.  I   - 
Wi  -  S      _:nan.  253. 

Shreveport,  135. 
Wife  ^tanhope.  1041. 

Stockholder    etc..    267,  206 

,   ! 
Wilson  v.  Tesson.  33S    381 
Wilson  v.  Welch.  1304,  1418 

son  v.  Whil 
Wilson  v.  Wi..-  Valley  R  R  Ca,  168, 

- 
Wilson-  J   884,  744.  118 

Wife  .  ional   Rank. 

■    7,118 
Wiltbauk's  Appeal    ]   J    J  & 
Wiltz  v.  Pet     -    - 

Winans  v.  Gibbs,  etc.,  Mfg..  Co..  1431 
Winaos  r.  Has 
Winch   v.    Birkenl  .   R'y,   1145. 

15 
Wincham,  In  re.  109. 

Winchester  v.  Bait,    fc  S      .    R  R.  HIT. 
Winchester  v.  Metier.  I 
Winchester,  etc..  R  R  v.  Coif  el  L   138a 
Winchester  &  L.  T.  Co.  v.  VimonL  1266. 
Wincock  v.  Turpin.  855s  88ft 
Windham  Provident  Institution,  etc..  v. 

•    SSI 
Windram  v.  French.  79.  480. 
Windsor,  Town  of.  v.  Hallett.  146,  150. 
Winfield  v.  Barton,  250. 
Wing  v.  Harvey.  1115. 
Wing  v.  Hoi  laud  TL  C    ,68 
Winget  v.  Qnin  Boo,  662. 

Wingfield  v.  Peel,  i 
Winn  v.  Macon,  133. 
Winne  v.  Ulster,  etc..  Inst..  1118. 
Winslow  v.  Fletch.  .    614,  615. 

Winsor  v.  Bailey,  1142.  1144.  1147. 
Winsor,  Ex  parte,  717. 
Winsor,  etc..  Co.  v.  Chicago,  etc..  R  R 

Winston  v.  Tennessee,  etc.,  R  R  Ca,  137 


to  the  foot-paging.] 

Winter  v.  Baldwiu. 

Dter  v.  Belmont  Min.  Co..  MO. 
Winter  v.  City  Council  of  Montgomery. 

147.  151. 
Winter  v.  Litti       181 
Winter  v.  Montgomery,    eta,    Ca,    438, 

509.  511. 
Winters  v.  Armstrong.   £      MB,  SSI 
Winters  v.  Muscogee  R  R  C 

Winthrop  Iron  C  •.  v.  M.  ek 
Wintringham  v.  Rosenthal.  88, 

i:.  V,.  v.  Wisconsin. 
')0 
all  v.  Greenville,  etc.,  R   R  Ca, 
1591. 

■.all  v.  Sampson,  U 
Witherhead  r.  ADei 

then  v.  Buckley.  1538 
Witman  v.  Porter.  668. 
Witnu-r  v.  Schk  06. 

Witmer.  Appeal  of. 

Witte  v.  Derby  Fishing  Ca.  1093.  116a 
Witter  v.  Grand  Rapids,  etc..  Co..  1056, 

126a 
Witter  v.  Miss..  Ouachita  &   Red  River 

R  R  Ca,  631,  6aa 
Witters  v.  Sowers,  1031. 
Witt-  re  y.  &  wles,  105,  875,  887,  300.  331, 

7.  351,  412.  734.  1116. 
Witts  v.  Steere,  741.  742. 
Woerishoffer  v.  North  River  Con.  Ca. 

1424. 
Wolcot  v.  Heath.  4  ] 
Wolf  v.  Under  woe  I 
Wolff  v.  New  Orleans,  136. 
Wolffe  v.  Perry  man.  472. 
Wolffe  v.  Underwood.  I 
Wolverton  v.  T 
W<  :..  :.'-.  eta,  Union  v.  Taylor,  1055. 

neon  v.  Fen-. 
Wontnet  v.  Bhairp,  887,  225.  228. 

d  v.  Argyle.  1" 
Wood  v.  Bedford,  etc..  R.  R,  1266,  1500, 
15 

d  v.  Boney. 
d  v.  CI.      -        :c  R  F      "    - 

-  of  Oxford.  1 36. 
d  v.  Consolidated,    etc..    Co..   1197, 
.- 


TABLE    OF    CA8ES. 


CCV 


[77te  references  are  to  the  foot -paging.] 

Wood  v.  Coosa,  etc.,  R  R   Co..  93,  94,  |  Woodruff  v.  Jewett,  M4&  MBj 

219,  232. 
Wood  v.  Cory,  etc.,  Co.,  52,  70,  805, 1126, 

1138,  1212,  1220,  1221. 
Wood  v.  Draper,  670,  747. 
Wood  v.  Dubuque,  etc..  R  R,  961,  1305. 

1473,  1480,  1481. 
Wood  v.  Dummer,  248, 260,  729,  732,  889. 
Wood  v.  Finch,  661. 
Wood  v.  Goodwin,  1347,  1360,  1389. 
Wood  v.  Guarantee,   etc.,   Deposit    Co., 

1235,  1395,  1403. 


Wood  v.  Hayes,  573,  591. 

Wood  v.  Jefferson  Co.  Bank,  1167. 

Wood  v.  Lary,  373,  1208. 

Wood  v.  Lost,  etc.,  Co.,  928. 

Wood  v.  McCardel,  etc.,  Co.,  1392. 

Wood  v.  Meyer,  1262. 

Wood  v.  Oregon  Development  Co.,  1419. 

Wood  v.  Railroad  Co.,  1548. 

Wood  v.  Smith,  593. 

Wood  v.  Union,  etc.,  Ass'n,  400. 

Wood  v.  Whelan.  1046,  1100,  1101,  1261. 

1293,  1295.  1384. 
Wood  v.  Wiley,  etc.,  Co.,  879,  1095. 
Wood  v.  Woad.  1026. 
Wood's  Appeal,  442,  548,  593,  594,  595. 
Wood's  Case,  124. 
Wood's  Claim,  63. 
Wood's,  etc.,  Co.,  Re,  925. 
Wood,  etc.,  Co.  v.  Cold  well,  1003. 
Wood,  etc..  v.  Lawrence  County,  1215. 
Wood  Hydraulic,  etc.,  v.  King,  1059. 
Wood  Mowing  Co.,  Walter  A.,  v.  Cald- 
well, 1002. 
Wood  fork  v.  Union  Bank,  630,  888. 
Woddhouse  v.  Commonwealth  Ins.  Co., 

630. 
Woodhouse  v.   Crescent    MuL  Ins.  Co., 

4*4. 
Woodhull's  Case,  31. 
Woodman  v.  York,  etc.,  R  R  Co.,  1098, 

1367. 
Wood  roof  v.  Howes,  417,  919,  946,  1145, 

1153. 
Woodruff  v.  Dubuque,  etc.,  R  R  Co., 

822,  846. 
Woodruff  v.  Erie  R'y,   1436,   1442,  1443, 

1498. 
Woodruff  v.  Harris,  622. 


Woodruff  v.  McDonald,  92,  480. 
Woodruff  v.    X.    Y.   etc.,    R.    R..    I 

1308. 
Woodruff  v.  Rochester,  etc..  R  R,  1091, 

154& 
Woodruff  v.  Trapnall,  629,  1942. 
Woodruff  v.  Wentworth,  844. 
Woodruff,  Estate  of.  739. 
Woodruff  &  Beach  Iron  Works  v.  Chit- 
tenden. 279,  299. 
Woods  v.  De  Figaniere,  682. 
Woods  v.  Hicks,  321. 
Woods  v.  Lawrence  County,  133, 1214. 
Woods  v.  Pittsburgh,  etc.,  R  R,  1350. 
Woods  v.  Wicks,  292. 
Woodson  v.  Murdock.  1276.  1277. 
Woodstock  Iron  Co.  v.   Extension  Co., 

123. 
Woodworth  v.  Blair,  1350. 
WToollaston's  Case,  177,  178,  179. 180. 
W^oolmer  v.  Toby,  1040. 
Wroolsey   v.    Independent    Order,    etc., 

1026. 
Woonsocket  Union  R  R  Co.   v.  Sher- 
man. 127. 
WTooster  v.  Nevills,  482. 
WTooster  v.  Sage,  494. 
Wooster,  Bank  of,  v.  Stevens,  266. 
Worcester  v.  Norwich,  etc.,  R  R,  151& 
Worcester,  etc.,  Co.  v.  Willard,  113,  11"). 

174. 
Worcester,  etc.,  Co..  In  re,  277. 
Worcester  &  N.  R.  R  Co.  v.  Hinds.  22s». 
Work  v.  Bennett,  591,  596,  790. 
Work  v.  Ogden,  603. 
WTorkingman"s  Banking  Co.  v.  Rauten- 

berg,  986. 
Worral  v.  Harford.  654. 
W^orrall  v.  Judson,  15,  345,  353. 
Worrell's  Appeal,  434 
Worth  v.  Commissioners,  750,  751. 
Worth  v.  Phillips.  471. 
Worthington  v.  Sebastian,  150. 
Worthington  v.  Tormey.  574.  604. 
Worthington,  etc.,  Co.   v.   Pfister,  etc., 

Co.,  941. 
Woven  Tape  Skirt  Co.,  Matter  of,  88 
Wright  v.  Bank  of  Metropolis,  788. 
Wright  v.  Bishop,  141. 


CCV1 


TABLE    OF    CASES. 


[The  references  are  to  the  foot-paging.} 


Wright  v.  Bundy,  1059,  1293,  1295. 

Wright  v.  Carter,  1589. 

Wright  v.  Central     California     Colony 

Water  Co.,  819,  839. 
Wright  v.  Commonwealth,  810,  817,  819. 
Wright  v.  Kentucky,    etc.,     R'y,     1364, 

1395. 
Wright  v.  Lanckton,  1095. 
Wright  v.  Lee,  318,  796,  988,  1050,  1102. 
Wright  v.  Liverpool  &  G.  Ins.  Co.,  1175. 
Wright  v.  McCormick,  257,  278,  280, 288, 

305. 
Wright  v.  Milwaukee,    etc.,    R'y,    1480, 

1502. 
Wright  v.  Nagle,  1944. 
Wright  v.  Ohio,  etc.,  R.  R.,  1232. 
Wright  v.  Oroville  M.  Co.,  933. 
Wright  v.  Pipe  Line  Co.,  426. 
Wright  v.  Shelby  R  R.  Co.,  218. 
Wright  v.  Stelz,  748,  764. 
Wright  v.  Tuckett,  711,  743.  745.' 
Wright  v.  Vermont,  etc.,  R  R.  Co.,  377. 
Wright  v.  White,  740. 
Wright  v.  Wood,  454 
Wright  v.  Wynockie,  etc.,  Co.,  1390. 
Wright's  Appeal,  395,  396,  398.  479. 
Wright's  Case,  201,  208,  213,  801. 

Wrysgan,  etc.,  Co.,  In  re,  664,  665. 
Wullenwaher  v.  Dunnigan,  153,  190. 

Wurtzbarger    v.   Anniston,  etc.,   Mills, 
189. 

Wyatt  v.  Larimer,  etc.,  Co.,  1600. 

Wyatt  v.  Ohio,  etc.,  R  R,  1447. 

Wych  v.  Meal,  683,  1146. 

Wylde  v.  Northern  R  R  of  N.  J.  &  E. 
R'y  Co.,  1533,  1536. 

Wyles  v.  Suydam,  285. 

Wylie  v.  Missouri  Pac.  R  R.,  1198. 

Wylie  v.  Speyer,  1233. 

Wylly  v.  Collins,  654. 

Wyman  v.  American  Powder    Co.,  31, 
101,  278,  779,  785,  787. 

Wyman  v.  Fiske,  469,  475,  476,  477. 

Wyman  v.  Hallowell,  etc.,  Bank,  1112. 

Wyman  v.  Penobscot  &  K.  R  R,  1535. 

Wynkoop  v.  Seal,  567. 

Wynne  v.  Price,  355,  461,  463,  525,  569. 

Wynne's  Case,  1588. 

Wyoming,  etc.,  Assoc,  v.  Talbott,  620. 

Wyscaver  v.  Atkinson,  140. 


Y. 


Yard  v.  Durant,  1948. 

Yardley  v.  Clothier,  1430. 

Yates  v.  Boston,  etc.,  R  R,  1470. 

Yates  v.  Madden,  410. 

Yates  v.  Van  De  Bogert,  890. 

Yazoo,  etc.,  R  R  v.  Board,  etc.,  772. 

Yeager  v.  Scrantou,  etc.,  Bank,  160. 

Yeager  v.  Wallace,  1428,  1431. 

Yeaton  v.  Eagle,  etc.,  Co.,  417. 

Yeaton  v.  United  States,  294. 

Yelland's  Case,  524. 

Yellow,    etc.,    Co.   v.   Stevenson,    1077, 
1082,  1120. 

Yellow,    etc.,    Co.   v.   Wood  Co.,  1600. 

Yerkes  v.  Saloman,  469,  472,  476. 

Yetts  v.  Norfolk  R'y  Co.,  165,  1539. 

Yoebel  v.  Wolf,  652. 

Yoeland,  etc.,  Re,  335. 

Yolo,  Bank  of,  v.  Weaver.  305, 1068. 

York  v.  Passaic,  etc.,  Co.,  464. 

York  &  C.  R.  R,  Co.  v.  Pratt,  223. 

York  &  Maryland  L.  R  R   Co.  v.  Wi- 
nans.  1535. 

York  &  North  Midi.  R'y  Co.  v.  Queen, 
886. 

York  Co.  v.  Central  R  R,  1537. 

York  County  v.  Small,  1057. 

York,  etc.,  Co.,  Re,  415. 

York,  etc.,  R'y  Co.  v.  Hudson,  922,  1540. 

York,  etc.,  R  R  Co.  v.  Ritchie,  178, 1071. 

York  Tramways  v.  Willows,  171. 

Youghiogheny  Shaft  Co.  v.  Evans,  271, 
283. 

Young  v.  Clarendon  Township,  143. 

Young  v.  Drake,  1142. 1151. 

Young  v.  Erie  Iron  Co.,  48,  81,  83. 

Young  v.  Farwell,  294. 

Young  v.  Fox,  482. 

Young  v.  Harrison,  1577. 

Young  v.  M'Kay,  345. 

Young  v.  Montgomery,  etc.,  R  R,  1247, 
1276,    1278,    1299,    1314,   1349,   1419, 
1420. 
Young  v.  Moses,  891. 
Young  v.  New  York  &  Liverpool  Steam- 
ship Co.,  259. 
Young  v.  Northern,  etc.,  Iron  Co.,  1367. 


TABLE    OF    CASES. 


CCVll 


[27ic  references  are 

Young  v.  Providence,  etc.,  Co.,  1171. 

Young  v.  Rollins,  963. 

Young  v.  Rondout,  etc.,  Co.,  784,  1154, 

1498. 
Young  v.  Rosenbaum,  280,  285,  286. 
Young  v.  South,  etc.,  Iron  Co.,  615.  621. 
Young  v.  Toledo,  etc.,  R  R,  806,,  1494, 

1506. 
Young  v.  Towere,  1164. 
Young  v.  Vough,  687,  692,  698,  700,  701. 
Young  v.  Wempe,  287. 
Young,  Ex  parte,  472,  474,  476. 
Youngblood  v.   Georgia  Imp.  Co.,  634, 

639.  ' 
Youngman  v.  Elmira,  etc.,  R  R,   1280, 

1321,  1381,  1513. 
Younkin  v.  Collier,  584,  624. 


z. 


Zabriskie  v.  Cleveland,  C.  &  C.  R  R  Co., 
74, 423, 634, 801, 1108, 1130,  1139, 1213, 
1244,  1247. 


to  the  foot-paging.'] 

Zabriskie  v.  Hackensack  &  N.  Y  R.  R 

Co.,    627,    631,    636,   637,   640,    858, 

1130. 
Zabriskie  v.  Railroad  Co.,  132. 
Zack  v.  Pennsylvania  R  R  Co.,  1524. 
Zambrino  v.   Galveston,   etc.,  R'y   Co., 

1179. 
Zanesville  v.  Zanesville,  etc.,  Co.,   1582. 
Zanesville,  etc.,  Co.  v.  Zanesville.  1582. 
Zebley    v.    Farmers',     etc.,    Co.,     1468. 

1474. 
Zelaya  Min.  Co.  v.  Meyer,  50. 
Zihlman  v.  Cumberland  Glass  Co.,  1068. 
Zimmer  v.  Schleehau",  278. 
Zimmer  v.  State,  1517,  1545. 
Zimmerman  v.  Jewett,  846. 
Zion  Ch.  v.  St.  Peter's  Ch.,  1166. 
Zirkel   v.   Joliet  Opera  House  Co.,  49, 

217. 
Zoedone  Co.,  Re,  47. 
Zuccani  v.  Nacupoi,  etc.,  Co.,  1474. 
Zulick  v.  Markbam,  510,  573. 
Zulueta's  Claim,  337,  414,  416. 


STOCK  AND  STOCKHOLDERS,  BONDS,  MORTGAGES, 


AND 


GENERAL  CORPORATION  LAW. 


PART  I. 

ISSUE  OF  AND  LIABILITY  ON  STOCK. 


CHAPTER  I. 


DEFINITIONS  AND  SCOPE  OF  THE  WORK 


1.  Definition  of  corporation. 

2.  Definition  of  charters,  general  and 

special. 

3.  Definition  of  powers,  express  and 

implied. 

4.  The     certificate    of    incorporation 

under  the  general  act  cannot 
legally  contain  any  powers,  re- 
strictions or  provisions  except 
those  called  for  by  the  statute. 

5.  Mistakes,  irregularities  and  illegali- 

ties in  becoming  incorporated. 

6.  A  corporation  is  not  a  partnership ; 

but  where  the  corporation  is  a 
mere  "  dummy,"  its  existence  is 
sometimes  disregarded  and  its 
acts  held  to  be  the  acts  of  its  offi- 
cers and  stockholders. 


§7. 


Classes  of  corporations  and  the  class 
considered  herein. 

Corporations  having  a  capital  stock. 

Definition  of  capital  stock. 

Definitions  of  corporator,  sub- 
scriber, shareholder  and  stock- 
holder. 

Relation  of  stockholders  towards 
the  corporation. 

Shares  of  stock  defined  —  What 
law  governs. 

Classes  of  stock. 

Certificates  of  stock. 
15.  Definition  of  bond,  mortgage,  deed 
of  trust,  debenture,  articles  of  as- 
sociation, memoranda  of  associa- 
tion, scrip,  certificate  book,  trans- 
fer book,  stock  ledger,  underwrit- 
ing, founders'  shares. 


9. 

10. 


11. 

12. 

13. 
14. 


§  1.  Definition  of  corporation. —  A  corporation  is  an  artificial 
person  like  the  state.  It  is  a  distinct  existence  —  an  existence 
separate  from  that  of  its  stockholders  and  directors.  Chief  Justice 
Marshall,  in  the  Dartmouth  College  Case,1  defined  a  corporation  as 


1  Dartmouth  College  v.  Woodward,  4 
Wheat.,  518,  636  (1819). 

The  supreme  court  of  the  United 
States  has  said  that  "  An  incorporated 
company  is  an  association  of  individ- 

(1) 


uals,  acting  as  a  single  person  and  by 
their  corporate  name ; "  and  again. 
"  Private  corporations  are  but  associa- 
tions of  individuals  united  for  some  com- 
mon purpose,  and  permitted  by  the  law 


§2.] 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[CH.  I. 


"  an  artificial  being,  invisible,  intangible,  and  existing  only  in  con- 
templation of  law." 

A  corporation  can  be  created  by  or  under  legislative  enactment, 

and  by  that  alone.1 

§  2.  Definition  of  charters,  general  and  special—  A  charter  is  the 
instrument  which  creates  the  corporation.  It  formerly  was  granted 
by  the  king.  Later  it  was  granted  by  an  act  of  the  legislature  — 
a  separate  act  being  passed  for  each  charter.  At  present  the  con- 
stitutions of  many  of  the  states  require  that  in  all  possible  cases  the 


to  use  a  common  name,  and  to  change 
its  members  without  a  dissolution  of 
the  association."  United  States  v.  Trin- 
idad Coal  Co.,  137  U.  S.,  160  (1890). 

The  following  cases  give  definitions 
of  a  corporation :  Ohio  Tns.  Co.  v.  Nun- 
nemacher,  15  Ind.,  295  (1860) ;  Ohio,  etc., 
R  R  Co.  v.  Wheeler,  1  Black  (U.  S.), 
286,  295  (1861),  per  Taney,  C.  J. ;  Board, 
etc.,  Tippecanoe  Co.  v.  Lafayette,  etc., 
R.  R  Co.,  50  Ind.,  85,  108  (1875) ;  Rail- 
road Commissioners  v.  Portland,  etc., 
R  R  Co.,  63  Me.,  269,  277  (1872) ;  Thomp- 
son v.  Waters,  25  Mich.,  214,  223  (1872) ; 
Baltimore,  etc.,  R  R  Co.  V.  Fifth  Bap. 
Church,  108  U.  S.,  317,  330  (1882);  Peo- 
ple v.  Assessors  of  Watertown,  1  Hill, 
616,  620  (1841);  Thomas  v.  Dakin,  22 
Wend.,  9,  70,  104  (1839);  Warner  v. 
Beers,  23  Wend.,  103,  123,  124  (1840); 
Head  v.  Providence  Ins.  Co.,  2  Cranch 
(U.  S.  S.  C),  127,  167  (1804);  Bank  of 
U.  S.  v.  Deveaux,  5  Cranch,  61,  88  (1809), 
per  Marshall,  C.  J. ;  Louisville,  etc.,  R.  R 
Co.  v.  Letson,  2  How.,  497,  552  (1844) ; 
2  Kent,  Com.,  268 ;  State  v.  Milwaukee, 
etc.,  R'y  Co.,  45  Wis.,  579,  592  (1878). 

In  Tippling  v.  Pexall,  2  Bulst.,  233 
(1613),  "The  opinion  of  Manhood,  chief 
baron,  was  this,  as  touching  corpora- 
tions :  that  they  are  invisible,  immortal, 
and  have  no  soul.  A  corporation  is  a 
body  aggregate ;  none  can  create  souls 
but  God ;  but  the  king  creates  them,  and 
therefore  they  have  no  souls." 

The  domicile  of  a  corporation  is  en- 
tirely distinct  from  the  domicile  of  its 
officers  or  stockholders.  Perry  v.  Round, 
etc.,  Assoc,  22  Hun,  293  (1880).  See, 
also,  cases  in  ch.  XLV,  infra,  where  the 


jurisdiction  of  the  federal  courts  was  at 
issue. 

It  is  well  to  state  here  that  a  joint- 
stock  corporation  and  a  joint-stock  as- 
sociation are  essentially  different.  Both 
have  a  capital  stock,  and  both  are  man- 
aged by  boards  of  officers  and  meetings 
of  the  stockholders.  But  a  joint-stock 
company  is  unincorporated  and  is  but  a 
partnership.     See  ch.  XXIX 

1  Franklin  Bridge  Co.  v.  Wood,  14  Ga., 
80  (1853);  United  States  Trust  Co.  v. 
Brady,  20  Barb.  119  (1855);  Penn.  R  R 
Co.  v.  Canal  Com'rs,  21  Pa.  St.,  9  (1852); 
Stowe  v.  Flagg,  72  111.,  397  (1874) ;  Hoad- 
ley  v.  County,  etc.,  Essex,  105  Mass.,  519 
(1870);  State  v.  Bradford,  32  Vt,  50 
(1859) ;  McKirn  v.  Odom,  3  Bland's  Ch. 
(Md.),  407,  417  (1829). 

In  England  certain  colleges  have 
power  to  create  corporations.  No  such 
power  exists  in  this  country.  Medical 
Inst  v.  Patterson,  1  Denio,  61  (1845). 

Congress  has  constitutional  power  to 
incorporate  a  bank.  McCullough  v. 
State  of  Md.,  4  Wheat.,  316  (1819).  Con- 
gress may  incorporate  interstate  rail- 
roads. California  v.  Pacific  R  R  Co., 
127  U.  S.,  1,  39  (1888). 

No  particular  form  of  words  is  requi- 
site to  create  a  corporation.  Denton  v. 
Jackson,  2  John.  Ch.,  320  (1817).  Yet  a 
statute  which  seems  to  create  a  corpo- 
ration may  be  construed  not  to  have 
that  effect.  See  Walsh  v.  Trustees,  etc., 
96  N.  Y.,  427  (1884),  holding  that  the 
trustees  of  the  Brooklyn  bridge  are  not  a 
corporation,  but  that  the  property  be- 
longs to  the  two  cities  of  New  York  and 
Brooklyn. 


CH.  I.] 


DEFINITIONS    AND    SCOPE    OF   THE    WORK. 


[§2. 


legislature  shall  pass  general  acts  whereby,  by  the  simple  filing  of 
a  prescribed  instrument,  persons  may  form  a  corporation  without 
applying  to  the  legislature  at  all.  These  general  acts  specify  the 
contents  of  the  instrument  to  be  filed,  and  specify  also  the  powers 
of  the  corporation.  A  charter  is  special  where  a  special  act  of  the 
legislature  creates  the  corporation.  A  charter  is  under  the  general 
act  when  it  consists  of  a  certificate  of  incorporation  filed  with  the 
public  authorities  in  accordance  with  a  general  act  of  the  legislature 
allowing  corporations  to  be  formed  in  that  manner.  The  general 
laws  of  the  state  apply  to  a  corporation  organized  under  a  special 
act  so  far  only  as  the  former  are  consistent  with  the  latter.1 


1  The  provisions  of  the  general  statutes 
relative  to  corporations  are  not  appli- 
cable to  a  special  charter  so  far  as  the 
provisions  of  the  special  charter  seem  to 
be  inconsistent  with  those  of  the  gen- 
eral statutes.  See  State  v.  Bowen,  30 
Barb.,  24 ;  affirmed  on  other  points,  21 
N.  Y.,  517;  also  Hollis  v.  Drew,  etc., 
Seminary,  95  N.  Y.,  166,  173;  Lefevre  v. 
Lefevre,  59  N.  Y,  434 ;  Clarkson  v.  Hud- 
son River  R  R  Co.,  12  N.  Y.,  304 ;  John- 
son v.  Hudson  River  R.  R.  Co.,  49  N.  Y, 
455 ;  Burroughs  v.  Burroughs,  68  N.  Y., 
259. 

A  general  statute  reserving  the  power 
to  amend  or  repeal  charters  is  a  part  of 
all  special  charters  passed  subsequently. 
Griffin  v.  Kentucky  Ins.  Co.,  3  Bush 
(Ky.),  592 ;  approved  in  Louisville  Water 
Co.  v.  Clark,  143  U.  S.,  1  (1892). 

The  charter  of  a  company  formed 
under  the  general  law  consists  not  only 
of  its  articles  of  association,  but  also  of 
the  general  statutes  of  the  state  under 
which  the  organization  takes  place. 
People  v.  Chicago  Gas  T.  Co.,  22  N.  E. 
Rep.,  798  (111.,  1889). 

"  Corporations  organized  under  the 
general  law  are  vested  with  the  powers 
conferred  by  the  general  act,  and  those 
contemplated  by  the  certificate,  and 
such  incidental  powers  with  respect  to 
the  general  and  special  powers  as  are 
necessary,  in  the  sense  of  convenient, 
reasonable  and  proper."  Ellerman  v. 
Chicago  Junction,  etc.,  Co.  et  al.,  23  Atl. 
Rep.,  287  (N.  J.,  1891). 

Special  powers  may  be  given  to  an  old 


corporation  although  a  new  constitu- 
tion prohibits  special  charters.  Wallace 
v.  Loomis,  97  U.  S.,  146  (1877). 

Although  a  constitutional  provision 
requires  incorporations  under  general 
acts  if  at  all,  yet  an  old  charter  existing 
prior  to  the  constitutional  provision 
may  be  amended  by  the  legislature  after 
such  constitutional  provision.  Farns- 
worth  v.  Lime  Rock,  etc.;  R  R,  22  Atl. 
Rep.,  373  (Me.,  1891). 

An  old  special  charter  may  be 
amended  although  a  new  constitution 
forbids  the  grant  of  special  charters. 
St.  Joseph,  etc.,  R.  R.  v.  Shambaugh,  17 
S.  W.  Rep.,  581  (Mo.,  1891). 

Concerning  the  abuses  which  grow 
out  of  the  granting  of  special  charters, 
see  Cook  on  The  Corporation  Problem, 
pp.  110-113. 

In  New  York  the  legislature  is  to 
decide  whether  a  special  or  general  in- 
corporation law  shall  be  enacted.  Peo- 
ple v.  Bowen,  21  N.  Y,  516  (1860);  Gil- 
bert El.  R.  R  Co.,  70  N.  Y.  361  (1877 1 

A  charter  cannot  be  sold,  mortgaged 
or  assigned,  although  the  property  and 
power  to  operate  the  property  may  be. 
See  Part  VI,  infra. 

In  the  case  Citizens'  Bank  v.  Board 
of  Assessors,  54  Fed.  Rep.,  73  (1893),  the 
court  held  that  the  acceptance  by  the 
corporation  of  an  act  which  compelled 
the  corporation  to  accept  the  terms  of 
a  new  constitution  did  not  have  that 
effect 

In  the  case  Citizens'  St  R  Co.  v.  Mem- 
phis, 53  Fed.  Rep.,  715  (1893),  the  court 


3 


§  3.J  DEFINITIONS    AND    SCOPE    OF   THE    WORK.  [CH.  I. 

The  state  creates  the  corporation  upon  the  application  of  indi- 
viduals, who  are  called  incorporators.  The  incorporators  then 
organize  the  corporation.  The  functions  of  the  incorporators  there- 
upon cease  and  stockholders  proceed  to  contribute  the  capital  and 
elect  directors.  The  directors  then  start  and  continue  to  keep  in 
operation  the  powers  of  the  corporation. 

§  3.  Definition  of  powers,  express  and  implied. — The  powers  of 
the  corporation  are  given  by  the  charter,  and  these  powers  are  ex- 
press or  implied. 

The  express  powers  are  those  which  are  expressly  specified  in 
the  charter  or  the  statutes  under  which  the  corporation  was  incor- 
porated. 

The  implied  powers  of  a  corporation  are  those  which  naturally 
arise  from  the  nature  of  the  business.  Thus  a  corporation  has  im- 
plied power  to  buy,  hold  and  sell  necessary  real  estate  and  other 
property  in  its  corporate  name;  to  sue  and  be  sued  in  that  name; 
to  do  business  in  its  corporate  name  without  rendering  its  stock- 
holders liable  as  partners  for  its  debts ;  to  govern  its  officers,  agents 
and  business  by  by-laws ;  to  issue  transferable  shares  of  stock  to  its 
stockholders;  to  have  its  business  managed  by  directors  instead  of 
by  the  stockholders  as  in  a  partnership;  to  continue  business 
although  its  stockholders  die  or  sell  their  stock;  to  borrow  money 
and  give  bills,  notes  and  acceptances ;  to  issue  negotiable  bonds ;  to 
assign  for  the  benefit  of  creditors ;  and,  except  in  quasi-\mb\\c  cor- 
porations, such  as  railroads,  to  give  a  mortgage.1 

held  that  a  charter  granted  without  the  278,  n.,  adds :  (6)  The   power  to  expel 

reserved  right  to  amend  or  repeal  did  members.     1  Kyd  on  Corp.,   13,  69.  70, 

not  become  subject    to    the  right    to  has  a  different  summary  of  incidents, 

amend  or  repeal,  although  it  had  en-  The  greatest  and  most  vital  features 

tered  into  a  consolidation  after  a  con-  of    modern    corporations,     however,— 

stitutional    provision    was    passed    re-  features  that  have  become  prominent 

serving    this    right  in  all  cases.     The  since    those    authors    wrote,—  and  the 

consolidation  was  held  not  to  have  dis-  features  that  have  rendered  possible  the 

solved  the  old  corporation.  universal   use  and  great  achievements 

1  The     definition     of    a    corporation  of  corporations,   are  two  in  number : 

throws  some  light  upon  its  nature,  but  (1)  The    limited  liability  conferred,  by 

a  still  clearer  idea  is  obtained  by  consid-  implication,  by  the  granting  of  a  char- 

ering  the  inherent  powers  of  corpora-  ter.     (2)  The  right  of  the  corporation  to 

tion.     1  Blackstone's  Com.,  475,  says  that  issue  shares  of  stock  and  the  right  of 

the  inseparable  incidents  or  powers  of  the  members  to  transfer  them, 

all  corporations  aggregate  are :  (1)  To  A    corporate    franchise    may    mean 

have  perpetual  succession.     (2)  To  sue  either  the  power  to  act  as  a  corporation, 

and  be  sued,  and  grant  and  receive  in  or  may  mean  the  right  which  a  corpo- 

the  corporate  name.    (3)  To  purchase  ration  has  to  operate  a  franchise,  such 

and  hold    lands    and    chattels.    (4)  To  as  a  railroad's  right  of  way.    The  for- 

have  a  common  seal.    (5)  To  make  by-  mer  is  not  property.    It  is  not  an  ele- 

laws.    Chancellor   Kent,    in    II  Com.,  ment  of  value  in  estimating  the  value 


CH.  I.] 


DEFINITIONS    AND    SCOPE   OF    THE    WORK. 


[§3. 


The  theory  of  a  corporation  is  that  it  has  no  powers  except  those 
expressly  given  or  necessarily  implied.  But  this  theory  is  no 
longer  strictly  applied  to  private  corporations.  A  private  corpo- 
ration may  exercise  many  extraordinary  powers,  provided  all  of 
its  stockholders  assent  and  none  of  its  creditors  are  injured.  There 
is  no  one  to  complain  except  the  state,  and  the  business  being  en- 
tirely private  the  state  does  not  interfere.  Thus  fifty  years  ago 
the  courts  would  summarilv  have  declared  it  illegal  for  a  business 
corporation  to  become  an  accommodation  indorser  of  commercial 
paper.  But  to-day  if  all  the  stockholders  assent  thereto  and  cred- 
itors are  not  injured,  such  an  act  is  held  to  be  legal.1 

Again  the  old  theory  of  a  corporation  was  that  it  could  not  give 
away  its  assets.  But  the  modern  view  is  that  a  private  corpora- 
tion may  do  so  if  all  its  stockholders  assent  and  if  creditors  are 
paid.  Public  policy  does  not  require  business  corporations  to  con- 
fine themselves  strictly  to  their  express  and  implied  powers.2 

In  the  case  of  railroad  corporations,  however,  public  policy  does 
intervene  and  does  limit  the  implied  powers.  A  railroad  com- 
pany has  no  implied  power  to  sell,  lease  or  mortgage  its  road,  or 
to  charge  such  rates  for  service  as  it  sees  fit,  or  to  charge  one  man 
more  than  another  for  the  same  service.3 


of  the  majority  of  the  stock.  Johnson 
v.  Kirby,  65  Cal.,  482  (1884).  It  is  not  an 
asset.  A  bank  franchise  does  not  pass 
to  its  assignee  for  the  benefit  of  credit- 
ors, and  the  court  will  deny  his  applica- 
tion to  sell  it.  Fietsam  v.  Hay,  13  N.  E. 
Rep.,  501  (111.,  1887).  For  various  defini- 
tions of  franchise,  see  Wait  on  Insolvent 
Corporations,  §  12. 

It  has  been  said  that  the  essence  of  a 
corporation  consists  of  a  capacity  (1)  to 
have  perpetual  succession  under  a  spe- 
cial name  and  in  an  artificial  form ; 
(2)  to  take  and  grant  property,  contract 
obligations,  sue  and  be  sued,  by  its  cor- 
porate name  as  an  individual ;  and  (3)  to 
receive  and  enjoy  in  common  grants  of 
privileges  and  immunities.  Thomas  v. 
Dakin,  22  Wend.,  1.  The  supreme  court 
of  Illinois,  speaking  of  the  above,  says : 
"The  first  two  describe  the  franchises 
which  belong  to  the  incorporators ;  the 
last  those  which  belong  to  the  corpora- 
tion." Snell  v.  Chicago,  24  N.  E.  Rep., 
532  (111.,  1890). 

»  See  §  774,  infra. 


2  The  New  York  court  of  appeals  said 
in  the  case  Kent  v.  Quicksilver  Mining 
Co.,  78  N.  Y.  159,  186 :  "  A  bank  has  no 
authority  from  the  state  to  engage  in 
benevolent  enterprises ;  and  a  subscrip- 
tion, though  formally  made,  for  a  char- 
itable object  would  be  out  of  its  pow- 
ers ;  but  it  would  not  be  otherwise  an 
illegal  act ;  yet  if  every  stockholder  did 
expressly  assent  to  such  an  application 
of  the  corporate  funds,  though  it  would 
still  be  in  one  sense  ultra  vires,  no  wrong 
would  bedone,  no  public  interest  harmed  ; 
and  no  stockholder  could  object,  or  claim 
that  there  was  an  infringement  of  his 
rights,  and  have  redress  or  protection. 
Such  an  act,  though  beyond  the  power 
given  by  the  charter,  unless  expresly 
prohibited,  if  confirmed  by  the  stock- 
holders could  not  be  avoided  by  any  of 
them  to  the  harm  of  third  persons. 
This  arises  from  the  principle  that  the 
trust  for  stockholders  is  not  of  a  public 
nature."     See  also  §  774. 

3  See  Part  VI,  infra. 


§  4.]  DEFINITIONS    AND    SCOPE    OF   THE    WORK.  [CH.  I. 

"  Every  public  grant  of  property,  or  of  privileges  or  franchises, 
if  ambiguous,  is  to  be  construed  against  the  grantee  and  in  favor 
of  the  public,"  and  especially  so  as  regards  corporations  organized 
under  general  laws.1 

§  4.  The  certificate  of  incorporation  under  the  general  act  cannot 
legally  contain  any  powers,  restrictions  or  provisions  except  those 
called  for  by  the  statute.—  Frequently  the  incorporators  desire  to 
obtain  more  powers  than  the  statute  specifies,  or  to  restrict  unal- 
terably some  of  the  powers  possessed  by  the  corporations,  or  to 
regulate  in  some  unalterable  way  the  business  of  the  company. 
For  the  purpose  of  doing  so  they  insert  in  the  certificate  of  incor- 
poration under  the  general  act  special  provisions  not  called  for  by 
the  act  which  authorizes  the  incorporation. 

The  law  is  clear  that  the  articles  of  association  of  a  corporation 
organized  under  a  general  act  are  allowed  to  contain  only  those 
matters  and  statements  which  are  required  by  the  statute  itself. 
The  incorporators  are  not  at  liberty  to  insert  additional  provisions 
and  regulations.  If  such  additional  provisions  and  regulations  are 
inserted  they  are  void.  The  law  does  not  recognize  them.  They 
do  not  constitute  a  part  of  the  charter,  but  are  rejected  as  surplus- 
age and  extraneous  matter.  If  the  articles  of  association  contain 
the  matters  required  by  the  statute  and  also  contain  additional 
matters,  the  former  are  sufficient  to  sustain  the  charter,  and  the 
additional  matter  does  not  vitiate  the  legitimate  part  of  the  articles, 
but  the  additional  matter  is  disregarded  by  the  law  as  though  it 
had  not  been  written.  All  of  the  decisions  hold  that  any  state- 
ments of  restrictions  inserted  in  the  articles  of  association,  outside 
of  the  statements  required  by  the  general  act  allowing  the  incor- 
poration, are  unauthorized  and  void.2 

In  New  York,  New  Jersey  and  under  the  National  Banking  Act 

i  Central  Trans.  Co.  v.  Pullman's  Car  Crary,  418  (1880);  Ancient  Club  v.  Mil- 
Co.,  139  U.  S.,  24,  49  (1891).  ler,  7  Lansing,  412 ;  People  v.  Utica  Ins. 

2  Eastern  Plank  Road  Co.  v.  Vaughan,  Co.,  15  Johns.,  358  (1818). 

14  N.  Y.,  546  (1856) ;  Oregon  R'y  Co.  v.  A  provision  cannot  be  included  in  a 

Oregonian    R'y    Co.,   130    U.   S.,    1,   25  charter  under  the  general  act,  whereby 

(1889) ;  Albright  v.  Lafayette,  etc.,  Asso-  stockholders  are  to  vote  according  to 

ciation,  102  Pa.  St.,  411  (1883) ;  Becket  v.  their  stock.     Commonwealth  v.  Nicker- 

Uniontown,    etc.,   Assoc,    88    id.,   211 ;  son,  10  Phil.,  55  (1873). 

Grangers',  etc.,  Ins.  Co.  v.   Kamper,  73  For  many  decisions  on  this  subject 

Ala.,  325;  Thomas  v.  Railroad  Co.,  101  see  ch.  XIII,  §§  231-234,  notes. 

U.  S.,  71  (1879);  Penn.  R.  R.  Co.  v.  St.  The  by-laws  cannot  modify  the  articles 

Louis,  etc.,  R.  R.  Co.,  118   U.  S.,  290,  307  of  incorporaton  in  any  of  the  particulars 

(1886) ;  Bigelow  v.  Gregory,  73  111.,  197 ;  required  by  statute  to  be  stated  in  the 

Rochester  Ins.  Co.  v.  Martin,  13  Minn.,  articles   of   incorporation.     Guinness  v. 

54 ;  Western  U.  T.  Co.  v.  U.  P.  R'y,  1  Mc-  Land  Corp.,  L  R,  22  Ch.  D.,  349  (1882). 

6 


CH.  I.] 


DEFINITIONS    AND    SCOPE    OF   THE    WORK. 


[§5- 


such  special  provisions  are  allowed,1  and  a  broad  public  policy  fa- 
vors the  allowance  of  them,  but  under  the  usual  general  incorporat- 
ing act  they  are  void. 

The  certificate  of  incorporation  may,  however,  provide  that  the 
business  shall  be  two  or  more  of  the  kinds  of  business  which  are 
authorized  by  the  statute.2 

§  5.  Mistakes,  irregularities  and  illcfjalities  in  lecoming  incorpo- 
rated.—  Often  it  happens  that  mistakes  are  made  in  organizing  a 
corporation.  The  certificate  of  incorporation  may  be  defective,  or 
it  may  not  be  filed  or  published  as  required  by  the  statutes,  or  the 
corporation  itself  may  be  irregularly  organized  thereafter.  Com- 
plicated questions  then  arise  as  to  the  rights  and  liabilities  of  the 
various  parties.  Stockholders  cannot  set  up  such  irregularities  as  a 
defense  to  an  action  by  the  corporation  to  enforce  their  subscriptions 
to  stock.3  Corporate  creditors  cannot  hold  the  stockholders  liable 
as  partners  by  reason  of  the  irregular  incorporation.4  Indeed,  the 
general  rule  now  is,  with  few  exceptions,  that  no  one  can  question 


Concerning  the  advisability  of  allow- 
ing the  incorporators  to  insert  provis- 
ions in  the  articles  of  incorporation 
restricting  and  regulating  the  powers 
of  the  corporation  or  directors  or  stock- 
holders, see  Cook  on  the  Corporation 
Problem,  pp.  90.  91. 

In  incorporating  under  the  general 
act  no  powers  can  be  placed  in  the  arti- 
cles of  incorporation  except  such  powers 
as  the  general  act  authorizes.  People  v. 
Chicago  Gas  L.  Co.,  22  N.  E.  Rep.,  798 
(111.,  1889). 

Where  a  land  company  is  incorporated 
under  the  general  act,  and  the  general 
act  does  not  provide  for  any  statement 
in  the  articles  of  association  as  regards 
the  amount  of  debts  which  the  corpora- 
tion may  incur,  a  provision  inserted  in 
the  articles  of  association  that  "  the  in- 
debtedness of  the  company  shall  not  ex- 
ceed $500  at  any  time  "  is  not  a  part  of 
the  charter.  The  provision  is  at  the 
most  merely  a  by-law.  The  court  said  : 
"We  think  that  the  limitation  of  $500 
in  the  charter  of  the  corporation  cannot 
be  regarded  of  any  more  force  than  a 
by-law/'  Sherman,  etc.,  Co.  v.  Morris. 
2:1  Pac.  Rep.,  5G9  (Kan..  1890). 

A  provision  in  the  charter  that  the 
stock  shall  be  divided  in  a  certain  way 


is  binding  upon  the  corporation  so  far 
as  it  is  concerned,  and  upon  the  parties 
thereto,  but  may  be  contradicted  by 
other  evidence  of  what  the  agreement 
really  was.  Bates  v.  Wilson,  24  Pac. 
Rep.,  99  (Colo.,  1890). 

Provisions  for  internal  management 
should  not  appear  in  a  charter.  In  re 
The  Stevedores'  Beneficial  Association. 
14  Phila.  Rep.,  130 ;  Re  M.  E.  Patterson 
Memorial  Church,  41  Leg.  Int.,  253 ;  Re 
St.  Luke's  Church,  id.,  74 ;  Re  Central 
Democratic  Ass'n,  46  Leg.  Int,  380; 
Boos'  Appeal,  109  Pa.  St.,  596. 

1  See  Part  VI,  infra;  also,  Society,  etc., 
v.  Meyer,  52  Pa.  St.,  125. 

2  Bird  v.  Daggett,  97  Mass.,  494  (1867). 

A  statement  in  the  articles  of  incor- 
poration that  the  company  may  carry  on 
such  business  as  it  thinks  to  be  for  the 
benefit  of  the  stockholders  is  void.  Re 
Crown,  etc.,  Bank,  62  L.T.  Rep.,  823 
(1890). 

Charters  for  enumerated  objects  "and 
other  purposes  "  will  be  rejected.  In  re 
Journalists'  Fund,  8  Phila.  Rep.,  272. 
So  as  to  mining  for  "minerals."  Re 
Glenwood  Co.,  6  Pa  Co.  Ct  Rep.,  575. 

3  See  §  183.  infra. 

4  See  §§  231-239,  infra. 


6.] 


DEFINITIONS   AND    SCOPE   OF   THE    WORK. 


[CH. 


the  regularity  of  the  incorporation  except  the  state,  where  the 
statutes  allow  incorporation  and  the  company  has  endeavored  to 
incorporate  and  is  acting  as  a  corporation.1  But  where  the  pur- 
pose for  which  the  corporation  is  organized  is  illegal  or  not  speci- 
fied in  the  act  authorizing  the  incorporation,  then  the  rule  is  dif- 
ferent.2 

§  6.  A  corporation  is  not  a  partnership;  out  where  the  corpora- 
tion is  a  mere  "dummy,'"'  its  existence  is  sometimes  disregarded 
and  its  acts  held  to  oe  the  acts  of  its  officers  and  stockholders. —  A 
corporation  is  an  entity  and  existence  separate  from  its  officers  and 
stockholders.  And  the  inclination  of  some  writers  to  assimilate  a 
corporation  as  nearly  as  possible  to  a  partnership  and  to  apply 
to  the  former  the  rules  applicable  to  the  latter  leads  only  to  con- 
fusion and  is  contrary  to  the  law.3 

The  difference  between  a  corporation  and  a  partnership  and  the 
advantages  of  a  corporation  over  a  partnership  as  a  means  of  doing 
business  are  very  marked  and  should  not  be  limited  by  construc- 
tion.4 


i  See  §  637,  infra. 

2  See  chapter  XIII,  infra. 

The  organization  of  a  company  to 
carry  on  the  lottery  business  in  foreign 
countries  was  held  legal  in  Macuee  v. 
Persian,  etc.,  Corp.,  62  L.  T.  Rep.,  894 
(1890). 

3  The  house  of  lords  in  England  has 
pointed  out  the  fact  that  there  is  no  real 
analogy  between  an  ordinary  partner- 
ship and  a  corporation.  Birch  v.  Crop- 
per, 61  L.  T.  Rep.,  621  (1889),  refusing 
to  apply  the  analogy  and  saying  that  to 
apply  it  would  in  the  case  before  it 
"  work  inequality  and  injustice  and  not 
equity." 

A  trading  corporation  is  governed  by 
the  ordinary  rules  of  partnership,  ex- 
cept so  far  as  special  conditions  may  be 
inserted  into  their  constitution  by  the 
legislature  or  by  their  own  articles  of 
association.  Oakes  v.  Turquand,  L.  R., 
2  H.  L.,  325,  as  referred  to  in  Whiting  v. 
Hovey,  13  Ont.  App.  Cas.,  7  (1886). 

In  speaking  of  the  fact  that  decisions 
concerning  municipal  corporations  and 
the  powers  of  their  officers  are  not  at 
all  applicable  to  private  corporations. 
Chief  Justice  Ruger,  in  Wallace  v. 
Walsh,  125  N.  Y.,  26,  36  (1890),  said : 


"It  is  manifest  that  no  analogy  exists 
between  the  action  of  a  body  of  men 
invested  with  the  exercise  of  political 
power  under  special  conditions,  and  the 
action  of  the  trustees  of  a  private  cor- 
poration in  the  conduct  of  its  ordinary 
business  operations.  The  one  relates  to 
the  execution  of  powers,  and  the  other 
to  the  performance  of  duties  and  the  en- 
joyment of  privileges.  The  one  is  con- 
trolled by  the  principles  governing  the 
relations  of  principal  and  agent,  and  the 
other  to  the  general  rules  regulating  the 
consequences  following  a  neglect  or  dis- 
obedience of  the  requirements  of  stat- 
utes affecting  private  relations.  In  the 
one  case  the  question  as  to  what  is  a 
good  execution  of  a  power  is  involved, 
and  in  the  other  as  to  what  may  be  con- 
sidered an  adequate  performance  of  a 
duty.  These  questions  are  manifestly 
controlled  by  different  rules,  and  that 
which  is  required  in  one  is  not  an 
authority  for  the  requirements  of  the 
other.''' 

4  In  his  work  on  The  Corporation  Prob- 
lem, pp.  2,  3,  the  author  describes  these 
differences  as  follows : 

"  The  partnership  has  been  found  to 
be  clumsy,  dangerous  and  insufficient. 


8 


CH.  I.] 


DEFINITIONS    AND    SCOPE    OF   THE   WORK. 


[§6. 


A  corporation  is  an  entity,  an  existence,  irrespective  of  the  per- 
sons who  own  all  its  stock.  The  fact  that  one  person  owns  all  the 
stock  does  not  make  him  and  the  corporation  one  and  the  same 
person.1  Although  one  railroad  corporation  owns  all  the  stock  of 
another  railroad  corporation,  yet  the  separate  existence  of  the  two 
corporations  continues  and  they  are  not  thereby  merged.2 


If  unsuccessful  it  brings  ruin  upon  all 
of  its  members,  because  each  partner  is 
liable  absolutely  for  all  debts.  Any  mem- 
ber may  bind  the  firm  by  his  contract 
and  each  one  has  an  equal  voice  in  de- 
ciding its  policy.  Its  capital  and  credit, 
and  consequently  its  amount  of  busi- 
ness, are  limited  necessarily  by  the  capi- 
tal and  credit  of  a  very  few  men  —  the 
members  themselves.  The  death  of  a 
member  or  the  transfer  of  his  interest 
dissolves  the  firm.  Any  member  may 
arbitrarily  cause  a  dissolution  at  any 
time,  and  the  insolvency  of  a  member 
renders  the  partnership  property  sub- 
ject to  levy  of  execution  for  his  debt. 
Upon  the  death  of  a  partner  the  surviv- 
ing partners  have  the  sole  charge  of  wind- 
ing up  the  business,  and  the  executor  of 
the  deceased  partner  is  not  allowed  to 
come  in.  A  partner  may  withdraw  his 
money  only  at  a  sacrifice,  or  by  long 
and  expensive  proceedings.  He  cannot 
conveniently  sell  his  interest  or  borrow 
money  upon  it.  New  partners  cannot 
readily  or  safely  be  admitted. 

"The  partnership  is  restricted  in  its 
capital,  dangerous  in  its  liabilities,  nar- 
row in  its  exclusion  of  new  members, 
too  free  in  its  mode  of  making  con- 
tracts, and  too  contracted  in  its  oppor- 
tunities for  withdrawal.  It  is  becoming 
obsolete  as  a  mode  of  doing  business  on 
a  large  scale. 

"  In  a  corporation  all  this  is  changed. 
The  members  are  not  liable  for  the 
debts.  The  amount  already  invested 
may  be  lost,  but  the  private  fortunes  of 
the  stockholders  are  not  involved.  The 
business  is  done  and  contracts  made  not 
by  all,  but  by  a  select  few,  called  direct- 
ors. A  large  capital  is  created  by  the 
union  of  funds  from  many  sources.     A 


person  may  safely  invest  in  many  en- 
terprises and  yet  not  take  part  in  the 
management  nor  watch  the  business  of 
any  one  of  them.  The  leading  spirit  in 
an  enterprise  may  hold  a  majority  of 
the  stock  and  may  admit  associates,  em- 
ployees or  strangers  as  holders  of  a 
minority  of  the  stock,  and  yet  he  will 
retain  the  management  as  though  he 
were  the  single  owner  of  the  concern. 
Persons  may  easily  buy  into  or  retire 
from  the  enterprise.  Dissolution  is  not 
brought  about  by  the  death  or  with- 
drawal or  dissatisfaction  of  a  stock- 
holder. The  insolvency  of  a  stockholder 
does  not  affect  the  business  of  the  cor- 
poration. Upon  the  death  of  a  stock- 
holder his  executor  votes  his  stock  and 
has  a  voice  in  the  continuation  of  the 
business.  A  stockholder  may  sell  or 
pledge  his  interest  readily  and  intelli- 
gibly by  reason  of  the  reports,  dividends 
and  market  quotations  of  his  stock. 
The  corporation  is  a  protection  in  that 
the  liability  is  limited ;  it  is  capable  in 
that  it  renders  possible  the  collection  of 
a  great  capital;  it  is  efficient  because 
the  directors  and  they  alone  govern  its 
policy  and  its  contracts ;  and  it  is  con- 
venient because  it  is  easy  to  sell  or  buy 
or  pledge,  or  bequeath  ones  interest  ir 
the  concern." 

i  §  709,  infra. 

-  Although  one  railroad  owns  or  con- 
trols all  the  stock  of  another  railroad, 
yet  the  former  is  not  personally  liable 
for  the  negligence,  debts,  etc.,  of  the 
latter.  Atchison,  etc.,  R.  R  v.  Cochran, 
23  Pac.  Rep.,  151  (Kan.,  1890). 

A  railroad  company  owning  all  the 
stock  and  bonds  of  another  company 
does  not  own  the  property  of  the  latter 
and  cannot  sue  on  a  cause  of  action  be- 


9 


6.] 


DEFINITIONS   AND    SCOPE    OF   THE    WORK. 


[CH.  I. 


Not  only  is  the  identity  of  the  corporation  preserved  as  distinct 
from  its  stockholders,  but  it  is  also  distinct  from  its  promoters,  in- 
corporators and  antecedents.  It  is  not  liable  on  the  contracts  and 
obligations  of  its  promoters.1  Nor  is  it  liable  for  the  debts  of  a 
prior  corporation  to  whose  property  it  succeeds  by  foreclosure  sale.2 
"Where  a  partnership  or  a  corporation  is  merged  into  another  cor- 
poration, the  creditors  of  the  former  may  pursue  the  property  but 
they  cannot  hold  the  corporation  liable  for  the  debt,3  unless  the 
latter  took  with  such  notice  that  it  may  be  held  to  account.4 

But  there  are  occasions  where  the  courts  will  ignore  the  corpo- 
rate existence  and  will  hold  that  its  acts  are  the  acts  of  its  stock- 
holders and  vice  versa  the  same  as  in  a  partnership.  Thus  where 
an  individual  organizes  a  corporation  to  violate  a  contract  which 


longing  to  the  latter.  Fitzgerald  v.  Mis- 
souri P.  R'y,  45  Fed.  Rep.,  812  (1891). 

Where  one  corporation  owns  all  the 
stock  of  another  corporation,  the  prop- 
erty of  the  latter  is  not  subject  to  a 
mortgage  given  by  the  former,  but  an 
independent  first  mortgage  may  be 
given  by  the  latter  company.  Central 
T.  Co.  uKneeland,  138  U.  S.,  414  (1891). 

A  bridge  owned  by  a  bridge  corpora- 
tion is  not  to  be  taxed  as  railroad  prop- 
erty, even  though  its  stock  is  owned  by 
the  stockholders  in  a  railroad  corpora- 
tion, and  the  stock  has  been  pledged  to 
such  railroad  corporation  and  the  bridge 
itself  leased  to  the  latter.  St.  Louis,  etc., 
R'y  v.  Williams,  13  S.  W.  Rep.,  796  (Ark., 
1890). 

Although  a  new  railroad  corporation 
is  clearly  a  "  dummy  "  corporation,  its 
incorporators  and  officers  being  officers 
in  another  railroad  corporation  and  its 
expenses  being  paid  by  the  latter  com- 
pany, still  it  is  a  legal  corporation. 
Southern  Kan.,  etc.,  R  R  v.  Towner,  21 
Pac.  Rep.,  221  (Kan.,  1889);  23  id.,  151. 

The  fact  that  one  corporation  owns  a 
large  amount  of  stock  in  another  corpo- 
ration does  not  affect  the  identity  of  the 
two.  Ex  parte  Fisher,  20  S.  C,  179 
(1882). 

As  to  the  power  of  one  corporation  to 
buy  the  stock  of  other  corporations,  see 
§§  315-317,  infra.  Concerning  the  lia- 
bility, see,  also,  §  643,  infra. 

But  in  Nebraska  a  "  dummy  "  domes- 


tic corporation  cannot  condemn  land 
for  a  foreign  corporation.  Koenig  v. 
Chicago,  etc.,  R  R,  43  N.  W.  Rep.,  433 
(Neb.,  1889). 

A  railroad  company  owning  practi- 
cally all  the  stock  of  another  company 
may  lease  the  line  of  the  latter  company 
to  another  company.  Chicago,  etc.,  R'y 
v.  Union  Pac.  R'y,  47  Fed.  Rep.,  15  (1891). 

Where  a  railroad  company  causes  a 
telegraph  company  to  be  incorporated 
and  subscribes  to  all  its  stock  and  ap- 
points all  its  officers  and  holds  it  out  as 
the  future  owner  of  a  telegraph  system 
which  the  railroad  owns,  and  then  sells 
that  system  to  someone  else,  a  person 
contracting  witli  the  telegraph  com- 
pany on  the  faith  of  the  scheme  being 
carried  out  may  hold  the  railroad  com- 
pany liable  on  the  contract  on  the  prin- 
ciple of  a  principal  being  liable  on  the 
contracts  of  its  agent  Interstate  Tel. 
Co.  v.  Bait.  &  O.  T.  Co.,  51  Fed.  Rep.,  49 
(1892). 

A  domestic  corporation  cannot  obtain 
a  patent  to  a  mining  claim  under  the 
federal  statutes,  unless  all  of  its  stock- 
holders are  citizens  of  the  United  States, 
and  are  severally  and  individually  quali- 
fied and  competent  to  make  the  location. 
Thomas  v.  Chisholm,  21  Pac.  Rep.,  1019 
(Colo.,  1889).    See,  also,  chs.  13,  38, 39,  43. 

i  See  §  707,  infra. 

2See§643,  infra. 

3  See  §  667,  infra,  and  ch.  II. 

*  See  §  727,  infra. 


10 


CH.  I.]  DEFINITIONS    AND    SCOPE    OF   THE    WORK.  [§  7. 

he  himself  would  not  be  allowed  to  violate,  the  court  will  enjoin 
the  corporation  as  though  it  were  the  person  himself.1  So,  also, 
where  a  director  causes  the  corporation  to  give  a  valuable  contract 
to  a  corporation  in  which  he  is  secretly  interested,  this  is  the  same 
as  though  he  were  interested  in  a  firm  which  received  that  con- 
tract.2 

This  same  principle  applies  to  trade  combinations  of  corpora- 
tions called  "Trusts."3  The  corporate  existence  will  be  disre- 
garded and  the  acts  and  contracts  of  the  persons  holding  all  the 
stock  will  be  considered  the  acts  and  contracts  of  the  corporation 
itself  where  the  effect  is  the  same  as  though  the  corporation  had 
acted  or  contracted  as  a  corporation.  Hence  where  all  the  stock 
is  combined  with  all  the  stock  of  other  combinations  in  order  to 
form  a  combination  which  is  illegal,  the  state  will  forfeit  the  char- 
ter of  the  corporation,  although  technically  it  is  not  a  party  to  the 
agreement.4 

§  7.  Classes  of  corporations  and  the  class  considered  lierein. — 
For  the  better  understanding  of  the  law  of  corporations,  and  for 
the  treatment  of  special  branches  of  that  law,  the  early  writers, 
like  Kyd,  Blackstone,  Kent,  Angell  and  Ames,  and  many  subse- 
quent authors,  subdivided  corporations  into  distinct  classes.  These 
subdivisions  have  been  made  on  various  principles  of  classification. 
When  divided  with  respect  to  the  members  of  corporations  they 
are  aggregate  and  sole.  As  regards  their  functions  they  are  public, 
such  as  cities  and  towns;  quasi-^whWc,  such  as  counties  and  school 
districts;  and  private;  and  again  private  corporations  are  divided 
into  ecclesiastical  and  lay ;  and  still  further,  lay  corporations  are 
divided  into  eleemosynary  or  charitable,  and  civil,  the  latter  of 
which  include  all  private  corporations  that  are  created  for  tem- 
poral purposes,  such  as  banking,  insurance,  trading,  railroad,  man- 
ufacturing, turnpike,  bridge  and  canal  corporations,  and  certain 
educational  institutions.5 

i  See  ch.  XXXIX,  infra.  Co.,  3  Out,  284,  and  again  in  the  case  of 

2  id.  The  Pittsburgh  &  Lake  Erie  Railroad 

3  Seech.  XXIX,  infra.  Co.  v.  Bruce,  6  Out,  23.     ...     So  in 
*Id. ;  also,  State  v.  Standard  Oil  Co.,  the  case  of  The  Trustees  of  the  Presby- 

30  N.  E.  Rep.,  279  (Ohio,  1892;.  terian  Society  v.  The  Auburn  &  Roch- 

5  Concerning  the  question  of  whether  ester  Railroad  Co.,  3  Hill,  567,  it  is  said 

a  railroad  company  is  a  private  corpo-  that  a  railroad  company  is  not  public, 

ration,  the  court  said  in  Pierce  v.  Com-  nor  does  it  stand  in  the  place  of  the 

monwealth,  104  Pa.  St.,  155  (1883) :  public ;  it  is  but  a  private  corporation 

"Railroad  and  canal  companies  are  over  whose  rails  ihe  public  may  travel 

private  corporations.     This  we  have  de-  if  they  choose  to  ride  in  its  cars.     In- 

cided  in  point  twice  within  the  last  two  deed,  we  regard  it  as  a  misnomer  to  at- 

years;  once  in  the  case  of  Timlow  v.  tach  even  the  name  '  guast-public  cor- 

The  Philadelphia  &  Reading   Railroad  poration  '  to  a  railroad  company,  for  it 

11 


§  7.]  DEFINITIONS    AND    SCOPE    OF   THE    WORK.  [CH.  I. 

A  domestic  corporation  is  one  that  has  been  organized  under  the 
laws  of  the  state  referred  to.  A  foreign  corporation  is  one  that 
has  been  organized  under  the  laws  of  another  state  or  of  a  foreign 
government.  An  alien  corporation  is  one  that  has  been  organized 
under  the  laws  of  a  foreign  government.1 

At  an  early  day  private  corporations  for  business  purposes  were 
few  in  number  and  of  little  importance  in  the  law.  Chancellor 
Bland  states  that  no  instance  of  such  a  corporation  in  the  colonial 
times  of  America  can  be  found.2  In  England,  also,  at  that  time, 
private  corporations  for  profit  were  of  small  consequence.  But  the 
past  seventy-five  years  have  completely  reversed  the  relative  im- 
portance of  the  different  classes  of  corporations,  and,  at  the  present 
time,  private  corporations  for  temporal  purposes  have  completely 
overshadowed  all  other  kinds. 

With  this  change  there  is  a  decided  tendency  to  re-classify  the  sub- 
ject, and  the  modern  treatises  on  corporation  law  have  recognized 
the  fact  that  old  classifications  are  to  be  disregarded,  and  that  cor- 
porations are  to  be  divided  into  joint-stock  corporations,  or  those 
having  a  capital  stock,  and  corporations  without  a  capital  stock. 
Indeed,  the  modern  text-books  on  corporations  treat  very  little  of 
the  older  classes  of  corporations  and  the  principles  wThich  govern 
them,  but  fully  and  explicitly  of  corporations  having  a  capital  stock. 

This  change  is  due  largely  to  the  remarkable  growth  of  the  law 
regulating  the  one  prominent  difference  between  the  two  classes. 
That  feature  is  that  corporations  with  a  capital  stock  have  stock 
and  stockholders,  while  corporations  without  a  capital  stock  have 
none,  and  are  governed  largely  by  principles  of  law  that  have 
changed  little  since  the  days  of  Blackstone,  Kyd  and  Kent.  It  is 
with  this  feature  of  modern  corporations,  that  of  stock  and  stock- 
holders, as  distinguished  from  the  characteristics  of  the  early  cor- 
porations, which  have  sunk  into  comparative  unimportance,3  that 
the  present  work  is  concerned. 

has  none  of  the  features  of  such  corpo-  1  An  English  corporation  is  an  alien 

rations,  if  we  except  its  qualified  right  corporation.     Eureka,  etc.,  Co.  v.  Rich- 

of  eminent  domain,  and  this  it  has  be-  mond,  etc.,  Co.,  2  Fed.  Rep.,  829  (1880). 

cause  of  the  right  reserved  to  the  public  The  residence  of  a  corporation  is  the 

to  use  its  way  for  travel  and  transporta-  town  or  city  specified  in  its  articles  of 

tion.     Its  officers  are  not  public  officers,  incorporation.      Rossie  Iron  "Works  v. 

and  its  business  transactions  are  as  pri-  Westbrook,  59  Hun,  345  (1891).  ' 

vate  as  those  of  a  banking  house.     Its  2  McKim  v.  Odoni,  3  Bland's  Ch.  (Md.), 

road  may  be  called  a  gttasf-public  high-  407,  418  (1828).     For  a  list  of  the  first 

way,  but  the  company  itself  is  a  private  incorporated     business     companies    in 

corporation  and  nothing  more."  America,    see    Harvard    Law    Review, 

A  mining  and  manufacturing  corpo-  Nov.  1888,  p.  165. 
ration  is  a  private  corporation.     Wolffe  3  The  subject  of  municipal  corpora- 
te. Underwood,  8  S.  Rep.,  774  (Ala..  1891).  tions  would  seem  to  form  an  exception 

12 


OH.  I.]  DEFINITIONS    AND    SCOPE   OF   THE   WORK.  [§§  S,  9. 

§  8.  Corporations  having  a  capital  stock  —  The  questions  which 
arise  in  connection  with  corporations  having  a  capital  stock  may 
be  divided  into  two  groups.  The  first  includes  those  principles  of 
law  which  affect  all  corporations,  whether  they  have  a  capital 
stock  or  not.  Of  such  a  kind  are  the  old  questions  of  how  a  cor- 
poration shall  contract;  whether  a  seal  be  necessary;  whether  and 
how  it  may  act  through  an  agent;  the  right  to  sue  and  be  sued  in 
various  courts ;  and  to  hold  and  dispose  of  property.  These  ques- 
tions, capacities  and  incidents,  for  the  most  part,  have  become  so 
well  settled  as  to  give  rise  to  comparatively  little  litigation  at  the 

present  day.1 

On  the  other  hand,  it  is  believed  that  the  modern  law  of  corpo- 
rations, as  regards  its  litigated  questions,  its  unsettled  principles, 
its  new  problems  and  its  rapidly  crystallizing  results,  is  the  law  of 
stock  and  stockholders.  This  law  involves  the  issue  of  stock  and 
the  rights,  duties,  liabilities  and  miscellaneous  incidents  of  stock- 
holdership.  Indeed,  it  may  be  said  that  the  law  of  stock  and  stock- 
holders is  the  proper  standpoint  from  which  to  treat  of  general 
corporation  law.  It  is  upon  this  theory  that  the  present  edition  of 
this  work  has  been  written.2 

§  9.  Definition  of  capital  stock.—  Capital  stock  is  the  sum  fixed 
by  the  corporate  charter  as  the  amount  paid  in  or  to  be  paid  in  by 
the  stockholders  for  the  prosecution  of  the  business  of  the  corpora- 
tion and  for  the  benefit  of  corporate  creditors.3  The  capital  stock 
is  to  be  clearly  distinguished  from  the  amount  of  property  pos- 

to  this  statement,  were  it  not  that  the  143,  146  (1881);  Mutual  Ins.  Co.  v.  Su- 

great  and  deservedly  successful  work  of  pervisors,    etc.,    4    N.    Y.,    442    (1851) ; 

Judge  Dillon  on  Municipal  Corporations  Bailey   v.   Clark,  21   Wall.,  2S4  (1874), 

has  clearly  stated,  and  thereby  settled,  where  Field,  J.,  says  "  it  applies  only 

most  of  the  difficult  subjects  connected  to  the  property  or  means  contributed  by 

with  that  branch  of  the  law.  the  stockholders  as  the  fund  or  basis  for 

i  The  first  edition  of  this  treatise  did  the  business  or  enterprise  for  which  the 

not  include  these  subjects.    The  pres-  corporation  or  association  was  formed." 

ent  edition,  however,  has  been  extended  Jones  v.  Davis,  35  O.  St.,  474,  476J1880) ; 

so  as  to  include  all  subjects  of  corpora-  Burrall  v.  Bushwick  R  R.  Co.,  75  N.  Y., 

tion  ]aw.  211  (1878),  where  Folger.  J.,  defines  it  as 

2  See  the  preface  for  an  explanation  "  that  money  or  property  which  is  put 
of  the  author's  ideas  on  this  subject.  in  a  single  corporate  fund  by  those  who, 

3  For  various  definitions  see  Barry  v.  by  subscription  therefor,  become  mem- 
Merchants'  Ex.  Co.,  1  Sand.  Ch.,  280,  bers  of  a  corporate  body."  Williams  v. 
305  (1844) ;  Christensen  v.  Eno,  106  N.  Y,  Western  Union  Tel.  Co.,  93  N.  Y,  162, 
97,  100  (1887) ;  Hightower  v.  Thornton,  188  (1883),  where  Earl,  J.,  tersely  says 
8  Ga.,  486,  500  (1850);  Hanuibal  &  St.  it  is  "the  property  of  the  corporation 
Joseph  R  R.  Co.  v.  Shacklett,  30  Mo.,  contributed  by  its  stockholders  or  other- 
551.  558  (I860) ;  St.  Louis,  Iron  M.,  wise  obtained  by  it,  to  the  extent  re- 
etc,  R  R  Co.  v.  Loftin,  30  Ark.,  693,  quired  by  its  charter."  Sanger  v.  Up- 
709(1875);  Bent  v.  Hart,  10  Mo.  App.,  ton,   91  U.  S.,  56,  60  (1875);   State  v. 

13 


§io.] 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[CH. 


sessed  by  the  corporation.  Occasionally  it  happens  that,  under  the 
terms  of  statutes  relating  to  taxation  which  have  been  drawn 
without  regard  to  the  technical  meaning  of  words,  the  courts  will 
construe  the  capital  stock  to  mean  all  the  actual  property  of  the 
corporation.1  But  this  is  for  the  purpose  of  carrying  out  the  intent 
of  the  statute,  and  is  not  the  real  meaning  of  the  term.  At  com- 
mon law  the  capital  stock  does  not  vary,  but  remains  fixed,  although 
the  actual  property  of  the  corporation  may  fluctuate  widely  in 
value  and  may  be  diminished  by  losses  or  increased  by  gains.  The 
term  "stock"2  has  been  used  at  times  to  indicate  the  same  thing 
as  capital  stock.  Generally,  however,  it  means  shares  of  stock,  and 
in  this  sense  it  is  used  in  this  treatise. 

§  10.  Definitions  oj  corporator,  subscriber,  shareholder  and  stock- 
holder.—  A  corporator  is  one  of  those  to  whom  a  charter  is  granted, 
or  of  those  who  file  a  certificate  of  incorporation  under  a  general 
incorporating  statute.3    A  subscriber  is  one  who  has 


agreed  to 


Morristown  Fire  Ass'n,  23  N.  J.  L,  195 ; 
State  v.  Cheraw  &  C.  R.  R.  Co.,  16  S.  C, 
524  (1881).  A  savings  bank  corporation 
may  be  formed  without  any  capital 
stock,  the  profits  going  to  depositors. 
Huntington  v.  Sav.  Bank,  96  U.  S.,  388 
(1877).  Such  is  the  statute  law  of  New 
York. 

The  word  "  capital "  has  been  defined 
as  "  the  property  or  means  contributed 
by  the  stockholders  as  the  fund  or  basis 
for  the  business  or  enterprise  for  which 
the  corporation  was  formed."  Iron  R'y 
v.  Lawrence,  etc.,  Co.,  30  N.  E.  Rep.,  616 
(Ohio,  1892). 

Definition  of  capital  stock.  People  v. 
Coleman,  126  N.  Y.,  433  (1891). 

"Capital  stock  of  a  corporation  is  a 
different  thing  from  shai-es  of  stock. 
The  capital  stock  represents  the  prop- 
erty and  assets  of  the  company,  which 
may  consist  in  whole  or  in  part  of  real 
estate.  The  certificates  or  shares  of 
stock  are  the  evidence  of  an  interest 
which  the  holder  has  in  the  corporation, 
and  it  is  well  settled  that  this  interest  is 
personal  property."  "Wilkes  Barre,  etc., 
Bank  v.  City  of  Wilkes  Barre,  24  AtL 
Rep.,  Ill  (Pa.,  1892). 

Where  the  charter  prescribes  that  the 
debts  shall  not  exceed  one-half  of  the 
capital  stock,  capital  stock  means  the 


paid-in  capital  stock  and  not  the  capi- 
tal stock  as  stated  in  the  charter.  Le- 
high, etc.,  R'y  Co.'s  Appeal,  18  Atl.  Rep., 
498  (Pa..  1889). 

1  Ohio  &  M.  R  R.  Co.  v.  Weber,  96  111., 
443  (1880) ;  City  of  Philadelphia  v.  Ridge 
Ave.  R.  R  Co.,  102  Penn.  St.,  190  (1880) ; 
Security  Co.  r.  Hartford,  23  Atl.  Rep., 
699  (Conn.,  1891). 

2  Burr  v.  Wilcox,  22  N.  Y,  551,  555 
(1860) ;  People  v.  Commissioners,  etc.,  23 
N.  Y,  192,  220  (1861) ;  Bailey  v.  Railroad 
Co.,  22  Wall,  604,  637  (1874).  Formerly 
government  bonds  were  called  "stock," 
both  in  England  and  in  this  country. 
Bank  of  Commerce  v.  New  York,  2 
Black,  620  (1862);  Weston  v.  City  of 
Charleston,  2  Pet,  449  (1829);  Cava- 
nagh's  Law  of  Money  Securities  (2d  ed.), 
488-494.  This  use  of  the  term  still  pre- 
vails  in  England,  but  is  generally  obso- 
lete in  this  country,  although  the  se- 
curities of  the  city  of  New  York  are 
still  called  "  stock." 

In  tax  statutes.  "  stock  "  may  be  de- 
fined to  mean  shares  of  stock.  Lock- 
port  v.  Weston,  23  Atl.  Rep.,  9  (Conn., 
1891). 

3  Chase  v.  Lord,  77  N.  Y,  1-11  (1879), 
the  court  saying:  "Corporators  exist 
before  stockholders,  and  do  not  exist 
with  them.    When  stockholders  come 


14 


OH.  I.] 


DEFINITIONS    AND    SCOPE    OF-  THE    WORK. 


[§H. 


take  stock  from  the  corporation  on  the  original  issue  of  such  stock.1 
A  shareholder  in  this  country  means  the  same  thing  as  a  stock- 
holder, and  the  terms  are  used  interchangeably  to  indicate  one  who 
owns  stock  in  a  corporation  and  has  been  accepted  as  a  stock- 
holder by  the  corporation.2  A  stockholder  does  not  stand  in  the 
attitude  of  a  partner  towards  the  corporation. 

§  11.  Relation  of  stockholders  towards  the  corporation. —  A  cor- 
poration may  contract  with  its  stockholders  to  the  same  extent  and 
in  the  same  manner  that  it  may  with  any  other  persons.3 


in,  corporators  cease  to  be."  Cf.  Lady 
Bryan's  Case,  1  Saw.,  349.  In  Pennsyl- 
vania, under  a  peculiar  statute,  it  has 
been  held  that  the  incorporators  thereof 
need  not  be  subscribers.  See  Densmore 
Oil  Co.  v.  Densmore,  64  Penn.  St.,  43,  54 
(1870). 

It  has  frequently  been  held  that  where 
a  statute  authorizes  persons  to  form  a 
corporation,  although  the  statute  does 
not,  in  express  terms,  say  that  they 
must  be  of  full  age,  yet  it  is  implied 
that  they  shall  be  of  full  age.  Matter 
of  Globe,  etc.,  Assoc,  63  Hun,  263  (1892). 
Cf.  67  L.  T.  Rep..  85. 

A  married  woman  is  not  at  common 
law  qualified  to  act  as  an  incorporator 
nor  as  treasurer.  9  Ry.  &  Corp.  L.  J., 
107. 

A  corporation  is  legally  organized  al- 
though the  incorporators  are  not  share- 
holders as  required  by  statute.  Welch 
v.  Importers',  etc.,  Bank,  122  N.  Y.,  177 
(1890). 

1  Busey  v.  Hooper,  35  Md.,  15 ;  Spear 
v.  Crawford,  14  Wend.,  20,  23.  In  The 
Thames  Tunnel  Company  v.  Sheldon,  6 
Barn.  &  C,  341  (1827),  the  word  "  sub- 
scriber" is  elaborately  defined,  and  it 
is  held  to  mean  only  such  persons  as 
have  entered  into  an  express  contract 
to  take  up  a  certain  definite  number  of 
shares.  See,  also,  a  definition  at  some 
length  by  Cooley,  J.,  in  Peninsular,  etc., 
R  R  Co.  v.  Duncan,  28  Mich.,  130  (1878). 

Subscribers  are  stockholders,  although 
no  certificates  have  been  issued  to  them 
and  no  payments  made.  McComb  v. 
Barcelona,  etc.,  Assoc,  10  N.  Y.  Supp., 
546  (1890). 


"  It  is  the  payment  which  makes  the 
subscriber  a  stockholder."  Bates  v. 
Great  Western  Tel.  Co.,  25  N.  E.  Rep., 
521  (111.,  1890). 

A  "  subscription"  for  stock  is  differ- 
ent from  a  sale."  A  "subscription  "  ap- 
plies to  an  original  issue.  Bates  v.  Great 
Western  Tel.  Co.,  25  N.  E.  Rep.,  521  (III., 
1890). 

2  See  Rosevelt  v.  Brown,  11  N.  Y.  148, 
150  (1854);  State  v.  Ferris,  42  Conn., 
560  (1875);  Adderly  v.  Storm,  6  Hill  624 
(1844);  Worrall  v.  Judson,  5  Barb,  210 
(1849).  Where  the  registered  holder  is 
merely  a  nominal  holder  he  will  not  be 
entitled  to  special  privileges,  such  as 
free  admission  to  a  place  of  amuse- 
ment. Appeal  of  American  Acad.,  etc. 
108  Pa.  St,  510  (1885). 

A  person  is  held  to  be  a  stockholder, 
although  no  certificate  has  been  issued 
to  him.  See  §  192,  infra.  Moreover,  he 
may  be  held  to  be  a  stockholder,  al- 
though he  has  sold  and  transferred  his 
certificate  of  stock,  if  such  transfer  has 
not  been  recorded  on  the  corporate  stock- 
book.     See  chapter  XV.  infra. 

* Hartford  &  N.  H.  R.  R  Co.  r.  Ken- 
nedy, 12  Conn.,  499,  509  (1838);  Gordon 
v.  Preston,  1  Watts,  385  (1833);  Cent  nil 
R  R,  etc.,  Co.  v.  Claghorn,  1  Speers'  Eq. 
(S.  C),  545,  562  (1844). 

Thus,  where  one  subscribed  for  stock 
and  paid  for  it  by  mortgages  payable  at 
times  mutually  agreed  upon  between 
the  parties,  "this  was  merely  a  mode 
of  payment."  "  He  stands  in  two  ca- 
pacities :  one  as  debtor  to  the  associa- 
tion, one  as  stockholder  in  it.  These 
capacities    are    independent    of    each 


15 


§11.] 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[CH. 


A  stockholder,  as  a  creditor  of  the  corporation,  may  obtain  secu- 
rity for  his  debt  in  exclusion  of  other  creditors.1 

A  stockholder  has  no  legal  title  to  the  property  or  profits  of  the 
corporation  until  a  dividend  is  declared,  or  a  division  made  on  the 
dissolution  of  the  corporation.2  He  may  sue  the  corporation  or  be 
sued  by  it,  both  at  law  and  in  equity.3  However,  he  has  a  direct 
interest  in  the  corporation,  and  at  times  may  take  the  part  of  the 
corporation  in  prosecuting  or  defending  its  suits.4 

The  stockholder  is  not  liable  for  the  debts  of  the  corporation.5 

The  admissions  or  declarations  of  stockholders  do  not  bind  the 
corporation ; 6  nor  do  the  admissions  of  one  stockholder  bind  an- 
other stockholder.7 

Notice  to  individual  stockholders  is  not  notice  to  the  corporation, 


other."  Ely  v.  Sprague,  1  Clark's  Ch. 
(N.  Y.),  351  (1840);  Longley  v.  Stage 
Line  Co.,  23  Me.,  39  (1843),  holding  that 
where  a  creditor  consented,  as  a  stock- 
holder, to  the  re-organization  of  the 
company  which  had  become  indebted 
to  him  under  the  former  organization, 
lie  had  not  thereby  forfeited  his  right  to 
recover  from  the  newly-organized  cor- 
poration, to  which  he  had  become  a 
subscriber ;  American  Bank  r.  Baker,  4 
Met.  (Mass.),  164,  176  (1842),  holding 
that  a  corporation  vote  to  compromise 
certain  securities  to  the  detriment  of  a 
member  who  was  also  a  creditor  could 
not  be  regarded  as  consented  to  by  him 
in  his  absence. 

1  Reichwald  v.  Commercial  Hotel  Co., 
106  111.,  439  (1883). 

-1  Hyatt  v.  Allen,  56  N.  Y.,  553  (1874); 
Jones  v.  Terre  Haute,  etc.,  R  R.  57  N. 
Y..  196  (1874);  Brundage  v.  Brundage, 
1  N.  Y.  Supr.  (T.  &  C),  82  (1873);  Good- 
win v.  Hardy,  57  Me.,  143(1869);  Minot 
v.  Paine,  99  Mass.,  101  (1868);  Granger 
v.  Bassett,  98  Mass.,  462  (1868);  Phelps  v. 
Farmers",  etc.,  Bank,  26  Conn.,  269  (1857) ; 
Burroughs  v.  N.  C.  R  R  Co.,  67  N.  C, 
376  (1872) ;  Curry  v.  Woodward,  44  Ala., 
305  (1870) ;  Lockhart  v.  Van  Alstyne,  31 
Mich..  76,  78  (1875).  See,  also,  ch. 
XXXII,  on  Dividends. 

3"VVariDg  v.  Cahawba  Co.,  2  Bay  (S. 
C),  109  (1797),  where  this  right  of  a 
stockholder  was  the  question  directly 


in  litigation;  Rogers  v.  Danby  Univ. 
Soc,  19  Vt„  187  (1847);  Culberston  V. 
Wabash  Nav.  Co.,  4  McLean,  544  (1849) ; 
Peirce  r.  Partridge,  44  Mass.,  44  (1841) ; 
Barnstead  v.  Empire  Min.  Co.,  5  Cal. 
299  (1855);  Ex  parte  Booker,  18  Ark., 
338  (1857);  Sanborn  v.  Lefferts,  58  N. 
Y,  179  (1874) ;  Cary  v.  Schoharie,  etc., 
Co.,  2  Hun,  110  (1874);  Wausau,  etc., 
Co.  v.  Plummer,  35  Wis.,  274 ;  Sawyer 
r.  Methodist  Ep.  Soc,  18  Vt,  405  (1846) : 
Dunstan  v.  Imperial,  etc.,  Co.,  3  B.  & 
Ad.,  125  (1822);  Gifford  v.  New  Jersey, 
etc.,  Co.,  2  Stock.  Ch.,  171  (1854);  Sam- 
uel V.  Holladay,  1  Woolw.,  400,  418 
(1869).  A  stockholder  may  collect  his 
debt  the  same  as  other  creditors.  Lang 
v.  Dougherty,  12  S.  W.  Rep.,  29  (Tex., 
1889).    See,  also,  30  Pac,  Rep.,  882. 

A  stockholder  who  is  also  a  director 
may  nevertheless  sue  to  compel  his  cor- 
poration to  abate  a  nuisance.  Leonard 
v.  Spencer.  108  N.  Y,  338  (1888). 

♦Part  IV  is  on  this  subject  It  is. 
however,  a  general  rule  that  a  stock- 
holder cannot  usually  come  in  as  a  party 
and  defend  a  suit  in  which  the  corpora- 
tion is  the  defendant,  even  though  the 
corporation  is  unable  or  unwilling  to 
defend.    See  §  659,  infra. 

6  See  chapter  XIII. 

e  See  §  726,  infra. 

"Simmons  v.  Sisson,  26  N.  Y.,  264 
(1863). 


16 


CH.  I.]  DEFINITIONS    AND    SCOPE    OF    THE    WOEK.  [|  11. 

and  their  knowledge  of  facts  is  not  notice  of  those  facts  to  the  cor- 
poration.1 Service  of  process  on  a  stockholder  is  not  service  on  the 
corporation.2 

A  stockholder  in  an  insurance  company  has  the  same  rights  that 
a  stockholder,  in  any  other  corporation  has.3 

The  stockholder  is  an  individual,  distinct  from  the  corporation  in 
its  contracts  and  transaction  of  business.  The  mere  fact  that  he  is 
a  stockholder  does  not  make  him  an  agent  to  contract  for  it  or  bind 
it  by  his  acts.4 

One  person  may  own  all  the  stock,  and  yet  the  existence,  rela- 
tions and  business  methods  of  the  corporation  continue.5 

The  stockholders,  assembled  together  in  a  corporate  meeting,  have 
the  powers  to  elect  officers;  make  by-laws;  increase  or  reduce  the 
capital  stock,  if  the  statute  permits;  authorize  auxiliary  or  funda- 
mental changes  in  the  charter,  if  constitutional:  and  perform  a  few 
other  acts  for  and  in  behalf  of  the  corporation.  But  there  their 
powers  cease.  The  forming  of  corporate  contracts;  the  manage- 
ment of  corporate  business ;  the  employment  and  direction  of  agents ; 
the  brino-iriff  or  defending  of  suits,  and  all  the  infinite  details  of  cor- 
porate  management,  are  under  the  control  of  the  directors  and  their 
agents.  The  stockholders  have  no  power  herein,  either  individually 
or  in  meeting  assembled.6 

A  stockholder  is  chargeable  with  notice  of  entries  made  upon  the 
corporate  books,  if  they  were  made  in  his  presence  and  he  presum- 
ablv  assented  thereto.7 

1  See  §  727,  infra.  ticm,  who  aided  in  the  perpetration  of 

2  See  g  752,  infra.  the  fraud,  was  a  stockholder  in  the  cor- 
s  Thus,  a  shareholder  in  an  insurance     poration.      Grand  Rapids,   etc.,   Co.   v. 

company,  conducted  on  both  the  stock  Cincinnati,  etc.,  Co.,  45  Fed.  Rep.,  671 

and  the  mutual-insurance  plan,  is  en-  (1891). 

titled  to  all  the  rights  in  the  guaranty  5  See  §§  708,  etc. 

accumulations  that  a  stockholder  in  any  6  See  §  712,  infra. 

other  corporation  has  in  the  corporate  "  The  property  of  a  corporation  is  not 

assets.     Traders',  etc.,  Ins.  Co.  v.  Brown,  subject   to    the    controf  of   individual 

8  N.  E.  Rep,  134  (Mass.,  1886).  members,  whether  acting  separately  or 

4  See  g§  708,  etc,  infra-  jointly.    They  can  neither  incumber  nor 

Where  the  law  permits  punishment  transfer    that  property,   nor  authorize 

or    confiscation    of  property,   but    not  others    to    do  so.     The   corporation  — 

both,  the  conviction  of  a  stockholder  the  artificial  being  created  —  holds  the 

for  violation   of  the  internal  revenue  property,   and   alone  can  mortgage  or 

law  prevents  a  confiscation  of  the  cor-  transfer   it;   and   the  corporation   acts 

poration  property.    United  States  v.  Dis-  only  through  its  officers,  subject  to  the 

tillery,  43  Fed.  Rep.,  846  (1890).  conditions  prescribed  by  law."  Humph- 

Damages  may  be  recovered  by  a  cor-  revs  v.  McKissock,  140  U.  S.,  304  (1891). 

poration  for  a  fraud  practiced  upon  it.  7  See  §  727,  infra. 
even  though  an  agent  of  the  corpora- 
(2)                                                    17 


§11.] 


DEFINITIONS    AND   SCOPE    OF   THE    WORK. 


[CH.  I. 


A  shareholder  in  a  corporation  which  does  not  properly  insure 
its  property  has  such  an  insurable  interest  in  that  property  that  he 
may  recover  upon  a  policy  thereon  taken  in  his  own  name,  for  an 
amount  which,  added  to  the  company's  insurance,  would  cover  his 
interest.1 

At  common  law  the  stockholder,  on  account  of  his  interest  in 
the  corporation,  was  not  a  competent  witness  for  the  corporation  in 
a  suit  in  which  the  corporation  was  a  party.2    In  some  states,  how- 


i  Warren  v.  Davenport  Fire  Ins.  Co., 
31  Iowa,  464  (1871),  distinguishing  Phil- 
lips v.  Knox  County  Ins.  Co.,  20  Ohio, 
174  (1851).  Cf.  Seaman  v.  Enterprise 
Fire,  etc.,  Ins.  Co.,  18  Fed.  Rep.,  250; 
S.  C,  5  McCrary,  558  (18S3).  Contra, 
Riggs  v.  Commercial,  etc.,  Ins.  Co.,  51 
N.  Y.  Super.  Ct,  466  (1884).  See  Green- 
hood  on  Public  Policy,  255 ;  Angell  on 
Fire  &  Life  Insurance,  ch.  XI,  and  cases 
cited. 

A  stockholder  has  an  insurable  inter- 
est in  the  property  of  the  corporation. 
Riggs  v.  Commercial,  etc.,  Ins.  Co.,  125 
N.  Y.,  7  (1890). 

-'  Porter  v.  Bank  of  Rutland,  19  Vt., 
410  (1847) ;  McAuley  v.  The  York,  etc.,  6 
Cal.,  80  (1854).  See  cases  in  next  note. 
In  Pierce  v.  Kearney,  5  Hill,  82  (1843), 
a  shareholder  was  held  incompetent  to 
testify  that  the  defendant,  in  an  action 
to  enforce  a  statutory  liability  of  stock- 
holders, was  a  stockholder. 

Compare,  however,  In  the  Matter  of 
Kip,  1  Paige,  601  (1829),  involving  the 
testimony  of  a  corporator  and  pew- 
holder  in  a  church  corporation ;  Moke- 
lumne,  etc.,  v.  Woodbury,  14  Cal.,  265, 
in  which,  in  deciding  upon  the  compe- 
tency of  a  stockholder  as  a  witness,  the 
court  held  that  "  members  of  a  corpo- 
ration who  are  answerable  personally 
for  the  corporate  debts  and  liabilities 
stand  in  the  same  position  in  relation 
to  the  creditors  of  the  corporation  as  if 
they  were  conducting  their  business  as 
a  common  partnership."  To  same  ef- 
fect, Mitchell  v.  Beckman,  64  Cal.,  117 
(1883). 

The  president,  though  a  stockholder, 
is  a  competent  witness  for  the  company 


if  he  is  willing  to  testify,  since  his  pri- 
vate interest  is  greater  than  his  stock- 
holder interest.  Church  v.  Sterling,  16 
Conn.,  388  (1844). 

A  stockholder  in  a  company  which  is 
a  creditor  of  a  party  to  a  suit  may  tes- 
tify in  behalf  of  the  latter.  Simons  v. 
Vulcan,  etc.,  Co.,  61  Pa.  St.,  202  (1869). 

The  purchase  by  a  bank  of  its  own 
stock,  in  order  to  enable  the  stockholder 
to  testify  for  it,  was  upheld,  though  its 
charter  prohibited  it  from  purchasing 
goods,  etc.  Farmers',  etc..  Bank  u 
Champlain  Trans.  Co.,  18  Vt.,  131  (1846). 
Washington  Bank  v.  Palmer,  2  Sandf. 
Super.  Ct.,  686  (1850),  and  New  York, 
etc.,  R  R.  Co.  v.  Cook,  id.,  732  (1850), 
are  both  to  the  effect  that  a  stockholder 
is  not  a  party  to  the  action,  nor  a  per- 
son for  whose  immediate  benefit  it  is 
prosecuted,  within  meaning  of  the  code. 
He  is  therefore  a  competent  witness. 

A  stockholder  need  not  testify  against 
his  corporation.  Bank  of  Oldtown  v, 
Houlton,  21  Me.,  501  (1842). 

A  stockholder,  under  the  New  York 
statute,  cannot  testify  to  a  personal  com- 
munication between  the  corporation 
and  a  deceased  person.  Keller  v.  West, 
etc.,  Co.,  39  Hun,  348  (1886). 

A  witness  who  is  agent  of  a  corpora- 
tion, the  latter  being  a  party  to  the  suit, 
is  entitled  to  the  same  privilege  as  to 
libelous  statements  made  by  him  as 
witness  that,  a  party  has.  Nissen  v. 
Cramer,  10  S.  E.  Rep.,  676  (N.  C,  1890). 
The  plaintiff  in  a  suit  against  a  corpo- 
ration may  offer  a  stockholder  as  a  wit- 
ness. Hart  v.  New  Orleans,  etc.,  R.  R, 
1  Amer.  St  R'y  Dec,  4  (La.,  1841). 


18 


CH.  I.J 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[§H. 


ever,  this  rule  lias  been  changed  by  statute;  and  in  others  it  is 
easily  evaded  by  a  formal  transfer  of  the  certificate  of  stock  to  an- 
other person.1  A  stockholder  is  incompetent  to  serve  as  a  judge  - 
or  juror ^  in  a  case  where  the  corporation  is  a  party.  A  stockholder 
or  director  of  an  insolvent  corporation  is  competent  and  qualified 
to  act  as  its  receiver  or  assignee.4     A  director  need  not  necessarily 


1  That  a  transfer  will  render  the  trans- 
ferrer competent,  see  111.  Ins.  Co.  v.  Mar- 
seilles Mfg.  Co.,  6  111.,  236  (1844);  Union 
Bank  v.  Owen,  4  Humph.  (Tenn.),  338 
(1843);  Bell  v.  Hull,  6  M.  &  W.,  699 
(1840);  1  Greenleaf's  Evidence,  §  429. 
He  is  competent  though  the  transfer  has 
not  been  registered.  Bank  of  Utica  V. 
Smalley.  2  Cow..  770  (1824);  Gilbert  v. 
Manchester  Iron  Mfg.  Co.,  11  Wend., 
627  (1834);  Delaware,  etc..  R  R  Co.  v. 
Irick,  23  N.  J.  Law,  321  (1852);  and  al- 
though he  expects  to  buy  it  back ;  but 
there  must  be  no  agreement  expressly 
to  that  effect  Utica  Ins.  Co.  v.  Cad- 
well,  3  Wend.,  296  (1829);  State  v.  Cats- 
kill  Bank,  18  Wend..  406  (1837).  Contra. 
Carver  v.  Braintree  Mfg.  Co..  2  Story, 
432  (1843,). 

-  Dinns  v.  Prop,  of  Grand  Junction 
Canal,  3  H.  L.  Cases,  759  (1852).  where 
the  lord  chancellor  was  a  stockholder 
in  the  defendant  company,  and  had  af- 
firmed a  decree  by  the  vice-chancellor 
in  the  case.  The  house  of  lords  reversed 
the  decision  on  this  ground.  Cooley  on 
Constitutional  Limitations.  §§  410,  411; 
Washington  Ins.  Co.  v.  Price,  1  Hopk. 
Ch.  (N.  Y.),  1  (1823),  Chancellor  Sandford 
therein  refusing  to  follow  Chancellor 
Kent  in  Stuart  i\  Mechanics'  &  Farm- 
ers' Bank,  19  Johns.,  496,  501  (1822).  In 
Peninsular  Ry  Co.  r.  Howard,  20  Mich., 
18  (1870),  the  court  say:  "It  is  not  a 
matter  of  discretion  with  the  judge  or 
other  person  acting  in  a  judicial  capac- 
ity, nor  is  it  left  to  his  own  sense  of 
propriety  or  decency ;  but  the  principle 
forbids  him  to  act  in  such  capacity  at 
all  when  he  is  thus  interested,  or  when 
he  may  possibly  be  subject  to  the  temp- 
tation,"' In  New  York  the  statute  now 
prevents  an  interested  judge  from  sit- 


ting. N.  Y.  Code  of  Civil  Procedure, 
§§  828,  839.  See  Cregin  v.  Brooklyn. 
etc,  R  R  Co.,  19  Hun,  349  (1879).  Being 
related  to  a  stockholder  does  not  dis- 
qualify.  Searsburgh  T.  Co.  i\  Cutter, 
6  Vt,  315  (1834). 

A  judge  is  not  disqualified  merely  be- 
cause he  formerly  owned  stock.  Nich- 
olson v.  Showalter,  18  S.  W.  Rep.,  326 
(Tex.,  1892). 

3  Page  v.  Contocook  Valley  R  R  Co., 
21  N.  H,  438  (1850) :  Peninsular  R  R  Co. 
v.  Howard,  20  Mich.,  18  (1870);  Fleeson 
v.  Savage  S.  M.  Co.,  3  New.  157  (1867); 
Silver  v.  Ely.  3  Watts  &  S.  (Penn.t.  420 
(1842).  Cf.  Williams  r.  Smith,  6  Cow.. 
166  (1826).  The  incompetency  extends 
to  the  son  of  a  stockholder.  Georgia  R 
R  Co.  v.  Hart,  60  Ala..  550  (1878).  A  per- 
son donating  to  the  railroad  is  incompe- 
tent to  serve  in  condemnation  proceed- 
ings. Michigan  Air  Line  Ry  Co.  v. 
Barnes,  40  Mich.,  383  (1879).  But  the 
fact  that  the  corporation  is  interested  in 
a  subsequent  case  on  the  same  facts  does 
not  render  the  stockholder  incompetent 
Commonwealth  v.  Boston,  etc.,  R  R  Co., 
57  Mass..  25  (1849). 

Objection  to  competency  must  be 
raised  at  the  trial.  It  cannot  be  raised 
for  first  time  by  motion  for  new  trial. 
Williams  r.  Great  Western  Ry  Co.,  3 
H.  &  N„  869  (1859). 

The  fact  that  a  juror  and  plaintiff  are 
both  stockholders  in  the  same  corpora- 
tion is  no  cause  for  challenge  in  a  suit 
not  involving  the  corporation.  Brittain 
v.  Allen.  2  Dev.  Eq.  (N.  C),  120  (1829). 

A  juror  is  qualified  although  his  wife 
is  related  to  a  stockholder.  Butler  v. 
Glens,  etc.,  R  R,  121  N.  Y„  112  (1890). 

*  Covert  i".  Rogers,  38  Mich..  363  (1ST  -  : 
Re   Eagle    Iron   Works,  8    Paige,    385 
19 


§12-] 


DEFINITIONS    AND    SCOPE    OF   THE    WORK. 


[CH. 


be  a  stockholder,  unless  a  statute  or  the  charter  expressly  so  pro- 
vides.1 

§  12.  Shares  of  stock  defined—  What  law  governs  —  A  share  of 
stock  may  be  defined  as  a  right  which  its  owner  has  in  the  man- 
agement, profits  and  ultimate  assets  of  the  corporation.  By  the 
court  of  appeals  of  New  York  it  is  said  that  •'  the  right  which  a 
shareholder  in  a  corporation  has,  by  reason  of  his  ownership  of 
shares,  is  a  right  to  participate  according  to  the  amount  of  his 
stock  in  the  surplus  profits  of  the  corporation  on  a  division,  and 
ultimately  on  its  dissolution,  in  the  assets  remaining  after  payment 
of  its  debts." 2  . 


(1840),  modifying  S.  C,  3  Edw.  Ch.,  385 
(1840) ;  Bowery  Bank  Case,  16  How.  Pr., 
56  (1857).  Cf.  Attorney-General  v.  Bank 
of  Columbia,  1  Paige,  511  (1829),  §  2429, 
N.  Y.  Code  of  C.  P.,  expressly  authoriz- 
ing such  appointments. 

In  Atkins  v.  Wabash,  etc.,  R  Co.,  29 
Fed.  Rep.,  161  (1886),  however,  the  court 
removed  the  receivers,  and  said  :  "  Re- 
ceivers should  be  impartial  between  the 
parties  in  interest;  and  stockholders 
and  directors  of  insolvent  corporations 
should  not  be  appointed  unless  the  case 
is  exceptional  and  urgent;  and  then 
only  on  consent  of  the  parties  whose 
iaterests  are  to  be  intrusted  to  their 
charge."    See,  also,  chapter  LI,  infra. 

In  New  Jersey  a  corporate  officer  is 
held  to  be  ineligible  to  the  position  of 
receiver.  Freeholders  v.  State  Bank,  28 
N.'J.  Eq.,  166  (1877) ;  McCullough  v.  Mer- 
chants', etc.,  Co.,  29  N.  J.  Eq.,  217  (1878). 
The  court  will  not  appoint  as  counsel 
for  the  receiver  the  counsel  for  the 
party  who  obtained  the  receivership. 
Emmons  v.  Davis,  etc.,  Co.,  16  Atl.  Rep., 
157  (N.  J.,  1888). 

i  Wight  v.  Springfield,  etc.,  R  R  Co., 
117  Mass.,  226  (1875) ;  Re  St  Lawrence 
Steamboat  Co.,  44  N.  J.  L,  529,  541 
(1882) ;  State  v.  McDaniel,  22  Ohio  St.,  354 
(1872).  Cf.  Bartholomew  v.  Bentley,  1 
Ohio  St,  37  (1852) ;  Despatch  Line  v.  Bel- 
lamy Mfg.  Co.,  12  N.  H.,  205,  223  (1841) ; 
Cumming  v.  Prescott,  2  Younge  &  C, 
488  (1837) ;  Stack's  Case,  33  K  J.  (Ch.), 
731  (1864). 
2  Plimpton  v.  Bigelow,  93  N.  Y,  592, 


599  (1883).  To  same  effect  see  Burrall 
v.  Bushwick  R  R  Co.,  75  N.  Y,  211,  216 
(1878);  Kentu  Quicksilver  Mining  Co.. 
78  N.  Y,  159  (1879);  Jermain  v.  Lake 
Shore,  etc.,  R  R  Co.,  91  N.  Y,  483,  492 
(1883):  Field  v.  Pierce,  102  Mass.,  253, 
261  (1869) ;  Jones  v.  Davis,  35  Ohio  St, 
474,477  (1880);  Bradley  v.  Bauder,  36 
id.,  28,  35  (1880);  Bent  v.  Hart,  10  Mo. 
App.,  143  (1881);  Harrison  v.  Vines,  46 
Tex.,  15,  21  (1876);  Brightwell  r.  Mal- 
lory,  10  Yerg.  (Tenn.),  196  (1836);  Barks- 
dale  v.  Finney,  14  Graft,  338,  357  (1858) : 
Van  Allen  v.  Assessors,  3  Wall,  573,  585 
(1865) ;  Union  Nat'l  Bank  v.  Byram,  22 
N.  E.  Rep.,  842  (111.,  1889). 

"The  interest  of  each  stockholder 
consists  in  the  right  to  a  proportionate 
part  of  the  profits  whenever  dividends 
are  declared  by  the  corporation  during 
its  existence  under  its  charter,  and  to  a 
like  proportion  of  the  property  remain- 
ing upon  the  termination  or  dissolution 
of  the  corporation,  after  payment  of  its 
debts."  Gibbons  v.  Mahon,  132  U.  S., 
549  (1890). 

Chief  Justice  Shaw,  by  way  of  a  defi- 
nition of  a  share  of  stock,  says :  "  The 
right  is,  strictly  speaking,  a  right  to  par- 
ticipate, in  a  certain  proportion,  in  the 
immunities  and  benefits  of  the  corpora- 
tion; to  vote    in  the    choice    of    their 
officers,  and  the  management  of  their 
concerns ;  to  share  in  the  dividends  of 
profits,  and  to  receive  an  aliquot  part  of 
the  proceeds  of  the  capital  on  winding 
up  and  terminating  the  active  existence 
and    operations    of    the    corporation." 


20 


CH.  I.] 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[§12. 


It  is  said  that  the  rights  which  a  share  of  stock  secures  to  its 
owner  are  the  rights  "  to  meet  at  stockholders'  meetings,  to  partic- 
ipate in  the  profits  of  the  business,  and  to  require  that  the  corpo- 
rate property  shall  not  be  diverted  from  the  original  purpose."1 

In  England  a  share  means  the  same  as  it  does  in  this  country; 
but  the  word  "stock"  there  signifies  a  number  of  paid-up  shares, 
so  united  that  the  owner  may  divide  it  and  transfer  it  in  large  or 
small  quantities,  irrespective  of  the  number  and  par  value  of  the 
shares  which  have  been  thus  merged  into  "stock."2 

Hence  a  share  of  stock  may  be  defined  as  a  proportional  part  of 
certain  rights  in  the  management  and  profits  of  the  corporation 
during  its  existence,  and  in  the  assets  upon  dissolution.3 

It  has  been  well  settled  that  shares  of  stock  are  personaltv  and 
not  realty.  A  share  of  stock  is  not  real  estate,  has  nothing  to  give 
it  the  character  of  real  estate,  is  not  land,  nor  an  hereditament,  nor 
an  interest  in  either  of  them.4 


Fisher  v.  The  Essex  Bank,  5  Gray.  373, 
378  (1855).  Cf.  Arnold  v.  Ruggles,  1 
R  I.,  165  (1837). 

1  Forbes  v.  Memphis,  etc.,  R  R  Co.,  2 
Woods,  323,  331  (1872).  Cf.  Payne  V. 
Elliott,  54  Cal.,  339  (1880).  Mr.  Justice 
Sharswood  says :  "A  share  of  stock  is 
an  incorporeal  intangible  thing.  It  is  a 
right  to  a  certain  proportion  of  the  cap- 
ital stock  of  a  corporation  —  never  real- 
ized except  upon  the  dissolution  and 
winding  up  of  the  corporation  —  with 
the  right  to  receive  in  the  meantime 
such  profits  as  may  be  made  and  de- 
clared in  the  shape  of  dividends."  Nei- 
lerr.  Kelley,  69  Penn.  St.,  403,  407  (1871). 
See,  also.  Bridgman  v.  City  of  Keokuk, 
33  N.  W.  Rep.,  355  (Iowa,  1887). 

2Norrice  v.  Aylmer,  L.  R,,  7  H.  L,  717, 
says :  "  Shares  are  not  necessarily  con- 
verted into  stock  as  soon  as  they  are 
paid  up ;  they  may  exist  either  as  paid- 
up  shares  or  as  not  paid-up  shares.  But, 
as  regards  stock,  that  can  only  exist  in 
the  paid-up  state.  .  .  .  There  is  a 
certain  extent  of  change  as  well  as  con- 
solidation in  these  paid-up  shares.  They 
are  changed  from  ordinary  shares  in 
this  respect,  that  they  are  no  longer  in- 
capable of  being  subdivided." 

Stock  "  is  a  fund  or  capital  which  is 
capable  of  being  divided  into  and  held 


in  any  irregular  amount  Thus,  the  or- 
dinary government  funds  (consols,  new 
threes,  etc.)  are  called  'stocks,'  because 
a  person  can  buy  them  in  any  amount 

(such  as  £99  19s.  lid.  as  well  as  £1 

A  share  or  debenture,  on  the  other  hand, 
is  of  a  fixed  amount  (such  as  £10.  £50, 
£100),  and  is  incapable  of  subdivision  or 
consolidation.^  Rapalje  &  Lawrence's 
Law  Die,  p.  1224.  Shares  may  be  con- 
verted by  the  company  into  stock,  so  as 
to  enable  their  holders  to  dispose  of 
them  in  small  or  irregular  amounts. 
Hurrell  &  Hyde  on  Joint-Stock  Com- 
panies, 47. 

3Oakbank   Oil  Co.  v.  Crum,  L  R,  8 
App.  Cas.,  65  (1882). 

<Bligh  v.  Brent,  2  Younge  &  G 
(Exch.),  268  (1836):  Edwards  v.  Hall,  C 
De  G.,  M.  &  G..  74  (1855);  Bradley  v. 
Holdsworth.  3  Mees.  &  W.,  422  (1838 
Ex  parte  Lancaster  Canal  Navigation 
Co.,  1  Dea.  &  Ch..  411  (1832);  Watson  r. 
Spratley,  28  Eng.  Law  &  Eqn  507  0854). 
In  Allen  v.  Pegram,  16  Iowa,  163.  173 
(1864),  Mr.  Justice  Dillon  says:  "Mr. 
Williams  treats  of  shares  in  corporations 
as  'incorporeal,  personal  property' — a 
very  neat  and  accurate  designation. 
Wms.  on  Pers.  Prop.,  155."  See,  also, 
Johns  v.  Johns.  1  Ohio  St..  350  (1853), 
Thurman,  J. ;  Arnold  v.  Ruggles,  1  R  L, 


21 


§12.] 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[CH. 


In  some  of  the  earlier  cases,  upon  the  theory,  perhaps,  that  the 
shareholders  had  a  direct  interest  in  the  tangible  property  of  the 
corporation,  shares  were  held  to  be  real  estate  where  the  corporate 
property  consisted  wholly  or  chiefly  of  realty.1 

Bat  as  a  result  of  all  the  authorities  it  is  clearly  settled  that 
shares  of  stock  are  to  be  regarded  as  personalty,2  a  view  which  has 
frequently  found  expression  in  declaratory  statutes  both  in  Eng- 
land:!  and  the  various  states  of  the  Union.4 

Stock,  though  personalty,  is  not  a  chattel;5  it  is  rather  a  chose  in 
action;  or,  as  some  older  authorities  declare,  property  in  the  nature 
of  a  chose  in  action.9 

It  is,  moreover,  of  such  a  nature  that  it  cannot  ordinarily,  either 


165  (1837);  Dyer  v.  Osborne,  11  id.,  321, 
325  (1876);  Tippets  v.  Walker,  4  Mass., 
595,  596  (1808),  Parsons,  C.  J. ;  Sargent 
v.  Franklin  Ins.  Co.,  8  Pick.,  90  (1829); 
Weyer  v.  Second  National  Bank,  57 
Ind..  198  (1877):  Manns  v.  Brookville 
National  Bank.  7:5  id.,  213  (1881);  Sew- 
ard v.  City  of  Rising  Sun.  79  id.,  351 
(1881);  Southwestern  R  R.  Co.  v.  Thom- 
as- m.  40  Ga.,  408  (1869).  Cf.  Wheelock 
v.  Moulton,  15  Vt,  519  (1843):  Russell  v 
Temple  (Mass.,  1798),  3  Dane's  Abr.,  108, 
109. 

i  Price  v.  Price,  6  Dana  (Ky.),  107 
(1838) ;  Copeland  v.  Copeland,  7  Bush, 
349  (1870).  But  as  soon  as  this  latter 
decision  was  handed  down,  the  legisla- 
ture passed  an  act  declaring  shares  of 
stock  in  Kentucky  to  be  personal  prop- 
erty ;  thus  bringing  the  courts  of  that 
state  into  line  with  other  common-law 
courts  upon  this  question.  In  Meason's 
Estate,  4  Watts,  341  (1835),  there  is  to 
be  found  a  tendency  to  hold  shares  in  a 
toll-bridge,  real  estate.  Turnpike  stock 
was  held  realty  in  Welles  v.  Cowles,  2 
Com.,  567  (1818);  S.  P.,  Knapp  v.  Will- 
iams, 4  Ves.  Jr.,  430,  note  (1798).  So  of 
canal  shares.  Tomlinson  V.  Tomlinson, 
9  Beav.,  459  (1823).  Cf.  Buckeridge  v. 
Ingram,  2  Ves.,  652  (1795):  Drybutter 
v.  Bartholomew,  2  P.  Wms,  127  (1723); 
The  King  v.  Winstanley,  8  Price,  180 
(1820).  Contra,  Walker  v.  Milne,  11 
Beav..  507  (1849).  See,  also.  Sparling 
v.  Parker,  9  id.,  450  (1846);  Myers  v. 
Perrigal,   18  L.  J.   (Chan.),    185  (1849); 


S.  C,  21  L.  J.  (C.  P.),  217  (1852);  Ashton 
V.  Langdale,  4  Eng.  L.  &  Eq.,  80  (1851); 
S.  G,  20  L  J.  (Chan.),  234,  and  an  inter- 
esting discussion  of  the  question  in  3 
Dane's  Abridgment,  108  et  seq. 

2  See  cases  cited  supra.  Also,  an 
essay  on  Stock,  its  Nature  and  Transfer, 
7  Southern  Law  Review  (N.  S.),  430 
(1881). 

3  41  Geo.  III.,  ch.  3;  Watson  v.  Sprat- 
ley,  28  Eng.  Law  &  Eq.,  507  (1854);  Ex 
parte  Vallance,  2  Deacon,  354  (1837); 
Ex  parte  Lancaster  Canal  Navigation 
Co.,  1  Dea.  &  Ch.,  411  (1832). 

4  1  Rev.  Laws  of  New  York,  247 ;  New 
York  Laws  of  1848,  ch.  40,  §  8;  New 
York  Laws  of  1850,  ch.  140,  £  8;  Laws 
of  New  Jersey,  1830,  p.  83,  §  17 ;  Code  of 
Virginia,  p.  550,  §  21. 

5  King  v.  Copper,  5  Price  (Eng.  Exch.), 
217  (1870). 

6Wildman  v.  Wildman,  9  Ves.,  174 
(1803) ;  How  v.  Starkweather,  17  Mass., 
240.  243  (1821);  Hutchins  v.  State  Bank, 
12  Mete,  421,  426  (1847);  Union  Bank  of 
Tennessee  v.  The  State,  9  Yerg.  (TenD.), 
490,  500  (1836);  Allen  v.  Pegram,  16 
Iowa,  163, 173  (1864);  Arnold  v.  Ruggles, 
1  R.  I.,  165  (1837) ;  Slaymaker  v.  Bank  of 
Gettysburg,  10  Penn.  St,  373  (1849); 
Denton  v.  Livingston,  9  Johns.,  96  (1812) ; 
Chesapeake,  etc.,  R  R  Co.  v.  Paine,  29 
Gratt,  502,  506  (1877) ;  Barksdale  v.  Fin- 
ney, 14  id.,  338,  357  (1858);  Fisher  v. 
Essex  Bank,  5  Gray,  373,  377  (1855); 
People's  Bank  v.  Kurtz,  99  Penn.  St., 
344,349(1882):  Humble  v.  Mitchell,  11 
22 


CH.  I.]  DEFINITIONS    AND    SCOPE    OF  THE    WORK.  [§  12. 

by  act  of  the  law  or  act  of  its  owner,  be  taken  into  tangible  pos- 
session, although,  of  course,  its  representative  —  the  certificate  of 
stock  — may  be.1 

It  is  an  English  doctrine  that  shares  of  stock  are  not  "goods, 
wares  or  merchandise,"  as  those  terms  are  to  be  understood  in  con- 
struing that  section  of  the  statute  of  frauds  which  requires  deliv- 
ery, payment  or  memorandum  in  writing  of  a  sale  thereof.2  In 
this  country,  however,  the  courts  have  taken  the  opposite  view.' 
Furthermore,  it  is  said  that  shares  are  not  money,4  nor  are  they 
security  for  money,5  nor  a  credit.6 

Shares  of  stock,  being  in  the  nature  of  a  chose  in  action,  are,  at 
common  law,  not  subject  to  attachment  or  levy  of  execution ; 7  but 
most  of  the  states  have  enacted  statutes  which  have  changed  this 
rule.  This  species  of  property  may  be  made  subject  to  taxation ; 8 
and  for  purposes  of  taxation  it  exists  apart  from  the  corporation, 
the  corporate  property,  the  corporate  franchises  and  the  capital 
stock.  In  most  of  the  states,  and  in  the  federal  courts,  trover  lies 
for  the  conversion  of  stock.  In  Pennsylvania,  however,  a  contrary 
rule  prevails,  although  conversion  is  held  to  lie  in  reference  to 
certificates  of  stock.9 

Justice  Story,  in  his  Conflict  of  Laws,  says  that  questions  relating 
to  shares  of  stock  are  to  be  determined  by  the  law  of  the  state  of 
the  corporation.10  For  purposes  of  attachment  and  execution  levied 
upon  stock  this  is  undoubtedly  true,  since  it  is  only  at  the  domi- 
cile of  the  corporation  that  such  an  attachment  or  execution  can 
be  levied.11  As  regards  the  taxation  of  stock,  however,  the  stock 
follows  the  domicile  of  the  stockholder,  and  may  be  taxed  in  ac- 

Adol.  &  El.,  205,  208  (1839).    Cf.  Kellogg  443  (1849):    Mechanics'   Bank  v.    Ne%v 

r.  Stockwell,  75   111.   68  (1874);    In  re  York,  etc.,  R  R.  Co..  13  N.  Y.,  599,  626 

Jackson.  L.  R,  12  Eq.,  354  (1871).  (1856). 

ijermain  v.  Lake  Shore,  etc..  R.  R  6  New  Orleans  National  Banking  As- 

Co.,  91  N.  Y,  483,492  (1883);  Neiler  v.  sociation  v.   Wiltz,    10  Fed.    Rep.,    330 

Kelley,   69  Penn.   St.,   403,   407  (1871);  (1881);  S.    C,   4  Woods,  44.     See,  also, 

Payne  v.  Elliot,  54  CaL,  339,  341  (1880).  Smith  v.  Crescent  City,  etc.,  Slaughter- 

2  See  §§  339,  340,  infra.  house  Co..  30  La.  Ann.,  1378  (1878). 

3  id.  •  See  chapter  XXVII. 

4  Nightingal  v.  Devisme,  5  Burr.,  2589 ;  8See  chapter  XXXIV. 
S.  C,  2  Wm.  Black.,  684  (1770) ;  Jones  v.  aSee  chapter  XXXV. 

Brinley,   1   East,    1  (1800);  Douglas    v.  10  Story  on  Conflict  of  Laws  (8th  ed.),    i 

Congreve,  1  Keen,  410  (1836).  g  :!83.     And  see   the  discussion  of  this 

s Ogle  v.  Knipe,  38  L.  J.  (Chan.).  692  suhject  in   Black   v.  Zacharie,  3  How., 

(1869);  Gosden  v.  Dotterill,  1   Mylue  &  483  (1844>     As  to  the  situs  of  stock  see 

K.  56  (1832)  ?  Lowe  v.  Thomas,  5  De  G.,  article  in  45  Alb.  L  J.,  330;  147  U.  S., 

M.  &  G.,  315  (1854);  Hotham  v.  Sutton,  360;  135  id..  538;  7  S.  Rep.,  90. 

15  Ves.,  320  (1808) ;  Atkins  v.  Gamble,  42  »  See  chapter  XXVIX 
Cat,  86  (lb71) ;  Wilson  v.  Little,  2  N.  Y, 

23 


§  13.]  DEFINITIONS    AND   SCOPE    OF    THE    WORK.  [CH.  I. 

cordance  with  the  law  of  the  domicile  of  such  stockholder.1  In 
reference  to  transfers  of  stock,  the  law  of  the  forum  governs.2 
Legal  proceedings  against  the  stock  may  be  initiated  at  the  domi- 
cile of  the  corporation.3 

In  regard  to  shares  of  stock  owned  by  married  women,  the  pay- 
ment of  dividends  is  governed  by  the  law  of  the  domicile  of  the 
corporation ; 4  but  the  legality  of  transfers  is  governed  by  the  law 
of  her  domicile.5 

A  guardian's  sale  of  stock  is  governed  by  the  law  of  the  state  of 
the  guardianship.6 

A  certificate  of  stock  is  not  necessary  to  the  complete  ownership 
of  the  stock ; 7  nor  is  payment  of  the  subscription  necessary  thereto.3 
But  the  corporation  is  bound,  upon  demand,  to  issue  a  certificate 
of  stock  to  one  who  is  entitled  to  it;9  and,  if  it  refuses,  the  stock- 
holder may  bring  suit  in  equity  to  compel  its  issuance;'0  or  he  may 
sue  it  in  an  action  at  law  for  damages.11 

As  regards  the  common-law  and  statutory  liability  of  a  stock- 
holder on  his  stock,  the  law  of  the  domicile  of  the  corporation 
determines  the  extent  of  the  liability,  while  the  law  of  the  forum 
determines  the  method  of  enforcing  that  liability.12 

§  13.  Classes  of  stock. —  The  capital  stock  of  a  corporation  may 
be  either  common  or  preferred.  By  common  stock  is  meant  that 
stock  which  entitles  the  owners  of  it  to  an  equal  pro  rata  division 
of  profits,  if  any  there  be;  one  shareholder  or  class  of  shareholders 
having  no  advantage,  priority  or  preference  over  any  other  share- 
holder or  class  of  shareholders  in  the  division.  By  preferred  stock 
is  meant  stock  which  entitles  its  owners  to  dividends  out  of  the 

1  See  chapter  XXXIV.  Dickinson  v.   Central   Nat'l   Bank,   129 
The  case  of  Glenn  v.  Clabaugh,  3  Atl.     Mass.,  279 ;  Sibley  v.  Quiusiganiund  Nat'l 

Rep.,  902  (1886),  holds  that  the  insolvent  Bank,  133  Mass.,  515  (1882) ;  State  v.  First 
laws  of  Maryland  cannot  discharge  a  Nat'l  Bank,  etc.,  89  Ind.,  302(1883);  Hoi- 
Ma  ry land  subscriber  to  a  Virginia  cor-  brook  v.  New  Jersey,  etc.,  Co.,  57  N.  Y., 
poration.     The  validity  of  a  contract  to  616  (1874). 
sell  stock  under  the  statute  of  frauds  is  4  See  §  542,  infra. 
determined  by  the  lex  loci  contractus.  5See  §  319,  infra. 
Tisdale  v.  Harris,  37  Mass.,  9  (1838).  *See  §  328,  infra. 

2  See  chapter  XXII.  -Wheeler    v.   Millar,    90    N.    Y.,   353 

3  See  chapter  XXVII,  and  §§  361,  362,  (1882);  Burr  v.  Wilcox,  22  N.  Y,  551, 
infra;  and,  in  general,  see  Noyes  v.  555  (1860) ;  Thorp  v.  Woodhull,  1  Sand. 
Spaulding,   27    Vt.,    420    (1853);    Rich-    Ch.,  411  (1844). 

mondville  Mfg.  Co.   v.   Prall,  9   Conn.,  8  Wheeler  v.  Millar,  supra. 

487(1833);  Black  v.  Zacharie,  3  How.,  9  See  §  192,  infra. 

483  (1845).     As  regards  national  banks,  10Id. 

see  Scott  v.  Pequonnock  Nat'l  Bank,  15  u  Id. 

Fed.  Rep.,  494  (1883);  Continental  Nat'l  12  See  chapters  XI  and  XII. 

Bank  v.  Eliot  Nat'l  Bank,  12  Rep.,  35; 

24 


CH.  I.]  DEFINITIONS    AND    SCOPE   OF    THE    WORK.  [§  14. 

net  profits  before  or  in  preference  to  the  holders  of  the  common 
stock.  Common  stock  entitles  the  owner  to  a  pro  rata  of  dividends 
equally  with  all  other  holders  of  the  stock  except  preferred  stock- 
holders; while  preferred  stock  entitles  the  owner  to  a  priority  in 
dividends. 

By  watered  or  fictitious  stock  is  meant  stock  which  is  issued  as 
fully  paid  up,  when,  in  fact,  the  whole  amount  of  the  par  value 
thereof  has  not  been  paid  in.  If  am*"  amount  less  than  the  whole 
face  value  of  the  stock  has  not  been  paid,  and  the  stock  has  been 
issued  as  full  paid,  then  the  stock  is  watered  to  the  extent  of  the 
deficit.  Watered  stock  is,  accordingly,  stock  which  purports  to 
represent,  but  does  not  represent,  in  good  faith,  money  paid  in  to 
the  treasury  of  the  company,  or  money's  worth  actually  contrib- 
uted to  the  working  capital  of  the  concern.  The  issue  of  such 
stock  may  be  lawful,  but  sometimes  it  is  in  fraud  of  the  rights  of 
some  interested  party,  as,  e.  g.,  creditors  of  the  corporation,  certain 
shareholders  or  classes  of  shareholders.1 

By  deferred  stock  or  bonds  is  meant  stock  or  bonds  the  payment 
of  dividends  or  interest  upon  which  is  expressly  postponed  until 
some  other  class  of  shareholders  are  paid  a  dividend,  or  until  some 
certain  obligation  or  liability  of  the  corporation  is  satisfied.2 

By  overissued  or  spurious  stock  is  meant  stock  issued  in  excess  of 
the  full  amount  of  capital  stock  authorized  by  the  charter  of  the 
corporation.3     Such  stock  is  void  even  though  issued  in  good  faith. 

In  Massachusetts  some  classes  of  corporations  issue  what  is  there 
known  as  special  stock.  This  is  a  peculiar  kind  of  stock,  essentially 
local  in  character,  provided  for  by  statute,  and  unknown  before  the 
year  1S55.  Its  characteristics  are  that  it  is  limited  in  amount  to 
two-fifths  of  the  actual  capital;  it  is  subject  to  redemption  by  the 
corporation  at  par  after  a  fixed  time,  to  be  specified  in  the  certifi- 
cate ;  the  corporation  is  bound  to  pay  a  fixed  half-yearly  sum  or 
dividend  upon  it  as  a  debt ;  the  holders  of  it  are  in  no  event  liable 
for  the  debts  of  the  corporation  beyond  the  amount  of  their  stock, 
and  the  issue  of  special  stock  makes  all  the  general  stockholders 
liable  for  all  debts  and  contracts  of  the  corporation  until  the  spe- 
cial stock  is  fully  redeemed.4 

§  14.  Certificates  of  stock. —  A  certificate  of  stock  is  from  one 
point  of  view  a  mere  muniment  of  title,  like  a  title  deed.  It  is  not 
the  stock  itself,  but  evidence  of  the  ownership  of  the  stock;  that  is 
to  say,  it  is  a  written  acknowledgment  by  the  corporation  of  the 
interest  of  the  shareholder  in  the  corporate  property  and  fran- 
chises ;  it  operates  to  transfer  nothing  from  the  corporation  to  the 

« See  chapter  III.  3  See  §§  291,  298. 

2  See  §  762,  infra,  and  chapter  IIL  *  See  chapter  XVI,  infra. 

25 


§14-] 


DEFINITIONS    AND    SCOPE    OF    THE    WORK. 


[CH.  L 


shareholder,  but  merely  affords  to  the  latter  evidence  of  his  rights. 
It  should  be  clearly  apprehended  that  the  certificate  is  not  the 
stock,  but  merely  written  evidence  of  the  ownership  of  shares.1 
Accordingly  it  follows  that  shares  have  no  "ear-marks"  —  that 
one  share  cannot  be  distinguished  from  another  share  —  but  that 
it  is  only  the  certificates  which  are  distinguishable  one  from  the 
other  by  their  numbers  and  in  other  ways.2  The  certificate,  there- 
fore, has  value  in  itself  only  as  evidence,  and,  apart  from  the  shares 
which  it  represents,  it  is  utterly  worthless.3  And  even  as  evidence 
it  is  not  in  every  case  essential;  it  is  merely  a  convenient  voucher, 
which  the  shareholder  has  a  right  to  receive  if  he  asks  for  it.4  One 
element  of  its  value  to  the  shareholder  is  that  it  is  prima  facie  evi- 
dence of  his  title.5 

The  right  of  every  shareholder  to  demand  and  receive  from  the 
company  a  certificate  is  generally  conceded.6  When  certificates 
are  executed  by  a  part  only  of  the  officers  required  by  law  to  sign 
them,  they  may  be  void.7  But  a  certificate  issued  to  an  officer  of 
the  corporation  who  is  a  shareholder,  although  the  certificate  is 

contemplation  the  certificate  was  merely 
an  additional  and  convenient  evidence 
of  the  ownership  of  the  stock."  Cin- 
cinnati, etc.,  R  R  Co.  v.  Pearce,  28  Ind., 


i  Hawley  v.  Brumagim,  33  Cal.,  394 
(1867) ;  Campbell  v.  Morgan,  4  Bradw., 
100  (1879);  People's  Bank  v.  Kurtz,  99 
Penn.  St.,  344  (1882) ;  Hubbell  v.  Drexel, 
11  Fed.  Rep,  115  (1882);  Van  Allen  v. 
Assessors,  3  Wall.,  573,  598  (1865) ;  Burr 
v.  Wilcox.  22  N.  Y.  551  (1860) ;  Birming- 
ham Nat'l  Bank  v.  Roden,  11  S.  Rep., 
883  (Ala.,  1892).  "Stock  is  one  thing, 
and  certificates  another.  The  former  is 
the  substance,  and  the  latter  is  the  evi- 
dence of  it."  Hawley  v.  Brumagim, 
supra. 

*  Hubbell  v.  Drexel,  supra. 

3  Payne  v.  Elliot,  54  Cal.,  339. 

4  Johnson  v.  Albany,  etc.,  R.  R.  Co.,  40 
How.  Prac,  193  (1870).  Cf.  Arnold  v. 
Suffolk  Bank,  27  Barb.,  424  (1857),  a  case 
in  which  the  distinction  between  a  re- 
fusal on  the  part  of  a  corporation  to 
issue  a  certificate  in  a  certain  form  and 
a  refusal  to  recognize  the  owner  of 
shares  as  owner  —  a  denial  of  his  prop- 
erty in  the  stock  —  is  clearly  drawn. 
The  supreme  court  of  Indiana  have 
noted  the  distinction  to  the  effect  that  a 
certificate  is  not  the  title,  but  only  evi- 
dence of  the  title,  to  shares.  The  court 
say :  "  The  certificate  did  not  constitute 
the  title  to  the  stock.    ...    In  legal 


502  (1867). 

5  Broadway  Bank  tt  McElrath,  13  N. 
J.  Eq.,  24  (1860) ;  Courtright  v.  Deeds, 
37  Iowa,  503  (1873);  Walker  v.  Detroit 
Transit,  etc.,  Co.,  47  Mich.,  338  (1882). 

e  Buffalo,  etc.,  R  R.  Co.  n  Dudley,  14 
N.  Y.,  336,  347  (1856) ;  National  Bank  v. 
Watsontown  Bank,  105  U.  S.,  217  (1881). 
A  valid  certificate  may  be  issued  out  of 
the  state  in  which  the  corporation  ex- 
ists. Courtright  v.  Deeds,  37  Iowa,  503 
(1873).    See  §  61. 

The  failure  of  the  corporation  to  issue 
a  certificate  is  no  defense  to  an  action 
to  collect  the  subscription.  See  §  192, 
infra. 

The  certificate  of  stock  need  not  be 
under  seal.  Halstead  v.  Dodge,  51  N.  Y. 
Super.  Ct.,  169  (1884).  There  is  no  com- 
mon-law rule  requiring  certificates  of 
stock  to  have  the  corporate  seal  placed 
upon  them.  Coddington  v.  Railroad,  103 
U.  S.,  409  (1880),  dictum. 

''  Holbrook  v.  Farquier,  etc.,  Co.,  3 
Cranch,  C.  C,  425  (1829).    See  §  363. 


26 


OH.  I.]  DEFINITIONS    AND    SCOPE    OF    THE    WORK.  [§  15. 

signed  bv  that  officer,  is  valid.1  It  is  not,  however,  essential  to  the 
existence  of  the  corporation  that  certificates  of  stock  shall  be  issued.2 
"Without  a  certificate  the  shareholder  has  a  comphte  power  to 
transfer  his  stock,3  to  receive  dividends,4  and  to  vote.5  and  he  is  in- 
dividually liable  as  a  stockholder.6  A  certificate  of  stock  may  be 
a  valid  subject  of  a  donatio  causa  mortis,  of  a  legacy,  a  contract  of 
sale,  a  pledge,  or  a  gift.7  Under  the  English  statute  an  issue  of 
stock  by  a  corporation  has  reference  only  to  the  issue  of  the  cer- 
tificates, and  means  an  original  putting  out  of  the  shares.8  In  Xew 
York,  making  out  and  mailing  the  certificates  has  been  held  to  con- 
stitute a  due  issuing  thereof.9  And  in  Maryland,  the  stub  of  a 
book  from  which  certificates  have  been  detached  is  evidence  of 
their  regular  isssue.10 

Certificates  of  stock  are  not  negotiable  instruments.  They  have 
sometimes  been  said  to  have  a  ^cm-negotiability,  but  this  phrase- 
ology throws  little  light  upon  the  real  character  of  the  transfer- 
ability of  stock.  It  may  be  said  in  general  that  by  the  operation 
of  the  law  of  estoppel  the  purchaser  of  a  certificate  of  stock,  in 
good  faith  and  for  value,  may  take  it  free  from  many  claims  of 
previous  holders  which  would  be  allowed  to  come  in,  in  the  case  of 
a  sale  of  an  ordinary  chose  in  action.11 

§  15.  Definition  of  bond,  mortgage,  deed  of  trust,  debenture,  arti- 
cles of  association,  memoranda  of  association,  scrip,  certificate  bool; 
transfer  bool;  stock  ledger,  underwriting,  founders'  shares. —  A 
bond  of  a  corporation  is  an  instrument  executed  under  the  seal  of 
the  corporation,  acknowledging  the  loan  and  agreeing  to  repay  the 
same  upon  terms  set  forth  therein.  A  coupon  bond  is  one  that  has 
coupons  attached,  usually  in  the  form  of  promissory  notes  to  pay 
an  amount  of  money  equal  to  the  annual  or  semi-annual  interest  on 
the  bond.  A  registered  bond  is  one  whose  negotiability  is  tempo- 
rarily withdrawn  by  a  writing  on  the  bond  that  it  belongs  to  a 
specified  person,  and  by  a  registry  to  that  effect  at  an  office  speci- 
fied by  the  company. 

1  Titus  v.  President,  etc.,  of  the  G.  W.  6  Agricultural  Bank  v.  Wilson,  24  Me., 
Turnpike  Road,  61  N.  Y.,  237  (1874).  273  (1844) ;  Mitchell  v.  Beckman,  64  Cat, 

2  Chester  Glass  Co.  v.  Dewey,  16  Mass.,     117  (1883). 

94  (1819) ;  Burr  v.  Wilcox,  22  N.  Y.,  551  '  See  chapter  XVIII. 

(I860).  8  East  Gloucestershire  R'y  Co.  n  Bar- 

•>  First  National  Bank  v.  Gifford,  47  tholomew,   L.   R.,    3  Exch.,   15  (1867); 

Iowa,  575  (1877);  National  Bank  v.  Wat-  Bush's  Case,  L.  R,  9  Chan.,  554  (1874). 

sontown  Bank,  105  U.  S.,  217  (1881).  Cf.  d  Jones  r.  Terre  Haute,  etc.,  R.  R  Co., 

Brigham  v.  Mead,  10  Allen.  245  (1865).  17  How.  Pr.,  529  (1859). 

*  Ellis  v.  Proprietors  of  Essex  Merri-  »°  Weber  v.  Fickey,  47  Md.,  196  (1877). 

mack  Bridge,  2  Pick.,  243  (1824).  »  See  chapter  XXIV. 

5  Beckett  v.   Houston,    32    Ind.,    393 
(1869). 

27 


§  15.]  DEFINITIONS    AND    SCOPE    OF   THE    WORK.  [CH.  I. 

A  mortgage  given  by  a  corporation  may  be  similar  to  the  ordi- 
nary mortgage  given  by  an  individual. 

But  usualty  a  corporate  mortgage  is  made  in  the  form  of  a  mort- 
gage deed  of  trust.  Such  a  deed  of  trust  is  a  mortgage,  the  mort- 
gagee, however,  being  a  trustee  for  bondholders,  and  the  bonds 
being  secured  by  the  mortgage  deed  of  trust.  The  trustee  may  be 
an  individual  but  generally  is  a  trust  company.  Where  the  mort- 
gage is  to  secure  a  large  number  of  bonds,  it  is  almost  necessary 
that  a  deed  of  trust  be  used.  Otherwise  the  mortgage  would  run 
to  the  bondholders,  who  are  constantly  changing,  and  many  of 
whom  are  soon  unknown  to  the  corporation  mortgagor.  Moreover 
in  foreclosing  such  a  mortgage  serious  difficulties  would  arise. 
Hence  where  a  corporation  gives  a  mortgage  to  secure  bonds,  this 
mortgage  is  made  in  the  form  of  a  deed  of  trust. 

The  word  "  debenture  "  has  no  definite  legal  meaning.  It  may  be 
applied  to  any  promise  or  security  of  the  company  to  pay  money. 
It  may  be  a  mere  promise  to  pay,  or  a  covenant  under  seal  to  pay, 
or  a  mortgage  or  charge  under  the  seal  of  the  company. 

"  Debenture  stock  "  is  an  English  term  and  means  borrowed  money 
consolidated  into  one  mass  for  the  sake  of  convenience.  Instead 
of  each  lender  having  a  separate  bond  or  mortgage,  he  has  a  cer- 
tificate entitling  him  to  a  certain  sum,  being  a  portion  of  one  large 
loan.1  In  this  country  the  same  thing  is  done  by  issuing  to  a  bond- 
holder a  certificate  entitling  him,  and  him  alone,  to  a  specified  sum 
and  interest  in  exchange  for  bonds  to  the  same  amount  which  he 
delivers  to  the  company  at  the  time  when  he  receives  the  certifi- 
cate. 

Articles  of  association  are  similar  to  by-laws,  and  are  for  the  reg- 
ulation and  management  of  the  corporation. 

Memoranda  of  association  are  the  same  as  the  American  articles 
of  incorporation  required  to  be  filed  under  general  statutes  for 
incorporations.2 

In  England  scrip  is  a  written  acknowledgment  by  a  corporation 
that  the  holder  will  be  entitled  to  certain  shares  of  stock  and  a 
certificate  therefor  when  the  unpaid  instalments  on  such  shares  are 
all  paid  in.     They  are  negotiable  instruments.3 

1  Lindley  on  Company  Law,  p.  195.         Guiness  v.  Land  Corporation  of  Ireland, 

2  Deed  of  settlement  is  a  term  that  was    L  R,  22  Ch.  D.,  369. 

used  in  England,  prior  to  1862,  to  indi-  3  Goodwin  v.  Robarts,  L.  R,  1  App. 

cate  the  same  as  the  modern  articles  of  Cas.,  476  (1876) ;  Rumball  v.  Metropoli- 

association  and  memoranda  of  associa-  tan  Bank,  L.  R,  2  Q.  R  Div.,  194  (1877). 

tion.     See  Burrows  v.  Smith,  10  N.  Y.,  In  this  country  scrip  generally  means 

^50,  555  (1853);  Rapalje  &  Lawrence's  a  kind  of  dividend:   e.  g.,  land  scrip 

Law.  Die,  361 ;  London  Financial  Asso-  dividend  entitling  the  holder  to  take  so 

ciation  v.  Kelk,  L  R,  26  Cb,  D.,  107;  much  land;  and  a  scrip  dividend  en- 

28 


CH.  I.]  DEFINITIONS    AND    SCOPE    OF    THE    WORK.  [§  15k. 

The  certificate  hook  of  a  corporation  contains  t>be  printed,  litho- 
graphed or  engraved  certificates  of  stock,  which  are  filled  out  and 
signed  by  the  proper  officers  and  then  delivered  to  the  stockhold- 
ers. A  stub  in  the  book,  opposite  each  certificate,  states  the  name, 
amount,  date,  etc.,  of  the  certificate  which  is  issued.  When  the 
certificate  is  returned,  upon  a  transfer  to  a  new  person,  it  is  can- 
celed and  attached  to  the  old  stub.  On  the  back  of  the  certificate 
a  blank  form  for  a  transfer  of  the  stock  represented  by  it  is  given. 

The  transfer  hook  is  for  the  purpose  of  keeping  a  record  of  trans- 
fers of  stock.  The  entries  in  it  correspond  to  the  transfers  on  the 
backs  of  the  canceled  certificates  of  stock.  The  entries  in  the 
transfer  book  are  generally  made  by  a  clerk  as  attorney  in  fact  for 
the  transferrer.  The  form  of  transfer  on  the  back  of  the  certifi- 
cate contains  such  a  power  of  attorney. 

The  stock  ledger  contains  a  statement  of  how  much  stock  the  past 
and  present  stockholders  have  owned  or  now  own. 

Underwriting  means  an  agreement,  made  before  the  shares  are 
brought  before  the  public,  that  in  the  event  of  the  public  not  tak- 
ing all  the  shares  or  the  number  mentioned  in  the  agreement,  the 
underwriter  will  take  the  shares  which  the  public  do  not  take.1 

Founders'  shares  are  shares  which  take  the  profits  after  certain 
dividends  are  paid  on  the  other  shares.  They  are  a  sort  of  de- 
ferred stock.  They  are  issued  to  the  founders  or  promoters  of  the 
enterprise.  They  are  unknown  in  America.  In  England  they  often 
acquire  a  great  value. 

So  enormous  have  been  the  profits  of  some  of  the  trust  and  in- 
vestment companies  that  their  founders'  shares,  which  divide  the 
surplus  after  payment  of  a  moderate  maximum  dividend  on  the 
ordinary  shares,  are  worth  almost  fabulous  sums  of  money.  The 
Trustees,  Executors  and  Securities  Insurance  Company  is  the  most 
remarkable  illustration,  with  its  founders'  shares  quoted  on  the 
market  at  something  like  seven  thousand  five  hundred  per  cent. 
Founders'  shares  in  the  Foreign  and  Colonial  Debenture,  the  Im- 
perial Bank  of  Persia,  the  London  Produce  Clearing,  the  United 
States  Debenture,  and  the  North  of  England  Trustee  Debenture 
and  Assets  all  command  an  extraordinary  premium. 

Founders'  shares  are  often  given  as  a  gift  to  eminent  persons 
who  consent  to  act  as  directors  and  to  be  held  out  to  the  public  as 
such. 

titling  the  holder  to  future  dividends  the        '  The  underwriter    is    liable    on   the 
same  as  stock  receives,  but  without  the    stock.    Re  Licensed,  etc,  Ass'n,  CO  L.  T. 
voting  privilege  of  stock.     See  chapter    Rep.,  684  (1889> 
XXXII,  infra. 

29 


CHAPTER  II. 


STOCK  MAY  BE  ISSUED  LEGALLY  FOR  MONEY  OR  PROPERTY,  OR  EY 

A  STOCK  DIVIDEND. 


16.  Different  methods  of  issuing  stock. 

17.  First  method:    Issue    by   money 

subscription. 

18.  Second  method:    Issue  for  prop- 

erty, labor  or  construction  work. 

19.  When  such  subscriptions  are  not 

legal. 

20.  What  property  may  be  received. 

21.  Payment  in  property  as  a  favor, 

not  as  a  contract  right. 

22.  Sale  of  stock  for  property. 


23. 
24. 


25. 

26. 
27. 


English  statute  governing  issue 
for  property. 

Performance  of  contract  to  pay  in 
property  —  Obligation  of  the 
corporation  to  issue  the  stock. 

Third  method :  Issue  by  stock  divi- 
dend. 

Pledge  of  stock  by  the  corporation. 

Issue  of  stock  for  partnership 
property,  or  the  property  of  an- 
other corporation. 


§  16.  Methods  of  issuing  stock —  There  are  in  general  three  meth- 
ods of  issuing  stock.  It  may  be  issued,  first,  by  means  of  subscrip- 
tions, payable  in  cash,  the  subscription  being  made  in  writing,  or  by 
acts  equivalent  thereto.1  Second,  the  issue  may  be  by  means  of 
subscriptions,  payable  in  labor,  property,  or  both.  Third,  the  issue 
may  be  by  a  stock  dividend. 

§17.  First  method:  Issue  by  money  subscription. —  An  issue  of 
stock  by  means  of  a  subscription,  payable  in  cash,  is  the  most  sim- 
ple and  safe  method  of  issuing  stock.  In  the  absence  of  any  agree- 
ment to  the  contrary,  an  ordinary  subscription  for  stock  is  deemed 
a  cash  subscription,  and  payment  in  money  may  be  enforced.  The 
subscription  contract  is  generally  made  by  a  writing  duly  signed 
by  the  subscriber.  The  writing  itself  is  contained  in  books  opened 
by  the  corporation  or  by  commissioners  appointed  in  conformity 
with  a  statute,  or  it  is  made  without  formality  on  subscription  lists 
or  separate  sheets  of  paper. 

A  subscription,  payable  in  cash,  may  arise  also  from  the  mere 
acts  or  declarations  of  a  party.  A  person  having  assumed  the  posi- 
tion of  a  subscriber  or  stockholder  is  frequently  held  to  be  bound 
as  such.  Any  act  or  declaration,  sufficient  to  indicate  an  intent  on 
the  part  of  the  person  to  be  a  subscriber,  and  an  acceptance  by  the 
corporation  of  the  person  as  such,  is  equivalent  to  a  written  sub- 
scription, and  the  person  is  bound  as  a  subscriber.2 

§  18.  Second  method:  Issue  for  property,  labor  or  construction 
work. —  The  issue  of  stock  for  labor,  property,  contract  work,  or 


1  See  chapter  IV. 


2  Id. 


30 


CH.   II.] 


METHODS    OF    ISSUING    STOCK. 


[§  L8. 


any  valuable  consideration  other  than  money,  has  given  rise  to 
much  controversy  and  litigation.  In  England  a  long  line  of  decis- 
ions, under  the  Companies  Act,  has  established  the  principle  that 
stock  need  not  necessarily  be  paid  for  in  cash,  but  that  it  may  be 
paid  for  in  money's  worth.1  Such,  also,  was  the  rule  at  common 
law.2  The  well-established  rule  now  is  that  a  subscription  for  stock, 
payable  by  its  terms  in  property  or  labor,  or  both,  is  a  good  and 
legal  subscription.  If  the  property  is  taken  at  a  valuation  made 
without  fraud,  the  payment  is  as  effectual  and  valid  as  though  made 
in  cash  to  the  same  amount.  An  issue  of  stock  for  property  is  one 
which  finds  support,  not  only  in  the  decisions,  but  in  the  daily 
transactions  of  corporations,3  and  the  law  does  not  compel  the  cor- 
poration and  the  subscriber  to  go  through  the  useless  form  of  a 
payment  by  the  corporation  to  the  subscriber  of  the  value  of  the 


1  See  many  cases  in  chapter  III.  Stacy 
v.  Little  Rock,  etc.,  R.  R  Co.,  5  Dill.,  348, 
376  (1876). 

2  Woodhall's  Case,  3  De  G.  &  Sm.,  63 
(1849) ;  Burkinshaw  v.  Nichols,  L.  R,  3 
App.  Cas.,  1004,  1012  (1878),  where,  pay- 
ment having  been  made  in  property, 
the  court  said:  "If  there  had  been  no 
statutory  enactment  forbidding  a  trans- 
action of  that  kind,  it  is  a  transaction 
which  might  be  properly  valid."  Cf. 
dictum  in  Sanger  v.  Upton,  91  U.  S.,  56, 
60  (1875).  "It  is  not  now  questioned 
that  a  corporation  may  issue  its  stock  by 
way  of  payment  in  the  purchase  of  prop- 
erty. This  is  on  the  principle  that  there 
is  no  need  for  the  roundabout  process 
of  first  issuing  the  stock  for  money,  and 
then  paying  the  money  for  the  prop- 
erty. But  it  is  necessary  that  the  prop- 
erty so  taken  be  considered  reasonably 
worth  the  par  value  of  the  stock  paid 
for  it."  Chouteau  v.  Dean,  7  Mo.  App., 
210  (1879);  Wyman  v.  Araer.  Powder 
Co.,  62  Mass.,  168  (1851) ;  Reichwald  v. 
Commercial  Hotel  Co.,  106  111.,  439 
(1883);  Haydon  v.  Atlanta  Cotton  Fac- 
tory, 61  Ga.,  234  (1878).  "  Whatever  may 
have  been  formerly  held,  it  is  now  es- 
tablished that  subscriptions  to  corpo- 
rate stock  need  not,  in  the  absence  of 
statutory  provisions  requiring  it,  be  paid 
for  in  cash.    The  principle  is  now  gen- 


erally accepted,  both  in  England  and 
America,  that  any  property  which  the 
corporation  is  authorized  to  purchase, 
or  which  is  necessary  for  the  purposes 
of  its  legitimate  business,  may  be  re- 
ceived in  payment  for  its  stock.  Any 
payment,  whether  it  be  in  money  or 
money's  worth,  so  that  it  be  in  good 
faith,  will  give  the  shares  so  paid  for 
the  status  of  paid-up  stock.  In  the 
language  of  Lord  Justice  Gifford,  in 
Drummond's  Case,  4  Ch.  App.,  772:  'If 
a  man  contracts  to  take  shares  he  must 
pay  for  them,  to  use  a  homely  phrase, 
in  meal  or  in  malt ;  he  must  either  pay 
in  money  or  money's  worth ;  if  he  pays 
in  one  or  the  other  that  will  be  a  satis- 
faction.' .  .  .  The  contract  to  re- 
ceive in  payment  the  latters  patent, 
plows,  material  and  other  assets  of  its 
predecessor,  Unthank  &  Coffin,  was 
therefore  not  ultra  vires.'"  Coffin  v. 
Ransdall,  11  N.  E.  Rep,  20  find., 
1887).  holding,  also,  that  payment  for 
stock  by  transferring  to  the  corpora- 
tion the  property  and  assets  of  a  part- 
nership was  legal,  provided  that  a  fair 
valuation  was  placed  upon  the  property 
so  conveyed.  If  such  property  is  over- 
valued, the  dangers  incurred  thereby  are 
various.  See  ch.  Ill :  20  S.  W.  Rep.,  965. 
3  Foreman  v.  Bigelow,  4  Cliff.,  508,  544 
(1878). 


31 


§19-1 


METHODS    OF    ISSUING   STOCK. 


[CH.  II. 


property,  and  an  immediate  repayment  of  the  same  money  by  the 
subscriber  to  the  corporation  on  his  subscription.1 

There  is  some  doubt  as  to  whether  an  oral  agreement  of  the  cor- 
porate agents  that  a  subscription  may  be  paid  in  property  is  bind- 
ing upon  the  corporation.  Under  the  well-established  rule  that 
parol  evidence  will  not  be  allowed  to  add  to  or  vary  a  written 
agreement,  it  has  been  held  that  such  an  oral  agreement  with  the 
agent  cannot  be  admitted  in  evidence.2  When,  however  the  parol 
agreement  is  made  subsequently  to  the  act  of  subscribing,  and  is 
supported  by  a  sufficient  consideration,  it  is  valid  and  enforceable.3 

§19.  When  such  subscriptions  arc  not  legal. —  A  subscription 
payable  by  its  terms  in  labor  or  property  is  in  the  nature  of  a  con- 
ditional subscription.  Accordingly,  in  certain  states,  where  a  per- 
centage or  fixed  amount  of  the  capital  stock  must  be  subscribed  for 
before  a  charter  can  be  obtained,  and  where,  by  the  decisions  of 
the  courts,  such  preliminary  subscriptions  must  be  absolute  and 
unconditional,  a  subscription  payable  by  its  terms  in  labor  or  prop- 
erty, being  conditional  to  that  extent,  cannot  form  a  part  of  the 
preliminary  subscription.4  In  such  states,  however,  subscriptions 
to  the  remainder  of  the  capital  stock,  the  part  subscribed  after  the 
charter  has  been  or  may  be  obtained,  may  be  conditional,  and  may, 
by  their  terms,  be  payable  in  property  or  labor.5  On  the  ground 
that  subscriptions  payable  in  property  or  labor  are  conditional,  it 
has  been  held  also  that  a  subscription  payable  in  labor  or  prop- 
erty is  not  to  be  counted  in  ascertaining  whether  the  full  capital 
stock  has  been  subscribed/*  in  order  to  enforce  subscriptions  for 
stock. 


1  Seawright  r.  Payne,  6  Lea  (Tenn.), 
283  (188U);  Brant  v.  Ehlen,  59  Md.,  1 
(1882);  Spargo's  (  ase,  L.  R.,  8  Ch.  App., 
412  (1873);  Boot  ioe  Co.  v.  Hart.  56 

N.  H.,  548  (1876).  [  aj  nl<  at  in  property 
by  subscribers  v.  held  riot  allowable 
in  Neuse  River  Nav.  Co.  v.  Coui'rs  of 
Newbern,  7  Jones'  Law  (N.  C),  275 
(1859);  also  Henry  v.  Vermillion  &  Ash- 
land R.  R.  Co.,  1 J  Ohio,  187  (1843),  al- 
though the  latter  case  seems  to  involve  an 
oral  agreement  to  allow  such  payment, 
and  to  have  been  decided  on  that  ground. 
There  is  a  long  line  of  cases  sustaining 
the  validity  of  an  issue  of  stock  for 
money's  worth  instead  of  money  itself. 
They  are  given  in  this  and  the  following 
chapter.    So  well  established  has  this 


principle  of  law  become  that  the  few 
cases  holding  to  the  contrary  can  no 
longer  be  considered  good  law.  "That 
in  the  absence  of  fraud  an  agreement 
may  ordinarily  he  made  by  which  stock- 
holders could  be  allowed  to  pay  for 
their  shares  in  patents,  mines  or  other 
property,  to  which  it  is  not  easy  to  as- 
sign a  determinate  value,  would  appear 
to  be  well  settled."  New  Haven,  etc., 
Co.  v.  Linden  Spring  Co.,  142  Mass.,  349 
(1886). 

2  See  §  137,  infra. 

3  Id. 

*  See  §§  79,  180,  infra. 

5  See  §  82,  infra. 

6  See  §  180,  infra. 


32 


CH.  II.] 


METHODS    OF   ISSUING    STOCK. 


[§20. 


§20.  What  property  may  he  received. —  A  corporation  may  re- 
ceive in  payment  of  its  shares  of  stock  any  property  which  it  may 
lawfully  purchase,1  and,  in  general,  may  receive  any  consideration 
which  is  suitable  and  applicable  to  the  purposes  for  which  the  cor- 
poration was  organized.2  A  railroad  corporation  may  receive  pay- 
ment in  contract  work,  in  right  of  way,  or  in  any  kind  of  material 
or  labor  applicable  to  its  construction.3    A  manufacturing  corpo- 


1  Brant  v.  Ehlen,  59  Md.,  1  (1882) ;  The 
American  Silk  Works  v.  Sale-man,  4 
Hun,  135  (1875). 

In  Louisiana  the  general  act  for  in- 
corporation prescribes  that  the  articles 
of  incorporation  shall  state  the  time 
when  and  the  manner  in  which  "  the 
stock  shall  be  paid  for."  See  New  Or- 
leans, etc.,  R.  R  Co.  v.  Frank,  1  South 
Rep.,  310  (La.,  1887). 

2  See  Green's  Brice's  Ultra  Vires  (2d 
ed.),  145;  Angell  &  Ames  (11th  ed.), 
§  517.  "Payment  of  stock  subscrip- 
tions need  not  be  in  cash,  but  may  be  in 
whatever,  considering  the  situation  of 
the  corporation,  represents  to  that  corpo- 
ration a  fair,  just,  lawful  and  needed 
equivalent  for  the  money  subscribed." 
Liebke  v.  Knapp,  79  Mo.,  22  (1883).  Pay- 
ment in  newspaper  advertising  of  the 
enterprise  upheld  in  this  case.  The  sub- 
scription may,  by  its  terms,  be  payable 
in  plank  for  a  plank-road  company,  and 
the  subscriber  is  a  stockholder  before 
payment  is  completed.  Haywood,  etc., 
Co.  v.  Bryan,  6  Jones'  Law  (N.  C),  82 
(1858).  Payment  in  Confederate  bonds 
redeemable  in  cotton  upheld.  Schro- 
der's Case,  L  R.,  11  Eq.  Cas.,  131  (1870). 
So,  also,  payment  in  stock  in  a  coal  cor- 
poration carrying  on  a  supplementary 
business.  East,  etc.,  R.  R.  Co.  v.  Light- 
house, 6  Rob.  (N.  Y.),  407  (1868).  Pay- 
ment by  a  patent-right  has  been  upheld. 
Edwards  v.  Bringier  Sugar  Extracting 
Co.,  27  La.  Ann.,  118  (1875);  and  in  an- 
other case,  under  a  statute  not  upheld. 
Tasker  v.  Wallace,  6  Daly,  364  (1876). 
Payment  may  be  by  canceling  a  debt 
of  the  company  past  due.  Carr  v.  Le 
Fevre,  27  Pa.  St.,  413  (1856);  Reed  v. 
Hayt  51  N.  Y.  Super.  Ct.,  121  (1884).    Or 

(3)  33 


not  yet  due.  Appleyard's  Case,  49  L  J. 
(Ch.),  290  (1880).  Payment,  however,  to 
a  bank  in  its  own  currency  was  not  up- 
held, it  being  statutory  that  only  specie 
could  be  received.  King  v.  Elliott,  13 
Miss.,  428  (1845).  Payment  by  check 
cannot  be  objected  to  by  another  sub- 
scriber. Thorp  v.  Woodhull,  1  Sandf. 
Ch.,  411  (1844).  Stock  may  be  issued  to 
the  president  in  payment  of  past  salary 
and  debts.  Reed  t?.  Hayt,  4  Ry.  &  Corp. 
L.  J.,  135  (N.  Y,  1888). 

3  "  We  can  see  no  objection  whatever 
to  a  railroad  company  issuing  stock  and 
taking  in  payment  materials  or  labor  or 
lands  necessary  for  its  road."  Clark  v. 
Farrington,  11  Wis.,  306  (1860).  As  to 
payment  in  stock  for  construction  work, 
see,  also,  Wood  on  R'ys,  §  282.  "  The 
corporation  had  a  right  to  accept  pay- 
ment of  stock  in  labor  or  materials,  in 
damages  which  the  company  were  lia- 
ble to  pay,  or  in  any  other  liability  of 
the  company,  provided  these  transac- 
tions were  entered  into  and  carried  out 
in  good  faith."  Phil.  &  West  Chester 
R  R.  Co.  v.  Hickman,  28  Pa.  St,  318 
(1857);  Bedford  County  v.  Nashville,  C. 
&  St  Louis  R  R.  Co.,  14  Lea(TeDn.),  525 
(1884),  holding,  also,  that  thirty  yeai-s 
delay  in  demanding  the  stock  is  no  bar 
to  the  right  To  same  effect,  payment 
being  in  services,  Kobogum  v.  Jackson 
Iron  Co.,  43  N.  W.  Rep.,  602  (Mich.,  1889). 
Payment  may  be  in  cross-ties.  Ohio, 
Ind.  &  111.  R  R  Co.  v.  Cramer,  23  Ind., 
490  (1864).  Or  in  real  estate  and  serv- 
ices. Cm.,  Ind.  &  Chicago  R  R  Co.  V. 
Clarksou.  7  Ind.,  595  (1856).  Or  in  serv- 
ices and  materials.  Phillips  v.  Coving- 
ton &  Cin.  Bridge  Co.,  2  Mete.  (Ky.),  219 
(1859).     Or  by  construction  of  the  road. 


§21.] 


METHODS   OF   ISSUING    STOCK. 


[ch.  n. 


ration  may  receive  payment  in  the  good-will  of  a  business  or  the 
stock  in  trade.1  Land  may  be  taken  in  payment  when  the  corpo- 
ration would  be  allowed  to  purchase  the  same.2  Promissory  notes 
may  also  be  taken,  under  the  corporate  power,  to  give  credit  and 
extend  the  time  of  payment  of  debts.3 

§  21.  Payment  in  property  as  a  favor,  not  as  a  contract  riglxt. — 
There  is  an  important  distinction  to  be  made  between  payments  in 


See  §  17.  One  railroad  having  power 
to  consolidate  with  another  may,  in  pay- 
ment therefor,  issue  stock  to  the  con- 
tractors who  are  constructing  the  latter. 
Branch  v.  Jesup,  106  U.  S.,  468  (1882). 
A  corporation  may  agree  to  give  $5,000 
of  stock  to  one  who  will  borrow  $15,000 
for  it  Arapahoe,  etc.,  Co.  v.  Stevens,  22 
Pac.  Rep.,  823  (Colo.,  1889).  A  contract 
that  subscriptions  shall  be  payable  in 
land  is  illegal  by  statute  in  Alabama, 
but  after  subscription  payment  in  land 
may  be  allowed.  Knox  v.  Childersburg 
L.  Co.,  5  South.  Rep.,  579  (Ala.,  1889). 

i  Pell's  Case,  L.  R.,  5  Ch.,  11  (1869). 

2Goodin  v.  Evans,  18  Ohio  St,  150 
(1868);  Cin.,  Ind.  &  Chicago  R  R  Co.  v. 
Clarkson,  7  Ind.,  595  (1856) ;  Peck  v.  Coal- 
field Coal  Co.,  11  Bradw.  (111.)..  88  (1882) ; 
Brant  v.  Ehlen,  59  Md.,  1  (1882) ;  Jones' 
Case,  L.  R,  6  Ch.  App.,  48  (1870) ;  May- 
nard's  Case,  22  W.  R.,  119.  In  Foreman 
v.  Bigelow,  4  Cliff.,  508,  544  (1878),  the 
court  say :  "  Argument  to  show  that  the 
transaction  of  issuing  the  stock  in  pay- 
ment for  the  mineral  land  would  have 
been  valid  ...  is  scarcely  neces- 
sary." In  Indiana  formal  acceptance 
by  the  directors  is  necessary.  State  v. 
Bailey,  16  Ind.,  46  (1861) ;  Junction  R. 
R.  Co.  v.  Reeve,  15  Ind.,  236  (1861) ;  Day- 
ton, etc.,  R.  R.  Co.  v.  Hatch,  1  Disney,  84 
(1855) ;  Carr  v.  Le  Fevre,  27  Penn.  St, 
413  (1856) ;  Johnson  v.  N.  Y.  &  Erie  R. 
R  Co..  2  Sand.,  39  (1848).  A  corporation 
receiving  a  deed  of  land  in  payment  of 
stock  subscription  is  protected  in  its  title 
to  the  land  the  same  as  any  other  bona 
fide  purchaser  of  it  would  be  against  a 
former  vendor's  lien  for  the  purchase- 
money.  Frenkel  v.  Hudson,  2  South. 
Rep.,  758  (Ala.,  1887). 


3  Stoddard  v.  Shetucket  Foundry  Co., 
34  Conn.,  542  (1868) ;  Ogdensburgh,  etc., 
R.  R  Co.  v.  Wooley,  3  Abb.  Ct  of  App. 
Dec,  398  (1864);  Magee  v.  Badger,  30 
Barb.,  246  (1859);  Goodrich  v.  Reynolds, 
31  111.,  490  (1863) ;  Vermont  Central  R 
R.  Co.  v.  Clayes,  21  Vt,  30  (1848) ;  Hardy 
v.  Merriweather,  14  Ind.,  203  (1860); 
Pacific  Trust  Co.  v.  Dorsey,  72  Cal.,  55 
(1887).  In  Wisconsin  a  corporation  may 
accept  in  payment  of  stock  a  note  se- 
cured by  a  mortgage  on  real  estate. 
Clark  v.  Farrington,  11  Wis.,  306  (1860); 
Blunt  v.  Walker,  11  Wis.,  234  (1860); 
Cornell  v.  Hichens,  11  Wis.,  353  (1860); 
Lyon  v.  Ewings,  17  id.,  61  (1863) ;  An- 
drews v .  Hart,  id.,  297 ;  Western  Bank 
of  Scotland  v.  Tallman,  17  Wis.,  530 
(1863).  In  Tennessee  payment  in  notes 
is  not  upheld,  but  the  subscriber  is  to  be 
credited  with  the  amount  collected  on 
such  notes.  Moses  v.  Ocoee  Bank,  1  Lea 
(Tenn.),  398  (1878).  In  New  York  the 
payment  of  a  subscription  by  one's  own 
note  is  prohibited  by  statute.  1  R  S., 
ch.  18,  title  4,  §  2.  Payment  by  bond 
and  mortgage  was  upheld  in  Valk  v. 
Crandall,  1  Sandf.  Ch.,  179  (1843),  and 
in  Leavett  v.  Pell,  27  Barb.,  322  (1858). 
Also  in  Pennsylvania,  Leighty  v.  Sus- 
quehanna &  Waterford  T.  Co.,  14  S.  & 
R.  (Pa.),  434  (1826),  although  the  pay- 
ment was  contrary  to  statute ;  also,  Peo- 
ple v.  Stockton,  etc.,  R.  R.  Co.,  45  Cal., 
306  (1873).  But  a  worthless  note  is  not 
payment.  Bouton  v.  Dament,  123  111., 
142  (1887).  A  company  authorized  by 
statute  to  sell  stock  for  cash  may  sell  it 
for  the  bonds  of  the  vendee,  and  may 
enforce  the  bonds.  Southern  Life  Ins. 
Co.  v.  Lanier,  5  Fla.,  110  (1853). 


34 


CH.  II.] 


METHODS    OF   ISSUING    STOCK. 


[§  22. 


property,  where  the  subscription  itself,  by  its  terms,  allows  such 
payment,  and  a  payment  in  property,  which  is  allowed,  as  a  matter 
of  favor,  by  the  corporation,  the  subscription  itself  being  silent  as 
to  the  mode  of  payment.1  The  latter  class  of  transactions  have 
been  uniformly  upheld,  except  when  positively  prohibited  by  stat- 
ute, and  payment  has  even  been  held  to  be  valid,  although  the 
statute  required  it  to  be  in  money  or  in  cash.2 

§  22.  Sale  of  stoclc  for  property. —  The  issue  of  stock  for  prop- 
erty, labor  or  contract  work  need  not  necessarily  be  accompanied 
with   the   formality  of  a   subscription.3     Frequently  the  issue  is  $ 
spoken  of  as  a  sale  of  the  stock  for  the  property  received  in  pay- 

1  Many  of  the  cases  which  apparently 
are  cases  of  subscriptions,  wherein  the 
subscriber  has  expressly  stipulated  that 
he  may  pay  in  property  or  labor,  will  be 
found,  on  close  examination,  to  be  ab- 
solute subscriptions    payable    in    cash. 
Afterwards  the   corporation,   although 
not  obliged  so  to  do,  accepts  property 
or  labor  instead  of  the  cash.     This  kind 
of  transaction  is  almost  universally  up- 
held by  the  courts  when   entered  into 
and  carried  out  in  good  faith.     Such 
payment  is  upheld  even  in  opposition  to 
the  express  terms  of  a  statute  requiring 
payment  in  cash.     See  §  23.     Many  of 
the  American  cases,   also,  are  plainly 
cases  in  which  payment  in  property  was 
allowed  by  the  corporation,  not  as  a 
right  but  as  a  matter  of  favor.    The 
courts  uphold  such  agreements  because 
they  are  similiar  to  offsets  of  accounts, 
and   the    delays,  uncertainties,  special 
privileges,  and  other  objections  to  sub- 
scriptions payable  in  terms  in  property 
and  labor  are  obviated.     See  Boot  & 
Shoe  Co.  v.  Hoit,  56  N.  H.,  548  (1876); 
Stoddard  v.  Shetucket  Foundry  Co.,  34 
Conn.,  542  (1868),  where  the  court  say, 
"  that  the  defendant  could  have  insisted 
upon  the    plaintiff's    payment  for  his 
stock  in  cash  is  unquestionable."    See, 
also,  Vermont  Central  R.  R  Co.  v.  Clayes, 
21  Vt,  30  (1848) ;  Boston,  etc.,  R  R  Co. 
v.  Wellington,  113  Mass.,  79  (1873).     A 
subscription  may  be  made  and  then  by 
another  contract  be  paid  up  by  a  lease 
of  a  railroad.     Coe  v.  East,  etc.,  R  R.,  52 
Fed.  Rep.,  531  (1892).   In  New  York  rail- 


road corporations  must  require  payment 
in  cash  of  a  certain  percentage  of  the 
subscription  at  the  time  of  subscribing. 
Laws  1850,  ch.  140,  §§  2,  4.  Ninety  per 
cent,  may  be  paid  in  such  manner  as  the 
directors  may  require.  Id.,  §  7.  Even 
here,  however,  the  courts  hold  that  the 
ten  per  cent  may  be  paid  by  property 
actually  received.  Beach  v.  Smith,  30 
N.  Y.,  116  (1864),  where  payment  was  by 
services  rendered.  The  court  said : 
"  Was  it  necessary,  for  any  purpose,  that 
the  ceremony  of  paying  money  by  the 
company  to  the  defendant,  and  by  the 
defendant  of  the  same  money  back 
again,  should  be  gone  through  with? 
It  seems  to  me  not." 

2  See  p.  36,  note  4. 

3  A  charter  provision  authorizing  the 
opening  of  stock  subscription  books 
does  not  amount  to  a  prohibition  against 
any  other  mode  of  becoming  a  stock- 
holder. "  If  a  railroad  could  sell  its 
stock  for  the  right  of  way,  for  lands  for 
depot  purposes,  for  iron,  or  anything 
essential  to  the  accomplishment  of  its 
purpose,  it  might  do  so."  It  is  a  legal 
issue  of  stock  without  subscription. 
Western  Bank  of  Scotland  v.  Tallman, 
17  Wis.,  530  (1863).  See,  also,  Clark  v. 
Farrington.  11  Wis.,  306  (1860);  Reed  v. 
Hayt,  51  N.  Y.  Super.  Ct,  121  (1884). 
In  Jackson  v.  Traer,  20  N.  W.  Rep, 
704  (1884),  stock  having  been  issued  in 
payment  of  contract  work,  the  court 
say:  "We  have  seen  no  case  which 
recognizes  a  difference  between  those 
stockholders  who  become  such  in  pur- 


35 


§  23.]  METHODS    OF   ISSUING    STOCK.  [CH.  II. 

ment.  Sometimes  the  issue  is  by  means  of  a  contract,  whereby, 
upon  the  completion  of  certain  work,  the  party  is  to  be  entitled  to 
the  stock.  The  New  York  court  of  appeals  stated  the  law  clearly 
when  it  said,  in  respect  to  such  issues,  that  "  the  right  of  the  offi- 
cers of  a  railroad  corporation  to  enter  into  an  agreement  to  build 
its  road  and  pay  for  the  construction  of  the  same  in  stock  or  bonds 
cannot  be  seriously  questioned,  and  contracts  of  this  description 
are  frequently  made  for  such  a  purpose."  x 

It  is  doubtful,  however,  whether  any  clearness  of  ideas  is  ob- 
tained, under  any  circumstances,  by  calling  an  original  issue  of 
stock  a  sale  of  stock.  Such  a  transaction  is  not  a  sale  of  stock.  A 
sale  of  stock  means  a  transfer  of  stock  after  the  stock  has  been 
issued,  or  an  agreement  to  transfer  the  same.  Such  original  issues 
of  stock  as  are  occasionally  spoken  of  as  being  sales  of  stock  might 
better  be  considered  as  informal  subscriptions  arising  by  the  acts 
or  declarations  of  the  parties,  and  payable  in  property  by  the  terms 
of  the  contract.2 

§  23.  English  statutes  on  issues  of  stock  for  property.— In  Eng- 
land the  payment  for  stock  in  property,  labor  or  contract  work  is 
regulated  largely  by  act  of  parliament.  The  statute  requires  that 
payment  shall  be  in  cash,  unless  the  contract  allowing  payment  in 
property  is  registered  at  a  specified  public  registry.3  Nevertheless, 
even  where  no  registry  is  made,  the  courts  have  held  that  a  pay- 
ment in  property  is  equivalent  to  a  payment  in  cash,  where  the 
property  has  been  actually  delivered.4     Such  a  payment  in  prop- 

suance    of   a  written    agreement   and  First,  where  payment  is  actually  made 

those  who  become  such  by  the  mere  ac-  in  property,  if  fairly  made,  it  is  upheld, 

ceptance  of  stock  issued  to  them."  under  the  principles  laid  down  in  sec- 

iVan   Cott  v.  Van  Brunt,   82  N.  Y.,  tion  16.     See  Jones'  Case,  L.  R,  6  Ch. 

535  (1880).     See,  also,   Eppes    v.   Miss.,  App.,  48  (1880) ;  Maynard's  Case,  22  W. 

Gainesville  &  Tuskaloosa  R  R  Co.,  35  R,  119  (1877) ;  payment  by  colliery,  Re 

Ala.,    33  (1859);    Brady  v.   Rutland  &  Boylan  Hull  Colliery  Co.,  L.  R,  5  Ch. 

Burlington  R   R   Co.,    3   Blatch.,    25;  App.,    346   (1870);     Drummond's    Case, 

S.  C,   24  Vt,  660 ;   Troy  &  Greenfield  L.  R,  4  Ch.  App.,  772  (1869) ;  Schroder's 

R  R  Co.  v.  Newton,  8  Gray,  596  (1857) ;  Case,  L.  R,  11  Eq.  Cas.,  131  (1870) ;  Pell's 

McMahon  v.   N.  Y.,  etc.,  R  R  Co.,  20  Case,  L.  R,  5  Ch.,  11  (1869);  by  services, 

N.  Y.,  463  (1859),  construing  such  a  con-  Ex  parte  Clarke,  L.  R,  7  Eq.,  550.     The 

tract.  amounts  on  each  side  must  be  payable 

2  See  "Weiss  v.  Mauch  Chunk  Iron  Co.,  presently  and  in  cash.    Fothergill's  Case, 

58  Penn.  St.,  295  (1868) ;  St.  Paul,  etc.,  L.  R,  8  Ch.  App.,  270  (1873) ;   so  that  the 

R.    R.    Co.   v.   Robbins,    23    Minn.,   440  transaction  is  in  the  nature  of  a  set-off. 

(1877);   Clark  v.   Continental  Improve-  Forbes' Case,  L.  R,  5  Ch.  App.,  270  (1870) ; 

ment  Co.,  57  Ind.,  135  (1877).  64  L.  T.  Rep.,  61.    Conveyance  of  a  lease 

s  Companies  Act,   Amendment  1867,  held  to  be  a  good  payment.     Spargo's 

30  and  31  Vic,  ch.  131,  §  25.  Case,  L.  R,  8  Ch.  App.,  407  (1873).     A 

4  Under  this  statute  three  classes  of  second  class  of  unregistered  agreements 

cases   of  unregistered   contracts  arise :  to  take  pay  in  property  turn  upon  the 

36 


CH.  II.] 


METHODS    OF    ISSUING    STOCK. 


[§24. 


erty,  however,  is  as  a  matter  of  favor,  and  not  as  a  matter  of  right.1 
It  is  to  be  distinguished  from  the  payment  in  property  which  the 
subscriber  may  not  yet  have  made,  but  has  a  right  to  make  in  the 
future.  The  one  is  an  executed  contract.  The  other  may  still  be 
an  executory  contract. 

§  24.  Performance  of  contract  of  payment  in  property  —  Obliga- 
tion of  the  corporation  to  issue  the  stock. —  Subscriptions  payable 
in  property  are  not  subject  to  calls,  and  a  demand  for  the  property 
must  be  made  b}r  the  corporation.2  Upon  failure  of  the  subscriber 
to  furnish  the  property,  or  upon  insolvency  of  the  corporation, 
such  subscriptions  become  payable  in  cash.3  A  payment  of  part 
of  the  subscription  in  cash  does  not  waive  the  right  of  the  sub- 
scriber to  pay  the  balance  in  property.4 

The  stock  may  be  issued  to  a  contractor  before  his  work  in  pay- 
ment therefor  has  been  completed.5  If  the  corporation  prevents 
the  completion  of  the  contract  or  refuses  to  fulfill,  the  contractor 
may  hold  it  liable  for  damages  or  may  have  specific  performance. 


question  whether  the  agreement  that 
payment  shall  be  in  property  is  a  con- 
dition precedent  or  subsequent  to  the 
subscription.  If  the  condition  is  pre- 
cedent, and  must  be  performed  before 
the  subscription  can  be  enforced,  none 
of  the  parties  are  bound,  even  though 
the  corporation  becomes  insolvent  Pel- 
latt's  Case,  L.  R,  2  Ch.,  527  (1867); 
Stace's  Case,  L.  R.,  4  Ch.  App.,  682 
(1869).  The  third  class  is  where  the 
contract  to  pay  in  property  is  construed 
to  be  a  condition  subsequent.  The  con- 
dition being  subsequent  the  party  must 
pay ;  and  if  the  corporation  becomes  in- 
solvent, he  must  pay  in  cash.  Elking- 
ton's  Case,  L.  R,  2  Ch.  App.,  527  (1867) ; 
Simpson's  Case,  L.  R,  4  Ch.  App.,  184 
(1868) ;  Bridger's  Case,  L.  R,  5  Ch.  App., 
305  (1870);  Thomson's  Case,  34  L.  J. 
(Ch.),  525  (1865) ;  Fisher's  Case,  53  Law 
Times  Rep.,  832  (1886);  Sherrington's 
Case,  34  Weekly  Rep.,  49  (1865).  See, 
also,  §§  47,  78. 
i  See  §  16. 

2  See  §  89,  infra. 

3  See  §  89,  infra. 
*  Id. 

5  Pendleton,  etc.,  Co.  v.  Mahan,  18  Pac. 
Rep.,  563  (Oreg.,  1888).  If  a  corporation 
accepts  an  absolute  order  upon  it  by  the 


contractor  to  deliver  to  a  third  person 
certain  stock,  it  cannot  afterwards  de- 
cline to  issue  the  stock  on  the  ground 
that  the  contractor  has  not  performed 
his  work.  Appeal  of  Hite,  etc.,  Co.,  12 
Atl.  Rep.,  267  (Pa.,  1887). 

The  courts  of  Massachusetts  will  not, 
at  the  suit  of  a  foreign  construction 
company,  enjoin  a  foreign  railroad 
company  and  a  resident  from  the  issue 
by  the  railroad  company  to  the  resident 
of  bonds  and  stock  which  the  railroad 
company  has  contracted  to  deliver  to 
the  construction  company.  The  suit 
should  be  at  the  residence  of  the  rail- 
road company.  Kansas  Con.  Co.  v.  To- 
peka,  etc.,  R  R,  135  Mass.,  34  (1883). 

Where  property  is  deeded  to  trustees 
to  deed  to  a  corporation  for  part  of  the 
stock,  the  remaining  stock  to  be  for 
working  capital,  the  cestui  que  trust  are 
entitled  to  the  stock  before  the  rest  is 
sold.  The  statute  of  limitations  does 
not  run.  Philes  v.  Hickies,  18  Pac.  Rep., 
595  (Ariz.,  1888). 

If  the  corporation  prevents  the  com- 
pletion of  the  contract  the  contractor 
may  recover  as  damages  the  value  of 
the  work  already  done  and  also  the  prof- 
its lost.  Mayers  v.  York  &  Cumber- 
land R  R  Co.,  2  Curtis,  28  (1854).    If 


37 


§§  25-27.]  METHODS   OF   ISSUING    STOCK.  [cH.  Ik 

§25.  Third  method  of  issue:  By  stock  dividend,— The  third 
method  of  issuing  stock  is  bv  a  stock  dividend.  It  is  allowable 
when  an  amount  of  cash  or  property  equal  to  the  amount  of  the 
par  value  of  the  stock  so  divided  is  added  permanently  to  the  cap- 
ital stock  of  the  corporation.  A  stock  dividend  can  be  made  only 
when  the  whole  of  the  capital  stock  has  not  been  issued,  or  when 
it  may  be  increased.  It  can  never  increase  the  capital  stock  be- 
yond the  amount  as  limited  by  legislative  enactment.  An  issue  of 
stock  by  a  stock  dividend  is  prohibited  by  constitutional  or  legis- 
lative enactment  in  some  states.  In  England  it  has  been  a  ques- 
tion of  doubt  whether  stockholders  can  be  compelled  to  accept  a 
dividend  of  stock.  These  questions,  however,  are  discussed  else- 
where.1 

§  26.  Pledge  of  stoclc  oy  a  corporation. —  It  is  now  settled  that  a 
corporation  may  pledge  its  unissued  stock  to  secure  the  debts  of 
the  corporation.2  It  is  also  clear  that,  for  non-payment  of  the  debt 
so  secured,  the  pledgee  may  sell  the  stock;3  and  such  sale  is  legal 
even  though  the  stock  does  not  sell  for  its  full  par  value.4 

§  27.  Issue  of  stoclc  for  partnership  property  or  the  property 
of  another  corporation. —  A  copartnership  may,  of  course,  sell  its 
stock  to  a  corporation  and  take  shares  of  stock  in  payment.  But 
if  the  partnership  is  in  a  failing  condition  at  the  time  of  the  trans- 
fer, the  creditors  of  the  firm  may  disregard  the  sale  and  levy  an 
execution  on  the  property  itself.5  The  same  rules  apply  to  a  sale 
by  one  company  to  another.6 

the  corporation  refuse  to  issue  the  stock  him  necessary.    Moore  v.  Hudson  River 

according  to  contract  the    contractor  R  R  Co.,  12  Barb.,  156  (1851). 

may  recover   as  damages  the  viarket  If  in  organizing  and  issuing  the  stock 

value  of  the  stock    Porter  v.  Buckfield  the  amount  to  be  issued  for  the  property 

Branch  R   R   Co.,  32  Me.,  539  (1851);  is  not  what  the  contract  calls  for,  the 

Barker  v.  Rutland  &  "Washington  R  R  vendor  may  compel  a  specific  perform- 

Co.,  27  Vt,  766  (1855).     If  the  contract  ance.     Bailey  v.  Champlain,  etc.,  Co.,  46 

provides  for  payment  to  the  contractor  N.  W.  Rep.,  539  (Wis.,  1890).     See,  also, 

in  stock,  without  stating  that  the  stock  §§  61,  335. 

is  to  be  taken  at  its  par  value,  the  con-  l  See  §  51,  ch.  XXXIL 

tractor  may  demand  the  stock  at  its  2  See  §  465,  infra. 

market  value ;  and  if  it  is  worthless,  he  3  See  §  476,  infra. 

may  then  demand  money  in  lieu  thereof.  4  See  §  465,  note. 

Hart  v.  Lauman,   29  Barb.,  410.    The  5  This  subject  and  the  numerous  com- 

contractor  cannot,   however,  complain  plicated  questions  connected  with  it  are 

because  the  capital  stock  has  been  in-  considered  in  chapter  XL,  infra;  also  §  6. 

creased,  nor  is  a  tender  of  the  stock  to  6  Id. 

38 


CHAPTER  III. 


"WATERED"  STOCK— STOCK  ISSUED  ILLEGALLY  FOR  MONEY,  PROP- 
ERTY, OR  BY  A  STOCK  DIVIDEND.  IT  IS  THEN  CALLED  "  WA- 
TERED "  OR  FICTITIOUSLY  PAID-UP  STOCK 


A.   NATURE  OF  "WATERED  STOCKS 

§  28.  Objects  of  issuing  fictitiously  paid- 
up  stock. 

29.  Methods    of    issuing     "watered" 

stock  —  Forfeited  stock. 

30.  Dicta  in  regard  to  such  issues. 

31.  Fictitious  stock  may  be  voidable. 

B.  WATERED  STOCK  ISSUED  FOR  CASH. 

32.  First    method  of    issue:  By  dis- 

count in  cash. 
33-34.  Dangers  attending  this  method. 

•C  WATERED  STOCK  ISSUED  FOR  PROP- 
ERTY OR  CONSTRUCTION  WORK 
WHICH  IS  OVERVALUED. 

35.  Second  method  :  Issue  of  stock  for 

property  taken  at  an  overvalu- 
tion. 

D.  WHO  MAT  COMPLAIN  AND  AGAINST 
WHOM  COMPLAINT  MAY  BE  MADE. 

36.  Liability  on  "watered"  stock,  and 

who  may  enforce  it 

37.  Who  may  complain  of  an  issue  of 

stock  as  "  paid  up,"  when  it  has 
not  been  fully  paid? 

38.  Right  of  the  corporation  itself  to 

complain. 


§  39.  Stockholders  participating  in  the 
act  cannot  complain. 

40.  Transferees  of  participating  stock- 

holders cannot  complain. 

41.  Stockholders    dissenting    at    the 

time  of  the  issue  may  complain. 

42.  Corporate  creditors  as  complain- 

ants where  the  issue  is  for  money. 

43.  Corporate  creditors  as  complain- 

ants where  the  issue  is  for  prop- 
erty or  construction  work. 

44  Who  is  liable,  and  the  character 
of  the  liability  —  Liability  of  the 
corporation. 

45.  Liability  of  persons  to  whom  stock 
is  issued  for  cash  at  less  than 
par. 

46-47.  Liability  of  persons  to  whom 
stock  is  issued  for  property 
taken  by  the  corporation  at  an 
overvaluation. 

48.  Liability  of  the  officers  of  the  cor- 

poration. 

49.  Liability  of  the  persons  purchas- 

ing the  stock  with  notice. 

50.  Liability  of  the  bona  fide  trans- 

ferees without  notice. 

E.  ISSUE     OF     WATERED     STOCK     BY    A 
STOCK  DIVIDEND. 


51.  Third  method: 
dends. 


Issue  by  stock  divi- 


A.    NATUKE    OF   WATERED    STOCK. 

§  28.  Object  of  issuing  fictitiously  paid-up  stock. —  The  issue  of 
shares  of  stock  as  "  paid  up,"  when  in  fact  they  are  not  paid  up, 
gives  rise  to  some  of  the  most  complicated  questions  connected 
with  the  law  of  corporations. 

A  share  of  stock  is  supposed,  in  theory,  to  represent  its  par  value 
in  money  or  money's  worth,  paid  in  or  to  be  paid  in  to  the  corpo- 
ration. Accordingly,  when  it  is  issued  as  paid  up,  it  is  bought  and 
sold  in  open  market  on  the  supposition  that  the  corporation  has 
received  its  full  par  value.1     Upon  this  basis,  transactions  in  paid-up 

1  The  reasons  why  the  par  value  of  in  to  the  corporation  are  stated  by  the 
stock  is  required  by  the  law  to  be  turned    supreme  court  of  the  United  States,  in 

39 


§28.] 


"watered"  stock. 


[CH.  III. 


stock,  involving  many  millions  of  dollars,  are  of  daily  occurrence 
in  the  commercial  centers  of  the  country.  The  facilities  which  ex- 
ist for  the  sale  of  properly  issued  stock  are  equally  available  for 
the  sale  of  fictitiously  paid-up  stock,  until  it  has  become  well  un- 
derstood and  expected  that  railroad  and  business  corporations  will 
make  these  issues  of  stock.1  The  issue  is  generally  to  the  organ- 
izers or  other  co-operators,  in  ostensible  payment  for  property  or 
construction  work.  It  is  no  unusual  thing  for  a  newly-organized 
railroad  corporation  to  issue  to  a  construction  company  bonds  and 
stock  whose  par  value  is  many  times  the  value  of  the  construction 
work  done.2  These  bonds  and  the  stock  are  then  sold  to  the  pub- 
lic at  a  profit,  large  or  small,  according  to  the  prospects  of  the  en- 
terprise/and the  skill  of  the  parties  who  are  manipulating  the  cor- 
poration. Soon,  however,  default  is  made  in  the  payment  of  the 
interest  on  the  bonds,  and  this  is  followed  by  corporate  insolvency, 


Handley  v.   Stutz,  139  U.   S.,  417,  428 
(1891),  as  follows : 

"The  stock  of  a  corporation  is  sup- 
posed to  stand  in  the  place  of  actual 
property  of  substantial  value,  and  as 
being  a  convenient  method  of  repre- 
senting the  interest  of  each  stockholder 
in  such  property,  and  to  the  extent  to 
which  it  fails  to  represent  such  value  it 
is  either  a  deception  and  fraud  upon  the 
public,  or  an  evidence  that  the  original 
value  of  the  corporate  property  has  be- 
come depreciated.  .  .  If  it  be 
once  admitted  that  a  corporation  may 
issue  stock  without  receiving  a  consid- 
eration therefor,  and  where  it  does  not 
represent  actual  or  substituted  value  in 
corporate  assets,  there  is  apparently  no 
limit  to  the  extent  to  which  the  original 
stock  may  be  'watered,'  except  the 
caprice  of  the  stockholders."  Concern- 
ing the  subject  of  watered  stock,  see, 
also,  Cook  on  The  Corporation  Problem, 
pp.  24-33. 

1 "  According  to  the  estimate  of  the 
most  widely  acknowledged  statistical 
authorities  upon  railways,  through  the 
methods  of  sale  or  hypothecation, 
$3,700,000,000  of  purely  paper  values 
have  been  sold  to  the  public."  Hudson 
on  The  Railways  and  The  Republic,  274 
(1886),  a  book  that  deals  with  the  rail- 
way problems  of  the  day  from  an  anti- 


railway  point  of  view.    See,  also,  Preface 
to  Poor's  Manual  for  1884. 

2  Jeans  on  Railway  Problems,  311 
(1887),  says :  "  In  1872  the  difference  be- 
tween the  total  cost  of  American  rail- 
ways and  their  equipment,  and  the  total 
capital  of  the  system,  was  $85,250,000. 
In  1884  this  sum  had  been  increased  to 
upwards  of  $162,000,000.  In  1872  the 
watered  capital  amounted  to  an  average 
of  about  $1,800  per  mile,  but  in  1884  the 
average  of  such  capital  was  only  $1,343 
per  mile.  At  the  end  of  1884  fully  ten 
per  cent  of  the  total  capital  embarked 
in  American  lines  was  additional  to  the 
actual  cost  of  the  railways  and  their 
equipment,  and  the  greater  part  of  it 
may  be  regarded  as  representing '  wa- 
tered '  stock." 

Atkinson  on  the  Distribution  of  Prod- 
ucts (2d  ed.,  1886),  page  259,  says :  "  The 
elimination  of  what  has  been  called 
'  watered  stock  and  bonds '  against 
which  the  silly  crusade  of  the  so-called 
anti-monopolists  has  been  directed,  is 
therefore  in  process  of  accomplishment 
by  methods  far  more  potent  than  any 
possible  legislative  acts,  namely,  by  the 
triple  competition  of  water-ways.  Sec- 
ond. The  competition  of  one  railway 
with  another.  Third.  The  competition 
of  product  with  product  in  the  greater 
markets  of  the  world." 


40 


CH.  III.] 


"  WATERED  " 


STOCK. 


[§29. 


foreclosure,  receivership  and  re-organization.  The  issue  of  ficti- 
tiously paid-up  stock  is  the  favorite  device  of  corporate  promoters, 
organizers  and  manipulators  in  carrying  out  their  plans  of  realizing 
enormous  gains  from  small  investments,  and  in  accumulating  great 
fortunes  at  the  expense  of  the  public.  Occasional^,  too,  the  issue 
is  made  for  the  purpose  of  concealing  large  and  unreasonable  prof- 
its, which,  if  known,  might  cause  the  public  to  regulate  and  dimin- 
ish the  source  of  income.  In  such  cases  a  stock  dividend  is  gener- 
ally resorted  to. 

§  20.  Methods  of  issuing  "  watered  "  stock  —  Forfeited  stock.—  All 
stock  which  has  been  issued  as  paid-up  stock,  but  whose  full  par 
value  has  not  been  paid  in  to  the  corporation  in  money  or  money's 
worth,  is  watered  to  the  extent  that  the  par  value  exceeds  the  value 
actually  paid  in.  There  are  three  different  ways  in  which  watered 
stock  is  issued :  It  is  done  bv  issue  of  certificates  of  stock  for  an 
amount  of  money  less  than  the  par  value  of  the  stock,  the  certificates 
asserting  on  their  face  that  the  full  value  has  been  paid  in ;  or  for 
property  or  construction  work  taken  at  a  fraudulent  overvaluation  ; x 
or  by  a  stock  dividend,  the  equivalent  par  value  of  which  has  not 


1  Mr.  Simon  Stern,  in  the  Cyclopaedia 
of  Political  Science,  Political  Economy 
and  United  States  History,  vol.  Ill, 
p.  527,  describes  this  method  of  issuing 
"  watered  "  stocks  and  bonds  as  follows : 

"  A  line  from  one  point  to  another, 
say  a  distance  of  one  hundred  miles,  is 
surveyed.  It  is  ascertained  that  it  will 
cost  about  $15,000  a  mile  to  build,  in- 
cluding acquisition  of  land,  and  about 
$5,000  a  mile  to  equip ;  a  total  of  $20,000 
a  mile.  Application  is  then  made  for 
town  and  county  aid,  which  aid  is 
generally  represented  by  investment  in 
the  stock  of  the  road.  The  first  purpose 
is  to  give  as  little  as  possible  in  the  way 
of  value  in  return  for  such  money  aid, 
and  it  is  therefore  necessary  to  inter- 
pose between  the  stock  and  the  prop- 
erty a  sufficient  number  of  mortgages 
to  make  prospective  value  of  the  stock 
of  little  or  no  value.  A  construction 
company  is  then  organized,  which  takes 
the  town  and  county  aid  as  part  of  its 
capital?  and  the  railway  corporation, 
instead  of  making  its  contract  on  the 
basis  of  cash,  issues  to  the  construction 
company,  say  first-mortgage  bonds  of 


$20,000  a  mile,  or  possibly  $25,000  a 
mile ;  second-mortgage  bonds  of  $20,000 
a  mile,  and  stock  of  an  equal  value  — 
making  a  total  capitalization  of  $65,000 
a  mile,  instead  of  $20,000  at  which  the 
road  could  be  constructed.  The  con- 
struction company  is  composed  gener- 
ally, directly  or  indirectly,  of  the  offi- 
cers of  the  road  and  their  friends,  who 
build  the  road  upon  the  basis  of  cash  ob- 
tained by  negotiating  through  bankers 
the  securities  represented  by  the  bond 
issues  of  the  railroad  company ;  they 
acquire  the  stock  for  little  or  nothing, 
and  also  frequently  a  large  proportion, 
if  not  the  whole,  of  the  second  mort- 
gage; and  in  prosperous  times  they 
may  succeed  in  building  and  equipping 
the  road  on  the  issue  of  the  bonds  se- 
cured by  the  first  mortgage  alone.  By 
this  system  the  road  comes  into  exist- 
ence laboring  under  the  necessity  to 
earn,  over  and  above  operating  ex- 
penses, interest  on  a  funded  debt  about 
double  the  cost  of  the  enterprise,  and,  if 
possible,  to  earn  dividends  on  the  stock 
beyond  that  sum." 


41 


30.] 


''watered"  stock. 


[ch.  m. 


been  permanently  added  to  the  capital  stock.  Each  of  these  three 
methods,  as  was  shown  in  the  preceding  chapter,  may  be  the 
means  of  issuing  stock  which  had  been  paid  up  in  good  faith.  Each, 
also,  is  available  for  the  issue  of  "  watered "  stock.  The  second 
method  particularly  —  that  of  taking  property  at  an  overvalua- 
tion —  is  well  calculated  to  conceal  the  fictitious  character  of  the 
issue,  and  to  accomplish  the  purposes  of  the  participants. 

"Where,  however,  a  corporation  has  acquired  shares  of  its  own 
capital  stock,  either  by  purchase  or  by  forfeiture  for  non-payment 
of  calls,  it  may  re-issue  and  sell  the  same  at  market  prices.1 

§  30.  Dicta  in  regard  to  such  issues. —  There  are  various  opin- 
ions, generally  dicta,  contained  in  the  cases,  as  to  the  character  of 
stock  issued  as  paid  up,  when  in  fact  it  has  not  been  paid  for.  The 
customary  expression  is  that  such  an  issue  is  a  fraud  upon  the  law 
and  upon  the  public  and  upon  the  stockholders ;  or  that  it  is  against 
public  policy;  or  is  a  fraud  on  subsequent  purchasers  of  the 
stock  so  issued.2  Other  cases,  however,  and  cases  of  high  authority, 
hold  that  an  issue  of  stock  as  full  paid-up  stock,  under  an  agree- 
ment that  the  full  par  value  shall  not  be  paid,  is  not  necessarily  a 
fraudulent  transaction,  but  that  as  between  the  parties  thereto  it  is 
a  legal  and  valid  agreement,  and  violates  no  principle  of  public 
policy.3 


iRamwell's  Case,  50  L.  J.  (Ch.),  827 
(1881),  where  the  stock  had  been  for- 
feited. See,  also,  to  same  effect,  dic- 
tum in  Otter  v.  Brevoort,  etc.,  Co.,  50 
Barb.,  247  (1867);  People  v.  Albany,  etc., 
R.  R.,  55  Barb.,  344,  371  (1869). 

But  where  a  subscription  is  not  paid, 
and  the  stock  is  transferred  to  the  cor- 
poration as  "  treasury  stock  "  and  then 
sold  below  par,  the  purchaser  is  liable 
for  the  unpaid  par  value.  Ailing  v. 
Ward,  24  N.  E.  Rep.,  551  (111.,  1890). 

It  is  not  necessary  that  treasury  stock 
be  placed  in  the  names  of  trustees  for 
the  benefit  of  the  company.  See  §§  309- 
314 

2  In  Barnes  v.  Brown,  80  N.  Y.,  527, 
534  (1880),  the  court  said  in  a  dictum: 
"It  is  not  claimed,  and  could  not  be 
claimed,  that  the  corporation  or  its  di- 
rectors could  create  any  valid  stock  by 
issuing  the  same  without  any  consider- 
ation. The  directors  assuming  to  issue 
stock  in  that  way  would  perpetrate  a 
wrong  upon   the    corporation  and  its 


stockholders,  and  a  fraud  upon  every 
person  who  took  such  stock  as  full -paid 
stock,  relying  upon  the  appearances, 
and  deceived  thereby."  In  the  case  of 
Sturges  v.  Stetson,  1  Biss.,  246  (1858),  the 
court  said :  "  The  subscription  of  stock 
by  plaintiff,  for  less  than  the  price  of  the 
shares  fixed  in  the  charter,  was  void,  as 
against  law  and  the  power  of  the  di- 
rectors." See,  also,  Ex  parte  Daniell, 
1  De  G.  &  J.,  372  (1857);  Oliphant  v. 
Woodhaven,  etc.,  Co.,  63  Iowa,  332 
(1884) ;  Tobey  v.  Robinson,  99  III,  222, 
228  (1881) ;  Osgood  v.  King,  42  Iowa,  478 
(1876). 

3  In  Scoville  v.  Thayer,  105  U.  S.,  143 
(1881),  the  court  say:  "It  is  conceded 
to  have  been  the  contract  between  him 
and  the  company  that  he  should  never 
be  called  upon  to  pay  any  further  as- 
sessments upon  it  [the  stock].  The 
same  contract  was  made  with  all  the 
other  shareholders,  and  the  fact  was 
known  to  all.  As  between  them  and 
the  company  this  was  a  perfectly  valid 


42 


CH.  III.] 


"  WATERED  " 


STOCK. 


[§30. 


The  explanation  of  this  is,  as  will  be  shown  hereafter,  that  such 
issues  are  open  to  attack  in  some  cases  and  in  other  cases  they  are 
not.  It  depends  altogether  on  who  complains  of  the  issue  and 
against  whom  complaint  is  made.  The  issue  may  be  fraudulent  as 
to  one  party  while  it  is  free  from  fraud  as  to  another  party. 

The  general  statement  of  law  that  watered  stock  is  illegal  throws 
little  light  upon  the  important  questions  of  the  rights,  risks  and 
liabilities  growing  out  of  such  issues  of  stock.  The  stockholder 
and  the  practitioner  wish  to  know  whether  such  stock  is  void  or  is 
voidable,  or  is  valid.  They  wish  to  know,  also,  what  are  the  rights 
and  remedies  of  the  various  parties  involved.  If  the  stock  is  valid, 
then  the  question  arises  whether  any  one  is  liable  for  that  part  of 
the  par  value  which  has  not  been  paid,  and  also  who  may  bring 
suit  to  enforce  that  liability. 

It  is  wTell  settled  that  watered  stock  is  not  illegal  and  void  per  se, 
unless  it  is  declared  to  be  void  by  constitutional  or  statutory  pro- 


agreement  It  was  not  forbidden  by 
the  charter  or  by  any  law  or  public  pol- 
icy." In  the  case  of  In  re  Ambrose, 
etc.,  Co.,  L.  R,  14  Ch.  Div.,  390,  394-5, 
where  paid-up  stock  was  issued  for 
property  taken  at  a  gross  overvalua- 
tion, the  court  said :  "  It  seems  to  me 
impossible  to  say  that,  however  wrong 
the  transaction  was  in  respect  to  other 
persons,  there  was  anything  wrong  as 
between  the  company  and  the  vendors." 
In  Flinn  v.  Bagley,  7  Fed.  Rep,  785 
(1881),  the  court  held  that  it  was  only  as 
a  fraud  upon  future  creditors  that  ex- 
ception could  be  taken  to  an  issue  of 
stock  at  a  discount.  In  Lorillard  v.  Clyde, 
85  N.  Y.,  384  (1881),  the  court  held  it 
legal  for  the  parties,  as  between  them- 
selves, to  issue  paid-up  stock  for  prop- 
erty taken  at  a  valuation  agreed  upon 
between  themselves.  The  court  said : 
«'  If  it  had  appeared  that  the  organi- 
zation of  the  corporation  in  this  way 
was  a  device  to  defraud  the  public, 
by  putting  valueless  stock  on  the  mar- 
ket, having  an  apparent  basis  only,  a 
different  question  would  be  presented." 
See,  also,  Otter  v.  Brevoort  Co.,  50  Barb., 
247-256  (1867),  dictum;  Spring  Co.  v. 
Knowlton,  103  U.  S.,  49-58  (1880),  dic- 
tum. 

There  have  also  been  various  dicta  in 


the  cases  and  text-books  that  the  issue 
of  "watered"  stock  by  mining  com- 
panies is  a  customary,  and  hence  legal, 
issue.  There  is  no  reason,  however, 
why  stock  issued  for  a  mine  should  be 
issued  more  recklessly  than  stock  issued 
for  a  patent-right. 

The  case  generally  cited  as  holding 
that  mining  companies  may  legally  issue 
watered  stock  is  lie  South  Mountain 
Consol.  Min.  Co.,  7  Saw.,  30  (1881) ;  S.  C, 
4  Fed.  Rep.,  403.  In  this  case,  however, 
it  is  stated  that  corporate  creditors  were 
protected  "by  the  personal  liability  of 
each  shareholder  for  his  pro  rata  share 
of  the  indebtedness  of  the  corporation." 
Aff'd,  14  Fed.  Rep.,  347  (1882). 

Under  the  Minnesota  statute  author- 
izing mining  corporations  to  sell  their 
unissued  stock  as  the  corporation  may 
see  fit,  and  providing  that  if  it  is  issued 
thus,  as  paid  up,  no  further  liability 
shall  exist,  the  sale  of  shares  of  a  par 
value  of  $2  for  six  cents  exempts  the 
purchaser  from  further  liability  to  any 
o  ie,  including  corporate  creditors.  Ro;S 
v.  Silver,  etc.,  Co.,  29  N.  W.  Rep.,  591 
(Minn.,  1886) ;  Ross  v.  Silver,  etc.,  Co.,  31 
N.  W.  Rep.,  219  (Minn.,  1887).  See,  in 
general,  Kimberly  v.  Arms,  129  U.  S., 
512,  530  (1889). 


43 


§31.]  "wateeed"  stock.  [ch.  III. 

visions.  Nearly  all  the  cases  assume  this  to  be  the  rule,  and  do  not 
discuss  it.  Even  when  a  constitution  or  statute  declares  such  stock 
to  be  void,  it  is  rarely  possible  to  apply  the  statutory  law.  A  few 
cases  speak  of  such  stock  as  being  void;  but,  inasmuch  as  the  rem- 
edies given  in  those  cases  were  remedies  for  the  rescission  of  con- 
tracts for  fraud,  they  do  not  establish  the  proposition  that  the  issue 
was  void  absolutely.1 

§  31.  Fictitious  stock  may  be  voidable. —  Is  stock  voidable  when 
fraudulently  issued  as  paid  up?  There  are  few  cases  on  this  ques- 
tion, but  the  tendency  of  the  courts  is  to  hold  that  such  issues  of 
stock  may  be  avoided  by  a  withdrawal  of  the  issue  and  a  cancella- 
tion of  the  certificates.  Thus  a  court  of  equit}',  on  the  application 
of  a  dissenting  stockholder,  has  decreed  that  stock  falsely  issued  as 
paid-up  stock  should  be  delivered  up  to  the  corporation  for  cancel- 
lation.2 Where,  however,  the  stock  has  passed  into  the  hands  of 
bona  fide  purchasers  for  value,  such  purchasers  are  entitled  to  re- 
tain the  stock.  Some  cases  intimate  that  the  stock  fictitiously  is- 
sued may  be  canceled,  except  a  part  whose  par  value  would  equal 
the  amount  actually  paid  in  b}r  the  persons  receiving  it.3  Many 
cases  hold  also  that  the  transaction  is  in  the  nature  of  a  fraudulent 
contract,  and  that  it  may  be  rescinded  for  fraud ;  in  which  case  the 
stock  would  have  to  be  returned  to  the  corporation. 

So  far  as  the  right  of  the  corporation  to  issue  stock  below  par  is 
concerned,  the  courts  have  frequently  held  that  the  issue  is  an 
ultra  vires  act.4    But  an  ultra  vires  act  is  not  always  void  abso- 

1  Sturges  v.  Stetson,  1  Biss.,  246  (1858) ;  be  no  question  that  this  remedy  is  avail- 
Fosdick  v.  Sturges,  1  Biss.,  255  (1858);     able. 

Gilman,  etc.,  R  R.  Co.  v.  Kelly,  77  111.,  *  Fisk  v.  Chicago,  etc.,  R  R  Co.,  5a 

426    (1875) ;     Campbell    v.    Morgan,    4  Barb.,  513  (1868),  where  the  court  says : 

Bradvv.  (111.),  100  (1879).     See,  also,  §  47.  "It  is  not  a  question  of  good  faith,  or  of 

2  Gilman,  etc.,  R  R  Co.  v.  Kelly,  77  honest  intention,  or  of  wise  policy,  or 
111.,  426  (1875).  In  this  case  it  was  ad-  skilful  or  discreet  management  on  the 
mitted  that  the  stock  was  issued  gratui-  part  of  the  directors.  It  is  a  question 
tously  and  for  the  purpose  of  enabling  of  power."  In  West,  etc.,  R  v.  Mowatt, 
the  construction  company  to  own  a  12  Jur.,  pt  1,  407  (1848),  the  court  sus- 
majority  of  the  stock,  thereby  control-  tained  a  demurrer  to  a  bill  for  specific 
ling  the  corporation.  performance  of  a  contact  to  take  shares 

3  Sturges  v.  Stetson,  1  Biss.,  246,  254  from  the  corporation  at  a  discount,  the 
(1858).  The  court  said,  in  a  dictum,  court  holding  that  the  contract  was 
that  stock  taken  at  less  than  par,  with  ultra  vires.  In  Ex  parte  Daniell,  1 
knowledge,  is  subject  to  the  right  of  De  G.  &  J.,  372,  the  court  says:  "It  was 
other  stockholders,  being  such  at  the  very  properly  admitted  .  .  .  that 
time  of  its  issue,  "to  have  it  reduced  the  directors  of  the  company  had  no 
to  the  charter  value  of  the  shares.  This  power  to  pass  the  resolution  "  issuing 
would  take  from  him  nearly  one-third  the  stock  for  less  than  its  par  value, 
of  his  shares."  In  Fosdick  v.  Sturges,  1  In  Brown's  Case,  2  De  G.,  F.  &  J.,  275. 
Biss.,  255  (1858),  the  court  say  there  can  295  (1860),  it  is  held  to  be  "beyond  the 

44 


ch.  in.]  "watered"  stock.  [§§  32  :!4. 

lutely,  and  it  is  voidable  only  at  the  instance  of  persons  standing 
in  a  certain  relation  towards  the  act.  Who  can  avoid  the  act  will 
be  explained  hereafter. 

B.    WATERED    STOCK   ISSUED    FOR   CASH. 

§  32.  First  method  of  issue:  By  discount  in  cash. —  As  already 
stated,  paid-up  stock  may  be  improperly  issued  in  three  different 
methods :  by  part  cash  payment ;  by  taking  property  at  an  over- 
valuation ;  by  an  invalid  stock  dividend. 

An  issue  of  paid-up  stock  for  cash,  upon  payment  of  only  part  of 
the  par  value  of  the  stock,  is  not  often  made,  inasmuch  as  the  real 
nature  of  the  transaction  is  readily  discovered  and  easily  remedied. 
Sometimes  the  corporation  makes  the  issue  under  a  contract  with 
those  receiving  it  that  no  more  than  a  certain  percentage  of  the 
par  value  will  be  called  for.  Again,  a  release  is  sometimes  made 
by  a  resolution  of  the  directors  or  stockholders,  after  subscrip- 
tions have  been  made  and  partly  paid,  discharging  the  subscribers 
from  any  further  liability  on  such  subscriptions.  The  proceedings 
are  generally  spread  upon  the  corporate  records ;  certificates  are 
'issued,  asserting  on  their  face  that  they  are  paid  up;  and  all  in- 
quiries at  the  corporate  office  are  answered  by  a  substantiation  of 
that  assertion. 

§  33.  Dangers  attending  this  method. — There  are  various  dangers 
and  liabilities  growing  out  of  such  a  transaction.  The  stock  is 
liable  to  be  canceled.1  The  person  to  whom  it  was  issued,2  or  his 
transferee  with  notice,3  or  the  corporate  officers  participating  in 
the  act,4  may,  under  certain  circumstances,  each  be  held  liable  per- 
sonally for  the  unpaid  par  value  of  the  stock.  They  may  be  liable 
to  the  corporation  itself,5  or  to  the  corporate  creditors,6  or  to  bona 
fide  transferees  of  the  stock.7 

A  bona  fide  transferee  of  such  stock,  however,  is  not  liable.8  But 
it  has  been  held  that  the  corporation  may  refuse  to  allow  a  trans- 
fer on  the  corporate  transfer  book  of  stock  so  issued.9 

§  34.  In  England  there  has  been  great  doubt  on  this  subject.10 
It  formerlv  was  held  that,  where  a  contract  for  the  issue  of  stock 
for  cash  at  a  discount  is  regularly  registered  with  the  public 
registrar,  as  provided  by  statute,  then  the  person  to  whom   the 

functions  and  in  excess  of  the  powers  "        6  See  §§  42,  43. 

of  the  directors.  7  See  S  40. 

i  See  §  81.  8  See  §  50. 

2  See  §§  46,  47,  167.  9  People  v.  Sterling  Mfg.  Co.,  82  111.. 

3  See  §  4ft.  457  (1876). 

4  See  §  48.  "  See  §  43. 

5  See  §  38. 

15 


§34.] 


"  WATEKED  "    STOCK. 


[CH.  III. 


stock  was  thus  issued  by  contract  as  paid-up  stock  was  not  liable  to 
the  corporation,  nor  corporate  creditors,  nor  any  other  person,  for 
the  unpaid  par  value  of  the  stock,  and  his  transferee  was  likewise 

protected.1 

The  latest  authority  in  England,  however,  is  in  accord  with  the 
American  rule,  and  holds  that  stock  cannot  be  issued  for  cash  at  a 
discount.2 


i  Re  Ince  Hall  Rolling  Mills  Co.,  30 
W.  R,  945  (1882) ;  S.  C,  L.  R,  23  Ch.  D., 
545.    The  court  refused  to  hold  liable 
the  person  receiving  the  stock,  but  in  a 
dictum  said:  "Assuming  that  the  con- 
tract was  ultra  vires,  what  would  bo 
the  result?    If  it  is  ultra  vires  it  must 
be  set  aside  in  toto,  the  consequence 
being  that  these  gentlemen  would   be 
entitled  to  be  relieved  of  their  shares 
and  receive  back  the  money  paid  upon 
them."    In  the  case  of  Guest  v.  Wor- 
cester R.  R  Co.,  L  R,  4  C.  P.,  9  (1868), 
where  stock  had  been  issued  as  paid-up 
stock  to  a  corporate  creditor  as  security 
for  his  debt,  nothing  having  been  paid 
on  such  stock,  the  court  said  it  did  "  not 
entertain  a  shadow  of  a  doubt,"  and  that 
the  holder  was  not  liable  thereon.     In 
Baron   De  Beville's  Case,  L  R,  7  Eq. 
Cas.,  9  (1868),  "  paid-up  "  shares  had  been 
issued  to  De  Beville.  who  had  subscribed 
for  "  paid-up "  shares,  but  had  paid  no 
part  of  the  par  value  thereof.   The  court 
held  him  not  liable.     In  this  case  the 
corporation  had  authority  to  issue  ordi- 
nary shares  for  cash,   and   "paid-up" 
shares  for  property  or  services.     See, 
also,   Gold  Co.,  L.   R,  11   Ch.  D.,  701 ; 
James  v.  Eve,  6  H.  L.  Cas.,  335 ;  Plask- 
gnaston  Tube  Co.,  L.  R,  23  Ch.  D.,  542. 
Ex  parte  Daniell,  1  De  Gex  &  Jones, 
372  (1857),  is  not  strictly  in  accordance 
with  the  preceding  authorities,  but  in 
Daniell's  case  the  issue  was  to  a  director 
who  was  acting  in  a  fiduciary  capacity. 
The  case  is  so  distinguished  in  Carling's 
Case,  L.  R,  1  Ch.  D.,  115  (1875). 

In  Re  Dronfield  Silkstone  Coal  Co., 
L.  R,  17  Ch.  Div.,  76  (1880),  on  page  97, 
the  court  says :  "  If  the  company  could 
not  question  it,  neither  can  a  creditor ; 


for  he  can  obtain  nothing  but  what  the 
company  can  get  from  the  sharehold- 
ers." See,  also,  Re  Ambrose  Lake  T.  & 
C.  Min.  Co.,  L.  R.  14  Ch.  D.,  390  (1880) ; 
Re  Ince  Hall  Rolling  Mills  Co.,  30  W.  R, 
945  (1882),  where  the  court  said  the  same 
as  in  the  preceding  case.  In  Waterhouse 
v.  Jamieson,  L.  R,  2  H.  L.  (Sc),  29,  the 
court  said,  page  37:  "I  take  it  to  be 
quite  settled  that  the  rights  of  creditors 
against  the  shareholders  of  a  company, 
when  enforced  by  a  liquidator,  must  be 
enforced  by  him  in  right  of  the  com- 
pany ;  what  is  to  be  paid  by  the  share- 
holders is  to  be  recovered  in  that  right." 
Cf.  remarks  of  the  lord  chancellor, 
page  32. 

2  Re  Addlestone,  etc.,  Co.,  58  L.  T.  Rep., 
428  (1887).  In  Ex  parte  Stephenson,  15 
L.  R,  Ir.,  51  (1885),  it  was  held  that,  upon 
dissolution  of  the  corporation,  the  stock- 
holders are  entitled  to  the  remaining  as- 
sets in  proportion  to  the  amounts  paid 
by  them,  without  regard  to  the  "  water  " 
in  the  stock. 

An  issue  of  stock  in  England  for  cash 
at  less  than  par  is  invalid,  even  though 
the  contract  is  duly  registered  under  the 
Companies  Act  The  holders  are  liable 
for  the  unpaid  par  value.  Re  London, 
etc.,  Co.,  59  L.  T.  Rep.,  109  (1888). 

In  England  an  issue  of  stock  for  cash 
at  a  discount  is  illegal,  and  a  holder 
may  sue  to  rescind  the  issue  to  him  and 
for  repayment  of  the  money  paid.  Re 
Almado,  etc.,  Co.,  59  L  T.  Rep.,  159(1888), 
overruling  Re  Ince,  etc.,  Co.,  23  Ch.  D., 
545,  n.,  and  Re  Plaskgnaston,  etc.,  Co., 
id.,  542. 

A  person  subscribing  for  and  taking 
stock  for  cash  at  less  than  par  cannot 
repudiate  the  same  and  cancel  the  sub- 
46 


OH.  III.]  "  WATERED  "    STOCK.  [§  35. 

0.    WATERED     STOCK     ISSUED     FOR     PROPERTY     OR    CONSTRUCTION     WORK 

WHICH    IS   OVERVALUED. 

§  35.  Second  method:  Issue  of  stoclc  for  property  taken  at  an 
overvaluation. —  A  second  method  of  issuing  stock  as  paid  up,  when 
it  is  not  actually  paid  up,  is  by  its  issue  for  property  taken  at  an 
overvaluation.  This  method  is  the  most  frequently  employed,  the 
most  difficult  to  prove,  and  the  least  easy  to  remedy.  A  large 
amount  of  litigation  and  confusion  has  been  experienced  and  gone 
through  with  in  determining  the  principles  of  law  which  should 
govern  such  transactions.  The  questions  which  have  perplexed 
the  courts  were,  first,  what  constituted  an  overvaluation  sufficient 
to  invalidate  the  contract;  second,  what  remedy  should  be  applied 
when  the  contract  was  invalidated. 

It  is  now  well  settled  that  in  order  to  invalidate  an  issue  of  stock 
which  is  issued  for  property  taken  at  an  overvaluation,  it  must  be 
shown  not  only  that  there  was  an  overvaluation,  but  also  that  such 
overvaluation  was  intentional  and  consequently  fraudulent.1 

The  property  is  not  to  be  considered  as  overvalued  merely  be- 
cause, subsequently,  it  turns  out  to  be  so.  The  various  circum- 
stances under  which  the  valuation  was  made  should  be  considered 
in  determining  the  lona  fides  of  the  transaction.2 

scription  on  the  ground  that  he  sup-  remedy.     Coffin  v.  Ransdell,  11   N.  E. 

posed  that  the  issue  was  legal.    Re  Rail-  Rep..  20  (Ind.,  1887). 
way,  etc.,  Pub.  Co.,  61  L.  T.  Rep.,  94        In  Phelan  v.  Hazard,  3  Dill.  45  (1ST-  . 

(1889).  Cf.  Re  Zoedone  Co.,  60  id.  (1889) ;  Judge   Dillon  thoroughly   reviews  the 

Re  Midland,  etc,  Co.,  60  id.,  666(1889).  authorities  and  says :    "The  coutract  is 

An  agreement  of   the  company  that  valid  and  binding  upon  the  corporation 

stock  may  be  issued  at  a  certain  figure  and  the  original  shareholders  unless  it 

below  par  is  not  such  a  "  contract "  as  is  rescinded  or  set  aside  for  fraud ;  and 

upon  being  duly  filed  authorizes  such  .    .     .     while  the  contract  stands  uuim- 

an   issue.     Re  New  Eberhardt  Co.,  62  peached,   the  courts,   even    where  the 

L.  T.  Rep.,  301  (1889).  rights   of   creditors  are  involved,   will 

i  Brant  v.  Ehlen,  59  Md.,  1  (1882).     In  treat  that  as  a  payment  which  the  par- 

this  case  the  court  said :  "So  long  as  the  ties  have  agreed  should  be  payment." 

transaction    stands    unimpeached    for  See,  also,  Brant  v.  Ehlen,  supra,  fully 

fraud,  courts  will  treat  as  a  payment  explaining  the  meaning  of   the    term 

that  which  the  parties  themselves  have  trust  fund  as  applied  herein.     Crawford 

agreed  shall  be  a  payment,  and  this,  too,  v.  Rohrer,  59  Md.,  599  (1882). 
incases  where  the  rights  of  creditors        2Schenck     r.  Andrews,  57  N.  Y.,  133 

are  involved."    New  Haven,  etc.,  Co.  v.  (1874).   In  Coit  v.  North  ( !ar.  ( told  Amal. 

Linden  Spring  Co.,  142  Mass.,  349  (1886).  Co.,  14  Fed.   Rep.,   12   (1882),  the  court 

Where  the  plaintiff  does  not  allege  said  corporators  '"  ought  not  to  be  made 

fraud  in  the  valuation  the  action  fails,  liable  individually  for  the  debts  of  the 

An  action  framed  on  the  theory  of  un-  company  at  the  instance   of   creditors, 

paid    subscriptions    is    ineffectual  as  a  because,  at  a  later  day,  the  estimate 

47 


§§  36,  37.]  "  WATERED  "    STOCK.  [CH.  III. 

D.    WHO   MAY    COMPLAIN   AND  AGAINST  WHOM  COMPLAINT   MAT    BE   MADE. 

§  36.  Liability  on  "  watered  "  stock,  and  ivho  may  enforce  it— 
"When  it  has  been  established  that  the  overvaluation  of  the  prop- 
erty taken  in  payment  for  stock  was  intentional  and  fraudulent, 
the  questions  then  arise,  what  liability  has  been  incurred,  who  is 
liable,  and  what  is  the  remedy?  The  clearest  method  of  investigat- 
ing and  presenting  the  law  in  answer  to  these  questions  is  by  con- 
sidering, first,  who  may  complain  of  the  transactions  —  who  may 
be  the  party  plaintiff  or  complainant ;  second,  who  is  liable  in  such 
a  transaction  —  who  is  to  be  made  the  defendant.  Incidentally 
also  there  arise  questions  as  to  the  extent  of  that  liability,  and  the 
remedy  to  be  applied. 

§  37.  Who  may  complain  of  an  issue  of  stock  as  "paid  up"  when 
it  has  not  been  fully  paid!—  The  state.—  As  already  indicated,  the 
issue  of  stock  as  paid-up,  when  not  actually  paid  up,  is  an  act  ultra 
vires  of  the  corporation.  The  commission  of  ultra  vires  acts  by  a 
corporation,  to  the  detriment  of  the  public,  renders  its  charter 
liable  to  forfeiture,  at  the  instance  of  the  state. 

The  issue  of  fictitiously  paid  up  stock,  with  a  view  to  defrauding 
the  public,  might  constitute  a  misuse  of  the  corporate  rights  and 
privileges.  In  such  a  case,  however,  it  has  been  held  that  the  state 
would  not  forfeit  the  charter  of  the  corporation.  But  a  very  pal- 
pable case  of  fraud  will  justify  the  forfeiture.1 

fairly  put  upon  the  property  at  that  tract"     See,  also,  Schroder's  Case,  L. 

time  has  become  modified    by   subse-  R,  11  Eq.  Cas.,  131  (1870). 

quent  events,  and  will  not  amount  to  Where  a  mine  is  turned  in  at  a  large 

the  value  which  they  set  upon  it."  valuation  for  stock,  no  fraud  is  proved 

On  appeal  the  court,  in  affirming  the  by  the  mere  fact  that  the  mine  subse- 

judgment  below    (see  119  U.  S.,   343)  quently  turns  out  to  have  been  worth 

<1886),  said:    "Where  full-paid  stock  is  only  one-fifth  of  that  amount     Fraud 

issued  for  property  received,  there  must  exists  only  when  intentional  overvalu- 

be  actual  fraud  in  the  transaction  to  en-  ation,  "or  such  reckless  conduct  in  the 

able  creditors  of  the  corporation  to  call  placing  of  this  value,  without  regard  to 

the  stockholders  to  account"    To  same  its  real  worth,  as  would  indicate,  with- 

effect,  Mege's  Case,  10  W.  N.  (Eng.),  208  out  explanation,  an  intent  to  defraud." 

<1875).  Young  v.  Erie  Iron  Co.,  31  N.  W.  Rep., 

In  Carr  v.  Le  Fevre,  27  Pa.  St,  413  814  (Mich.,  1887). 
(1856),  the  court  said  that  if  the  direct-  1  Quo  warranto  does  not  lie  against  a 
ors  "  took  lands  at  a  prospective  value,  corporation  merely  because  it  issues  its 
never  realized,  it  is  nothing  more  than  stock  below  par.  State  v.  Minn.,  etc, 
many  individuals  and  corporations  have  Co.,  41  N.  W.  Rep.,  1020  (Minn.,  1889). 
done  before.  Such  an  error  in  manage-  In  Holman  v.  State,  etc.,  5  N.  E.  Rep., 
ment  or  in  their  judgment  of  the  value  556,  702  (Ind.,  1886).  the  state  caused  a 
of  a  purchase,  made  without  fraud,  charter  to  be  forfeited  because  the  sub- 
forms  no  ground  for  rescinding  the  con-  scribers  for  stock  were  insolvent  at  the 

48 


22 

si 


CH.  III. J 


44  WATERED  "    STOCK. 


[§38. 


Moreover,  when  a  corporation  is  guilty  of  an  ultra  vires  act,  and 
such  act  is  detrimental  to  the  interests  of  the  public,  it  is  possible 
that  the  attorney-general  may  file  an  information  for  the  purpose 
of  enjoining  or  setting  aside  such  act.1  Such  a  proceeding,  how- 
ever, would  be  difficult  to  maintain. 

§  38.  Might  of  the  corporation  itself  to  complain. —  The  corpora- 
tion itself,  after  issuing  its  stock  as  paid-up  stock,  and  declaring  it 
"so  to  be,  cannot  subsequently  repudiate  that  declaration  and  agree- 
cment  and  proceed  to  collect,  either  from  the  person  receiving  the 
stock  or  his  transferee,  the  unpaid  part  of  the  par  value.     It  is  es- 
-     topped  from  so  doing.2 

>  i  time  of  subscribing,  thereby  perpetrating  than  quo  warranto,  see  People  v.  Bal- 

^~a  fraud  on  the  public.     See,  also,  State  lard,  134  N.  Y.,  269  (1892). 

v.  Atchison,  etc.,  R.  R,  38  N.  W.  Rep.,  43  °-  In  the  case  of  Scoville  v.  Thayer,  105 

(Neb.,  1888).    The  case  Jersey  City  G.  L.  U.  S.,  143  (1880),  the  court  said,  in  a. 

Co.  v.  Dwight,  29   N.  J.  Eq.  242,  was  dictum:  "No  call  could  have  been  made 

overruled  by  Railroad  v.  Railroad,  32  by  the  company  under  its  agreement 


N.  J.  Eq.,  755,  according  to  Elizabeth- 
town  G.  L.  Co.  v.  Green,  18  Atl.  Rep., 
844  (N.  J.,  1890) ;  affirmed,  24  id.,  560. 

The  state  may  bring  an  action  to  for- 
feit a  charter  where  the  corporation 
commences  business  before  the  full  cap- 
ital stock  is  subscribed.  People  v.  Natl. 
Sav.  Bank,  11  N.  E.  Rep.,  170  (111.,  1887). 

The  state  cannot  enjoin  private  par- 


with  the  shareholders,  unless  to  pay  its 
creditors.  .  .  .  The  shares  were  is- 
sued as  paid  up,  on  a  fair  understand- 
ing, and  that  bound  the  company."  The 
issue  had  been  at  a  discount. 

See,  also,  Union,  etc.,  Co.  v.  Frear, 
etc.,  Co.,  97  111.,  537  (1881),  dictum.  In 
the  case  of  Granite  Roofing,  etc.,  Co.  v. 
Michael,  54  Md.,  65  (1880),  stock  was  is- 


ties  from  dealing  in  "watered"  stock,  sued  as  paid  up  for  cash,  although  not 
State  v.  American  Cotton  Oil  Trust,  3  actually  paid.  The  corporation  passed 
S.  Rep,  409  (La.,  1888);  People  v.  Natl,     under  the  control  of  purchasers  of  the 


Sav.  Bank,  11  N.  E.  Rep.,  170  (111.,  1887); 
affirmed  on  rehearing,  22  id.,  288  (1889). 
See,  also,  Columbus,  etc.,  R.  R.  v.  Burke, 
20  Week.  L.  Bull.,  287. 

Quo  tvarranto  failed  in  Common- 
wealth v.  Central  P.  R'y,  52  Pa.  St.,  506 
(1866),  where  a  large  amount  of  "wa- 
tered "  stock  was  issued.  Contra,  12  S. 
Rep.,  377. 

1  See  §  635,  infra. 

The  state  will  not  be  allowed  to  inter- 
vene in  a  foreclosure  suit  for  the  pur- 


stock,  who  caused  the  corporation  to' 
sue  the  original  subscribers  for  the  un- 
paid par  value  of  the  stock.  The  court 
said :  "  While  the  law  may  rejeet,  as 
illegal  and  fraudulent,  that  which  the 
parties  have  agreed  upon,  ...  it 
will  not  arbitrarily  incorporate,  in  lieu 
thereof,  terms  in  the  contract  to  which 
the  parties  have  never  assented."  In 
the  case  of  Re  Ambrose,  etc.,  L.  R,  14 
Ch.  Div.,  390  (1880),  where  all  the  stock- 
holders acquiesced   and  there  were  no 


pose  of  preventing  it  on  the  ground  that  creditors'  rights  involved,  the  court  held 
the  bonds  are  illegal  and  void,  and  that  that  the  corporation  could  not  hold  the 
on  a  re-organization  a  greater  issue  will  directors  liable  for  the  profits  made  by 
be  made.  State  v.  Farmers',  etc.,  Co.,  17  them.  In  Zirkel  v.  Joliet  Opera  House 
S.  W.  Rep,  60  (Tex.,  1891).  Co.,  79  111.,  334  (1875),  the  corporation 
Concerning  the  power  of  the  state  to  had  released  the  subscriber  after  the 
object  to  an  ultra  vires  act  of  a  private  subscription  had  been  made.  The  re- 
corporation  by  any  proceeding  other  lease  being  without  consideration,  and 
(4)                                                  49 


38.] 


"  WATERED  " 


STOCK; 


[CH.  III. 


Where,  however,  actual  fraud  enters  into  the  transaction,  then 
the  corporation  is  not  estopped  from  having  the  agreement  set 
aside.  The  person  receiving  the  stock  can  then  be  compelled  to 
return  the  stock  or  its  market  value,  and  take  back  that  which  he 
gave  to  the  corporation  for  it.  But  the  corporation  cannot  hold 
him  liable  for  the  par  value  of  the  stock.1 


not  a  contract,  was  held  void,  and  the 
corporation  was  allowed  to  recover. 
The  case  of  The  Society  of  Prac.  Knowl. 
v.  Abbott,  3  Beav.,  559  (1840),  was  dis- 
tinguished in  Re  British  S.  P.  B.  Co., 
L.  R,  17  Ch.  D.,  467  (1881),  the  latter 
case  holding  that  no  one  is  liable  on  fic- 
titiously paid  up  stock  where  all  acqui- 
esced and  there  was  no  intent  to  bring 
in  new  stockholders.  This  is  held  to  be 
the  rule  even  though  new  stockholders 
were  subsequently  brought  in. 

In  the  case  of  Harrison  v.  Union  Pac. 
R'y  Co.,  13  Fed.  Rep.,  522  (1882),  where 
plaintiff  sued  to  recover  on  bonds  guar- 
antied by  the  defendant,  the  court  said : 
"The  intention  of  the  Arkansaw  Valley 
Railway  Company  was  to  sell  the  stock 
to  Harrison  for  less  than  its  par  value ; 
i.  <?.,  to  give  him  $15,000  in  stock 
(twenty  bonds  of  the  company),  guar- 
antied by  the  Kansas  Pacific  Company, 
aud  the  Clay  county  bonds,  all  for 
$15,000  in  cash.  There  is  nothing  in 
the  statutes  of  Colorado,  where  the  cor- 
poration was  created,  to  forbid  the  sale 
of  stock  at  less  than  par ;  nor  was  Har- 
rison forbidden  to  purchase  the  stock 
by  reason  of  the  fact  that  he  was  al- 
ready a  stockholder  and  director  in  the 
Kansas  Pacific  Railway  Company.  The 
transaction  was  therefore  valid  as  be- 
tween the  corporation  and  Harrison, 
whatever  the  right  of  the  creditors  of 
the  corporation  as  against  Harrison  may 
be."  See,  also,  Harrison  v.  Arkansas, 
etc.,  R  R,  8  South.  L.  R,  182  (U.  S. 
C.  C,  1882). 

In  St  Louis,  etc.,  R  R  Co.  v.  Tiernan, 
15  Pac.  Rep.,  544  (Kan.,  1887),  it  was 
held  that  an  issue  of  $3,600,000  of  stock 
and  the  payment  of  $200,000  to  directors 
for  an  old  road-bed  which  had  cost  them 


$15,000,  was  legal,  since  all  the  stock- 
holders and  directors,  except  a  few 
nominal  holders  of  stock,  were  fully  in- 
formed of  the  facts,  and  no  other  stock- 
holders came  in  until  several  months 
subsequently.  The  corporation  was  held 
incompetent  to  complain.  See,  also, 
Flinn  v.  Bagley,  7  Fed.  Rep.,  785  (1881); 
Re  Glen  Iron  Works,  17  Fed  Rep.,  24 
(1S83).  Cf.  People  v.  Sterling  Mfg.  Co.. 
82  111.,  457  (1876>  As  to  receivers,  see  20 
S.  W.  Rep..  1015. 

Where  all  the  stockholders  unite  in 
the  issue  of  watered  stock  to  the  presi- 
dent for  his  own  use.  and  assent  to  a 
contract  between  him  ami  the  company, 
the  corporation  itself  cannot  subse- 
quently complain.  Arkansas,  etc.,  Co. 
v.  Farmers',  etc.,  Co.,  22  Pac.  Rep.,  054 
(Colo.,  1889). 

The  corporation  itself  cannot  com- 
plain. First  Nat'l  Bank  r.  Gustin,  etc.. 
Co.,  44  N.  W.  Rep.,  198  tMinn.,  1890). 

The  city  court  of  New  York  in  Zelaya 
Min.  Co.  u.  Meyer,  8  N.  Y.  Supp.,  487 
(1890),  held  that  where  a  corporation 
agrees  to  and  does  issue  its  stock  below 
par,  the  corporation  itself  cannot  levy 
assessments  for  the  unpaid  par  value. 

1  See  §  47.  It  is  to  be  noticed,  how- 
ever, that  there  are  few  well-defined 
cases  on  this  principle  of  law.  Most  of 
the  cases  on  the  liability  of  the  director 
herein  involved  the  additional  fact  that 
the  director  received  some  of  the  stock 
himself.  In  the  case  of  Continental  Tel. 
Co.  v.  Nelson,  49  N.  Y.  Super.  Ct,  197 
(1883),  the  president  was  sued  by  the  cor- 
poration itself  for  issuing  stock  in  pay- 
ment of  labor,  the  par  value  of  the  stock 
being  worth  over  twice  the  value  of  the 
labor.  The  court  held  that  he  was  liable 
only  for  the  actual  market  value  of  the 


50 


CH.  III.] 


"watered"  stock:. 


[§39. 


The  corporation  has  also  a  remedy  herein  against  its  directors 
who  issued  the  stock  either  fraudulently  or  in  an  ultra  vires  man- 
ner.1 This  liability  is  similar  to  their  general  liability  to  the  cor- 
poration for  fraudulent,  negligent  or  ultra  vires  acts  on  their  part.2 
The  measure  of  their  liability  herein  is  not  the  par  value  of  the 
stock,  less  the  value  actually  received  therefor  by  the  corporation, 
but  it  is  the  actual  or  market  value  of  the  stock,  less  the  propertv 
or  cash  actually  received  by  the  corporation  on  the  stock  so  issued. 
It  has  also  been  held  that  the  corporation  cannot,  in  a  court  of 
equity,  compel  a  person,  who  agreed  to  take  stock  at  a  discount, 
to  carry  out  the  contract,  inasmuch  as  it  is  ultra  vires? 

Where  the  corporation  contracts  to  issue  stock  to  a  contractor 
for  work  to  be  done  in  the  future,  and  such  work  is  not  completed, 
various  complications  arise.  This  subject,  however,  is  considered 
elsewhere.4 

§  39.  Stockholders  participating  in  the  act  cannot  complain. — 
Stockholders  in  a  corporation,  who  participate  or  aid  in  the  issue 
of  paid-up  stock,  upon  payment  of  less  than  its  par  value,  or  who 
have  knowledge  of  the  act  and  acquiesce  therein,  cannot  after- 
wards complain  of.  the  transaction,  either  in  their  own  behalf  or  in 
behalf  of  the  corporation.  They  are  bound  by  estoppel  or  acquies- 
cence.5 


stock  in  excess  of  the  value  of  the  labor, 
and  submitted  the  question  to  the  jury. 

A  corporation  cannot  refuse  to  trans- 
fer stock  on  the  ground  that  the  vendor 
fraudulently  induced  the  company  to 
issue  the  stock  to  him  where  the  com- 
pany has  been  guilty  of  laches  in  not 
seeking  a  remedy  before  the  transfer. 
The  vendee  in  this  case  was  a  director. 
American,  etc.,  Co.  v.  Bayless,  15  S.  W. 
Rep.,  10  (Ky.,  1891). 

Although  the  incorporators  of  a  New 
Jersey  company  have  contracted  to  issue 
sixty  per  cent,  of  its  stock  to  a  person 
for  two  patents,  yet  the  board  of  direct- 
ors after  the  company  is  organized  may 
refuse  to  carry  out  the  agreement,  one 
patent  being  worthless  and  the  other  not 
having  been  perfected.  Trie  court  said : 
"  To  justify  a  corporation  in  issuing 
stock  under  our  act  for  property  pur- 
chased, there  should  be  an  approxima- 
tion, at  least,  in  true  value  of  the  thing 
purchased  to  the  amount  of  the  stock 
which    it   is    supposed    it    represents." 

51 


Edgerton  v.   Electric,  etc.,  Co.,  24  AtL 
Rep.,  540  (N.  J.,  1892). 

1  See  §  48. 

2  See  Part  IV. 

3  West.  R  R.  Co.  v.  ^Mowatt,  12  Jur., 
pt  I,  407  (1848). 

4  See  ch.  XLVI  and  §  24. 

s  In  Re  Gold  Co.,  L.  R.,  2  Ch.  Div.,  701, 
712,  the  court  says :  "  It  could  not  be  a 
fraud  upon,  or  a  wrong  to,  the  existing 
stockholders,  because  every  one  of  them 
was  a  party  to  the  transaction."  See, 
also,  Scoville  v.  Thayer,  105  U.  S.,  143 
(1881);  Lorillard  v.  Clyde,  86  N.  Y.,  384 
(1881) ;  Hall  v.  Brooklyn  El.  R  R,  N.  Y. 
L.  J.,  April  30,  1892.  But  in  the  case  of 
Knowlton  v.  Congress,  etc.,  Co.,  14 
Blatch.,  364,  368  (1877),  the  court  said  in 
a  dictum:  "Can  there  be  any  doubt 
that,  up  to  the  time  of  the  abandon- 
ment of  the  scheme  by  the  defendant, 
the  plaintiff  could  have  resorted  to  a 
court  of  equity  and  restrained  further 
proceedings  and  vacated  the  proceed- 
ings already  taken?    The  cases  are  nu- 


§39.] 


"  WATERED  "    STOCK. 


[CH.  III. 


The  cases  are  in  conflict  on  the  question  whether  the  party  re- 
ceiving stock  at  a  partial  discount  of  its  par  value  may  repudiate 
the  transaction  and  recover  from  the  corporation  the  money  he 


merous  where  courts  of  equity  have 
interfered  to  prevent  the  consummation 
of  a  wrong,  upon  the  motion  of  a  party 
who  was  instrumental  in  its  inception." 
Affirmed,  103  U.  S.,  49.  The  issue  of 
stock  in  that  case  was  held  to  be  abso- 
lutely void  by  statute. 

A  participating  stockholder  cannot 
complain,  even  though  he  or  his  as- 
signee is  a  corporate  creditor.  Callanan 
v.  Windsor,  42  .N.  W.  Rep.,  652  (Iowa, 
1889);  Lewis  v.  N.  Y,  etc.,  Iron  Co., 
N.  Y.  L.  J.,  April  30,  1890. 

A  purchaser  of  stock  that  has  voted 
for  an  issue  of  "watered"  bonds  and 
stock  is  estopped  from  complaining, 
even  though  the  issue  was  prohibited  by 
the  constitution  of  the  state  (Pennsyl- 
vania). Wood  v.  Corry,  etc.,  Co.,  44  Fed. 
Rep,  146  (1890). 

A  participating  stockholder  cannot 
as  a  corporate  creditor  enforce  the  lia- 
bility. Callanan  v.  Windsor,  42  N.  W. 
Rep.,  652  (Iowa,  1889). 

A  purchaser  of  stock  who  voted  in 
favor  of  a  re-organization  scheme  can- 
not object  to  the  scheme  as  being  ultra 
vires,  there  being  nothing  illegal  per  se. 
in  it.  Hollins  v.  St.  Paul,  etc.,  R.  R,  9 
N.  Y.  Supp.,  909  (1889). 

In  the  case  of  Skinner  v.  Smith,  134 
N.  Y,  240  (1892),  $40,000  of  stock  was  is- 
sued for  letters  patent  Afterwards, 
with  the  consent  of  all  the  stockholders, 
the  transaction  was  rescinded,  the  stock 
being  returned  and  the  patents  retrans- 
f  erred.  A  license  to  manufacture  under 
t'.ie  patents  was  then  transferred  to  the 
company  for  $350,000  in  stock.  The 
court  found  that  the  transaction  was  in 
good  faith  and  with  no  intent  to  de- 
fraud future  stockholders,  and  that  the 
license  was  an  adequate  consideration 
for  the  stock.  The  court  held  that  there 
was  nothing  illegal  in  the  transaction. 
A  stockholder  cannot  have  a  receiver 
appointed    and    mortgages    set    aside 


where  all  the  stock  is  "water,"  even 
though  the  controlling  party  has  made 
the  mortgages  to  himself  and  is  about 
to  sell  the  assets  of  the  company  to  an- 
other company  controlled  by  himself, 
and  has  levied  an  assessment  on  the 
stock  of  the  old  company  in  order  to  sell 
out  the  stock.  Robinson  v.  Dolores,  etc., 
Co.,  29  Pac.  Rep.,  750  (Colo.,  1892). 

A  person  to  whom  watered  stock  has 
been  issued  as  full-paid  stock  is  not  such 
a  bona  fide  stockholder  as  may  compel 
a  creditor  to  return  bonds  which  were 
illegally  issued.  The  stock  is  void  under 
the  Wisconsin  statutes.  Hinckley  r. 
Pfister,  53  N.  W.  Rep.,  21  (Wis.,  1892). 

A  conditional  sale  of  stock,  the  condi- 
tion being  that  the  sale  shall  be  complete 
for  fifty  cents  on  the  dollar,  when  the 
stock  is  worth  par,  is  valid.  Until  the 
stock  is  worth  par,  no  further  sum  is  re- 
coverable by  a  creditor  who  as  a  stock- 
holder participated.  Callanan  v.  Wind- 
sor, 42  N.  W.  Rep.,  652  (Iowa,  1889). 

A  person  who  buys  stock  in  a  com- 
pany, knowing  that  the  stock  was  issued 
without  consideration,  cannot  compel 
another  stockholder  to  return  his  stock 
to  the  company  for  cancellation  or  to  ac- 
count for  dividends.  Clark  v.  American 
Coal  Co.,  53  N.  W.  Rep.,  291  (Iowa,  1892). 

Where  three  persons  own  all  the  stock 
of  a  company,  two  of  them  may  buy  the 
stock  of  the  third  and  give  the  com- 
pany's notes  in  partial  payment  for  the 
same.  The  transaction  is  legal  inas- 
much as  none  is  injured  and  all  consent. 
Neither  subsequent  purchasers  of  the 
stock,  nor  those  who  become  stockhold- 
ers after  the  notes  are  paid,  nor  stock- 
holders who  consent  to  the  arrangement, 
can  complain  of  it.  Schilling,  etc.,  Co., 
et  al.  v.  Schneider  etal.,  19  S.  W.  Rep.,  67 
(Mo.,  1892). 

Where  about  one-half  of  the  capital 
stock   is  issued  as  full-paid  stock  for 
property,  the  real  value  of  which  is  one- 
52 


CH.  III.] 


"  WATERED  "    STOCK. 


[§40- 


has  already  paid  thereon.1  It  is  certain,  however,  that  where  the 
stockholders  participating  in  the  issue  use  the  stock  to  rob  a  rail- 
road and  bribe  a  judge,  and  then  disagree  among  themselves,  the 
courts  will  not  render  aid  to  one  as  against  the  others.2 

§  40.  Transferees  of  participating  stockholders  cannot  complain. 
Not  only  the  participating  and  acquiescing  stockholders,  but  also 
their  transferees,  are  bound  by  the  participation  or  acquiescence. 
The  transferee  cannot  claim  to  have  greater  rights  than  his  trans- 
ferrer, as  regards  a  general  remedy  invalidating  the  whole  trans- 
action. He  cannot  bring  suit  in  behalf  of  the  corporation  and 
other  stockholders  against  the  party  or  parties  participating  in  the 
issue,  inasmuch  as  his  own  title  is  tainted  with  the  same  fraud.3 


quarter  of  the  par  value  of  the  stock, 
and  then  subsequently  the  remaining 
stock  is  sold  for  cash  at  one-quarter  of 
its  par  value,  as  between  the  stockhold- 
ers and  the  corporation,  the  remaining 
seventy-five  cents  on  the  dollar  cannot 
be  collected  from  the  parties  to  whom 
the  stock  was  issued  for  cash,  it  having 
been  agreed  at  the  time  of  the  issue  that 
the  stock  should  be  full-paid  and  non- 
assessable. Green  v.  Abietine,  etc.,  Co., 
31  Pac.  Rep.,  100  (Cal.,  1892). 

1  The  case  of  Clarke  v.  Lincoln  Lum- 
ber Co.,  49  Wis.,  655  (1884),  holds  that  a 
participating  subscriber  cannot  with- 
draw and  recover  back  sums  already 
paid.  See,  also,  Goff  v.  Hawkeye,  etc., 
Co.,  62  Iowa,  691  (1883).  Knowlton  v. 
Congress  &  Empire  Spring  Co.,  57  N.  Y., 
518,  537  (1874),  holds  the  same,  the  court 
saying :  "  Such  parties  are  left  in  the 
position  the}*  have  placed  themselves." 
The  latter  case  was  decided  otherwise  in 
the  federal  courts  (14  Blatch.,  364,  and 
103  U.  S.,  49),  it  being  there  held  that  a 
recovery  might  be  had  where  others 
are  repaid.  A  person  to  whom  stock  is 
issued  for  cash  at  a  discount  may  sue 
to  have  his  subscription  canceled.  Re 
Goedone  Co.,  60  L.  T.  Rep.,  383  (1889). 

Mandamus  will  not  issue  to  compel 
the  issue  of  stock  at  a  discount,  in  per- 
formance of  a  resolution  by  the  stock- 
holders that  such  issue  shall  be  made. 
Equity  will  not  aid  the  fraud.  State  v. 
Timken,  28  N.  J.  Law,  87  (1886). 


2  Tobey  v.  Robinson,  99  111.,  202  (1881). 
The  courts  will  not  aid  a  stockholder 
as  against  directors'  breaches  of  trust, 
where  the  business  is  illegal  and  the 
stock  fictitious  and  "watered."  Le 
Warne  v.  Meyer,  38  Fed.  Rep.,  191  (1889). 

3  Parsons  v.  Hays,  14  Abb.  N.  C,  419 
(Super.  Ct.,  1883);  Nott  v.  Clews,  14 
Abb.  New  Cases  (N.  Y.),  437 ;  Ffooks  v. 
Southwestern  R'y,  1  Sm.  &  G,  142 
(1853) ;  Re  British,  etc.,  Co.,  L  R,  17  Ch. 
D.,  467  (1881);  Flagler  Co.  v.  Flagler.  19 
Fed.  Rep.,  468  (1884,  Circ.  Ct.  Mass.); 
S.  C,  14  Abb.  New  Cases  (N.  Y.),  435 ; 
In  re  Syracuse,  etc.,  R.  R.  Co.,  91  N.  Y., 
1  (1883) ;  Kent  v.  Quicksilver,  etc.,  Co., 
78  N.  Y.,  159,  188  (1879).  The  purchaser 
of  stock  which  was  issued  to  directors 
cannot  complain  that  the  directors  were 
guilty  of  fraud  in  the  issue.  Barr  v.  N. 
Y.,  etc.,  R.  R,  125  N.  Y„  263  (1891).  See, 
also,  Langdon  v.  Fogg,  18  Fed.  Rep.,  5 
(1883).  Contra,  Parson  v.  Joseph,  8  S. 
Rep.,  788  (Ala.,  1891).  In  the  late  case 
of  Foster  v.  Seymour,  23  Fed.  Rep.,  65 
(1885,  U.  S.  Circ.  Ct.  Wallace,  J.),  an 
issue  of  stock  for  property  at  an  over- 
valuation is  distinctly  held  to  be  no 
fraud  upon  the  corporation,  nor  upon 
the  stockholders,  all  of  whom  partici- 
pated. "  A  purchaser  of  the  stock 
would  not  be  injured  by  the  transaction 
unless  he  paid  more  for  it  than  it  was 
worth ;  and  every  purchaser  would 
stand  upon  the  particular  circumstances 
of  his    purchase."    A  suit  against  the 


-33 


40.] 


"watered"  stock. 


[CH.  IU. 

But  the 


Nor  can  he  bring  an  action  against  the  corporation.1 
transferee  is  by  no  means  without  a  remedy.  He  may  bring  an 
action  for  damages  against  those  who,  knowing  the  facts,  induced 
him  to  purchase,  or  those  who  made  it  possible  for  the  fraud  to  be 
practiced,  or  who  actually  assisted  in  perpetrating  the  fraud  upon 

him.2 

The  transferee  has  other  remedies.  If  the  transfer  to  him  was 
from  one  of  the  participants,  he  may  rescind  the  transfer  and  re- 
cover back  the  price  paid  by  him ; 3  or,  if  the  contract  of  purchase 
is  not  yet  completed,  he  may  refuse  to  take  the  stock.4 


guilty  parties,  who  were  the  directors, 
to  compel  them  to  account  for  a  fraud- 
ulent disposition  of  corporate  property, 
will  not  lie.  The  fraud  is  not  corporate ; 
it  is  personal.    See,  also.  §  733. 

i  In  Re  Gpld  Co.,  L.  R.,  11  Ch.  D.,  701 
(1879),  the  court  said:  "It  was  not  a 
wrong  done  by  the  company  or  to  the 
company."  In  Re  Ambrose  Lake  T.  & 
C.  Min.  Co.,  L.  R,  14  Ch.  D.,  390,  397 
(1880),  the  court  says:  "There  would  be 
no  liability  on  the  part  of  the  company, 
as  such." 

2  The  leading  case  on  this  principle  of 
law  is  Cross  v.  Sackett,  6  Abb.   Pr.   R, 
247  (1858),  argued  by  eminent  counsel 
and  decided  by  learned  judges.    A  bona 
fide  purchaser  in  open    market,  from 
an  innocent  holder  of  stock  issued  as 
paid  up  for  property  taken  at  an  over- 
valuation, sued  a  director,  being  also  an 
original  stockholder,  for  damages.    The 
court  in  its '  decision    said  :  "  When    a 
party  projects  and  publicly  promulgates 
the  scheme  of  a  joint-stock  company ; 
when  he  causes  the  usual  books  to  be 
opened,  and  allows  or  causes  the  inscrip- 
tion of  a  person  as  an  owner  of  an  in- 
terest to  a  definite  amount  and  value 
therein,  which  is  false  within  his  own 
knowledge ;  when    he    embodies    such 
false  statements  in  a  certificate  of  this 
right  directly  issued  and  of  the  same 
effect  as  if  signed  by  himself;  when  he 
accompanies  that  certificate  by  a  writ- 
ten   power    authorizing  a  transfer    at 
large  by  the   party    to  whom   he  has 
given  the  certificate ;  when  that  repre- 
sentation induces  an  innocent  person  to 


advance  his  money, —  the  defendant's 
own  individual  act  has  created  the  priv- 
ity of  contract,  .  .  .  and  he  must 
be  held  responsible  to  any  one  who  has 
been  deceived." 

The  plaiutiff  must  prove  that  a  repre- 
sentation was  made  that  the  stock  was 
paid  up,  and  that  he  relied  thereon,  and 
that  the  representation  was  false  and 
fraudulent.  McAleer  v.  McMurray,  58 
Penn.  St.,  126(1868);  Priest  v.  White,  1 
S.  W.  Rep.,  361  (Mo.,  1886). 

The  court,  in  In  re  Ambrose  Lake  Tin 
&  Cop.  Min.  Co.,  L.  R,  14  Ch.  D.,  390, 
397  (1880),  said  that  the  transferee  has  a 
remedy  against  the  person  who,  in  any 
way,  made  the  misrepresentations  to 
him.  Re  Gold  Co.,  L.  R.,  11  Ch.  D.,  701, 
pp.  713,  714,  is  to  the  same  effect.  In 
Barnes  v.  Brown,  80  N.  Y.,  527  (1SS0). 
the  plaintiff,  being  under  contract  to  re- 
ceive paid-up  stock  from  defendants, 
received  such,  and  afterwards  disco t- 
ered  that  its  par  value  had  not  been 
paid  in  to  the  corporation.  The  court 
held  that  he  could  recover  damages 
from  the  defendant  for  the  fraud. 

«  Fosdick  v.  Sturges,  1  Biss.,  255  (1858). 
In  this  case  the  certificate  was  brought 
into  court  to  be  disposed  of  as  the  court 
should  direct. 

4  Sturges  v.  Stetson,  1  Biss.,  246,  253 
(1858),  the  court  holding  that  an  action 
for  the  price  of  such  stock  is  in  the 
nature  of  a  bill  in  equity  for  the  specific 
performance  of  a  contract,  and  the  de- 
fendant may  defeat  it  by  avoiding  the 
contract  altogether,  although  the  cer- 
tificates have  been  transferred  to  him. 


54 


CH.  III.] 


"watered"  stock. 


41,  42. 


§  41.  Stockholders  dissenting  at  the  time  of  the  issue  may  com- 
plain.—  Stockholders,  being  such  when  an  issue  of  paid-up  stock  is 
improperly  made,  and  not  assenting  to  or  acquiescing  in  it,  may 
bring  suit  in  a  court  of  equity  to  annul  and  set  aside  the  whole 
transaction.1  It  has  been  held  that  the  issue  may  be  canceled.2 
The  dissenting  stockholders'  rights  and  remedies  herein,  in  their 
scope  and  details,  are  similar  to  the  rights  and  remedies  of  stock- 
holders in  other  cases  of  ultra  vires  acts  or  fraud  to  the  injury  of 
the  corporation  —  a  subject  fully  treated  in  the  fourth  part  of  this 
work.3 

§42.  Corporate  creditors  as  complainants  where  the  issue  is  for 
money. —  According  to  well-established  rules  of  law  in  America, 


To  same  effect,  Coolidge  v.  Goddard,  77 
Me.,  579. 

i  In  Fisk  v.  Chicago  &  Rock  Isl.  R.  R. 
Co.,  53  Barb.,  513  (1868),  the  court  en- 
joined any  transfer  of  the  stock,  and 
appointed  a  receiver  to  receive  what 
the  corporation  had  realized  from  the 
stock,  and  to  use  the  funds  in  retiring 
the  stock  and  paying  damages  caused 
thereby.  In  Sturges  v.  Stetson,  1  Biss., 
246,  254  (1858),  and  Fosdick  v.  Sturges, 
1  Biss.,  255,  259  (1858),  the  court  in  dicta 
said  that  the  issue  could  be  withdrawn, 
leaving  with  the  guilty  parties  so  much 
stock  as  the  money  paid  by  them  would 
equal  the  par  value  of. 

Stockholders  may  restrain  the  issue 
of  deferred  "bonds,"  i.  e.,  irredeemable 
bonds  entitling  the  holder  to  interest 
after  a  certain  dividend  is  paid  to  the 
stockholders,  it  being  merely  a  scheme 
to  issue  stock  below  par.  Taylor  v.  Phil., 
etc.,  R  R.  Co.,  7  Fed.  Rep.,  386  (1881). 
Compare  ch.  46,  infra. 

In  New  York,  by  statute,  income  bonds 
with  voting  privileges  may  be  issued. 

Laches  on  the  part  of  the  dissenting 
stockholder  will  bar  his  remedy.  Taylor 
v.  South,  etc.,  R  R  Co.,  13  Fed.  Rep.,  152 
(1882). 

2  Campbell  v.  Morgan,  4  Bradw.  (111.), 
100  (1879);  Gilman,  Peoria  &  Spring. 
R.  R  Co.  v.  Kelly,  77  111.,  426  (1875). 

A  dissenting  stockholder  may  cause 
an  issue  of  stock  to  be  canceled  where 
it  was  issued  for  land  at  five  times  its 


real  value,  and  then  the  capital  stock 
was  doubled  and  the  increase  issued  f<  r 
nothing.  Parson  v.  Joseph,  8  S.  Rep., 
788  (Ala.,  1891). 

A  dissenting  stockholder  may  cause 
to  be  canceled  certain  stock  which  was 
issued  without  consideration  to  a  con- 
struction company  in  which  the  direct- 
ors are  interested.  Gilman,  etc.,  R  R. 
v.  Kelly,  77  111.,  426  (1875). 

Where  the  president,  in  order  to  get 
control  of  the  corporation,  causes  a 
meeting  of  the  board  of  directors  to  vole 
stock  in  payment  for  services  and  prop- 
erty whose  value  is  much  less  than  the 
par  value  of  the  stock,  the  stock  being 
voted  to  outside  parties,  but  thereafter 
secretly  transferred  to  the  president,  a 
stockholder  may  compel  him  to  return 
the  stock  to  the  corporation  for  cancel- 
lation. Such  an  issue  is  also  illegal  by 
the  statutory  law  of  the  state.  Perry  v. 
Tuscaloosa,  etc.,  Co.,  9  South.  Rep.,  217 
(Ala.,  1891). 

The  issue  of  new  stock  by  the  corpo- 
ration cannot  be  enjoined  where  neither 
the  corporation  nor  any  of  its  directors 
are  parties  to  the  action.  "White  v.  "Wood, 
129  N.  Y.,  527  (1892). 

3  They  cannot  have  the  corporation 
wound  up  therefor.  In  re  Gold  Co., 
L.  R,  11  Ch.  D..  701 ;  Morrison  v.  Globe 
Panorama  Co.,  28  Fed.  Rep.,  817  (1886). 
See,  also,  §  701,  infra;  68  L.  T.  Rep.,  163 
(1893). 


05 


§^2.] 


"  WATERED  " 


STOCK. 


[CH.  III. 


corporate  creditors  may  object  to  certain  transactions,  which,  as 
between  the  corporation  and  its  stockholders  and  third  persons, 
may  be  valid  and  binding.  This  right  of  corporate  creditors  is  an 
essentially  American  doctrine.  It  is  based  on  the  principle,  first 
enunciated  by  Judge  Story,  that  the  capital  stock  of  the  corpora- 
tion is  a  trust  fund,  to  be  preserved  for  the  benefit  of  corporate 
creditors.  That  principle  of  law,  when  applied  to  a  transaction 
whereby  stock  is  issued  as  paid  up,  when  it  is  in  fact  not  paid  up, 
enables  corporate  creditors  to  object  to  the  act,  and,  in  certain 
cases,  to  undo  what  has  been  done,  and,  in  other  cases,  to  compel 
payment  of  the  actually  unpaid  part  of  the  par  value  of  the  stock. 
Where  the  issue  of  stock  was  for  cash,  under  an  agreement  that  only 
part  of  the  par  value  need  be  paid,  corporate  creditors  may  compel 
the  persons  receiving  the  stock  to  pay  the  unpaid  full  par  value.1 
A  resolution  by  a  corporation  that  upon  the  stockholders  paying 


1  The  leading  case   on    this   point  is 
Sagory  v.   Dubois.   3  Sandf.    Ch.   Rep., 
466,  499  (1846),  where  the  court  said: 
"  The  defendant  being  liable  by  force  of 
his  subscription  for  the  stock,  the  res- 
olution of  the  directors    .     .    .     not  to 
make  any  further  calls  upon  the  shares 
was  unavailing  to  discharge  his  liabil- 
ity in  respect  of  the  association  and  its 
creditors."    In  Scoville  v.  Thayer,  105 
U.  S.,  143  (1881),  the  court  said  that  a 
contract  whereby  stockholders    are  to 
pay  but  part  of  the  par  value  of  their 
stock  to  the  corporation,  "  though  bind- 
ing on  the  company,  is  a  fraud  in  law 
on   its  creditors,   which    they  can  set 
aside :  when  their  rights  intervene  and 
their    claims    are    to   be   satisfied,  the 
stockholders  can  be  required  to  pay  then- 
stock  in  full."    Upton  v.  Tribilcock,  91 
U.  S.445  (1875),  is  the  first  of  a  series 
of  cases    growing    out  of    the   failure 
of  the  Great  Western  Insurance  Com- 
pany of   Illinois.     The  other  cases  are 
Sanger  v.   Upton,   91   U.  S.,  56  (1875); 
Webster  v.  Upton,  91  U.  S.,  65  (1875); 
Chubb   v.  Upton,  95  U.   S.,  666  (1877); 
Pullman  v.  Upton,  96  U.  S.,  328  (1877); 
Hawley  v.  Upton,  102  U  S.,  314  (1880); 
Upton  v.  Burnham,  3  Biss.,  431  (1873) ; 
S.  C,  3  Biss.,  520,  and  Upton  v.  Hans- 
brough,  3  Biss.,  417  (1873V.  Great  West- 
ern Tel.  Co.  v.  Gray,  14  N.  E.  Rep ,  214 


(111..  1887).  This  series  of  cases  estab- 
lished for  the  federal  courts  the  rule 
given  above.  See,  also,  Flinn  v.  Bag- 
ley,  7  Fed.  Rep.,  785  (1881),  giving  full 
review  of  the  American  and  English 
doctrine  herein ;  In  re  Glen  Iron  Works, 
17  Fed.  Rep.,  374  (1883);  Union  M.  L. 
Ins.  Co.  v.  Frear  Stone  Mfg.  Co.,  97  III, 
537  (1881),  also  reviewing  the  doctrine; 
Hickling  v.  Wilson,  104  111.,  54  (1882); 
Northrop  v.  Bushnell,  38  Conn.,  498 
(1871):  Fisher  v.  Seligman,  7  Mo.  App., 
388  (1879);  Eyerman  v.  Krieckhaus,  7 
Mo.  App.,  455  (1879);  Skrainka  v.  Allen, 
7  Mo.  App.,  434  (1879);  Pickering  v. 
Templetou,  2  Mo.  App.,  424  (1876); 
Christensen  v.  Eno,  21  Weekly  Dig, 
202  (1885):  Mann  v.  Cooke,  20  Conn., 
178  (1850);  Myers  v.  Seeley,  10  Natl. 
Bank.  Reg.,  411 ;  20  S.  W.  Rep.,  1015. 

Where  the  directors  of  an  insurance 
company  issue  to  themselves  all  the 
stock  at  one-third  of  its  par  value,  and 
upon  an  increase  of  the  capital  vote  to 
themselves,  for  services  in  selling  the 
increase,  one  share  for  every  two  shares 
sold,  they  are  liable  upon  corporate  in- 
solvency for  the  unpaid  par  value  of 
the  first  issue,  and  the  par  value  of  the 
stock  received  as  compensation.  Their 
transferee  with  notice  was  held  not 
liable.  Freeman's  Assignee  v.  Stine,  15 
Phil.,  37  (1881). 


56 


CH.  III.] 


"watered"  stock. 


[§42. 


in  a  portion  of  the  par  value  of  the  stock  the  capital  shall  be 
deemed  to  be  fully  paid  is  wholly  ineffectual  as  against  the  credit- 
ors of  the  company-.1 

In  order  to  enforce  a  liability  where  stock  is  issued  as  full-paid 
stock  for  cash  at  less  than  the  par  value,  it  is  not  necessary  to 
prove  that  fraud  entered  into  transaction,  where  the  issue  was  for 
cash,  since  there  is  no  possibility  of  mistaken  judgment  in  the  value 
of  the  thing  received  in  payment.2 

It  has  been  held  that  the  custom  of  the  country  will  exempt 
stockholders  from  liability  on  stock  issued  as  paid  up  when  it  was 
not  paid  up.  Such  a  decision,  however,  is  inconsistent  with  the 
great  weight  of  authority,  and  must  be  considered  poor  law.3 


1  "  It  is  the  settled  doctrine  of  this  court 
that  the  trust  arising  in  favor  of  credit- 
ors by  subscriptions  to  the  stock  of  a 
corporation  cannot  be  defeated  by  a 
simulated  payment  of  such  subscrip- 
tion, nor  by  any  device  short  of  an  act- 
ual payment  in  good  faith.  And  while 
any  settlement  or  satisfaction  of  such 
subscription  may  be  good  as  between 
the  corporation  and  the  stockholders,  it 
is  unavailing  as  against  the  claims  of 
the  creditors.  Nothing  that  was  said  in 
the  recent  cases  of  Clark  v.  Bever,  139 
U.  S.,  96;  Foggu  Blair,  139  U.  S.,  118; 
or  Handley  v.  Stutz,  139  U.  S.,  417,  was 
intended  to  overrule  or  qualify  in  any 
way  the  wholesome  principle  adopted 
by  this  court  in  the  earlier  cases,  espe- 
cially as  applied  to  the  original  sub- 
scribers to  stock.  The  later  cases  were 
only  intended  to  draw  a  line  beyond 
which  the  court  was  unwilling  to  go  in 
affixing  a  liability  upon  those  who  had 
purchased  stock  of  the  corporation,  or 
had  taken  it  in  good  faith  in  satisfaction 
of  their  demands."  Camden  v.  Stuart, 
144  U.  S.,  104  (1892) ;  20  S.  W.  Rep.,  1015. 

Persons  taking  stock  from  the  corpo- 
ration for  cash  at  forty  cents  on  the  dol- 
lar cannot  avoid  liability  to  corporate 
creditors  for  the  remaining  sixty  cents 
by  setting  up  that  unknown  to  them 
the  stock  had  previously  been  issued  to 
a  contractor  for  work  to  be  done,  and 
that  he  appointed  the  corporation  his 
agent  to  sell  the  stock  at  forty  cents  on 
t'ie   dollar.     Their  subscription   to  the 


stock  was  an  original  subscription  and 
bound  them.  Bates  v.  Great  Western 
Tel.  Co.,  25  N.  E.  Rep.,  521  (111.,  1890). 

Where  property  is  sold  to  the  com- 
pany for  stock  and  cash,  the  cash  may 
be  credited  on  other  subscriptions.  Re 
Jones,  etc.,  Co.,  Lim.,  61  L.  T.  Rep.,  219 
(1889). 

2Flinn  v.  Bagley,  7  Fed.  Rep.,  785 
(1881). 

3  Re  South  Mountain  Consol.  Min. 
Co.,  7  Sawyer,  30  (1881).  In  this  case  it 
is  stated  that  corporate  creditors  were 
protected  "  by  the  personal  liability  of 
each  shareholder  for  his  pro  rata  share 
of  the  indebtedness  of  the  corporation." 
See  comments  on  this  case,  supra,  %  30. 
The  English  rule  is  now  the  same  as  the 
American.     See  §  34,  supra. 

Stock,  however,  which  is  purchased 
by  the  corporation,  after  its  original 
issue,  may  be  sold  by  the  corporation  at 
a  discount.  The  corporation  may  then 
sell  the  same  as  an  individual  stock- 
holder. Otter  i«.  Brevoort,  eta,  Co.,  50 
Barb.,  247  (1867);  Barnwell's  Case,  50 
L.  J.  (Ch.),  827  (1881),  where  the  stock 
came  to  the  corporation  by  forfeiture. 
See,  also,  §  29,  supra.  In  many  cases 
stock  is  issued  to  a  patentee  for  his  pat- 
ent, and  he  then  donates  and  turns  back 
to  the  corporation  a  part  of  this  stock 
to  be  sold  at  a  reduced  price  for  the 
benefit  of  the  corporate  treasury.  Lake 
Superior  Iron  Co.  v.  Drexel,  90  N.  Y.,  87. 
This  transaction  is  legal ;  and  it  is  not 
at  all  necessary  that  the  stock  so  donated 


57 


42.] 


"wateked"  stock. 


[CH.  III. 


But  the  amount  collected  must  be  to  the  extent  and  for  the  pur- 
pose of  paying  corporate  creditors'  claims  only.1  A  resolution  dis- 
charging stockholders  from  all  liability  on  stock  after  thirty  per 
cent,  of  the  par  value  has  been  paid,  and  then  suffering  a  forfeiture 
of  the  stock,  is  void  so  far  as  corporate  creditors  are  concerned.2 

It  is  legal  for  the  company  to  pay  a  cash  commission  to  a  person 
who  procures  subscriptions,  even  though  that  commission  is  de- 
ducted from  the  subscription  price.3 

Where  a  railroad  corporation  is  in  financial  straits,  and  its  stock 
worth  nothing,  it  is  legal  for  the  corporation  to  settle  with  one  of 
its  creditors  by  issuing  stock  to  him  at  twenty  cents  on  the  dollar. 
Other  corporate  creditors  cannot  afterwards  hold  him  liable  for 
the  remaining  eighty  cents  on  the  dollar.4 


be  placed  in  the  names  of  trustees  for 
the  benefit  of  the  corporation.  It  may 
be  transferred  to  the  corporation  direct 
In  Stribling  v.  Bank  of  the  Valley.  5 
Rand.  (Va.),  132,  where  the  bank  took  a 
note  for  its  own  stock  at  a  price  in  ex- 
cess of  the  market  value  of  the  stock, 
the  court  held  the  note  to  be  usurious. 

It  is  a  question  for  the  jury  whether 
fraud  exists  in  sale  of  stock,  represented 
to  be  paid  \ip,  when  part  of  the  pay- 
ments had  been  by  dividends  from  the 
corporation.  Kruger  v.  Andrews,  35 
N.  W.  Rep.,  245  (Mich.,  1887). 

But  where  the  corporation  has  an  ac- 
cumulated profit,  and  that  profit  is  by 
agreement  with  the  stockholders  ap- 
plied to  unpaid  subscriptions,  such  stock 
is  then  paid  up.  Kenton,  etc.,  Co.  v. 
McAlpin,  5  Fed.  Rep.,  737  (1880). 

Where  the  capital  stock  is  reduced, 
and  subscribers  cancel  unpaid  subscrip- 
tions and  take  paid-up  stock  to  the  ex- 
tent of  their  payments  on  the  old  stock, 
old  corporate  creditors  may  hold  them 
liable  on  the  former.  In  re  State  Ins. 
Co.,  14  Fed.  Rep.,  28  (1882). 

The  presumption  is  that  a  corporate 
creditor  did  not  know  and  acquiesce  in 
the  issue  of  "  watered  "  stock.  Stutz  v. 
Handley,  41  Fed.  Rep.,  531  (1890). 

As  affecting  corporate  creditors  herein, 
the  statute  of  limitations  does  not  com- 
mence to  run  until  judgment  is  recov- 
ered by  the  corporate  creditors  against 


the  corporation.  Christensen  v.  Quin- 
tard,  36  Hun,  334  (1885). 

For  other  cases  on  the  right  of  corpo- 
rate creditors  to  sue,  see  §  735,  infra. 

i  Scoville  v.  Thayer,  105  U.  S.,  143, 155, 
(1881). 

2Slee  v.  Bloom,  19  Johns.  Rep.,  456 
(1822). 

3  Re  Licensed,  etc.,  Assoc,  60  L.  T. 
Rep.,  684  (1889). 

A  corporation  may  agree  to  give 
$5,000  of  stock  to  one  who  will  borrow 
$15,000  for  it  Arapahoe,  etc.,  Co.  v. 
Stevens,  22  Pac.  Rep.,  823  (Colo.,  1889). 

A  commission  of  fifteen  per  cent  may 
be  paid  by  the  company  to  those  who 
agree  to  take  all  the  stock  not  subscribed 
for  by  the  public.  Re  Licensed,  etc., 
Assoc,  supra. 

*  Clark  v.  Bever,  139  U.  S.,  96  (1891). 
After  deciding  that  nothing  in  the  Iowa 
statutes  forbids  the  issue  of  stock  below 
par,  the  court  says : 

"If  the  legislature  had  intended  that 
the  acquisition  of  stock  at  less  than  its 
face  value  should  be  conclusive  evidence 
in  every  case  that  the  stock,  as  between 
creditors  and  stockholders,  is  'unpaid,' 
it  would  have  been  easy  to  so  declare, 
as  has  been  done  in  some  of  the  states. 
If  such  a  rule  be  demanded  by  consid- 
erations of  public  policy,  the  remedy  is 
with  the  legislative  department  of  the 
government  creating  the  corporation. 
A  rule  so  explicit  and  unbending  could 


58 


CH.  III.] 


"  WATERED  " 


STOCK. 


[§42. 


"Where  stock  is  given  by  the  company  gratuitously  as  a  "  bonus  " 
to  persons  who  are  induced  thereby  to  purchase  the  bonds  of  the 
company,  it  has  been  held  that  such  persons  are  liable  to  corporate 
creditors  for  the  par  value  of  such  stock.1 

But  in  New  York  a  different  rule  prevails  and  the  stockholder 
is  not  liable.2 

In  the  federal  courts  it  is  the  law  that  an  embarrassed  corpora- 
tion may,  upon  an  increase  of  its  stock,  put  such  stock  upon  the 
market  and  sell  it  for  the  best  price  that  can  be  obtained,  and  that 
the  corporation  may  throw  in  as  a  bonus  a  certain  amount  of  full- 
paid  stock  to  the  purchaser  of  its  bonds,  and  there  will  be  no  liabil- 
ity on  the  stock.3 


be  enforced  without  injustice  to  any 
one,  for  all  would  have  notice  from  the 
statute  of  the  will  of  the  legislature." 
A  limitation  on  the  extent  of  this 
case  is  laid  down  in  that  the  stockhold- 
ers are  liable,  "  unless  it  appears  that 
they  acquired  the  stock  under  circum- 
stances that  did  not  give  creditors  and 
other  stockholders  just  ground  for  com- 
plaint." Affirming  31  Fed.  Rep.,  670 
(1887).  To  same  effect,  Morrow  v.  Iron, 
etc.,  Co.,  87  Tenn.,  262,  276  (1888). 

1 A  "  bonus  "  of  paid-up  stock  to  a  di- 
rector who  loans  money  to  the  com- 
pany and  takes  its  notes  and  bonds  as 
collateral  is  not  legal,  the  issue  of  the 
stock  being  the  original  issue.  The 
court,  in  a  dictum,  stated  that  the  di- 
rector was  liable  for  the  full  par  value 
of  the  stock.  Richardson  v.  Green,  133 
U.S.,  30(1890). 

Persons  purchasing  bonds  from  a 
company  and  taking  stock  as  a  "  bonus," 
the  stock  being  unissued  until  that  time, 
are  liable  for  the  par  value  of  the  stock. 
Stutz  v.  Handley,  41  Fed.  Rep.,  531  (1890) ; 
reversed  on  other  grounds,  139  U.  S., 
417;  Haldeman  v.  Ainslie,  82  Ky.,  395. 
Where  the  stockholders  increase  the 
stock  and  distribute  part  of  it  among 
.  themselves  as  full-paid  stock,  but  give 
nothing  for  it,  they  may  be  held  liable 
by  corporate  creditors  for  the  par  value 
thereof.  Handley  v.  Stutz,  139  U.  S.. 
417  (1891);  Skrainka  v.  Allen,  76  Mo., 
384 


In  a  suit  for  contribution  in  the  fed- 
eral court  by  a  Missouri  stockholder, 
who  has  been  compelled  by  the  Missouri 
courts  to  pay  for  stock  issued  to  him  as 
a  "  bonus,"  the  court  will  follow  the 
Missouri  decision  rather  than  a  New 
York  decision  holding  that  the  same 
"  bonus  "  created  no  liability.  Allen  v. 
Fairbanks,  45  Fed.  Rep.,  ^45  (1891). 

A  distribution  gratis  of  stock  among 
the  stockholders  has  been  held  to  be  an 
unauthorized  reduction  of  the  capital 
stock,  and  it  will  be  ordered  to  be  re- 
turned. Holmes  v.  Newcastle,  etc.,  Co., 
45  L.  J.  (Ch.).  383  (1875). 

2  In  New  York  it  is  held  that  unissued 
shares  of  stock  may  be  issued  gratui- 
tously to  stockholders;  also  bonds  of 
the  company ;  and  they  are  not  liable 
for  the  par  value  or  any  part  thereof  to 
the  corporation  or  corporate  creditors, 
unless  they  agree  to  pay  therefor  or  the 
statute  requires  payment.  A  subscrip- 
tion is  otherwise,  since  it  is  a  contract. 
Even  though  the  stockholder  has  sold 
such  stock  and  bonds,  he  is  not  liable  to 
corporate  creditors  for  the  amount  re- 
ceived from  the  sale.  He  has  received 
nothing  from  the  corporation  except  a 
promise  to  pay.  (Skrainka  v.  Allen,  7 
Mo.,  434;  S.  C,  76  id.,  384,  not  followed.) 
Christensen  v.  Enu,  106  N.  Y,  97  (1S87) : 
Christensen  v.  Quiutard,  8  N.  Y.  Supp., 
400  (1890). 

s  Handley  v.  Stutz,  139  U.  S.,  417  (1891). 
The  court  said:     '"To  say  that  a  cor- 


59 


§§  43,  44.] 


"  WATERED  "    STOCK. 


[CH.  III. 


Where  the  capital  stock  of  the  corporation  is  increased,  the  in- 
srease  is  not  a  trust  fund  for  the  benefit  of  corporate  creditors  who 
were  such  before  the  increase  was  made.' 

In  Minnesota  the  doctrine  is  clearly  and  boldly  announced  that 
the  issue  of  stock  for  cash  at  less  than  par  is  legal  and  that  noth- 
ing more  can  be  collected  on  such  stock,  except  by  corporate  cred- 
itors who  have  relied,  or  can  fairly  be  presumed  to  have  relied,  on 
the  representation  that  the  capital  stock  is  as  stated;  in  other 
words,  that  it  was  paid  in  full. 2 

Inasmuch  as  a  corporation  may  pledge  its  unissued  stock  to  a 
corporate  creditor,  the  pledgee  cannot  be  held  liable  thereon  on 
the  ground  that  the  stock  was  "  watered."  3 

§43.  Corporate  creditors  as  complainants  where  the  issue  is  for 
property  or  construction  work.—  The  rights  of  corporate  creditors 
where  stock  has  been  issued  for  property  taken  at  an  overvaluation 
are  considered  elsewhere.4 

§  44.  Who  is  liable,  and  the  character  of  the  liability— Liability 
of  the  corporation  —  The  corporation  itself,  it  has  been  intimated, 
is  not  liable  to  any  person  by  reason  of  the  issue  of  its  stock  as 


poration  may  not,  under  the  circum- 
stances above  indicated,  put  its  stock 
upon  the  market  and  sell  it  to  the  high- 
est bidder,  is  practically  to  declare  that 
a  corporation  can  never  increase  its 
capital  by  a  sale  of  shares,  if  the  original 
stock  has  fallen  below  par. 
The  liability  of  a  subscriber  for  the 
par  value  of  increased  stock  taken  by 
him  may  depend  somewhat  upon  the 
circumstances  under  which,  and  the 
purposes  for  which,  such  increase  was 
made.  If  it  be  merely  for  the  purpose 
of  adding  to  the  original  capital  stock 
of  the  corporation,  and  enabling  it  to  do 
a  larger  and  more  profitable  business, 
such  subscriber  would  stand  practically 
upon  the  same  basis  as  a  subscriber  to 
the  original  capital.  But  we  think  that 
an  active  corporation  may,  for  the  pur- 
pose of  paying  its  debts,  and  obtaining 
money  for  the  successful  prosecution  of 
its  business,  issue  its  stock  and  dispose 
of  it  for  the  best  price  that  can  be  ob- 
tained." 

iCoit  v.  North  Car.  Gold  Amal.  Co., 
14  Fed.  Rep.,  12  (1882);  aff'd,  119  U.  S., 
343  (1886). 


Only  those  who  become  corporate 
creditors  after  an  increase  of  stock  is 
voted  can  hold  liable  the  subscribers  to 
such  increase  which  was  issued  without 
value  received.  Handley  v.  Stutz,  139 
U.  S.,  417  (1891). 

2  The  basis  of  the  creditor's  suit  is  not 
contract,  but  fraud.  Creditors  who  were 
such  before  the  watered  stock  was  is- 
sued cannot  complain  of  it  Nor  can  a 
subsequent  creditor  complain  if  he 
knew  of  the  issue  of  watered  stock. 
Nor  will  one  who  purchased  claims 
after  the  corporation  became  insolvent 
and  a  receiver  was  appointed  be  al- 
lowed to  complain.  Hospes  v.  North- 
western, etc.,  Co.,  50  N.  W.  Rep.,  1117 
(Minn.,  1892). 

3  See  §  465,  infra. 

Unissued  stock  may  be  issued  by  the 
corporation  as  a  pledge  to  secure  a  loan, 
and  the  corporation  cannot  set  up  that 
it  was  issued  at  less  than  par  in  viola- 
tion of  the  constitution.  The  issue  is 
good  in  the  hands  of  the  pledgee  to  the 
extent  of  the  loan.  Gasquet  v.  Crescent 
City  B.  Co.,  49  Hun,  496  (1892). 

*  See  §§  46,  47,  infra. 


60 


OH.  III.]  "  WATERED  "    STOCK.  [§§  45,  4G. 

full-paid  stock,  when,  as  a  matter  of  fact,  it  has  not  been  fully 
paid.1  It  is  very  certain  that  the  stockholder  has  no  remedy  herein 
against  the  corporation,  since  his  remedy  is  against  the  corporate 
officers,  as  in  other  cases  of  breach  of  trust  by  them.  As  regards 
corporate  creditors,  they  cannot  complain  provided  the  corporation 
remain  solvent  and  able  to  pay  its  debts.  If,  on  the  other  hand,  it 
becomes  insolvent,  it  would  be  no  object  to  them  to  bring  suit 
against  the  corporation. 

§  45.  Liability  of  persons  to  whom  stock  is  issued  for  cash  at  less 
than  par. — Where  stock  is  issued  for  cash  at  less  than  par,  the 
parties  taking  it  are  liable  to  corporate  creditors  for  the  unpaid  par 
value  thereof,2  unless  the  issue  was  subsequent  to  the  commence- 
ment of  business  and  the  real  value  of  the  stock  was  paid  in  to 
the  corporation  in  order  to  enable  it  to  go  on  with  its  business 
instead  of  becoming  insolvent.3  A  representation  of  the  corporate 
agents  to  the  person  receiving  the  stock,  that  full  payment  will  not 
be  required,  is  immaterial,  and  constitutes  no  defense.4 

§46.  Liability  of  persons  to  whom  stock  is  issued  for  property 
taken  by  the  corporation  at  an  overvaluation.—  A  dissenting  stock- 
holder may  object  to  such  an  issue,  inasmuch  as  it  decreases  the 
value  of  his  stock.  He  may  have  the  transaction  set  aside,  and  the 
person  receiving  the  stock  compelled  to  return  it  or  pay  over  its 
actual  market  value,  less  the  value  of  property  given  for  it.5  The 
person  receiving  stock  at  a  discount  is  liable  also  to  a  bona  fide 
transferee  of  that  stock.6 

Corporate  creditors,  however,  are  the  persons  who  generally 
complain.  The  company  becomes  bankrupt  and  they  are  not  paid. 
They  then  find  that  the  capital  stock  did  not  represent  cash;  it 
was  paid  for  by  property  taken  by  the  corporation  at  a  valua- 
tion much  greater  than  its  real  value.  The  company  being  insolv- 
ent and  its  property  gone,  the  corporate  creditors  seek  to  hold  the 
stockholders  liable.  They  seek  to  hold  the  stockholders  liable  for 
the  par  value  of  the  stock,  less  the  real  value  of  the  property  which 
was  turned  into  the  corporation.     During  the  past  ten  years  there 

i  In  the  case  of  In  re  Ambrose  L.  T.  done  by  the  company  or  to  the  com- 

&  Cop.  Min.  Co.,  L.  R,  14  Ch.  D.,  390,  pany."    See,   also,   Lewis    v.  Meier,   14 

397  (1880),  the  court  says :  "  There  would  Fed.  Rep.,  311  (1882).     Cf.  §  157,  infra. 
be  no  liability  on  the  part  of  the  com-        2  See  §  42. 
pany  as  such."    In  Re  Gold  Co.,  L.  R,        3See  §  42. 

11   Ch.   D.,  701  (1879),  where  the  pro-        *  Upton    v.   Tribilcock,   91   U.   S.,  45 

ceeding  was  to  compel  a  winding  up  of  (1875) ;   Ogilvie  v.    Knox    Ins.   Co..  22 

the  company  on  account  of  an  improper  How.,  380  (1859). 
issue  of  paid-up  stock,    the    court   re-        5  See  §  41. 

fused  to  support   the  proceeding,  and        6See§  40,  and  Fisher  t\  Seligman,  7 

said,  pp.  713,  714,  "  it  was  not  a  wrong  Mo.  App.,  383  (1879) 

61 


§46.] 


"  WATERED  "    STOCK.  [CH.  III. 


has  been  a  vast  amount  of  litigation  on  this  subject.  The  courts 
still  disagree  in  their  -conclusions,  but  a  careful  study  of  the  cases 
will  show  that  upon  authority  as  well  as  principle  the  stockholders 
cannot  be  held  liable  in  such  a  case,  unless  the  property  was  of  so 
trifling  a  character  that  it  practically  had  no  value  whatever.  This 
class  of  cases  has  arisen  under  two  aspects;  first,  at  common  law  ; 
and  second,  under  statutes. 

At  common  law  it  is  well  settled  that  corporate  creditors  cannot 
hold  stockholders  liable  on  stock  which  has  been  issued  for  prop- 
erty, even  though  the  property  was  turned  over  to  the  corporation 
at  an  agreed  valuation  which  was  largely  in  excess  of  the  real  value 
of  the  property,  provided  the  property  had  some  substantial  value. 
There  have  been  cases  which  refuse  to  follow  this  rule,  but  it  is 
clearly  established  by  the  great  weight  of  authority.  The  reason 
of  the  rule  is  that  if  "the  payment  by  property  was  fraudulent,  then 
the  contract  is  to  be  treated  like  other  fraudulent  contracts.  It  is 
to  be  adopted  in  toto,  or  rescinded  in  toto,  and  set  aside.  Both 
parties  are  to  be  restored  as  nearly  as  possible  to  their  original  po- 
sitions. The  property  or  its  value  is  to  be  returned  to  the  person 
receiving  the  stock,  and  he  must  return  the  stock  or  its  real  value. 
Another  reason  for  the  rule  is  that  the  stock  had  no  value  when  it 
was  issued  for  property.  "  If,  when  disposed  of  by  the  railroad 
company,  it  was  without  value,  no  wrong  was  done  to  creditors." 
Such  is  the  language  of  the  supreme  court  of  the  United  States.1 

1  The  leading  case  on  this  subject,  per-  the  railroad  company,  it  was  without 

haps,  is  Van  Cott  v.  Van  Brunt,  82  N.  value,  no  wrong  was  done  to  creditors." 

Y,  535  (1880),  a  case  that  has  been  se-  Even  the  Missouri  constitution  and  stat- 

verely  criticised,  but  which  is  not  only  utes  do  not  change  this  rule, 

in  accordance  with  general  principles  It  is  legal  for  a  railroad  company  to 

of  law  governing  the  rescission  of  con-  issue  bonds  and  stock  in  payment  for 

tracts,  but  is  in  strict  accordance  with  the  construction  of  its  road.     If  all  the 

the  authorities  and  cases  on  the  subject  parties  assent   no   one    can  complain, 

of  paid-up  stock.  "  As  the  stock  was  issued  as  a  part  of 

The  most  important  case,  however,  is  the  consideration  for  construction,  it 
the  recent  one  of  Fogg  v.  Blair,  139  U.  cannot  be  said  that  it  was  taken  without 
S.,  118  (1891),  holding  that  where  all  the  value  given."  The  par  value  is  imma- 
stock  and  a  large  quantity  of  bonds  are  terial.  "  The  fact  that  they  were  cre- 
issued  by  a  railroad  corporation  to  its  ated  for  an  expenditure  less  than  the  par 
contractor  in  payment  for  the  construe-  value  of  the  aggregate  issues  of  capital 
tion  of  the  road,  the  contractor  is  not  stock  and  bonds  does  not  affect  the 
liable  to  corporate  creditors  on  the  question  at  all."  Barr  v.  N.  Y.,  etc., 
stock,  even  though  the  bonds  were  a  R  R,  125  N.  Y.,  263  (1891). 
sufficient  consideration  for  building  the  Stockholders  cannot  be  held  liable  for 
road,  unless  the  corporate  creditors  the  difference  between  the  par  value  of 
prove  that  the  stock  at  the  time  of  its  their  stock  and  the  actual  value  of  prop- 
issue  had  a  real  or  market  value.  The  erty  turned  in  to  the  corporation  in 
court  said:    "If,  when  disposed  of  by  payment  of  the  stock,  unless  fraud  is 

62 


CH.  III.  J 


"  WATERED  "    STOCK. 


[§46. 


There  is  nothing  sacred  about  the  par  value  of  stock.  Moreover, 
in  business  circles  it  has  become  customary  to  capitalize  property 
at  a  reasonably  high  figure.  This  is  due  to  the  fact  that  it  is  easier 
to  sell  stock  at  less  than  par  than  at  par,  and  also  to  the  fact  that, 


proved.  "If  the  transaction  was  an 
honest  one,  the  difference  in  value  be- 
tween the  property  constituting  the  con- 
sideration of  the  sale  and  the  stock  had 
no  legal  significance.  .  .  .  The  val- 
uation of  property  in  making  the  ex- 
change, either  on  the  one  side  or  the 
other,  cannot  be  supervised  or  controlled 
by  a  court  of  chancery  ;  for.  in  the  ab- 
sence of  deceit,  or  some  other  corrupt 
constituent,  the  bargain  between  the 
parties  cannot  be  disturbed."  Bickley  v. 
Schlag,  20   Atl.  Rep.,  250  (N.  J.,  1890). 

Where  stock  is  issued  for  construc- 
tion work  the  persons  receiving  the 
stock  cannot  be  held  liable  on  the  theory 
of  the  stock  not  having  been  paid  up, 
unless  fraud  is  charged  and  proved. 
The  statements  of  one  of  the  officers  to 
tax  commissioners  are  not  admissible  as 
evidence  of  the  cost  of  the  work.  The 
act  of  the  company  in  crediting  each 
of  the  directors  with  one  thousand 
dollars  on  their  subscriptions  in  payment 
of  services  rendered  and  money  ad- 
vanced was  upheld.  Clow  v.  Brown,  31 
N.  E.  Rep,  361  (Ind.,  1892). 

Where  a  corporation  issues  its  stock, 
as  full  paid,  in  payment  for  coal  lands, 
and  the  stock  is  sold  to  a  purchaser  for 
value,  the  purchaser  is  not  liable  to 
creditors  of  the  corporation  on  the  stock 
on  the  ground  that  it  is  not  full-paid 
stock,  even  though  the  land  was  taken 
at  a  great  overvaluation,  there  being  no 
actual  fraud  in  the  transaction.  The 
text  as  stated  above  was  quoted  with 
approval.  Du  Pont  v.  Tilden,  42  Fed. 
Rep.,  87  (1890). 

In  Coffin  v.  Ransdell,  1  Corp.  &  L.  J., 
326  (Ind.,  1887),  the  court  sustained  the 
rule  given  in  the  text,  and  said  :  "Sup- 
pose it  to  be  true  that,  in  consummat- 
ing the  arrangement,  the  property  of 
Unthank  &  Coffin  was  turned  into  the 
corporation  at  an    overvaluation,   and 


that  the  defendant  and  the  other  cor- 
porators participated  in  the  alleged 
wrong.  The  transaction  was  the  result 
of  an  agreement  which  the  parties  had 
the  right,  as  between  themselves,  to 
make.  Shall  he  be  capriciously  pun- 
ished by  being  made  liable  ex  contractu 
upon  a  contract  which  he  never  made? 
If  the  defendant  has  participated  in  a 
fraud  whereby  creditors  of  the  corpora- 
tion who  exercised  ordinary  business 
sagacity  had  suffered  damages,  whatever 
redress  such  creditors  may  now  obtain 
while  their  representative  retains  the 
defendant's  property  must  be  sought  by 
an  action  ex  delicto.''''  See,  also,  Conti- 
nental Telegraph  Co.  v.  Nelson,  18 
Weekly  Dig.,  48  (1883) ;  S.  C,  49  N.  Y. 
Super.  Ct.,  197;  Crawford  v.  Rohrer, 
59  Md.,  599  (1882);  Brant  v.  Ehlen,  59 
Md.,  1  (1882) ;  Morrison  v.  Globe  Pano- 
rama Co.,  28  Fed.  Rep.,  817  (1886). 
Judge  Dillon,  in  Phelan  v.  Hazard,  5 
Dill.,  45,  reviewed  the  authorities  and 
sustained  the  principles  enunciated 
herein.  Before  any  recovery  can  be  had 
in  this  class  of  cases  the  transaction 
must  be  set  aside.  Scoville  v.  Thayer, 
105  U.  S.,  143, 156  (1881) ;  Wood's  Claim, 
9  W.  R,  366  (1861). 

In  Anderson's  Case,  L.  R,  7  Ch.  D., 
75,  stock  was  issued  to  a  promoter  for 
property  taken  at  an  overvaluation. 
This  action  was  to  render  him  liable  for 
the  par  value  of  the  stock,  less  the  real 
value  of  the  property.  The  court  said, 
pp.  94,  95,  104:  "I  am  not  going  to 
alter  men's  contracts  unless  the  pro- 
visions of  an  act  of  parliament  compel 
me  to  do  so.  .  .  .  You  cannot  alter 
the  contract  to  such  an  extent  as  to  say, 
though  you  have  bargained  for  paid-up 
shares,  we  will  change  that  into  a  bar- 
gain to  take  shares  not  paid  up,  and 
put  you  on  the  list  of  contributories  on 
that  ground.  ...  If  you  set  aside 
63 


§46.] 


"  WATERED  "    STOCK. 


[CH.  III. 


by  a  large  capitalization,  dividends  are  kept  low  enough  to  avoid 
the  cupidity  of  possible  competitors  and  the  interference  of  legis- 
latures. To  such  an  extent  is  this  practice  carried  of  issuing  stock 
for  property  at  an  overvaluation,  that  the  investing  public  and 


this  allotment  of  shares,  you  must  set 
it  aside  altogether,  and  then  you  can- 
not make  them  a  contributory ;  and  if 
you  do  not  set  it  aside  altogether  you 
must  adopt  it,  and  the  utmost  you  can 
do  is,  as  I  said  before,  that  you  can 
take  away  any  profit  from  the  person 
who  has  improperly  made  it."  In  Cur- 
vie's  Case,  3  De  G.,  J.  &  S.,  367  (1863), 
the  court  said  that  the  transaction 
"  was  either  valid  or  invalid.  If  valid, 
it  is  clear  that  neither  he  [the  person 
receiving  the  stock]  nor  his  alienees  can 
be  called  upon  to  contribute  in  respect 
of  those  shares.  If  invalid,  I  cannot 
see  my  way  to  hold  that  either  a  court 
of  law  or  a  court  of  equity  could  do 
more  than  treat  the  purchase  as  void, 
and  undo  the  transaction  altogether. 
It  could  not,  as  I  apprehend,  be  com- 
petent either  to  a  court  of  law  or  to  a 
court  of  equity  to  alter  the  terms  of 
the  purchase,  or  treat  as  shares  not  paid 
up  shares  which  were  given  as  paid-up 
shares  in  part  consideration  of  the  pur- 
chase. Fraud  —  assuming  there  was 
fraud  —  would  of  course  warrant  the 
court  in  treating  the  purchase  as  void, 
or  in  undoing  it ;  but  it  could  not,  I 
conceive,  authorize  any  court  to  sub- 
stitute other  terms."  See,  also,  Bar- 
nett's  Case,  L.  R.,  18  Eq.,  507  (1874), 
where  the  issue  had  been  canceled  by 
the  corporation.  In  Van  Cott  v.  Van 
Brunt,  cited  supra,  a  case  very  similar 
in  its  facts  to  those  of  the  preceding 
case,  the  court  said :  "  The  conclusion 
of  law  was  erroneous  that  the  scheme 
was  fraudulent  as  against  the  company 
and  against  the  creditors,  and  that 
the  defendants  were  only  entitled  to 
credit  for  the  actual  outlay,  paid  or  in- 
curred, and  were  liable  for  the  amount 
unpaid  on  the  stock.  The  result  must 
be  that  the  defendant  was  not  liable  to 
pay  the  par  value  of  the  stock  received 


by  him  under  the  contract  for  building 
and  equipping  a  portion  of  the  road." 
Page  542.  This  case  has  been  severely 
criticised  as  being  contrary  to  estab- 
lished principles  of  law. 

In  Phelan  v.  Hazard,  supra  (1878), 
Judge  Dillon  thoroughly  reviews  the 
authorities,  and  says :  "  The  contract  is 
valid  and  binding  upon  the  corporation 
and  the  original  shareholders  unless  it 
is  rescinded  or  set  aside  for  fraud ;  and 
.  .  .  while  the  contract  stands  uuim- 
peached,  the  courts,  even  where  the 
rights  of  creditors  are  involved,  will 
treat  that  as  a  payment  which  the  par- 
ties have  agreed  should  be  payment" 
See,  also,  Brant  v.  Ehlen,  59  Md.,  1  (1882), 
fully  explaining  the  meaning  of  the 
term  trust  fund  as  applied  herein. 
Crawford  v.  Rohrer,  59  Md.,  599  (1882). 

In  Coit  v.  Gold  Amal.  Co.,  119  U.  S., 
343(1886,  affirming  14  Fed.  Rep.,  12), 
where  this  question  clearly  arose,  the 
court  said  that  the  creditors  could  riot 
hold  the  stockholders  liable  unless  there 
was  an  intentional  and  fraudulent  over- 
valuation. The  court  said  that  "  where 
full-paid  stock  is  issued  for  property  re- 
ceived, there  must  be  actual  fraud  in 
the  transaction  to  enable  creditors  of 
the  corporation  to  call  the  stockholders 
to  account ;  a  gross  and  obvious  over- 
valuation of  property  would  be  strong 
evidence  of  fraud."  The  court  held  that 
although  a  machine  and  a  license  to  use 
a  patent  were  put  into  the  company  in 
payment  for  $100,000  of  stock,  yet  there 
was  no  fraud. 

To  same  effect,  Mege's  Case,  10  W.  N. 
(Eng.),  208(1875). 

In  Carr  v.  Le  Fevre,  27  Pa,  St,  413 
(1856),  the  court  said  that  if  the  direct- 
ors "  took  lands  at  a  prospective  value, 
never  realized,  it  is  nothing  more  than 
many  individuals  and  corporations  have 
done  before.    Such  an  error  in  manage- 


64 


CH.  III.] 


"  WATERED  "    STOCK. 


[§46. 


persons  who  give  credit  to  corporations  rather  expect  it,  and 
they  no  longer  rely  upon  the  nominal  capitalization  of  the  com- 
pany. Experience  has  taught  them  that  they  must  investigate  the 
real  financial  condition  of  the  company,  and  invest  or  give  credit 
upon  that  alone. 


ment  or  in  their  judgment  of  the  value 
of  a  purchase,  made  without  fraud, 
forms  no  ground  for  rescinding  the  con- 
tract." See,  also,  Schroder's  Case,  L  R, 
11  Eq.  Cas.,  131  (1870). 

The  doctrine  laid  down  in  Van  Cott  v 
Van  Brunt,  supra,  was  approved  in  Coe 
v.  East, etc.,  R  R,  52  Fed.  Rep.,  531  (1892), 

In  the  case  Stewart  v.  St  Louis,  eta, 
R  R.  Co.,  41  Fed.  Rep.,  738,  where  a 
railroad  road-bed  worth  $2,000  was 
turned  in  to  a  corporation  for  $200,000 
of  its  notes  and  $3,600,000  of  its  stock, 
the  court  held  that  the  notes  were  good 
and  could  be  collected. 

The  corporate  creditor's  bill  may  be  by- 
one,  but  must  be  in  behalf  of  all.  Cleve- 
land, etc.,  Co.  v.  Texas,  etc.,  R'y  Co.,  27 
Fed.  Rep.,  250  (1886). 

In  passing  upon  the  legality  of  an 
issue  of  $500,000  of  stock  for  a  road  that 
had  just  been  sold  under  a  mortgage  for 
$100,000,  the  court  said  in  Common- 
wealth v.  Central  Pass.  R'y,  52  Pa.  St, 
506,  515  (1886) :  "  In  all  such  cases  the 
determination  of  the  amount  of  stock 
must  be  an  arbitrary  adjustment  As 
we  have  said,  the  cost  of  the  property  is 
no  fair  measure  of  what  the  stock  rep- 
resents, and  if  the  real  value  be  adopted 
as  the  standard,  it  is  no  standard  at 
all.  It  varies  with  the  estimates  of  wit- 
nesses, and  the  franchises  are  incapable 
of  valuation.  ...  If  that  was  a  sum 
greater  than  the  actual  value  of  the 
company's  franchises  and  property,  as 
it  was  greater  than  the  cost,  we  are  una- 
ble to  see  how  the  public  was  affected 
by  the  exaggerated  estimate." 

A  few  cases  seem  to  be  in  conflict 
with  the  above  authorities.  Thus,  in 
Wetherbee  v.  Baker,  35  N.  J.  Eq.,  501 
(1882),  the  defendant  neither  owned  nor 
conveyed  to  the  corporation  the  prop- 
erty which  he  alleged  constituted  pay- 

(5)  65 


ment  Savage  v.  Ball,  17  N.  J.  Eq.,  142 
(1864),  held  that  the  validity  of  an  elec- 
tion is  not  affected  by  the  question 
whether  the  stock  voted  was  issued  for 
value  or  not 

In  North  Carolina  it  has  been  held 
that  the  value  of  the  property  turned  in 
in  payment  for  the  stock  may  be  ascer- 
tained by  the  court,  and  the  stockholders 
held  liable  for  the  par  value  of  the  stock 
less  the  real  value  of  the  property,  if 
such  property  was  fraudulently  over- 
valued. Clayton  v.  Ore,  etc.,  Co.,  14  S.  E. 
Rep,  36  (N.  C,  1891). 

In  the  case  First  Nat'l  Bank  v.  Gustin, 
etc.,  Co.,  44  N.  W.  Rep,  198  (Minn., 
1890),  there  is  a  dictum  to  the  effect 
that  in  certain  cases  bona  fide  creditors 
may  enforce  payment  of  the  difference 
between  par  value  of  the  stock  and  the 
real  value  of  the  property  turned  in  as 
payment  for  it  in  full. 

It  has  been  held  that  the  person  re- 
ceiving the  stock  becomes  liable  for 
profits  made  thereby.  Four  Mile  V.  R 
R  Co.  v.  Bailey,  18  Ohio  St.,  208  (1868). 

Where  a  railroad  worth  $112,000  is 
sold  to  a  new  corporation  for  $1,120,000 
of  bonds  and  all  its  capital  stock,  the 
transaction  is  fraudulent  The  bond- 
holders may  obtain  judgment  against 
the  company  on  their  bonds  and  then 
compel  the  stockholders  to  pay  the  full 
par  value  of  their  stock.  Preston  v.  Cin- 
cinnati, etc.,  R  R  Co.,  36  Fed.  Rep.,  54 
(1888).    See  Lloyd  v.  Preston  on  p.  67,  sub. 

In  Osgood  v.  King,  42  Iowa,  478  (1876), 
where  stock  was  issued  for  land  grossly 
overvalued,  the  court  held  the  vendor 
liable  for  the  par  value  of  the  stock  less 
the  actual  value  of  the  land.  The  per- 
son receiving  the  stock  was  a  director 
at  the  time. 

In  Jackson  v.  Traer,  64  Iowa,  469 
(1884),  overruling  S.  C,  16  N.  W.  Rep., 


§46.] 


"  WATERED  "    STOCK. 


[CH.  III. 


The  fact  that  the  person  to  whom  the  stock  is  issued  returns  a 
part  of  it  as  a  gift  to  the  corporation  or  to  trustees  for  the  cor- 
poration to  sell  the  same  below  par  and  put  the  proceeds  in  the 
corporate  treasury  for  a  working  capital  does  not  necessarily  prove 
that  the  property  was  overvalued.  The  person  receiving  the  stock 
may  have  been  willing  to  sacrifice  a  part  of  his  stock  and  property 
in  order  to  make  the  rest  more  valuable.1 

In  no  case  can  a  corporate  creditor  complain  where,  at  the  time 
when  he  contracted  with  the  company,  he  knew  that  the  stock  had 
been  issued  for  property  taken  at  an  overvaluation.2 


120  (1884),  the  stock  was  not  issued  to 
the  construction  company  for  the  pur- 
pose of  constructing  the  corporate 
works,  but  was  issued  after  the  con- 
struction was  finished,  and  a  cash  debt 
was  due  them,  which  was  paid  by  an 
issue  of  the  stock  to  pay  that  debt  al- 
ready due. 

The  supreme  court  of  the  United 
States,  in  Clark  v.  Bever,  139  U.  S.,  96 
(1891),  refused  to  follow  the  decision  in 
Jackson  v.  Traer,  64  Iowa,  469. 

In  Chisholm  Bros.  v.  Forney,  65  Iowa, 
140  (1884),  where  full-paid  stock  was 
issued  for  a  patent-right,  in  good  faith, 
but  the  patent-right  subsequently  turned 
out  to  be  worthless,  Jhe  stockholders 
were  held  liable  to  corporate  creditors 
as  though  no  payment  had  been  made. 

Where  $100,000  of  stock  was  issued 
for  patents  worth  $16,000,  and  $50,000 
of  the  stock  was   transferred    by    the 
patentees  to  a  trustee  for  all  the  stock- 
holders,   a   subscriber    for   $1,500    of 
stock,  who  pays  the  company  therefor 
$500,  is  liable  to  corporate  creditors  for 
$1,000,  even  though  the  $1,500  of  stock 
was  a  part  of  the  $50,000  of  stock  that 
the  inventors  retained  and  directed  the 
company  to  issue  to  defendant      The 
defendant   was    not  a    bona  fide  sub- 
scriber or  transferee,  but  was  one  of  the 
promoters    and  was    president   of  the 
company.    Fraud  cannot  be  alleged  in 
defense.     Boulton   Carbon  Co.  v.  Mills, 
43N.W.  Eep.,  290  (Iowa,  1889). 

In  the  following  case  a  very  peculiar 
device  was  successful.  Stock  was  issued 
conditionally  that  its  issue  be  complete 


and  binding  when  it  became  worth  par, 
and  that  the  price  then  to  be  paid  for  it 
to  the  company  should  be  fifty  cents  on 
the  dollar.  The  stock  was  issued  and 
partly  paid  for,  but  never  reached  par 
in  value.  Held,  that  a  participating 
stockholder,  who  was  also  a  creditor 
could  not,  nor  could  his  assignee,  enforce 
any  liability.  Callanan  v.  Windsor,  42 
N.  W.  Rep.,  652  (Iowa,  1889). 

JLake  Superior  Iron  Co.  v.  Drexel, 
90  N.  Y.,  87  (1882) ;  Williams  v.  Taylor, 
120  N.  Y.,  244  (1890). 

The  person  to  whom  stock  has  been 
issued  in  payment  for  property  may  do- 
nate a  part  of  it  as  a  bonus  to  go  with 
bonds  sold  at  par  directly  from  the 
corporation  to  the  person  taking  the 
bonus.  The  value  of  the  property  in 
this  case  was  not  proved.  Davis  v. 
Montgomery,  etc.,  Co.,  8  S.  Rep.,  496 
(Ala.,  1890).  In  the  case  of  Van  Gestel 
v.  The  Van  Gestel  Electric  Street  Car 
Co.  (N.  Y.  L.  J.,  July  3,  1890),  the  court 
enjoined  a  company  from  disposing  of 
such  stock  contrary  to  the  contract 

2  Bank  of  Fort  Madison  v.  Alden,  129 
U.  S.,  373  (1889). 

A  corporate  creditor  who  took  the 
note  of  the  corporation  in  payment  of 
an  antecedent  debt,  and  took  with  full 
knowledge  of  the  facts  as  to  the  issue  of 
the  stock  for  property,  cannot  com- 
plain. A  corporate  creditor  cannot  com- 
plain as  to  stock  issued  subsequently  to 
the  debt  First  Nat'l  Bank  v.  Gustin, 
etc.,  Co.,  44  N.  W.  Rep.,  198  (Minn.,  1890). 

An  issue  of  stock  for  an  old  franchise 
and  uncompleted  road-bed  of  a  railroad 
66 


CH.  III.] 


"  WATERED  " 


STOCK. 


[§  48. 


There  is  a  limit,  however,  beyond  which  the  courts  will  not  go 
in  sustaining  the  issue  of  stock  for  property  taken  at  an  overvalua- 
tion. If  the  property  which  is  turned  in  is  practically  worthless, 
or  is  unsubstantial  and  shadowy  in  its  nature,  the  courts  will  hold 
that  there  has  been  no  payment  at  all,  and  that  the  stockholders 
are  liable  on  the  stock.1 


is  valid  although  the  par  value  of  the 
stock  is  much  more  than  the  value  of 
the  property.  All  the  stockholders  hav- 
ing assented  thereto,  and  there  being  no 
creditors,  the  transaction  is  valid.  A 
holder  of  bonds  issued  long  subse- 
quently, and  who  purchased  with  knowl- 
edge of  the  facts,  cannot  complain  and 
hold  the  stockholders  liable.  Walburn 
v.  Chenault,  23  Pac.  Rep.,  657  (Kan., 
1890).    See  20  S.  W.  Rep,  1015. 

A  stockholder  who  is  also  a  creditor, 
and  who  became  such  with  full  knowl- 
edge that  the  stock  was  paid  for  by 
property  at  an  overvaluation,  cannot  as 
a  creditor  compel  other  stockholders  to 
make  payments  on  their  stock  as  being 
partly  unpaid.  Whitehall  v.  Jacobs,  44 
N.  W.  Rep.,  630  (Wis.,  1890). 

A  person  who  buys  an  old  railroad 
bed  for  $2,000,  which  is  all  it  is  worth, 
and  then  forms  a  corporation  of  which 
he  is  a  director,  and  sells  the  road-bed  to 
the  company  for  $200,000  in  company 
notes  and  $3,600,000  of  its  stock,  may 
collect  the  notes  if  all  parties  at  the 
time  knew  all  the  facts  and  consented 
thereto.  Stewart  v.  St.  Louis,  etc.,  R.  R, 
41  Fed.  Rep.,  736  (1887). 

JThe  supreme  court  of  the  United 
States,  in  the  case  of  Camden  v.  Stuart, 
144  U.  S.,  104  (1892),  held  liable  for  un- 
paid subscriptions  the  subscribers  to 
$150,000  of  stock  who  had  turned  in 
therefor  a  contract  for  real  estate  and  a 
health  resort  which  a  year  prior  thereto 
they  had  taken.  The  court  did  not 
allow  any  value  for  the  contract  and 
threw  out  the  good-will,  and  said  (p.  115) : 
"The  experience  and  good-will  of  the 
partners,  which  it  is  claimed  were  trans- 
ferred to  the  corporation,  are  of  too  un- 
substantial and  shadowy  a  nature  to  be 


capable  of  pecuniary  estimation  in  this 
connection.  It  is  not  denied  that  the 
good-will  of  a  business  may  be  the  sub- 
ject of  barter  and  sale  as  between  the 
parties  to  it,  but  in  a  case  of  this  kind 
there  is  no  proper  basis  for  ascertaining 
its  value,  and  the  claim  is  evidently  an 
afterthought  The  same  remark  may 
be  made  with  regard  to  the  contract  of 
January  30,  and  the  loss  of  time  and 
trouble  to  which  the  parties  were  sub- 
jected, which  are  now  claimed  to  be  ele- 
ments of  value  in  the  property  contrib- 
uted to  the  corporation,  but  of  which 
no  account  was  made  at  the  time." 

In  the  case  of  Lloyd  v.  Preston,  146 
U.  S.,  630  (1892),  affirming  36  Fed.  Rep., 
54  (1888),  where  the  owner  of  a  railroad 
sold  it  to  a  newly-organized  corporation 
for  stock  and  bonds,  the  par  value  of 
which  were  fifty  times  the  real  value  of 
the  railroad,  the  court  held  that  the 
bondholders  and  other  creditors  who 
had  obtained  judgment  against  the  cor- 
poration, the  execution  being  returned 
and  satisfied,  might  hold  the  party  re- 
ceiving the  stock  liable  thereon  on  the 
ground  that  the  subscription  price  of 
such  stock  has  never  been  paid.  The 
court  said :  "  The  entire  organization 
was  grossly  fraudulent  from  first  to 
last,  without  a  single  honest  incident  or 
redeeming  trait."  The  court  also  said  : 
"  It  having  been  found,  on  convincing 
evidence,  that  the  overvaluation  of  the 
property  transferred  to  the  railway  com- 
pany by  Harper,  in  pretended  payment 
of  the  subscriptions  to  the  capital  stock, 
was  sc  gross  and  obvious  as,  in  connec- 
tion with  the  other  facts  in  the  case,  to 
clearly  establish  a  case  of  fraud,  and  to 
entitle  bona  fide  creditors  to  enforce 
actual  payment  by  the  subscribers,  it 


67 


"  WATERED  "    STOCK.  [CH.  III. 


The  remedy  of  the  corporate  creditor  is  in  equity.  An  action  at 
law  for  fraud  or  for  conspiracy  is  difficult  to  maintain.1 

§  47.  The  preceding  section  contains  the  common  law  on  the 
liability  of  persons  who  pay  for  stock  in  property  taken  at  an 
overvaluation.  The  common  law  sustains  the  transaction  and  hence 
renders  easy  the  issue  of  watered  stock.  Now  in  former  days 
watered  stock  did  much  harm.  It  deceived  people  and  induced 
them  to  buy  the  stock  or  bonds,  or  to  extend  credit  to  the  com- 
pany, on  the  supposition  that  the  capital  stock  had  really  been 
paid  for  at  actual  par  value.  Hence,  when  it  became  clear  that 
the  common  law  did  not  prevent  the  issue  of  watered  stock,  but 
compelled  the  public  to  rely,  not  upon  statements  of  the  capital 
stock,  but  on  an  investigation  of  the  actual  condition  of  the  com- 
pany, a  demand  arose  for  statutes  and  constitutional  provisions  to 
protect  the  people  from  watered  stock. 

This  demand  gave  rise  to  certain  constitutional  provisions  which 
have  been  enacted  in  several  states.  These  provisions  are  very 
similar  in  their  wording,  and  are  substantially  as  follows:  "No 
corporation  shall  issue  stocks  or  bonds  except  for  money,  labor  done 
or  money  or  property  actually  received ;  and  all  fictitious  increase 
of  stock  or  indebtedness  shall  be  void."2 

It  is  now  over  twenty  years  since  the  first  of  these  provisions  was 
enacted,  and  yet  it  may  be  said  that  these  constitutional  provisions 
have  decidedly  failed  to  remedy  the  evil  which  they  were  expected 
to  cure.  They  are  so  sweeping  in  their  effects,  and  so  disastrous 
to  innocent  holders  of  corporate  securities,  that  the  courts  are  re- 
luctant to  declare  void  the  stock  and  bonds  which  have  passed  into 
bona  fide  hands.  The  provision  is  held  to  be  applicable  and  effective 
only  when  the  issue  is  entirely  fictitious.     It  does  not  interfere 

only  remains  to  consider  the  effect  of  fraud  and  deceit.  Priest  r.  White,  1 
the  defenses  set  up."  S^e,  also,  Garrett  S.  W.  Rep.,  361  (Mo.,  1886). 
v.  Kansas,  etc.,  Co.,  20  S.  W.  Rep.,  965  It  is  difficult  for  a  corporate  creditor 
(Mo.,  1892).  to  seek  collection  by  making  out  a  con- 
Where  an  insolvent  partnership  trans-  spiracy.  Brackett  V.  Griswold,  13  N.  Y. 
fers  its  assets  to  a  newly-created  corpo-  Supp.,  192  (1891). 

ration  in  payment  for  its  shares  of  stock,  2  See  Constitution  of  111.  (1870),  art.  XI, 

and   the    corporation    assumes    all  the  §  13;    Neb.   (1875),   art.   XI,   §  5;    Mo. 

debts  of  the  partnership,  the  payment  (1875),  art  XII,  §  8;  Penn.  (1875),  art 

for  the  stock  is  fraudulent  per  se.     A  XVI,  §  7 ;  Texas  (1876),  art  XII,  §  6 ; 

corporate  creditor  may  hold  the  stock-  Colorado  (1876),  art.  XV,  §  9;  Arkansas, 

holders  liable  on  the    subscription    as  art.  XII,  §  8;  Alabama,  art  XIV,  §  6: 

though  no  payment  had  been  attempted.  Louisiana  (1879),  art  238.     In  the  last 

Sayler,  Assignee,  v.  Simpson,  4  Ry.  &  state  any  corporation  issuing  such  stock 

Corp.  L.  J.,  195  (Ohio,  1888).  shall  forfeit  its  charter.     See,  also,  Part 

1  The    corporate     creditor's    remedy  VII,  infra. 
herein  is  not  by  an  action  at  law  for 

68 


CH.  III.] 


" WATERED  " 


STOCK. 


[§47. 


with  the  customary  methods  of  starting  the  corporate  enterprise 
by  the  issue  of  stock  and  bonds  in  payment  for  the  construction  of 
the  corporate  works,  and,  except  in  Alabama,  it  may  be  said  that 
the  courts  have  construed  away  the  language  and  purpose  of  the 
provision.1 


i  Peoria,  etc.,  R.  R.  Co.  v.  Thompson, 
103  111.,  187  (1882).  In  this  case  bonds 
and  cash  were  given  to  the  contractors 
in  payment  for  the  construction  of  the 
road.  The  transaction  was  upheld.  In 
California  the  supreme  court  in  Stein 
v.  Howard,  65  Cal.,  616  (1884),  has  held 
that  the  constitutional  prohibition  does 
not  prevent  the  issue  of  stock  at  less 
than  its  par  value.  The  meaning  of 
"  fictitious  "  is  defined  to  be  that  given 
in  Webster's  Dictionary.  The  court  said : 
"Of  the  shares  proposed  to  be  issued 
there  is  no  one  share  upon  which  a  per- 
son can  place  his  finger  and  say,  that 
share  is  or  will  be  feigned,  imaginary, 
not  real ;  counterfeit,  false,  not  genuine." 
An  injunction  to  restrain  such  an  issue 
of  new  increased  stock  was  refused.  In 
New  Castle  R.  R.  Co.  v.  Simpson,  21  Fed. 
Rep.,  535  (1884),  the  court,  in  passing  on 
the  provision  in  the  Pennsylvania  con- 
stitution, held  that  a  contract  giving  a 
construction  company  $300,000  of  stock 
and  $300,000  of  bonds  for  work  worth 
but  $180,000  will  be  set  aside,  although 
$40,000  of  work  has  been  done.  The 
construction  company  will  be  repaid 
the  $40,000  in  cash.  See  S.  C,  23  Fed. 
Rep.,  214  (1885),  holding  that  the  con- 
tractor may  recover  back  not  only  this, 
but  also  a  reasonable  compensation  and 
interest 

Receiving  the  subscriber's  note  in  pay- 
ment for  stock  does  not  render  the  stock 
void,  under  this  constitutional  provision. 
Pacific  Trust  Co.  v.  Dorsey,  13  Pac.  Rep, 
148  (Cal.,  1887) ;  Pacific  Trust  Co.  v.  Dor- 
sey, 12  Pac.  Rep.,  49  (Cal.,  1886). 

The  supreme  court  of  the  United 
States  in  Memphis,  etc.,  R.  R.  Co.  v. 
Dow,  120  U.  S.,  287  (1887),  held  that  this 
provision  did  not  invalidate  a  transac- 
tion upon  the  reorganization  of  a  com- 
pany after  a  foreclosure  of  its  property. 

69 


and  a  purchase  of  the  property  by  a 
committee  for  the  bondholders,  whereby 
they  took  in  payment  of  such  property 
the  bonds  and  stock  of  the  new  corpo- 
ration, even  though  the  stock  alone  of 
the  new  company  thus  taken  was,  at  its 
par  value,  equal  to  the  value  of  the  prop- 
erty involved. 

If  the  tangible  property  of  the  corpo- 
ration is  actually  in  excess  of  the  par 
value  of  the  capital  stock,  then  a  stock 
dividend  to  the  extent  of  that  excess 
would  be  legal,  but  the  proceedings  to 
declare  the  stock  dividend  must  show 
these  facts  or  the  dividend  will  be  en- 
joined. Fitzpatrick  v.  Dispatch,  etc., 
Co.,  83  Ala.,  604  (1887).  The  court  very 
judiciously  changed  the  reasoning  of  its 
opinion  as  reported  in  2  S.  Rep,  727. 

Where  all  the  stock  and  a  large 
quantity  of  bonds  are  issued  by  a  rail- 
road corporation  to  its  contractor  in 
payment  for  the  construction  of  the 
road,  the  contractor  is  not  liable  to  cor- 
porate creditors  on  the  stock,  even  though 
the  bonds  were  a  sufficient  consideration 
for  building  the  road,  unless  the  corporate 
creditors  prove  that  the  stock  at  the 
time  of  its  issue  had  a  real  or  market 
value.  "If  when  disposed  of  by  the 
railroad  company  it  was  without  value, 
no  wrong  was  done  to  creditors."  Even 
the  Missouri  constitution  and  statutes 
do  not  change  this  rule.  Fogg  v.  Blair, 
139  U.  S.,  118  (1891). 


A  contract  calling  for  "original 
ground  floor  or  treasury  stock  "  means 
any  of  the  stock  that  is  issued,  where 
the  statutes  prohibit  fictitious  stock.  All 
the  stock  is  then  presumed  to  be  "ground 
floor"  stock  and  to  represent  at  par  the 
actual  value  received.  Williams  v. 
Searcy,  10  S.  Rep.,  632  (Ala.,  1891). 

Land  may  be  turned  in  in  payment 
for  stock  even  at  an  overvaluation  where 


§47.] 


"  WATERED  " 


STOCK. 


[CH.  III. 


The  trouble  with  such  remedies  is,  that  they  attempt  to  cure  the 
evil  after  it  has  been  consummated,  instead  of  attempting  to  pre- 
vent its  occurrence. 


the  valuation  is  set  forth  in  the  incor- 
poration papers  under  the  Pennsylvania 
act.  Cock  v.  Bailey,  23  Atl.  Rep.,  370 
(Pa.,  1892). 

Stock  issued  as  full  paid  for  no  con- 
sideration whatsoever  is  void  under  the 
constitutional  provision  that  stock  shall 
be  issued  only  "  for  labor  done,  services 
performed,  or  money  or  property  actu- 
ally received."  The  original  holder  of 
such  stock  cannot  institute  a  suit  to 
remedy  a  wrong  done  to  the  corporation 
by  its  president  Arkansas,  etc.,  Co.  v. 
Farmers',  etc.,  Co.,  22  Pac.  Rep,  954 
(Colo.,  1889). 

A  contract  by  a  corporation  that  it 
will  issue  its  stock  for  one-fifth  of  its  par 
value  is  void  under  the  Alabama  consti- 
tutional prohibition.  The  subscriber 
having  sold  his  contract  to  another  per- 
son cannot  collect  on  such  sale.  Will- 
iams v.  Evans,  6  S.  Rep.,  702  (Ala.,  1889). 
See,  also,  concerning  the  rule  in  Ala- 
bama, Knox  v.  Childersberg,  etc.,  Co., 
5  S.  Rep,  579  (Ala.,  1889). 

The  person  to  whom  stock  ha3  been 
issued  in  payment  for  property  may  do- 
nate a  part  of  it  as  a  bonus  to  go  with 
bonds  sold  at  par  directly  from  the  cor- 
poration to  the  person  taking  the  bonus. 
The  value  of  the  property  in  this  case 
was  not  proved.  Davis  v.  Montgomery, 
etc.,  Co.,  8  S.  Rep.,  496  (Ala.,  1890). 

Where  parties  pay  $5,000  on  a  $55,000 
contract  to  buy  land  and  then  organize 
a  corporation  and  turn  this  contract 
into  the  corporation  for  $250,000  of 
stock  issued  as  full  paid,  the  company 
agreeing  to  pay  the  other  $50,000,  they 
are  liable  to  corporate  creditors  for  the 
difference  between  $250,000  and  the 
value  of  the  property.  The  constitution 
and  statute  of  Alabama  forbid  such  a 
transaction.  Elyton,  etc.,  Co.  v.  Birm- 
ingham, etc.,  Co.,  9  S.  Rep.,  129  (Ala., 
1891). 

In  the  case  of  Coe  v.  East,  etc.,  R  R, 


52  Fed.  Rep.,  531  (1892).  the  court  held 
that  the  above  provision  in  Alabama 
against  watered  stock  and  bonds  did  not 
invalidate  bonds,  although  $10,000  of 
bonds  and  $10,000  of  stock  were  issued 
for  every  mile  of  road  constructed,  even 
though  it  cost  much  less  than  $20,000 
cash  per  mile. 

Where  $100,000  of  bonds  and  $125,000 
of  stock  are  issued  in  payment  of  con- 
struction work  of  the  value  of  $121,000, 
the  bonds  are  valid  and  may  be  en- 
forced by  bona  fide  purchasers.  Wood 
v.  Cony,  etc.,  Co.,  44  Fed.  Rep.,  146 
(1890).  This  last  case  held  also  that 
only  the  state  could  object  to  an  issue 
of  "watered  "  stock  and  bonds  as  being 
in  violation  of  this  constitutional  pro- 
vision. 

The  constitutional  provision  in  Ala- 
bama forbidding  the  issue  of  stock  or 
bonds  except  for  value,  and  the  stat- 
utory provision  requiring  subscriptions 
to  railroad  stock  to  be  paid  in  money, 
labor  or  property  at  their  money  value, 
does  not  prevent  one  railroad  company 
selling  its  property  to  another  railroad 
company  for  bonds  and  stock  of  the  lat- 
ter, and  the  value  placed  upon  the  prop- 
erty may  be  its  net  earning  power  and 
the  cost  of  rebuilding  it.  It  is  immate- 
rial that  the  original  cost  was  much 
less.  Grant  tt  East,  etc.,  Co.  of  Ala.,  54 
Fed.  Rep.,  569  (1893). 

Although  the  statutes  authorize  the 
directors  to  dispose  of  the  capital  stock 
at  any  time  remaining  unpaid  in  such 
manner  as  the  by-laws  may  prescribe, 
yet  this  does  not  authorize  the  issue  of 
stock  for  cash  at  less  than  par.  Mathis 
v.  Pridham,  20  S.  W.  Rep.,  1015  (Tex.,  1892). 

Where  stock  is  issued  as  full  paid  for 
labor  done  and  the  good  faith  is  not 
questioned  and  the  consideration  was 
performed,  the  stockholders  cannot  be 
held  liable  on  the  stock  as  not  being 
paid  up  in  full.     Holly  Mfg.  Co.  v.  New 


?0 


CH.  III.] 


"  WATERED  " 


STOCK. 


[§47. 


Statutes  are  found  in  some  of  the  states  on  this  subject.  There 
have  been  a  large  number  of  decisions  under  these  various  statutes, 
and  those  decisions  have  been  confused  with  the  cases  which  were 
decided  on  the  common  law  alone.  The  following  are  some  of 
these  statutes: 

In  New  York  directors  in  manufacturing  corporations  are  made 
personally  liable  for  all  corporate  debts,  if,  in  the  reports  which 
they  are  required  to  file,  they  misstate  facts.  Accordingly,  if  they 
state  the  capital  stock  to  have  been  paid  up,  when  in  fact  it  was 
paid  for  by  property  taken  at  a  fraudulent  overvaluation,  then 
the  penalty  applies.  Most  of  the  New  York  cases  on  watered  stock 
have  arisen  under  this  statute.  Under  this  statute  the  court  of 
appeals  were  at  first  in  doubt  whether  proof  of  a  mere  overvalu- 
ation of  the  property  was  sufficient  to  set  aside  the  payment  as  a 
full  payment,  or  whether  it  was  necessary  for  the  plaintiff  to  prove 


Chester,  etc.,  Co.,  48  Fed.  Rep.,  879 
(1891). 

The  issue  of  stock  in  violation  of  this 
provision  of  the  constitution  renders  the 
charter  liable  to  forfeiture  by  the  state. 
State  v.  Atchison,  etc.,  R  R,  38  N.  W. 
Rep.,  43  (Neb.,  1888). 

A  contractor  who  receives  bonds  in 
payment  of  construction  work  and  sells 
them  cannot  claim  that  they  are  void 
as  contrary  to  the  statute  prohibiting 
"watered"  bonds.  Reed's  Appeal,  16 
Atl.  Rep.,  100  (Pa.,  1888). 

Where  a  consolidated  company  of 
New  York  and  Pennsylvania  issues 
bonds  in  New  York,  fictitiously,  such 
bonds  cannot  be  enforced  in  Pennsyl- 
vania, since  they  are  void  by  its  consti- 
tution. A  foreclosure  in  New  York  of 
the  mortgage  securing  the  bonds  may 
be  set  aside  and  the  bonds  declared 
void.  Pittsburgh,  etc.,  R  R  Co.'s  Ap- 
peal, 4  Atl.  Rep.,  385  (Penn.,  1886). 

The  fact  that  a  contractor  received 
stock  and  bonds  four  times  in  par  value 
the  value  of  the  work  is  not  fatal, 
where  no  fraud  is  alleged  and  the  actual 
cost  of  the  work  is  not  alleged.  But 
where  the  contractor  then  entered  into 
a  contract  whereby  the  mortgage  was 
to  be  foreclosed,  and  he  was  to  partici- 
pate in  the  property  purchased  at  the 
sale,  all  for  the  purpose  of  cutting  off 


other  creditors,  he  is  liable  to  them. 
Cleveland,  etc.,  Co.  v.  Crawford,  9  R'y  & 
Corp.  L.  J.,  171  (Chicago,  1891). 

In  regard  to  the  constitutional  pro- 
vision against  the  issue  of  fictitious 
bonds  and  stock,  the  supreme  court  of 
Alabama  has  said :  "  The  constitutional 
provision,  standing  by  itself,  does  not 
require  that  the  amount  of  money,  or 
the  value  of  the  labor  or  property,  for 
which  stock  or  bonds  are  issued,  shall 
correspond  with  the  face  value  of  the 
stock  or  bonds  for  which  it  is  issued." 
Hence  the  court  held  that  bonds  might 
be  issued  at  less  than  their  par  value, 
provided  that  some  substantial  value 
was  paid  for  them,  such  value  to  be  fair 
and  reasonable,  and  "  not  a  mere  trick 
or  device  to  evade  the  law."  Nelson  v. 
Hubbard,  11  S.  Rep.,  413  (Ala.,  1892). 

It  is  legal  for  a  company  to  issue 
$67,000  of  bonds  and  $67,000  of  full-paid 
stock  even  to  one  of  its  directors  for 
$67,000  in  cash,  if  this  was  all  that  the 
whole  $134,000  of  securities  were  worth 
and  if  all  the  directors  and  stockholders 
knew  of  it  and  agreed  to  it  The  pro- 
vision in  the  California  constitution  rel- 
ative to  watered  stock  and  bonds  does 
not  invalidate  them.  Union,  etc.,  Co.  v. 
Southern,  etc.,  Co.,  51  Fed.  Rep.,  840 
(1892). 


71 


§47.] 


"watered"  stock. 


[CH. 


Til. 


also  that  the  overvaluation  was  intentional  and  fraudulent.1  Later 
cases,  however,  have  firmly  established  the  principle  that  not  only 
must  proof  be  given  that  there  was  an  overvaluation  of  the  prop- 
erty or  services  rendered,  but  proof  also  must  be  given  that  such 
overvaluation  was  intentional  and  consequently  fraudulent.2 

The  property  is  not  to  be  considered  as  overvalued  merely  be- 
cause, subsequently,  it  turns  out  to  be  so.  The  various  circum- 
stances under  which  the  valuation  was  made  should  be  considered 
in  determining  the  bona  fries  of  the  transaction.3  The  questions 
as  to  whether  there  was  an  overvaluation  of  the  property,  and 
whether  that  overvaluation  was  intentional  and  fraudulent,  are 
generally  questions  of  fact  to  be  submitted  to  the  jury.4  Where, 
however,  the  overvaluation  is  so  great  as  to  bear  evidence  upon  its 
face  that  it  was  intentional  and  fraudulent,  the  court  will  hold  that, 
unless  the  transaction  is  reasonably  explained,  there  is  no  question 
of  fact  for  the  jury,  but  that,  as  a  matter  of  law,  the  overvaluation 
Avas  fraudulent.  Various  cases  which  have  arisen  under  this  stat- 
ute are  given  in  the  notes  below.5 

1  Boynton   v.  Hatch,    47    N.    Y.,   225    held,  as  a  presumption  of  law,  that  the 


(1872).  Three  of  the  judges  held  that 
proof  of  fraud  was  necessary,  and  three 
that  it  was  not  necessary.  All  con- 
curred in  holding  that  proof  of  over- 
valuation was  competent  and  neces- 
sary. 

a  Douglas  v.  Ireland,  73  N.  Y.,  100 
(1878);  Schenckv.  Andrews,  57  N.  Y, 
133  (1874);  Boynton  v.  Andrews,  63  N. 
Y,  93  (1875) ;  Lake  Superior  Iron  Co.  v. 
Drexel,  90  N.  Y,  87  (1882). 

3Schenck  v.  Andrews,  57  N.  Y,  133 
(1874).  In  Coit  v.  North  Car.  Gold 
Amal.  Co.,  14  Fed.  Rep.,  12  (1882),  the 
court  said  corporators  "  ought  not  to  be 
made  liable  individually  for  the  debts 
of  the  company  at  the  instance  of  cred- 
itors, because,  at  a  later  day,  the  esti- 
mate fairly  put  upon  the  property  at 
that  time  has  become  modified  by  sub- 
sequent events  and  will  not  amount  to 
the  value  which  they  set  upon  it"  Af- 
firmed, 119  U.  S.,  343  (1886). 

*  Boynton  r.  Hatch,  47  N.  Y,  225 
(1872);  Lake  Superior  Iron  Co.  v.  Drexel, 
90  N.  Y,  87  (1882). 

5  Thus,  where  stock  for  $300,000  was 
issued  for  property  which  the  jury 
found  to   be  worth   $64,000,  the  court 


transaction  was  fraudulent.  Tou  jlas  v. 
Ireland,  73  N.  Y,  100  (1878).  In  another 
case,  involving  the  same  facts,  the  trial 
court  submitted  the  question  to  the 
jury.  Brockway  v.  Ireland,  61  How. 
Pr.,  372  (1880). 

In  another  case,  where  stock  for 
$100,000  was  issued  for  property  worth 
not  more  than  $50,000,  the  court  held 
that,  in  the  absence  of  evidence  to  ex- 
plain the  presumption  of  fraud,  there 
was  no  question  for  the  jury,  and  that 
the  transaction  was  fraudulent  upon  its 
face.  Boynton  v.  Andrews,  63  N.  Y,  93 
(1875).  An  issue  of  $190,000  of  stock 
for  property  worth  $27,500  was  held  to 
be  a  fraudulent  overvaluation,  as  a  mat- 
ter of  law.  Osgood  v.  King,  42  Iowa, 
478  (1876).  The  case  of  Lake  Superior 
Iron  Co.  v.  Drexel,  90  N.  Y,  87,  tends  to 
make  the  valuation  of  the  property  a 
question  for  the  jury  exclusively.  In 
that  case  stock  for  $2,500,000  was  issued 
for  property  in  a  patent;  $900,000  of 
the  stock  was  returned  to  the  corpora- 
tion as  a  gift.  The  court  held  that  the 
question  of  fraud  was  for  the  jury. 
This  case  was  followed  in  Draper  v. 
Beadle,    16    "Weekly   Dig.,    475    (1883), 


72 


CH. 


III.] 


"  WATERED  " 


STOCK. 


[§*7. 


Under  the  ~New  York  statute  stockholders  also  are  liable  in  cer- 
tain companies  to  double  the  amount  of  their  stock  until  a  certifi- 
cate is  filed  to  the  effect  that  the  capital  stock  is  all  paid  in.1 


Supm.  Ct.  N.  Y.,  Gen.  T.  In  Bolz  v. 
Eidder.  19  Weekly  Dig.,  463  (1884),  N.  Y. 
Cora.  PI.,  the  remarkable  rise  in  value  of 
a  patent-right  from  $1,000  to  $100,000, 
when  sold  for  stock  issued  in  payment 
therefor,  was  held  to  be  only  presump- 
tively fraudulent,  and  may  be  explained 
sufficiently  to  raise  a  question  for  the 
jury.  The  directors  in  estimating  the 
value  of  property  may  take  the  opinion 
of  experts  and  rely  thereon.  Brockway 
v.  Ireland,  61  How.  Pr.,  372  (1880).  See, 
also,  Knowles  v.  Duffy,  40  Hun,  485  (1886). 
Of.  Thurston  v.  Duff y.  38  Hun,  327  (1885). 

Under  the  New  York  statute,  where 
patents  worth  $75,000  are  transferred  to 
the  corporation  in  payment  for  $300,000 
of  stock,  and  $100,000  of  the  stock  is  at 
once  donated  to  the  company  by  the 
inventor,  and  other  stock  is  at  once 
sold  by  him  for  about  one-third  of  the 
par  value,  the  only  fraudulent  intent 
that  need  be  proved  is  that  the  directors 
knew  that  the  patents  were  not  worth 
$300,000.  National  Tube,  etc.,  Co.  v.  Gil- 
fillan,  124  N.  Y,  302  (1890). 

In  determining  whether  property  is 
worth  the  par  value  of  stock  which  is 
issued  for  it,  the  intrinsic  or  market 
value  is  the  test,  but  the  jury  may  con- 
sider also  "  its  value  for  the  use  to  which 
it  was  to  be  put,  and  the  adaptability  of 
it  to  any  specific  purpose,  and  any  pe- 
culiar advantages  it  then  had."  Hunt- 
ington v.  Attrill,  118  N.  Y,  365  (1890). 
The  evidence  of  experts  as  to  the  value 
of  similar  property  is  not  admissible.  Id. 


Under  the  New  York  statute,  where 
property  worth  but  $60,000  is  turned  in 
for  $1,000,000  of  stock  and  $200,000  of 
bonds,  the  act  is  fraudulent.  Blake  v. 
Griswold,  103  N.  Y.  429  (1886),  sustain- 
ing a  finding  of  the  special  term  to  that 
effect.  See,  also,  Hatch  v.  Attrill,  id., 
383  (1890). 

In  the  case  Chittenden  v.  Thaunhau- 
ser,  47  Fed.  Rep.,  410  (1891).  the  court 
held  the  directors  liable  under  the  stat- 
ute for  a  false  report,  where  $1,500,000 
of  stock  was  issued  for  mines  and  prop- 
erty which  was  offered  for  sale  at  about 
the  same  time  for  $150,000. 

In  Ferguson  v.  Gill,  64  Hun,  284 
(1892),  $100,000  of  stock  was  issued  for  a 
patent  which  turned  out  to  be  worthless. 
The  statute  made  the  directors  liable  if 
they  knew  this  fact.  The  court  held 
that  the  officers  were  entitled  to  prove 
the  c  on  versation  at  which  the  value  was 
fixed  upon. 

In  Thurber  v.  Thompson,  21  Hun,  472 
(1880),  the  court  said  the  jury  should 
have  before  them  "evidence  of  the  prob- 
able enhanced  value  growing  out  of  the 
contemplated  improvements  made  and 
to  be  made  by  the  company,  and  of  the 
public  improvements  which  were  ex- 
pected to  add  largely  to  the  value  of 
the  land  for  the  new  objects  and  pur- 
poses to  which  it  was  to  be  devoted.  It 
would  be  extremely  unjust  to  such  a 
company  as  this  to  hold  that  farming 
lands  upon  which  the  site  of  a  city  or 
town  is  about  to  be   established,   and 


1  It  has  been  held  that  an  issue  of 
$300,000  of  full-paid  stock  for  a  right  to 
apply  for  patents,  if  found  by  the  jury 
to  be  an  intentional  overvaluation  of 
that  right,  subjects  a  transferee  of  any 
of  the  shares,  taking  with  notice  of  all 
the  facts,  to  this  statutory  liability  in  New 
York  to  an  amount  equal  to  the  par 


value  of  the  stock.     National,  etc.,  Co. 
v.  Gilfillan,  46  Hun,  248  (1887). 

Under  the  statute  creating  a  double 
liability  until  the  stock  is  fully  paid,  a 
creditor  may  show  that  propert}'  was 
taken  at  an  overvaluation  knowingly 
and  fraudulently  and  may  then  enforce 
the  liability.  Goodrich  v.  Dorman,  14 
N.  Y.  Supp.,  879  (1891). 


73 


§  47.] 


"  WATERED  " 


STOCK. 


[CH.  III. 


In  Ohio,  by  statute,  an  issue  of  stock  to  a  director,  directly  or 
indirectly,  for  less  than  the  par  value  thereof,  is  void.1 

In  Maine  the  statutes  are  construed  so  as  to  render  stockholders 
liable  to  corporate  creditors  where  property  is  taken  in  payment 
at  an  overvaluation.2     So  also  in  Wisconsin.3 


which  are  brought  for  that  purpose,  and 
mapped,  platted  and  subdivided  into 
city  or  village  lots,  are  -to  be  viewed, 
upon  a  question  of  overvaluation, 
merely  as  agricultural  land." 

See,  also,  Huntington  v.  Attrill,  42 
Hun,  459  (1886),  (aff'd,  see  supra),  where 
land  costing  $80,000  was  turned  in 
for  $700,000  of  stock.  The  finding  of 
the  jury  that  the  act  was  fraudulent 
was  sustained  on  appeal.  And  where 
property  worth  but  $60,000  is  turned  in 
for  $1,000,000  of  stock  and  $200,000  of 
bonds,  the  act  is  fraudulent  as  a  matter 
of  law.  Blake  v.  Griswold,  103  N.  Y.,  429 
(1886). 

In  New  York,  under  the  statute  allow- 
ing the  incorporation  of  manufacturing 
companies,  it  has  been  assumed  that  an 
issue  of  stock  as  paid  up  for  cash,  at 
less  than  its  par  value,  is  void.  Spring 
Co.  v.  Knowlton,  103  U.  S.,  49  (1880); 
Knowlton  v.  •Congress  and  Empire 
Spring  Co.,  14  Blatch.,  364  (1877); 
Knowlton  v.  Congress,  etc.,  Co.,  57 
N.  Y,  518  (1874).  These  three  decisions 
arise  from  the  litigation  of  a  single  case. 
After  being  reversed  in  the  New  York 
court,  it  was  removed  into  the  federal 
court.  In  all  three  decisions  the  inva- 
lidity of  the  stock  was  conceded  by 
both  parties.  The  federal  courts  dif- 
fered from  the  state  courts,  and  held 
that  a  person  partly  paying  for  such 
illegal  stock  may  recover  back  such 
payment,  although  he  had  allowed  the 
stock  to  be  forfeited  for  non-payment 
of  further  calls. 

Under  the  New  York  Manufacturing 
Company  Act  providing  for  the  issue  of 
stock  for  property  "  to  the  amount  of 
the  value  thereof,"  the  value  of  the 
property  must  equal  the  par  value  of 
the  stock.  Gamble  v.  Queens,  etc.,  Co., 
123  N.  Y,  91  (1870),  the  court  referring 


to  and  affirming  Van  Cott  v.  Van  Brunt, 
82  N.  Y.,  535,  as  being  a  decision  sus- 
taining the  common-law  right  to  issue 
stock  below  par. 

In  estimating  the  value  of  property 
turned  in  to  a  corporation  in  payment 
of  stock  a  fair  profit  to  the  contractor 
is  to  be  allowed.     Id. 

Section  3313  of  the  Revised  Statutes 
of  Ohio  sets  forth  that  "  all  capital 
stocks,  bonds,  notes  or  other  securities 
of  a  company  purchased  of  a  company 
by  a  director  thereof,  either  directly  or 
indirectly,  for  less  than  the  par  value 
thereof,  shall  be  null  aud  void."  In 
Zabriskie  v.  Cleveland,  C.  &  C.  R.  R. 
Co.,  23  How.,  381  (1859),  this  provision 
was  held  hot  to  affect  the  liability  of  a 
guarantor  of  such  bonds. 

But  in  Union  Trust  Co.  v.  N.  Y.,  etc., 
R.  R.  Co..  1  R'y  &  Corp.  L.  J.,  50  (Ohio 
Com.  PI.,  1887),  the  court,  in  applying 
this  statute,  held  that,  where  fifty  mill- 
ions of  paid-up  stock  and  fifteen  mill- 
tion  of  bonds  are  given  to  a  syndicate, 
of  which  a  director  is  a  member,  for 
eighteen  millions  of  money,  the  stock 
and  bonds  and  the  mortgage  securing 
the  bonds  are  void. 

-  In  Maine  it  is  held  that  where  prop- 
erty purchased  by  individuals  for 
$6,667.67  is  turned  in  to  the  corporation 
for  $240,000  of  full-paid  stock,  the  stock- 
holders are  liable  on  the  stock  as  though 
the  subscription  price  had  not  been  paid. 
This  decision  is  made  under  the  statute 
that  property  shall  be  taken  "at  a  bona 
fide  and  fair  valuation  thereof."  In  this 
case  a  part  of  the  stock  was  turned  back 
as  treasury  stock  and  sold  at  a  small 
figure.  The  court  expressly  stated  that 
its  decision  was  based  on  the  statute  and 
that  alone.  Libby  v.  Tobey,  19  Atl.  Rep., 
904  (Me.,  1890). 

3  In  Wisconsin  under  the  statutes  and 


74 


nr.  in.] 


"  WATERED  " 


STOCK. 


[§47. 


A  statute  prohibiting  the  sale  of  stock  below  par  does  not  pre- 
vent the  corporation  from  pledging  it,  and  a  sale  of  the  stock  by 
the  pledgee  below  its  par  value  is  legal.1 

There  have  been  decisions  under  the  Missouri  statutes  in  addition 
to  those  under  the  constitutional  provision  referred  to  above. 
And  various  other  states  have  statutes  on  this  subject.3 


also  under  the  common  law  as  under- 
stood by  the  courts  of  that  state,  stock- 
holders who  paid  for  their  stock  by 
turning  in  mining  property  known  to 
them  to  be  worth  only  one-tenth  of  the 
par  value  of  the  stock  are  liable  for  the 
remaining  nine-tenths  of  the  par  value 
to  corporate  creditors.  The  question  of 
whether  the  creditors  knew  all  the  facts 
is  a  matter  to  be  set  up  in  defense. 
Gogebic  Inv.  Co.  v.  Iron,  etc.,  Co.,  47  N. 
W.  Rep.,  726  (Wis.,  1891). 

i  Peterborough,  etc.,  R.  R  Co.  v. 
Nashua,  etc.,  R  R  Co.,  59  N.  H.,  385 
(1879). 

2  In  Missouri  a  contractor  who  was 
paid  in  bonds  and  stock  was  held  liable 
to  corporate  creditors  for  the  par  value 
of  the  stock  over  and  above  the  mai-ket 
price  of  all  the  bonds  and  stock  so  given, 
where  such  value  was  greater  than  a 
reasonable  price  for  the  contract  work. 
The  court  said  "  that  where  an  agree- 
ment is  entered  into   between  a  con- 
tractor and  a  corporation,  whereby  the 
former  is  to  perform  work  for,  or  fur- 
nish material  to,  the  latter,  and  to  take 
unpaid  stock  in  part  or  in  full  payment, 
that  such  contractor,  whether  for  labor 
or   material,  can  only  charge   therefor 
the  reasonable   market  value  for  such 
labor    or    material   thus    given   in  ex- 
change ;  and  that  all  agreements  by  the 
corporation  to  pay  more  than  such  rea- 
sonable   compensation    will    be    disre- 
garded   and    held    for    naught   by  the 
courts   where  the  rights  of  creditors 
intervene ;  and  this    is  the  case  even 
though  no  fraud  be  proven."     Shickle 
v.  Watts,  7  S.  W.  Rep.,  276  (Mo.,  1888). 

Where  all  the  stock  and  a  large  quan- 
tity of  bonds  are  issued  by  a  railroad 
corporation  to  its  contractor  in  payment 


for  the  construction  of  the  road,  the 
contractor  is  not  liable  to  corporate 
creditors  on  the  stock,  even  though  the 
bonds  were  a  sufficient  consideration  for 
building  the  road,  unless  the  corporate 
creditors  prove  that  the  stock  at  the 
time  of  its  issue  had  a  real  or  market 
value.  "If,  when  disposed  of  by  the 
railroad  company,  it  was  without  value, 
no  wrong  was  done  to  creditors."  Even 
the  Missouri  constitution  and  statutes 
do  not  change  this  rule.  Fogg  v.  Blair, 
139  U.  S.,  118  (1891). 

In  the  case  of  Northwestern,  etc.,  Ins. 
Co.  v.  Cotton,  etc.,  Co.,  46  Fed.  Rep,  22 
(1891),  the  court  held  that  where  prop- 
erty worth  $157,000  is  turned  into  a  cor- 
poration for  $200,000,  payable  in  $125,000 
of  stock  and  $75,000  of  bonds,  the  cred- 
itors of   the   company  might   hold   the 
parties  liable  on  the  stock,  as  though  it 
were  unpaid  stock,  and  the  creditor  is 
presumed   not  to  have  known  of  the 
transaction  when  he  contracted  the  debt. 
3  See  part  VII,  infra. 
In  the  case  Brown  v.  Duluih,  etc.,  R'y, 
53   Fed.  Rep,  889  (1893),  the  court  re- 
fused to  enjoin  an  issue  of  stock  and 
refused  to  cancel  stock  already  issued 
although  $900,000  of  bonds  and  $945,000 
of  stock  were  issued  for  construction 
work  which  cost  $580,000.    The  court  so 
held,  although  the  statute  required  the 
stock  to  be  fully  paid,  and  prohibited 
issues   except  for  property  actually  re- 
ceived.    The  plaintiff,  however,  was  a 
holder  who  purchased  with  full  knowl- 
edge of    the  facts.      The    court    said : 
"  This  statute  was  not  intended  to  pre- 
vent or  interfere  with  the  usual  method 
of   raising  money  to  build  railroads  or 
for  any  legitimate  corporate   purpose. 
It  is  not  to  be  construed  as  obstructive 

tO 


§47.] 


" WATERED  " 


STOCK. 


[CH.  III. 


In  England,  in  1863,  the  Companies  Clauses  Consolidation  Act1 
prohibited  the  issue  of  new  stock  for  a  price  less  than  its  par  value. 
An  amendment  thereto  in  1869 2  struck  out  this  prohibition,  and 
gave  power  to  the  directors  to  issue  stock  on  such  terms  and  con- 
ditions as  they  saw  fit.  The  Kailway  Companies  Act3  of  1867  is 
to  the  same  effect. 

In  England  the  issue  of  stock  for  property  or  services  is  largely 
regulated  by  statute.  On  account  of  the  many  frauds  perpetrated 
upon  the  public  by  the  issue  of  stock  for  property  taken  at  a  gross 
overvaluation,  parliament,  in  1867,  passed  an  act  requiring  all  con- 
tracts whereby  stock  was  issued  for  property  or  services  to  be 
publicly  registered,  under  penalty  of  the  payment  being  void.4 
Difficulty  then  arose  as  to  what  was  the  status  and  liability  of  a 
person  receiving  stock  for  property,  in  case  the  contract  therefor 
was  not  publicly  registered,  as  required  by  act  of  parliament.  The 
courts  finally  decided  that,  if  the  sums  due  reciprocally  were  ex- 
pressly offset,  then  that  the  stock  was  to  be  deemed  paid  for,  not- 
withstanding the  statute.5     But  a  mere  general  understanding  that 


to  the  extent  of  restricting  and  hamper- 
ing corporations  in  their  internal  man- 
agement, and  embarrass   them  in  pro- 
curing means  to  carry  out  the  legitimate 
purposes  of  the  corporation  ;  and  unless 
it  appears  that,  under  the  guise  of  build- 
ing its  road,  bonds  and  stock  of  the  de- 
fendant company  are  to  be  issued  and 
put  upon  the  market  fraudulently  that 
do  not  and  are  not  intended  to  represent 
money  and  property,  this  corporation  is 
not  prohibited  from  entering  into  a  real 
transaction  based  upon  a  present  con- 
sideration, and  having  reference  to  legit- 
imate corporate  purposes."    The  court 
also  said   that  "such  a  provision  does 
not  necessarily  indicate  a  purpose  to 
make  the  validity  of  every  issue  of  stock 
or  bonds  by  a  corporation  depend  upon 
the  inquiry  whether  the  money,  prop- 
erty or  labor  actually  received  therefor 
was  of  equal  value  in  the  market  with 
the  stock  or  bonds  so  issued." 
i  See  26  &  27  Vict,  ch.  118,  §  21. 

2  See  32  &  33  Vict.,  ch.  48,  §  5. 

3  See  30  &  31  Vict,  ch.  127,  §  27. 

«  30  &  31  Vict,  ch.  131,  §  25.  "  Every 
share  in  any  company  shall  be  deemed 
and  taken  to  have  been  issued  and  to 
be  held  subject  to  the  payment  of  the 


whole  amount  thereof  in  cash,  unless 
the  same  shall  have  been  otherwise  de- 
termined by  a  contract  duly  made,  in 
writing,  and  filed  with  the  registrar  of 
joint-stock  companies  at  or  before  the 
issue  of  such  shares."  Where  the  stock- 
holders apply  long  after  incorporation 
for  leave  to  file  with  the  public  register 
the  contract  whereby  stock  is  issued  for 
property,  the  court  will  require  them 
first  to  provide  for  existing  debts.  Re 
Darlington,  etc.,  Co.,  56  L.  T.  Rep.,  627 
(1887). 

A  mere  vote  of  stock  to  a  director  in 
compensation  for  his  services  does  not 
render  him  liable  thereon  for  failure  to 
register  the  contract,  unless  he  knows 
of  the  entry  of  his  name  as  holder  of 
the  shares  or  accepts  certificates  for  the 
same.  Arnot's  Case,  57  L.  T.  Rep.,  353 
(1887), 

s  Pell's  Case,  L.  R.,  5  Ch.  App.,  11 
(1869) ;  Ex  parte  Clarke,  L.  R,  7  Eq. 
Cas.,  550  (1869);  Nicoll's  Case,  L.  R,  7 
Ch.  Div.,  533  (1878).  See,  also,  §  23.  In 
Spargo's  Case,  L.  R,  8  Ch.  App.,  407 
(1873),  the  court  said :  "  If  the  parties 
account  with  each  other,  and  sums  are 
stated  to  be  due  on  one  side,  and  sums 
to  an  equal  amount  due  on  the  other 
7$ 


CH.  III.] 


"  WATERED  "    STOCK. 


[§4S. 


the  property  is  payment  for  the  stock  is  insufficient.  The  prohibi- 
tion in  the  statute  then  applies,  and  payment  in  cash  will  have  to 
be  made  upon  a  winding  up.1  The  point  decided  by  these  cases 
seems  to  have  been  misapprehended  in  a  few  American  cases.2 

Frequently  actions  herein  are  against  corporate  officers  who  di- 
rectly or  indirectly  received  the  stock.3  This  class  of  cases  is  con- 
sidered in  the  next  section. 

§  48.  Liability  of  the  officers  of  the  corporation. —  There  is  great 
difficulty  in  defining  clearly  and  accurately  the  liability  of  the 
corporate  officers  herein.  This  is  because  the  officers  may  have 
committed  an  ultra  vires  or  fraudulent  act;  or  may  have  partici- 
pated in  the  profits  as  promoters;  or  may  have  received  a  gift  of 
part  of  the  stock  from  the  parties  to  whom  they  issued  it. 

There  are  few  cases  holding  a  director  liable  for  loss  to  the  cor- 
poration where  an  issue  of  its  stock  for  money  or  property  less  in 
value  than  the  par  value  of  the  stock  has  been  made.  Such  an  ac- 
tion would  be  similar  in  its  character  to  the  numerous  cases  against 
directors  for  their  frauds  and  ultra  vires  acts.4 

In  a  suit  of  this  character,  however,  against  an  officer  of  the  cor- 
poration, he  is  liable  not  for  the  par  value  of  the  stock,  less  the 
value  of  the  property  or  labor  received  therefor,  but  at  the  most 


side  on  that  account,  and  those  accounts 
are  settled  by  both  parties,  it  is  exactly 
the  same  thing  as  if  the  sums  due  on 
both  sides  had  been  paid."  See,  also, 
Maynard's  Case,  22  Week.  R,  119;  Be 
Vulcan  Iron  Works,  Law  Times,  May, 
1885,  p.  61. 

i  Dent's  Case,  L.  R,  15  Eq.  Cas.,  407 
(1873);  Fothergill's  Case,  L.  R,  8  Ch. 
App,  270  (1873);  Crickmer's  Case,  L. 
R,  10  Ch.  App.,  614  (1875);  Rowland's 
Case,  42  L.  T.  (N.  S.),  785  (1880).  Per- 
son taking  stock  at  a  discount  for 
property  overvalued  may  withdraw. 
Re  Midland,  etc.,  Co.,  60  L.  T.  Rep.,  666 
(1889). 

2  See  Wethcrbee  v.  Baker,  35  N.  J. 
Eq.,  501  (1882). 

3  A  statement  filed  with  the  state  com- 
missioner as  required  by  statute,  in  re- 
gard to  the  amount  of  the  paid-up  stock, 
is  not  such  a  representation  as  will  sus- 
tain an  action  for  damages  for  fraudulent 
representations  inducing  a  person  to 
take  the  notes  of  the  company.     Hun- 


newell  v.  Duxbury,  28  N.  E  Rep.,  267 
(Mass.,  1891). 

In  an  action  by  a  treasurer  for  pay 
for  his  services  it  is  no  defense  that  the 
corporation  with  a  capital  fixed  at 
$1,000,000  had  $50,000  paid  in  in  cash 
to  comply  with  the  statute,  and  then 
the  remaining  capital  stock,  $950,000, 
together  with  the  cash  so  paid  in,  were 
issued  for  two  patents,  and  that  the 
treasurer  checked  out  therefor  the  said 
$50,000,  being  the  part  unexpended  at 
that  time.  Sears  v.  Kings  Count}'  El. 
R'y  Co.,  31  N.  E  Rep,  490  (Mass.,  1892). 

The  fact  that  the  corporate  officers 
have  filed  a  false  statement  as  to  the 
amount  of  paid-up  capital  stock  will 
not  sustain  an  action  for  damages  for 
fraud  in  inducing  a  party  to  take  the 
notes  of  the  corporation.  Representa- 
tions as  to  the  credit  of  a  corporation 
must  be  in  writing  in  order  to  be  ac- 
tionable under  the  Massachusetts  stat- 
ute. Hunnewell  v.  Duxbury  et  ah,  31 
N.  E.  Rep,  700  (Mass.,  1892). 

*  See  Part  IV. 


77 


§48.] 


"  WATERED  "    STOCK. 


[CH.  III. 


he  can  be  held  liable  only  for  the  market  value  of  the  stock,  less 
the  value  of  the  labor  or  property  received  by  the  corporation.1 

Where,  however,  the  directors  receive  a  part  of  the  stock  them- 
selves, either  by  its  issue  directly  to  themselves,  or  by  being  secret 
partners  with  those  to  whom  it  is  issued,  or  by  a  gift  to  them  from 
the  parties  to  whom  it  is  issued,  then  the  directors  may  be  com- 
pelled to  account  to  the  corporation  for  the  stock  actually  received 
by  themselves.  In  such  a  case,  however,  the  directors,  as  such,  cannot 
be  made  liable  on  the  watered  stock  issued  to  third  persons  and  still 
retained  by  them.  The  directors  are  liable  only  to  the  extent  that 
they  themselves  received  stock.  This  liability  arises  from  the  prin- 
ciple of  law  that  a  director  must  account  to  his  corporation  for  any 
secret  gift  that  may  be  made  to  him  by  persons  contracting  with 
the  corporation ;  and  must  account  also  for  profits  made  by  his 
secret  participation  in  contracts  between  the  corporation  and  third 
persons.2  In  such  cases  the  director  is  liable  to  the  corporation  or 
its  creditors,  not  for  the  par  value  of  the  stock  received  by  him,  but 
for  the  actual  value  of  the  stock,  or  for  the  profit  or  price  which 
he  received  therefor.3 


i  Continental  Tel.  Co.  v.  Nelson,  49  N. 
Y.  Super.  Ct,  197  (1883),  where  the  ques- 
tion as  to  what  was  the  market  value 
was  submitted  to  the  jury.  See,  also, 
Nott  v.  Clews,  14  Abb.  N.  C.  (N.  Y.),  437, 
overruling  a  demurrer.  In  this  case, 
however,  the  directors  had  received  part 
of  the  stock  as  a  gift.  See,  also,  Os- 
good v.  King,  42  Iowa,  478  (1876) ;  but 
see  Flagler,  etc.,  Co.  v.  Flagler,  19  Fed. 
Eep.,  468  (1884);  Langdon  v.  Fogg,  18 
Fed.  Rep.,  5  (1883);  S.  C,  in  state  court, 
14  Abb.  N.  C.  (N.  Y),  435. 

2  See  §§  649,  650,  and  cases  in  notes 
thereto. 

s  In  Carting's  Case,  L.  R,  1  Ch.  D.,  115 
(1875),  where  the  person  receiving  stock 
for  property  taken  at  an  overvaluation 
gave  part  of  it  to  a  corporate  director, 
the  court  held  that  the  corporation 
could  demand  of  the  director  either  the 
stock,  or  the  profit  realized  by  him,  or 
the  profits  thereby  lost  by  the  corpora- 
tion, but  could  not  compel  him  to  pay 
the  full  par  value  of  the  stock.  In  De 
Ruvigne's  Case,  L.  R,  5  Ch.  D.,  316 
(1876),  where  shares  of  stock  were  is- 
sued as  paid  up  to  a  person  for  services 
palpably  overvalued,  and  he  transferred 


a  part  of  the  stock  to  a  director,  De 
Ruvigne,  the  court  said :  "  If  the  com- 
pany attempt  to  make  the  appellant 
[director]  a  contributor,  and  they  al- 
lege fraud  in  the  original  agreement  by 
which  he  was  to  take  the  shares,  they 
must  either  throw  over  the  agreement 
altogether,  or  they  must  take  it  alto- 
gether ;  they  cannot  adopt  it  as  to  one 
part  and  reject  it  as  to  the  rest."  The 
court  said  the  director  could  be  held 
liable  for  breach  of  trust  and  be  made 
to  pay  to  the  corporation  the  selling 
value  of  the  shares ;  and  since  some  of 
the  stock  was  sold  at  par,  he  was  charge- 
able with  the  par  value  of  the  stock  so 
received  by  him. 

In  Anderson's  Case,  L.  R,  7  Ch.  D.,  75, 
94,  the  court  held  that,  if  shares  were 
improperly  issued  to  a  director  at  a  dis- 
count, the  contract  might  be  set  aside 
and  the  consideration  returned,  or  the 
profits  realized  by  him  might  be  re- 
covered. In  Currie's  Case,  3  De  Gex, 
J.  &  S.,  367  (1863),  where  shares  were 
taken  both  directly  and  indirectly  by 
the  corporate  officers  for  property  and 
services  grossly  overvalued,  the  court 
held  that  the  transaction  might  be  un- 
78 


CH. 


III.] 


U  WATERED  " 


STOCK. 


[§48. 


There  is  still  another  class  of  cases,  in  which  a  director  acts  also 
as  a  promoter  of  the  company  and  receives  stock  for  his  services. 
He  then  is  liable  to  account  to  the  corporation  therefor,  not  only 
as  a  director,  but  also  as  a  promoter.1 

Another  class  of  cases  may  exist  where  the  directors  vote  stock 
to  themselves  in  payment  for  their  services  to  the  company.2 

Whether  the  directors  are  liable  herein  to  purchasers  of  stock  or 
to  corporate  creditors  in  an  action  for  deceit  is  an  open  question.3 


done  altogether  for  fraud,  but  there 
was  no  liability  on  their  part  to  con- 
tribute anything  on  the  shares.  The 
only  remedy  is  to  set  aside  the  transac- 
tion and  recover  the  profits  thereof. 
Langdon  v.  Fogg,  18  Fed.  Rep.,  5  (1883) ; 
S.  C,  14  Abb.  N.  C.  (N.  Y.),  435,  holding 
that  the  directors  are  not  liable  to  the 
corporation  for  the  par  value  of  stock 
issued  to  their  dummy  for  property  and 
then  transferred  to  themselves.  See, 
also,  §  650,  infra,  and  cases  in  notes. 

In  the  case  of  Re  Ambrose  Lake  T. 
&  C.  Minn.  Co.,  L.  R,  14  Ch.  D.,  390 
(1880),  it  was  held  that  where  all  the 
stockholders  acquiesced,  and  there  were 
no  creditors'  rights  involved,  the  cor- 
poration cannot  recover  from  its  direct- 
ors profits  realized  by  them  from  shares 
issued  to  them  as  paid  up  in  considera- 
tion of  property  taken  at  a  gross  over- 
valuation. The  corporation  was  held 
to  be  in  no  position  to  complain.  In 
Van  Cott  v.  Van  Brunt,  82  N.  Y.,  535 
(1880),  where  the  facts  were  very  much 
the  same  as  in  the  preceding  case,  the 
court  said :  "  If  the  defendant  [director 
and  president]  had  realized  a  sum  be- 
yond the  amount  actually  expended, 
there  might  have  been,  perhaps,  some 
ground  for  claiming  that  the  arrange- 
ment would  inure  to  and  for  the  bene- 
fit of  the  company."     Page  541. 

1  See  the  important  case  of  Chandler 
v.  Bacon,  30  Fed.  Rep.,  538(1887);  also, 
§  651,  infra,  and  cases  cited.  In  Iowa 
where  "watered"  stock  is  given  as  a 
gift  by  the  patentees  to  a  promoter,  who 
afterwards  became  the  first  president  of 
the  company,  he  is  liable  to  corporate 
creditors  for  all  the  "water"  there  is  in 


the  stock.     Boulton  Carbon  Co.  v.  Mills, 
43  N.  W.  Rep.,  290  (Iowa,  1889). 

2  See  §  657,  infra. 

3  See  §§  157,  158,  355. 

A  sale  or  pledge  of  stock  stamped 
"non-assessable,"  when  in  fact  it  was 
,not  legally  paid  paid  up,  renders  liable 
for  false  representations  the  president 
and  secretary  who  made  such  sale  or 
pledge  and  who  knew  that  it  was  not 
paid-up  stock.  Windram  v.  French,  24 
N.  E.  Rep.,  914  (Mass.,  1890). 

In  Bartholomew  v.  Bentley,  15  Ohio, 
659  (1846),  certain  persons  incorporated 
a  bank,  incurred  large  debts,  then  sold 
their  stock  to  the  bank  and  left  the 
creditors  nothing.  A  creditor  brought 
an  action  on  the  case  for  fraud.  The 
court  sustained  the  action,  and  said  : 
"If  the  defendants,  with  the  design 
to  defraud  the  public  generally,  have 
knowingly  combined  together  and  held 
forth  false  and  deceptive  colors,  and 
done  acts  which  were  wrong,  and  have 
thereby  injured  the  plaintiff,  they  must 
make  him  whole  by  refunding  to  the 
full  extent  of  that  injury ;  and  they 
cannot  place  between  him  and  justice. 
with  any  success,  the  charter  of  the 
German  Bank  of  Wooster,  whether  it 
be  valid  or  void,  forfeited  or  in  esse. 
Neither  a  good  nor  a  bad  thing  may  be 
falsely  used  for  purposes  of  deception, 
and  made  a  scapegoat  for  responsibility. 
Nor  is  it  material  that  there  should  have 
been  an  intention  to  defraud  the  plaintiff 
in  particular.  If  there  was  a  general 
design  to  defraud  all  such  as  could  be 
defrauded  by  taking  their  pffper  issues, 
it  is  sufficient,  and  the  plaintiff  may 
maintain    his    suit,    provided    he    has 


79 


§§  49,  50.]  "watered"  STOCK.  [ch.  III. 

The  officers  of  the  corporation  who  participate  in  the  issue  of 
stock  as  paid  up,  when  it  has  not  been  fully  paid,  are  liable  to  per- 
sons purchasing  such  stock  for  damage  thereby  suffered.1  In  Massa- 
chusetts, by  statute,  corporate  officers  are  made  liable  for  corporate 
debts,  if  they  issue  stock  for  property  at  an  unfair  valuation  of  the 
latter.2 

§  49.  Liability  of  the  persons  purchasing  the  stoelz  ivitli  notice. — 
It  seems  to  be  generally  assumed,  as  a  matter  of  course,  that  per- 
sons purchasing  stock,  with  notice  that  it  had  not  been  paid  up, 
although  in  fact  it  had  been  issued  as  paid  up,  are  liable  on  such 
stock  to  the  same  extent  that  their  transferrers  were  liable.3 

§50.  Liability  of  the  hona  fide  transferees  without  notice.— A 
bona  fide  purchaser  for  value  and  without  notice  of  stock  issued  by 
a  corporation  as  paid  up  cannot  be  held  liable  on  such  stock  in  any 
way,  either  to  the  corporation,  corporate  creditors,  or  other  persons, 
even  though  the  stock  was  not  actually  paid  up  as  represented.  Such 
a  purchaser  has  a  right  to  rely  on  the  representations  of  the  cor- 
poration that  the  stock  is  paid  up.  Difficulty  sometimes  arises  in 
determining  what  will  constitute  a  sufficient  representation  that 
the  stock  is  paid  up.  A  representation  by  the  corporate  agents 
that  the  full  par  value  will  not  be  required  is  insufficient.*  The 
word  "  non-assessable,"  stamped  or  printed  or  written  on  the  face 
of  the  certificate,  is  not  a  sufficient  representation  that  the  stock 
is  paid  up,  so  as  to  protect  a  bona  fide  purchaser  thereof,  where  the 
certificate  also  shows  that  only  twenty  per  cent,  has  been  paid 
thereon.5 

taken  the  paper  and   suffers  from  the  >  Cross   v.   Sackett,   6   Abb.    Pr„  247 

fraud.    ...    The    act    incorporating  (1858);  Re  Gold  Co.,  11  Ch.D.,  701  (1878). 

the  president  and  directors  of  the  Ger-  See,  also,  §  47,  supra. 

man  Bank  of  Wooster,  admitting  it  to  2  Statutes  of  Mass.,  Acta  of  1875,  ch. 

be  in  force,  conferred  no  authority  upon  177,  §  2. 

any  person  to  hold  out  false  colors  to  3  Upton  v.  Tribilcock,  91  U.  S.,  45 
•deceive  the  public,  no  authority  to  issue  (1875).  But  they  are  not  liable  if  any 
bills  without  the  means  of  redeeming  prior  owner  was  bona  fide  and  without 
them ;  and  those  who  combined  to  use  notice.  Barrow's  Case,  L.  R,  14  Ch.  D., 
it  for  the  purposes  of  swindling  acted  432(1880).  A  transferee  of  "watered" 
for  themselves  rather  than  as  agents  of  stock  taking  with  notice  is  liable  the 
the  bank."  same  as  his  transferrer.  Boulton  Car- 
Creditors  of  a  corporation  cannot  hold  bon  Co.  v.  Mills,  43  N.  W.  Rep.,  290 
the  directors   liable  for  fraud,   deceit,  '  (Iowa,  1889). 

etc.,  in  forming  a  sham   corporation,  4  Webster  v.  Upton,  91  U.  S.,  65  (1875) ; 

when    no    misrepresentations    can    be  Upton  v.  Tribilcock,  91  U.  S.,  45  (1875). 

traced  to  them.     Mere  statements  as  to  3  Webster  v.  Upton,  91  U.   S.,   65,  71 

the  amount  of  capital  stock  are  insum-  (1875);  Sanger  v.  Upton,  id.,  56  (1875). 
cient     Brackett  v.  Griswold,  112  N.  Y., 
-454  (1889). 

80 


CH.  III.] 


"  WATERED  "    STOCK. 


[§50. 


"Where,  however,  a  statement  is  made  on  the  face  of  the  certifi- 
cate that  it  is  paid-up  stock,  the  honaf.de  purchaser  of  the  certifi- 
cate need  not  inquire  further,  but  may  rely  on  that  representation, 
and  is  protected  thereby  against  liability.1 

A  purchaser  of  stock  is  entitled  to  rely  on  statements  in  the  cor- 
porate books  that  the  stock  is  paid  up.2  The  law  goes  still  further, 
and  holds  that  where  a  person  in  open  market,  in  good  faith  and 
without  notice,  purchases  certificates,  such  stock  is  to  be  deemed 
"paid  up  "in  his  hands,  and  he  is  protected  as  a,hona  fide  pur- 
chaser, even  though  there  is  nothing  on  the  face  of  the  certificates 
stating  that  they  are  paid  up.5     This  can  now  be  laid  down  as  the 


1  This  principle  of  law  was  clearly  laid 
down,  explained  and  sustained  in  the 
recent  case  of  Young  v.  Erie  Iron  Co.,  31 
N.  W.  Rep.,  814  (Mich.,  1887).  In  Water- 
house  v.  Jamieson,  L  R,  2  H.  L.  (Sc), 
29,  where  the  stock  was  purchased  in 
open  market,  the  court  said :  "  Here  the 
appellant  is  a  bona  fide  holder  of  shares 
upon  which,  no  doubt,  there  was  a  false 
statement  made  by  the  company,  of 
which  he  had  no  knowledge,  and  as  to 
which  he  was  under  no  obligation  to 
inquire,  and  therefore  he  cannot  be  sub- 
jected to  liability  by  having  imputed  to 
him  a  knowledge  of  the  falsehood."  In 
Brant  v.  Ehlen,  59  Md.,  1  (1882).  the 
court  said :  "  Where  shares  are  issued 
by  the  company  to  the  subscriber  as 
full-paid  shares,  and  are  sold  by  the 
subscriber  as  such,  there  is  no  ground 
on  which  a  promise  can  be  implied,  on 
the  part  of  the  purchaser  without  no- 
tice, to  be  answerable  either  to  the  com- 
pany or  its  creditors,  should  the  repre- 
sentations on  the  faith  of  which  he 
purchased  prove  to  be  false.  He  could 
not  be  held  liable  on  the  ground  of  con- 
tract, because  he  never  agreed  to  pur- 
chase any  other  shares  than  full-paid 
shares ;  and  if  it  be  said  that  the  shares 
were  fraudulently  issued,  he  could  not 
be  held  liable  on  the  ground  of  fraud, 
because  he  was  in  no  sense  a  party  to 
the  fraud."  In  Steacy  v.  Little  Rock  & 
Ft  Smith  R.  R  Co.,  5  Dill.,  348  (1879), 
Judge  Dillon  examined,  at  considerable 
length,  the  reasons  of  the  rule  protect- 
ing bona  fide  purchasers  of  stock  issued 
(6) 


as  paid  up,  and  sustained  the  rule  itself. 
See,  also,  Burkinshaw  v.  Nichols,  L.  R, 
3  App.  Cas.,  1004  (1878).  One  case, 
Myers  v.  Seeley,  10  Nai'l  Bankr.  Reg., 
411,  lays  down  a  different  doctrine. 
The  court  says :  "  The  assignee  of  shares 
can  be  in  no  better  condition  tTian  the 
assignor.  .  .  .  The  question  is  .simply 
whether  the  stock  has  been  really  paid 
in  full  to  the  corporation.  The  assignee 
may  have  paid  for  it  to  the  assignors, 
and  may  have  relied  or  the  representa- 
tions of  the  latter,  and  of  officers  of  the 
company,  that  the  shares  bought  were 
fully  paid,  yet  creditors  are  not  bound 
thereby  ;  and  if  the  stock  was  not  fully 
paid,  the  holder  is  liable  to  creditors 
for  the  amount  remaining  unpaid." 
This  case  must  ue  considered  poor  law. 
See  68  L.  T.  Rep..  15. 

2  Erskine  v.  .Loewenstein,  11  Mo.  App, 
595  (1884). 

3  Keystone  Bridge  Co.  v.  McCheney,  8 
Mo.  App.,  496(1880);  Foreman  v.  Bige- 
low,  4  Cliff.,  508  (1878),  as  explained  in 
8  Mo.  App.,  496:  Johnson  v.  Sullivan,  15 
Mo.  App.,  55  (1884),  where  the  court  says : 
"  If  any  presumption  of  fact  arises  from 
the  face  of  a  stock  certificate  in  custom- 
ary form,  as  was  the  one  in  this  case, 
it  is  that  the  stock  .  .  is  fully  paid 
up."  See,  also,  Erskine  v.  Loewenstein, 
82  Mo.,  301  (1884) ,  Cleveland,  etc.,  Co.  v. 
Texas,  etc.,  R'y  Co. ,  27  Fed.  Rep.  250  (1886). 

If  a  certificate  of  stock  is  silent  on  its 

face  as  to  whether  it  is  full  paid  or  not, 

a  bona  fide  purchaser   is  protected  in 

considering    it    full-paid    stock.     West 

81 


50.] 


"  WATERED " 


STOCK. 


[Cff.  ITT. 


established  rule.  It  is  based  on  sound  public  policy,  favoring, 
as  it  does,  the  transfer  of  personal  property,  and  the  quasi-nego- 
tiability  of  stock,  and  discountenancing  secret  liens  and  construct- 
ive notice. 

A  purchaser  in  open  market  of  stock  represented  to  be  paid  up 
by  a  statement  to  that  effect  on  the  certificate  is  presumed  to 
be  a  bona  fide  purchaser.  Hence  there  has  arisen  the  well-estab- 
lished rule,  both  in  America  and  England,  that  a  bona  fide  pur- 
chaser for  value,  and  without  notice,  of  stock  issued  as  paid  up,  is 
not  liable  for  any  part  of  the  par  value  which  may  not  have  been 
paid.1 


Nashville,  etc.,  Co.  v.  Nashville  Sav. 
Bank,  6  S.  W.  Rep.,  340  (Term.,  1888). 
Cf.  Burkinshaw  v.  Nichols,  L  R,  3 
App.  Gas.,  1004,  1017  (1878).  In  Brant  v. 
Ehlen,  59  Md.,  1  (1882),  the  court  say : 
"  The  purchaser  is  not  bound  to  suspect 
fraud  when  everything  seems  fair.  .  . 
Any  other  doctrine  would  virtually  de- 
stroy the  transferable  nature  of  such 
shares,  and  paralyze  the  whole  of  the 
dealings  in  the  stock  of  the  corpora- 
tions." 

A  party  purchasing  a  certificate  of 
stock  which  does  not  state  whether  it  is 
paid  up  or  not  may  assume  that  it  is 
paid  up,  and  will  be  protected  in  that 
assumption.  Dn  Pont  v.  Tilden,  42  Fed. 
Rep.,  87  (1890). 

An  inquiry  by  a  purchaser  of  stock  of 
corporate  officers,  as  to  whether  it  was 
full-paid  stock,  must  be  made  to  officers 
having  authority  to  speak  for  the  cor- 
poration. Browning  v.  Hinkle,  51  N.  W, 
Rep,  605  (Minn.,  1892). 

1  In  Re  British  Farmers'  Pure  Unseed 
Cake  Co.,  L.  R.,  7  Ch.  D.,  533  (1878); 
aff'd,  L.  R,  3  App.  Cas.r  1004  0880),  the 
court  held  that,  if  the  bona  fide  pur- 
chaser were  not  protected,  "no  person 
buying  shares  in  the  market,  as  paid-up 
shares,  would  be  safe,  for  he  would  get 
nothing  more  than  a  certificate  to  show 
they  are  paid  up.  ...  ubviously 
such  a  construction  would  destroy  the 
transferable  nature  of  shares  altogether." 
See,  also,  Foreman  v.  Bigelow,  4  Cliff., 
508  (1878);  McCracken  v.  Mclntyre,  1 
Duv.  (Can.),  479 ;  Stacey  v.  Little  Rock 


&Ft.  S.  R  R.  Co.,  J  Dill.,  348  (1878); 
Jackson  v.  Slido,  etc.,  Co.,  1  Lea  (Tenn.), 
210;  Brant  V.  Ehlen,  59  Md..  1  (1883); 
Waterhouse  v.  Jamieson,  L.  R,  2  H.  L 
(Sc),  29.  Cf.  Crickmer's  Case,  L  R.,  10 
Ch.  App.,  614.  Contra,  Myers  v.  Seeley, 
10  Nat'l  Bank.  Reg.,  411.  It  is  immate- 
rial that  the  payment  in  stock  issued  as 
paid  up  turns  out  to  have  been  valueless. 
The  bona  fide  purchaser  is  protected, 
and  the  corporation  must  allow  registry 
by  him.  Protection  Life  Ins.  Co.  v.  Os- 
good, 93  111.,  69  (1879).  In  the  case  of 
Wintringham  v.  Rosenthal,  25  Hun,  580 
(1881),  the  court  held  that  a  bona  fide 
purchaser  of  stock,  which  he  purchased 
supposing  it  to  be  paid  up,  is  not  liable 
for  the  unpaid  par  value.  The  stock  was 
issued  by  a  bank,  evidently  on  a  cash 
subscription.  This  case  practically  over- 
rules Mann  v.  Currie,  2  Barb.,  294  (1848). 
The  general  railroad  act  of  New  York 
(Laws  1850,  ch.  140,  §  10)  prescribes  that 
each  stockholder  shall  be  liable  "  to  an 
amount  equal  to  the  amour':  unpaid  on 
the  stock  held  by  him."  In  the  case  of 
Tasker  v.  Wallace,  6  Daly,  364, 374  (1876), 
the  court  held  that  under  this  statute, 
"  as  between  a  stockholder  and  a  cred- 
itor, it  is  wholly  immaterial  whether  he 
was  a  bona  fide  and  innocent  purchaser 
of  stock  which  the  vendor  assured  him 
had  been  paid."  This  remark  was,  it 
seems,  a  dictum,  and  being  by  an  inferior 
court  is  doubtful  as  an  authority.  The 
representation,  moreover,  was  not  on 
the  face  of  the  certificate,  nor  was  it 
made  by  the  corporation.     In  the  case 


DH.  III.] 


"  WATERED  ''    STOCK. 


[§51. 


Where  a  subscriber  who  has  not  yet  taken  out  his  certificate  of 
stock  instructs  the  corporation  to  issue  the  certificates  to  a  desig- 
nated transferee,  the  latter  has  been  held  to  be  the  original  allottee 
of  that  stock,  and,  if  the  stock  was  irregularly  issued  as  paid-up 
stock,  he  cannot  claim  to  be  a  bona  fide  transferee  without  notice.1 

A  contrary  rule  has  been  laid  down  in  other  cases,  however,  and 
would  seem  to  be  more  in  accordance  wTith  justice.2 

E.    ISSUE    OF   WATERED    STOCK    BY    A    STOCK    DIVIDEND. 

§  51.  Tliird  method:  Issue  by  stock  dividends. —  The  third  method 
of  issuing  fictitiously  paid  up  stock  is  by  a  wrongful  use  of  the 
power  to  issue  stock  dividends.  It  seems  to  be  generally  conceded 
that  if  the  capital  stock  and  the  actual  property  of  the  corpora- 
tion is  not  permanently  increased  to  the  extent  of  the  par  value  of 
the  stock  distributed  as  a  dividend,  then  that  the  issue  of  stock  by 
such  dividend  is  irregular,  and  under  certain  circumstances  fraud- 
ulent.3 

In  some  of  the  states  stock  dividends  are  prohibited  by  constitu- 
tional or  statutory  provisions.4 

of  Hubbell  v.  Meigs,  50  N.  Y..  480,  489  cases,  condemns  such  dividends.  .  .  . 
(1872),  where  the  purchaser  of  Wiscon-  No  harm  is  done  to  any  person,  provided 
sin  railroad  stock  sued  his  vendor  for  the  dividend  is  not  a  mere  inflation  of 
damages  for  deceit  on  the  ground,  the  stock  of  the  company,  with  no  cor- 
air.ong  others,  that  the  stock  had  been  responding  values  to  answer  to  the  stock 
issued  fictitiously  as  paid  up,  the  court  distributed.  ...  So  long  as  every 
said  :  '*  It  is  unnecessary  to  determine  dollar  of  stock  issued  by  a  corporation 
whether  the  corporation  was  authorized  is  represented  by  a  dollar  of  property, 
by  its  charter  to  sell  its  stock  at  less  than  no  harm  can  result  to  individuals  or  the 
par,  or  whether,  in  so 'selling,  its  officeio  public  from  distributing  the  stock  to 
did  not  violate  their  duty.  The  plaintiff  the  stockholders."  Howell  v.  Chicago  & 
was  a  bona  fide  purchaser,  and,  being  Northw.  R'y  Co.,  51  Barb..  378  (1868),  is 
such,  acquired  a  valid  title  to  the  stock  to  the  same  effect  In  Bailey  v.  Rail- 
transferred  to  him."  road  Co.,  22  Wall.,  604,  the  court  said 
i  Rowland's  Case,  42  L.  T.  (N.  S.),  785  that  net  earnings,  however  expended  or 


(1880);  Potter's  Appeal,  Weekly  Notes, 
1878,  p.  81 ;  Re  Vulcan  Iron  Works,  Law 
Times,  1885.  p.  61. 

*  Young  v.  Erie  Iron  Co.,  31  N.  w! 
Kep.,  814  (Mich.,  1887);  Carling's  Case, 
L.  R,  1  Ch.  D.,  115  (1875).  See,  also,  §  62, 
infra. 

3  In  Williams  v.  Western  Union  Tel. 
Co.,  93  N.  Y,  189  (1883),  the  court  said 
that  a  stock  dividend  "  could  be  declared 
by  a  corporation  without  violating  its 
letter,  its  spirit  or  its  purpose.  .  .  . 
There  is  no  public  policy  which,  in  all 


invested,  "  belong  to  the  stockholders, 
and  may  be  distributed  as  they  may  di- 
rect, in  dividends  of  stock  or  by  a  sale 
of  property."  See,  also,  ch.  32.  Whe:e 
the  company  is  under  obligations  to 
issue  stock  to  represent  interest  on  sub- 
scriptions until  dividends  are  declared,  a 
stock  dividend  does  not  stop  the  inter- 
est Hardin  County  v.  Louisville,  etc., 
R  R,  17  &  W.  Rep.,  860  <Ky..  1891). 

*  III.  Const,  art  XI,  §  13.  In  Wis- 
consin by  statute.  R  S.  1878,  §  1753, 
amended  by  ch.  93,  Laws  1881.     In  Mas- 


83 


§51.] 


"  WATERED  " 


STOCK. 


[CH.  III. 


The  decided  tendency  of  the  law,  however,  is  to  sustain  and  even 
encourage  stock  dividends,  where  they  are  regularly  and  legally 
made  by  adding  to  the  property  representing  the  capital  stock  fur- 
ther property  to  represent  the  stock  dividend.    By  such  an  act  the 


sachusetts  railway  corporations  are  by 
statute  prohibited  from  declaring  a 
stock  dividend  except  by  authority  of 
the  general  court.  Pub.  Stat  of  Mass., 
ch.  112,  §  61.  It  has  been  held  not  a 
violation  of  this  statute  for  a  railway 
company  to  distribute  among  its  share- 
holders, without  the  assent  of  the  gen- 
eral court,  shares  of  its  own  stock  which 
it  had  purchased  from  the  common- 
wealth, when  it  had  legislative  author- 
ity for  such  purchase  and  distribution. 
Commonwealth  v.  Boston  &  Albany 
R  R  Co.,  142  Mass.,  146  (1886).  See 
§287. 

If  the  tangible  property  of  the  corpo- 
ration is  actually  in  excess  of  the  par 
value  of  the  capital  stock,  then  a  stock 
dividend  to  the  extent  of  that  excess 
would  be  legal ;  but  the  proceedings  to 
declare  the  stock  dividend  must  show 
these  facts  or  the  dividend  will  be  en- 
joined. Fitzpatrick  v.  Dispatch,  etc., 
Co.,  83  Ala.,  604  (1887).  The  court  very 
properly  changed  the  reasoning  of  its 
opinion  as  reported  in  2  S.  Rep.,  727. 

In  one  point  of  view  stock  dividends 
are  objectionable.     They  are  issued  to 
represent  the  increased  value  of  the  cor- 
porate  property  as   it  stands.     In   the 
case  of  railroads,  this  increase  of  value 
arises  very  largely  from  the  increased 
value  of  the  eminent  domain  franchises 
which  the  corporation  is  using.     These 
franchises  belong  to  the  people,  and  the 
people    are    entitled    to    the  increased 
value  of  them.    Such  an  increased  value 
could  be  readily  secured  to  the  people 
by  a    reduction    of    railroad    charges. 
But  by  stock  dividends,  based  on  this  in- 
creased value  of  the  franchise,  the  rail- 
road is  able,  by  increasing  its  stock,  to 
divide  all  profits  and  yet  not  declare 
more  than  a  six  or  eight  per  cent,  divi- 
dend.    The  smallness  of  the  dividend 
prevents  a  legislative  reduction  of  rates. 


If,  however,  no  stock  dividend  were  al- 
lowed, and  the  increased  earning  ca- 
pacity of  the  railroad  gave  large  profits, 
such  profits  would  have  to  be  employed 
in  improving  the  property  or  in  making 
extravagant  dividends,  which  would 
justify  a  reduction  of  railroad  rates.  It 
is  urged,  in  reply  to  this  view,  that  about 
three  out  of  four  railroad  enterprises 
are  the  cause  of  total  loss  to  their  pro- 
jectors, and  that  the  fourth  should  be 
made  to  pay  more  largely,  by  reason  of 
the  risk  incurred ;  also  that  large  cap- 
ital and  great  ability  in  managing  en- 
terprises of  such  magnitude  should  be 
more  fully  compensated. 

Mr.    Swan,    in    Investors'    Notes    on 
American   Railroads  (1886),   p.  42,  pre- 
sents  an   ingenious  argument  on   this 
question  when  he  says :    "The  assertion 
by  a  state  of  a  right  to   fix   rates  and 
limit  dividends  by  ex  post  facto  legisla- 
tion, without  regard  to  existing  charters 
and   without  compensation   or  indem- 
nity, is,  in  fact,  the  barely  disguised  as- 
sertion  of  a   right  to  confiscate   to  a 
greater  or  less  extent  the  increment  of 
value  legitimately  accruing  to  a  going 
concern.     In  connection  with  a  railroad 
the  increment  of  value  cannot  with  any 
semblance  of  propriety  be  described  as 
an   'unearned'   increment     In   a  vast 
number  of  instances  an  American  rail- 
road may  be  said  to  create  the  setth  - 
ment  of   population  which  is  destined 
to  furnish   passengers  and  to  produce 
freight.     Reflex  activities  are  of  course 
stimulated,  and  contribute  in  their  turn 
to  the   development  of  traffic ;    but  in 
many  instances  the  railroad  itself  pri- 
marily constitutes  the  determining  con- 
dition   of    settlement    in  a    particular 
place,  and  of  the  transportation  of  pas- 
sengers and  merchandise  through  a  par- 
ticular   channel.      Subject    to    the    re- 
straints   of    equitable    regulation,    t!.e 


84 


CH.  III.] 


"  WATERED  "    STOCK. 


[§51. 


responsibility  of  the  corporation  is  increased,  creditors  are  more 
secure,  inasmuch  as  there  is  more  property  to  respond  to  their 
claims,  and  the  stockholders  have  increased  their  investment  bv 
adding  the  profits  to  the  capital  stock  instead  of  distributing  them 
by  a  cash  dividend. 


right  of  a  constructing  company  to  the 
increasing  benefit  of  the  business  which 
it  builds  up  by 'its  outlay  and  its  skill  is 
no  less  real  than  that  of  the  founder  of 
a  purely  commercial  or  professional 
business  to  the  increasing  benefit  of  his 
capital  or  ability."' 

Alexander  on  Railway  Practice  (1887), 
p.  37,  says  with  some  force :  "  It  is  as- 
serted that  much  of  the  stock  of  our 
railroads  is  not  legitimate,  but  is  water. 
Such  an  argument  may  apply  against 
any  particular  railroad  that  earns  ex- 
orbitant dividends,  but  against  the  sys- 
tem as  a  whole  it  does  not.  For  it 
would  be  easy  to  show  that  for  every 
dollar  of  water  in  existing  stocks,  two 
dollars  of  the  money  of  railroad  in- 
vestors has  been  lost  like  water  spilt  in 
the  sand.  Much  of  it  was  lost,  doubt- 
less, by  bad  judgment;  but  the  fact 
remains  that  our  existing  system  of  rail- 
roads, as  a  whole,  has  cost  fully  as 
much  as  it  is  capitalized  at  Scarcely 
one  of  them  was  originally  built  as  it 
stands  to-day.  The  earlier  ones  have 
been  rebuilt  and  re-equipped  three  or 
four  times,  as  experience  pointed  out 
necessary  improvements.  Many  of 
them,  too,  were  built  before  the   busi- 


ness really  demanded  them,  and  the  loss 
from  this  source  has  been  enormous. 
.  .  .  If  the  State  would  guaranty 
the  interest  upon  money  legitimately  in- 
vested in  railroad  construction,  invest- 
ors would  readily  furnish  all  that  might 
be  desired,  and  railroads  could  and 
would  be  built  without  watered  stock. 
But  the  state  very  properly  refuses  to 
assume  any  risk,  and  leaves  it  to  be 
borne  entirely  by  the  investor.  The 
latter,  then,  having  all  the  risk,  naturally 
demands  to  have  also  all  the  chances  of 
profit  if  the  road  turns  out  a  success. 
He  discounts  the  future,  and  takes  wa- 
tered stock  to  represent  what  he  hopes 
will  be  his  earnings.  That  is  the  only 
way  that  communities  wanting  rail- 
roads can  induce  investors  to  supply  the 
funds.  .  .  .  But  I  record  my  con- 
viction that  the  practice  of  stock-water- 
ing should  be  prohibited,  without  much 
hope  of  ever  seeing  it  done,  and  more 
on  the  ground  that  it  is  against  public 
policy  to  make  it  easy  for  men  to  build 
railroads,  or  float  any  enterprises  with 
other  people's  money,  than  from  the 
fear  of  railroads  being  enabled  to  prac- 
tice extortion  by  the  possession  of  wa- 
tered stock." 


85 


CHAPTER  IT. 


METHOD   OF  SUBSCRIBING  -  PARTIES  TO  SUBSCRIPTIONS  -  ACTION 

TO  ENFORCE  SUBSCRIPTIONS. 


A.   METHODS  OF  SUBSCRIBING. 

§  52.  Generally   no    formalities    neces- 
sary. 

53.  Informalities,    irregularities     and 

mistakes  in  subscriptions. 

54.  Various  defenses  to  subscriptions. 

55.  Proof  of  subscription. 
56."  The  English  rule. 

57.  Subscriptions  taken  by  commis- 

sioners. 

58.  Subscriptions    in    excess    of    the 

capital  stock. 

59.  Subscriptions     and     organization 

where  there  is  a  special  charter 
and  no  commissioners  are  pro- 
vided for. 

60.  Subscriptions  delivered  in  escrow. 

61.  Liability  of    corporation   for    re- 

fusal to  issue  a  certificate  of 
stock. 

62.  Substitution  of  subscribers  before 

the  incorporation  and  alterations 
in  subscription  paper. 

63.  Right  to  recover  money  advanced 

on  shares  upon  a  failure  to  or- 
ganize the  company. 

B.    WHO     IS     COMPETENT    TO     SUBSCRIBE 
FOR  STOCK. 

64.  Corporations  generally  not. 


§  65.  Commissioners,     directors,     part- 
ners, etc.,  as  subscribers. 

66.  Married  women  as  subscribers. 

67.  Infant  as  subscriber. 

68.  Agent  as  subscriber. 

69.  Subscriptions    taken    by   an    un- 

authorized agent  of  corporation. 

70.  Unissued     or     increased    capital 

stock  —  Right  to  subscribe  there- 
for. 

C.    AN    ACTION     LIES     TO     COLLECT    SUB- 
SCRIPTIONS. 

71.  A  subscription  implies  a  promise 

to  pay,  which  is  enforceable 
without  proof  of  any  particular 
consideration. 

72.  Such  is  the  rule  for  subscriptions 

before  incorporation  as  well  as 
those  after. 

73.  In  New  York  a  contrary  rule  pre- 

vails. 

74.  In  New  England  an  express  prom- 

ise or  express  statute  is  neces- 
sary to  support  an  action  to 
collect  subscriptions. 

75.  Professor    Collin's  rules    on    this 

subject. 

76.  Stockholders'  agreements  to  guar- 

anty company  debts. 


A.    METHODS   OF    SUBSCRIBING. 

§  52.  Generally  no  formalities  necessary. —  The  contract  of  sub- 
scription for  shares  of  stock  in  an  incorporated  company  may  be 
entered  into  in  various  ways.  Whenever  an  intent  to  become  a 
subscriber  is  manifested,  the  courts  incline,  without  particular  ref- 
erence to  formality,  to  hold  that  the  contract  of  subscription  sub- 
sists. It  is,  as  in  the  case  of  other  contracts,  very  much  a  question 
of  intent.  Formal  rules  are  for  the  most  part  disregarded.  And 
in  general  a  contract  of  subscription  may  be  made  in  any  way  in 
which  other  contracts  may  be  made.1  Any  agreement  by  which  a 
person  shows  an  intention  to  become  a  stockholder  is  sufficient  to 

1  Blunt  v.  Walker,  11  Wis.,  334,  349  (1860). 
86 


CH.  IV.]        SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [§  52. 

bind  both  him  and  the  corporation.1  When  one  accepts  or  assumes 
the  position  and  duties,  and  claims  the  rights  and  privileges  and 
emoluments,  of  a  stockholder,  and  the  corporation  accepts  or  ac- 
quiesces therein,  such  person  is  estopped  to  deny  that  he  is  a  sub- 
scriber, even  though  there  may  have  been  something-  irregular  or 
defective  in  the  form  or  manner  of  his  subscription,  or  there  may 
have  been  no  formal  subscription  at  all.2 

Merely  accepting  and  holding  a  certificate  of  stock  is  sufficient 
to  constitute  one  a  stockholder.3 

There  have  been  various  dicta  to  the  effect  that  a  subscription 
cannot  be  entered  into  by  parol;4  but  the  later  and  better  opinion 
is  that  such  a  subscription  is  valid  and  binding. 

!Fry  v.  Lexington,  etc.,  R.  R  Co.,  2  Gondola  Co.,  17  C.  B.,  180  (1855);  Bailey 
Mete.  (Ky.),  314  (1859);  Wellersburg,  v.  Universal  Provident  Life  Associa- 
etc.,  Co.  v.  Young,  12  Md.,  476  (1858) ;  tion,  1  C.  B.  (N.  S.),  557  (1857). 
Gill  v.  Kentucky,  etc.,  Co.,  7  Bush,  635  "  Underwriting  means  an  agreement 
(1870);  Oler  v.  Baltimore,  etc.,  R.  R  Co.,  before  the  shares  are  brought  before 
41  Md.,  583  (1S74) ;  Schaeffer  v.  Missouri,  the  public,  that  in  the  event  of  the  pub- 
eta,  Co.,  46  Mo.,  248  (1870).  lie  not  taking  the  whole  or   the  num- 

2  Sanger  v.  Upton,  91  U.  S.,  56  (1875)^  ber  mentioned  in  the  agreement,  the 
Upton  v.  Tribilcock,  91  id.,  45  (1875) ;  underwriter  will  apply  for  the  allotment 
Wheeler  v.  Millar,  90  N.  Y.,  353  (1882) ;  of  and  take  the  shares  which  the  pub- 
Hamilton,  etc.,  Co.  v.  Rice,  7  Barb,  159  lie  do  not  take."  The  underwriter  is 
(1849);  Dorris  v.  French,  4  Hun,  292  liable  on  the  stock.  Re  Licensed,  etc., 
(1875);  Boston,  etc..  R  R  Co.  v.  Wei-  Assoc,  60  L.  T.  Rep.,  684(1889). 
lington,  113  Mass..  79  (1873);  Ex  parte  3  Upton  v.  Tribilcock.  91  U.  S.,  45 
Besley,  2  Mac.  &  G,  176  (1850);  Clark  (1875);  McLaughlin  v.  Detroit,  etc.,  R 
v.  Farringtou,  11  Wis.,  306  (1860);  Jew-  R  Co.,  8  Mich.,  100  (1860);  Stutz  v.  Hal- 
ell  v.  Rock  River,  etc.,  Co.,  101  111.,  57  deman,  41  Fed.  Rep.,  531  (1890).  See. 
(1881);  Haynes  v.  Brown,  36  N.  H.,  545  also,  McHose  v.  Wheeler,  45  Pa.  St..  32 
0858);  Chaffin  v.  Cummings,  37  Me.,  (1863);  Clark  v.  Continental,  etc.,  Co.,  57 
76  (1853) ;  Chester,  etc.,  Co.  v.  Dewey,  Ind.,  135.  Person  taking  stock  from  a 
16  Mass.,  94  (1819);  Griswold  v.  Selig-  corporation  on  its  original  issue  is  liable 
man,  72  Mo.,  110  (1880);  Boggs  v.  01-  without  subscription.  Shickle  v.  Watts, 
eott,  40  111.,  303  (1866) ;  Musgrave  v.  7  S.  W.  Rep.,  274  (Mo.,  1888). 
Morrison,  54  Md.,  161  (1880) ;  Phoenix,  4  Pittsburgh,  etc.,  R  R  Co.  v.  Gazzam, 
etc.,  Co.  v.  Badger,  67  N.  Y,  294  (1876) ;  32  Pa.  St.,  340  (1858).  In  this  case  an 
S.  C,  6  Hun,  293  (1875) ;  Palmer  v.  attempt  was  made  to  make  defendant 
Lawrence,  3  Sandf.,  161  (1849);  Phila.,  liable  upon  his  signature  to  a  paper  by 
etc.,  R  R  Co.  v.  Cowell,  28  Penn.  St,  which  the  signers  agreed  to  subscribe 
329  (1857) ;  Cheltenham,  etc.,  R'y  Co.  v.  for  stock  in  a  railroad  company,  but  the 
Daniel,  2  Q.  B.,  281;  West  Cornwall  v.  signatures  were  shown  to  have  been 
Moffatt,  15  Q.  B.,  521  (1850).  And  see  the  copies  and  not  originals.  Vreeland  v. 
dissenting  opinion  of  Lord  St.  Leonards  N.  J.  Stone  Co.,  29  N.  J.  Eq.,  188.  The 
in  Spackmau  v.  Evans,  L.  R,  3  H.  of  L.  decision  was  on  the  question  of  fraud  in 
Cas.,  171,  197  (1868);  Harrison  v.  Hea-  inducing  defendant  to  take  the  stock, 
thorn,  6  Man.  &  G.,  81  (1843);  Ness  v.  Thames  Tunnel,  etc.,  v.  Sheldon,  6  Barn. 
Angas,  3  Exch.,  805  (1849);  Ness  v.  Arm-  &  C,  341,  holding  that  one  who  had 
strong,  4  id.,  21  (1849) ;   Moss  v.  Steam  subscribed  a  preliminary  paper  and  had 

87 


§  52.]       SUBSCRIPTIONS  —  METHOD  —  PARTIES  —  ENFORCEMENT.       [CH.  IV. 

It  has  been  held  that,  where  a  director  is  required  to  be  a  stock- 
holder, the  act  of  serving  as  a  director  is  an  implied  subscription 
for  stock  to  the  amount  required  in  order  to  be  a  director.1  But  a 
contrary  rule  now  exists.2 

A  subscription  in  a  small  pocket  memorandum  book  has  been 


paid  the  sum  required  in  advance,  but 
who  had  not  signed  the  contract  re- 
ferred to  in  an  act  of  parliament,  was 
not  a  subscriber  within  the  meaning  of 
that  act 

Fanning  i\  Insurance  Co.,  37  Ohio  St., 
339  (1881),  a  suit  upon  a  note  secured  by 
a  mortgage  claimed  to  have  been  given 
in  payment  for  stock.  The  proof  showed 
that  defendant  verbally  agreed  with  a 
canvasser  to  take  the  stock,  but  did  not 
sign  any  subscription  book  or  other  con- 
tract, and  never  received  certificates  of 
stock.  Held,  that  there  was  no  subscrip- 
tion and  no  sufficient  consideration  for 
t!ie  note. 

Galveston  Hotel  v.  Bolton,  46  Tex., 
633  (1877).  In  this  case  defendant  had 
sigrned  an  informal  paper  as  a  subscrip- 
tion for  stock,  and  had  offered  excuses 
for  not  paying  the  first  call,  asking  for 
time,  etc.  The  informal  paper  was  lost, 
and  defendant's  name  did  not  appear  on 
the  company's  books  in  any  capacity. 
After  the  organization  of  the  company 
he  acknowledged  to  its  secretary  his  ob- 
ligation to  pay  the  call.  Held,  that  he 
was  not  a  stockholder  liable  to  calls. 

In  Iowa  it  is  denied  that  parol  sub- 
scriptions are  void.  Hence,  where  a 
person  present  at  a  corporate  meeting 
directed  the  secretary  to  subscribe  cer- 
tain stock,  and  the  secretary  did  so  on 
a  loose  sheet  of  paper,  the  court  held  the 
subscriber  bound ;  also  that  the  corpo- 
rate records  reciting  the  facts  were  com- 
petent to  show  acceptance,  though  re- 
corded subsequently.  Colfax  Hotel  Co. 
v.  Lyon,  29  N.  W.  Rep.,  780  (Iowa,  1886). 
A  verbal  subscription  suffices.  The  stat- 
ute of  frauds  does  not  apply.  Bullock 
v.  Falmouth,  etc.,  Co.,  3  S.  W.  Rep,  129 
(Ky.,  1887).  Where  a  person  orally  tells 
a  director  that  he  will  subscribe  a  speci- 


fied amount  of  stock,  and  gives  a  check 
in  part  payment,  he  is  liable  as  a  stock- 
holder. Cookney's  Case,  3  De  G.  &  J., 
170  (1858).  And  see,  also,  various  cases 
in  the  notes  herein,  involving  somewhat 
similar  facts. 

i  See  Har wood's  Case,  L  R,  13  Eq., 
30  (1871);  Stephenson's  Case,  45  L.  J. 
(Ch.),  488;  In  re  British  &  American 
Telegraph  Co.,  L.  R.,  14  Eq.,  316  (1872) ; 
In  re  Empire  Assurance  Co.,  L.  R,  6 
Chan.,  469  (1S71). 

Where  one  accepts  the  office  of  di- 
rector without  owning  the  required 
number  of  shares  of  stock  and  is  in  con- 
sequence under  obligation  to  qualify 
himself  by  taking  stock,  he  is  not 
obliged  to  t  ke  the  stock  from  the  com- 
pany, but  may  purchase  or  procure  the 
shares  as  he  is  able  in  the  open  market 
or  at  private  sale.  Brown's  Case,  L  R., 
9  Chan.,  102  (1873);  Karuth's  Case,LR, 
20  Eq..  506. 

2 Onslow's  Case,  55  L.  T.  Rep,  612 
(1881),  and  cases  cited.  And  see  sum- 
mary in  Healey's  Company  Law  and 
Practice,  135,  139. 

The  common-law  rule  that  a  director 
is  not  liable  to  the  amount  of  qualifica- 
tion shares  which  he  is  required  by  stat- 
ute to  have,  but  which  he  does  not  have, 
is  not  applicable  to  directors  in  national 
banks.  Finn  v.  Brown,  142  U.  S.,  56 
(1891). 

Hawley's  Case,  L.  R.  6  Ch.  D.,  705 
(1877),  holds  that  a  director  who  was 
not  qualified  did  not  by  acting  render 
himself  liable  to  creditors  to  the  amount 
of  qualification  stock.  The  court,  in  a 
dictum,  said :  "  He  never  was  a  director, 
and  he  never  will  be  a  director,  as  far 
as  that  election' is  concerned,"  although 
of  course  his  acts  as  director  may  bind 
the  company  as  to  third  persons.     See, 


88 


CH.  IV.]       SUBSCRIPTIONS  —  METHOD PARTIES ENFORCEMENT.       [§  53. 

held  sufficient  to  bind  the  subscriber.1  So,  a  subscription  on  a 
single  sheet  of  paper  may  be  binding,2  even  though  the  charter 
provides  for  the  opening  of  books.3  A  signature  to  the  certificate 
required  by  statute  to  be  filed  in  order  to  obtain  the  charter  of  in- 
corporation, with  the  number  of  shares  placed  opposite  to  the  sig- 
nature, is  a  sufficient  subscription  to  bind  both  the  corporation  and 
the  subscriber.4 

§  53.  Informalities,  irregularities  and  mistakes  in  subscriptions. 
But  a  subscription  to  an  incomplete  copy  of  the  articles  of  asso- 
ciation will  not  bind  the  subscriber;5  and  again,  a  subscription 
paper  in  which  the  names  of  directors  were  left  blank  has  been 
held  not  enforceable  against  a  subscriber  after  the  blank  has  been 
filled  without  his  consent  or  concurrence.6     Equity  will  not,  how- 


also,  Ex  parte  Stock,  33  L.  J.  (Ch.),  731 
(1864). 

Resignation  releases  the  liability.  In 
re  Self-Acting,  etc.,  Co.,  54  L.  T.  Rep., 
676 ;  Marquis  of  Abercorn's  Case,  4  De 
G.,  F.  &  J.,  78  (1862);  Ex  parte  Jobling, 
58  L.  T.  Rep.,  823  (1888).    See,  also,  ch.  37. 

"Can  a  director  part  with  his  qualifi- 
cation shares?  "  See  on  this  subject  8 
Ry.  &  Corp.  L.  J. 

i  Buffalo,  etc.,  R  R  Co.  v.  Gifford,  87 
N.  Y.,  294  (1882) ;  Brownlee  v.  Ohio,  etc., 
R  R  Co.,  18  Ind.,  68  (1862).  Contra, 
McClelland  v.  Whiteley,  11  Biss.,  444 
(1883);  S.  C.  15  Fed.  Rep.,  322.  The 
full  christian  name  need  not  be  sub- 
scribed. State  v.  Beck,  81  Ind.,  501 
(1882). 

2  Iowa,  etc.,  R  R  Co.  v.  Perkins,  28 
Iowa,  281  (1869) ;  Hamilton,  etc.,  v.  Rice, 
7  Barb.,  157  (1849).  Cf.  Bucher  v.  Dills- 
burg,  etc.,  R  R  Co.,  76  Penn.  St.,  306 
(1874);  Hawley  v.  Upton,  102  U.  S.,  314 
(1880). 

3  Mexican  Gulf,  etc.,  R.  R.  Co.  v. 
Viavant,  6  Rob.  (La.),  305  (1843);  Ash- 
tabula, etc.,  R.  R.  Co.  v.  Smith,  15  Ohio 
St,  328  (1864). 

*  Phoenix,  etc.,  Co.  v.  Badger,  67  N.  Y., 
294  (1876) ;  S.  C,  6  Hun,  295 ;  Nulton  v. 
Clayton,  54  Iowa,  425  (1880) ;  Herries  v. 
Wesley,  13  Hun,  492  (1878). 

Where  the  statute  provides  that  the 
persons  signing  the  articles  of  incorpo- 
ration shall  set  opposite  their  names  the 


amount  of  their  subscription,  a  sub- 
scriber who  complies  therewith  but  does 
not  acknowledge  the  articles  as  required 
by  the  statute  is  not  bound  by  his  sub- 
scription so  far  at  least  as  the  articles 
are  concerned.  Coppage  v.  Hutton,  24 
N.  E.  Rep.,  112  (Ind.,  1890). 

5  Dutchess,  etc.,  R  R.  Co.  v.  Mabbett, 
58  N.  Y,  397  (1874). 

6  Dutchess,  etc.,  R.  R.  Co.  v.  Mabbett, 
58  N.  Y,  397(1874),  the  court  saying: 
"A  signature  to  an  incomplete  paper, 
wanting  in  any  substantial  particular, 
when  no  delegation  of  authority  is  con- 
ferred to  supply  the  defect,  does  not 
bind  the  signer  without  further  assent 
on  his  part  to  the  completion  of  the  in- 
strument." To  same  effect,  Consol's 
Ins.  Co.  v.  Newall,  3  Foster  &  F,  130 
(1862),  where  the  number  of  shares  was 
left  in  blank.  See,  also,  Eakright  v. 
Logansport,  etc.,  13  Ind.,  404  (1859).  In 
this  case  the  charter  required  that  di- 
rectors should  be  named  in  the  articles 
of  association.  The  adoption  of  the 
articles  at  the  time  of  electing  directors 
was  held  to  be  a  substantial  compliance 
with  the  charter,  the  requirement  being 
considered  as  only  directory. 

But  where  an  actual  subscription  is 
made,  with  a  view  of  influencing  other 
subscriptions,  but  the  number  of  shares 
to  be  taken  is  left  blank,  so  that  the 
subscription  itself  might  be  subse- 
quently  withdrawn,   it  was  held   that 


§  53.]       SUBSCRIPTIONS METHOD PARTIES  ENFORCEMENT.      [CH.  IV. 


ever,  in  the  absence  of  fraud,  relieve  a  subscriber  merely  upon  the 
ground  that  he  by  mistake  subscribed  for  more  stock  than  he  in- 
tended, in  a  case  where  he  suffered  the  corporation  to  act  upon  the 
faith  of  his  subscription.1  But  if  one  signs  an  agreement  to  sub- 
scribe, on  a  subscription  paper,  entirely  misunderstanding  the 
nature  of  the  contract  he  is  entering  into,  his  subscription  must,  on 
general  principles,  be  treated  as  null  and  void  for  want  of  mutual 
consent.  Cases  of  this  nature  may  arise  without  involving  the 
question  of  fraud.2 

If  the  business  of  the  incorporation  is  illegal,  the  subscription,  of 
course,  cannot  be  enforced.3 

Many  cases  are  given  in  the  notes  which  will  throw  some  light 
on  the  various  principles  of  law  as  applicable  to  the  facts  in  actions 
to  collect  subscriptions.4 


the  corporate  agents  might  fill  up  the 
blank,  and  thereby  bind  the  subscriber. 
Jewell  v.  Rock  River,  etc.,  Co.,  101  111., 
57  (1881). 

The  case  of  Clark  v.  Continental,  etc., 
Co.,  57  Ind.,  135  (1877),  held  that  an 
agreement  to  pay  in  instalments  a  cer- 
tain sum  to  a  contactor  as  the  work 
progressed,  in  consideration  of  stocks  to 
be  delivered  by  the  corporation,  after 
full  payment  has  been  made  in  this 
way,  was  not  a  subscription  to  capital 
stock,  and  that  the  maker  of  such  an 
agreement  was  not  a  subscriber. 

1  Diman  v.  Providence,  etc.,  R  R  Co., 
5  R  I.,  130  (1858). 

2  Jackson  v.  Hayner,  12  Johns.,  469 
(1815);  Thoroughgood's  Case,  2  Rep.,  9; 
Foster  v.  Mackinnon.  L.  R,  4  C.  R,  704 
(1869);  Rockford,  etc.,  R  R  Co.  v. 
Schunick,  65  111.,  223  (1872) ,—  not  stock 
cases,  but  sustaining  the  general  prin- 
ciple. 

Reed  v.  Richmond,  etc.,  50  Ind.,  342 
(1875).  In  this  case  the  statute  author- 
izing the  organization  of  street  railway 
companies  required  that  the  articles  of 
association  should,  among  other  things, 
state  the  number  of  directors  and  their 
names.  Neither  of  these  requirements 
was  observed ;  and  in  an  action  to  re- 
cover a  subscription  the  court  held  the 
subscription  void,  saying :  "  If  one  of 
these  requirements    can  be    dispensed 


with,  or  held  to  be  directory  merely, 
we  do  not  see  where  we  are  to  stop. 
The  case  of  Eakright  v.  The  Logans- 
port,  etc.,  R  R.  Co.,  supra,  went  as  far 
in  this  direction  as  we  are  willing  to  go." 

s  See  ch.  XIII. 

Notes  given  in  the  purchase  of  stock 
in  a  corporation  whose  sole  business  is 
to  carry  on  an  infringing  telephone 
business  are  without  consideration  and 
void.  Clemshire  v.  Boone,  etc.,  Bank,  14 
S.  W.  Rep.,  901  (Ark.,  1890). 

4Boggs  v.  Olcott,  40  111.,  303  (1866), 
holding  that  the  payment  of  calls  by 
one  whose  name  appears  to  a  subscrip- 
tion to  the  stock  of  a  corporation  is  an 
admission  that  his  signature  and  sub- 
scription were  authorized  and  binding 
upon  him.  Musgrave  v.  Morrison,  54 
Md.,  161  (1880),  to  same  effect,  A  prom- 
ise to  subscribe  for  a  certain  amount  of 
stock,  for  the  purpose  of  inducing  the 
company  to  adopt  a  certain  route,  is  en- 
forceable, though  no  formal  subscription 
ever  was  made.  Rhey  v.  Evensburg, 
etc.,  Co.,  27  Pa.  St.,  261  (1856);  Hawley 
v.  Upton,  102  U.  S.,  314  (1880).  Where 
the  paper  issued  was  a  bond  in  consid- 
eration of  shares  received,  but  which 
were  in  fact  never  issued,  the  signer 
was  held  to  be  a  stockholder.  Cayuga, 
etc.,  v.  Kyle,  64  N.  Y.,  185  (1876).  Where 
the  articles  of  association  were  defective 
in  not  distinctly  stating  the  termini  of 


90 


OH.  IV.]       SUBSCRIPTIONS METHOD PARTIES  ENFORCEMENT.       [§  54. 


§  54.  Various  defenses  to  subscriptions. —  There  are  various  de- 
fenses to  the  validity  and  enforceability  of  a  subscription  which 
have  been  treated  of  elsewhere.  Thus,  a  subscriber  to  the  capital 
stock  of  an  incorporated  company  is,  in  general,  bound  to  know 


the  road  nor  the  counties  through  which 
it  passed,  it  being  held  that  such  defect 
could  not  avail  the  defendant  in  an  ac- 
tion for  a  balance  of  an  unpaid  sub- 
scription, the  person  agreeing  to  place 
stock  is  not  liable  as  stockholder.  Gor- 
risen's  Case,  L.  R,  8  Ch.,  507  (1873); 
Boston,  etc.,  v.  Wellington,  113  Mass., 
79  (1873),  in  which  the  railroad  was  not 
divided  into  sections  as  contemplated 
by  the  subscription  paper,  the  change, 
however,  being  a  merely  formal  irregu- 
larity. In  an  old  case  in  Massachu- 
setts it  was  held  that  a  statement, 
made  at  a  public  meeting  of  the  corpo- 
ration, by  one  of  the  stockholders,  that 
he  would  spend  half  his  estate,  or 
enough  of  it  to  make  the  enterprise 
undertaken  by  the  corporation  a  suc- 
cess, did  not  render  him  liable  for  a 
failure  to  do  so.  Andover,  etc.,  Co.  v. 
Hay,  7  Mass.,  102  (1810). 

The  validity  of  a  subscription  depends 
upon  the  law  of  the  state  creating  the 
corporation,  unless  payment  is  to  be 
made  elsewhere.  Penobscot,  etc.,  Co. 
v.  Bartlett,  78  Mass.,  244  (1858). 

Burlington,  etc.,  v.  Palmer,  42  Iowa, 
222,  was  an  action  upon  a  subscription 
note  to  a  railroad,  which,  by  agreement, 
was  not  to  be  delivered  until  a  right  of 
way  had  been  secured,  when  a  contract 
should  be  executed  by  the  railroad  to 
construct  an  extension  upon  certain 
conditions.  Held,  that  the  fact  that  the 
contract  last  referred  to  did  not  con- 
tain one  of  the  conditions,  which  had, 
however,  been  complied  with,  did  not 
constitute  a  defense  to  the  action. 

Lane  v.  Brainerd,  30  Conn.,  565  (1862), 
where  one  who  had  subscribed  in  an 
irregular  way,  but  had  acted  as  a  stock- 
holder and  accepted  the  office  of  di- 
rector, was  held  to  have  waived  all 
objection  to  the  form  of  his  subscrip- 
tion.    To  same  effect,  Danbury  &  Nor- 


walk  Railroad  Co.  v.  Wilson,  22  Conn., 
435  (1853). 

Where  the  name  of  an  individual  ap- 
peals upon  the  stock  book  of  a  corpora- 
tion as  a  stockholder,  the  presumption  is 
that  he  is  regularly  and  lawfully  the 
holder  and  owner  of  the  stock,  and,  in 
the  absence  of  evidence  that  the  stock 
has  come  to  him  by  transfer,  that  lie 
was  regularly  a  subscriber.  Turnbull 
V.  Payson,  95  U.  S.,  148  (1877);  Pitts- 
burgh, etc.,  R.  R.  Co.  v.  Applegate,  21 
W.  Va.,  172  (1882) ;  McHose  v.  Wheeler, 
45  Pa.  St.,  32  (1863),  and  many  cases  in 
§  55.  infra. 

The  fact  that  a  subscription  paper 
does  not  correctly  designate  the  termini 
of  a  railroad  already  built  is  no  defense 
to  a  subscriber.  Boston,  etc.,  R  R  Co. 
v.  Wellington,  supra.  The  legislature 
cannot  make  a  person  a  subscriber  in 
opposition  to  his  will.  Richmond,  etc., 
Co.  v.  Clarke,  61  Me.,  351  (1S73). 

One  who  never  subscribes  in  writing 
for  stock,  nor  assumes  the  position  or 
rights  of  a  stockholder,  but  gives  a  bond 
to  repay  the  subscription  price,  which  is 
loaned  to  him,  is  not  liable  on  the  bond. 
Butler  University  v.  Scoonover,  16  N.  E. 
Rep.,  642  (1888). 

It  is  a  question  of  fact  and  of  con- 
tract whether  a  party  loaned  money  to 
the  company  or  was  a  subscriber  to  the 
stock.  McComb  v.  Barcelona,  etc., 
Assoc,  134  N.  Y.,  598  (1892). 

Where  the  corporation  contracts  with 
the  subscriber  to  give  him  indefinite 
time  in  which  to  pay  for  his  stock  the 
subscription  is  void.  McComb  v.  Credit 
Mobilier,  etc.,  Co.,  13  Phila.,  468  (1878); 
Van  Allen  v.  Illinois,  etc.,  R  R  Co.,  7 
Bosw.,  515  (1861).  It  is  otherwise  when 
only  a  reasonable  credit  is  given.  Mitch- 
ell v.  Beckman,  64  Cal.,  117. 

The  fact  that  the  subscriptions  to 
various  subscription  lists  of  the  same 


91 


§  54.]       SUBSCRIPTIONS  —  METHOD  —  PARTIES  —  ENFORCEMENT.       [CH.  IV. 

the  legal  effect  of  his  subscription ;  and  false  and  even  fraudulent 
representations  made  to  him  at  the  time  of  taking  his  subscription, 
as  to  the  legal  effect  of  his  contract  of  subscription,  are  not  suf- 


character  are  cat  off  from  the  headings 
and  pasted  under  one  heading  does  not 
release  the  subscribers.  It  is  not  a  mu- 
tilation. Sodus  Bay,  etc.,  R  R  Co.  v. 
Hamlin,  24  Hun,  390  (1881). 

Charlotte,  etc.,  v.  Blakely,  3  Strobh., 
245  (1848).  In  this  case  one  who  sub- 
scribed a  paper  agreeing  to  take  certain 
railroad  stock  "  provided  the  road  comes 
to  Columbia,"  but  did  not  sign  the  sub- 
scription books  when  opened,  was  held 
not  to  be  a  stockholder. 

Erie,  etc.,  R  R  Co.  v.  Owen,  32  Barb., 
616  (1860).     In  this  case  it  is  said  that 
there  are  two  modes  in  which  a  person, 
under  the  general   railroad  act  of  the 
state  of    New  York,    may    become    a 
stockholder  in  a  railroad  corporation, 
viz. :  by  subscribing  the  articles  of  as- 
sociation, and  becoming  a  member  of 
the    corporation    as   the    act    provides 
(§§  1  and  2),  or  by  subscribing  to  the 
capital  stock,  in  the  book  opened  by  the 
directors,  after  the  corporation  is  in  ex- 
istence ;  and  that  no  one  who  has  only 
signed  the  articles    of  association,  be- 
fore the  corporation  came  into  being,  is 
a  corporator  or  member  of  the  corpora- 
tion, unless  the  articles  so  signed  by 
him  have  been  duly  filed  in  the  office 
of  the  secretary  of  state,  as  required  by 
the  statute.    It  is  doubtful  whether  this 
can  be  considered  good  law.    This  case 
is  distinguished  in  Buffalo,  etc.,  R  R 
Co.    v.    Clark,  22   Hun,   359,   362,   and 
Sodus,  etc.,  R  R  Co.  v.  Hamlin,  24  Hun, 
390,  394. 
Although  the  statute  provides  for  sub- 


k   scription  books,  yet  a  subscription  on  a    action  for  calls  on  shares. 

— _i •    i.- mi i:j      t> i_       -_.l!>    /„i^i u     ~„«     ^P 


Co.,  32  Gratt,  146  (1879).  Especially 
where  the  loose  sheets  are  subsequently 
bound  up  into  a  volume  and  make 
part  of  the  records  of  the  corporation. 
Woodruff  v.  McDonald,  33  Ark.,  97 
(1878). 

Ex  parte  Besley,  2  Mac.  &  G.,  176,  in 
which  the  defendant  was  liable  to  be  a 
subscriber  and  liable  to  creditors  of  a 
railway  although  he  had  not  signed  any 
subscription  paper  or  book,  but  had  at- 
tended meetings  of  the  provisional  com- 
mittee as  a  member  thereof,  and  had 
paid  small  assessments  ordered  by  it. 

Carlisle  v.  Saginaw,  etc.,  27  Mich.,  315 
(1873).     Where   the   law   required  sub- 
scriptions to  be  made  "  in  the  manner 
to  be  provided  by  its  by-laws,"  a  sub- 
scription   made    before    such    by-laws 
were  adopted  was  declared  to  be  void. 
New  Brunswick,  etc,  v.  Muggeridge, 
4  Hurl.  &  N.,  160  (1859).   Defendant  had 
agreed  in  writing  to  accept  shares  he 
desired  to  subscribe  for,  and  had  paid 
the  sum   required  in  advance,  but  he 
did  not  sign  the  articles  of  association 
subsequently  sent  to  him  for  his  signa- 
ture.   In  an  action  for  calls  he  was  held 
not  to  be  a  shareholder  although  his 
name  had  been  placed  as  such  upon  the 
company's  register.   The  decision  rested 
upon  a  clause  in  the  Joint-Stock  Com- 
panies Act,  1856,  to  the  effect  that  no 
person  shall  be  deemed  to  have  accepted 
any  share  unless  his  acceptance  be  in 
writing. 

Tilsonburg,   etc.,   Co.   v.   Goodrich,  8 
Ontario  Rep.,  565  (1885),  which  was  an 

"  The  defend- 


subscription  paper  will  be  valid.  People 
v.  Stockton,  etc.,  R  R  Co.,  45  Cal.,  306 
(1873) ;  Ashtabula,  etc.,  R  R  Co.  v.  Smith, 
15  Ohio  St,  328  (1864) ;  Brownlee  n  Ohio, 
etc,  R.  R  Co.,  18  Ind.,  68  (1862) ;  Buffalo, 
etc,  R  R.  Co.  v.  Gifford,  87  N.  Y.,  294 
(1882);  Hamilton,  etc,  Co.  v.  Rice,  7 
Barb.,  157  (1849);  Stuart  v.  Valley  R  R 


ant"  (although  one  of  the  projectors 
and  original  subscribers)  "was  not  a 
party  to  the  petition,  and  he  is  not  by 
the  terms  of  the  [general]  statute  a 
member  of  the  company,  and  he  has 
done  nothing  since  the  patent,  by  at- 
tending meetings  or  otherwise,  which 
can   have  relation  to  his  agreement  to 


92 


CH.  IV.]       SUBSCRIPTIONS METHOD PARTIES —  ENFORCEMENT.       [§  55. 


ficient  to  release  him.1  Parol  conditions  or  agreements  in  refer- 
ence to  subscriptions  which  are  absolute  on  their  face  are  generally 
not  sustained.2  The  right  of  a  stockholder  to  withdraw  from  his 
subscription  is  also  discussed  elsewhere  in  this  volume.3  And 
many  other  defenses  which  have  been  raised  to  defeat  actions  for 
the  collection  of  subscriptions  are  considered  elsewhere.4 

§55.  Proof  of  subscription. —  It  is  presumptive  evidence  that 
one  is  a  subscriber  or  stockholder  when  his  name  appears  on  the 
books  of  the  company  in  either  of  these  capacities.5  And  so  also 
it  is  said  that  the  commissioners'  books  are  prima  facie  evidence  of 
the  subscriptions  found  in  them,"  and  likewise  as  to  the  original 
subscription   paper.7     And  again,  entries  in   the  proper  books  by 


take  stock."  The  court  with  regret  held 
that  he  was  not  a  stockholder. 

As  to  enforceability  of  subscriptions, 
not  for  stock,  but  as  a  gift  to  enter- 
prises, see  Smith  v.  Sowles,  10  Atl. 
Rep.,  536  (Vt,  1887) ;  McCabe  v.  O'Con- 
nor, 28  N.  W.  Rep.,  573  (Iowa,  1886) ; 
Broadbent  v.  Johnson,  13  Pac.  Rep.,  83 
(Idaho,  1882),  where  subscription  was  to 
a  railroad ;  Gaus  v.  Reimensnj'der,  2 
Atl.  Rep.,  425  (Pa.),  note ;  Grand  Lodge 
v.  Farnhara.  11  Pac.  Rep.,  592  (Cal., 
1886);  Roberts  v.  Cobb,  9  N.  E.  Rep., 
500  (N.  Y.\  note  (1886);  Utica.  etc..  R. 
R,  Co.  v.  Brinkerhoff,  21  Wend.,  139 
(1839);  Watkins  v.  Evans,  63  Mass.,  537 
(1852).  See,  also,  117  id..  456  (1875) ;  Pres- 
byterian Church  v.  Cooper,  20  N.  E. 
Rep.,  352  (N.  Y.,  1889);  Cottage,  etc., 
Church  v.  Kendall,  121  Mass.,  529 ;  Liv- 
ingston v.  Rogers,  1  Caines,  585(1804); 
Trustees,  etc.,  v.  Stewart,  1  N.  Y.,  581 
(1848);  Amherst  Academy  v.  Cowls,  23 
Mass.,  427  (1828). 

A  subscriber  or  donator  of  money  to 
a  factory  cannot  prevent  its  moving 
away  if  it  is  a  losing  enterprise.  Ayres 
v.  Dutton,  49  N.  W.  Rep„  897  (Mich., 
1891). 

i  See  §  196,  infra. 

2  See  ch.  IX.  A  defendant,  it  is  said, 
however,  who  is  sued  on  a  subscription 
absolute,  may  show  that  he  agreed 
orally  to  subscribe  conditionally,  and 
placed  his  name  on  blank  paper,  and 
that  the  secretary  of  the  corporation 
subsequently,   without  his  knowledge, 


subscribed  the  name  unconditionally  to 
a  subscription  paper.  See  §  137,  infra. 
And  it  is  held  that  when  a  corporation 
invites  and  accepts  subscriptions  as  a 
loan,  to  be  repaid  in  full  and  the  sub- 
scription canceled,  it  cannot  repudiate 
such  a  contract  and  treat  the  subscrip- 
tion so  induced  as  absolute.  See  §  247,  n., 
infra. 

3  See  §§  167-170,  infra. 

*  See  ch.  X. 

s  Hoagland  v.  Bell.  36  Barb.,  57  (1861) ; 
Turnbull  v.  Payson,  95  U.  S,  418(1877); 
Hamilton,  etc.,  Co.  v.  Rice,  7  Barb.,  157 : 
Pittsburg,  etc.,  R  R.  Co.  v.  Applegate, 
21  West  Va.,  172  (1882);  Taylor  v. 
Hughes,  2  Jones  &  Lat.  (Irish  Chan.), 
24,  55  (1844);  McHose  v.  Wheeler,  45 
Penn.  St.,  32  (1863).  Cf.  Coffin  v.  Col- 
lins, 17  Me.,  440  (1840);  Whitman  v. 
Proprietors,  etc.,  24  id.,  236  (1844) ;  Rock- 
ville,  etc.,  Co.  v.  Van  Ness,  2  Cranch, 
C.  C,  449(1824);  Mudgett  v.  Horrell, 
33  Cal.,  25  (1867).  Or  when  a  certificate 
has  been  issued  to  him,  which  he  pro- 
duces. Boardman  v.  Lake  Shore,  etc., 
R.  R,  Co.,  84  N.  Y,  157  (1881);  Agricult- 
ural Bank  v.  Burr,  24  Me.,  256;  Van- 
derwirken  v.  Glenn,  6  S.  E.  Rep,  806 
(Va.,  1888);  Lewis,  Adm'r,  v.  Glenn,  6 
S.  E.  Rep.,  866  (Va.,  1888). 

6  Rockville,  etc.,  Co.  v.  Van  Ness,  2 
Cranch,  C.  C,  449(1824) ;  Wood  v.  Coosa, 
etc.,  R  R  Co.,  32  Ga.  273  (1861). 

7  Partridge  v,  Badger,  25  Barb.,  146 
(1857). 


93 


§  55.]       SUBSCRIPTIONS  —  METHOD  —  PARTIES  —  ENFORCEMENT.      [cH.  IT. 

commissioners  duly  appointed  to  take  subscriptions  are  evidence 
against  the  subscribers.1  So  corporate  books  to  which  a  subscription 
has  been  transferred  by  authority  of  the  subscriber  are  evidence  of 
the  subscription,2  and  also  the  books  that  contain  the  original  sub- 
scriptions.3 

Entries  on  the  stock  ledger  and  corporate  books  are  competent 
evidence  of  an  issue  of  stock  to  a  person.4  But  the  presumption 
that  one  is  a  stockholder,  arising  from  the  fact  of  his  name  being 
found  in  the  stock  and  transfer  book,  may  be  met  by  proof  to  the 
contrary.5  When,  however,  the  books  of  the  corporation  have 
been  destroyed  or  lost,  a  certified  copy  of  the  recorded  list  of  the 


i  Wood  v.  Coosa,  etc.,  R  R  Co.,  32 
Ga.,  273  (1861). 

2  Iowa.  etc..  R  R  Co.  v.  Perkins,  28 
Iowa,  281  (1869);  Hawley  v.  Upton,  102 
U.  S.,  314  (1880).  Cf.  Whitman  v.  Pro- 
prietors, etc.,  24  Me..  236  (1844). 

3  Marlborough,  etc.,  R  R  Co.  v.  Ar- 
nold, 9  Gray,  159  (1858).  Cf.  Mudgett 
v.  Horrell,  33  Cat,  25  (1867). 

The  subscription  books  are  prima 
facie  evidence  of  stockholdership. 
Seniple  r.  Glenn,  9  S.  Rep.,  265  (Ala., 
1891). 

In  enforcing  a  subscription,  stock- 
holdership is  proven  by  showing  the 
name  on  the  subscription  list  and  prov- 
ing payment  of  several  assessments. 
Glenn  v.  McAllister's  Ex'rs,  46  Fed.  Rep., 
883(1891). 

The  stock  book  and  a  subscription  list 
are  sufficient  to  prove  stockholdership 
in  the  absence  of  rebuttal  testimony. 
Glenn  v.  Liggett,  47  Fed.  Rep.,  472  (1891). 
But  entries  in  the  cash  book  are  not  ad- 
missible, nor  the  report  of  the  treasurer 
of  the  corporation.     Id. 

Stockholdership  may  be  proved  by  ad- 
missions of  the  stockholder,  and  the 
testimony  of  the  treasurer,  and  by  the 
record  book  purporting  to  contain  copies 
of  the  original  minutes.  The  stock  book 
could  not  be  found.  Congdon  v.  Winsor, 
21  Atl.  Rep.,  540  (R  I.,  1891). 

4  Chapman  v.  Porter,  69  N.  Y.,  276 
(1877). 

s  Mudgett  v.  Horrell,  33  Cal.,  25  (1867). 
Cf.  Brewers',  etc.,  Ins.  Co.  v.  Burger,  10 
Hun,  56  (1877). 


The  stock  books  are  sufficient  to  prove 
stockholdership,  if  the  name  contained 
therein  is  the  same  as  defendant's  and 
was  entered  as  his  name.  Liggett  V. 
Glenn,  51  Fed.  Rep.,  381  (1892). 

The  corporate  books  are  not  admis- 
sible to  prove  stockholdership.  Howard 
v.  Glenn.  11  S.  E.  Rep.,  610  (Ga.,  1890). 

The  books  of  the  corporation  are 
prima  facie  evidence  of  stockholder- 
ship.  Lehman  v.  Glenn,  6  S.  Rep.,  44 
(Ala.,  1889);  Lehman  v.  Semple,  6  S. 
Rep.,  44  (Ala.,  1889). 

A  mistake  in  entering  the  name  of 
the  subscriber  on  the  corporate  books 
may  be  fatal  to  proving  stockholdership 
by  the  books.  Where  the  subscription 
is  denied,  the  best  evidence  is  the  sub- 
scription itself,  and  until  it  is  accounted 
for,  the  stock  ledger  is  inadmissible  in 
evidence.  If  the  action  is  on  the  writ- 
ten subscription,  recovery  can  be  on 
that  alone.  Taussig  v.  Glenn,  51  Fed. 
Rep.,  409  (1892). 

Where  there  is  no  law  authorizing  a 
paper  containing  the  subscriptions  to 
the  capital  stock  of  a  corporation  to  be 
filed  in  the  office  of  the  secretary  of 
state,  a  copy  thereof,  certified  under  the 
seal  of  the  secretary  of  state,  is  not  ad- 
missible as  evidence,  in  a  suit  by  the 
corporation,  to  charge  the  defendant 
as  stockholder.  Troy,  etc.,  R  R  Co.  v. 
Kurr,  17  Barb.,  581,  600  (1854) ;  Tilson- 
burg,  etc.,  Co.  v.  Goodrich,  8  Ontario 
(Q.  B.  Div.),  565  (1885).  Cf.  Bouchaud 
v.  Dias,  3  Denio,  238  (1846;;  Dick  v. 
Balch,  8  Peters,  30  (1834). 
94 


CH.  IV,]       SUBSCRIPTIONS  —  METHOD  —  PARTIES  —  ENFORCEMENT.       [§  5G. 


names  of  shareholders,  required  by  statute  to  be  filed  in  the  office 
of  the  register  of  deeds,  is  ])rima  facie  evidence  as  to  the  fact  of 
subscription  and  ownership  of  the  shares.1  So  it  is  said  that  the 
stock  book  of  a  corporation  is  not  admissible  in  evidence  in  an  ac- 
tion by  a  creditor  of  the  corporation  against  one  alleged  to  be  a 
stockholder  for  the  purpose  of  proving  that  he  is  such  stockholder.2 
In  order  to  let  in  secondary  evidence  of  a  subscription,  there  must 
be  proof  of  an  original  subscription  and  of  the  loss  of  the  book  or 
paper,  or  the  absence  of  the  original  paper  satisfactorily  accounted 
for.3  But  parol  evidence  is  admissible  to  show  that  a  certificate  has 
been  issued  to  one  by  a  wrong  Christian  name.4  The  mere  erasure 
of  a  subscription  will  not  of  itself  prevent  a  recovery  upon  it.5 
Various  other  principles  of  evidence  relative  to  proving  one  to  be  a 
subscrib3r  are  given  in  the  notes  below.6 


1  Cleveland  v.  Burnham,  55  Wis.,  598 
(1 885).  A  corporation  may,  by  suit,  com- 
pel its  agents  to  deliver  up  subscrip- 
tion lists,  or  in  lieu  thereof  be  liable 
tbemselves  on  the  subscriptions.  Peo- 
ple's, etc.,  Co.  v.  Babinger,  4  S.  Rep., 
82  (La.,  1888). 

2  Mudgett  v.  Horrell,  33  Cal.,  25  (1867). 

3  Pittsburgh,  etc.,  R.  R.  Co.  v.  Gaz- 
zam,  32  Penu.  St.,  340  (1858) ;  Graff  v. 
Pittsburgh,  etc.,  R.  R.  Co.,  31  id.,  489 
(1858);  Hays  v.  Pittsburgh,  etc.,  R.  R. 
Co.,  38  Penn.  St.,  81  (1860). 

4  Cleveland  v.  Burnham,  55  Wis.,  598. 

5  Johnson  v.  Wabash,  etc.,  Co.,  16  Ind., 
399  (1861).  And  where  one  took  a 
book  for  subscriptions  from  an  agent  of 
the  corporation,  and  subscribed  himself 
and  persuaded  others  to  subscribe,  and 
kept  the  book  some  months,  but  finally, 
because  of  a  difference  with  the  agent 
about  the  payment  for  his  services,  cut 
his  name  out  of  the  book  and  returned 
it  to  the  company,  it  was  held,  in  an 
action  by  the  company  for  the  amount 
of  his  subscription,  that  he  was  bound 
thereon  just  as  though  he  had  left  his 
name  on  the  list  of  subscribers.  Greer 
v.  Chartiers  R.  R.  Co.,  96  Penn.  St.,  391 
(1880);  Railroad  Co.  v.  White,  10  S.  C, 
155  (1878). 

It  has  been  held,  however,  in  New 
York,  that  where  the  statutory  certifi- 
cate inquired  by  law  to  be  filed  in  order 
to  obtain  incorporation  remains  in  the 


hands  of  a  subscriber,  or  either  of  them, 
a  subscriber  may  erase  or  modify  his 
subscription  as  he  sees  fit,  even  though 
he  had  previously  induced  others  to 
subscribe.  Burt  v.  Farrar,  24  Barb.,  518 
(1857). 

6  See  cases  in  notes  to  the  preceding 
sections  of  this  chapter;  also  the  follow- 
ing cases : 

Galveston  Hotel  Co.  v.  Bolton,  46  Tex., 
633  (1877),  where  the  original  subscrip- 
tion paper  was  lost  and  the  name  of  the 
defendant  did  not  appear  on  the  books 
of  the  company,  and  he  had  not  paid 
the  stipulated  advance,  nor  participated 
in  any  action  of  the  company,  but  had 
acknowledged  verbally  to  the  secretary 
his  obligation  to  pay.  Held,  that  the 
evidence  was  not  sufficient  to  meet  the 
proof  that  he  was  a  legal  subscriber. 

Pittsburgh,  etc.,  v.  Applegate,  21  W. 
Va.,  172  (1882).  where,  in  the  absence  of 
the  subscription  list,  the  company's 
stock  book  was  held  to  be  admissible  in 
evidence  as  tending  to  show  that  de- 
fendants were  stockholders.  Citing 
cases. 

Iowa,  etc.,  v.  Perkins,  28  Iowa,  281 
(1869).  Defendant  attended  a  township 
meeting  called  to  obtain  subscriptions 
to  a  railroad  company.  The  names  of 
subscribers  were  written  by  the  parties 
soliciting  upon  a  slip  of  paper,  being  au- 
thorized to  do  so  by  the  subscribers.  The 
meeting  then  gave  authority  to  an  offi- 


95 


§  50.]       SUBSCRIPTIONS  —  METHOD  —  PARTIES  —  ENFORCEMENT.       [CH.  IT. 


§56.  The  English  rule. —  In  England  the  contract  of  subscrip- 
tion for  shares  is  entered  into  in  a  somewhat  more  technical  or 
formal  manner.  An  application,  in  the  first  instance,  is  made  in 
writing  for  specified  number  of  shares,  which  application  is  held 
to  be  a  mere  offer,  open  for  acceptance  by  the  corporation  for  only 
a  limited  time.1  If  the  application  be  accepted,  the  corporation 
formally  allots  to  the  applicant  the  desired  number  of  shares,  and 
gives  him  a  notice  of  the  allotment.  The  notice  is  of  the  essence 
of  the  contract.  An  allotment  without  notice  is  not  sufficient  to 
bind  the  applicant  as  a  contributory  or  a  shareholder.2  If  the  no- 
tice of  allotment  is  sent  by  mail,  the  allottee  becomes  bound  from 
the  time  of  posting  the  letter,  whether  he  received  it  or  not.3    And 


cer  of  the  company  to  transcribe  the 
subscriptions  into  the  company's  book. 
Held,  that  the  bonk  thus  became  the 
original  contract  of  subscription,  and 
was  admissible  in  evidence  without 
proof  of  loss  of  the  slip. 

Haynes  v.  Brown,  36  N.  H.,  545(1859). 
The  absence  of  records  being  sufficiently 
accounted  for  to  make  parol  evidence 
admissible,  defendant's  attendance  at 
meetings  of  the  corporation  and  his  act- 
ing as  president  were  accounted  compe- 
tent proof  of  his  being  a  stockholder. 

Corporate  stock  book,  containing  list 
of  stockholders,  number  of  shares  owned 
by  each,  amount  paid  and  amount  due, 
and  containing  defendant's  name  among 
others,  is  sufficient  evidence  of  balance 
due  on  unpaid  subscription.  Glenn  v. 
Orr,  2  S.  E.  Rep.,  538  (N.  C,  1887). 

A  contract  between  the  defendant, 
who  is  sued  as  a  stockholder,  and  his  at- 
torney relative  to  defending  the  action 
is  inadmissible  to  prove  stockholdership. 
Liggett  v.  Glenn,  51  Fed.  Rep.,  381 
(1892);  Dorsheimer  v.  Glenn,  id.,  404. 

1  Ramsgate,  etc.,  Co.  v.  Montefiore,  L. 
R.,  1  Exch.,  109  (1866);  In  re  Bowron, 
L.  R,  5  Eq.,  428  (1868),  and  the  cases 
generally  cited,  infra,  in  this  section. 

A  subscriber  may  withdraw  before 
allotment  by  a  legally  convened  meet- 
ing of  the  directors.  Re  Portuguese, 
etc.,  Mines,  62  L.  T.  Rep.,  88  (1889).  But 
not  where  the  allotment  is  made  irregu- 


2  Hebbs'  Case,  L  R,  4  Eq.,  9  (1867) ; 
Gunn's  Case,  L.  R,  3  Chan.,  40  (1867)  ; 
In  re  Peruvian  R'y  Co.,  L.  R,  4  Chan., 
302  (1869);  Pellatt's  Case,  L.  R.  2  Chan., 
527(1867);  Ward's  Case,  L.  R,  10  Eq., 
659  (1870);  Harris'  Case,  L.  R,  7  Chan., 
587  (1872) ;  Household,  etc.,  Co.  v.  Grant, 
L.  R,  4  Exch.  Div.,  216  (1879).  The 
mere  act  of  signing  the  memorandum 
of  association  does  not  make  one  a 
stockholder.  Mackley's  Case.  L.  R.,  1 
Ch.  Div..  247  (INT")).  A  mere  allotment 
without  an  entry  of  the  name  on  the 
stock  registry  does  not  render  the  per- 
son liable  as  a  stockholder.  Nicoll's 
Case,  L.  R.  29  Ch.  Div..  421  (1883>  Nor 
is  one  a  stockholder  unless  he  signs  the 
deed  of  settlement  Irish  Peat  Co.  v. 
Phillips,  1  Best  &  S.,  598  (1861).  Nor 
will  a  certificate  be  issued  till  then. 
Wilkinson  r.  Anglo,  etc.,  G.  M.  Co.,  18 
Q.  B.,  728(1852). 

Although  an  allotment  of  stock  may 
be  illegal  by  reason  of  notice  not  having 
been  given  of  a  directors'  meeting,  yet 
the  allotment  may  be  confirmed  by  a 
subsequent  legally  called  meeting.  Re 
Portuguese,  etc.,  Mines,  Limited,  63  L  T. 
Rep..  423  (1890). 

3  Harris'  Case,  L.  R,  7  Chan.,  587 
(1872);  Household,  etc.,  Co.  v.  Grant, 
L  R,  4  Exch.  Div.,  216(1879);  Town- 
send'sCase.  L.  R.  13  Eq.,  148;  Hebbs' 
Case,  L.  R,  4  Eq.,  9  (1867).  Contra, 
British,  etc.,  Telegraph   Co.   v.  Colson, 


larly   before,   but  regularly   confirmed    L.  R,  6  Exch.,  108  (1871);  In  re  Constan- 
after,  the  withdrawal.    Id.,  179.  tinople,  etc.,  Co.,  19  W.  R,  219  (1870). 

96      ' 


CH.  IV.]        SUBSCRIPTIONS METHOD PARTES — -  ENFORCEMENT.       [§57. 


if  the  allottee  knew  of  the  fact  of  the  allotment,  and  especially  if  he 
acted  or  suffered  others  to  act  upon  the  assumption  that  he  was  a 
shareholder,  a  formal  notification  may  be  unnecessary  to  bind  him.1 
The  application  being  in  the  nature  of  an  offer  or  a  proposition 
may  be  withdrawn  at  any  time  before  it  has  been  regularly  ac- 
cepted, and  it  must  be  accepted  within  a  reasonable  time,  or  the 
party  making  it  cannot  be  held  bound;2  and  although  the  applica- 
tion should  be  in  writing,  the  withdrawal  of  it  may  be  oral.3  It 
seems  to  be  well  settled  in  England,  that,  in  order  to  make  the  con- 
tract to  take  up  shares  completely  binding,  there  must  be  the  ap- 
plication in  writing,  the  allotment  of  the  shares  to  the  applicant, 
and  a  communication  to  him  of  notice  of  the  allotment.4 

§  57.  Subscriptions  taken  by  commissioners.—  Although  the  stat- 
ute provides  for  subscription,  either  by  an  original  subscription  to 
the  articles  of  association,  or,  after  the  incorporation,  by  a  subscrip- 
tion in  books  to  be  opened  by  commissioners,  nevertheless  it  has 
been  held  that  a  subscription  in  some  other  way  is  binding.5     The 


iLevita's  Case,  L.  R,  3  Chan.,  36 
(1867);  In  re  Peruvian  R'y  Co.,  L  R.,  4 
Chan.,  322  (1869);  Richards  v.  Home, 
etc.,  Assoc,  L.  R,  6  C.  P.,  591  (1871); 
Pellatt's  Case,  L.  R,  2  Chan.,  527  (1867). 

2  Ward's  Case,  L.  R,  10  Eq.,  659 
(1870) ;  Best's  Case,  2  De  G.,  J.  &  S.,  650 
(1865);  Ramsgate,  etc.,  Co.  v.  Monte- 
fiore,  L.  R,  1  Exch.,  109  (1866) ;  Chap- 
man's Case,  L.  R,  2  Eq.,  567  (1866) ; 
Ritso's  Case,  L.  R,  4  Chan.  Div.,  774 
(1877) ;  Wilson's  Case,  20  L.  T.  (N.  S.), 
962  (1869). 

3  Wilson's  Case,  20  L.  T.  (N.  S.),  962 
(1869). 

*  Adams'  Case,  L.  R.,  13  Eq.,  474; 
Hebbs'  Case,  L.  R,  4  Eq.,  9  (1867) ;  Pel- 
latt's Case,  L.  R,  2  Chan.,  527(1867); 
Roger's  Case,  L.  R,  3  Chan.,  637  (1868) ; 
Tucker's  Case,  20  W.  R,  89  (1871).  Cf. 
Bloxam's  Case,  33  Beav.,  529,  distin- 
guished in  Pellatt's  Case,  supra.  But 
under  the  twenty-third  section  of  the 
Companies  Act  of  1862,  the  decisions  are 
uniform  that  whenever  one  signs  the 
memorandum  of  association  he  becomes 
a  share  owner,  and  must  be  put  on  the 
list  of  coutributories,  although  no  shares 
may  have  been  allotted  to  him.  In  re 
London,  etc..  Co.,  L.  R,  5  Chan.  Div., 
525  (1877) ;  Evan's  Case,  L.  R,  2  Chan., 

(7)  97 


427  (1867);  Sidney's  Case,  L.  R,  13 
Eq.,  228  (1871) ;  Levick's  Case,  40  L.  J. 
(Chan.),  180  (1870);  Hall's  Case,  L.  R.  r> 
Chan.,  707  (1870),  distinguishing  Snell's 
Case,  L.  R.,  5  Chan.,  22  (1869).  An  al- 
lotment to  a  person  who  has  not  applied 
for  shares  is  not  binding.  Re  The 
Northern,  etc.,  Co.,  Limited,  63  L.  T. 
Rep.,  369  (1890). 

&  Buffalo,  etc.,  R  R.  Co.  v.  Gifford,  87 
N.  Y.,  294  (1882) ;  Stuart  v.  Valley  R  R. 
Co.,  32  Gratt,  146  (1879).  Contra.  Troy. 
etc.,  R.  R.  Co.  v.  Tibbits,  18  Barb.,  297 
(1854) ;  Parker  v.  Northern,  etc.,  R  R. 
Co.,  33  Mich.,  23  (1875);  Unity  Insur- 
ance Co.  v.  Cram,  43  N.  H,  636  (1862) ; 
Schultz  v.  Schoolcraft,  etc.,  R  Co.,  9 
Mich.,  269  (1861).  But  when  the  stat- 
utes provide  for  commissioners,  it  is 
said  they  must  all  be  present  in  order  to 
the  valid  performance  of  the  judicial 
duties  assigned  to  them.  Crocker  v. 
Crane,  21  Wend.,  211  (1839).  It  is  said 
that  in  the  taking  of  subscriptions  the 
commissioners  act  ministerially,  but  in 
the  distribution  or  allotment  of  shai'es 
they  act  judicially  ;  and  that  a  distribu- 
tion of  shares  by  commissioners  not 
sufficient  in  number  to  constitute  a  legal 
board  is  void.     Crocker  v.  Crane,  supra. 

It  has  been  held  that  the  commission- 


§58.] 


SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [CH.  IV. 


commissioners  may  themselves  be  subscribers  to  the  stock,1  but 
they  can  have  no  priority  of  right  to  subscribe  over  others,  and  no 
subscriptions  can  lawfully  be  taken  with  closed  doors.  The  books 
must  be  open,  and  the  public  must  have  an  opportunity  to  sub- 
scribe.2 The  commissioners  have  only  such  general  powers  as  are 
necessary  to  validate  the  subscriptions  to  the  stock.  Their  author- 
ity and  functions  cease  upon  the  organization  of  the  corporation.3 

§  58.  Subscriptions  in  excess  of  the  capital  stock  — In  general, 
after  the  full  amount  of  stock  provided  for  in  the  act  of  incorpo- 
ration has  been  subscribed,  any  further  subscriptions  are  void.4 
Where,  by  statute,  the  commissioners  do  not  properly  apportion 
stock,  in  cases  involving  an  excess  of  subscriptions,  an  aggrieved 
subscriber  may  apply  to  a  court  of  equity  for  relief.5 

But,  after  the  organization  of  the  corporation,  the  duty  to  appor- 


ers  may  limit  the  amount  of  stock 
which  any  one  subscriber  may  take, 
and  will,  in  a  proper  case,  be  sustained 
therein  on  grounds  of  public  policy,  al- 
though the  power  so  to  act  is  not  specif- 
ically conferred  upon  them  by  the  stat- 
ute. Brower  v.  Passenger  R.  R  Co.,  3 
Phila.,  161  (1858).  And  accordingly  fic- 
titious subscriptions  for  the  pupose  of 
evading  such  a  limitation  of  the  amount 
of  stock  to  be  taken  by  a  single  sub- 
scriber are  illegal  and  void.  Perkins  v. 
Savage,  15  Wend.,  412  (1836).  Commis- 
sioners to  take  subscriptions  may  refuse 
to  allow  one  person  to  subscribe  for  half 
of  the  stock,  and  may  refuse  to  accept 
a  subscription  from  a  person  as  trustee. 
Thomas  v.  Citizens',  etc.,  R'y,  1  Araer. 
St.  R'y  Dec,  299  (Pa.,  1858). 

i  Walker  v.  Devereaux,  4  Paige,  229 
(1833). 

2  Brower  v.  Passenger  R'y  Co.,  3  Phila., 
161  (1858).  When  the  amount  of  the 
subscription  is  not  limited,  the  commis- 
sioners, in  the  absence  of  other  express 
provision,  may  usually  decide  when 
enough  stock  has  been  subscribed,  and 
their  decision  is  practically  conclusive 
as  an  exercise  of  discretion.  Saugatuck, 
etc.,  Co.  v.  Westport,  39  Conn.,  337,  348 
V1872).  Their  failure  to  take  the  statu- 
tory oath  will  not  invalidate  the  sub- 
scriptions taken  by  them,  if  they  are  in 
other  essential  respects  regular.     Holl- 


man  r.  Williamsport,  etc.,  Co.,  9  Gill  & 
J.,  462  (1838). 

3  James  v.  Cincinnati,  etc,  R  R  Co. 
2  Disney  (Cin.  Super.  Ct),  2G1  (1868); 
Peninsular,  etc.,  R  R  Co.  v.  Duncan,  28 
Mich.,  130  (1873) ;  Hardenburgh  v.  Farm- 
ers', etc..  Bank,  3  N.  J.  Eq.,  68  (1834); 
Walker  v.  Devereaux,  4  Paige,  229(1833); 
Crocker  r.  Crane,  21  Wend.,  211  (1839); 
Wellersburg,  etc.,  Co.  v.  Hoffman,  9  Md., 
559  (1834);  Smith  v.  Bangs,  15  III.,  399 
(1854);  State  v.  Lehre,  7  Rich.  Law,  234 
(1851). 

The  corporation  may  by  suit  set  aside 
illegal  subscriptions  —  the  subscribers 
not  being  qualified.  Union  Bank  V.  Mc- 
Donough,  5  La.,  63  (1833). 

♦Lathrop  v.  Kneeland.  46  Barb.,  432 
(1866);  Mackley's  Case,  L  R,  1  Chan. 
Div.,  247  (18751 

5  Walker  v.  Devereaux,  4  Paige,  229 
(1833);  Meads  v.  Walker.  Hopk.  Ch.,587 
(1825).  Cf.  Haight  r.  Day,  1  John.  Ch., 
18  (1814). 

Where  an  apportionment  is  provided 
for  in  the  event  of  an  excess  of  subscrip- 
tions, it  is  said  that  the  contract  of  sub- 
scription is  not  complete  until  the  ap- 
portionment is  made ;  that  there  can  be 
neither  stockholders  nor  corporation 
prior  to  the  apportionment  Walker  v. 
Devereaux,  4  Paige,  229  (1833);  Crocker 
v.  Crane.  21  Wend..  211  (1839);  Burrows 
v.  Smith,  10  N.  Y„  550  (1853).     Cf.  Buf- 


OH.  IV.]      SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.      [§§  59,  60. 


tion  the  stock,  if  there  has  been  an  oversubscription,  belongs  to  the 
corporation  and  not  to  the  commissioners.1  And,  in  the  absence  of 
statutory  authority,  the  commissioners,  even  before  organization, 
have  no  general  power,  if  they  receive  excessive  subscriptions,  to 
reduce  proportionally  all  the  subscriptions  and  apportion  the  stock. 
It  is  their  only  duty  to  take  subscriptions  up  to  the  full  amount  of 
the  prescribed  capital,  and  to  refuse  anything  beyond  that.2  Neither 
can  the  corporation,  if  it  has  issued  the  full  amount  of  the  stock, 
recover  on  subscriptions  in  excess.  The  subscriber  acquires  no  title 
by  such  a  subscription,  and  corporate  creditors  can  enforce  no  lia- 
bility thereon.3 

§  59.  Subscriptions  and  organization  where  there  is  a  special 
charter  and  no  commissioners  are  provided  for. —  This  subject  is 
considered  elsewhere.4 

§  60.  Subscriptions  delivered  in  escrow. —  Subscriptions  for  shares 
may  be  made  and  delivered  in  escrow  to  an  agent  of  the  corpora- 
tion who  is  engaged  in  taking  subscriptions,5  or  to  a  director  of 
the  corporation.6  But  a  delivery  in  escrow  to  a  commissioner  is 
bad,  and  a  subscription  so  delivered  is  absolute.7    Delivery  of  a 


falo,  etc.,  R  R  Co.  v.  Dudley,  14  N.  Y., 
336,  346  (1856). 

Where  a  resolution  was  passed  by  a 
board  of  directors,  entitling  a  promoter 
to  have  a  certain  number  of  shares  al- 
lotted to  him,  and  the  available  shares 
had  been  disposed  of  before  his  bill  for 
specific  performance  was  filed,  held,  he 
had  no  ground  for  coming  into  equity. 
Ferguson  v.  Wilson,  L.  R,  2  Ch.  App., 
77,  87  (1866). 

1  State  v.  Lehre,  7  Rich.  Law,  234 
(1854),  where  an  application  for  man- 
damus to  compel  commissioners  to  re- 
apportion stock  agreeably  to  the  charter 
of  a  company,  and  for  quo  warranto 
against  officers  claimed  to  have  been 
illegally  elected,  was  refused,  the  appel- 
late court  holding  that  the  commission- 
ers had  no  power  to  re-apportion  stock 
after  the  subscribers  had  become  a  body 
corporate.  Smith  v.  Bangs,  15  111.,  399 
(1854).  In  this  case,  after  the  commis- 
sioners had  closed  the  subscription 
books  and  called  a  meeting,  at  which 
directors  were  chosen,  they  re-opened 
the  books  to  receive  further  subscrip- 
tions.    On  the  application  of  one  of  the 


directors  they  were  restrained  by  in- 
junction, the  court  holding  that  their 
powers  were  at  an  end. 

2  Van  Dyke  v.  Stout,  8  N.  J.  Eq.,  333 
(1850). 

3  Burrows  v.  Smith,  10  N.  "Y.,  550 
(1853);  Oler  v.  Baltimore,  etc.,  R  R  Co., 
41  Md„  583  (1874).  When  the  corpora- 
tion has  accepted  subscriptions  in  excess 
of  the  capital  stock,  corporate  officers 
cannot  buy  in  shares  of  the  stock  at  a 
discount  and  then  re-issue  them  to  pro- 
vide for  the  oversubscription,  charging 
the  corporation  par  for  the  stock  bought 
in,  and  thereby  realizing  a  profit  to 
themselves  individually  on  the  transac- 
tion. East  New  York,  etc.,  R  R  Co.  v. 
Elmore,  5  Hun,  214  (1875). 

< Seech.  XXXVI,  infra, 

5  Cass  v.  Pittsburgh,  etc.,  R  R  Co.,  80 
Penn.  St,  31  (1875). 

6  Ottawa,  etc.,  R  R  Co.  v.  Hall,  1 
Bradw.  (111.),  612  (1878). 

^  Wight  v.  Shelby  R  R  Co.,  16  R 
Mon.,  4  (1855).  It  is  the  rule  in  Ken- 
tucky that,  to  become  effectual  as  an 
escrow,  the  delivery  must  be  to  a  third 
person.      Wight  v.   Shelby   R   R   Co., 


99 


§  61.]       S DESCRIPTIONS METHOD PARTIES ENFORCEMENT.       [CH.   IV. 

subscription  in  escrow,  to  become  absolute  on  performance  of  cer- 
tain conditions  by  the  corporation,  differs  from  a  conditional  sub- 
scription in  this :  that  a  subscription  in  escrow  is,  strictly  speaking, 
no  subscription.  As  in  the  case  of  a  deed  delivered  in  escrow,  no 
estate  passes  until  the  second  delivery.  So,  in  the  case  of  a  sub- 
scription delivered  in  escrow,  there  is  no  subscription  until  a  second 
delivery,  and  the  depositary  can  only  deliver  it  up  on  performance 
of  the  condition.1  So,  also,  a  subscriber  may  show  by  parol  an 
agreement  with  an  agent  of  the  corporation  that  his  subscription 
to  blank  paper  should  not  be  a  subscription  until  he  had  seen  and 
approved  the  heading  of  the  subscription  paper.2 

§  61.  Liability  of  the  corjwration  for  refusal  to  issue  a  certificate 
of  stoclc. —  The  corporation  is  bound,  upon  demand,  to  deliver  to  a 
stockholder  a  certificate  of  stock  representing  his  interest  in  the 
corporation.3  If  it  refuses  to  issue  the  certificate  the  stockholder 
may  bring  suit  in  equity  to  compel  its  issuance,4  or  he  may  recover 


supra.  But  in  Pennsylvania  it  seems 
the  rule  is  otherwise.  Cass  v.  Pitts- 
burgh, etc.,  R  R  Co.,  supra.  And  so 
in  Illinois.  Ottawa,  etc.,  R  R  Co.  v. 
Hall,  supra.  Cf.  Price  v.  Pittsburgh, 
etc.,  R  R  Co.,  84  111.,  13,  36  (1864). 

1  Ottawa,  etc.,  R  R  Co.  v.  Hall,  1 
Bradw.  (111.),  612  (1878).  It  is  competent 
to  show  by  parol  that  a  subscription 
was  delivered  in  escrow.  The  court  of 
appeals  of  Illinois  declares  that  a  con- 
trary rule  is  not  sustained  by  any  re- 
spectable authority.  Ottawa,  etc.,  R  R 
Co.  v.  Hall,  supra.  Cf.  Tonic,  etc.,  R  R 
Co.  v.  Stein,  21  111.,  96  (1859). 

2  Bucher  v.  Dillsburg,  etc.,  R  R  Co., 
76  Penn.  St.,  306  (1874).  This,  however, 
amounted  to  a  parol  condition  —  a  sub- 
ject fully  treated  in  chapter  IX,  infra. 

3  Fletcher  v.  McGill,  10  N.  E.  Rep., 
651  (Ind.,  1887). 

The  stockholder  is  entitled  to  a  certifi- 
cate of  stock.  Rio  Grande,  etc.,  Co.  v. 
Burns,  17  S.  W.  Rep.,  1043  (Tex.,  1891). 

A  statute  authorizing  the  issue  of  cer- 
tificates of  stock  when  it  is  fully  paid 
up  does  not  prevent  the  issue  of  such 
certificates  before  it  is  fully  paid  up. 
Green  v.  Abietine,  etc.,  Co.,  31  Pac.  Rep., 
100  (Cal.,  1892). 

The  subscriber  for  stock  is  not  en- 


titled to  a  certificate  until  he  has  paid 
for  the  stock  in  full.  Baltimore,  eta, 
Co.  v.  Hambleton,  26  Atl.  Rep.,  279  (Md., 
1893). 

Where  a  prospective  corporate  officer 
issues  certificates  of  stock  in  the  pros- 
pective corporation,  a  person  who  loans 
money  on  such  stock  as  collateral  secu- 
rity may  hold  such  officer  liable  for 
issuing  the  stock  before  the  corporation 
was  organized.  Merchants'  Nat.  Bank 
v.  Robison,  30  Pac.  Rep.,  985  (Utah, 
1892).  The  duty  of  the  corporation  to 
issue  a  certificate  is  considered  also  in 
§3  192.  197. 

A  subscriber  for  stock  who  has  paid 
ten  per  cent  cannot  sue  a  consolidated 
company,  into  which  his  company  has 
been  merged,  for  a  certificate,  even 
though  the  articles  of  consolidation  pro- 
vide for  the  issue  of  one  share  of  the 
latter  company  for  every  two  shares  of 
the  old  company,  unless  he  has  first  de- 
manded the  certificate  and  has  offered 
to  pay  the  remaining  ninety  per  cent, 
or  asks  for  a  certificate  of  stock  not 
paid  up.  Babcock  v.  Schuylkill,  etc.,  R 
R,  133  N.  Y.,  420  (1892). 

4  Appeal  of  Rowley,  9  Atl.  Rep.,  329 
(Pa.,  1887);  Chester  Glass  Co.  v.  Dewey, 
16  Mass.,  94  (1819);  Ferguson  v.  Wilsou, 


100 


CH.  IV.]        SUBSCRIPTIONS METHOD PARTIES  —  ENFORCEMENT.       [§  61. 


of  the  corporation  in  assumpsit  the  value  of  the  shares  at  the  time 
of  the  demand.1 

The  fact  that  the  corporation  has  not  issued  a  certificate  to  a 
stockholder  for  thirty  years  and  that  he  has  not  insisted  on  his 
right  as  such  is  no  bar  to  his  suit  to  establish  his  stockholdership.2 

In  case  the  full  capital  stock  has  been  issued,  then,  of  course, 
specific  performance  of  an  agreement  to  issue  more  shares  cannot 
be  had.3  The  liability  of  a  corporation  to  issue  stock  to  the  sub- 
scribers thereof  does  not  necessarily  devolve  upon  another  corpora- 
tion which  succeeds  to  its  debts,  liabilities  and  franchises.4 


L.  R,  2  Ch.,  77  (1866).  Cf.  Thorp  v. 
Woodhull,  1  Sand.  Ch.,  411  (1844). 

A  corporation  cannot  be  compelled  by 
the  subscriber  for  stock  to  issue  a  cer- 
tificate therefor  before  it  has  been  fully 
paid  up,  the  stock  being  a  part  of  the 
increased  capital  stock.  Baltimore,  etc., 
Co.  v.  Hambleton,  26  Atl.  Rep.,  279  (Md., 
1893). 

If  in  organizing  and  issuing  the  stock 
the  amount  to  be  issued  for  the  property 
is  not  what  the  contract  calls  for,  the 
vendor  may  compel  a  specific  perform- 
ance. Bailey  v.  Champlain,  etc.,  Co.,  46 
N.  W.  Rep.,539  (Wis.,  1890).  See,  also,  § 24. 

1  "  A  subscriber  for  shares  of  stock,  in 
case  the  contract  of  subscription  was 
regularly  entered  into,  may,  if  the  cor- 
poration refuse  to  issue  him  a  certifi- 
cate, have  his  action  in  equity  for  specific 
performance,  or  he  may  recover  of  the 
corporation,  in  assumpsit,  the  value  of 
the  shares  at  the  time  of  the  demand." 
Birmingham  Nat.  Bank  v.  Roden,  11  S. 
Rep.,  883  (Ala.,  1892),  quoting  the  text 

Wyman  v.  American  Powder  Co.,  62 
Mass.,  168  (1851).  But  to  entitle  one  to 
recover  back  money  advanced  to  a  cor- 
poration for  shares,  upon  the  ground 
of  a  failure  to  issue  the  certificate,  the 
subscriber  must,  before  suit,  rescind  the 
contract  and  demand  the  money. 
Swazy  v.  Choate,  etc.,  Co.,  48  N.  H.,  200 
(1868).     See,  also,  141  U.  S.,  227. 

2  Bedford  County  v.  Nashville,  etc.,  R 
R,  14  Lea  (Tenn.),  525  (1884) ;  Kobogum 
v.  Jackson  Iron  Co.,  43  N.  W.  Rep.,  602 
(Mich..  1889). 

3Finley,  etc.,  Co.  v.  Kurtz,  34  Mich., 


89  (1876*.  Where  a  bank  contracted  to 
give  a  person  a  certain  amount  of  stock 
if  he  would  do  business  with  it,  and  he 
did  so,  the  bank  is  liable  in  damages  for 
refusal  to  deliver  the  stock.  Rich  n 
State  Nat'l  Bank  of  Lincoln,  7  Neb.,  231. 
For  the  refusal  of  the  corporation  to 
issue  original  stock  to  a  subscriber,  the 
measure  of  damages  is  the  difference 
between  the  price  contracted  for  and 
the  market  value  on  the  day  when  the 
issue  ought  to  have  been  made.  Van 
Allen  v.  Illinois,  etc.,  R  R  Co.,  7  Bosw., 
515  (1861).  For  another  rule  as  to  the 
measure  of  damages,  and  one  more  in 
favor  of  the  plaintiff,  see  Baltimore,  etc., 
R'y  Co.  v.  Sewall,  35  Md.,  238  (1871);  and 
see,  also,  ch.  XXXV.  In  Louisiana  the 
universal  legatee  may  pay  for,  and  de- 
mand, the  certificate  of  stock  subscribed 
for  by  his  ancestor.  The  executor  has 
no  power  to  cancel  the  subscription,  and 
the  stock  cannot  be  appropriated  by  a 
subsequent  subscriber,  who  subscribed 
for  it  by  consent  of  the  executor.  State 
v.  Crescent  City,  etc.,  Co.,  24  La.  Ann., 
318  (1872).  Cf.  Wallace  v.  Townsend' 
43  Ohio,  537.  If  a  mistake  has  been 
made  by  which  the  certificates  and 
stock  have  been  issued  to  the  wrong 
person,  a  court  of  equity  will  remedy 
it  O'Meara  v.  North  Am.  Min.  Rev.,  2 
Nev.,  112  (1866). 

4  Conant  v.  National,  etc.,  Co.,  8  Jones 
&  S.  (N.  Y.  Super.  Ct),  83  (1875). 

In  England  it  seems  that  directors  are 
not  individually  liable  to  subscribers  for 
the  breach   by  the  corporation   of  its 

Ferguson  v> 


agreement  to  issue  stock, 


101 


§  62.]        SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [CH.  IT. 

§  62.  Substitution  of  stockholders  before  the  incorporation  — 
Alteration  of  the  subscription  paper.—  There  has  been  some  con- 
troversy as  to  the  legality  of  one  person  being  substituted  for  an- 
other as  a  subscriber  before  the  incorporation  and  issue  of  the  stock. 
If  the  facts  are  such  that  a  cancellation  of  the  subscription  is  legal, 
then  doubtless  the  substitution  is  legal.1  But  where  such  is  not  the 
case,  then  it  would  seem  that  the  substitution  is  merely  a  transfer 
of  the  stock,  and  the  transferrer,  in  that  case,  should  be  held  liable 
to  the  same  extent  as  in  other  cases  of  transfer  of  stock.2 

In  California  it  is  held  that  no  substitution  of  stockholders  is 
legal;  but  the  weight  of  authority  clearly  sustains  a  contrary  rule.3 
If  the  vendor  afterwards  obtains  the  certificates  and  sells  them 
again  to  others,  he  is  liable  to  the  first  person  to  whom  he  sold  his 
interest,4  and  is  liable  also  to  the  latter  if  the  corporation  is  never 
formed.5  If  the  corporation  is  duly  formed,  the  vendor  may  com- 
pel the  vendee  to  pay  for  the  subscription  transferred.6 

Where  articles  are  materially  altered  without  the  consent  of  all 
the  subscribers,  after  their  subscription  and  before  the  complete 
organization  of  the  company,  such  articles  are  not  binding  upon  the 
non-consenting  subscribers.' 


Wilson,  L.  R,  2  Chan.,  77  (1866).  But 
see,  also,  Swift  v.  Jewsbury,  L.  R,  9 
Q.  B.,  301 ;  Betts  v.  De  Vitre,  L.  R,  3 
Chan.,  429,  441  (1868);  Henderson  v. 
Lacon,  L.  R,  5  Eq.,  249  (1867) ;  Eagles- 
field  v:  Marquis  of  Londonderry,  25 
Week.  Rep.,  190. 

iSee  §§  167-170,  infra,  on  cancella- 
tion. See,  also,  dictum,  in  Ryder  v.  Al- 
ton, etc.,  R  R.  Co.,  13  111.,  516,  521 
(1851).  Cf.  Selma,  etc.,  R  R  Co.  v. 
Tipton,  5  Ala.,  787  (1843),  to  the  effect 
that  a  subscriber  cannot  withdraw. 

2 Seech.  XV. 

«  Baltimore  City  R'y  Co.  v.  Sewell,  35 
Md.,  238  (1871);  Tempist  v.  Kilmer,  3 
C.  B.,  249  (1846) ;  Hunt  v.  Gunn,  13  C. 
B.  (N.  S.),  226  (1862) ;  Merrimac,  etc., 
Co.  v.  Levy,  54  Penn.  St.,  227  (1867). 
Contra,  Hawkins  v.  Mansfield  Gold 
Mining  Co.,  52  Cal.,  513  (1877);  Mor- 
rison v.  Gold  Mountain  G.  M.  Co.,  52 
Cal.,  306 ;  Coleman  r.  Spencer,  5  Blackf. 
(Ind.),  197  (1839).  See,  also,  Chater  v. 
San  Francisco  S.  F.  Co.,  19  Cal.,  219 
(1861). 

A  substitution  of  stockholders  after 


organization  by  canceling  some  sub- 
scriptions and  filling  in  others  is  illegal. 
There  should  be  a  transfer.  Cartwright 
v.  Dickinson,  12  S.  W.  Rep.,  1030  (Tenn., 
1890). 

An  alteration  of  a  subscription  list  by 
a  subscription  being  changed  and  an- 
other name  substituted  releases  other 
subscribers  who  signed  before  the  altera- 
tion. Texas  Printing,  etc.,  Co.  v.  Smith, 
14  S.  W.  Rep.,  1074  (Tex.,  1889).  See, 
also,  on  this  subject,  §  169  and  §  50. 

4Beckitt  v.  Bilbraugh,  8  Hare,  188 
(1850). 

5Kempson  v.  Saunders,  4  Bing.,  5 
(1826).  But  the  latter  is  not  liable  to 
take  the  shares  nor  to  indemnify  his 
vendor.  Jackson  v.  Cocker,  4  Beav., 
59(1841). 

e  Mahan  v.  Wood,  44  Cal.,  462  (1872). 
And  may  collect  a  note  given  in  pay- 
ment. 

'  Burrows  v.  Smith,  10  N.  Y.,  550  (1853). 
See,  also,  16  S.  E.  Rep.,  877 ;  17  id.,  305. 

An  alteration  of  a  subscription  list  by 
a  subscription  being  changed  and  an- 
other  name  substituted  releases  other 


102 


CH.  IV.]      SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.      [§§  63,  64. 

§  63.  Bight  to  recover  bade  money  advanced  on  shares  upon  a 
failure  to  organize  the  company. —  Where  one  Las  advanced  money 
in  good  faith  to  the  promoters  of  a  company,  as  a  deposit  or  assess- 
ment upon  shares  subscribed  for  to  be  subsequently  issued,  and  the 
enterprise  contemplated  by  the  proposed  incorporation  is  aban- 
doned, or  the  company  for  any  reason  fails  to  be  incorporated,  such 
subscriber  may  recover  back  the  money  so  advanced.1  Nor  is  he 
obliged  to  submit  to  the  deduction  of  any  part  thereof  to  be  ap- 
plied to  the  payment  of  the  expenses  incurred  by  the  promoters  in 
attempting  the  incorporation.2 


B.    WHO   IS    COMPETENT   TO    SUBSCRIBE    FOR   STOCK. 

§  64.  Corporations  generally  not. —  Upon  general  common-law 
principles  any  one  who  is  competent  to  enter  into  ordinary  con- 
tracts may  make  a  valid  subscription  .for  stock  in  an  incorporated 
company.  A  subscription  for  stock  is  a  contract;  and,  in  general, 
any  one  who  can  contract  may  subscribe.  The  corporation  itself, 
however,  cannot  be  a  subscriber  to  its  own  stock.3  It  is  con- 
clusively settled  that   municipal   corporations   may  lawfully  sub- 


subscribers  who  signed  before  the  alter- 
ation. Texas  Printing,  etc.,  Co.  v.  Smith, 
14  S.  W.  Rep.,  1074  (Tex.,  1889). 

A  change  in  the  subscription  by  sev- 
eral of  the  subscribers  does  not  release 
the  others.  Gibbons  v.  Grinsel,  48  N.  W. 
Rep.,  255  (Wis.,  1891).  An  increase  in 
the  capital  upon  incorporation  does  not 
release.     Id. 

1  Nockels  v.  Crosby,  3  Barn.  &  C,  814 
(1825);  Ward  v.  Lord  Londesborough, 
12  C.  B.,  252  (1854);  Asphitel  v.  Ser- 
combe,  5  Exch.,  147  (1850) ;  Williams  v. 
Salmond,  2  Kay  &  J.,  463  (1856) ;  Chaplin 
v.  Clarke,  4  Exch.,  403  (1849).  Cf.  Val- 
lams  v.  Fletcher,  1  Exch.,  20  (1847); 
Grand  Trunk,  etc.,  R'y  Co.  v.  Brodie,  9 
Hare,  823  (1852);  Kempson  v.  Saunders, 
4  Bing,  5,  where  a  vendee  recovered 
from  his  vendor  money  paid  for  stock 
in  a  company  which  was  never  organ- 
ized. And  see,  also,  Williams  v.  Page, 
24  Beav.,  654  (1857).  "A  bill  in  equity 
lies  to  recover  back  money  paid  on  a 
bubble."  Colt  v.  Woollaston,  2  P.  Wms., 
154  (1723) ;  Green  v.  Barrett,  1  Sim.,  45 
(1826).  See,  also,  "the  bubble  act,"  6 
Geo.  I.,  ch.  18 ;  also  §  705,  etc.,  infra. 


Where  a  subscriber  for  stock  pays  for 
the  stock  before  the  company  is  organ- 
ized, he  may  recover  back  the  money  if 
the  company  is  not  organized.  Bradford 
v.  Harris,  26  Atl.  Rep.,  186  (Md.,  1893). 

Where  promoters  agree  to  sell  stock 
in  a  proposed  corporation  upon  a  tender 
of  the  price  by  a  certain  day,  such  ten- 
der need  not  be  made  if  the  company  is 
not  organized.  The  proposed  purchaser 
may  recover  back  the  consideration. 
Manistee,  etc.,  Co.  v.  Union,  etc.,  Bank, 
32  N.  E.  Rep.,  449  (III.,  1892). 

2  Nockels  v.  Crosby,  supra.  But  see, 
contra,  Williams  v.  Salmond,  supra. 

3  Thus,  where  a  number  of  individuals 
attempted  to  organize  a  corporation 
with  a  capital  stock  of  seventy-two 
thousand  five  hundred  shares,  of  the 
par  value  of  $100  each,  and  six  differ- 
ent persons  subscribe  for  one  share  each, 
and  one  person  then  subscribes  for  the 
corporation  as  follows :  "  Oregon  Cen- 
tral Railroad  Company,  by  G.  L.  Wood, 
Chairman,  seventy  thousand  shares, 
seven  million  dollars,"  it  was  held  that 
this  subscription  was  void,  and  that  the 
corporation   could    not  be    created   by 


103 


§64:.]       SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [cil.  IV. 


subscribe  for  the  stock  of  private  corporations,  when  authorized  by- 
statute  to  do  so.1  It  is  not  equally  clear  that  one  private  corpora- 
tion may  subscribe  for  the  stock  in  another  such  corporation.  On 
the  contrary,  such  subscriptions  are  ultra  vires  and  void  unless 
clearly  within  the  ordinary  objects  and  business  of  the  subscribing- 
corporation.2  A  railroad  corporation  cannot  subscribe  for  shares 
of  stock  in  another  railroad  company ; 3  nor  can  a  steamship  com- 
pany be  held  liable  upon  a  subscription  for  stock  in  a  dry-dock 
company;4  nor  can  a  manufacturing  company  legally  subscribe  to 
the  stock  of  a  bank  for  the  purpose  of  carrying  on  the  banking  busi- 
ness.5    All  such  contracts  are,  in  general,  ultra  vires  and  not  en- 


such  subscriptions.  Holladay  v.  Elliott, 
8  Oregon,  84  (1879).  See,  also,  §  251, 
infra.  And  again  it  has  been  held  that 
where  the  directors  of  a  company,  in 
order  to  make  up  the  required  amount 
of  capital  stock,  subscribed  as  trustees 
for  the  corporation  itself,  they  are  liable 
for  calls  on  the  amount  so  subscribed. 
In  the  same  case  a  bill  by  a  member  of 
the  corporation  on  behalf  of  himself 
and  all  the  other  members  except  the 
defendants,  praying  that  this  transac- 
tion, although  it  had  been  sanctioned 
unanimously  at  a  meeting  of  the  com- 
pany, might  be  declared  fraudulent  and 
void,  was  sustained,  although  some  of 
the  members,  on  behalf  of  whom  the 
bill  was  filed,  had  been  present  and 
voted  at  that  meeting.  Preston  v.  Grand 
Collier,  etc..  Co.,  11  Sim.,  327  (1840). 

Allibone  v.  Hager,  46  Pa  St.,  48  (1863), 
where  the  court  held  it  no  defense  to 
an  action  by  a  creditor  of  a  corporation 
that  defendants  had  subscribed  for  stock 
in  their  own  names,  but  really  as  agents 
for  the  corporation  itself. 

1  Sharpless  v.  The  Mayor,  21  Penn.  St., 
147  (1853),  and  the  long  train  of  decis- 
ions following.  The  matter  of  munici- 
pal subscriptions  is  fully  considered  in 
chapter  VI. 

2  Thus,  for  example,  a  banking  corpo- 
ration cannot  lawfully  subscribe  for 
stock  in  a  railway  corporation.  Nassau 
Bank  v.  Jones,  95  N.  Y.,  115  (1884), 
holding  that  the  bank  could  not  recover 
the  profits  on  such  subscription  which 
was  made  in  the  name  of  its  agent ;  nor 


for  stock  in  any  other  corporation,  the 
business  of  which  is  wholly  other  than 
banking.  Franklin  Co.  v.  Lewiston 
Bank,  68  Me.,  43  (1877);  Mechanics' 
Bank  v.  Meriden  Agency,  24  Conn.,  159 
(1855);  Talmage  v.  Pell,  7  N.  Y.,  328 
(1852).  Cf.  First  National  Bank  v.  Na- 
tional Exchange  Bank,  92  U.  S.,  122 
(1875);  and  see  Royal  Bank  of  India's 
Case,  L.  R,  4  Chan.,  252  (1869) ;  Joint- 
stock,  etc.,  Co.  v.  Brown,  L.  R,  8  Eq.,  381 
(1869);  Berry  v.  Yates,  24  Barb.,  189 
(1857),  holding  that  one  insurance  com- 
pany cannot  subscribe  to  another.  For 
a  failure  of  proof  to  show  that  a  corpo- 
ration was  a  subscriber  for  stock,  see 
McMillan  v.  Carson,  etc..  Co.,  12  Phil., 
404  (1878).  An  owner  of  land  cannot 
defeat  its  condemnation  by  showing 
that  a  corporation  subscribed  to  part  of 
the  capital  of  the  corporation  seeking  to 
obtain  the  land.  In  re  Rochester,  etc., 
R  R,  110  N.  Y.,  119  (1888) ;  Union  Hotel 
v.  Herr,  79  N.  Y.,  454  (1880).  See,  also, 
§§  315-317,  infra. 

3  Maunsell  v.  Midland  Great  Western 
R'y  Co.,  1  Hem.  &  M.,  130  (1863).  One 
railroad  company  has  no  implied  power 
to  subscribe  to  the  capital  of  another, 
and  cannot  do  so  indirectly  by  having 
individuals  subscribe  and  then  indemni- 
fying the  individuals.  Logan  v.  Earl  of 
Courtown,  13  Beav.,  22  (1859);  and  see 
ch.  XIX. 

4  New  Orleans,  etc.,  Steamship  Co.  v. 
Dry  Dock  Co.,  28  La.  Ann.,  173  (1876). 

5  Sumner  v.  Marcy,  3  Woodb.  &  M., 
105. 


104 


CH.  IV.]      SUBSCRirriONS — METHOD — PARTIES — ENFORCEMENT.      [§§  65,  66. 

forceable.1  A  construction  company,  however,  is  presumed  to  have 
power  to  subscribe  for  the  stock  of  a  railroad  which  it  is  building.2 
A  railroad  company  has  no  power  to  donate  its  funds  to  a  fair.3  A 
hotel  compan}'  may  subscribe  to  a  military  encampment  enter- 
prise.* 

§  65.  Commissioners,  directors,  partners,  etc.,  as  subscribers. — 
Commissioners  may  be  subscribers  to  the  capital  stock.5  So,  also, 
may  directors  and  corporate  officers  subscribe;  and  a  director,  in 
the  absence  of  fraud  or  fraudulent  intent,  may  subscribe  for  the 
whole  of  the  unsubscribed  stock  in  his  own  name  and  for  his  own 
benefit.6  A  partner,  if  the  act  be  within  the  scope  of  the  partner- 
ship business,  may  bind  his  firm  by  a  subscription  in  the  firm  name.7 
But  if  it  is  not  within  the  scope  of  the  partnership  business,  the 
person  so  signing  is  liable  personally ;  and  whether  or  not  the  sub- 
scription was  within  the  scope  of  the  partnership  business  may  be 
a  question  for  the  jury.8 

§  66.  Married  women  as  subscribers. —  At  common  law  a  married 
woman  could  not  subscribe  for  stock,  and  any  person  subscribing  in 
her  name  was  himself  personally  liable  on  the  subscription.9  But 
now,  in  England,  and  "generally  in  the  United  States  by  statute,  a 
married  woman  may  bind  her  separate  estate  by  such  a  subscription ; 10> 
and  when  it  appears  that  the  contract  was  with  the  wife,  having 
been  made  directly  and  solely  with  her,  the  husband  is  not  bound." 

1  See  Part  IV,  on  ultra  vires  contracts  ingston  v.  Pittsburg,  etc.,  R  R.  Co.,  2 
in  general.  Grant's  Cas.,  219;  State  v.  Beck,  81  Ind., 

2  In  re  Rochester,  etc.,  R'y  Co.,  45  501  (1882).  Where  partners  are  stock- 
Hun,  126  (1887).  holders,   and  all   stockholders    join  in 

3  See  ch.  XL,  infra.  sureties  to  notes  to  aid  the  corporation, 
*  Richelieu  Hotel  Co.  v.  International,     one  partner  may  bind  the  firm  by  sign- 

etc,  Co.,  29  N.  E.  Rep.,  1044  (La.,  1892).  ing  its  name  also  as  surety.     Morse  v. 

5  Walker  v.  Devereaux,  4  Paige,  229  Hagenah,  32  N.  W.  Rep.,  634  (Wis.,  1887). 
(1833).  8Id. 

6  Sims  v.  Street  Railroad  Co.,  37  Ohio  9Pugh  &  Sharman's  Case,  L.  R,  1& 
St,  556  (1882).     See,   also,   §  653.     But  Eq.,  566  (1872). 

neither  the  commissioners  (Brower  v.  10  Witters  v.  Sowles,  32  Fed.  Rep,  767 

Passenger  R'y  Co.,  3  Phila,,  161),  nor  any  (1887) ;  Mrs.  Matthew-man's  Case,  L.  R, 

original  stockholder  (Curry  v.  Scott,  54  3  Eq.,  781  (1866);  Luard's  Case,  1  De  G., 

Penn.  St.,  270  —  1867),  have  any  priority  F.  &  J.,  533  (1860) ;  Pugh  &  Sharman's 

of  right  over  the  other  subscribers,  or  Case,  supra;  Butler  v.  Cumpstqu,  L.  R, 

the  public  generally,  in  the  matter  of  7  Eq.,  16  (1868) ;  In   the   Matter  of  the 

subscription  for  stock.     Of.  §  70.  Reciprocity   Bank,   22  N.  Y.,   9  (I860). 

7Maltby  v.  Northwestern,  etc.,  R  R  See  §§  250,  319. 

Co.,  16  Md.,   422  (1860);  Ogdensburgh,  "Angas'   Case,   1   De  G.   &  Sm.,  560 

etc.,   R  R  Co.  v.  Frost,   21   Barb.,   541  (1849):  Dalton  v.  Midland,  etc.,  R'y  Co., 

(1856);  Union  Hotel   Co.  u  Hersee,  79  13  C.  B.,  474  (1853);  S.  C,  22  L.  J.(C.  P.X 

N..  Y.,   454   (1880).       Otherwise    if  not  177 ;  Luard's  Case,  supra;  Ness  v.  Angas, 

within  the  partnership  business.     Liv-  3  Exch.,  805  (1849). 

105 


§  67.]       SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [CH.  IV. 


The  recourse  of  the  corporation  or  the  corporate  creditors  is,  in  such 
a  case,  to  her  separate  estate  only.1 

In  England  a  husband  has  been  held  liable  on  his  wife's  subscrip- 
tion to  the  capital  stock  of  an  incorporated  company,  the  subscrip- 
tion having-  been  made  before  marriage.2 

§  67.  Infant  as  subscriber. — A  subscription  for  stock  by  an  infant 
is  a  contract  to  be  governed  by  the  general  rules  of  law  that  apply 
to  the  contracts  of  infants  generally.  In  general,  the  subscriptions 
of  infants  are  voidable  rather  than  void.  He  may  repudiate  it  at 
majority,  and  thereby  entirely  escape  liability ;  or  he  may  ratify  it, 
and  thereby  become  as  fully  bound  as  though  the  subscription  had 
been  made  after  majority.3  Accordingly  it  is  a  settled  rule  that, 
where  one  subscribes  for  shares  in  the  name  of  an  infant,  he  is  lia- 


1  Biggart  v.  City  of  Glasgow  Bank,  6 
Rettie  (Scotch  Ct  of  Sessions  Cases),  470 
(1879):  Mrs.  Matthewman's  Case,  L.  R, 
3  Eq.,  781  (1866). 

2  Burlington's  Case,  3  De  G.  &  Sm„ 
18  (1849),  where  the  husband  was  held 
liable,  although  he  bad  not  fulfilled  the 
conditions  of  the  deed  of  settlement 
entitling  him  to  become  a  member,  but 
had  only  received  dividends  on  the 
wife's  shares. 

Luard's  Case,  1  De  G,  F.  &  J.,  533 
(1860),  holding  that  where  a  woman, 
being  a  registered  owner  of  stocks  be- 
fore marriage,  attempted  to  deed  them 
in  trust  so  as  to  exclude  the  husband, 
but  the  trustees  did  not  accept,  and 
they  continued  in  her  name  until  the 
liquidation  of  the  company,  the  husband 
should  be  placed  with  the  wife  on  the 
list  of  contributories. 

White's  Case,  3  De  G.  &  Sm.,  157 
(1850),  was  decided  on  special  facts 
under  the  terms  of  a  deed  of  settlement 
which  regulated  the  rights  of  the  hus- 
band and  wife  as  to  shares  in  her  name. 
In  this  case  a  restricted  liability  for  a 
limited  time  was  imposed  upon  the  hus- 
band, he  having  done  some  acts  in  rela- 
tion to  the  shares,  but  not  sufficient  to 
constitute  an  entire  acceptance. 

Sadler's  Case,  3  De  G.  &  Sm.,  36  (1849), 
holding  the  husband  liable  when  the 
shares  came  to  the  wife  by  legacy  be- 
fore marriage,  although  neither  she  nor 
the  husband  paid  the  covenanted  calls, 


received  any  dividends,  or  otherwise 
acted  as  members. 

Kluht's  JCase,  id,  210  (1850),  where 
the  husband  was  held  liable  for  losses 
during,  but  not  for  losses  before  and 
after,  the  coverture.  He  had  not  com- 
plied with  necessary  preliminaries  for 
becoming  a  member,  although  he  had 
done  some  acts  in  relation  to  the  shares 
of  the  wife. 

And  also  upon  a  legacy  of  stock  to 
her  during  coverture,  where  it  appeared 
that  the  stock  had  been  transferred  to 
her,  and  the  transfer  duly  accepted  by 
her  and  her  husband,  and  that  she  only 
had  signed  the  dividend  warrants  and 
drawn  the  dividends,  the  proceeds  being 
applied  to  ordinary  household  expenses. 
Thomas  v.  City  of  Glasgow  Bank,  6 
Rettie  (Scotch  Ct  of  Sessions  Cases),  607 
(1879). 

3  Lumsden's  Case,  L.  R.,  4  Chan.,  31 
(1868),  where  an  infant  transferred 
shares  after  coming  of  age,  and  did  not 
attempt  to  repudiate  his  remaining 
shares  until  four  months  after  the  wind- 
ing-up order,  being  nine  months  after 
his  majority.  He  was  held  to  have  af- 
firmed his  holding. 

Ebbett's  Case,  L.  R,  5  Chan.,  302 
(1870),  where  a  holding  for  fourteen 
months  after  majority  without  repudi- 
ating the  shares  was  held  to  be  an  ac- 
quiescence, though  the  shareholder  had 
never  acted  as  such. 

Baker's  Case,    L.    R.,   7   Chan.,    115 


106 


CH.  IV.]        SUBSCRIPTIONS  —  METHOD PARTIES ENFORCEMENT.       [§  68. 

ble  personally  to  the  corporation  or  the  corporate  creditors  on  the 
subscription.1  An  infant's  subscription  must  be  repudiated  within 
a  reasonable  time  after  coming  of  age  or  he  will  be  held  to  have 
ratified  it.2 

§68.    Subscription  by  agent.  —  A   valid   subscription   may,   of 
course,  be  made  through  an  agent.3     The  subscriptions  of  the  orig- 


(1871),  where  a  company  was  in  process 
of  being  wound  up,  when  an  infant, 
holding  shares  as  trustee,  attained  his 
majority,  and  he  promptly  repudiated 
the  shares  when  the  notice  of  a  call 
was  sent  him  four  months  afterwards. 
Subsequently  he,  by  letter,  authorized 
the  official  liquidator  to  use  his  name  in 
proceedings  against  the  cestui  que  trust. 
Held,  that  by  the  letter  he  had  not  re- 
tracted his  repudiation  of  the  shares. 

Mitchell's  Case,  L.  R,  9  Eq.,  863 
(1870).  An  infant  holding  shares  as 
trustee,  who  took  no  steps  to  repudiate 
them  for  two  years  after  coming  of 
age,  was  held  to  be  a  contributory. 

Wilson's  Case,  L.  R,  8  Eq.,  240  (1869). 
An  infant  holding  shares  in  a  trust,  who 
came  of  age  after  the  winding-up  order 
was  made,  was  held  not  to  be  a  con- 
tributory, though  he  had  made  no  for- 
mal repudiation,  but  had  not  done  any 
act  of  acquiescence,  except  that  his  so- 
licitors, acting  for  him  and  others,  had 
opposed  an  order  for  a  call. 

Hart's  Case,  L.  R,  6  Eq.,  512  (1868). 
"Where  notice  of  intention  to  put  the 
name  of  a  female  infant  upon  the  list 
of  contributories  of  a  corporation  in 
process  of  being  wound  up  was  served 
during  infancy,  and  more  than  two 
years  after  her  majority  a  summons 
for  a  call  was  made,  when  she  applied 
to  have  her  name  removed  from  the 
list,  it  was  held  she  was  not  precluded 
by  the  delay. 

Pirn's  Case,  3  De  G.  &  Sm..  11  (1849), 
where  a  son  who,  after  the  death  of  his 
father,  discovered  that  shares  had  been 
taken  in  his  own  name,  was  held  not  to 
be  a  contributory,  although,  at  the  re- 
quest of  an  officer  of  the  company,  he 


had    surrendered    the    shares    for    ex- 
change for  others. 
See  §§  250,  318. 

1  Weston's  Case,  L.  R,  5  Chan.,  614 
(1870) ;  Richardson's  Case,  L.  R,  19  Eq., 
588  (1875) ;  Reaveley's  Case,  1  De  G.  & 
Sm.,  550  (1848);  Ex  parte  Reavely,  1 
Hall  &  Tw.,  118  (1849);  Capper's  Case, 
L.  R,  3  Chan.,  458  (1868);  Castelo's 
Case,  L.  R,  8  Eq.,  504  (1869);  Symon's 
Case,  L.  R,  5  Chan.,  298  (1870);  Reid's 
Case,  24  Beav.,  318  (1857);  Curtis'  Case, 
L.  R,  6  Eq,  455  (1868). 

2  Dublin,  etc.,  R'y  Co.  v.  Black,  7 
Railway  &  Canal  Cas.,  434  (1852);  S.  C, 
8  Exch.,  181.  Infancy  is  a  personal  de- 
fense. Beaidsley  v.  Hotchkiss,  96  N.  Y., 
201  (1884).  Where  an  infant  allows  his 
name  to-remain  on  the  register  after  he 
becomes  of  age,  he  thereby  ratifies  his 
subscription.  Cork,  etc.,  R'y  Co.  v. 
Cazenove,  10  Q.  B.,  935  (1847).  A  court 
will  not  presume  that  an  infant  sub- 
scriber has  avoided  his  contract;  and 
hence  a  defense  of  infancy,  in  an  action 
on  a  subscription,  without  an  allegation 
of  avoidance,  is  ineffectual,  and  the 
plaintiff  may  have  judgment.  Leeds, 
etc.,  R'y  Co.  v.  Fearnley,  4  Exch.,  26 
(1849).  But  it  has  been  held  that  repu- 
diation before  coming  of  age  avoids  the 
contract  of  subscription  ab  initio;  and 
hence  a  plea  of  infancy  and  of  repudia- 
tion while  an  infant,  and  of  notice  to 
the  company  that  the  stock  was  at 
their  disposal,  is  a  good  defense  to  an 
action  on  a  subscription.  Newry,  etc., 
R'y  Co.  V.  Coombe,  3  Exch.,  565  (1849); 
S.  C,  18  L,  J.  (Exch.),  325;  Parson's 
Case,  L.  R.  8  Eq.,  656. 

s  Musgrave  v.  Morrison,  54  Mo.,  161 
(1880);    Burr   v.  Wilcox,   22  N.  Y.,  551 


107 


68.]       SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [CH.  IV. 


inal  incorporators  may  be  made  by  an  agent.1  No  person  can  be 
made  a  subscriber  to  the  capital  stock  of  a  corporation,  and  be  sub- 
jected to  the  liabilities  of  a  subscriber,  by  a  subscription  in  his 
name,  made  by  another  without  authority,  but  assuming  to  act  as 


(I860);  Rhey  v.  Evensburg,  eta,  27  Pa. 
St.,  261 ;  In  re  N.  Y.,  etc.,  Co.,  35  Hun, 
220  (1885).  Where  bonds  are  purchased 
by  one  for  several,  they  are  liable  to 
contribute  therefor.  Musgraver.  Buck- 
ley, 114  N.  Y.,  506  (1889). 

If  both  the  principal  and  agent  are 
incorporators,  and  the  agent  subscribes 
in  his  own  name,  the  principal  cannot 
claim  the  stock,  inasmuch  as  he  has 
sworn  in  the  articles  of  incorporation 
that  all  the  incorpoi'ators  werebonajide 
subscribers.  Appeal  of  Rowley,  9  Atl. 
Rep.,  329  (Pa.,  1887). 

In  re  Whitely  Partners,  L.  R.,  32  Ch. 
D.,  337.  A  subscription  by  one  of  sev- 
eral heirs  in  the  name  of  the  "  estate " 
is  not  binding  on  any  of  the  heirs  where 
a  statute  requires  such  subscription  to 
be  several.  Troy,  etc.,  R.  R  Co.  v.  War- 
ren, 18  Barb.,  310  (1854). 

Davidson  v.  Grange,  4  Grant's  Ch. 
(U.  Can.),  377  (1854).  In  this  case  a  sub- 
scription by  an  agent  in  his  own  name 
was  held  to  constitute  him  a  trustee  for 
his  principals. 

Stater.  Lehre,  7  Rich.  Law,  234(1854), 
holding  that  a  statute  forbidding  any 
person  from  subscribing  for  shares  in 
the  name  of  another  person  did  not  ex- 
clude a  subscription  by  an  agent  for  his 
principal. 

Cox's  Case,  4  De  G.,  J.  &  S.,  53  (1863), 
was  decided  under  the  Companies  Act, 
but  the  court  was  inclined  to  think  the 
result  would  have  been  the  same  inde- 
pendent of  that  statute.  It  was  there 
held  that  where  a  subscriber,  in  addi- 
tion to  his  own  shares,  had  caused  a 
large  number  to  be  registered  in  the 
names  of  mere  nominees  for  him,  in 
order  to  delude  the  public  as  to  the 
number  of  members,  he  was  rightly 
placed  on  the  list  of  contributories  for 


all  the  shares  when  the  company  was 
wound  up.  This  case  was  distinguished 
in  King's  Case,  L.  R,  6  Ch.  App.,  196 
(1871). 

On  this  question  of  "  dummies,"  see 
ch.  XIV.  See,  also,  brief  in  15  Ohio  St, 
332. 

If  such  subscriptions  are  prohibited 
by  the  corporate  charter,  the  principal 
cannot  recover  back  money  which  he 
has  given  to  the  agent  to  subscribe. 
Perkins  v.  Savage,  15  Wend.,  412  (1836). 

Mere  authority  to  an  agent  to  sub- 
scribe is  not  a  subscription  in  itself. 
Granger,  etc.,  Co.  v.  Vinson,  6  Oregon, 
172  (1876).  Also,  New  Brunswick,  etc., 
Co.  v.  Muggeridge,  4  Hurl.  &  N.,  160 
(1859). 

In  New  York  it  is  a  penal  offense  for 
a  person  to  subscribe  for  another  who 
does  not  intend  to  pay,  or  to  subscribe 
in  the  name  of  a  fictitious  person.  N.  Y. 
Penal  Code,  §  590. 

Where  one  subscribes  for  stock  in  his 
own  name,  in  pursuance  of  a  verbal 
agreement  between  himself  and  an- 
other that  the  stock  should  belong  to 
them  jointly,  and  that  he  should  hold 
it  on  joint  account,  and,  the  company 
subsequently  becoming  insolvent,  the 
stockholders  are  called  on  to  contribute 
an  amount  equal  to  their  stock,  it  was 
held,  in  New  York,  that  the  nominal 
owner  of  the  stock  might  have  contri- 
bution from  the  joint  owner.  Stover  v. 
Flack,  30  N.  Y.,  64  (1864) ;  Orr  v.  Bige- 
elow,  14  N.  Y,  556  (1856).  The  parties 
had  covenanted  that  plaintiffs  should 
subscribe  for  stock,  pay  ten  per  cent 
thereon,  and  then  assign  it  to  defend- 
ant who  engaged  to  indemnify  them 
from  further  liability.  Defendant  re- 
fused to  take  the  shares,  and  the  cor- 
poration   recovered    judgment  against 


» In  re  N.  Y,  etc.,  R'y  Co.,  99  N.  Y,  12  (1885). 
108 


CH.  IV.]       SUBSCRIPTIONS METHOD  — ■  PARTIES ENFORCEMENT.       |  §  68. 


his  agent.  Such  a  subscription  is  not  binding  on  the  principal.1 
But  such  an  unauthorized  subscription  may  be  adopted  and  ratified 
by  the  person  in  whose  name  it  was  made  without  warrant  of  au- 
thority, in  such  a  way  as  to  make  it  valid  and  binding.2     A  person 

plaintiffs  for  the  balance  of  the  subscrip-    in    general,  a    question    for    the    jury. 

Philadelphia,  etc.,  R  R  Co.  v.  Cowell, 
28  Penn.  St.,  329  (1857).  Cf.  Fox  v. 
Clifton,  6  Bing.,  776  (1830).  It  is  held 
that  silence  or  failure  to  object  to  the 
subscription  for  a  considerable  time 
after  knowledge  of  it  is  brought  to  the 
subscriber  is  evidence  of  a  ratification. 
McHose  v.  Wheeler,  45  Pa.  St.,  32  (1863); 
Thompson  v.  Reno  Savings  Bank.  10 
Am.  &  Eng.  Corp.  Cas.,  203  (1885);  San- 
ger v.  Upton,  91  U.  S.,  56  (1875).  Contra, 
Hume  v.  Commercial  Bank,  9  Lea,  728 
(1882).  And  giving  a  proxy  to  vote  the 
stock  may  be  sufficient  to  ratify  such  a 
subscription.  McCully  v.  Pittsburgh, 
etc.,  R.  R.  Co.,  32  Pa.  St.,  25  (1858). 
Contra,  McClelland  v.  Whiteley,  11  Biss., 
444  (1883).  But  a  mere  declaration  to 
strangers,  by  the  person  in  whose  name 
the  subscription  had  been  made,  that  he 
had  taken  that  amount  of  stock,  is  not  a 
ratification  of  the  subscription.  Rut- 
land, etc.,  R  R.  Co.  v.  Lincoln,  29  Vt, 
206  (1857).  And  even  the  fact  that  one 
whose  name  had  been  in  this  way  put 
down  as  a  subscriber  was  a  director  in 
the  corporation  was  held  not.  in  se,  to 
imply  knowledge  that  his  name  was  on 
the  books  as  a  subscriber.  In  re  Win- 
cham,  etc.,  Co.,  L.  R,  9  Chan.  Div.,  329 
(1878).  Cf.  Fox  v.  Clifton,  6  Bing.,  776 
(1830).  But  as  a  rule  it  is  believed  that 
accepting  the  office  of  a  director  would. 
in  this  country,  be  held  a  sufficient  rati- 
fication of  such  a  subscription,  in  the 
absence  of  any  other.  This  is  expressly 
declared  to  be  the  rule  in  Tennessee  and 
elsewhere.  Moses  v.  Ocoee  Bank,  1  Lea, 
398  (1878);  Danbury,  etc.,  R  R.  Co.  v. 
Wilson,  22  Conn.,  435  (1853).  Cf.  Fry  v. 
Lexington,  etc.,  R.  R.  Co.,  2  Mete.  (Ky.  >, 
314  (1859).  Contra,  Hume  v.  Commer- 
cial Bank,  9  Lea,  728  (1882). 

But  where  an  agent  takes  stock  as 
agent,  on  condition  that  it  is  to  be  sub- 


tion.  In  this  action  plaintiffs  had  judg- 
ment against  defendant  upon  the  cove- 
nant, the  measure  of  damages  being 
held  to  be  the  balance  paid  by  them,  and 
not  that  sum  less  the  market  value  of  the 
stock.  A  state  subscribing  through  its 
officers  is  bound  by  their  acts  as  direct- 
ors. State  v.  Jefferson  T.  Co..  3  Humph. 
(Tenn.),  305  (1842;.  Colt  v.  Clapp,  127 
Mass.,  476  (1879),  where  one  who  had 
verbally  agreed  to  purchase  stock  for 
the  joint  benefit  of  himself  and  others 
refused  to  divide  the  stock,  he  was  held 
accountable  to  the  others  for  their  re- 
spective shares  of  dividends  paid  thereon 
in  actions  for  money  had  and  received. 

1  Ticonic,  etc.,  Co.  v.  Lang,  63  Me.,  480 
<1874);  Pirn's  Case,  3  De  G.  &  Sm.,  11 
<1849) ;  Henessey's  Case,  3  id.,  191  (1850) ; 
Ex  parte  Hall,  1  Macn.  &  G.,  307  (1849). 

Drover  v.  Evans,  59  Ind.,  454,  holding 
that  where  an  agent  to  make  a  sub- 
scription exceeds  his  authority  the  prin- 
cipal is  not  bound  by  it. 

Cf.  Chapman  &  Barker's  Case,  L.  R., 
3  Eq.,  361  (1867).  And  this  is  equally 
the  rule  when  it  is  sought  to  charge  one 
by  such  a  subscription,  not  in  his  indi- 
vidual capacity,  but  only  in  the  capacity 
of  trustee  for  another.  Ex  parte  Hall, 
supra. 

2  Musgrave  v.  Morrison,  54  Md.,  161 
(1880) ;  Mississippi,  etc.,  R  R  Co.  v.  Har- 
ris, 36  Miss.,  17  (1858),  where  the  defend- 
ant promised  to  pay ;  Jones  v.  Milton, 
etc.,  Co.,  7  Ind.,  547  (1856),  where  the 
principal  subscribed  over  again ;  Phila- 
delphia, etc.,  R  R  Co.  v.  Cowell,  28  Penn. 
St.,  329  (1857),  where  the  defendant  ac- 
quiesced for  seven  years ;  Putnam  v. 
City  of  Albany,  4  Biss.,  365  (1869),  where 
the  city  ratified. 

What  acts  or  omissions,  short  of  ex- 
press ratification,  will  in  law  suffice  to 
bind  one  upon  such  a  subscription,  is, 


109 


§§  ('.<»,  70.]      SUBSCRIPTIONS— METHOD PARTIES— ENFORCEMENT.      [CH.  IV. 

subscribing  for  shares  as  agent  for  another,  and  in  that  other's 
name,  but  without  authority,  thereby  becomes  himself  a  subscriber 
in  place  of  the  person  whose  name  he  signs,  or  his  unauthorized 
subscription  may  subject  him  to  an  action  of  damages.1  - 

§  69.  Subscriptions  taken  by  an  unauthorized  agent  of  the  cor- 
poration.— A  subscription  taken  by  a  person  who  has  no  authority 
from  the  corporation  to  take  subscriptions  is  not  in  general  enforce- 
able.2 But  it  has  been  held  that  such  a  subscription  may,  by  accept- 
ance and  ratification  on  the  part  of  the  corporation,  be  validated, 
and  the  subscriber  made  liable  as  though  the  subscription  had 
been  regularly  taken.3 

§70.  Unissued  or  increased  capital  stock  —  Eight  to  subscribe 
therefor. —  Where  the  whole  capital  stock  or  a  part  of  the  author- 
ized capital  stock  is  offered  for  subscription  and  a  part  only  of 
the  amount  so  offered  is  subscribed  for,  the  remainder  may  be 
taken  by  any  person,  even  though  that  person  is  a  director  in  the 
company.4  But  where  the  part  offered  for  subscription  is  not  taken, 
or  where  a  part  of  the  authorized  capital  is  offered  and  is  all  taken, 
and  subsequently  it  is  resolved  to  issue  more  of  the  authorized  cap- 
ital, or  where  the  capital  stock  is  increased  under  the  statutes  and 
the  increase  is  about  to  be  issued,  then  a  different  rule  prevails. 
Every  existing  stockholder  then  has  the  right  to  subscribe  at  par 
for  such  a  proportion  of  the  stock  to  be  issued  as  his  old  holdings 
bear  to  the  amount  of  stock  then  outstanding.5  Any  other  rule 
would  enable  the  parties  in  control  to  seize  the  new  stock,  in  some 
cases  for  gain  because  the  stock  is  worth  more  than  par,  and  in 
other  cases  so  as  to  acquire  increased  votes  at  a  coming  election. 
In  either  case  this  would  work  a  fraud  on  the  other  stockholders.6 

mitted  to   the    principal,   and,    "if  ap-  Bank,  10  Am.  &  Eng.  Corp.  Cas.,  203 

proved,  to  be  taken  out  in  the  purchase  (Nev.,  1885) ;  §  249,  infra. 

of  thread."  the  principal  is  not  bound  2  Essex,   etc.,   Co.  v.  Collins,  8  Mass., 

where  he  declines  to  accept,  even  though  292  (1811);  Shurtz  v.   Schoolcraft,  etc., 

he  did  not  notify  the  corporation  of  his  R  R  Co.,  9  Mich.,  269  (1861) ;  Carlile  v. 

refusal.     Merrick,  etc.,  Co.  v.  Philadel-  Saginaw,  etc.,  R  R  Co.,  27  id.,  315  (1873). 

phia,  etc.,  Co.,  8  Atl.  Rep.,  794  (Pa.,  18S7).  Contra,  Northeastern  R  R  Co.  v.  Rod- 

1  Salem,  etc.,  Corp.  v.  Ropes,  9  Pick,  riques,  10  Rich.  Law,  278  (1857). 

187  (1829).     In  some  jurisdictions  it  is  3  Walker  v.   Mobile,   etc.,   R   R  Co., 

held  that  by  such  a  subscription  the  sub-  34  Miss.,  245  (1857);   Mobile,  etc.,  R  R. 

scriber  makes  himself  personally  liable  Co.    v.    Yandal,    5    Sneed,   294    (1858) ; 

as  a  subscriber.     Union    Hotel   Co.   v.  Judah  v.   American,  etc.,   Co.,   4  Ind., 

Hersee,   79  N.  Y.,   454  (1880);  State  v.  333. 

Smith,  48  Vt,  266  (1876).     See,  also,  Troy,  *  Sims  v.  Street  R  R,  37  Ohio  St.,  556 

etc.,  R  R  Co.  v.  Warren,  18  Barb.,  310  (1882).     Also,  §  65,  supra. 

(1854);  Pugh  &  Sharman's  Case,  L.  R,  »See  ch.  XVII,  §  286. 

13  Eq.,  566  (1872) ;  McHose  v.  Wheeler,  6  Where  a  director  issues  to  himself. 

45  Pa.  St.,  32 ;  Thompson  v.  Reno,  etc.,  at  par,  stock  belonging  to  the  corpora- 

110 


CH.  IV.]       SUBSCRIPTIONS METHOD PARTIES —  ENFORCEMENT.       [§71. 


C.    AN    ACTION    LIES   TO   COLLECT    SUBSCRIPTIONS. 

§  71.  A  snhscription  for  shares  implies  a  promise  to  pay  for  them, 
and  this  promise  sustains  an  action  to  collect,  without  proof  of  any 
particular  consideration. —  This  rule  of  law  is  sustained  by  the 
great  weight  of  authority.  The  signing  of  the  subscription  paper 
is  an  implied  promise  to  pay  the  subscription.1 

There  have  been  various  opinions  of  the  courts  as  to  the  consid- 
eration supporting  this  implied  promise  which  sustains  an  action 
to  collect  the  subscription.  It  has  been  held  that  the  right  to  mem- 
bership in  the  proposed  corporation,  and  the  probable  advantages 
to  be  derived  from  membership  in  the  company,  constitute  the  con- 
sideration.2 


tion  and  which  is  worth  more  than  par, 
the  transaction  is  voidable,  but  if  all 
the  stockholders  acquiesce  therein  for  a 
long  time,  the  acquiescence  of  the  ex- 
ecutors of  a  deceased  stockholder  binds 
the  estate.     St  Croix  L.  Co.  v.  Mittle- 
stadt,  44  N.  W.  Rep.,  1079  (Minn..  1890). 
Where,  long  after  the   company  has 
commenced  to  do  business,  it  has  dis- 
posed of  its  property  and  is  ready  to  de- 
clare a  five  hundred  per  cent  dividend, 
the  directors  issue  to  themselves  at  par 
that  part  of  the  original  capital  stock 
which  never  had  been  issued,  it  is  a  fraud 
on  the  remaining  stockholders.    Arkan^ 
sas,  etc.,  Soc.  v.  Eichholtz,  25  Pac.  Rep., 
613 (Kan.,  1891).  See,  also,  14  N.  J.  Eq.,  380. 
1  Upton    v.    Tribilcock,    91   U.    S.,  45 
(1875);  Hawley  v.  Upton,  102  U.  S.,  314 
(1880);    Webster    v.    Upton,   91    id.,   65 
(1875);  Buffalo,  etc.,  R  R.  Co.  v.  Dudley, 
14  N.  Y.,  336  (1856) ;  Small  v.  Herkimer, 
etc.,  Co.,  2  N.  Y.,  330  (1849);  Lake  On- 
tario, etc.,  R  R  Co.  v.  Mason,  16  id.,  451 
(1857);    Dayton    v.    Borst,   31    id,    435 
(1865);  Northern  R.  R  Co.  v.  Miller,  10 
Barb.,  260,  268  (1851);  Waukon,  etc.,  R. 
R  Co.  v.  Dwyer,  49  Iowa,  121  (1878); 
Nulton  v.    Clayton,    54  id.,  425   (1880): 
Miller  v.  Wild  Cat,  etc.,  Co.,  52  Ind.,  51 
(1875);    Mitchell   v.    Beckman,   64   Cal., 
117  (1883);  Merrimac,  etc.,  Co.  v.  Levy, 
54   Penn.  St,  227  (1867);  Beene  v.  Ca- 
hawba,  etc,  R  R  Co.,  3  Ala..  660  (1842); 
Fry  v.  Lexington,  etc.,  R  R  Co.,  2  Mete. 
Ky.),  314  (1859);  Gill  v.  Kentucky,  etc.. 

1 


Co.,  7  Bush,  635  (1870);  Mt  Sterling, 
etc.,  Co.  v.  Little,  14  id.,  429  (1879); 
Chase  v.  East  Tenn.  R.  R.  Co.,  5  Lea 
(Tenn.),  415  (1880).  Even  though  the 
corporation  has  the  power  to  forfeit  the 
shares  for  non-payment.  Hughes  v. 
Antietam,  etc.,  Co.,  34  Md,  316  (1870); 
Dexter,  etc.,  Co.  v.  Millerd,  3  Mich.,  91 
(1854). 

2  Lake  Ontario,  etc.,  R  R.  Co.  v.  Mason, 
16  N.  Y.,  451  (1857);  Fort  Edward,  etc., 
Co.  v.  Payne,  17  Barb.,  567(1854);  Ham- 
ilton, etc.,  Co.  v.  Rice,  7  id,  157  (1849); 
Schenectady,  etc.,  R  R.  Co.  v.  Thatcher, 
11   N.   Y,   102,    10S    (1854);    Barnes   v. 
Perine.    12    id.,    18    (1854);     Osborn    v. 
Crosby,  63  N.  H.,  583  (1885) ;  Bullock  v. 
Falmouth,   etc.,  Co.,  3  S.  W.  Rep.,  129 
(Ky.,  1887).     See,  also,  Stewart  v.  Trust- 
ees  of  Hamilton   College,  2  Denio,  43 
(1845);  Hamilton  College  v.  Stewart,  1 
N.  Y,  581  (1848);  Dutcher's  Manuf'g  Co. 
v.  Davis,  14  Johns.,  238;  Whittlesey?-. 
Frantz,  74  N.  Y,  456.     li  It  is  well  set- 
tled," said  Hand,  J.,  in  the  case  of  Fort 
Edward,   etc.,  Co.   v.   Payne,  17  Barb., 
567  (1854),  "that  a  subscription  to  the 
capital  stock  of  any  company,  from  the 
membership   of    which    a    shareholder 
may  derive  pecuniary  advantage,  gives 
to   the   subscriber   such  an  interest,  or 
will   support  a  promise  to  pay  for  the 
shares.     Such  an  enterprise  is  a  com- 
bination  of  means  for   mutual   profit. 
and  is  in  no  sense  a  gift  or  promise  with- 
out consideration."    And  elsewhere  it  i-- 
11 


§  72.]       SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [CH.  IV. 

It  has  been  held,  also,  that  the  stock  to  be  received  and  the  prob- 
able dividends  thereon  constitute  the  consideration.1 

Again,  the  consideration  has  been  said  to  be  the  mutual  obliga- 
tion of  all  the  subscribers  to  take  and  pay  for  their  stock.2 

And,  ao-ain,  it  has  been  held  that  a  consideration  is  conclusively 
implied  from  the  fact  of  subscription  itself;  that  it  is  implied  by 
law;  and  that  the  law  thereby  creates  a  duty  and  liability  to  pay 
for  the  stock.3 

The  particular  motive  of  a  subscriber  inducing  him  to  subscribe 
is  immaterial.  The  consideration  which  exists  in  law  cannot  be 
allowed  to  be  governed  bv  the  ideas  of  the  subscriber.4  The  as- 
signee  of  a  subscription  may  enforce  it.5 

§72.  This  rule  prevails  in  regard  to  subscriptions  taken  before 
incorporation  as  well  as  to  those  taken  after  incorporation. —  Such, 
undoubtedly,  is  the  rule  sustained  by  the  great  weight  of  authority.6 


said  that  "  the  advantage  to  be  derived 
from  being  a  member  of  such  a  com- 
pany, and  of  the  consequent  right  to 
participate  in  the  pecuniary  dividends, 
is  a  positive  benefit ;  and  where  the 
agreement  secures  that  advantage  to 
the  subscriber,  on  the  organization  of 
the  company,  the  objection  of  a  want 
of  consideration  cannot  be  made  with 
success."  Hamilton,  etc.,  Co.  v.  Rice,  7 
Barb,,  157  (1849),  adopted  by  Brown,  J., 
in  Lake  Ontario,  etc.,  R  R  Co.  v.  Mason, 
16  N.  Y.,  451,  463  (1857). 

1  Schenectady,     etc.,     R     R.     Co.     v. 
Thatcher,  11  N.  Y.,  102,  107  (1854) ;  Bish 
v.   Bradford   17   Ind.,  490    (1861);   New 
Albany,  etc.,  R.  R  Co.  v.  Fields,  10  id., 
187  (1858);  Fry  v.  Lexington,  etc.,  R  R 
■Co.,  2  Mete.  (Ky.),  314  (1859).     That  the 
interest    acquired    by    subscribing    for 
shares  of  the  capital  stock  is  a  good  con- 
sideration  for  the  promise  to  pay  for 
them.     Union,  etc.,   Co.   v.   Jenkins,    1 
Caines,  381  (1803) ;  Selma,  etc.,  R  R  Co. 
v.  Tipton,  5  Ala.,  7S7  (1843)  — a  full  and 
learned  opinion.     Cf.  Goshen,  etc.,  Co. 
v.  Hurtin,  9  Johns.,  217  (1812) ;  Daubury, 
etc.,  R  R  Co.  v.  Wilson,  22  Conn.,  435 
(1853) ;  East  Tennessee,  etc.,  R  R  Co.  v. 
Gammon,   5   Sneed,   567.      And  again, 
that  the  prior  proceedings  and  acts  of 
the  parties  are  a  legal    basis  for  the 
promise  to  pay;  also,  that  the  partial 

1 


execution  of  the  purpose  designed  by 
the  charter  is  a  sufficient  consideration. 
Kennebec,  eta,  R  R  Co.  i\  Palmer,  34 
Me.,  366  (1852);  McAuley  v.  Billenger, 
20  Johns.,  89(1822);  Amherst  Academy 
v.  Cowls,  23  Mass.,  427  (1828) ;  Ohio,  etc., 
College  v.  Higgins,  16  Ohio  St,  20  (1864). 
( 7'.  McCully  v.  Pittsburgh,  etc.,  R  R  Co., 
32  Penn.  St.,  25  (1858).  In  Minnesota 
the  implied  promise  to  issue  the  stock  is 
declared  to  be  the  consideration  for  the 
promise  to  pay  for  it.  St  Paul,  etc.,  R 
R  Co.  v.  Robbins,  23  Minn.,  439  (1877). 
And  in  Kentucky  it  is  held  that  the 
promise  by  each  of  the  subscribers  is  a 
sufficient  consideration  for  the  promises 
of  the  others.  Twin  Creek,  etc.,  Co.  v. 
Lancaster,  79  Ky.,  552. 

2  Spear  v.  Crawford,  14  Wend.,  20 
(1835);  Cole  v.  Ryan,  52  Barb.,  168 
(1868) ;  Upton  v.  Tribilcock,  91  U.  S.,  45 
(1875) ;  Northern,  etc.,  R  R  Co.  v.  Mil- 
ler, 10  Barb.,  260  (1851). 

3  East  Tenn.,  etc.,  R.  R  Co.  v.  Gam- 
mon, 5  Sneed  (Tenn.),  567. 

*DL  River  R  R  Co.  v.  Zimmer,  20 
111.,  654  (1858) ;  Miller  v.  Wild  Cat,  etc., 
Co.,  52  Ind.,  51.  64  (1875) ;  Andover,  etc., 
Co.  v.  Gould,  6  Mass.,  39,  44  (1809); 
Parker  v.  Northern,  etc.,  R  R  Co.,  33 
Mich.,  23  (1875). 

»See§  111. 

6  Richelieu  Hotel  Co.  u  Interna- 
12 


CH.  IV.]       SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT.       [§  72. 

It  has  been  held,  also,  that  the  corporation  may  bring-  an  action  at 
law  for  damages  against  a  subscriber  to  a  preliminary  subscription 

tional,  etc.,  Co.,  29  N.  E.  Rep.,  1044  (111.,  v.  Davis,  14  id.,  238  (1817) ;  Spear  v. 
1892);  West  v.  Crawford,  21  Pac.  Rep.,  Crawford,  14  Wend.,  20  (1835);  Har- 
1123  (Cal.,  1889);  Marysville,  etc.,  Co.  v.  leva,  etc.,  Co.  v.  Seixas,  2  Hall  (N.  Y. 
Johnson,  29  Pac.  Rep.,  126  (Cal.,  1892);  Super.  Ct),  504  (1829;:  Nulton  v.  Clay- 
San  Joaquin,  etc.,  Co.  v.  Beecher,  29  Pac.  ton,  54  Iowa.  425  (1880);  Worcester, 
Rep.,  785  (Cal.,  1892) ;  McCormick  v.  etc.,  Co.  v.  Willard,  5  Mass.,  80  (1809) ; 
Great  Bend,  etc.,  Co.,  29  Pac.  Rep..  1147  Stanton  v.  Wilson,  2  Hill,  153  (1841): 
(Kan.,  1892) ;  Minneapolis,  etc.,  Co.  v.  Sagory  v.  Dubois,  3  Sandf.  Chan.,  486 
Crevier,  40  N.  W.  Rep..  507  (Minn.,  1888) ;  (1846) ;  Palmer  r.  Lawrence,  3  Sandf. 
Reformed,  etc.,  Church  v.  Brown,  17  Super.  Ct,  161  (1849);  Twin  Creek,  etc., 
How.  Pr.,  287  (1859) ;  Penobscot,  etc.,  R  Co.  v.  Lancaster,  79  Ky.,  552  (1881); 
R  Co.  v.  Dummer,  40  Me.,  172  (1855);  Minn.,  etc.,  Co.  v.  Davis,  41  N.  W.  Rep, 
Athol,  etc.,  Co.  v.  Carey,  116  Mass.,  471  1026  (Minn.,  1889).  Cf.  Thompson  v. 
(1875);  Ashuelot,  etc.,  Co.  u  Hoit,  56  N.  Page,  1  Mete.  (Mass.),  565  (1840);  Ives  v. 
H.,  548  (1876);  Cross  v.  Pinckneyville,  Sterling,  6  id.,  310  (1843);  Robinson  v. 
etc.,  Co.,  17  111.,  54  (1855);  Griswold  v.  Edinboro'  Academy,  3  Grant's  Cas.,  107 


Trustees,  etc.,  26  id.,  41  (1861) ;  Stone  v. 
Great  Western,  etc.,  Co.,  41  id.,  85 
(1866);  Proprietors,  etc.,  v.  Dickinson,  6 
Gray,  586  (1856);  Heaston  v.  Cincinnati, 
etc.,  R  R.  Co.,  16  Ind.,  275  (1861);  Mil- 
ler v.  Wild  Cat,  etc.,  Co.,  52  Ind.,  51 
(1875);  Eastern,  etc.,  Co.  v.  Vaughan. 
14  N.  Y.,  546  (1856) ;  Buffalo,  etc.,  R  R. 
Co.  v.  Gifford,  87  id.,  294  (1882) ;  Same  v. 


(1861) ;  Edinboro'  Academy  v.  Robinson, 
37  Penn.  St.,  210  (1860);  Hutchins  v. 
Smith,  46  Barb.,  235  (1865);  Valk  v. 
Crandall,  1  Sandf.  Chan.,  179 ;  People's, 
etc.,  Co.  v.  Balch,  8  Gray,  303  (1857); 
Chater  v.  San  Francisco,  etc.,  Co.,  19 
Cal.,  219  (1861);  Highland,  etc,  Co.  v. 
McKean,  11  Johns.,  98  (1814) ;  Tar  River, 
etc.,  Co.   v.  Neal,   3  Hawks  (N.  C),  520 


Clark,  22  Hun,  359  (1880);  Peninsular,  (1825);  Klein  v.  Alton,  etc.,  R.  R  Co.,  13 

etc.,  R.  R  Co.  v.  Duncan,  28  Mich.,  130  111.,  514  (1851);  Banet  v.  Same,   13  id., 

(1873);  Buffalo,  etc..  R.  R.  Co.  v.  Dud-  501  (1851);  Sanger  v.  Upton.  91  U.  S.,  56 

ley,    14  N.    Y,   336   (1856):    Dayton  v.  (1875);    Kidwilly,  etc.,   Co.   v.   Roby,  2' 

Borst,    31    id.,    435(1865);    Rensselaer,  Price  (Eng.),  93  (1815) ;  Weiss  v.  Mauch 

etc.,  Co.   v.  Barton,   16  id.,   457  (1854):  Chunk,  etc.,   Co..  58  Pa,  St..  295   (1868).. 

Lake  Ontario,  etc..  R.  R.  Co.  v.  Mason.  The  bringing  of  a  suit  by  the  corpora- 


16  id.,   451   (1857);    Essex,   etc.,   Co.   v. 
Tuttle,   2   Vt,    393  (1830);    Kirksey    v. 


tion  to  collect  a  subscription  constitutes 
an   acceptance  of  the  subscription  by 


Florida,  etc.,  R  R.  Co.,  7  Fla.,  23  (1857);  the  corporation.  Buffalo,  etc.,  R  R.  Co. 
Beene  v.  Cahawba,  etc.,  R  R  Co..  3  y.  Clark,  22  Hun,  359  (1880).  A  sub- 
Ala.,  660  (1842);  Selma,  etc.,  R  R  Co.  scription  to  a  corporation  to  be  organ- 
ic. Tipton,  5  id.,  787  (1843);  Hartford,  ized  is  enforceable  by  the  corporation, 
etc.,  R  R  Co.  v.  Kennedy,  12  Conn.,  Auburn,  etc.,  Ass'n  v.  Hill,  32  Pac,  Rep, 
499  (1838);  Thigpen  v.  Mississippi,  etc.,  587  (Cal.,  1893).  The  corporation  may 
R  R  Co.,  32  Miss.,  347(1856);  Gill  v.  collect  a  subscription  to  its  stock  ob- 
Kentucky,  etc.,  Co.,  7  Bush  (Ky.),  635  tained  prior  to  the  incorporation,  the 
(1870);  Instone  v.  Frankfort,  etc.,  Co.,  subscriber  having  attended  meetings 
2  Bibb  (Ky.),  576  (1812);  Cucullu  r.  and  acquiesced  in  expenditures.  Inter- 
Union  Ins.  Co.,  2  Rob.  (La.),  573  (1842);  national,  etc.,  Assoc,  tt  Walker,  47  N.  W. 
Union,  etc.,  Co.  v.  Jenkins,  1  Caines,  Rep,  338  (Mich.,  1890).  It  has  been  held 
381  (1803) ;  Goshen,  etc.,  Co.  v.  Hurtin,  that  a  corporation  can  defeat  a  sub- 
1)  Johns.,  217(1812);  Dutchess,  etc..  Co.  scriber's  action  for  stock  by  proving 
(8)                                                   113 


§  73.]       SUBSCRIPTIONS METHOD  —  PARTIES ENFORCEMENT.       [CH.  IV. 


list  who  refuses  to  take  and  pay  for  the  stock;1  and  that  the 
measure  of  damages  for  such  a  breach  of  contract  to  subscribe  for 
stock  is  the  difference  between  the  par  and  market  value  of  the 
stock  involved.2 

§  73.  In  Neiv  York  a  contrary  rule  prevails. —  It  has  been  held 
by  the  New  York  court  of  appeals  that  where  the  preliminary 
subscription  did  not  purport  to  run  to  the  company,  but  was  merely 
an  agreement  among  the  signers  to  subscribe  to  its  stock,  the  com- 
pany could  not  enforce  the  agreement  as  a  subscription.3  In  that 
state  there  is  no  implied  contract  to  pay  for  stock,  not  even  though 
it  is  given  to  stockholders  as  a  bonus.4     The  liability  on  stock  de- 


tliat  it  never  accepted  his  subscription. 
Starrett  v.  Rockland,  etc.,  R  RvCo.,  65 
Me.,  374  (1876).  But  no  formal  accept- 
ance by  the  corporation  is  necessary  in 
order  to  enforce  a  subscription.  Stras- 
burg  R  R.  Co.  v.  Eichternacht,  21  Pa. 
St,  220  (1853) ;  Miller  v.  Wild  Cat,  etc., 
Co.,  52  Ind.,  51  (1875);  Thrasher  v.  Pike 
County,  25  III,  393;  Mt.  Sterling,  etc., 
Co.  v.  Little,  14  Bush,  429(1879);  Cali- 
fornia, etc.,  Co.  v.  Schafer,  57  CaL  396 
(1881);  Poughkeepsie,  etc..  Co.  v.  Griffin, 
24  N.  Y.,  150  (1860);  Troy,  etc.,  R  R  Co. 
v.  Tibbits,  18  Barb.,  297 ;  Charlotte,  etc., 
R  R  Co.  v.  Blakely,  3  Strobh.  L,  245 
(1848);  Pittsburgh,  etc.,  R  R  Co.  v. 
Gazzam,  32  Pa.  St.,  340  (1858) ;  Walling- 
ford,  etc.,  Co.  v.  Fox,  12  Vt,  304  (1840) ; 
Stoweu  Flagg,  72  111.,  397(1874);  Goff 
v.  Winchester  College,  6  Bush,  443 
(1869);  Perkins  v.  Union,  etc.,  Co.,  12 
Allen,  273  (1866);  Dayton,  etc.,  Co.  v. 
Coy,  13  Ohio  St.,  84  (1861).  See,  also,  va- 
rious cases  in  the  first  part  of  this  chap- 
ter, and  Brownlee  v.  Ohio,  etc.,  R  R., 
18  Ind.,  68  (1862);  Kilner  v.  Baxter,  L. 
R,  2  C.  P.,  174  (1866).  A  subscription  be- 
fore incorporation  is  enforceable,  where 
defendant  paid  for  one  or  more  shares 
after  incorporation.  Bell's  Appeal,  8 
Atl.  Rep.,  177  (Penn.,  1887).  Where  a 
subscriber  before  incorporation  is  offered 
the  stock  by  the  corporation  on  certain 
conditions  which  he  refuses,  he  is  not 
liable  as  a  stockholder.  Medler  v. 
Albuquerque,  etc.,  Co.,  28  Pac.  Rep.,  551 
(N.  M.,  1892).  A  subscription  with  an 
express  promise  to  pay  to  an  agent  speci- 


fied upon  the  incorporation  of  the  com- 
pany is  collectible  by  him.  West  v. 
Crawford,  21  Pac.  Rep.,  1123  (Colo.,  1889). 
i  Quick  v.  Lemon,  105  111.,  578  (1883) : 
Thrasher  v.  Pike  Co.,  etc.,  R.  R.  Co.,  25 
id.,  393  (1861) ;  Rhey  v.  Ebensburg,  etc., 
R  R  Co.,  27  Pa.  St,  261  (1856);  Mt 
Sterling,  etc.,  R  R  Co.  v.  Little,  14 
Bush,  429  (1879). 

2  Thrasher  v.  Pike  Co.,  etc.,  R  R  Co., 
25  111.,  393  (1861).  It  seems,  also,  that 
such  an  action  of  damages  might  be 
brought  by  one  of  the  signers  of  the  pre- 
liminary agreement  against  any  other 
signer  who  refused  to  take  and  pay  for 
stock  after  the  incorporation  of  the 
company,  and  that  the  measure  of  dam- 
ages in  this  case  would  be,  not  the 
amount  subscribed,  but  the  damage 
sustained  by  the  person  suing.  Lake 
Ontario,  etc.,  R.  R  Co.  v.  Curtiss,  80  N. 
Y.,  219  (18S0).  In  Pennsylvania  a  statute 
which  authorized  a  corporation  to  trans- 
fer a  subscription  from  one  enterprise  to 
another  has  been  held  unconstitutional. 
Pittsburgh,  etc.,  R  R  Co.  v.  Gazzam, 
32  Pa.  St,  340  (1858).  It  is  elsewhere 
said  that  a  subscription  preliminary  to 
organization  is  no  contract  but  merely 
a  means  of  bringing  the  parties  to- 
gether. Poughkeepsie,  etc.,  R  R  Co.  v. 
Griffin.  24  N.  Y,  150  (1860). 

3  Lake  Ontario,  etc.,  R.  R  Co.  v.  Cur- 
tiss, 80  N.  Y,  219  (1880).  See,  also,  §  705, 
etc.,  infra,  on  promoters'  contracts  gen- 
erally. 

4  See  §  42,  supra. 


114 


CH.  IV.]       SUBSCRIPTIONS  —  METHOD  —  PARTIES  —  ENFORCEMENT.       [§  74. 

pends  upon  express  contract  only.1  Hence  where  the  corporation 
is  not  in  existence  when  the  contract  is  made  between  the  parties, 
it,  not  being  a  party  to  the  contract,  cannot  enforce  the  subscription.2 
§  74.  In  Netv  England  a  subscription  for  stock  cannot  be  en- 
forced unless  the  subscriber  expressly  promised  to  pay,  or  the  charter 
expressly  obligated  him  to  do  so. —  Such  is  the  rule  in  New  England. 
It  grew  out  of  the  peculiar  charters  of  the  early  turnpike  companies, 
which  had  shares  of  stock  not  limited  in  amount,  but  indefinite, 
so  that,  as  a  result,  if  a  subscriber  were  liable  at  all,  he  was  liable 
for  the  whole  capital  stock,  except  so  far  as  it  had  already  been 
paid  in  by  himself  and  others.  Consequently,  inasmuch  as  these 
charters  gave  to  the  corporation  the  right  to  forfeit  stock  for  non- 
payment of  subscriptions,  the  courts  held  that  an  action  to  collect 
did  not  lie,  and  that  the  remedy  by  forfeiture  was  the  only  remedy 
of  the  corporation.3     This  rule  has  become  firmly  established  in  the 


1  Liability  on  the  subscription  price  of 
stock  in  New  York  depends  on  contract 
only.  Glenn  v.  Garth,  133  N.  Y.,  18 
(1892). 

2  This  difficulty  was  experienced  in  so- 
liciting subscriptions  for  a  proposed 
World's  Fair  corporation  in  October, 
1889.  The  form  of  contract  finally  used 
was,  in  substance,  as  follows : 

"  The  undersigned,  in  consideration  of 
the  advantages  which  will  result  to  us 
respectively  from  concert  of  action,  and 
from  other  good  causes  and  considera- 
tions, and  the  efforts  to  be  made  by 
Samuel  Babcock  [giving  names],  to  pro- 
cure the  subscriptions  hereinafter  pro- 
vided for,  and  the  organization  of  a 
corporation  to  control  and  manage  such 
exposition,  do  agree  each  for  himself  to 
pay  to  the  said  Samuel  D.  Babcock  and 
his  associates  hereinabove  named,  or  at 
their  request,  to  said  corporation,  the 
respective  amounts  set  opposite  our 
names  upon  the  following  terms  and 
conditions,  to  wit: 

"  Such  subscription  shall  not  be  bind- 
ing until  such  corporation  shall  be  or- 
ganized. 

"No  subscription  shall  be  binding 
until  the  said  Samuel  D.  Babcock  and 
his  associates  above  named  shall  have 
succeeded    in    obtaining    subscriptions 


hereto    in    the    amount     of     at    least 
$5,000,000. 

"  Such  subscription  shall  be  a  prelimi- 
nary or  guarantee  fund  to  be  paid  in 
in  instalments  of  not  more  than  one- 
quarter  of  their  respective  amounts  at 
any  one  time  upon  calls  for  the  same, 
made  at  intervals  of  not  less  than  three 
months  by  the  said  Samuel  D.  Babcock 
and  his  associates,  or,  if  they  shall  so  de- 
termine, by  the  said  corporation. 

"  Samuel  D.  Babcock  and  his  associates 
hereinabove  named  having  been  thus 
contracted  with  by  the  subscribers  be- 
cause of  their  having  been  selected  as  a 
finance  committee  aforesaid  in  and  of 
said  exposition,  it  is  hereby  further 
agreed  that  all  stipulations  in  the  agree- 
ment made  dependent  upon  the  ar 
tion  of  said  Babcock  and  his  associates, 
shall  be  considered  as  fully  met  by  the 
action  of  the  majority  of  them:  and  in 
case  of  vacancy  by  death,  resignation, 
or  otherwise,  such  vacancy  shall  be  filled 
by  these  subscribers."  See  74  N.  Y.,  72 ; 
44  id.,  126. 

3  Worcester,  etc.,  Turnpike  Co.  v. 
Willard,  5  Mass.,  80  (1809);  Andover, 
etc.,  Turnpike  Co.  v.  Gould,  6  Mass.,  40 
(1809) ;  New  Bedford,  etc.,  Turnpike  Co. 
v.  Adams,  8  id.,  138  (1811);  Essex,  etc., 
Co.  v.  Collins,  8  id.,  292  (1811) ;  Frank- 
lin, etc.,  Co.  v.  White,  14  id.,  286  (1817). 


115 


§  75.]       SUBSCRIPTIONS  —  METHOD  —  PARTIES ENFORCEMENT.       [CH.   IV. 

New  England  states,  and  still  prevails  in  its  application  to  all  classes 
of  corporations.1 

§75.  Professor  Collin's  rules  on  this  subject. —  Professor  Collin,  of 
the  Cornell  Law  School,  states  the  law  on  this  subject  as  follows : 

"  The  following  propositions  are  given  as  the  substantially  har- 
monious net  result  of  much  confusion  in  cases  and  text-books.  Ram- 
bling remarks  may  be  found  contrary  to  each  proposition,  but  very 
few  reported  cases  have  been  decided  contrary  to  any  one  of  these 
propositions  upon  the  facts  coming  within  it,  and  I  believe  every 
proposition  can  be  sustained  in  any  state  or  federal  court : 

"(a)  A  preliminary  agreement  to  form  a  corporation  and  take 
stock  therein  is  not  a  contract  by  the  subscribers  with  each  other, 
and  cannot  be  enforced  by  one  or  more  against  any  other,  but  only 
by  the  corporation. 

"  (b)  Such  an  agreement,  not  made  as  a  step  authorized  by  stat- 
ute in  the  process  of  forming  the  corporation,  is  a  mere  offer  to  the 
corporation  not  yet  in  existence,  and  is  revocable  by  any  subscriber 
until  the  birth  of  the  corporation,  which  operates  as  an  acceptance 
of  the  offer,  and  thereafter  the  subscription,  if  not  previously  re- 
voked, is  irrevocable  and  may  be  enforced  by  the  corporation. 

"  (c)  Such  an  agreement,  made  as  a  step  authorized  by  statute  in 
the  process  of  forming  the  corporation,  is  made  valid  by  the  statute, 

1  Kennebec,  etc.,  R.  R,  Co.  v.  Kendall,  ise  to  pay  for  them.  Buckfield,  etc, 
31  Me.,  470  (1850) ;  Belfast,  etc.,  R.  R  R  R.  Co.  v.  Irish,  39  Me.,  44  (1854) ; 
Co.  v.  Moore,  60  id.,  561  (1871);  New  Penobscot,  etc..  R.  R.  Co.  v.  Bartlett, 
Hampshire,  etc.,  R  R.  Co.  v.  Johnson,  12  Gray,  244  (1858).  See,  also,  Seymour 
30  N.  H.,  390  (1855);  White,  etc.,  R  R  v.  Sturgess,  26  N.  Y„  134  (1862);  Fort 
Co.  v.  Eastman,  34  id.,  124  (1856) ;  Essex,  Edward,  etc.,  Co.  v.  Payne,  17  Barb, 
etc.,  Co.  v.  Tuttle,  2  Vt.,  393  (1830);  Con-  567  (1854);  Pittsburgh,  etc.,  R  R  Co.  v. 
necticut,  etc.,  R.  R.  Co.  v.  Bailey,  24  id.,  Gazzam,  32  Pa.  St,  340  (1858).  It  is  to 
465 ;  Atlantic,  etc.,  Mills  v.  Abbott,  9  be  noticed  that  this  rule  was  established 
Cush.,  423  (1852) ;  Katama,  etc.,  Co.  v.  before  the  announcement  of  that  great 
Jernegan,  125  id.,  156  (1879);  Boston,  principle  of  American  law,  that  the  capi- 
etc.  R  R  Co.  v.  Wellington,  113  id.,  79  tal  stock  of  a  corporation  is  a  trust  fund 
(1873) ;  Buckfield,  etc.,  R  R  Co.  v.  Irish,  for  the  benefit  of  its  creditors. 
39  id.,  44  (1854);  Russell  v.  Bristol,  49  When  "neither  the  general  laws  nor 
Conn.,  251  (1881).  Cf.  Odd  Fellows,  etc..  the  act  by  which  the  plaintiffs  were 
Co.  v.  Glazier,  5  Harr.  (Del.),  172  (1848) ;  incorporated,  nor  any  by-laws  of  the 
Stokes  v.  Lebanon,  etc.,  Co.,  6  Humph.,  company,  created  any  forfeiture  of  the 
241  (1845) ;  City  Hotel  v.  Dickinson,  6  shares  for  the  non-payment  of  the  as- 
Gray,  586  (1856) ;  Belfast,  etc.,  R  R.  Co.  sessments,  .  .  .  the  legal  effect  of 
v.  Cottrell,  66  Me.,  185  (1876);  Katowa  his  (defendant's)  subscribing  for  the 
Land  Co.  v.  Holley,  129  Mass.,  540  (1880) ;  stock  is  to  render  him  liable  in  assump- 
Mechanics',  etc.,  Co.  v.  Hall,  121  id.,  sit  even  where  there  is  no  express  prom  - 
272  (1876).  In  Maine  an  agreement  to  ise  to  pay."  Essex,  etc.,  Co.  v.  Tuttle,  9 
"  take  and  fill  "  a  number  of  shares  has  Vt.,  393  (1830). 
been  held  equivalent  to  an  express  prom- 

116 


CH.  IV.]       SUBSCRIPTIONS METHOD  —  PARTIES ENFORCEMENT.       [§76. 

and  is  binding  upon  each  subscriber  from  the  time  of  signing  and 
is  irrevocable  thereafter,  but  can  be  enforced  only  by  the  corporation. 

"  (d)  An  agreement  to  pay  money  to  trustees,  to  be  by  them  paid 
to  a  corporation  thereafter  to  be  created,  the  trustees  to  return  to- 
the  subscribers  stock  in  the  corporation  accordingly,  is  a  valid  con- 
tract between  the  subscribers  and  the  trustees. 

"(e)  The  distinction  made  between  a  present  subscription  and  an 
agreement  to  subscribe  to  the  stock  of  a  corporation  thereafter  to 
be  created  is  unsound  in  principle,  and  disappears  as  mere  dicta 
upon  a  thorough  sifting  of  the  cases. 

"  (f)  The  damages  recoverable  by  the  corporation  upon  a  sub- 
scription is  the  amount  of  the  subscription ;  and  all  discussion  of 
any  other  measure  of  damages,  such  as  difference  between  par  and 
market  value  of  stock  subscribed,  arises  from  a  misconception  of 
the  situation,  and  disappears  from  the  net  result  of  the  authorities." 

§  76.  Stockholders'  agreements  to  guarantee  company  debts. —  An 
agreement  of  stockholders  to  be  responsible  for  future  debts  of  the 
corporation  can  be  enforced,  but  the  corporation  and  all  the  parties 
are  to  be  made  parties  defendant.1 

A  modification  of  the  contract  between  the  subscribers  and  a 
contractor  does  not  release  the  former  where  they  accept  the  work 
upon  the  completion  of  the  contract.2 

1  Farmers'  Nat.  Bank  v.  Harmon,  14  which  they  agree  to  pay  the  contractors 
Fed.  Rep.,  593  (1883).  If  the  plaintiff  is  who  are  parties  to  the  contract  a  speci- 
one  of  the  parties  to  the  agreement  his  fied  sum,  is  a  joint  undertaking  on  the 
remedy  is  in  equity.  Id..  4  id.,  612.  subscribers'  part  The  contractors  may 
An  agreement  of  stockholders  to  in-  hold  them  liable  as  partners,  the  agree- 
demnify,  protect  and  save  harmless  in  ment  not  limiting  their  liability  to  the 
proportion  to  their  stock  other  stock-  number  of  shares  taken  by  each.  An 
holders  who  sign  corporate  notes  con-  immaterial  alteration  after  a  part  have 
strued  and  the  remedy  explained.  Tay-  signed  does  not  release  any  one.  The 
lor  v.  Coon,  48  N.  W.  Rep.,  123  (Wis.,  agreement  of  the  contractors  to  hold 
1891) ;  Taylor  v.  North,  id.,  126.  each  subscriber  liable  only  on  his  sub- 
Stockholders  who  sign  corporate  scription  if  he  would  pay  that  is  with- 
notes  are  co-sureties  and  not  guarantors,  out  consideration  and  void.  Any  sub- 
Southerland  v.  Fremont,  12  S.  E.  Rep.,  scriber  could  expressly  limit  his  liability 
237  (N.  C,  1890).  to  his  subscription.  Davis  v.  Shafer,  50 
An  agreement  of  stockholders  that  if  Fed.  Rep.,  764  (1892).  See  Doud  v.  Bank, 
a  creditor  of  the  corporation  will  release  54  id.,  846.  Of.  Davis  v.  Barber,  51  id.,  148. 
certain  security  they  will  give  other  se-  2  Gibbons  v.  Ellis,  53  N.  W.  Rep.,  701 
curity  or  that  the  debt  will  be  paid  is  a  (Wis.,  1892). 

contract  of  guaranty  and  not  an  origi-        An   agreement  of  stockholders  that 

nal  undertaking.     Home  Nat.  Bank  v.  certain  corporate  notes  will  be  paid  is 

Waterman,  25  N.  E.  Rep.,  648  (111.,  1890).  released  by  taking  new  notes  from  the 

A  subscription  agreement  prior  to  in-  corporation  extending  the  debt.     Home 

corporation,  in  which  the  parties  state  Nat.  Bank  v.  Waterman's  Estate,  29  N. 

the   number  of  shares    taken,   and   in  E.  Rep.,  503  (111.,  1891). 

117 


CHAPTER  V. 


CONDITIONAL  SUBSCRIPTIONS. 


77. 
78. 
79. 

80. 


81. 
82. 


Definition. 

Conditions  subsequent. 

Conditional  subscriptions  before 
incorporation. 

In  New  York  such  subscription  is 
void ;  in  Pennsylvania  the  con- 
dition is  void. 

Oral  conditions  are  void. 

Conditional  subscriptions  after  in- 
corporation. 


83.  What  may  be  the  condition. 

84.  Acceptance  of  the  subscription  by 

the  corporation. 

85.  Construction  of  the  condition. 
86-87.  Performance  of  the  condition. 

88.  Waiver. 

89.  Notice    and  calls   on  conditional 

subscriptions. 


§  77.  Definition  of  conditional  subscription  —  A  conditional  sub- 
scription is  one  on  which  payment  can  be  enforced  by  the  corpo- 
ration onty  after  the  occurrence  or  after  the  performance  by  the  cor- 
poration of  certain  things  specified  in  the  subscription  itself.1  Oral 
agreements  made  with  the  subscriber  to  the  effect  that  payment 
will  not  be  required  except  on  certain  events  or  contingencies  are 
sometimes  spoken  of  as  conditions  to  the  subscription,  but  more 
properly  are  mere  variations  of  a  written  contract,  and  are  treated 
elsewhere.2 

§  78.  Conditions  precedent  and  conditions  subsequent. —  A  con- 
ditional subscription  is  also  to  be  distinguished  from  a  subscription 
on  a  condition  subsequent.  A  subscription  on  a  condition  subse- 
quent contains  a  contract  between  the  corporation  and  the  sub- 
scriber, whereby  the  corporation  agrees  to  do  some  act.  It  thereby 
combines  two  contracts :  one  the  contract  of  subscription,  the  other 
an  ordinary  contract  of  the  corporation  to  perform  the  specified 
acts.3     The  subscription  is  valid  and  enforceable  whether  the  con- 


1  A  conditional  subscription  has  often 
been  spoken  of  as  "a  continuing  offer 
which  is  final  and  absolute  when  ac- 
cepted." Taggart  v.  Western  Md.  R 
R.  Co.,  24  Md.,  563  (1866);  Ashtabula  & 
New  London  R.  R  Co.  v.  Smith,  15 
Ohio  St.,  328  (1864) ;  Lowe  v.  Edgefield 
&  K.  R.  R  Co.,  1  Head  (Tenn.),  659 
(1858). 

2  See  ch.  IX ;  also  §  81. 

3  Thus,  adding  to  a  subscription  the 
words,  "  to  be  expended  between  the 
Connecticut  river  and  the  east  line  of 


the  state,"  has  been  held  to  form  a  con- 
tract to  that  effect,  but  not  to  make  the 
subscription  conditional.  Lane  v.  Brain- 
erd,  30  Conn.,  565  (1862 ;  Henderson  & 
Nashville  R,  R.  Co.  v.  Leavell,  16  B. 
Monroe  (Ky.),  358  (1855).  So,  also,  of 
words  requiring  a  certain  location  or 
route  to  be  adopted.  Henderson  &  Nash- 
ville R  R  Co.  v.  Leavell,  supra;  the 
court  saying,  however,  that  if  the  route 
is  laid  out  otherwise,  before  payment, 
probably  the  subscriber  would  be  dis- 
charged ;  if  changed  after  payment,  it 


118 


CH.  V.] 


CONDITIONAL   SUBSCRIPTIONS. 


[§78. 


ditions  are  performed  or  not.1  The  condition  subsequent  is  the 
same  as  a  separate  collateral  contract  between  the  corporation 
and  the  subscriber,  for  breach  of  which  an  action  for  damages  is 
the  remedy.2     The  distinction  between  such  a  contract  and  the  or- 


could  be  enjoined.  Laches  will  bar  the 
right  to  such  an  injunction.  Chapman 
v.  Mad  River  &  Lake  Erie  R.  R.  Co.,  6 
Ohio  St,  119  (1856).  A  more  frequent 
requirement  is  a  certain  location  of  the 
route,  and  also  the  construction  of  a 
part  of  the  whole  of  the  road.  The 
first  requirement  is  construed  to  be  a 
condition  precedent,  tbe  second  a  condi- 
tion subsequent,  since  the  payment  of 
the  subscription  itself  is  necessary  to 
carry  out  the  requirement  Chamber- 
lain v.  Painesville  &  Hudson  R  R  Co., 
15  Ohio  St.,  225  (1864) ;  Belfast  &  Moose- 
head  Lake  R'y  Co.  v.  Moore,  60  Me.,  561, 
576  (1871);  North  Mo.  E.  R.  Co.  v.  Wink- 
ler, 29  Mo.,  318 ;  Bucksport  &  Bangor 
R  R.  Co.  v.  Inhabitants  of  Brewer,  67 
Me.,  295  (1877);  McMillan  V.  Maysville 
&  Lexington  R.  R  Co.,  15  B.  Monroe, 
218  (1854) ;  Swartout  v.  Mich.  Air  Line 
R  R  Co.,  24  Mich.,  389  (1872),  where 
Judge  Cooley  says :  "  It  is  only  reason- 
able to  infer  that  they  would  have  ex- 
pressed that  intent  more  clearly,  and 
would  have  indicated  with  definiteness 
what  stage  the  work  should  reach,  be- 
fore their  liability  should  become  fixed." 
So  also  in  Miller  v.  Pittsburgh  &  Con- 
nellsville  R  R  Co.,  40  Pa.  St.,  237  (1861), 
where  the  court  say :  "  It  is  a  most  ex- 
traordinary defense ;  for  it  presupposes 
that  the  company  were  to  build  their 
road  without  money,  and  to  deliver  it, 
a  finished  work,  to  the  stock  subscribers, 
who  were  then  to  pay  their  subscrip- 
tions." In  Pittsburgh  &  Steubenville 
R  R  Co.  v.  Biggar,  34  Pa.  St,  455  (1859), 
a  condition,  "  provided  the  road  goes 
within  half  a  mile  of  Florence,"  was 
held  to  be  a  condition  subsequent.  A 
condition  that  alterations  shall  be  or- 
dered only  by  a  vote  of  the  directors  is 
a  condition  subsequent  Bucksport  & 
Bangor  R  R  Co.  v.  Buck,  68  Me.,  81 
(1878).     So  also  of  a  condition  that  com- 


missioners should  be  appointed  to  see 
that  other  conditions  are  complied  with. 
Shaffner  v.  Jeffries,  18  Mo.,  512  (1853). 
And  a  condition  that  the  money  sub- 
scribed shall  be  expended  on  a  certain 
part  of  the  road.  Lane  v.  Brainerd,  30 
Conn.,  565  (1862).  A  condition  that  a 
depot  shall  be  established  at  a  certain 
place  is  a  condition  subsequent  Pa- 
ducah,  etc.,  R.  R.  v.  Parks,  8  S.  W.  Rep., 
842  (Tenn.,  1888).  A  condition  that 
bonds  will  be  issued  as  a  "  bonus  "  to  a 
stockholder  is  void.  It  is  a  condition 
subsequent.  The  subscription  is  en- 
forceable. Morrow  v.  Nashville,  etc., 
Co.,  10  S.  W.  Rep.,  495  (Tenn.,  1889). 
Condition  construed  subsequent  John- 
son v.  Georgia,  etc.,  R  R.  Co.,  8  S.  E 
Rep.,  531  (Ga.,  1889).  For  the  English 
cases  on  conditions  precedent  and  sub- 
sequent to  subscriptions  for  stock,  see 
ch.  II,  supra. 

1 A  condition  subsequent  "  will  not 
defeat  an  action  for  the  recovery  of  the 
money,  notwithstanding  it  had  not  been 
performed  when  the  action  was  com- 
menced." Belfast  &  Moosehead  Lake 
R'y  Co.  v.  Moore,  60  Me.,  561,  576  (1871). 
"  A  failure  to  perform  an  independent 
stipulation,  not  amounting  to  a  condi- 
tion precedent,  though  it  subject  the 
party  failing  to  damages,  does  not  ex- 
cuse the  party  on  the  other  side  from 
the  performance  of  all  stipulations  on 
his  part"  Mill  Dam  Foundry  v.  Hovey, 
38  Mass.,  417,  437  (1839). 

2  The  subscriber  is  left  to  the  ordinary 
remedies  for  breaches  of  contracts. 

A  subscriber  cannot  avoid  payment 
as  against  a  corporate  creditor  although 
the  subscription  was  on  condition  that 
if  the  subscription  exceeded  one-half  the 
cost  of  a  certain  building,  only  so  much 
of  the  subscription  should  be  called  for 
as  would  equal  that  half.  The  subscriber 
cannot  forfeit  what  he  has  paid  and  re- 


119 


§79.] 


CONDITIONAL    SUBSCRIPTIONS. 


[CH. 


dinary  conditional  subscriptions  —  that  is,  subscriptions  on  condi- 
tions precedent  —  is  sometimes  difficult  to  determine.  The  supreme 
court  of  Maine  has  said  that  the  question  whether  a  condition  in  a 
subscription  "  be  precedent  or  subsequent  is  a  question  purely  of  in- 
tent, and  the  intention  must  be  determined  by  considering  not  only 
the  words  of  the  particular  clause,  but  also  the  language  of  the 
whole  contract,  as  well  as  the  nature  of  the  act  required  and  the 
subject-matter  to  which  it  relates."  l  The  courts,  in  accordance 
with  well-established  rules,  favor  conditions  subsequent.2 

§  79.  Conditional  subscriptions  not  allowed  in  subscriptions  to 
obtain  incorporation. —  Conditional  subscriptions  made  before  the 
incorporation  of  a  company,  and  taken  for  the  purpose  of  secur- 
ing such  incorporation,  as  prescribed  by  statute,  are  of  doubtful 
validity.  The  weight  of  authority  holds  that  subscriptions  taken 
for  the  purpose  of  complying  with  a  statute  which  grants  a  charter 
only  upon  a  certain  amount  of  stock  being  subscribed  cannot  be 
conditional,  but  must  be  absolute.3  This  is  clearly  the  rule  in  New 
York  and  Pennsylvania,  and  is  founded  in  justice.4 

fuse  to  pay  the  remainder.  Mathis  v.  subscriptions."  Boyd  v.  Peach  Bottom 
Pridham,  20  S.  W.  Rep..  1015  (Tex.,  1892).  R'y  Co.,  90  Pa.  St.,  169  (1879).  «  Any 
A  condition  that  the  subscriptions  other  rule  would  lead  to  the  procure- 
when  collected  shall  be  used  to  build  ment  from  the  commonwealth  of  valu- 
factories  which  should  be  leased  was  en-  able  charters  without  any  absolute  cap- 
forced  in  Porter  v.  Carpenter,  23  Atl.  ital  for  their  support  and  thus  give  rise 


Rep.,  523  (N.  H.,  1874). 
See,  aleo,  §  97,  infra. 

1  Bucksport  &  B.  R  R  Co.  v.  Inhab- 
itants of  Brewer,  67  Me.,  295  (1877). 
"The  situation  and  relation  of  the  par- 
ties to  each  other,  the  object  sought  to 
be  attained,  and  the  subject-matter  to 
which  the  agreement  relates,  are  mate- 
rial .  .  .  and  indispensable  aids" 
in  deciding  whether  the  condition  be 
precedent  or  subsequent.  Chamberlain 
r.  Painesville  &  Hudson  R  R  Co.,  15 
Ohio  St.,  225  (1864). 

2  Chamberlain  v.  Painesville  &  Hud- 
son R.  R.  Co.,  15  Ohio  St,  225  (1864); 
Swartout  v.  Mich.  Air  Line  R  R.  Co., 
24  Mich.,  389  (1872). 

3 "  A  subscription  to  the  stock  of  a 
public  corporation,  made  before  letters 
patent  are  issued  and  an  organization 
effected,  must  be  considered  absolute 
and  unqualified,  and  any  condition  at- 
tached thereto  void.  Commissioners 
have  no  authority  to  receive  conditional 


to  a  system  of  speculation  and  fraud 
which  would  be  intolerable."  Caley  v. 
Phila.  &  Chester  County  R.  R  Co.,  80 
Pa.  St.,  363  (1876).  See,  also,  Erie,  etc., 
Co.  v.  Brown,  25  Pa.  St,  156  (1855): 
Nippenose  Mfg.  Co.  v.  Stadton,  68  Pa. 
St.,  256  (1871);  Pittsburgh,  etc.,  R  R 
Co.  v.  Stewart,  41  Pa  St,  54  (1861); 
Troy  &  Boston  R  R  Co.  v.  Tibbits,  18 
Barb.,  297  (1854).  That  conditional  sub- 
scriptions are  not  to  be  counted  in  as- 
certaining whether  the  whole  capital 
stock  has  been  subscribed,  which  must 
be  shown  before  another  absolute  sub- 
scriber can  be  made  liable,  see  §  180. 

4  Some  of  the  old  cases  uphold  condi- 
tional subscriptions  made  previous  to 
and  for  the  purpose  of  incorporation. 
Chamberlain  v.  Painesville  &  Hudson 
R  R  Co.,  15  Ohio  St.,  225  (1864).  It  is 
doubtful,  however,  whether  any  well- 
considered  case,  under  the  present  gen- 
eral laws  allowing  the  incorporation  of 
railroads,    would  sustain  such    a    sub- 


120 


CH.  V.]  CONDITIONAL    SUBSCRIPTIONS.  [§§  80-82. 

§  80.  In  New  York  the  subscription  is  void;  in  Pennsylvania  the 
condition  is  void. —  The  New  York  and  Pennsylvania  cases  differ, 
however,  in  regard  to  the  effect  of  a  conditional  subscription  to 
stock  before  and  for  the  purpose  of  incorporation.  In  New  York 
the  whole  subscription  is  void  absolutely.  It  is  as  though  not 
made,  and  cannot  be  enforced  either  by  the  corporation  or  by  the 
would-be  subscriber.1  In  Pennsylvania  a  different  rule  prevails. 
The  condition  is  void,  but  the  subscription  itself  is  treated  as  an 
absolute  unconditional  subscription,  and  may  be  enforced  by  the 
corporation.2  The  commissioners  are  held  to  have  only  limited 
statutory  powers,  of  which  the  subscriber  is  bound  to  take  notice, 
and  the  express  powers  do  not  give  authority  to  the  commissioners 
to  take  conditional  subscriptions.  They  have  no  right  to  receive 
various  kinds  of  subscriptions,  and  any  conditions  are  held  to  be 
void  as  a  fraud  upon  the  state,  upon  corporate  creditors,  and  upon 
other  subscribers.3 

§  81.  Oral  conditions  are  void. —  Under  the  general  rule  of  evi- 
dence that  a  written  agreement  cannot  be  varied  or  added  to  by 
parol,  it  is  not  competent  for  a  subscriber  to  stock  to  allege  that 
he  is  but  a  conditional  subscriber.4  The  condition  must  be  inserted 
in  the  writing  in  order  to  be  effectual.  Where,  however,  the  parol 
agreement  or  condition  is  made  subsequently  to  the  making  of  the 
contract,  and  upon  a  sufficient  consideration,  it  has  been  upheld.5 

§  82.  Conditional  subscriptions  after  incorporation  are  valid. — 
A  conditional  subscription  to  stock,  taken  and  accepted  by  a  corpo- 
ration after  its  incorporation,  is  legal  and  valid  by  the  common-law 

scription.     The  weight  of  authority  is  burgh  &  Steuben ville  R.  R.  Co.,  44  Pa. 

decidedly  in  favor  of  absolute  subscrip-  St,   358 ;  Pittsburgh  &  Steubenville  R. 

tions.  R  Co.  v.  Biggar,  34  Pa.  St.,  455  (1859) ; 

1  Troy  &  Boston  R  R.  Co.  v.  Tibbits,  Same  v.  Woodrow,  3  Phil,  271  (1858). 
18  Barb.,  297  (1854);  In  re  Rochester,  Tbe  subscription  itself,  however,  is  not 
etc.,  R.  R.  Co.,  50  Hun,  29  (1888),  where  binding  if  it  is  not  reported  by  the  com- 
the  subscription  was  to  be  paid  in  land,  missioners  and  used  to  obtain  the  char- 

2  "  Where  one  subscribes  to  the  stock  ter.  Ligonier  Valley  R.  R.  Co.  v.  Will- 
of  a  public  corporation,  prior  to  the  pro-  iams,  35  Leg.  Intel.,  40  (1878).  In  the 
curement  of  its  charter,  such  subscrip-  federal  courts,  Burke  v.  Smith,  16  Wall., 
tion  is  to  be  regarded  as  absolute  and  390,  396  (1872),  favors  the  Pennsylvania 
unqualified,  and  any  condition  attached  rule,  while  Putnam  v.  City  of  New  AI- 
thereto  is  void."  Caley  v.  Phila,  &  bany,  4  Biss.,  365,  383  (1869),  favors  the 
Chester  Co.  R  R  Co.,  80  Pa.  St,  363  New  York  rule.  In  both  cases  the  opin- 
(1876).  "  The  subscription  is  valid  and  ions  are  dicta.  See,  also,  Ellison  v.  Mo- 
binding,  and  the  condition  null  and  bile  &  O.  R.  R.  Co.,  36  Miss.,  572  (1858). 
void."     Boyd  v.  Peach  Bottom   R'y  Co.,  3  Same  cases. 

90  Pa.    St.,    169  (1879).      To  the  same        *  See  §§  137,  138. 
effect,  see  Bedford  R  R.  Co.  v.  Bowser,        5  Id. 
48  Pa.  St,  29  (1864);  Barington  v.  Pitts- 

121 


§83.] 


CONDITIONAL    SUBSCRIPTIONS. 


[CH. 


of  all  the  States.  In  Pennsylvania  the  legality  of  such  conditional 
subscriptions  is  clearly  declared  and  sustained.1  In  New  York,  also, 
conditional  subscriptions  have  been  upheld,2  but  not  where  the  con- 
dition is  one  that  affects  the  route  of  a  turnpike  or  railroad  com- 
pany. In  other  states  the  legality  of  such  subscriptions  is  rarely 
questioned,  but  is  generally  assumed  to  be  admitted.3 

§  83.  What  condition  may  be  attached  to  a  subscription  —  Any 
condition  which  can  be  legally  performed  or  complied  with  by  the 
corporation  may  be  the  condition  to  a  subscription  for  stock.4  The 
condition  may  be  that  payment  shall  be  in  labor  or  materials;5  it 


1  "  It  is  no  longer  to  be  doubted  that 
an  incorporated  company,  after  it  has 
obtained  its  letters  patent  and  effected 
its  organization,  may  receive  conditional 
subscriptions  to  its  stock."  Pittsburgh 
&  Connellsville  R.  R  Co.  v.  Stewart,  41 
Pa.  St,  54  (1861);  Caley  v.  Phila.  & 
Chester  County  R.  R  Co.,  80  Pa.  St.,  363 
(1876);  Phila.,  etc.,  R  R  Co.  v.  Hick- 
man, 28  Pa.  St.,  318  (1857).  After  incor- 
poration conditional  subscriptions  may 
be  received,  although  the  letters  patent 
have  not  been  issued  and  cannot  be 
until  ten  per  cent,  of  the  capital  stock  is 
subscribed.  The  conditional  subscrip- 
tion cannot,  however,  form  any  part  of 
such  percentage.  Hanover  Junction  & 
Susquehanna  R  R  Co.  v.  Haldernan,  82 
Pa.  St,  36  (1876). 

2  Ordinary  conditional  subscriptions 
were  treated  as  valid  in  Union  Hotel 
Co.  v.  Hersee,  79  N.  Y.  454  (1880) ;  Bur- 
rows v.  Smith.  10  N.  Y.,  550  (1853) ;  Mor- 
ris Canal  &  Bkg.  Co.  v.  Nathan,  2  Hall, 
239  (1892).  But  the  condition  that  a 
particular  location  of  the  proposed  road 
should  be  adopted  has  been  held  to  be 
contrary  to  public  policy,  since  im- 
proper means  would  thereby  influence 
the  question  of  location.  Butternuts  & 
Oxford  Turnpike  Co.  v.  North,  1  Hill, 
518  (1841);  Fort  Edward,  etc.,  Co.  v. 
Payne,  15  N.  Y,  583  (1857) ;  Macedon  & 
Bristol  Plank  Road  Co.  v.  Snediker,  18 
Barb.,  317  (1854);  dictum  in  Dix  v. 
Shaver,  14  Hun,  392  (1878).  However, 
in  the  case  of  Lake  Ontario  Shore  R  R 
Co.  v.  Curtiss,  80  N.  Y,  219  (1880).  a 
condition  of  this  kind  was  involved,  and 


no  objection  was  made  to  its  validity. 
Subscriptions  conditional,  in  that  pay- 
ment is  to  be  permitted  in  property, 
labor  or  contract  for  construction,  have 
been  repeatedly  passed  upon  in  New 
York  and  upheld.     See  ch.  II. 

3  "  Except  in  New  York,  conditional 
subscriptions,  in  the  absence  of  a  special 
prohibition,  so  far  as  we  have  observed, 
have  been  sustained  as  authorized  and 
not  in  conflict  with  public  policy." 
Ashtabula  &  New  London  R  R  Co.  v. 
Smith,  15  Ohio  St,  328  (1864).  See,  also, 
§  97,  infra;  New  Albany  &  Salem  R  R 
Co.  v.  McCormick,  10  Ind.,  499  (1858); 
McMillan  v.  Maysville  &  Lexington  R  R 
Co.,  15  B.  Monroe,  218  (1854);  Dayton, 
etc.,  R  R  Co.  v.  Hatch,  1  Disney,  84 
(1855).  A  conditional  subscription  to  the 
stock  of  a  railroad  company  is  legal. 
Baltimore,  etc.,  R  R  Co.  v.  Pumphrey, 
21  Atl.  Rep.,  559  (Md.,  1891).  Conditional 
subscriptions  may  be  received.  Arm- 
strong v.  Karshuer,  24  N.  E.  Rep.,  897 
(Ohio,  1890).  If  the  condition  is  ultra 
vires  of  the  corporation,  the  subscrip- 
tion is  not  enforceable,  there  having 
been  no  performance.  Pellatt's  Case,  L 
R,  2  Ch.,  527  (1867). 

4  The  subscriber  "may  agree  to  take 
and  pay  for  the  stock  absolutely  or 
upon  such  condition  as  he  may  choose 
to  incorporate  into  his  subscription." 
Penobscot  &  Kennebec  R  R  Co.  v. 
Dunn,  39  Me.,  587  (1855);  Mathis  v. 
Pridham,  20  S.  W.  Rep.,  1015  (Tex., 
1892). 

5  See  ch.  II. 


122 


CH. 


v.] 


CONDITIONAL    SUBSCRIPTIONS. 


[§  83. 


may  require  the  expenditure  of  the  subscription  on  a  particular 
part  of  the  enterprise ; l  it  may  stipulate  that  a  certain  amount  or 
the  whole  of  the  capital  stock  shall  be  subscribed  before  calls  are 
made  on  the  subscriptions;2  or  it  may  limit  the  time  within  which 
certain  things  specified  therein  must  be  done.3  In  most  states  the 
condition  to  a  subscription  may  require  the  route  of  a  railroad  to 
be  located  on  a  particular  line.4  In  New  York  such  a  conditional 
subscription  has  been  held  to  be  void,  on  the  ground  of  public  pol- 
icy, inasmuch  as  the  discretion  of  the  directors,  in  laying  out  the 
route,  would  thereby  be  influenced  by  considerations  other  than 
those  of  a  purely  public  nature.5 

In  general,  however,  subscriptions  to  the  capital  stock  of  a  cor- 
poration may  be  conditional  as  to  the  time,  manner  or  means  of 
payment,  or  in  any  other  way  not  prohibited  by  statute,  or  the 


1  Milwaukee  &  Northern  111.  R.  R  Co.     also,  Caley  v.  Phil.   &  Chester  County 


v.  Field,  12  Wis.,  340  (1860);  Hanover 
Junction  &  Sus.  R.  R  Co.  v.  Haldeman, 
82  Pa  St,  36  (1876). 

2  Phil.  &  West  Chester  R.  R  Co.  v. 
Hickman,  28  Pa.  St,  318 ;  Penobscot  & 
Kennebec  R.  R  Co.  v.  Dunn,  39  Me., 
587  (1855);  Hanover  Junction  &  Sus. 
R.  R.  Co.  v.  Haldeman,  supra;  Union 
Hotel  Co.  v.  Hersee,  79  N.  Y.,  454  (1880). 
Even  though  the  charter  allowed  the 
commencement  of  business  upon  the 
subscription  of  a  less  sum.     Ridgefield 

6  N.  Y.  R  R.  Co.  v.  Brush,  43  Conn.,  86 
(1875). 

3Ticonic  Water-power  Mfg.  Co.  v. 
Lang,  63  Me.,  480  (1874),  holding  also 
that  time  herein  is  of  the  essence  of  the 
contract  See,  also,  Morris  Canal  & 
Banking  Co.  v.  Nathan,  2  Hall  (N.  Y), 
239  (1829).    See,  also,  §  87. 

4  Fisher  v.  Evansville,  etc.,  R  R  Co., 

7  Ind.,  407  (1856) ;  Conn.  &  Passumpsic 
R.  R  Co.  v.  Baxtar,  32  Vt,  805  (1860) ; 
Cumberland  Valley  R.  R  Co.  v.  Baab, 
9  Watts,  458  (1840) ;  Evansville,  etc.,  R.  R 
Co.  v.  Shearer,  10  Ind.,  246  (1858);  Jew- 
ett  v.  Lawrenceburgh,  etc.,  R  R  Co.,  10 
Ind.,  539  (1858);  Missouri  Pacific  Ry 
Co.  v.  Taggard,  84  Mo.,  264  (1884) ;  Wear 
v.  Jacksonville,  etc.,  R  R  Co.,  24  111.,  595 
(1860);  Taggart  v.  Western  Md.  R  R 
Co.,  24  Md.,  563  (1866) ;  Racine  County 
Bank  v.  Ayers,  12  Wit'.,  512  (1860).     See, 


R  R  Co.,  80  Pa.  St.,  363  (1876).  Loca- 
tion may  be  required  to  be  subject  to 
the  approval  of  the  subscriber.  Rob- 
erts' Case,  3  De  Gex  &  Sm.,  205  (1850) : 
aff  d,  2  Mac.  &  G.,  196.  See,  also,  Mans- 
field, etc.,  R.  R  Co.  v.  Brown,  26  Ohio 
St,  224  (1875) ;  Same  v.  Stout  26  Ohio 
St.,  241  (1875) ;  Chamberlain  v.  Paines- 
ville,  etc.,  R  R  Co.,  15  Ohio  St,  225 
(1864) ;  North,  etc.,  R  R  Co.  v.  Winkler. 
29  Mo.,  318  (1860) ;  Spartanburgh,  etc., 
R  R  Co.  v.  De  Graffensied,  12  Rich.  L. 
675  (1860) ;  Des  Moines,  etc.,  R  R  Co.  v. 
Graff,  27  Iowa,  99  (1869).  A  subscrip- 
tion or  note,  not  for  stock,  but  abso- 
lutely as  a  gift  to  the  corporation,  in 
consideration  of  a  particular  route  being 
adopted,  has  been  upheld.  Stowell  v. 
Stowell,  45  Mich.,  364 ;  First  Nat'l  Bank 
V.  Hendrie,  49  Iowa,  402  (1878).  A  sub- 
scription or  donation  to  a  railroad, 
conditional  on  the  location  of  a  depot,  is 
enforceable  by  the  company.  Berry- 
man  v.  Cincinnati  S.  R'y,  14  Bush  (Ky.), 
755  (1879).  See  §  650.  A  construction 
company,  under  contract  to  coustruct  a 
road  by  the  shortest  route,  cannot  col- 
lect a  sum  promised  by  a  third  person 
for  a  deflection  of  the  route.  Wood- 
stock Iron  Co.  v.  Extension  Co.,  129 
U.  S.,  642  (1889- 
5  See  §  82,  n. 


123 


§84.] 


CONDITIONAL    SUBSCRIPTIONS. 


[CH. 


V. 


rules  of  public  policy,  and  not  beyond  the  corporate  powers  of  the 
corporation  to  comply  with.1 

§  84.  Acceptance  by  the  corporation  is  necessary. —  The  accept- 
ance by  the  corporation  of  a  conditional  subscription  is  necessary 
to  the  formation  of  the  contract.2  Until  such  acceptance  the  con- 
ditional subscription  is  but  a  continuing  offer.  After  acceptance 
the  subscriber  is  bound,  until  performance  of  the  condition  by  the 
corporation,  to  await  such  performance;  he  cannot  withdraw  the 
conditional  subscription  after  it  has  been  accepted.  It  seems,  how- 
ever, that  if  the  performance  of  the  condition  is  delayed  unreason- 
ably by  the  corporation,  the  conditional  subscriber  will  be  thereby 
released  from  his  obligation.3 


1  Conditions  inconsistent  with  the 
charter  are  void.  Thigpen  v.  Miss.,  etc., 
R.  R  Co.,  32  Miss.,  347  (1856).  The  con- 
ditions which  may  be  legally  made  to  a 
subscription  are  practically  limited  only 
by  the  power  of  the  corporation  to  con- 
tract. A  few  of  the  conditions  which 
have  been  passed  upon  by  the  courts 
have  been  given.  Many  minor  ones  are 
involved  in  the  cases,  and  present  a 
great  variety  of  conditions,  correspond- 
ing, as  they  do,  to  the  wishes  and  mo- 
tives of  individuals  subscribing  to  the 
stock  of  the  different  kinds  of  joint- 
stock  corporations.  The  condition  of  a 
subscription  may  be  that  the  subscriber 
b:a  made  secretary.  Mogridge's  Case,  58 
L.  T.  Rep.,  801  (1888). 

2  Junction  R.  R.  Co.  v.  Reeve,  15  Ind., 
236  (1860),  where  the  subscription  was 
payable  in  land.  See,  also,  Gait's  Ex'rs 
v.  Swain,  9  Gratt.  (Va.),  633  (1853). 
"When  the  offer  was  accepted  the 
minds  of  the  parties  met  and  the  con- 
tract was  complete.  .  .  The  ac- 
ceptance by  the  plaintiff  constituted  a 
sufficient  legal  consideration  for  the  en- 
gagement on  the  part  of  the  defend- 
ants." Taggart  v.  Western  Md.  R.  R 
Co.,  24  Md.,  563  (1866).  By  the  entry 
of  the  subscription  on  the  corporate 
record  an  acceptance  is  implied.  New 
Albany  &  Salem  R.  R.  Co.  v.  McCor- 
mick,  10  Ind..  499  (1858).  Acceptance 
by  the  president  of  the  corporation,  and 
a  subsequent  ratification  by  the  direct- 
ors of  all  his  acts,  is  sufficient.     Pitts- 


burgh &  Connellsville  R.  R  Co.  v. 
Stewart,  41  Pa.  St,  54  (1861).  The  de- 
livery and  acceptance  may  be  proved 
by  parol.  '  Mansfield  &  New  Lisbon  R 
R  Co.  v.  Smith,  15  Ohio  St,  328  (1864). 
Where  it  is  delivered  in  escrow  to  the 
agent  of  the  corporation,  there  can  be 
no  acceptance  of  it  by  the  corporation, 
so  long  as  such  delivery  continues.  Cass 
v.  Pittsburgh,  Va  &  Charleston  R'y  Co., 
80  Pa.  St,  31  (1875).  It  may  be  revoked 
while  still  in  the  hands  of  a  corporate 
agent  Lowe  v.  Edgefield  &  K.  R  R 
Co.,  1  Head  (Tenn. ),  659  (1858).  The  sub- 
scribers cannot  withdraw  unless  there 
is  unreasonable  delay.  Armstrong  v. 
Karshuer,  24  N.  E.  Rep.,  897  (Ohio,  1890). 
3  Where,  the  condition  not  being  per- 
formed, the  subscriber  notifies  the  sec- 
retary of  his  withdrawal  from  the  sub- 
scription, he  is  released.  Wood's  Case, 
L.  R,  15  Eq.,  236  (1873).  "The  objec- 
tion to  a  continuing  offer,  that  it  sus- 
pends indefinitely  the  liability  of  the 
conditional  subscribers,  is  sufficiently 
answered  by  the  consideration  that  all 
such  offers  are  subject  to  retraction, 
and  may  be  recalled  if  their  acceptance 
is  unreasonably  deferred."  Taggart  v. 
Western  Md.  R  R  Co.,  24  Md.,  563 
(1866).  See  query  and  briefs  in  Mans- 
field, Coldwater  &  Lake  Mich.  R  R  Co. 
v.  Stout,  26  Ohio  St.,  241  (1875),  which 
holds  that  the  question  of  acceptance  is 
immaterial  where  performance  of  the 
condition  has  been  completed  by  the 
corporation. 


124 


CH.  V.] 


CONDITIONAL    SUBSCRIPTIONS. 


; :  35,  86. 


§  85.  Construction  of  conditional  subscription. —  Conditional  sub- 
scriptions, like  other  contracts,  are  to  be  construed  reasonably  and 
according  to  the  intent  of  the  parties,  as  indicated  by  the  language 
used  in  the  contract.1  The  circumstances  under  which  the  sub- 
scription was  made  are  also  to  be  taken  into  consideration.2  If  two 
interpretations  are  possible,  that  which  facilitates  the  enterprise  is 
preferred  to  that  which  retards  it.3  If  the  meaning  is  ambiguous, 
it  is  for  the  jury  to  say  what  the  interpretation  is  to  be.4 

§  86.  Performance  of  the  condition. —  A  condition  to  a  subscrip- 
tion for  stock  must  be  performed  or  complied  with  before  the  sub- 
scriber can  be  compelled  to  pay  such  subscription.5  A  substantial 
performance  of  the  condition  is  sufficient."  A  failure  to  perform 
is  not  excused   by  reason  of  unforeseen   difficulties  arising  from 


1  The  whole  contract  is  to  be  taken  to- 
gether, and  is  "to  have  a  reasonable 
construction  according  to  the  intent 
of  the  parties."  People's  Ferry  Co.  v. 
Balch,  74  Mass.,  303  (1857).  "  The  lan- 
guage was  chosen  by  them  to  express 
their  mutual  intent,  and  such  construc- 
tion must  be  given  thereto  as  will  carry 
into  effect  that  mutual  understanding. 
.  .  .  We  are  to  ascertain  what  the 
parties  understood  and  intended  by 
this  language,  and  may  not  deviate 
therefrom,  whether  that  contract,  as  so 
interpreted,  be  wise  or  unwise  for  either 
party."  Memphis,  Kan.  &  Col.  R  R.  Co. 
v.  Thompson,  24  Kan.,  170  (1880). 

2 "The  contract  must  be  interpreted 
by  the  light  of  the  circumstances  which 
existed  at  the  time  it  was  made,  and 
not  of  those  which  arose  afterwards." 
Monadnock  R.  R.  v.  Felt,  52  N.  H.,  379 
(1872);  Detroit,  L.  &  L.  M.  R.  R  Co.  v. 
Starnes,  38  Mich.,  698  (1878). 

3  Ashtabula  &  New  Lisbon  R.  R.  Co. 
v.  Smith,  15  Ohio  St,  328  (1864). 

<  Connecticut  R.  R  Co.  v.  Baxter,  32 
Vt,  805  (1860). 

» Porter  v.  Raymond,  53  N.  H.,  519 
(1873);  Monadnock  R  R  v.  Felt,  59 
N.  H.,  379  (1872) ;  Montpelier  &  Wells 
River  R.  R.  Co.  v.  Langdon,  46  Vt.,  284 
(1873) ;  Ashtabula  &  New  Lisbon  R  R. 
Co.  v.  Smith,  15  Ohio  St,  328  (1864) ;  Phil. 
&  West  Chester  R.  R  Co.  v.  Hickman, 
28  Pa.  St,  318  (1857);  Burrows  v.  Smith, 


10  N.  Y.,  550.  Upon  the  performance 
of  the  condition  by  the  promisee  the 
contract  ij  clothed  with  a  valid  consid- 
eration, which  relates  back,  and  the 
promise  at  once  becomes  obligatory." 
Des  Moines  Valley  R.  R  Co.  v.  Graff. 
27  Iowa,  99  (1869).  Upon  fulfillment  of 
the  condition  that  a  certain  amount  be 
subscribed,  the  subscription  may  be  col- 
lected. Security  State  Bank  v.  Racine,  48 
N.  W.  Rep.,  262  (Neb.,  1891).  A  contract 
of  subscription  to  a  railroad  company 
when  certain  things  are  done  by  it  is 
collectible  when  these  things  have  been 
done.  Lesherv.  Karshner,  24  N.  E.  Rep., 
882  (Ohio,  1890).  A  conditional  subscrip- 
tion may  be  enforced  after  the  condition 
has  been  performed.  Webb  v.  Balti- 
more etc.,  Co.,  26  Atl.  Rep.,  113  (Md., 
1893). 

e  O'Neal  v.  King,  3  Jones'  L  (N.  C), 
517  (1856).  See,  also,  Virginia,  etc.,  R 
R.  Co.  v.  County  Comm'rs,  etc.,  8  Nev., 
68  (1870);  Springfield  St.  R'y  Co.  v. 
Sleeper,  121  Mass.,  29  (1876);  People  v. 
Holden,  82  111.,  93  (1876).  Performance 
must  be  within  a  reasonable  time.  Ste- 
vens v.  Corbitt,  33  Mich.,  458  (1S76). 
Subscription  on  express  condition  that 
it  shall  be  payable  only  in  case  the 
whole  amount  is  subscribed  cannot  be 
collected,  where  the  whole  amount  was 
made  up  by  including  the  subscriptions 
of  married  women  who  had  not  paid. 
Appeal  of  Hahn,  7  Atl.  Rep.,  482  (Pa, 


125 


87.] 


CONDITIONAL    SUBSCRIPTIONS. 


Tch. 


V. 


floods  and  natural  causes.1  A  conditional  subscriber  is  not  a  stock- 
holder or  member  of  the  corporation  until  after  the  condition  is 
performed.2  Whether  or  not  the  condition  has  been  performed  is 
a  question  of  fact.3  Performance  may  be  proved  by  parol  or  by 
the  records  of  the  corporation.4 

§  87.  Where  the  condition  is  that  the  work  shall  be  begun,  con- 
tracted for  or  completed  within  a  certain  time,  time  is  of  the  es- 
sence of  the  contract,  and  any  failure  to  perform  within  the  time 
so  specified  defeats  the  subscription.5     A  condition  that  the  road 


1886).     Condition  that  subscription  shall 
be  payable   only  when    a  sum  deemed 
sufficient  by  the  directors  has  been  sub- 
scribed is  not  fulfilled  when  the  direct- 
ors fixed  a  sum,  and  then  later  reduced 
the    sum    to    the    amount    subscribed. 
Only  unconditional  subscriptions  are  to 
be  counted.     Brand  v.    Lawrenceville, 
etc.,   R.   R   Co.,  1  S.  E.   Rep.,  255  (Ga., 
1887).     If  performance  turns  on  a  writ- 
ing, question  is  for  the  court    Id.    Rea- 
sonable  performance  is  all  that  is  re- 
quired.     Thus  completion  of   a    blast 
furnace,  as  a  condition,  is  satisfied  by 
completion  by  lessee.     Appeal   of  Cor- 
nell, 6  Atl.  Rep.,  258  (Pa,  1886).     Condi- 
tion that  company  shall    construct  a 
road  from  and  to  specified  points  is  not 
fulfilled  by  construction  of  part  of  the 
way  and  running  over  another  railroad 
for    the    remainder    of    the    distance. 
Brown  v.   Dibble,   32  N.    W.  Rep.,  656 
(Mich.,  1887).  Contra,  People  v.  Holden, 
82  111.,  93.      In   the  case  of  Martin   v. 
Pensacola  &  Geo.  R  R  Co.,  8  Fla.,  370, 
390  (1859),  it  is  stated,  in  a  dictum,  that  a 
strict  compliance  is  necessary.     But  see 
Branham  v.  Record,  42  Ind.,  181  (1873). 
A  subscription  to  an  enterprise,  condi- 
tional upon  the  performance  of  that  en- 
terprise by  certain  named  parties  and  a 
conveyance  of  the  results  to  a  corpora- 
tion, may  be  enforced  by  such  parties 
upon    due    performance.      Brewer   v. 
Stone,  77  Mass.,  228  (1858>     A  subscrip- 
tion to  a  railroad,  conditional  upon  its 
completing   the  road,    is   not   enforce- 
able by  a  consolidated  company  which 
succeeds    to   and   completes    the  road. 
Toledo,  etc.,  R  R  v.  Hinsdale,  15  N.  E 


Rep.,  665  (Ohio,  1888).  Substantial  com- 
pliance with  condition  is  sufficient.  Cra- 
vens v.  Eagle,  etc.,  Co.,  21  N.  E.  Rep., 
981  (Ind.,  1889). 

1  Memphis,  Kan.  &  Col.  R.  R  Co.  v. 
Thompson,  24  Kan.,  170  (1880). 

2  Chase  v.  Sycamore  &  Courtland  R 
R  Co..  38  111..  215  (1865);  Slipher  v.  Ear- 
hart.  Adm..  83  Ind.,  173  (1882) ;  Evans- 
ville,  Ind.  &  Cleveland  S.  L.  R.  R  Co.  v. 
Shearer,  10  Ind.,  244  (1858). 

3Je\vett  v.  Lawrenceburgh  &  U.  M. 

R  R.  Co.,  10  Ind.,  539  (1858).     And  is  a 

question  for  the  jury.    St.  Louis  &  Cedar 

Rapids  R  R  Co.  v.  Eakins,  30  Iowa,  279 

1870). 

4  By  parol.  St.  Louis  &  Cedar  Rapids 
R  R.  Co.  v.  Eakins,  30  Iowa,  279  (1870). 
By  corporate  records.  Penobscot  & 
Kennebec  R  R  Co.  v.  Dunn,  39  Me., 
587  (1855).  Contra,  Phil.  &  West  Ches- 
ter R  R  Co.  v.  Hickman,  28  Pa.  St,  318 
(1857).  Performance  must  be  alleged  in 
the  complaint  or  declaration.  Trott  v. 
Sarchett,  10  Ohio  St.,  241  (1859) ;  Roberts 
v.  Mobile  &  O  R  R  Co.,  32  Miss.,  373 
(1856) ;  Henderson  &  Nashville  R  R.  Co. 
v.  Leavell,  16  B.  Monroe,  358  (1855). 

8  Burlington  &  Missouri  River  R.  R 
Co.  •£>.  Boestler,  15  Iowa.  555  (1864),  per 
Dillon,  J. ;  Freeman  v.  Mack,  67  Ind., 
99  (1879J;  Memphis,  Kan.  &  Col.  R  R. 
Co.  v.  Thompson,  24  Kan.,  170  (1880); 
Portland  &  Oxford  Central  R  R  Co.  v. 
Inhabitants  of  Hartford,  58  Me.,  23 
(1870).  An  agreement  to  pay  a  corpora- 
tion a  certain  sum  if  it  built  and  started 
a  factory  within  a  certain  time  is  not 
collectible  if  the  contract  is  not  fulfilled 
within  that  time.     Bohn  Manuf.  Co.  v. 


126 


CH.  V.]  CONDITIONAL    SUBSCRIPTIONS.  [§  88. 

shall  be  "  permanently  "  located  on  a  specified  route  is  satisfied  by 
the  adoption  of  that  route  by  the  directors.1  Where  the  question 
of  whether  performance  has  been  completed  rests  in  the  decision 
of  the  directors,  their  conclusion  cannot  be  questioned,  unless  fraud 
or  bad  faith  is  proved.2  A  condition  that  the  subscription  shall  be 
applied  to  a  particular  portion  of  the  road  is  satisfied  by  the  com- 
pletion of  that  portion.3  Any  fraud  on  the  part  of  the  corporation 
in  the  performance  of  the  condition  may  be  shown  by  parol.4  All 
of  several  conditions  must  be  performed  before  calls  are  made.5 
But  if  one  part  of  the  subscription  be  free  from  condition,  that 
part  may  be  collected  independently.6  Where,  after  part  payment 
by  the  conditional  subscriber,  the  corporate  plans  are  changed,  so 
that  the  condition  is  not  complied  with,  the  money,  it  has  been 
held,  may  be  recovered.7 

§  88.  Waiver  of  tlie  condition. —  A  conditional  subscriber  to  the 
stock  of  a  corporation  may  waive  the  condition  and  performance 
thereof,  and  thus  become  liable  on  his  subscription,  as  though  it 
had  been  originally  an  absolute  one.  The  waiver  may  be  by 
an  oral  statement  or  agreement  of  the  subscriber.8  Certain  acts 
of  the  subscriber  have  been  held  to  indicate  an  intent  to  waive  a 
condition  to  the  subscription,  and  to  be  equivalent  to  a  direct 

waiver.     Thus  acting  as  a  director,9  or  as  president  of  the  corpora- 
Lewis,  47  N.  W.  Rep..  652  (Minn.,  1891).     a  certain  point  is  satisfied  by  its  being 

If  the  directors  certify  that  the  condi-    so    located.      Wear  v.   Jacksonville    & 

tion  was  performed  [within  the  specified    Savannah  R.  R  Co.,  24  111.,  593  (1860). 

time,   the    subscriber    may    prove    the        2  Cass  v.  Pittsburg,  Va.  &  Charleston 

falsity  of  their  certificate.   Morris  Canal    R'y  Co.,  80  Pa.  St.,  31  (1875). 

&  Bkg.  Co.  v.  Nathan,  2  Hall  (N.  Y.),        3  Nichols    v.    Burlington    &     Louisa 

239  (1829).     Upon  the  failure  of  the  cor-    County  Plank-road  Co.,  4  Greene  (Iowa), 

poration  to  comply  with  this  condition    42  (1853). 

the    subscription   ceases    to    have  any        *  New  York  Ex.  Co.  v.  De  Wolf,  31 

vitality  "by  its  own   limitation."     Ti-    N.  Y.,  271  (1865). 

conic  Water-power  &  Mfg.  Co.  v.  Lang,        5porter  v.    Raymond,  53  N.  H.,  519 

63  Me.,  430  (1874).    In  the  case,  however,     (1873). 

of  Missouri  Pacific  R'y  Co.  v.  Taggard,        6  St.  Louis,  etc.,   R  R  Co.  v.  Eakins. 

84  Mo.,  264  (1884),  a  completion  of  the    30  Iowa,  279  (1870). 

road  within  a  reasonable  time  after  the        «  Jewett  v.  Lawrenceburgh  &  LT.  M.  R 

time  specified  in  the  condition  was  held    R  Co.,  10  Ind.,  539  (1858). 

to  be  a  substantial   performance,  and        8  Hanover  Junction  &  Sus.  R  R  Co. 

sufficient,  the  grading  having  been  com-    v.  Haldeman,  82  Pa.  St,  36  (1876).     See, 

pleted  in  the  specified  time.     See,  also,     also,   Woonsocket  Union  R   R    Co.  v. 

Moore  v.  Campbell,  12  N.  E.  Rep.,  495    Sherman,  8  R  I..  564  (1867). 

(Ind.,  1887),  where  the  condition  was  iu-        9Lane    v.    Brainard,   30    Conn.,    565 

serted  in  a  promissory  note.  (1862). 

i  Smith  i\  Allison,  23  Ind.,  366  (1864) ;        Where  a   person  subscribes  for  pre- 

and  see  cases  in  §  78.     So  also  a  condi-     ferred  stock,  but  no  preferred  stock  is 

tion  that  the  road  shall  cross  another  at    provided  for,  and  he  becomes  a  director 

127 


89.] 


CONDITIONAL    SUBSCRIPTIONS. 


[CH. 


tion,1  paying  the  whole  of  the  subscription,2  giving  an  absolute 
promissory  note  without  conditions  in  payment  of  the  subscription,3 
have  each  been  held  to  constitute  a  waiver  of  the  condition  to  a  sub- 
scription. But  mere  silence  is  not  a  waiver,4  nor  pa}^ment  of  part 
of  the  subscription,5  nor  aid  in  the  attempt  to  start  the  enterprise, 
by  soliciting  subscriptions  and  being  elected  to  a  corporate  office." 
§  89.  Notice  of  performance  and  calls. —  There  is  some  doubt  as 
to  whether,  upon  performance  of  the  condition,  the  subscriber  is 
entitled  to  notice  of  such  performance.  The  better  rule  seems  to  be 
that  he  is  entitled  to  such  notice,  and  that  a  general  "  call "  for 
the  payment  of  part  or  all  of  the  subscriptions  for  stock  does  not 
apply  to  conditional  subscribers,  unless  the  condition  has  been  per- 
formed, and  the  fact  of  performance  has  been  brought  to  the  at 
tention  of  the  subscriber.7 


and  acts  as  such  for  several  years,  he  is 
liable  on  such  stock  to  corporate  cred- 
itors, as  though  it  were  a  subscription 
for  common  stock.  Tama,  etc.,  Co.  v. 
Hopkins,  44  N.  W.  Rep.,  797  (Iowa. 
1890). 

1  Dayton  &  Cincinnati  R.  R  Co.  v. 
Hatch,  1  Disney  (Ohio),  84  (1855). 

2  Parks  v.  Evansville,  Ind.  &  Cleveland 
S.  L.  R.  R.  Co.,  23  Ind.,  567  (1864). 

3  Chamberlain  v.  Painesville  &  Hud- 
son R.  R.  Co.,  15  Ohio  St.,  225  (1864) ;  Sli- 
pher  v.  Earhart,  Adm.,  83  Ind.,  173 
(1882);  Evansville,  etc.,  R  R  Co.  v. 
Dunn,  17  Ind.,  603  (1861) ;  Keller  v.  John- 
son,  11  Ind,  337  (1858);  O'Donald  v. 
Evansville,  etc.,  R  R.  Co.,  14  Ind.,  259 
(1860).  But  not  where  the  note  was 
given  by  reason  of  false  representations 
that  the  condition  had  been  complied 
with.  Parker  v.  Thomas,  19  Ind.,  213 
(1862);  Taylor  v.  Fletcher,  15  Ind.,  80 
(1860). 

4  Burlington  &  Mo.  River  R.  R.  Co.  v. 
Boestler,  15  Iowa,  555  (1864);  Bucks- 
port  &  Bangor  R.  R.  Co.  v.  Inhabitants 
of  Brewer,  67  Me.,  295  (1877).  In  Ore- 
gon it  is  held  that  where  the  condition 
was  the  subscribing  of  a  certain  amount 
within  a  certain  time,  which  was  not 
done,  but  was  performed  soon  after 
that  time,  the  conditional  subscriber  is 
bound,  where  he  did  not  cause  his  sub- 
scription to  be  stricken  from  the  books. 


Lee  v.  Granger,  etc.,  Co.,  11  Pac.  Rep., 
270  (1886).  Subscribers  obtaining  stock 
on  condition  that  a  building  contract  be 
given  to  them  cannot  rescind  for  non- 
performance by  the  company,  where 
the  subscribers  have  long  delayed  re- 
scission, after  such  refusal  of  the  com- 
pany to  perform.  Rankin  v.  Hop,  etc.. 
Co.,  20  L.  T.  Rep.,  207  (1869).  Failure 
of  a  subscriber  conditionally,  for  a  long 
time,  to  have  his  name  taken  off  the 
list,  renders  him  liable  on  the  wind-up. 
Wheatcroffs  Case,  29  L.  T.  Rep.,  324 
(1873). 

»  Pittsburgh  &  Connellsville  R  R  Co. 
v.  Stewart,  41  Pa.  St., 54  (1861);  Robert's 
Case,  2  Mac.  &  G.,  196  (1850);  Jewett  v. 
Lawrenceburgh  &  U.  M.  R  R.  Co.,  10 
Ind.,  539  (1858).  But  see  Appeal  of 
Mack,  7  Atl.  Rep.,  481  (Pa.,  1886),  where, 
however,  a  substantial  performance  had 
been  made. 

SRidgefield  &  N.  Y.  R.  R.  Co.  v.  Rey- 
nolds, 46  Conn.,  375  (1878). 

7  Chase  v.  Sycamore  &  Courtland  R 
R  Co.,  38  111.,  215  (1865);  Trott  v.  Sar- 
chett,  10  Ohio  St..  241  (1859).  Contra, 
Nichols  v.  Burlington  &  Louisa  Count}' 
Plank-road  Co.,  4  Greene  (Iowa),  42 
(1853);  Spartanburg  &  Union  R  R  Co. 
v.  De  Graffenreid,  12  Rich.  L  (S.  C), 
675  (1860),  holding  that  no  "call"  is 
necessary,  and  that  interest  runs  from 
the  time  of  performance. 


128 


CH.  V.] 


CONDITIONAL    SUBSCRIPTIONS. 


[§89. 


Subscriptions  payable  in  property  are  not  subject  to  calls,  and  a 
demand  for  the  property  must  be  made  by  the  corporation.1  Upon 
failure  of  the  subscriber  to  furnish  the  property,  or  upon  insolv- 
ency of  the  corporation,  such  subscriptions  become  payable  in  cash.2 


1  Ohio,  eta,  R  R  Co.  v.  Cramer,  23 
Ind.,  490  (1864).  Payment  cannot  be 
required  in  instalments.  Id.  But  upon 
demand  the  subscriber  must  ascertain 
when  and  where  the  materials  are  to 
be  delivered.  McClure  v.  People's  R  R 
Co.,  90  Pa.  St.,  269  (1879). 

2  Haywood,  etc.,  R  R  Co.  v.  Bryan, 
6  Jones  (N.  C),  82  (1858);  Sperry  v. 
Johnson,  11  Ohio,  452  (1842).    See  §  18, 


n.  3.  In  one  case,  however,  it  was  held 
that  the  subscriber  was  liable  only  in 
damages  to  the  extent  of  the  market 
value  of  the  stock.  Daj-ton  &  Cin.  R 
R  Co.  v.  Hatch,  1  Disney,  84  (1855). 
Subscription  on  condition  of  being  ap- 
pointed secretary  is  not  enforceable  on 
wind-up,  the  appointment  not  having 
been  made.  Rogers'  Case,  L.  R,  3  Ch., 
633  (1868). 


(9) 


129 


CHAPTER  VI. 


MUNICIPAL  SUBSCRIPTIONS. 


§  90.  A  municipal  corporation  has  no 
implied  power  or  authority  to 
subscribe  for  stock  in  any  other 
corporation. 

91.  The     legislature    may    authorize 

municipal  subscriptions  to  pub- 
lic   but  not    to  private  enter- 
*    prises. 

92.  Constitutional   provisions  prohib- 

iting municipal  subscriptions. 

93.  Change  in  the  state  constitution, 

or  the  general  statutory  laws, 
after  the  municipal  corporation 
has  voted  to  subscribe. 

94.  Statutory    formalities     must     be 

substantially  complied  with. 

95.  Submission  to  popular  vote. 


96. 


What  officer  or  agent  of  the  mu- 
nicipality may  make  the  con- 
tract of  subscription. 

Municipal  subscriptions  may  be 
conditional. 

When  may  a  municipal  subscrip- 
tion be  paid  in  bonds  instead 
of  money? 

A  municipal  corporation  as  a 
stockholder. 

A  municipality  may  enforce  de- 
livery of  stock  to  itself  in  a 
proper  case. 

Division  of  the  municipality  after 
the  subscription. 
102,  103.  Consolidation  of  companies 
after  the  municipal  aid  is  voted. 


97. 
98. 


99. 
100. 


101. 


§  90.  A  municipal  corporation  has  no  implied  power  or  authority 
to  subscribe  for  stock  in  any  other  corporation. —  A  municipal  corpo- 
ration, being  in  its  nature  anil  purposes  a  very  different  legal  insti- 
tution from  an  ordinary  private  corporation,  being  indeed  but  a 
mode  or  department  of  government  —  "an  investing  the  people  of 
a  place  with  the  local  government  thereof,"  ' —  it  is  plain  that  the 
general  rules  of  law  applicable  to  private  corporations  having  capi- 
tal stock  are,  for  the  most  part,  applicable  when  the  rights,  duties, 
powers  and  liabilities  of  municipal  corporations  are  sought  to  be 
accurately  determined.2 

It  is  proposed  to  consider  the  right  of  a  municipality  to  enter 
into  the  contract  of  subscription  to  the  capital  stock  of  other 
corporations,  and  of  the  liabilities,  rights  and  duties  growing  out 
of  such  a  subscription.  The  subject  practically  narrows  itself  to 
the  right  of  municipal  corporations  to  subscribe  to  the  stock  of 
railway  corporations,  inasmuch  as  this  right,  wherever  it  exists,  is 
almost  universally  exercised  in  favor  of  these  corporations,  and  the 
adjudicated  cases  almost  all  present  phases  of  the  question  applying 
to  them. 

It  is  a  well-settled  rule  of  law  that  municipal  corporations  have 

iCuddon  v.  Eastwick,  1  Salk.,  183  (1871);  State  v.  Leffingwell,  54  Mo.,  458 
(1704) ;  Dillon  on  Munic.  Corp.,  §§  19,  20.     (1873);    Norton    v.    Peck,    3    Wis.,   714 

2  People  v.  Morris,  13  Wend.,  325  (1854);  Ottawa  v.  Carey,  108  U.  S,  110 
(1835) ;  People  v.  Hurlbut,  24  Mich.,  44    (1883). 

130 


CII.   VI.] 


MINICIPAL    SUBSCRIPTIONS. 


[§  00. 


no  implied  right  or  authority  to  subscribe  for  the  stock  of  any  other 
incorporated  company.1  In  order,  therefore,  to  establish  the  valid- 
ity of  a  municipal  subscription  to  the  stock  of  a  railway  company, 
an  express  grant  of  authority  from  the  legislature  must  be  shown.2 
The  right  to  subscribe  is  derived  from  the  legislative  enactment; 
and  whether  or  not  an  enabling  act  is  sufficient  to  validate  a  sub- 
scription is  a  question  of  law  for  the  court,  not  for  the  jurv.3 

Every  holder  of  municipal  bonds  issued  to  raise  money  to  pay 
such  a  subscription,  whether  lie  receives  them  directly  from  the 
town  or  county,  or  from  the  railway  company  to  which  they  may 
have  been  delivered,  or  takes  them  from  some  prior  holder  in  the 
ordinary  course  of  business,  is  chargeable  with  notice  of  the  stat- 
utory provisions  under  which  they  were  issued.4 

The  right  to   make  a  donation  to  a  railroad  or  other  work  of 


1 "  To  become  stockholders  in  private 
corporations,"  says  Judge  Dillon,  "  is 
manifestly  foreign  to  the  usual  pur- 
poses intended  to  be  subserved  by  the 
creation  of  corporate  municipalities." 
Dillon  on  Munic.  Corp.,  £  161 ;  Kelley  v. 
Milan.  127  U.  S.,  139  (1888).  See,  also. 
Kenicott  v.  Supervisors,  16  Wall.,  452 
(1872);  Thompson  v.  Lee  County,  3  id., 
327  (1865);  BelL  v.  Railroad  Co.,  4  id., 
598  (1866);  Wells  v.  Supervisors,  102 
U.  S.,  625  (1880) :  Lamoille,  etc.,  R  R  Co. 
v.  Fairfield,  51  Vt,  257  (1878);  Barnes  v. 
Lacon,  84  111.,  461  (1877),  holding  that  a 
vote  of  the  people  of  a  town  to  subscribe 
for  stock  without  the  authorization  of 
law  is  not  binding  upon  the  town.  To 
same  effect,  Allen  v.  Louisiana,  103  U.  S., 
80  (1880):  Pennsylvania  R  R  Co.  v. 
Philadelphia,  47  Penn.  St,  189  (1864); 
City  of  Jonesboro'  v.  Cairo,  etc.,  R.  R 
Co.,  110  U.  S.,  192  (1883),  holding  that  a 
general  power  to  borrow  money  and 
issue  bonds  therefor  does  not  confer  the 
right  to  subscribe  for  stock,  even  with 
the  sanction  of  the  voters  at  a  general 
election.  Cf.  Gelpcke  v.  Dubuque,  1 
Wall..  220  (1863) ;  Campbell  v.  Paris,  etc., 
R  R.  Co.,  71  111.,  611  (1874);  East  Oakland 
v.  Skinner,  94  U.  S.,  255  (1876) ;  City  of 
Lynchburg  v.  Slaughter,  75  Va.,  57 
(1880);  Brodie  v.  McCabe,  33  Ark.,  690 
(1878).  A  municipal  corporation  cannot 
enforce  a  penal  bond,  given  to  it  by  a 


plank-road  company,  conditioned  that 
the  latter  will  use  to  build  its  road  cer- 
tain bonds  issued  by  the  former,  it  ap- 
pearing that  the  aid  to  the  plank-road 
company  was  ultra  vires  of  the  munici- 
pality. City  Council,  etc.,  v.  Montgom- 
ery, etc.,  Co.,  31  Ala.,  76  (1857).  Attor- 
ney-general may  restrain  municipality 
from  illegally  issuing  bonds  to  a  rail- 
road company.  State  v.  Saline,  etc., 
Court,  51  Mo.,  350  (1873),  reviewing  the 
English  and  American  cases. 

2  Sharpless  v.  The  Mayor,  21  Penn.  St, 
147  (1853) ;  Leavenworth  Co.  v.  Miller,  7 
Kan.,  479  (1871).  Cf.  Welch  v.  Post.  99 
111.,  471  (1881);  Marsh  v.  Fulton  Co..  10 
Wall.,  676  (1870),  holding  that  the  power 
to  subscribe  to  the  stock  of  a  railroad 
is  not  sufficient  to  authorize  a  subscrip- 
tion to  a  new  incorporation  of  a  part  of 
it;  La  Fayette  v.  Cox,  5  Ind..  38  (1854); 
Dillon  on  Munic.  Corp.,  §  161 ;  Ottawa 
v.  Carey,  108  U.  S.,  110  (1883);  Lewis  v. 
City  of  Shreveport,  108  id.,  282(1883). 

3  Post  v.  Supervisors,  105  U.  S..  667 
(1881):  Leavenworth  Co.  i:  Miller,  supra. 

4Ogden  V.  County  of  Daviess  102 
U.  S.,  634  (1880) ;  Lewis  v.  City  of  Shreve- 
port 108  id.,  282  (18S3);  City  of  Ottawa 
v.  Carey.  108  id.,  110  (188:!):  McClure  v. 
Township  of  Oxford,  94  id.,  429  (1876  . 
This  is  the  settled  rule  of  the  supreme 
court  of  the  United  States  on  this  point. 


131 


91.] 


MUNICIPAL    SUBSCRIPTIONS 


[CH. 


VI. 


internal  improvement  must  equally  be  derived  from  the  act  of 
the  legislature.  Without  such  express  authority  of  law,  a  dona- 
tion or  issue  of  bonds  as  a  gift  to  a  railroad  company  is  invalid  and 
void.1 

§  91.  The  legislature  may  authorize  municipal  subscriptions  to 
public  but  not  to  private  enterprises.—  It  was  long  a  question 
whether  the  legislature  had  the  constitutional  right  to  authorize  a 
municipality  to  subscribe  money,  or  donate  it,  in  furtherance  of 
any  enterprise  not  governmental  in  its  nature.  It  has  been  con- 
tended with  great  ability  and  learning  that  such  a  right  does  not 
inhere  in  the  legislative  branch  of  the  government  in  this  country, 
and  consequently  that  such  assumed  grants  are  unconstitutional 
and  void.2  But  it  is  now  a  well-settled  rule  that  the  legislature  has 
the  constitutional  power  to  authorize  a  municipal  corporation,  by 
its  charter  or  an  express  act,  to  subscribe  to  the  stock  of  a  railway 
or  other  ^wa^'-public  corporation,  and  to  issue  and  sell  its  bonds 
for  that  purpose.3     The  inclination  of  municipalities  to  repudiate 


i  Dixon  County  v.  Field,  111  U.  S.,  83 
(1884). 

The  power  of  the  legislature  to  au- 
thorize a  municipality  to  donate  funds 
or  bonds  herein  is  absolutely  denied  in 
Hanson  v.  Vernon,  27  Iowa,  28 ;  Sweet 
v.  Hulbert,  51  Barb.,  312  (1868).  Cf. 
Commissioners  v.  Miller,  7  Kan.,  479. 
The  railroad  cannot  collect,  as  a  dona- 
tion, money  which  was  voted  as  a  sub- 
scription. Crooks  v.  State,  4  N.  E.  Rep., 
589  (Ind.,  1886). 

A  gift  of  bonds  is  invalid.  So,  also, 
of  a  subscription  payable  in  bonds 
where  part  of  the  bonds  are  turned 
back  for  the  stock.  Post  v.  Pulaski 
County,  49  Fed.  Rep.,  628  (1892). 

2Cooley  on  Const  Lim.,  pp.  261-266; 
Dillon  on  Munic.  Corp.,  §§  12,  117,  153. 
For  the  rule  in  Michigan,  Iowa  and 
New  York,  see  next  note. 

Concerning  the  public  phases  of  mu- 
nicipal aid  to  railroads,  see  Cook  on  The 
Corporation  Problem,  pp.  99-101. 

3  So  held  by  the  supreme  court  of  the 
United  States.  Knox  County  v.  Aspin- 
wall,  21  How.,  539  (1858);  Zabriskie  v. 
Railroad  Co.,  23  id.,  381  U859);  Amey 
V.  Mayor,  24  id.,  364,  376  (1860);  Curtis 
v.  Butler  Co.,  24  id.,  435  (1860) ;  Gelpcke 
v.  Dubuque,  1  Wall.,  175  (1863) ;  Mercer 


Co.  v.  Hackett,  1  id.,  83  (1863) ;  Seybert 
v.  Pittsburgh.  1  id..  272  (1863) ;  Van  Has- 
trupr.  Madison,  1  id.,  291  (1863);  Have- 
meyer  v.  Iowa  Co.,  3  id.,  294  (1865); 
Thompson  v.  Lee  County,  3  id.,  327 
(1865);  Rogers  v.  Burlington,  3  id.,  654 
(1865),  holding  that  power  "to  borrow 
money  for  any  public  purpose"  gives 
authority  to  borrow  to  aid  a  railroad 
company ;  Mitchell  v.  Burlington,  4  id., 
270  (1866) ;  Von  Hoffman  v.  Quincy,  4 
id.,  535  (1866) ;  Campbell  v.  Kenosha,  5 
id.,  194  (1866),  holding  that  a  subscrip- 
tion may  be  validated  by  subsequent 
legislation,  and  such  validation  may  be 
by  implication;  holding  that  levy  of 
tax  and  payment  of  interest  validates 
bonds  irregularly  issued ;  Meyer  v.  Mus- 
catine, 1  id.,  384  (1863) ;  Lee  County  v. 
Rogers,  7  id.,  181  (1868) ;  Beloit  v.  Mor- 
gan, 7  id.,  619  (1868);  City  of  Kenosha 
v.  Lamson,  9  id.,  477  (1869);  Railroad 
Co.  v.  County  of  Otoe,  16  id,  667  (1872); 
S.  C,  1  Dillon,  338,  holding  that,  unless 
restrained  by  provisions  of  the  consti- 
tution of  a  state,  its  legislature  may  au- 
thorize a  county  to  issue  bonds  and  do- 
nate them  to  the  railroad  company 
which  will  give  it  a  valuable  connec- 
tion with  some  other  region.  As  to  the 
legislative  power,  donations   and  sub- 


132 


C1I.  VI.] 


MUNICIPAL    SL'CSCRIPTIOXS. 


[§01- 


their  obligations  after  receiving  the  benefits  of  those  obligations 
has  been  thwarted  bv  the  courts.  And  the  result  is  a  satisfactorv 
one.  Any  other  decision  would  have  checked  the  growth  of  the 
country,  unsettled  investments,  and  brought  upon  American  munic- 


scriptions  for  stock  stand  on  the  same 
ground.  Town  of  Queensbury  v.  Cul- 
ver, 19  Wall.,  83  (1873);  Woods  v.  Law- 
rence Co.,  1  Black,  380  (1861),  holding 
that  where,  by  statute,  the  grand  jury 
of  a  county  is  required  to  fix  the  amount 
of  the  subscription,  their  act  in  pursu- 
ance thereof  cannot  afterwards  be  ques- 
tioned by  the  county  as  to  such  amount ; 
and  if  payment  is  to  be  made  as  may  be 
agreed  upon,  an  issue  of  bonds  for  that 
purpose  is  binding  upon  the  county ; 
Oilman  v.  Sheboygan,  2  Black,  510 
(1862),  holding  that  a  statute  authoriz- 
ing a  city  to  borrow  money,  and  to  tax 
property  to  pay  it,  does  not  constitute 
such  a  contract  with  the  bondholders 
that  the  state  cannot  afterwards  modify 
the  taxation  even  by  the  exemption  of 
portions  of  taxable  property ;  Olcott  v. 
Supervisors,  16  id.,  678  (1872);  Rock 
Creek  v.  Strong,  96  U.  S.,  271  (1877) ; 
Hickory  v.  Ellery,  103  id.,  423  (1880); 
Clay  Co.  v.  Society  for  Savings,  104  id., 
579  (1881) ;  Taylor  v.  Ypsilanti,  105  id., 
60  (1881) ;  Lewis  v.  Barbour  Co.,  105  id., 
739(1881);  Amoskeag  National  Bank  v. 
Ottawa,  105  id.,  667  (1881);  Woods  v. 
Lawrence  Co.,  1  Black,  386 ;  Oilman  t\ 
Sheboygan,  2  id.,  510 ;  Town  of  Scipio 
v.  Wright,  101  U.  S.,  665  (1879).  And  in 
the  circuit  and  district  courts  of  the 
United  States.  Long  v.  New  London,  9 
Biss.,  539  (1880);  Sibley  v.  Mobile,  3 
Woods,  535  (1876);  United  States  v. 
New  Orleans,  2  id.,  230  (1876). 

Alabama  —  Stein  v.  Mayor,  etc..  24 
Ala.,  591  (1854);  Opelika  v.  Daniel,  59 
Ala.,  211  (1877);  Ex  parte  Selma,  etc., 
R.  R.  Co.,  45  id.,  696  (1871) ;  Gibbons  v. 
Mobile,  etc.,  R  R  Co.,  36  id.,  410  (1860). 

Arkansas  —  Mississippi,  etc.,  R  R.  Co. 
v.  Camden,  23  Ark.,  300  (1861) ;  English 
v.  Chicot  Co.,  26  id.,  454  (1871);  Jackson- 
port  v.  Watson,  33  id.,  704  (1878). 

California  —  Robinson  v.   Bidwell,  22 


Cat.  379  (1863);  People  v.  Coon,  25  id, 
635  (1864);  Napa  Valley  R  R  Co.  v. 
Napa  County,  30  id.,  435  (1866);  Stock- 
ton, etc.,  R  R,  Co.  v.  Stockton,  41  id., 
147  (1871). 

Colorado  —  People  v.  Pueblo  Co.,  2 
Col.,  360  (1874). 

Connecticut  —  Bridgeport  v.  Housa- 
tonic  R.  R  Co..  15  Conn.,  475  (1843), 
holding  that  a  subscription  made  by  a 
city  without  authority  may  be  made 
valid  by  subsequent  legislative  action ; 
in  this  case  the  validating  statute  was 
passed  upon  the  application  of  the  city 
making  the  subscription ;  Beardsley  i\ 
Smith,  16  id.,  368  (1844);  Society,  etc.,  v. 
New  London.  29  id.,  174  (1860);  Doug- 
lass v.  Chatham,  41  id.,  211  (1874). 

Florida  —  Cotton  v.  Leon  Co..  6  Fin., 
610  (1856). 

Georgia  —  Winn  v.  Macon.  21  Ga..  275 
(1857);  Powers  v.  Inferior  Court  of 
Dougherty  County,  23  id.,  65  (1857). 

Illinois  —  Shaw  v.  Dennis,  5  Gilm., 
405  (1849) ;  Prettymau  v.  Tazewell  Co., 
19  111.,  406  (1858),  holding  that  an  in- 
junction on  the  ground  of  fraud  at  an 
election  authorizing  a  subscription  will 
not  be  granted  to  one  who  delays  until 
others  have  actod  upon  the  faith  that 
the  municipal  corporation  will  aid  an 
enterprise;  Robertson  v.  Rockford.  31 
id.,  451  (1859);  Supervisors  of  Schuyler 
Co.  v.  People,  25  id..  181  (1860);  Butler 
v.  Dunham.  27  id.,  474  (1861);  Dunnovan 
V.  Green,  57  id..  63  (1870):  Madison  Co. 
v.  People,  58  id..  456  (1871);  Chicago, 
etc.,  R  R  Co.  v.  Smith.  62  id..  268(1871); 
Decker  v.  Hughes,  68  id..  33  (1873); 
Quincy,  etc..  R.  R  Co.  v.  Morris,  84  id., 
410  (1877);  Chicago,  etc.,  R  R.  Co.  v. 
Aurora,  99  id..  205  (1881);  Olcott  v.  Su- 
pervisors, 16  Wall.,  678  (1872).  But  see 
Weightman  v.  Clark,  103  U.  S.,  256  (1880). 

Indiana  —  City  of  Aurora  v.  West,  9 
Ind,  74  (1857);  S.  C,  22  id.,  88;  Evans- 


133 


§  oi.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  VI. 


ipalities  the   disgrace   and   disastrous   loss  of  credit  which  arise 
from  repudiation. 

The  act  of  the  legislature  authorizing  a  municipal  subscription, 
however,  will  not  avail  to  validate  such  a  contract,  unless  it  is  duly 


ville,  etc.,  R  R  Co.  v.  Evansville,  15  id., 
395(1860);  Board  of  Bartholomew  Co. 
v.  Bright,  18  id.,  93  (1862);  Thompson 
v.  City  of  Peru,  29  id.,  305(1868);  Lafay- 
ette, Muncie,  etc.,  R.  R  Co.  v.  Geiger, 
34  id.,  185  (1870);  John  v.  Cincinnati, 
etc.,  R  R  Co.,  35  id.,  539  (1871);  Com- 
missioners of  Crawford  Co.  v.  Louis- 
ville, etc.,  R  R  Co.,  39  id..  192  (1872) ; 
Mt.  Vernon  v.  Hovey,  52  id.,  563  (1876); 
Indiana,  etc.,  R  R  Co.  v.  Attica,  56  id., 
476  (1877) ;  Williams  v.  Hall,  65  id.,  129 
(1879) ;  Bittinger  v.  Bell,  65  id.,  445  (1879) ; 
Brocaw  v.  Gibson  Co.,  73  id.,  543  (1881) ; 
Peed  v.  Millikan,  79  id.,  86  (1881). 

Iowa— "In  Iowa,  up  to  1858,  it  was 
held  that  such  acts  were  constitutional ; 
but  from  that  time  up  to  1869  they  %vere 
held   to   be   unconstitutional,  when  the 
court  seems  to  have  undergone  a  radi- 
cal change,  and  from  that  time  to  the 
present  the    constitutionality   of    such 
measures  has  been   sustained."    Wood 
on  Railways,  p.  264,  citing  Dubuque  Co. 
v.  Dubuque,  etc.,  R   R    Co.,  4  Greene 
(Iowa),  1  (1853);   State  v.  Bissell,  4  id., 
328  (1854);  Clapp  v.  Cedar  Co.,  5  Iowa, 
15   (1857);   McMillen   v.   Lee  Co.,  6  id., 
391  (1858).     The  above  authorities,  prior 
to  1858,  hold  these  acts  constitutional, 
as  do  the  following,  handed  down  since 
1869 :  Stewart  v.  Polk  Co.,  30  Iowa,  9! 
(1870):    Bonnifield    v.   Bidwell,    32  id.. 
149;  Jordan  v.  Hayne,  36  id.,  9(1872); 
Muscatine,  etc.,  R  R  Co.  v.  Horton,  38 
id..  33  (1873);  Wapello  v.  B.  &  M.  R  R 
Co.,    44    id.,    585    (1876);    McMilleu    v. 
Boyles,   6   Iowa,   304   (1858);   Games  v. 
Robb,  8  id.,  193  (1859) ;  Chamberlain  v. 
Burlington,    19  id..  395,  holding  that  a 
charter   authorizing   a  city   to  borrow 
money  for  "  any  public  purpose  "  does 
not  confer  power  to  aid  in  constructing 
a  railroad ;  particularly  King  v.  Wilson, 
1  Dillon,  555  (1871),  as  to  how  far  the 
federal    courts    will    follow    the    state 


courts  as  to  the  constitutionality  of  such 
statutes.  While  the  following  cases, 
decided  between  1858  and  1869,  hold 
such  acts  unconstitutional  and  void 
Stokes  v.  Scott,  10  Iowa,  166  (1859) 
State  v.  Wapello,  13  id.,  388  (1862) 
Myers  v.  Johnson,  14  id.,  47  (1862).  See, 
also,  in  general,  Doon  Township  v.  Cum- 
mins, 142  U.  S..  366  (1892). 

Kansas  —  City  of  Atchison  v.  Butcher, 
3  Kan.,  104  (1865) ;  Leavenworth  Co.  v. 
Miller,  7  id.,  479  (1871);  Southern,  etc., 
R.  R  Co.  v.  Towner,  21  Pac.  Rep.,  220 
(Kan.,  1889);  Morris  v.  Morris  Co.,  7 
id.,  576  (1871) ;  State  v.  Nemaha  Co.,  7 
id.,  542  (1871) ;  Barnes  v.  Atchison,  2  id., 
454  (1864) ;  Leavenworth,  etc.,  R  R  Co. 
v.  Douglas  Co.,  18  id.,  169  (1877) ;  Turner 
v.  Commissioners,  etc.,  27  Kan.,  314 
(1882),  holding  that,  where  the  amount 
of  bonds  voted  to  be  issued  was  in  ex- 
cess of  the  amount  which  a  township 
might  legally  issue,  the  vote  was  a  nul- 
lity only  as  to  the  excess.  Kansas  City, 
etc.,  R  R  v.  Richmond  T.,  25  Pac.  Rep., 
595  (Kan.,  1891):  Hutchinson,  etc.,  R  R 
v.  Fox,  28  Pac.  Rep..  1078  (Kan.,  1892). 

Kentucky  —Talbot  v.  Dent,  9  B.  Mon., 
526  (1849);  Slack  v.  Maysville,  etc.,  R  R 
Co.,  13  id.,  1  (1852) ;  Maddox  v.  Graham. 
2  Mete,  56  (1859) ;  Shelby  Co.  Court  v. 
Cumberland,  etc.,  R  R  Co.,  8  Bush,  209 
(1871),  holding  that  a  subscription  not 
authorized  by  law  may  be  validated  by 
later  legislation;  Allison  v.  Versailles, 
etc.,  R  R  Co.,  10  id.,  1  (1873) ;  Chaffee 
County  v.  Potter,  142  U.  S.,  355  (1892); 
Christian,  etc.,  Court  v.  Smith,  13  S.  W. 
Rep.,  276  (Ky.,  1890):  Christian  Co. 
Court  v.  Smith,  12  S.  W.  Rep.,  134  (Ky., 
1889).  A  railroad  cannot  be  taxed  to 
aid  in  paying  a  municipal  subscription 
to  its  construction.  Louisville,  etc.,  R 
R  v.  Com'th,  12  S.  W.  Rep.,  1064  (Ky., 
1890). 

Louisiana— Police  Jury   v.   McDon- 


134 


CH.  VI.] 


MUNICIPAL    SUBSCRIPTIONS. 


[§91. 


passed  in  accordance  with  all  the  constitutional  formalities;1  and 
after  a  subscription  is  made,  any  act  of  the  legislature  restricting 
or  abridging  the  taxing  power  so  as  to  deprive  the  municipality  of 


ough.  8  La.  Ann.,  341  (1853);  Parker  v. 
Scogin.  11  id..  629  (1856).  Of.  Wilson  v. 
Shreveport,  29  id.,  673  (1877). 

Maine  —  Augusta  Bank  v.  Augusta, 
49  Me.,  507  (1860) ;  Stevens  v.  Anson,  73 
id..  489  (1882). 

Massachusetts  —  Supervisors  v.  Wis- 
consin, etc.,  R.  R  Co.,  121  Mass.,  460 
(1877),  holding  that  the  legislature  of 
Wisconsin  has  power  to  authorize 
counties  to  subscribe  for  stock  in  aid  of 
railroads  and  to  issue  bonds  therefor. 

Michigan  —  In  Michigan  the  courts 
hold  that  statutes  authorizing  munici- 
pal corporations  to  subscribe  to  the 
stock  of  a  railroad  or  vote  bonds  to  it 
are  void,  and  the  subscription  and 
bonds  are  void.  People  v.  Salem,  20 
Mich.,  452  (1870) ;  Thomas  v.  Port  Hud- 
son, 27  id.,  320  (1873);  Bay  City  v.  State 
Treasurer,  23  id.,  499 ;  People  v.  Detroit, 
28  id.,  228  (1873).  But  see  Talcott  v. 
Pine  Grove,  1  Flippin  (U.  S.),  120  (1871), 
where  the  position  taken  by  the  court 
of  Michigan  was  held  to  be  so  contrary 
to  precedent  and  so  unexpected  as  to 
operate  as  a  surprise  upon  the  commu- 
nity ;  S.  C.  affirmed,  sub  nom.  Town- 
ship of  Pine  Grove  v.  Talcott,  19  Wall., 
660  (1873),  which  was  adhered  to  in 
Taylor  v.  Ypsilanti,  105  U.  S.,  60  (1881). 
See,  also,  Chickaming  v.  Carpenter,  106 
U.  S.,  663  (1882). 

Minnesota  —  Davidson  v.  Ramsey  Co., 
18  Minn.,  482  (1872) ;  State  v.  Clark,  23 
Minn.,  422  (1877) ;  Kimball  v.  Lakewood, 

41  Fed.  Rep.,  289  (1890). 

Mississippi  —  Strickland  v.  Railroad 
Co..  27  Miss.,  209;  New  Orleans,  etc., 
R.  R  Co.  v.  McDonald,  53  Miss.,  240 
(1876);  Wells  v.  Supervisors,  102  U.  S., 
625  (1880) ;  Madison  County  v.  Priestly, 

42  Fed.  Rep.,  817  (1890). 

Missouri  —  St.  Louis  v.  Alexander,  23 
Mo.,  483  (1856) ;  St  Joseph,  etc.,  R  R. 


Co.  v.  Buchanan  Co.,  39  Mo.,  485  (1867): 
State  v.  Macon  County  Court.  41  id.,  1 
(1867);  Chillicothe,  etc.,  R  R.  Co.  o. 
Brunswick,  44  id..  553  (1867) :  State  v. 
Linn  Co.,  44  id.,  504  (1869);  Same  v.  Sul- 
livan Co..  51  id.,  522  (1873);  Osage  Val- 
ley, eta,  R.  R  Co.  v.  Morgan  County.  53 
id.,  156(1873):  Smith  v.  Clark  County. 
54  id.,  58  (1873) ;  State  v.  Greene  County, 
54  id.,  540  (1874) ;  State  v.  Hannibal,  etc., 
R  R,  13  S.  W.  Rep.  505  (Mo..  1890)t 

Nebraska  —  Hallenbeck  v.  Hahu.  2 
Neh.,  377  (1873) ;  Reineman  r.  Coving- 
ton, etc.,  R  R  Co..  7  id.,  310  (1878). 
holding  that,  if  a  county  votes  aid  to  a 
railroad  in  excess  of  the  sum  allowed 
by  the  law.  such  act  is  void  and  will  not 
authorize  the  issue  of  any  bonds  what- 
ever; Railroad  Company  v.  County  ot 
Otoe,  16  Wall.,  667  (1872  . 

Nevada  —  Gibson  v.  Mason,  5  Nev., 
283(1869);  Dixon  County  v.  Field,  111 
U.  S.,  83  (1884);  Lincoln  County  v.  Lim- 
ing, 133  U.  S.,  529  (1890). 

New  Hampshire  —  Perry  v.  Keane,  56 
N.  H.,  514  (1876> 

New  Jersey  —  Bernards  Township  v. 
Morrison.  133  U.  S.,  523  (1890). 

New  York  —  In  New  York  the  courts 
have  unwillingly  sustained  the  validity 
of  such  grants.  Clarke  v.  Rochester. 
28  N.  Y,  605  (1864);  Grant  v.  Courter, 
24  Barb.,  232  (1857) ;  Benson  v.  Albany. 
24  id.,  248(1857);  People  v.  Henshaw. 
61  id.,  409  (1870) ;  Ex  jwte  Tax-payers 
of  Kingston,  40  How.  Prac.  444  (1870) ; 
Gould  v.  Town  of  Oneonta.  71  N.  Y., 
298(1877);  Sweet  V.  Hurlburt,  51  Barb., 
312  (1868),  denying  the  constitutional- 
ity of  a  donation  of  bonds.  O/.  People 
v.  Batchellor,  53  N.  Y..  128  (1873),  hold- 
ing that  a  municipal  corporation  cannot 
be  compelled  by  the  legislature,  against 
its  consent  and  that  of  its  tax-payers,  to 
become  a  stockholder  in  a  corporation 


i  Amoskeag  Nat'l  Bank  v.  Town  of  Ottawa,  105  U.  S.,  667  (1881). 

135 


§91.] 


MUNICIPAL   SUBSCRIPTIONS. 


[CH.  VI. 


the  power  to  pay  the  bonds  is  unconstitutional  and  void.1  In  Cali- 
fornia the  courts  go  even  to  the  extent  of  holding  that  the  legis- 
lature may  compel  a  municipality  to  subscribe  to  the  stock  of  a 


which  is  private  in  character  (as  here,  a 
railroad)  —  a  statute  for  such  a  purpose 
is  void ;  Queensburg  v.  Culver,  19  Wall., 
82  (1873),  in  which  the  New  York  doc- 
trine is  denied  by  the  supreme  court  of 
the  United  States. 

But  the  law  is  clear,  in  New  York, 
that  such  statutes  and  subscriptions 
thereunder  are  constitutional.  Bank  of 
Rome  v.  Rome,  18  N.  Y,  38  (1858); 
Starin  v.  Genoa,  23  N.  Y,  439  (1861); 
Town  of  Solon  v.  Williamsburg  Saving 
Bank,  21  N.  E.  Rep.,  168  (N.  Y.,  1889); 
Alvord  v.  Syracuse  Sav.  Bank,  98  N.  Y., 
599  (1885),  holding  that  the  legislature 
may  give  to  the  bonds  a  negotiability 
which  is  not  given  to  them  by  the  court ; 
Craig  v.  Town  of  Andes,  93  N.  Y,  405 
(1883),  holding  that  bonds,  even  in  bona 
fide  hands,  are  void  where  part  of  the 
consents  thereto  were  conditional,  even 
though  the  bond  recites  that  all  legal 
steps  to  comply  with  the  law  were 
taken ;  Town  of  Lyons  v.  Chamberlain, 
89  N.  Y,  578  (1882),  where  the  person 
to  whom  illegal  bonds  were  issued  was 
held  to  account  for  them ;  Cagvvin  v. 
Town  of  Hancock,  84  N.  Y,  532  (1881), 
holding  that  the  town  may  set  up  that 
a  majority  did  not  vote  for  the  issue  of 
the  bonds ;  that  the  federal  decisions 
will  not  be  followed ;  that  an  innocent 
holder  is  not  protected,  and  that  "  the 
bonding  acts  are  now  regarded  as  hos- 
tile to  a  sound  public  policy ;  "  Town 
of  Springfort  v.  Teutonia  Sav.  Bank,  id., 
403  (1881),  also  holding  that  the  affidavit 
of  assessors  as  to  the  vote  is  only  prima 
facie  evidence.  To  same  effect  see 
Dodge  v.  County  of  Platte,  82  N.  Y,  218 
(1880),  declaring  void  certain  Missouri 
municipal  bonds ;  Duanesburgh  v.  Jen- 
kins, 57  N.  Y,  177  (1874),  sustaining  the 
constitutionality  of  bonding  acts  and 


reviewing  the  New  York  cases ;  People 
v.  Mitchell,  35  id.,  551  (1866) ;  S.  C,  45 
Barb.,  208 ;  People  v.  Spencer,  55  N.  Y., 

1  (1873) ;  Williams  v.  Duanesburgh,  66 
id.,  129(1876);  Horton  v.  Thompson,  71 
id.,  513(1878);  affirmed,  101  U.  S.,  665. 
In  New  York  an  effectual  remedy 
against  the  illegal  bonding  of  a  town  in 
aid  of  a  railroad  is  found  in  holding  lia- 
ble to  the  town  the  parties  who  pro- 
moted the  aid,  for  all  sums  paid  by  the 
town  to  bona  fide  holders  of  the  bonds. 
Farnham  r.  Benedict,  107  N.  Y,  159 
(1887).  A  suit  in  equity  to  cancel  ille- 
gal municipal  bonds  does  not  lie,  except 
where  the  defendant  fails  to  allege  that 
there  is  a  remedy  at  law.  Town  of 
Mentz  v.  Cook,  108  N.  Y,  504  (1888). 
Long  delay  may  bar  the  right  of  a  mu- 
nicipality to  have  such  bonds  canceled. 
Calhoun  v.  Millard,  121  N.  Y,  69  (1890). 
See,  also,  in  general,  Town  of  Solon  v. 
Williamsburgh,  etc.,  Bank,  114  N.  Y., 
122  (1889) ;  Brownell  v.  Town  of  Green- 
wich, id.,  518  (1889). 

North  Carolina  —  Taylor  v.  Newberne, 

2  Jones'  Eq.,  141  (1855);  Caldwell  v. 
Burke  Co.,  4  id.,  323  (1858) ;  Hill  r.  Com- 
missioners of  Forsyth  Co.,  67  N.  C,  367 
(1870);  Wood  v.  Com'rs  of  Oxford,  2 
S.  E.  Rep.  (N.  C,  1887);  McDowell  v. 
Rutherford,  etc.,  Co.,  id.,  351  (N.  C, 
1887);  Goforth  v.  Same,  id,  361  (id.). 

Ohio  —  Cincinnati,  etc.,  R  R  Co.  v. 
Clinton  Co.,  1  Ohio  St,  77  (1852);  Steu- 
benville,  etc.,  R  R  Co.  v.  North  Town- 
ship, 1  id.,  105  (1852) ;  Cass  v.  Dillon.  2 
id.,  607  (1853);  Thompson  v.  Kelley,  2 
id.,  647  (1853) :  State  v.  Union  Township, 
8  id.,  394  (1858);  State  v.  Com'rs,  etc., 
11  Ohio  St,  183  (1860);  Commissioners 
of  Knox  Co.  v.  Nichols,  14  id.,  260  (1863) ; 
Fosdick  v.  Perrysburg.  14  id.,  472  (1863) ; 
Same    v.    Goshen,    14    id.,   569    (1863); 


i  Wolff  v.  New  Orleans,  103  U.  S.,  358    Ala.,  145  (1881);  Hays  v.  Dowes,  75  Mo., 
(1880).     Cf.  Edwards  v.  Williamson,  70    250  (1881). 

136 


CH.  VI.]                                     MUNICIPAL    SUBSCRIPTIONS.  [§  91. 

railway  company  and  to  issue  its  bonds  in  payment  thereof.1  But 
this  extreme  view  is  disapproved  in  JSew  York2  and  in  Illinois,3 
the  courts  in  these  states  taking  the  better  ground  that,  while  it  is 
competent  for  the  legislature  to  authorize  a  municipal  subscription 
in  a  proper  case,  there  is  no  power  anywhere  to  compel  such  a 
subscription  or  donation. 

Walker  v.  Cincinnati,  21  id.,  14  (1871) ;  Virginia  —  Goddin  v.  Crump.  8  Leigh, 

S.  C,  sub  nom.  Cincinnati  v.  Walker,  1  120  (1837) ;  Board  of  Sup"rs  v.  Randolph, 

Cin.,  121  (1871).  16  S.  E.  Rep.,  722  (Va.,  1893).    See,  also, 

Pennsylvania  —  Commonwealth    v.  Goshorn   v.  Ohio  County,  1  West  Va., 

McWdliams,   11   Penn.   St.,    61    (1849);  308(1865). 

Brown  v.  Commissioners,  21  Penn.  St.,  Wisconsin  —  Clark    v.   Janesville,    10 

37  (1853);  Sharpless  v.  Philadelphia,  21  Wis.,  136  (1860);  Bushnell  v.  Beloit,  10 

id.,  147  (1853);  Moers  v.  Reading,  21  id.,  id.,  195   (1860);  Foster  v.   Kenosha,    12 

188(1853);  Commonwealth  v.  Allegheny  Wis.,  616;  Veeder  v.  Lima,  19  id.,  280 

Co.,  32  id.,  218   (1858);   Same  v.  Pitts-  (1865);  Fisk  v.  Kenosha,  26  id.,  23  (1870) ; 

burgh,  34  id.,  496  (1859):  Same  v.  Same,  Phillips  v.  Albany,  28  id.,   340   (1871); 

41  id.,  278  (1861);  Same  v.  Perkins,  43  Rogan  v.  Watertown,  30  id.,  259(1872); 

id.,  400;  Pennsylvania  R.  R.  Co.  v.  Phil-  Lawson  v.  Milwaukee,  etc.,  R.  R  Co.,  30 

adelphia,   47   id.,    189  (1864) ;    Riddle  v.  id.,  597  (1872) ;  Oleson  v.  Green  Bay,  etc., 

Philadelphia,  etc.,  R.  R   Co.,  1  Pittsb.,  36  id.,  383  (1874).     Cf.  Whiting  v.  She- 

158  (1872);  County  v.  Brinton,  47  Pa.  St,  boygan,  etc.,  R.  R  Co.,  25  id.,  167  (1870). 

367(1864).  Municipal  gift  of  land   to  a  railroad. 

South  Carolina  —  Copes  v.  Charleston,  Northern  P.   R.   R  Co.  v.   Roberts,  42 

10  Rich.  Law,  491 ;  County  of  Lancaster  Fed.  Rep.,  734  (1890).     A  county  cannot 

v.  Cheraw,  etc.,  R  R.,  5  S.  E.  Rep,  338  donate  land  to  a  railroad.   Ellis  f.  North- 

(S.  C,  1888) ;  State  v.  Whitesides,  9  S.  E.  em,  etc.,  R  R,  45  N.  W.  Rep.,  811  (Wis., 

Rep.,  661  (S.  C,  1889) ;  Floyd  v.  Perrin,  1890). 

8  S.  E.  Rep,  14  (S.  C,  1888).  The  leading  cases  upon  the  constitu- 

Tennessee  —  Tax-payers  of  Milan   v.  tionality  of    statutes   authorizing  mu- 

Tennessee,  etc.,  R  R.  Co.,  11  Bax.,  329;  nicipal    subscription    to    railroads    are 

County  of  Wilson  v.  National  Bank,  103  Goddin  v.  Crump,  8  Leigh,  120  (1837)  — 

U.  S.,  770  (1880);  Nichols  v.  Nashville,  9  which  is  said  by  Judge  Dillon  to  be  the 

Humph.,  252  (1848);  Louisville,  etc.,  R.  first  in   the  long  series;  Leavenworth 

R  Co.  v.   County   Court,   1   Sneed,  637  County  v.   Miller,  7   Kan.,   479  (1871); 

(1854) ;  Williams  v.  Duck  River,  etc.,  R.  Slack  v.  Maysville  &  Lexington  R  R 

R  Co.,  9  Bax.,  488  (1876) ;  Clay  v.  Haw-  Co.,  13  B.  Mon.,  1  (1852) ;  Knox  Co.  v 

kins,  5  Lea,  137  (1880);  Lauderdale  Co.  Aspinwall,  21  How.  (U.  S.),  539  (1858); 

v.  Fargason,  7  id.,  153  (1881) ;  Winston  Sharpless  v.   Mayor,  21  Penn.    St.,  147 

v.  Tennessee,  etc.,  R  R  Co.,  57  Tenn.  (1  (1853). 

Bax.),  60  (1873).  i  Napa    Valley    R    R    Co.    v.    Napa 

Texas  —  San    Antonio    v.    Jones,    28  County,  30  Cal.,  435  (1866). 

Texas,  19  (1866) ;  Same  v.  Lane,  32  id.,  2  People  v.   Batchelor,  53  N.  Y.,  128 

405  (1869);   Same  v.   Gould,   34  id.,   49  (1873).     Cf.   Queensburg    v.   Culver,   19 

(1870).  WalL  (U.  S.),  82  (1873). 

Vermont  —  Bennington    v.    Park,   50  3  Cairo,  etc.,   R  R  Co.  v.  Sparta,  77 

Vr.,  178  (1877) ;  First  National  Bank  of  111.,  505  (1875). 
St   Johnsbury  v.   Concord,  50  id.,  257 
(1877). 

137 


§  91.]  MUNICIPAL    SUBSCRIPTIONS.  [CH.  VI. 

While  it  may  be  conceded  that,  from  a  constitutional  standpoint 
as  well  as  from  that  of  public  policy  and  expediency,  there  are  grave 
objections  to  the  existence  or  exercise  of  this  power,  which  has 
plainly  been  monstrously  abused,1  it  is  clear  that  the  courts,  almost 
universally,  as  has  been  shown,  have  taken  and  will  continue  to 
hold  the  most  liberal  views  as  to  the  legislative  prerogative  in  this 
respect.  Such  authority  inhering  in  the  legislature  is  generally 
conceded. 

A  municipality  which  has  not  yet  been  incorporated  cannot  hold 
an  election  and  vote  a  subscription  for  stock.  The  subscription  is 
void.2  But  a  de  facto  municipal  corporation  recognized  by  the  leg- 
islature cannot  defeat  its  bonds  by  alleging  irregular  incorporation.3 
It  is  no  objection  to  the  validity  of  the  legislative  act,  or  the  mu- 
nicipal subscription,  that  the  subscription  is  made  to  a  railway 
company  not  yet  in  existence,4  or  to  the  company  that  first  builds 
the  road.5 

It  must  not  be  overlooked,  however,  that  municipalities  never 
have  the  power,  by  virtue  of  any  of  these  legislative  enactments, 
to  tax  themselves  for  the  benefit  of  enterprises  or  objects  which 
are  private  in  their  nature.  Municipal  subscriptions  can  only  be 
made  to  the  stock  of  companies  of  an  essentially  public  character. 
This  is  a  rule  conclusively  settled  and  plainly  salutary.6     Questions 

i  Dillon  on  Munic.  Corp.,  §§  12,  117,  (1875);  Railroad  Co.  v.  Falconer,  103  id, 

157;  Cooley  on  Const.  Lim.,  $  261  et  seq.  821  (1880).     Contra,  Rubey  v.  Shain,  54 

2  Clark    v.    Janesville,    13    Wis.,    414  Mo.,  207  (1873);   People  v.  Franklin,  5 
(1861);  S.  C,  10  id.,  136;  Rochester  v.  Lans.  (N.  Y.),  129(1871). 

Alfred.    13  id.,   432  (1861);   Berliner  v.  5  North  v.   Platte  County,  45  N.  W. 

Waterloo.  14  id..  378  (1861).     See  Lewis  Rep.,  692  (Neb.,  1890). 

v.  Clarendon,  5  Dillon,  329  (1878),  to  ef-  6  Loan    Association    v.    Topeka,     20 

feet  that,  if  authority  is  given  "to  any  Wall,  655  (1874);  Weismer  v.  Village  of 

incorporated  town  or  city  "  to  subscribe  Douglass,  64  N.  Y.,  91  (1876) ;  Bissell  v. 

for  stock,  it  is  not  limited  to  such  towns  Kankakee,   64  111.,  249   (1872);  Brewer 

as  are  incorporated  when  the  act  was  Brick  Co.  v.  Brewer,  62  Me.,  62  (1873); 

passed.  Allen  v.  Inhabitants  of  Jay,  60  id.,  124 

3  Comanche  County  v.  Lewis,  133  U.  (1872);  Lowell  v.  Boston,  111  Mass.,  463 
S.;  198  (1890).  (1873);  State  v.  Osawakee  Township,  14 

4  In  the  County  of  Daviess  v.  Huide-  Kan.,  418  (1875);  McConnell  v.  Hamm, 
koper  it  is  held  that  county  bonds  in  the  16  id.,  228  (1876);  Union  Pacific  R  R. 
hands  of  a  bona  fide  holder  for  value  Co.  v.  Smith,  23  id.,  745  (1880);  Clark  v. 
are  not  rendered  void  by  the  fact  that,  Des  Moines,  19  Iowa,  199  (1865) ;  Fred- 
at  the  time  the  vote  authorizing  the  erick  v.  Augusta,  5  Ga.,  561  (1848): 
subscription  was  taken,  the  company  Commercial  Bank  v.  City  of  Iola,  2 
to  be  benefited  was  not  created  accord-  Dillon,  353  (1873);  Savings  Assoc,  v. 
ing  to  law.  98  U.  S.,  98  (1878).  To  Topeka,  3  id.,  376  (1874).  Cf.  Bloodgood 
same  effect,  James  v.  Milwaukee,  16  v.  Mohawk,  etc.,  R.  R,  Co.,  18  Wend., 
Wall.,  159  (1872).  See,  also,  Concord  v.  9,  65  (1837).  [Compare  with  this  case 
Portsmouth  Savings  Bank,  92  U.  S,  625  Chapman   v.  Gates,  54  N.  Y„  132,  144 

138 


CH.  VI.] 


MUNICIPAL  SUBSCRIPTIONS. 


[§92. 


involving  the  distinction  between  public  and  private  uses  are  con- 
stantly arising  when  the  validity  of  municipal  bonds  is  the  issue, 
and  the  courts  very  consistently  adhere  to  the  rule  that  municipal 
aid  can  lawfully  be  extended  only  to  railways,  or  other  enterprises 
of  a  distinctly  public  or  qiiasi-])ub\ic  character.1 

§  92.  Constitutional  provisions  prohibiting  municipal  subscrip- 
tions.—  The  unchecked  exercise  of  this  power  on  the  part  of  the 
state  legislatures- has  entailed  upon  the  people  of  the  states  such  a 
burden  of  taxation2  that  in  many  states  are  found  constitutional 
prohibitions  rendering  it  unlawful  for  municipal  corporations  to 
make  subscriptions  or  lend  their  credit  to  any  incorporated  com- 


(1873).]  Osborne  v.  Adams  Co.,  109 
U.  S..  1  (1883) :  &  C,  106  U.  S.,  181 ;  Ot- 
tawa v.  Carey,  108  U.  S.,  110  (1883); 
Freeland  v.  Hastings,  10  Allen,  570 
(1865);  Jenkins  v.  Andover,  103  Mass., 
91  (1869) ;  People  v.  Salem,  20  Mich.,  452 
(1870);  Curtis  v.  Whipple,  24  Wis.,  350 
(1869);  Cook  v.  Manufacturing  Co.,  1 
Sneed  (Tenn.),  698  (1854);  Cooley  on 
Const.  Lim.,  §  212. 

1 A  municipal  donation  to  a  private 
manufacturing  concern  is  void.  Cole  v. 
La  Grange,  113  U.  S.,  1  (1884).  Aid  to 
bridge  manufacturing  and  iron-works 
company  held  void.  Loan  Assoc,  v. 
Topeka,  20  Wall.,  655  (1874).  Same  as 
to  hydraulic  works.  Weismer  v.  Doug- 
lass, 64  N.  Y..  91  (1876).  Also  to  linen 
company.  Bissell  v.  Kankakee,  64  111., 
249  (1872).  Also  exempting  manufact- 
uring companies  from  taxes  for  ten 
years.  Brewer  Brick  Co.  v.  Brewer,  62 
Me.,  62  (1873).  Also  loan  of  credit  to 
saw-mill  and  box  factory.  Allen  v.  In- 
habitants, 60  Me.,  124  (1872).  Also  to 
loan  to  persons  rebuilding  after  a  fire. 
Lowell  v.  Boston,  111  Mass.,  454.  Or  to 
relieve  the  destitute  poor.  State  v. 
Osawkee,  etc.,  14  Kan.,  418  (1875).  Or 
to  aid  in  constructing  a  woolen  mill. 
McConnell  v.  Hamra,  16  Kan.,  228 
(1876).  Or  to  build  a  dam.  Union  Pac. 
R.  R  Co.  v.  Smith.  23  id.,  745  (1880).  Or 
to  construct  a  toll-bridge.  Clark  v.  Des 
Moines,  19  Iowa,  199  (1865).  To  aid  a 
company  which  manufactures  bridges, 
plows,  stoves,  etc.  Commercial  Bank 
v.  City  of  Iola,  2  Dill.,  353  (1873);  Sav- 


ings Ass'n  v.  Topeka,  3  Dill,  376  (1874). 
Cf.  Bloodgood  v.  Mohawk,  etc.,  R.  R. 
Co.,  18  Wend.,  9,  65  (1837) ;  Chapman  v. 
Gates,  54  N.  Y.,  132, 144  (1873).  Or  to  aid 
a  steam-grist  mill.  Osborne  v.  Adams 
Co.,  109  U.  S.,  1  (1883);  S.  C,  106  U.  S., 
181.  Or  to  aid  the  development  of  a 
water-power.  Ottawa  v.  Carey,  108 
U.  S.,  110  (1883).  Or  to  repay  to  persons 
money  paid  by  them  for  substitutes  in 
the  army.  Freeland  v.  Hastings,  10 
Allen,  570.  As  to  tax  for  a  school-house, 
see  Jenkins  v.  Andover,  103  Mass.,  94 
(1869).  As  to  payment  of  money  on  ac- 
count of  drafting  of  soldiers,  see  Thomp- 
son v.  Pittston,  59  Me.,  545;  Tyson  v. 
School  Directors,  51  Pa.  St.,  9  (1865). 
Aid  to  a  private  school  is  void  (Curtis' 
Adm'r  v.  Whipple,  24  Wis.,  350);  or 
to  a  manufacturing  company.  Cook 
v.  Manuf'g  Co.,  1  Sneed  (Tenn.),  698; 
Cooley  on  Const.  Lim.,  §  212.  A  munic- 
ipality has  no  power  to  invest  in  the 
stock  of  a  steamship  company  (Penn., 
etc.,  v.  Philadelphia,  47  Pa.  St.,  189) ; 
nor  to  operate  free  ferries  (Jacksonport 
v.  Watson,  33  Ark.,  704);  but  a  sub- 
scription to  a  turnpike  company  has 
been  held  legal.  Clark  v.  Leathers,  5 
S.  W.  Rep..  576  (Ky.,  1887);  City  of 
Aurora  v.  West,  9  Ind.,  74;  S.  C,  22 
id.,  88.  And  to  obtain  a  water  supply. 
Frederick  v.  Augusta,  5  Ga.,  561  (1848). 
-'  Dillon  on  Munic.  Corp.,  §g  156,  160. 
The  sum  of  municipal  indebtedness  in 
this  country  is  said  to  exceed  one  thou- 
sand millions  of  dollars,  and  the  amount 
is  constantly  increasing. 


139 


§92.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  VI. 


pany  or  enterprise,  not  strictly  and  exclusively  governmental  in 
its  nature  and  constitution.  This  is  the  case  in  Pennsylvania,1 
Ohio,2  Illinois,3  New  York,4  Indiana,5  Missouri,6  Mississippi,7  and  in 
some  other  states.8  In  general  it  will  be  found  that  these  consti- 
tutional provisions  forbid  in  terms  any  subscription  or  lending  of 
credit  by  any  municipality  in  the  state,  or  by  the  state  itself,  to  any 
company,  association  or  corporation  whatsoever.  Sometimes  the 
prohibition  is  absolute,  and  at  other  times  two-thirds  or  a  majority 
of  the  qualified  electors  of  the  municipality  must  vote  to  render 
such  aid.  The  constitutional  or  statutory  provisions  which  prohibit 
municipal  subscriptions  are  construed  to  be  prospective  only,  un- 
less they  contain   express  words  making  them  retroactive.9     This 


i  Amend,  to  Const.  1857,  §  7,  art.  II ; 
Pennsylvania  R  R  Co.  v.  Philadelphia, 
47  Penn.  St.,  189  (1864). 

2 Const.,  art  VIII,  §  6;  Walker  v.  Cin- 
cinnati, 21  Ohio  St,  14  (1871) ;  Cass  v. 
Dillon,  2  id.,  607  (1853);  Fosdick  v.  Per- 
rysburg,  14  id.,  472  (1863) ;  Thompson  v. 
Kelly,  2  id.,  647  (1853);  Wyscaver  v.  At- 
kinson, 37  id.,  80  (18811 

3  Const  1870 ;  Concord  v.  Portsmouth 
Savings  Bank,  92  U.  S.,  625  (1875) ;  Lou- 
isville v.  Savings  Bank,  104  U.  S.,  469 
(1881) ;  Harter  v.  Kernochan,  103  U.  S., 
562  (1880);  Fairfield  v.  County  of  Galla- 
tin, 100  U.  S.,  47  (1879);  Chicago,  etc.,  R 
R  Co.  v.  Pinckney,  74  111.,  277  (1874) ; 
County  of  Moultrie  v.  Rockingham  Ten 
Cent  Savings  Bank,  92  U.  S.,  631  (1875) ; 
Robertson  v.  Rockford,  21  111.,  451.  The 
constitutional  prohibition  in  Illinois 
against  lending  credit  applies  to  the 
state  only,  and  not  to  counties  or  cities. 

4  Amend.  Const,  Jan.  1,  1875;  People 
n  Fort  Edward,  70  N.  Y.,  28  (1877) ; 
Dodge  v.  County  of  Platte,  82  id.,  218 
(1880),  reversing  S.  C,  16  Hun,  285. 

5  Const,  art.  X,  §  10;  Lafayette,  etc., 
R  R  Co.  v.  Geiger.  34  Ind.,  185  (1870) ; 
John  v.  Cincinnati,  etc.,  R  R  Co.,  35 
id.,  539  (1871) ;  Aspinwall  v.  Jo  Daviess 
Co.,  22  How.  (U.  S.),  364  (1859);  Brocaw 
v.  Board  of  Commissioners,  73  Ind.,  543 
(1881). 

6 Const,  art  XI,  §  14 ;  County  of  Schuy- 
ler v.  Thomas,  98  U.  S,  169(1878);  Smith 
v.  County  of  Clark,  54  Mo..  58  (1873); 
County  of  Macon  v.  Shores,  97  U.  S., 


140 


272  (1877) ;  County  of  Ray  v.  Vansycle, 
96  id.,  675  (1877) ;  County  of  Scotland  v. 
Thomas,  94  id.,  682  (1876). 

7  Const,  art.  XII,  §  14 ;  Supervisors  v. 
Galbraith,  99  U.  S,  214  (1878);  Hayes  v. 
Holly  Springs,  114  id.,  120(1885);  Gre- 
nada Co.  v.  Brogden,  112  id.,  261  (1884). 
Cf.  State  of  Minnesota  v.  Young,  29 
Minn.,  474  (1881).  Where  municipal  aid 
bonds  were  issued  under  an  unconstitu- 
tional statute,  but  are  enforced  by  the 
United  States  courts  in  favor  of  bona 
fide  holders,  the  municipality  may  re- 
cover back  from  the  railroad  company 
or  its  successor  the  amounts  so  paid  to 
such  bona  fide  holders.  Town  of  Plain- 
view  v.  Winona,  etc.,  R  R  Co.,  32  N.  W. 
Rep.,  745  (Minn.,  1887).  In  the  case  of 
Walker  v.  Cincinnati,  21  Ohio  St,  14 
(1871),  the  building  of  the  Cincinnati 
Southern  Railway  by  the  city  of  Cin- 
cinnati was  held  legal,  notwithstanding 
the  State  constitution  forbade  the  legis- 
lature from  authorizing  any  city,  etc., 
becoming  "a  stockholder  in  any  joint- 
stock  company,  corporation  or  associa- 
tion whatever." 

8  Walker  v.  Cincinnati,  21  Ohio  St.,  14 
(1871);  S.  C,  8  Am.  Rep.,  24,  and  11  Am. 
Law  Reg.  (N.  S.),  346,  and  the  note  by 
Judge  Redfield.  Where  the  statutes 
limit  the  amount  of  debt  which  a  county 
may  incur  in  aid  of  railroads,  and  aid  is 
voted  to  the  full  amount,  subsequent  aid 
is  void.  Chicago,  etc.,  R'y  Co.  v.  Free- 
man, 16  Pac.  Rep..  828  (Kan.,  1888). 
ss  County  of  Moultrie  u  Rockingbam 


CH. 


VI.] 


MUNICIPAL    SUBSCRIPTIONS. 


[§92. 


principle  is  frequently  applied  when  the  constitutional  enactment 
is  passed  after  a  municipal  subscription  is  voted  but  before  it  is 
actually  completed.1 

It  has  been  held  that  a  provision  restricting  the  power  of  a  state 
to  make  subscriptions  in  aid  of  railroads  cannot  be  construed  so  as 
to  prohibit  the  municipal  subdivisions  of  the  state  from  subscrib- 
ing.2 And  a  restriction  as  to  the  power  of  a  county  will  not  be 
held  applicable  to  a  city.3     School  districts  have  no  power  to  sub- 


Ten  Cent  Savings  Bank,  92  IT.  S.,  631 
(1875);  Grenada  Co.  v.  Brogden,  112  id., 
261(1884);  Fairfield  «.  County  of  Gal- 
latin, 100  id.,  47  (1879) ;  County  of  Ran- 
dolph v.  Post,  93  U.  S.,  502  (1876) ;  Ralls 
v.  Douglass,  105  U.  S.,  728(1881) ;  County, 
etc.,  v.  Nicolay,  95  U.  S.,  619  (1877),  hold- 
ing that  when  authority  had  been 
granted  to  a  county  in  Missouri  to  sub- 
scribe, the  power  was  not  subject  to  a 
constitutional  amendment  requiring  the 
assent  of  two-thirds  of  the  voters  of  the 
county ;  County,  etc.,  v.  Gillett,  100  U.  S., 
585,  following  and  approving  last  case ; 
County,  etc.,  v.  Foster,  93  U.  S.,  567 
(1876),  to  same  effect,  same  constitution  ; 
Louisiana  v.  Taylor,  105  IT.  S.,  454,  to 
same  effect,  same  constitution  ;  Durkee 
v.  Board  of  Liquidation,  103  id.,  646 
(1S86);  Howard  County  v.  Paddock,  110 
id.,  384  (1884);  Dallas  County  v.  McKen- 
sie,  110  id.,  686  (1884).  The  legislature 
cannot,  after  the  adoption  of  a  constitu- 
tional amendment  prohibiting  munici- 
palities from  voting  aid.  remedy  defects 
in  votes  taken  before  the  amendment 
was  adopted.  Katzenberger  v.  Aberdeen, 
121  IT.  S.,  172  (1887) ;  Decker  r.  Hughes, 
68  111.,  33  (1873),  holding  that,  where  a 
new  state  constitution  has  been  adopted, 
the  old  one  governs  as  to  bonds  issued 
under  its  authority  though  not  actually 
issued  until  after  the  adoption  of  the 
new  one;  County  v.  Moultrie,  105  IT.  S., 
370  (1881),  holding  that  where  a  dona- 
tion in  aid  of  a  railroad  had  been  voted 
by  a  county  before  the  adoption  of  the 
new  constitution  of  Illinois,  bonds  to 
pay  it  might  be  issued  after  its  adoption. 
In  Louisville  r.  Savings  Bank,  104  IT.  S., 
469  (1881),  it  was  held  that  the  court 


would  even  take  cognizance  of  the  frac- 
tions of  a  day  in  order  to  do  justice  in 
such  a  case.  Schall  v.  Bowman,  62  111., 
321  (1872) ;  Richards  v.  Donagho,  66  id.. 
73  (1872);  Wright  v.  Bishop,  88  id.,  302 
(1878).  Contra,  Jeffries  v.  Lawrence,  42 
Iowa,  498  (1876);  Falconer  v.  Buffalo, 
etc.,  R  R.  Co.,  69  N.  Y.,  491  (1877);  List 
r.  Wheeling,  7  West  Va.,  501  (1874).  Of. 
Hayes  v.  Holly  Springs,  114  U.  S.,  120 
(1885) ;  Hendricks  v.  Jackson  Co.,  2  Mc- 
Crary,  615  (1880). 

1  For  cases  involving  a  construction  of 
the  Illinois  constitution  and  its  effects 
on  previous  donations,  see  Fairfield  v. 
Gallatin  Co.,  100  U.  S.,  47  (1879) ;  Chi- 
cago, etc.,  R.  R  Co.  v.  Pinckney,  74 
111.,  277  (1874);  Lippincott  v.  Pana,  92 
id.,  24  (1879):  Middleport  v.  JEtna.  Ins. 
Co.,  82  id.,  562  (1876).  Cf.  County  of 
Moultrie  v.  Fairfield,  105  IT.  S.,  370 
(1881);  Enfield  v.  Jordan,  119  U.  S.,  680 
(18S7). 

-'Pattison  v.  Supervisors,  13  Cal.,  175 
(1859);  New  Orleans  «.  Graihle,  9  La. 
Ann.,  561  (1854);  Slack  v.  Maysville, 
etc.,  R.  R.  Co.,  13  B.  Mom.  1  (18 
Leavenworth  Co.  v.  Miller,  7  Kan.,  479 
(1871);  Prettymau  v.  Supervisors,  19111., 
406  (1858).  The  courts  are  inclined  to 
hold  that  a  limit  on  the  rate  of  taxation 
that  a  city  may  levy  does  not  apply  to  a 
tax  in  aid  of  municipal  subscriptions  to 
railroads.  Cf.  People  v.  State  Treasurer, 
23  Mich.,  499  (1871);  Pitzmau  v.  Free- 
burgh,  92  HI.,  Ill  (1879). 

3  Thompson  v.  City  of  Peru,  20  Ind., 
305  (1868);  City  of  Aurora  n  West,  9 
Ind.,  74.  Statute  may  prescribe  that 
the  aid  voted  shall  not  bind  property 
outside  of  a  town  in  the  county,  unless 


141 


§93.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  YT. 


scribe  to  the  stock  of  a  railway,  and  bonds  issued  to  pay  such  a 
subscription  are  void.1 

§  93.  Change  in  the  slate  constitution  or  the  general  statutory  law 
after  the  municipal  corporation  has  voted  to  subscribe. —  Constitu- 
tional provisions  or  general  statutes  prohibiting  municipal  corpora- 
tions from  subscribing  to  the  stock  of  other  corporations,  or  from 
lending  their  credit  thereto,  are,  as  we  have  seen,2  prospective  in 
their  application. 

That  which  a  corporation  has  the  constitutional  or  statutory 
right  to  do,  and  which  it  has  done  in  pursuance  of  that  right  or 
authority,  cannot  be  affected  or  undone  by  subsequent  constitu- 
tional change  or  amendment,  or  by  the  passage  of  general  statutes. 
This  is  a  fundamental  rule  of  constitutional  law.3     If  it  be  held 

a  constitutional  provision  prohibiting 
these  subscriptions  has  been  passed. 
Richison  v.  People,  5  N.  E.  Rep.  121 
(111.,  1886).  To  the  same  effect,  with 
regard  to  the  constitution  of  1875  of 
Nebraska,  see  State  v.  Lancaster  Co.,  6 
Neb..  214  (1870);  and  as  to  constitution 
of  Missouri  of  1865,  see  Louisiana  v. 
Taylor,  105  U.  S.,  454  (1881);  County 
of  Cass  v.  Gillett,  100  id.,  585  (1879); 
County  of  Scotland  v.  Thomas,  94  id., 
682  (1876) ;  County  of  Ray  v.  Vansycle. 
96  id.,  675 ;  County  of  Calloway  v.  Fos- 
ter, 93  id.,  567  (1876) ;  County  of  Ralls  v. 
Douglass,  105  U.  S.,  728  (1881).  in  which 
bonds  issued  under  a  city  charter  with- 
out a  popular  vote  were  held  valid  not- 
withstanding the  provisions  of  a  consti- 
tution adopted  afterwards,  but  in  force 
when  the  bonds  were  issued,  required  a 
submission  of  such  matters  to  a  vote; 
State  v.  Macon  Co.,  41  Mo.,  453  (1867% 
to  the  same  effect;  State  v.  County 
Court,  etc.,  51  Mo.,  522  (1873),  to  the 
same  effect  Cf.  State  v.  Dallas  Co.,  etc.. 
72  Mo.,  329  (1880),  where  a  later  statute 
was  held  to  have  taken  away  the  power 
under  a  former  one.  A  statute  passed 
subsequently  to  a  constitutional  prohi- 
bition may  legalize  irregular  subscrip- 
tion before  prohibition.  Bolles  v.  Brim- 
field,  120  U.  S.,  759  (1887).  The  repeal 
of  the  act  authorizing  a  tax  for  munici- 
pal aid  before  any  money  has  been  ex- 
pended by  the  railroad,  excepting  a 
small  sum  for  surveys,  prevents  a  lessee 


the  residents  outside  of  the  town  vote 
in  favor  of  it.  Kentucky  Union  R'y 
Co.  v.  Bourbon  Co.,  2  S.  W.  Rep.,  687 
(Ky.,  1887);  Dillon  on  Munic.  Corp., 
§  162,  citing  Butz  v.  Muscatine,  8  Wall, 
575  (1869) ;  Learned  v.  Burrington,  2  Am. 
Law  Reg.  (N.  S.),  394,  and  note ;  Leav- 
enworth v.  Norton,  1  Kan.,  432  (1863) ; 
Barnes  v.  Atchison,  2  id.,  454  (1864). 
And  see  Commonwealth  v.  Pittsburgh, 
34  Penn.  St.,  496  (1859) ;  Amey  v.  Alle- 
ghany City,  24  How.  (U.  S.),  364 :  Fos- 
dick  v.  Perry  burg,  14  Ohio  St.,  472  (1863) ; 
Cumberland  v.  Magruder,  34  Md.,  381 
(1871);  Assessors  v.  Commissioners,  3 
Brewst.  (Pa),  333  (1869) ;  State  v.  Gut- 
tenburg,  38  N.  J.  L,  419. 

i  Weightman  v.  Clark,  103  U.  S.,  256 
(1880). 

2  §92. 

3  See,  in  regard  to  the  Illinois  consti- 
tution, County  of  Clay  v.  Society  for 
Savings,  104  U.  S.,  579  (1881);  People  v. 
Logan  County,  63  111.,  374(1872) ;  County 
of  Moultrie  v.  Savings  Bank,  92  U.  S., 
631  (1875) ;  Louisville  v.  Savings  Bank, 
104  id.,  469  (1881) ;  Nelson  v.  Haywood 
County,  11  S.  W.  Rep.,  885  (Tenn.,  1889); 
Choisser  v.  People,  29  N.  E.  Rep.,  546 
(111.,  1892).  An  irregular  vote  to  issue 
bonds  before  constitutional  provision  is 
enacted  cannot  be  legalized  by  legisla- 
tive act  afterwards.  Williams  ?>.  Peo- 
ple, 24  N.  E.  Rep.,  647  (111.,  1890).  Where 
the  original  subscription  was  conditional 
the  condition  cannot  be  waived    after 


142 


Oil.  VI.] 


MUNICIPAL    SUBSCKIPTK  >NS. 


[§W. 


that  a  popular  vote  does  not  give  the  company  proposed  to  be  ben- 
efited a  vested  right  to  the  subscription  by  the  municipality,  and 
that  until  the  subscription  is  actually  made  the  contract  is  unexe- 
cuted, and  therefore  obligatory  upon  neither  party,  there  is  ground 
for  holding  that  a  constitutional  prohibition,  taking  effect  after 
the  election,  but  before  the  subscription  is  made  pursuant  to 
authority  conferred  by  the  popular  vote,  will  be  sufficient  to  invali- 
date the  subscription.  This  was  the  view  taken  by  the  supreme 
court  of  the  United  States  in  the  case  of  Aspinwall  v.  Commission- 
ers of  the  County  of  Daviess,1  and  affirmed  in  some  later  cases.2 
There  are  cases  of  authority,  however,  in  favor  of  the  rule  that, 
after  the  corporation  has,  by  a  popular  vote  at  an  election  lawfully 
held,  voted  to  subscribe  for  stock,  subsequent  changes  of  the  con- 
stitution or  the  general  statutes  will  not  affect  the  right  of  the 
municipality  to  go  on  and  complete  the  contract,  to  make  the  formal 
subscription,  and  to  issue  the  bonds  or  levy  the  special  tax  to  pay 
the  calls.3 

§  94:.  Statutory  formalities  rnusfbe  substantially  complied  with. — 
A  substantial  compliance  with  the  formalities  prescribed  by  a  stat- 
ute authorizing  a  municipal  subscription  to  stock  is  all  that  the  law 
requires;  but  such  a  compliance  is  requisite  to  the  validity  thereof.4 


of  the  railroad  enforcing  payment  when 
the  taxes  were  not  assigned  to  the  lessee. 
Barttel  v.  Meader,  33  N.  W.  Rep.,  446 
(Iowa,  18S7). 

i  22  How.,  33 1  (1859). 

2  Norton  v.  Brownsville,  129  IT.  S,, 
479  (1889);  Wadsworth  v.  Supervisors. 
102  U.  S.,  534  (1880).  See,  also,  Railroad 
Co.  v.  Falconer,  103  id.,  821  (1880);  Ger- 
man Bank  v.  Franklin  County,  128  U.  S., 
526  (1888);  Eddy  v.  People,  20  N.  E. 
Rep.,  83  (111.,  1889). 

3  United  States  v.  Jefferson  Co.,  5  Dil- 
lon, 310  (1878);  Maenhant  v.  New  Or- 
leans, 3  Woods,  1  (1876) ;  Sibley  v.  Mobile, 
3  id.,  535  (1876):  Nicolay  v.  St.  Clair 
County,  3  Dillon.  163  (1874);  Huideko- 
per  v.  Dallas  County,  3  id.,  171  (1875). 
Cf.  Red  Rock  v.  Henry,  106  IT.  S.,  596 
(1882),  and  cases  in  note  5,  supra. 

4  Bonds  issued  by  municipalities  to  aid 
railroads  are  valid  only  when  issued  in 
compliance  with  the  statute  authorizing 
them.  Young  v.  Clarendon  Township, 
132  U.  S.,  340  (1889);  Hoff  v.  Jasper 
County,  110  U.  S.,  53  (1884>,  following 


the  ruling  in  Anthony  r.  Jasper  County. 
101  U.  S.,  693  (1879),  where  it  was  held 
that  a  bona  fide  holder  of  bonds  could 
not  maintain  an  action  on  bonds  not 
registered  with  the  state  auditor  as  re- 
quired by  statute :  Bissell  v.  Spriug  Val- 
ley, etc.,  110  TJ.  S.,  162  (1884),  holding 
that  when  a  statute  required  bonds  to 
be  attested  by  the  county  clerk  under 
the  seal  of  the  county,  bonds  issued 
without  his  signature  were  not  valid: 
Hamlin  v.  Meadville,  6  Neb.,  227(1877  . 
holding  that  a  vote  authorizing  a  sub- 
scription gives  no  power  to  make  a  do- 
nation ;  Cairo,  etc.,  r.  Sparta.  77  111..  505 
(1875),  where  bonds  were  authorized  by 
a  vote  upon  a  proposition  that  they 
should  run  twenty  years,  when  the  stat- 
ute submitted  a  proposition  to  be  voted 
upon  for  bonds  to  run  not  exceeding  /<  u 
years.  The  court  refused  to  compel  the 
city  to  issue  them  ;  Mustard  v.  Hoppers, 
69  Ind.,  324,  where  an  election,  and  a 
tax  voted  and  levied  in  pursuance  of  it, 
were  held  not  invalidated  on  account  of 
a  canvass  of  the  votes  which  was  not 


143 


94.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  VI. 


But  not  every  failure  to  observe  all  the  formalities  prescribed 
by  the  statute  is  sufficient  to  invalidate  a  subscription.     When  the 
omission  is 
invalidate  the  subscription.1 


a  matter  of  form  more  than  of  substance,  it  will  not 


entirely  regular ;  People  v.  Dutcher,  56 
III,  144  (1870),  holding  that  when  the 
statute  does  not  prescribe  a  mode  of 
election  it  should  be  held  in  accordance 
with  the  law  of  the  organization  of  the 
municipality;  People  v.  Logan  County, 
63  111.,  374  (1872).  This  case  was  an  ap- 
plication for  mandamus  to  compel  a 
subscription.  A  demurrer  to  an  answer 
alleging  that  the  vote  in  favor  of  sub- 
scription was  obtained  by  fraudulent 
votes  with  the  knowledge  of  the  corpo- 
ration to  be  benefited  was  overruled ; 
Pana  v.  Lippincott,  2  Bradw.  (111.),  466 
(1877),  where  a  vote  taken  at  a  special 
town  meeting,  when  the  statute  required 
it  to  be  taken  at  a  regular  meeting,  was 
held  not  to  confer  authority  to  subscribe ; 
People,  etc.,  v.  Smith,  45  N.  Y.,  77  (1871), 
holding  that,  when  the  act  requires  a 
petition  of  tax-payers,  the  power  is  per- 
sonal to  them  and  cannot  be  exercised 
b}-  an  agent;  Wetumpka  v.  Wetumpka, 
63  Ala.,  611  (1879),  holding  that  a  judg- 
ment on  bonds  issued  by  a  municipality 
is  conclusive  upon  it  as  to  the  validity 
of  the  bonds  and  as  to  all  defenses  which 
might  have  been  urged  against  it  at  law ; 
but  in  a  bill  in  equity  to  enforce  a  statu- 
tory trust  by  which  the  property,  etc.,  of 
the  municipality  was  pledged  to  pay 
them,  it  may  show  that  the  bonds  were 
issued  in  violation  of  the  conditions  of  the 
statute ;  Munson  v.  Lyons,  12  Blatch.,  539 
(1875),  holding  that  an  objection  which 
would  be  good  in  a  direct  review  of  the 
proceedings  —  as  here  that  the  petition 
of  tax-payers  gave  the  authorities  no 
jurisdiction  —  may  be  of  no  avail  as 
against  bona  fide  holders  of  bonds; 
Thompson  v.  Perrine,  103  U.  S.,  806 
(1880);  County  of  Jasper  v.  Ballou,  103 
TJ.  S.,  745,  and  Mass.,  etc.,  Can.  Co.  v. 
Cherokee,  42  Fed.  Rep.,  750  (1890),  hold- 
ing that  a  subsequent  statute  may  cor- 
rect errors.    See,  also,  Carroll  County  v. 


Smith,  111  U.  S„  556  (1884) ;  Hawley  v. 
Fairbanks,  108  U.  S.,  543  (1883);  Bu- 
chanan v.  Litchfield,  102  U.  S.,  278(1880) ; 
People  v.  Hurlburt,  46  N.  Y.,  110  (1871): 
People  v.  Suffern,  68  N.  Y,  321  (1877); 
Wilson  v.  Cancadia,  15  Hun,  218  (1878) ; 
Angel  v.  Hume,  17  Hun,  374  (1879) ;  Peo- 
ple v.  Hutton,  18  Hun,  116  (1879);  Peo- 
ple v.  Barrett,  18  Hun,  206  (1879) ;  Wheat- 
land v.  Taylor,  29  Hun,  70  (1883).  Mu- 
nicipal subscription,  authorized  by  stat- 
ute, to  corporation  to  construct  locks 
and  dams,  and  duly  made,  cannot  be 
enforced  to  pay  for  repairing  old  locks 
and  dams.  Jessamine  County  v.  Swi- 
gert's  Adm'r,  3  S.  W.  Rep.,  13  (Ky.,  1887). 
Where  judgment  is  taken  by  default 
the  facts  alleged  cannot  be  disputed  in 
the  mandamus  proceedings.  Harsh  man 
v.  Knox  County,  122  U.  S.,  306  (1887). 
Vote  of  municipal  aid  is  void  if  grantee 
is  in  alternative.  State  v.  Roggen,  33 
N.  W.  Rep.,  108  (Neb.,  1887).  In  Kansas 
a  tax-payer  cannot  enjoin  the  board 
from  declaring  the  vote  on  municipal 
aid.  He  must  wait  and  enjoin  the  sub- 
scription. State  v.  County  of  Babaunsee. 
12  Pac.  Rep.,  942  (Kan.,  1887);  Peoples 
Town  of  Santa  Anna,  67  111.,  57  (1873), 
where  an  election  was  held  illegal  be- 
cause held  without  a  registration  of 
voters  as  required  by  law ;  People  v. 
Town  of  Laena,  67  111.,  65  (1873),  a  similar 
case ;  Chicago,  etc.,  v.  Mallory,  101  111., 
583,  where  an  election  presided  over  by 
one  moderator  with  one  clerk,  when  the 
law  required  three  judges  and  two 
clerks,  was  held  void,  conferring  no  au- 
thority upon  a  town  to  issue  bonds. 
Municipal  bonds  issued  without  the  order 
of  the  grand  jury  as  required  by  statute 
are  not  collectible  by  an  owner  who  does 
not  show  he  is  a  bona  fide  holder.  Frick 
v.  Mercer  County,  21  Atl.  Rep.,  6  (Pa., 
1891). 
i  Pana  v.  Bowler,  107  U.  S.,  529  (1882), 


144 


CH.  VI.] 


MUNICIPAL    SUBSCRIPTIONS. 


[§94. 


Many  of  these  defenses,  however,  are  defeated  by  the  fact  that 
the  municipality  is  estopped  from  setting  up  the  illegality,  there 
having  been  long  delay,  or  the  recitals  on  the  bonds  themselves 
having  represented  that  the  legal  formalities  were  duly  observed.1 


holding  that  the  fact  that  an  election 
was  irregularly  conducted  could  not 
avail  as  a  defense  to  bonds  in  the 
hands  of  a  bona  fide  holder,  the  court 
refusing  to  follow  the  ruling  of  the  Illi- 
nois supreme  court  in  Lippincott  v. 
Pana,  92  111.,  24  (1879),  which  declared 
the  bonds  void ;  Commissioners,  etc.,  v. 
Thayer,  94  U.  S.,  631  (1876),  where  the 
court  said :  "  Defects,  irregularities  or 
informalities  which  do  not  affect  the  re- 
sult of  the  vote  do  not  affect  its  valid- 
ity;" Belfast,  etc.  v.  Brooke,  60  Me., 
568  (1872),  where  a  call  for  a  town  meet- 
ing "to  see  if  the  town  will  loan  its 
credit  to  aid  in  the  construction  "  of  a 
railroad  named  was  held  to  give  reason- 
able notice  that  a  proposition  to  sub- 
scribe for  its  stock  would  be  acted  upon  ; 
Draper  v.  Springport,  104  U.  S.,  501 
(1881),  in  which  the  absence  of  a  seal 
was  held  not  to  affect  the  right  of  a 
bona  fide  holder  to  recover  upon  bonds 
issued  in  payment  of  a  subscription ; 
Clarke  v.  Hancock  Co.,  27  111.,  305  (1862), 
where  the  informality  consisted  in  sub- 
mitting two  propositions  by  one  vote, 
and  it  was  held  not  to  invalidate  bonds 
in  hands  of  bona  fide  holders;  Super- 
visors v.  Schenck,  5  Wall.,  772  (1866), 
where  bonds  issued  under  a  vote  or- 
dered by  a  "  county  court,"  instead  of 
by  the  "  board  of  supervisors,"  were 
held  valid  because  taxes  had  been  levied 
and  interest  paid  upon  them  by  the 
proper  authorities  for  nine  years  before 
the  claim  was  made  that  they  were  void. 
Cf.  County  of  Jasper  v.  Ballou,  103  U. 
S.,  745  (1880);  Pana  v.  Bowler,  107  TJ. 
S.,  529  (1882) ;  Johnson  v.  Stark,  24  111., 
75  (1860) ;  Singer  Manuf'g  Co.  v.  Eliza- 
beth, 42  N.  J.  L.,  249 ;  New  Haven,  etc., 
v.  Chatham,  42  Conn.,  465  (1875),  where 
a  vote  which  should  have  been  by  bal- 
lot was  taken  by  division  of  the  house, 


and  no  objection  was  made  thereto  until 
a  railroad  had  in  good  faith  issued  bonds 
which  were  to  be  guarantied  by  the 
town. 

1  Nugent  v.  Supervisors,  19  Wall.,  241 
(1873),  is  the  leading  case.     It  holds  that 
the  delivery  of  the  municipal  bonds  to 
the  railroad  in  exchange  for  the  stock, 
together  with  the  levy  of  a  tax  to  pay 
the  interest  on  the  bonds,  and  the  act  of 
the  municipality  in  voting  as  a  share- 
holder, estop  it  from  denying  the  legal- 
ity   of    the    subscription.     Menasha    v. 
Hazard,    102    TJ.    S.,   81    (1880),    where 
bonds  were  issued  to  be  valid  when  it 
was  certified  on  them  that  certain  con- 
ditions had  been    performed.     Such  a 
certificate  was  held  to  estop  the  town 
from  denying  their  validity;   Whiting 
v.  Town  of   Potter,  2    Fed.  Eep.,  517 
(1880),  in  which  it  was  held  that  retain- 
ing railroad  stock  received  for  bonds, 
and  paying  interest  on  the  bonds  for 
a  long  time,   estopped  a  municipality 
from  questioning    their  validity,  such 
acts  being  a  direct  ratification  of  the 
issue;     Lamb    v.    Burlington,    etc.,    39 
Iowa,  333  (1874),  holding  that  voting  a 
tax  in  aid  of  a  railroad,  and  remaining 
silent  for  a  year,  during  which  the  road 
was  completed  upon  the  faith  of  the 
tax,    and    until   the   benefits    accruing 
from    the    completion    were    realized, 
estopped  a  township  from  denying  the 
validity  of  the  tax ;  Leavenworth,  etc., 
v.    Douglas    Co.,   18   Kan.,    169    (1877), 
where  the  failure  of  a  railroad  to  com- 
ply with  the  conditions  of  an  agree- 
ment by  which  it  was  to  receive  bonds 
was  a  matter  of  public  knowledge,  and 
the  county  issuing  the  bonds  made  no 
objection,    but    paid    interest    on    the 
bonds    for    years,   these  circumstances 
were  considered  a  ratification  of  the  acts 
of  the  county  officers  in  issuing  them ; 


(10) 


145 


§94.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  VI. 


The  meeting  must  be  duly  called  and  by  the  proper  officer;1  the 
notice  of  the  meeting  must  be  duly  posted  for  the  full  time  pro- 
vided in  the  act. 


Lyons  v.  Munson,  99  U.  S.,  684  (1878), 
holding  that  where,  under  the  act  of 
New  York,   the  county  judge  decides 
upon  an  application  of  tax-payers,  his 
judgment  recited  in  the  bonds  cannot 
be  attacked  by  the  town  in  an  action 
on  bonds  by  a  bona  fide  holder,  and  the 
town  is  estopped  to  deny  their  validity 
on  that  account:    Hackett  v.   Ottawa, 
99  U.  S.,  86,  holding  that,  when  bonds 
purport  on  their  face  to  have  been  is- 
sued to  provide  for  a  loan  for  munici- 
pal purposes,  the  city  is  estopped  from 
setting  up    against  an    innocent    pur- 
chaser for  value  that  they  were  void 
because  the  proceeds  were  appropriated 
to  other  purposes  —  as  for  a  donation 
to  a  private  corporation ;  Pendleton  Co. 
v.   Amy,  13  Wall.,  297  (1871),  holding 
that  where  the  issue  of  bonds  by  county 
officers,  without  previous  fulfillment  of 
conditions,  would    be  a  misdemeanor, 
the  presumption  is  that  the  conditions 
were  fulfilled;    and    the    receiving  of 
stock  in  payment  and  holding  it  for 
seventeen  years  work  an  estoppel ;  First 
Nat'l,  etc.,  v.  Wolcott,  19   Blatch.,  370 
(1871),  where  the  retaining  of  stock  re- 
ceived for  bonds,  and  paying  interest  on 
the  bonds,  was  held,  as  against  bona 
fide  holders,  to  be  a  ratification  of  the 
act  of  commissioners  in  issuing  them, 
the  recital  on  them  being    that  they 
were  issued  in  pursuance  of  a  certain 
statute;  Block  v.  Commissioners,  99  U. 
S.,  686  (1878),  in  which  a  county  was 
held  estopped  from  asserting  that  a  ma- 
jority of  the  electors  had  not  voted  in 
favor  of  the  issue  of  bonds,  the  bonds 
having  been   issued  three   years  after 
the  vote  was  declared  and   recorded; 
Carroll  Co.  v.  Smith,  111  U.  S.,  556  (1883), 
holding  that  a  recital  in  a  bond  that  it 
is  authorized    by  a  particular  statute 
does  not  estop  the   municipality  from 
setting  up  that  it  was  not  authorized  by 


a  proper  majority  of  voters, —  in  this 
case  two-thirds.  See,  also,  Amey  v. 
Allegheny,  24  How.,  364;  Cagwin  v. 
Hancock,  84  N.  Y.,  532  (1881),  rev'g  S. 
C.  22  Hun,  291;  Orleans  v.  Piatt,  99 
U.  S.,  676  (1878). 

i  Town  of  Windsor  v.  Hallett,  97  Ill.r 
204(1880);  County  of  Richland  v.  Peo- 
ple, 3  Bradw.  (111.),  210  (1878);  Jackson- 
ville, etc.,  R.  R.  Co.  v.  Virden,  104  111., 
339  (1882) ;  Bowling  Green,  etc.,  R.  R. 
Co.  v.  Warren  Co.,  10  Bush  (Ky.),  711 
(1874).  But  see  Sauerhering  v.  Iron 
Ridge,  etc.,  R.  R.  Co.,  25  Wis.,  447  (1870)  ; 
Commissioners  v.  Baltimore,  etc.,  R  R. 
Co.,  37  Ohio  St.,  205  (1881). 

2  McClure  v.  Township,  etc.,  94  U.  S., 
429 ;  Harding  v.  Rockford,  etc.,  65  111., 
90  (1872),  where   bonds   were  held  in- 
valid because  the  notice  of  election  was 
posted  less  than  thirty  days,  as  required 
by  law ;  Packard  v.  Jefferson  Co.,  2  Col., 
338  (1874),  holding  that  a  change  in  the 
proposition  to  vote  bonds  which  is  in 
effect  a  new  proposition  cannot  be  le- 
gally voted  upon  at  an  election  already 
called,  there  not  being  sufficient  time 
remaining  before  the  election  to  give 
the  required  notice ;  McClure  v.  Town- 
ship, etc.,  94  U.  S.,  429  (1876),  in  which 
bonds  were  declared  void  because  the 
election  by  which  they  were  authorized 
was  not  held  pursuant  to  a  notice  of 
thirty  days,  as  required  by  the  act ;  An- 
derson v.  Beal,    113  U.    S.,   227  (1884), 
holding  that,  if  the  bonds  on  their  face 
recite  that  they  were  issued  in  pursu- 
ance of  a  vote  held  on  a  certain  day, 
the  statement  is  equivalent  to  one  that 
the  vote  was  regular  in  form  as  to  prior 
notice,  and  the  municipal  corporation 
is  estopped  from  showing  that  it  was 
held  without  proper  notice  in  an  action 
by  a  bona  fide  holder ;  George  v.  Ox- 
ford, etc.,  16  Kan.,   72  (1876),    holding 
that  when  an  election  authorizing  the 


146 


CH. 


VI.] 


MUNICIPAL   SUBSCRIPTIONS. 


[§95. 


§95.  Submission  to  popular  vote. —  While  the  legislature  may 
authorize  a  municipality  to  make  a  subscription  to  the  stock  of  a 
railway  or  other  corporation  without  submitting  the  question  to  a 
vote  of  the  people,1  it  has  the  power  to  direct  that  the  question 
shall  be  so  submitted.  Such  an  act  does  not  amount  to  a  delesra- 
tion  of  legislative  powers.2  When  it  is  provided  that  a  subscrip- 
tion can  be  made  only  upon  the  petition  of  a  certain  proportion  of 

issue  of  bonds  was  held  upon  insufficient  23  id.,  456  (1861) ;  Bank  of  Rome  v.  Vil- 
notice,  and  the  facts  appeared  upon  the 
face  of  the  bonds,  the  bonds  were  void ; 
Williams  v.  Roberts.  88  111.,  11  (1878), 
where  an  election  called  by  twelve  vot- 
ers instead  of  twenty,  as  required,  upon 
a  ten  days'  notice,  where  the  statute  re- 
quired twenty  days,  was  held  a  nullity. 
See,  also,  Wells  v.  Pontiac  Co.,  102  U. 
S.,  625  (1880) ;  Lincoln  v.  Cambria  Iron 
Co.,  103  U.  S.,  412  (1880).  But  where  the 
notice  was  required  by  the  statute  to  be 
"  posted  by  the  town  clerk  or  supervis- 
ors," it  was  held  that  this  did  not  require 
a  posting  by  these  officers  in  person,  but 
that  it  was  sufficient  if  they  procured 
others  to  post  the  notice.  Lawson  v. 
Milwaukee,  etc.,  R  R.  Co.,  30  Wis.,  597 
(1872);  Phillips  v.  Albany,  28  id.,  340 
(1871) ;  Jones  v.  Hurlburt,  13  N.  W.  Rep., 
5  (1882). 

lOtoe  County  v.  Baldwin,  111  U.  S., 
1  (1883);  Thompson  v.  Lee  County,  3 
Wall,  327  (1865);  County  of  Ralls  v. 
Douglass,  105  U.  S.,  728  (1881);  State  v. 
Macon  County  Court,  41  Mo.,  453  (1867); 
State  v.  County  Court  of  Sullivan 
County,  51  id.,  522  (1873).  Cf.  State  v. 
Dallas  County,  72  id.,  329  (1880);  Mc- 
Callie  v.  Chattanooga,  3  Head  (Tenn.), 
317  (1859);  Chicago,  etc.,  R.  R  Co.  v. 
Aurora,  99  111.,  205  (1881);  Burr  v.  Char- 
iton Co.,  2  McCrary.  603  (1880).  In  this 
case  a  charter  of  a  railroad  authorized 
it  to  receive  subscriptions  from  coun- 
ties without  a  vote  of  the  people.  Bonds 
so  issued  were  held  valid  though  a  prior 
special  act  required  a  vote  of  tax-payers 
as  a  condition  precedent  to  such  sub- 
scriptions. 

2Starin  v.  Town  of  Genoa,  23  N.  Y., 
439  (1861);  Gould  v.  Town  of  Sterling, 


lage  of  Rome,  18  id.,  38  (1858);  S.  C, 
19  id.,  20  (1859);  People  v.  Batchellor, 
53  id.,  128,  138  (1873);  Town  of  Du 
burgh  v.  Jenkins,  57  id.,  177,  192  I 
Hobart  v.  Supervisors,  17  Cat,  23  (1860) ; 
Slack  v.  Maysville,  etc.,  R.  R.  Co..  13 
B.  Mon.,  1  (1852);  Winter  v.  City  Coun- 
cil of  Montgomery,  65  Ala..  403  (1880). 
In  Harrington  v.  Plainview,  27  Minn.. 
224  (1880),  it  is  held  that,  where  a  sub- 
mission to  the  people  is  provided  for,  it 
must  be  to  the  legal  voters  of  the  mu- 
nicipality, and  cannot  lawfully  be  con- 
fined to  resident  tax-payers,  whether 
legal  voters  or  not.  Cf.  Babcock  v. 
Helena,  34  Ark.,  499  (1879);  Walnut  v. 
Wade,  103  U.  S,  683  (1880).  Again, 
where  a  popular  vote,  taken  in  accord- 
ance with  a  statute,  authorized  a  sub- 
scription to  a  designated  railway,  and 
the  bonds  were  issued  to  a  consolidated 
road  including  the  first  —  these  facts 
appearing  on  the  face  of  the  bond  —  the 
invalidity  of  the  transaction  was  held 
to  appear  on  the  face  of  it.  County  of 
Bates  v.  Winters,  97  U.  S,  83  (1877). 
Cf.  Chicot  Co.  v.  Lewis.  103  id.,  164 
(1880);  Schaeffer  v.  Bonham,  95  111.. 
368  (1880).  But  where  a  town  is  au- 
thorized to  subscribe  not  exceeding  a 
certain  sum  to  a  designated  railroad. 
several  subscriptions  made  at  different 
times  and  authorized  by  as  many  elec- 
tions, the  aggregate  not  exceeding  the 
amount  named  in  the  act,  are  valid. 
Empire  v.  Darlington,  101  U.  S.,  87 
(1879).  See.  also,  Hurt  v.  Hamilton.  25 
Kan.,  76  (1881);  Society  for  Savings?-. 
City  of  New  London,  29  Conn.,  171 
(1860);  First  Nat.  Bank  v.  Concord.  50 
Vt.  257. 


147 


§95.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  VI. 


the  legal  voters,1  there  must  be  a  substantial  compliance  with  the 
spirit  as  well  as  the  letter  of  the  act.2 

When  the  enabling  act  provides  for  municipal  aid  to  railways 
and  other  quasi-\)ub\\c  enterprises  upon  the  assent  of  a  majority  or 
two-thirds  of  the  legal  voters  of  the  town  or  county,  this  is  con- 
strued universally  to  mean  that  the  measure  is  to  be  approved  by 
a  majority  or  a  two-thirds  vote,  as  the  case  may  be ;  that  is  to  say, 
by  a  majority  or  two-thirds  of  the  voters  who  vote  at  the  election 
called  for  the  purpose,  and  not  two-thirds  or  a  majority  of  all  the 
qualified  electors  in  the  territory.  Those  who  fail  to  vote  against 
the  measure  are  not  considered  nor  counted  as  having  the  power 
to  vote.3 


1 E.  g.,  in  New  York.  People  v.  Hul- 
bert,  59  Barb.,  446 ;  People  v.  Peck,  62 
id.,  545 ;  People  v.  Oliver,  1  Thomp.  & 
C,  570  (1873);  People  v.  Hughitt,  5 
Lans.,  89  (1871);  People  v.  Franklin,  5 
id.,  129  (1871);  People  v.  Smith,  45  N.  Y., 
772  (1871) ;  Wellsbbrough  v.  New  York, 
etc.,  R  R  Co.,  76  id.,  182  (1879).  Cf.  St. 
Joseph  Township  v.  Rogers,  16  Wall., 
644  (1872);  Syracuse  Savings  Bank  v. 
Seneca  Falls,  21  Hun  (N.  Y),  304  (1880) ; 
Faris  v.  Reynolds,  70  Ind.,  360  (1880). 

2  People  v.  Smith,  45  N.  Y,  772  (1871); 
Craig  v.  Andes,  93  N.  Y,  405 ;  People  v. 
Oldtown,  88  111.,  202  (1878).  If  the  stat- 
ute requires  a  written  application  by  ten 
legal  voters  before  the  clerk  should  call 
an  election,  such  application  is  neces- 
sary to  the  validity  of  the  election,  and 
without  proof  of  it  the  municipality 
cannot  be  compelled  to  issue  bonds. 
Monadnock  R.  R  Co.  v.  Petersboro,  etc., 
49  N.  H.,  281  (1870),  holding  that  a  town 
cannot  delegate  its  power  to  authorize 
subscriptions  to  a  committee;  and  a 
statute  requiring  the  vote  of  "  two-thirds 
of  the  legal  voters  present  and  voting 
at "  the  meeting  must  be  strictly  obeyed. 
Mercer  Co.  v.  Pittsburgh,  etc.,  27  Pa.  St., 
389  (1856),  in  which  a  statute  designated 
the  grand  jury  of  a  county  to  decide 
upon  a  subscription.  It  was  held  that 
the  grand  jury  could  not  delegate  the 
power  so  conferred  to  county  commis- 
sioners, and  that  the  commissioners 
could  only  subscribe  in  accordance  with 


the  decision  of  the  grand  jury.  Where 
the  municipal  bonds  recite  that  the  vote 
was  on  an  application  of  fifty  voters, 
where  the  statute  required  that  the  ap- 
plication should  be  by  voters  and  tax- 
payers, held,  that  the  bonds  were  void, 
where  the  application  was  not  by  tax- 
payers. Gilson  v.  Dayton,  123  U.  S.,  59 
(1887).  Municipal  bonds  issued  on  a 
vote  of  a  minority  of  the  voters,  instead 
of  a  majority,  as  required  by  the  statute, 
in  aid  of  a  railroad,  are  void.  Onstott 
v.  People,  15  N.  E.  Rep.,  34  (111.,  1888). 
In  Prettyman  v.  Supervisors,  19  III.,  406, 
414  (1858),  a  case  of  subscription  by  a 
county  to  railroad  stock,  a  tax-payer 
waited  four  months  before  alleging 
fraud  in  the  election.  Held  equivalent 
to  acquiescence,  and  too  late.  See,  also, 
People  v.  Van  Valkenburg,  63  Barb.,  105 
(1872);  Evansville,  etc.,  R  R  Co.  v.  Ev- 
ansville,  15  Ind.,  395  (1860);  Chicago, 
etc.,  R  R  Co.  v.  Mallory,  101  111.,  583 
(1882).  For  the  manner  in  Indiana  of 
contesting  an  election,  see  Goddard  v. 
Stockman,  74  Ind.,  400  (1881). 

3  County  of  Cass  v.  Johnson,  95  U.  S., 
360  (1877);  Carroll  Co.  v.  Smith,  111  U. 
S.,  556  (1884) ;  County  of  Cass  v.  Jordan, 
95  id.,  373  (1877) ;  Hawkins  v.  Carroll  Co., 
50  Miss.,  735  (1874) ;  Louisville,  etc.,  R 
R  Co.  v.  Tennessee.  8  Heisk.,  663  (1875); 
State  v.  Brassfield,  67  Mo.,  331  (1878) : 
Webb  v.  La  Fayette  Co.,  67  id.,  353 
(1878);  People  v.  Chapman,  66  111.,  137 
(1872);  People  v.  Harp,  67  id.,  62  (1873); 


148 


CH.  VI.] 


MUNICIPAL    SUBSCRIPTIONS. 


[§96. 


The  legislature  may  render  effective  a  prior  vote  of  a  munici- 
pality, taken  without  statutory  authority,  in  aid  of  a  railroad.  If 
the  state  courts  vary  in  their  decisions  on  municipal  aid  to  rail- 
roads the  federal  court  will  decide  upon  its  own  judgment.1 

§  96.  What  officer  or  agent  of  the  municipality  may  make  the 
contract  of  subscription. —  In  the  absence  of  any  express  provision 
in  the  enabling  act  the  proper  persons  to  execute  the  contract  of 
subscription  for  a  municipal  corporation  are  those  whose  duty  it  is 
to  execute  other  contracts  for  and  in  the  name  of  the  municipality. 


Dunnovan  v.  Green.  57  111.,  63,  holding 
that  a  statute  which  authorizes  a  sub- 
scription, provided  a  majority  of  votes 
are  in  favor  of  it,  means  a  majority  of 
votes  cast,  not  a  majority  of  all  voters ; 
Culver  v.  Fort  Edward,  8  Hun,  340 
(1876),  holding  that,  if  the  statute  re- 
quires a  vote  of  the  majority  of  taxable 
inhabitants,  the  consent  of  a  majority 
who  attended  the  meeting  is  not  suffi- 
cient; Walnut  v.  Wade,  103  U.  S.,  683 
(1879),  holding  that  "inhabitants,"  as 
used  in  an  enabling  act,  meant  legal 
voters;  St  Joseph  v.  Rogers,  16  Wall., 
644  (1872),  where  a  law  of  Illinois,  re- 
quiring a  vote  of  "a  majority  of  the 
legal  voters  of  any  township "  in  one 
section,  and  a  majority  "  voting  at 
such  election,"  was  construed  to  mean 
a  majority  of  those  voting  at  the  elec- 
tion ;  People  v.  Oliver,  1  T.  &  C.  (N.  Y.), 
570  (1873),  holding  that  "tax-payers" 
includes  all  persons  whose  names  are 
on  the  assessment  roll  as  such,  though 
wrongfully  taxed  —  as  non-residents ; 
Milner  v.  Pensacola,  2  Woods,  632  (1875), 
where  a  statute  required  the  "  consent 
of  a  majority  of  the  corporation  com- 
prising "  the  cit}*.  A  defense  to  an  ac- 
tion on  the  bonds  by  an  innocent  holder, 
that  only  a  minority  of  citizens  voted, 
was  held  not  good ;  Melvin  v.  Lisenby, 
72  111.,  63  (1874),  holding  that  the  pre- 
sumption is  that  the  vote  cast  at  an  elec- 
tion held  according  to  law  is  the  vote 
of  the  whole  number  of  legal  voters; 
Reiger  v.  Beaufort  70  N.  C,  319  (1874), 
where  a  majority  of  votes  cast  at  an 
election  was  held  sufficient  under  a 
statute    requiring    a   majority    of    the 


voters  qualified  to  vote,  although  a  ma- 
jority of  all  the  voters  of  the  town  did 
not  vote.  If  petition  must  be  signed  by 
a  majority  of  freeholder,  minors  and 
married  women,  etc.,  are  to  be  counted. 
State  v.  City  of  Kokomo,  8  N.  E. 
Rep.,  718  (Ind.,  1886).  See,  also,  Cagwin 
v.  Hancock,  84  N.  Y.,  532  (1881).  And  for 
a  contrary  rule,  well  argued  out,  see 
Harshman  v.  Bates  Co.,  92  IT.  S.,  569 
(1875)  [overruled,  however,  in  County  of 
Cass  v.  Johnson,  95  U.  S.,  360  (1877)], 
and  the  dissenting  opinions  of  Miller 
and  Bradley.  JJ,  in  County  of  Cass  v. 
Johnson,  95  U.  S.,  360,  370  (1877).  As  to 
the  right  of  a  voter  or  signer  to  revoke 
his  consent  once  granted,  see  Spring- 
port  v.  Teutonia  Savings  Bank,  84  id., 
403  (1881) ;  People  v.  Sawyer,  52  N.  Y, 
296 ;  People  v.  Wagner,  1  Thomp.  &  C, 
221  (1873);  People  v.  Hatch,  1  id.,  113 
(1873).  Cf.  First  Nat.  Bank  v.  Dorset,  16 
Blatch.,  62  (1879) ;  Noble  v.  Vincennes, 
42  Ind.,  125  (1873) ;  and  see  Hannibal  v. 
Fountleroy,  105  U.  S.,  408  (1881). 

1  Anderson  v.  Township  of  Santa 
Anna,  116  U.  S.,  356  (1886).  Cf.  State  v. 
Holladay,  72  Mo.,  499 ;  Smith  v.  City  of 
Fond  du  Lac,  8  Fed.  Rep.,  2S9 ;  McCall 
v.  Town  of  Hancock,  10  id.,  8.  The 
fact  that  the  proposition  to  vote  aid  is 
defeated  at  one  election  does  not  pre- 
vent the  calling  of  another  election  to 
submit  the  question  again.  Supervis- 
ors v.  Galbraith,  99  U.  S.,  214  (1878); 
Society,  etc.,  v.  City,  etc.,  29  Conn.,  174. 
Nor  does  a  vote  of  aid  to  one  railroad 
prevent  a  subsequent  vote  of  aid  to  an- 
other railroad.  Chicot  Co.  v.  Lewis,  1C3 
U.  S.,  164. 


149 


§96.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH.  YI. 


A  subscription  is  a  contract,  to  be  executed  in  general  in  the  ordi- 
nary wav  in  which  any  other  contract  may  properly  be  made.  But 
the  act  authorizing  the  subscription  frequently  provides  by  whom 
and  in  what  manner  the  contract  shall  be  executed.  When  this  is 
the  case  the  provisions  of  the  statute  are  to  be  strictly  complied 
with.1 

It  has  been  held  that,  in  order  to  constitute  a  valid  municipal 
subscription  to  the  stock  of  a  railway  company,  it  is  not  necessary 
that  there  be  an  actual  act  of  subscribing.2 

1  Walnut  v.  Wade,  103  U.  S.,  683  agents  of  a  municipality  have  a  discre- 
(1880);  Town  of  Douglass  v.  Niantic 
Savings  Bank,  97  111.,  228  (1881);  Town 
of  Windsor  v.  Hallett,  97  111.,  204  (1880> 
The  commissioners  cannot  bind  the 
municipality  by  a  modification  of  the 
subscription  voted  by  it.  Bell  v.  Railroad 
Co.,  4  Wall.,  598  (1866).  A  subscription 
for  a  municipality  by  officers  in  a  sup- 
posed office  which  does  not  constitu- 
tionally exist  is  void.  Norton  v.  Shelby 
County.  118  U.  S.,  425  (1886).  So,  for 
example,  where  the  act  provides  for 
the  appointment  of  a  board  of  commis- 
sioners to  make  the  subscription,  they 
only  are  competent  to  make  it;  they 
are  for  this  purpose  the  agents  of  the 
municipality  for  which  they  act;  they 
may  insert  conditions  into  the  contract 
which,  unless  repudiated  by  the  corpo- 
ration, are  valid,  and  will  bind  all  par- 
ties concerned ;  their  powers  are  to  be 
exercised  jointly,  and  therein  all  must 
act  —  a  ma jority  not  being  sufficient  by 
their  act  to  bind  the  municipality; 
their  acts,  when  once  fully  performed, 
are  final  and  binding,  and  cannot  be 
recalled  or  revoked.  Danville  v.  Mont- 
pelier,  etc.,  R  R  Co.,  43  Vt,  144  (1870). 
Cf.  First  Nat  Bank  v.  Arlington,  16 
Blatch..  57  (1879);  Bank  v.  Concord,  50 
Vt.  257;  People  v.  Hitchcock,  2  T. 
&  C.  (N.  Y.),  134  (1873) ;  State  v.  Han- 
cock County,  11  Ohio  St.,  183  (1S60);  S.  C, 
12  id..  596.  Cf.  Jackson  County  v.  Brush. 
76  111.,  59  (1875);  Kankakee  v.  Mtna 
Life  Ins.  Co.,  106  U.  S.,  668  (1882) ;  Bis- 
sell  v.  Township  of  Spring  Valley.  110 
U.  S.,  162  (1884);  In  re  Bradner,  ^7 
N.    Y.,    171   (1881).     If    the    officers  or 


tion  with  reference  to  the  subscription 
to  make  it  or  not,  as  they  may  think 
best  under  the  circumstances,  their  ex- 
ercise of  that  discretion  is  final,  and 
cannot  be  reviewed  or  questioned. 
Mercer  County  r.  Pittsburgh,  etc.,  R  R. 
Co.,  27  Penn.  St,  389  (1856).  Cf.  Fal- 
coner v.  Buffalo,  etc.,  R  R  Co.,  G9 
N.  Y.,  491  (1877);  First  Nat  Bank  v. 
Concord,  50  Vt,  257  (1877). 

2  Nugent  v.  Supervisors,  19  Wall.,  241 
(1873),  holding,  also,  that  a  resolution 
by  a  duly  authorized  board  of  agents, 
declaring  a  subscription  made,  is,  upon 
the  acceptance  of  the  subscription  in 
that  shape  by  the  railway  company, 
and  a  notice  to  the  municipality  of  the 
acceptance,  a  good  and  binding  sub- 
scription, although  there  was  no  sub- 
scription made  in  the  books  of  the 
company.  To  same  effect  see  County 
of  Moultrie  v.  Rockingham  Ten  Cent 
Sav.  Bank,  92  U.  S.,  631  (1875) ;  Couuty 
of  Cass  v.  Gillett,  100  id.,  585  (1879). 
Cf.  State  v.  Jennings,  4  Wis.,  549.  The 
board  whose  duty  it  is  to  make  the  sub- 
scription may  do  so  through  the  county 
clerk.  Chicago,  etc.,  R.  R.  Co.  v.  Put- 
nam, 12  Pac.  Rep.,  593  (Kan.,  1887). 
The  bonds,  if  signed  on  Sunday,  will 
be  invalid,  although  the  signature  is 
by  the  proper  officer.  De  Forth  v. 
Wisconsin,  etc.,  R  R  Co.,  52  Wis.,  320 
(1881);  Bank,  etc.,  v.  Town,  etc.,  84 
N.  C,  169  (1881),  where  an  omission  of 
commissioners  to  sign  bonds  was  held 
not  fatal,  the  requirement  bein/;  direct- 
ory. 


150 


CH.  VI.] 


MUNICIPAL    SLliSCKIPTIONS. 


[§9T. 


But  the  vote  of  the  tax-payers  or  inhabitants,  as  the  case  may 
be,  is  not  a  subscription,  nor  does  it  amount  to  a  subscription;  nor 
does  it  in  general  vest  in  the  company  for  whose  proposed  benefit 
the  vote  was  taken  a  right  to  have  a  subscription  made.1 

It  has  been  held  that  the  officers  authorized  to  make  the  sub- 
scription have  a  certain  amount  of  discretion  in  fixing  the  terms  of 
payment.2 

§  97.  Municipal  subscriptions  may  be  conditional. —  A  municipal 
corporation  may  annex  to  its  subscription  any  condition  that  an 
individual  subscriber  might  lawfully  prescribe,  and  may,  in  con- 
sequence, make  the  payment  of  the  subscription  depend  upon  the 
performance   thereof.3     Moreover,  a  municipal  corporation  is  en- 


1  Cumberland,  etc.,  R  R  Co.  v.  Barren 
Co.,  10  Bush  (Ky.),  604  (1874);  Bates 
Co.  v.  Winters,  97  U.  S..  83  (1877).  A 
mere  vote  of  the  municipality  is  not  a 
subscription.  If  the  road  is  foreclosed 
before  subscription,  no  suit  lies  to  col- 
lect Board  of  Coninrrs  v.  Cottingharn, 
17  N.  E.  Eep.,  855  (Ind.,  1888) ;  County 
of  Bates  v.  Winters,  97  U.  S.,  83  (1877), 
holding  that  where,  after  an  election 
in  favor  of  making  a  subscription,  the 
county  court  made  an  order  for  a  sub- 
scription, and  its  agent  reported  that  the 
railroad  company  had  no  stock-books, 
for  which,  and  other  reasons,  he  did  not 
make  the  subscription,  it  was  held  that 
these  acts  were  not  final  and  self-exe- 
cuting, and  did  not  constitute  a  sub- 
scription ;  Wadsworth  v .  St  Croix  Co. , 
4  Fed.  Rep.,  378  (1880). 

2  Syracuse,  etc.,  v.  Seneca,  etc.,  86  N.  Y., 
317  (1881),  where  it  was  held  that  after 
regular  proceedings  had  been  taken  to 
bond  a  town,  the  commissioners,  under 
the  law,  had  a  right  to  make  the  bonds 
payable  at  one  time  or  at  different 
times:  Winter  v.  City  Council,  etc.,  65 
Ala.,  403  (1880),  where  a  vote  authorized 
the  issue  of  bonds  to  an  amount  not  ex- 
ceeding $1,000,000,  and  it  was  held  that 
the  corporate  authorities  had  discre- 
tionary power  to  issue  them  for  a  less 
amount. 

3Brocaw  v.  Gibson  Co.,  73  Ind.,  543 
(1881);  Portland,  etc.,  R  R  Co.  v.  In- 
habitants of  Hartford,  58  Me.,  23  (1870). 


A  municipality  authorized  to  vote  a 
subscription  to  the  stock  of  a  railroad 
company  may  impose  conditions  that 
shops  be  built  in  the  town.  Casey  v. 
People,  24  N.  E.  Rep.,  570  (111.,  1890); 
Chicago,  etc.,  R  R  Co.  v.  Aurora,  99 
111.,  205  (1881),  holding  that  if  of  two 
conditions  one  is  legal  and  the  other 
unauthorized,  and  they  are  severable, 
the  illegal  one  may  be  rejected  and  the 
bonds  issued  held  good  as  to  the  other ; 
Noesen  v.  Port  Washington,  37  Wis.,  168 
(1875) ;  Perkins  v.  Port  Washington,  37 
id.,  177  (1875);  Town  of  Platteville  v. 
Galena,  etc.,  R  R  Co.,  43  id.,  493  (1878), 
holding  that,  where  a  town  accepted  a 
written  proposition  from  a  railroad 
company,  the  terms  and  construction  of 
it  were  not  allowed  to  be  modified  by 
reason  of  representations  made  by  the 
company  to  the  voters  before  the  elec- 
tion. Foote  v.  Mount  Pleasant,  1  Mc- 
Crary,  101  (1878).  In  this  case  the  pro- 
ceeds of  city  bonds  issued  in  payment 
of  a  subscription  to  a  railroad  were  to 
be  expended  within  the  county  limits. 
It  was  held  that  as  between  the  city 
and  the  road  or  its  assignees  with  notice, 
the  bonds  could  not  be  enforced  if  no 
part  of  the  proceeds  had  been  so  ex- 
pended. Atchison,  etc.,  R  R  Co.  v.  Phil- 
lips Co.,  25  Kan.,  261  (1881).  Cf.  Mom- 
phis,  etc.,  R.  R  C<\  v.  Thompson,  24 
Kan.,  170  (1880);  Red  Rock  r.  Henry. 
106  U.  S.(  596  (1882);  Shurtleff  v.  Wis- 
casset,  74  Me.,  130  (1882);  State  v.  Han- 


151 


§  97.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH. 


VI. 


titled  to  the  benefit  of  any  implied  conditions  to  which  an  individ- 
ual subscriber  would  be  entitled.1 

Where  a  condition  precedent  has  not  been  fulfilled  the  subscrip- 
tion is  not  enforceable,  and  bonds  issued  in  payment  will  be  in- 
valid even  in  the  hands  of  lonaftde  holders;  as,  for  example,  where 
the  location  of  a  railway  in  a  certain  place  is  the  condition,  and  the 
location  is  not  made  as  required  by  the  condition.2  But  if  it  be  a 
condition  subsequent,  as  where  a  town  subscribed  for  stock  in  a 
railway  company  upon  condition  that  the  road  should  "  be  built 
through  the  town  on  the  line  as  run  by  the  engineer,  with  a  suita- 
ble depot  for  the  convenience  of  the  public,"  a  failure  to  perform 
is  not  a  defense  to  an  action  to  collect  assessments.3 


cock  Co.,  11  Ohio  St,  183  (1860).  In 
this  case  commissioners  who  were  au- 
thorized to  subscribe  for  stock  in  a  rail- 
road to  run  through  their  county  and  to 
issue  bonds  therefor,  and  who  had  sub- 
scribed for  the  stock,  were  allowed,  as 
against  a  proceeding  to  compel  them  to 
issue  bonds,  to  set  up  the  defense  that 
the  road  had  not  been  located  in  their 
county.  A  certificate  of  the  municipal 
authorities  that  the  condition  has  been 
complied  with  renders  the  bonds  issued 
on  that  certificate  valid  and  enforceable, 
though  the  certificate  was  a  fraud  on 
the  municipality.  Oregon  v.  Jennings, 
119  U.  S.,  74  (1886);  People,  etc.,  v.  Hol- 
den,  82  111.,  93  (1876).  In  this  case  com- 
pleting a  road,  except  about  one  mile, 
and  operating  its  trains  for  that  distance 
over  another  road  so  as  to  supply  all  the 
wants  of  the  public,  was  held  a  substan- 
tial compliance  with  a'condition  requir- 
ing its  completion.  Hodgman  v.  St 
Paul,  etc.,  23  Minn.,  153  (1876),  holding 
that  a  condition  calling  for  the  comple- 
tion of  a  road  to  a  certain  point  did  not 
require  the  building  of  a  bridge  across 
a  river,  other  facilities  for  crossing  it 
being  provided.  See,  also,  on  conditional 
subscriptions,  Concord  v.  Portsmouth, 
etc.,  92  U.  S.,  625  (1875);  Railroad  Co.  v. 
Falconer,  103  U.  S.,  821  (1880);  ch.  V, 
supra.  In  the  case  of  Madison  County 
Court  v.  Richmond,  etc.,  R  R  Co.,  80 
Ky.,  16  (1882),  it  is  held  that,  while  a 
county  may  make  such  conditions  as 
may  seem  proper  to  it  before  submitting 


1 


the  question  of  a  subscription  to  a  pop- 
ular vote,  the  county  court  cannot,  after 
the  vote  is  taken,  require  other  condi- 
tions, or  alter  those  already  imposed,  or 
by  a  second  election  change  the  terms 
of  the  contract  of  subscription  as  orig- 
inally made  and  entered  into.  See,  also, 
Carroll  v.  Smith,  111  U.  S.,  556  (1884). 

1  Lamb  v.  Anderson,  54  Iowa,  190 
(1880). 

2Mellen  v.  Town  of  Lansing,  19 
Blatch.,  512  (1871);  Chicago,  etc.,  R,  R. 
Co.  v.  Marseilles,  84  111.,  145  (1876); 
Bucksport,  etc.,  R  R  Co.  v.  Brewer,  67 
Me.,  295  (1877). 

3  Belfast  etc.,  R,  R  Co.  v.  Brooks,  60 
Me.,  568  (1872).  Cf.  Chicago,  etc.,  R.  R 
Co.  v.  Schewe,  45  Iowa,  79  (1876).  As  to 
a  subsequent  breach  of  a  condition  at- 
tached to  the  subscription,  see  People  v. 
Rome,  etc.,  R  R.  Co.,  103  N.  Y.,  95 
(1886).  A  contract  to  keep  certain  shops, 
etc.,  permanently  in  a  place,  in  consid- 
eration of  local  aid,  may  be  disregarded 
by  the  railroad  after  many  years,  when 
its  terminus  changes,  etc.  Texas,  eta, 
R'y  v.  Marshall,  132  U.  S.,  393  (1890). 
Lessees  of  purchaser  of  railroad  pur- 
chased at  foreclosure  sale  are  not  bound 
by  contract  of  first  railroad  company, 
made  with  municipalities  voting  aid  in 
reference  to  depots.  People  v.  Louis- 
ville, etc.,  R  R  Co.,  10  N.  E.  Rep.,  657 
(III.,  1887).  See,  also,  People  v.  Holden, 
82  111.,  93  (1876);  Hodgman  v.  St  Paul, 
etc.,  R  R.  Co.,  23  Minn.,  153  (1876);  State 
v.  Town  of  Clark,  23  id.,  422(1877) ;  State 
52 


CH. 


VI] 


MUNICIPAL    SUBSCRIPTIONS. 


[§98. 


§  98.  When  may  a  municipal  subscription  l)c  paid  in  bonds  in- 
stead of  money?  —  The  express  power  of  a  municipality  to  sub- 
scribe for  stock  does  not  authorize  it  to  issue  negotiable  bonds 
therefor.1  But  where  a  municipal  corporation  is  authorized  to  sub- 
scribe to  the  stock  of  a  railway  or  other  corporation,  or  to  lend  its 
credit  thereto,  and  to  issue  bonds  to  that  end,  it  may,  in  the  exer- 
cise of  its  proper  discretion,  instead  of  selling  the  bonds  and  apply- 
ing the  proceeds  to  the  payment  of  the  subscription,  deliver  the 
bonds  themselves  to  the  railway  company  in  exchange  for  an 
equivalent  amount  of  the  stock.2 

In  ]STew  York  a  contrary  view  prevails,  and  there  is  force  in  the 
lS"ew  York  argument  that  only  thus  can  the  full  par  value  of  the 
bonds  be  realized  for  the  purposes  of  the  enterprise.3 


v.  Lime,  23  id..  521  (1877).  See,  also,  §78, 
supra.  In  New  York  it  is  held  that, 
where  a  town  imposes  as  a  condition 
precedent  to  its  subscription  that  the 
road  be  located  and  constructed  through 
the  town,  the  commissioners  have  no 
power  to  accept  any  agreement  from 
the  company  or  any  substitute  in  lieu 
of  full  compliance.  Falconer  v.  Buffalo, 
etc.,  R.  R  Co.,  69  N.  Y..  491  (1877). 
Where  the  agent  of  the  railroad  repre- 
sented that  a  depot  was  to  be  con- 
structed at  a  certain  place,  a  failure  to 
so  construct  is  good  ground  for  enjoin- 
ing the  issue  of  municipal  aid  bonds. 
Wullenwahur  v.  Dunnigan,  47  N.  W. 
Rep.,  420  (Neb.,  1890).  Cf.  ch.  IX  As 
to  the  right  to  revoke  a  consent  by  pop- 
ular vote,  see  §  94,  supra. 

1  Norton  v.  Dyersburg,  127  U.  S.,  160 
(1888).  Even  though  a  municipal  cor- 
poration be  authorized  by  statute  to  sub- 
scribe to  the  stock  of  a  railroad,  yet  it 
cannot  issue  its  negotiable  bonds  to  pay 
such  subscription,  there  being  no  statu- 
tory authority  for  the  issue  of  such 
bonds.  Hill  v.  Memphis,  134  U.  S.,  198 
(1890). 

2  Meyer  v.  The  City  of  Muscatine,  1 
Wall.,  384,  392(1863);  Seybertv.  Pitts- 
burgh. 1  Wall.,  272  (1863);  Evansville, 
etc.,  R  R  Co.  v.  City  of  Evansville,  15 
Ind.,  395  (1860);  Curtis  v.  County  of 
Butler,  24  How.  (U.  S.).  435 ;  Common- 
wealth v.  Pittsburgh,  41  Penn.  St.,  278 ; 


Town  of  Concord  v.  Portsmouth  Savings 
Bank,  92  TJ.  S.,  625  (1871);  AspinwaU  u 
Jo  Daviess  Co.,  22  How..  364  (1852), 
where,  before  the  authorized  subscrip- 
tion was  made,  a  new  constitution  was 
adopted  making  such  subscript:ons  void 
unless  paid  in  cash ;  held,  that  bonds 
issued  to  pay  a  subscription  made  after 
the  new  constitution  was  adopted  were 
void.  Statutory  authority  to  raise 
money  by  tax  and  appropriate  it  to  aid 
of  railroad  does  not  authorize  issue  of 
bonds  by  the  municipality  therefor. 
Concord  v.  Robinson,  121  U.  S..  165 
(1887).  Where  a  town  issues  bonds  in- 
stead of  paying  money,  as  required  by 
statute,  and  the  bonds  are  declared  void, 
the  holder  is  not  subrogated  to  the  right 
of  the  railroad  to  the  money  itself. 
^Etna,  etc.,  Ins.  Co.  v.  Middleport,  124 
U.  S.,  534  (1888). 

sstarin  v.  Genoa,  23  N.  Y,  439  (1861); 
Bank  of  Rome  v.  Village  of  Rome.  19  id., 
20  (1859);  Horton  v.  Town  of  Thomp- 
son, 71  id.,  513  (1863),  holding  that,  if 
the  bonds  were  turned  over  to  the  rail- 
road, the  latter  would  sell  them  for 
what  they  would  bring,  which  would 
generally  be  less  than  par.  For  decis- 
ions to  the  effect  that,  at  common  law, 
a  municipal  corporation  cannot  sell  its 
bonds  at  less  than  par,  see  Neuse  River 
Nav.  Co.  v.  Com'rs.  7  Jones  (N.  C),  275  ; 
Dan.  Neg.  Instr.  (3d  ed.),  §  1533;  County 
of  Armstrong  v.  Brinton,  47  Pa.  St,  367 


153 


§§  99,  100.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH. 


VI. 


§99.  A  municipal  corporation  as  a  stockholder. —  When  a  mu- 
nicipal corporation  subscribes  to  the  stock  of  a  railway  company, 
it  becomes  a  stockholder  in  just  the  same  sense  as  any  individual 
subscriber;  is  entitled  to  the  same  rights,  privileges  and  emolu- 
ments; and  is  subject  to  the  same  burdens  of  duty  and  liability  as 
other  holders  of  the  stock.1 

This  doctrine  is  established  as  an  unquestioned  rule  of  law  by 
the  long  line  of  cases,  both  in  the  state  and  federal  courts,  which 
involve  the  validity  of  municipal  bonds  issued  in  aid  of  railway  or 
other  corporations. 

§  100.  A  municipality  may  enforce  delivery  of  stoclc  to  itself  in 
a  proper  case. —  Under  the  same  circumstances  and  conditions,  and 
to  the  same  extent,  as  any  other  subscriber,  a  municipal  corpora- 
tion may  compel  a  railway  or  other  corporation  to  deliver  to  it 
stock  to  which  the  subscribers  in  general  are  entitled.  Whatever 
would  prevent  an  individual  subscriber  from  enforcing  such  de- 
livery will  equally  prevent  a  municipality  in  a  like  case.2     A  mu- 

lock  v.  Missouri  Pac.  R'y  Co.,  2  S.  W. 
Rep.,  219  (Mo.,  1886).  See,  also,  ch. 
XXXVIII.  A  judgment  creditor  may 
reach  a  municipal  subscription  payable 
in  bonds  by  mandamus,  after  acquiring 
the  company's  right  thereto. .  Smith  v. 
Bourbon  County,  127  U.  S.,  105  (1888) 
A  municipality  as  a  stockholder  may 
assent  to  the  sale  of  the  railroad  by  the 
corporation  to  another  reorganized  cor- 
poration. Foster  v.  Chesapeake,  etc., 
R'y,  47  Fed.  Rep.,  369  (1891).  A  munici- 
pality's stock  in  a  corporation  cannot  be 
reached  by  a  judgment  creditor  of  the 
municipality  except  by  proving  that  the 
subscription  was  legal.  Hughes  v. 
Com'rs..  12  S.  E.  Rep.,  465  (N.  C,  1890). 
Where  stock  in  a  railroad  is  owned  by  a 
part  of  a  county,  that  part  becomes  a 
municipality  for  the  purpose  of  owning 
and  voting  the  stock.  Hancock  v.  Louis- 
ville, etc.,  R.  R.,  145  U.  S.,  409  (1892).  Exe- 
cution or  garnishee  process  cannot  be 
levied  on  stock  held  by  an  individual  as 
trustee,  where  the  debt  is  his  individual 
debt,  nor  can  it  be  levied  on  the  divi- 
dends from  such  stock.  So  held  where 
stock  was  owned  by  a  city  in  trust  for 
the  citizens.  Hitchcock  v.  Galveston  W. 
Co.,  50  Fed.  Rep.,  263  (1880). 
2  Wapello  Co.   v.   Burlington,  etc.,  R 


(1864):   Gould  r.  Town  of  Sterling,  23 
X.  Y.,  456,  460  (1861). 

J  Shipley  v.  The  City  of  Terre  Haute. 
74  Ind.,  297   (1881) ;  Kreiger  v.  Shelby 
R.   R.  Co.  (Ky.,  1886),  25  Am.  &  Eng. 
R.  R  Cas.,  528  (1886);  Gray  v.  The  State, 
83  Ind.,  567  (1880);  1  Dan.  Xeg.  Instr., 
§  436 :  Murray  v.  Charleston,  96  U.  S., 
432   (1877).     See,    also,   Curran    v.   The 
State.  15  How.,  304;  Robinson  v.  Bank 
of  Darien,  18  Ga.,  65:  County  of  Mor- 
gan r.   Allen,    103    U.    S.,    498    (1880); 
United  States  v.  Planters'  Bank,  9  Wheat., 
904;  Morgan  County  v.  Thomas,  76  111., 
120  (1875);  State  v.  Holladay,  72  Mo., 
499;  Marshall    v.   Western,  etc.,   R  R., 
92  X.  C,  322  (1885);  County  of  Morgan 
v.  Allen,  103  U.  S.,  498  (1880),   holding 
that  the  creditors  of  an  insolvent  corpo- 
ration   may    enforce    the    liability    of 
municipal     corporations      upon      their 
bonds ;  Robinson  v.  Bidwell,  22  Cal.,  379 ; 
People  v.  Coon,  25  Cal.,  635,  holding  that 
the  individual  members  of  a  municipal 
corporation   have   no   such   interest   in 
stock  in  a  railroad  subscribed  for  by  it 
as    will    disable    the    legislature    from 
authorizing  it  to  compromise  with  the 
railroad.     A  foreclosure  of  the  railroad 
on    a  mortgage    closes  out    the  stock 
which  a  municipality  has  therein.   Spur- 


154 


CH.  VI.]  MUNICIPAL    SUBSCRIPTIONS.  [§■§  101-103. 

nicipal  corporation,  as  a  subscriber,  is  in  no  better  position  than  an 
individual  subscriber  in  this  respect.1 

§  101.  Division  of  the  municipality  after  the  subscription. —  We 
find  a  line  of  cases  in  the  reports  of  some  of  the  western  states 
which  deals  with  the  questions  which  have  grown  out  of  the  sub- 
division of  towns  and  counties  in  those  states,  after  a  donation  or 
subscription  has  been  made  to  some  railway  or  other  corporation, 
and  before  the  bonds  have  been  issued,  or  before  they  have  become 
due  and  payable. 

It  is,  of  course,  not  competent  for  the  legislature  so  to  divide  a 
municipality  as  to  release  all  or  any  part  of  it  from  the  obligation 
of  any  contract  into  which  the  whole  had  previously  entered.2 
When  a  town  or  county  is  divided,  or  some  part  of  it  annexed  to 
some  other  town  or  county,  after  the  undivided  municipality  has 
voted  a  subscription,  and  it  is  provided  in  the  act  by  which  the 
division  is  accomplished  that  each  part  shall  remain  liable  for  the 
previous  municipal  indebtedness,  such  provision  is  held  to  mean 
nothing  more  than  that,  as  concerns  the  subscription  voted,  each 
part  is  liable  for  its  proportion  only  of  the  debt  according  to  the 
valuation  of  the  property  of  the  undivided  municipality  at  the  time 
the  vote  was  taken.3  This  rule,  however,  cannot  affect  the  cred- 
itors right  to  hold  liable  the  whole  of  the  old  municipality. 

§§  102, 103.  Consolidation  of  companies  after  the  municipal  aid  is 
voted. —  When  the  company  proposed  to  be  benefited  unites  or  is 
consolidated  with  another  company  or  companies  of  a  similar  char- 
acter, after  the  aid  of  a  municipality  has  been  voted  and  before  the 
subscription  has  been  paid  —  the  company  having  before  the  elec- 
tion the  right  to  consolidate  —  the  bonds  may  lawfully  be  issued  to 
or  sold  for  the  benefit  of  the  new  or  consolidated  company.4   When, 

R.  Co.,  44  Iowa, 585  (1876).     In  this  case  debts  of  the  county;  but  the  legislature 

the  stock  was  to  be  issued  only  when  may  apportion  the.  debt  between  the  old 

fully  paid.  and  the  new  counties ;  McBride  v.  llar- 

1  Pittsburgh,  etc.,  R  R  Co.  v.  Alle-  din  County,  58  la.,  219  (1882),  holding  that 
gheny  Co.,  79  Pa.  St.,  210  (1875).  Cf.  a  county  is  not  responsible  for  expenses 
State  v.  Garoutte,  67  Mo.,  445  (1878).  incurred  by  one  of  the  townships  eompris- 

2  Sedgwick  County  v.  Bailey,  11  Kan.,  ing  it  in  voting  taxes  in  aid  of  a  railroad- 
631(1873).  Cf.  State  v.  Lake  City,  25  4  Livingston  County  v.  Portsmouth 
Minn.,  404  (1879);  Marion  County  v.  Bank,  128  U.  S.,  102  (1888);  New  Buffalo 
Harvey  County,  26  Kan.,  181  (1881);  v.  Iron  Company.  105  U.  S..  73  (1881); 
Henderson  v.  Jackson  County,  12  Fed.  Bates  Count}'  v.  Winters.  97  U.  S.,  83; 
Rep,  676  (1881).  County  of    Scotland  v.  Thomas,  94   id., 

3  Hunt  v.  Hamilton,  25  Kan.,  76  (1881).  682  (1876) ;  Town  of  East  Lincoln  v. 
See,  also,  Eagle  V.  Beard,  33  Ark.,  497  Davenport,  94  id.,  801  (1876);  Wilson  v. 
(1878),  holding  that,  in  the  absence  of  Salamanca,  99  id.,  499  (1878);  Empire 
statutory  provision,  the  detached  part  of  v.  Darlington,  101  id.,  87  (1879),  holding 
a  county  is  released  from  liability  fur  the  that,  where  stock  in  a  railroad  had  been 

155 


§  103.] 


MUNICIPAL    SUBSCRIPTIONS. 


[CH. 


VI. 


however,  the  consolidation  works  such  a  fundamental  change  in  the 
constitution  and  purpose  of  the  original  corporation  that  individ- 
ual subscribers  are  thereby  released,  a  subscription  by  the  munic- 
ipality will  be  invalidated,1  but  otherwise  not.2  It  is  accordingly 
said  that  municipal  bonds  voted  and  delivered  to  a  corporation 
under  a  changed  name  are  not  by  such  change  invalidated.3 


subscribed  for  by  a  township  under 
statutory  authority,  an  additional  sub- 
scription after  it  was  consolidated  with 
another  road  and  under  a  new  name 
was  valid ;  Menasha  v.  Hazard,  102  id., 
81  (1880);  Harter  v.  Kernochan,  103  id., 
562  (1880),  holding  that  where  township 
records  showed  that  bonds  were  directed 
to  be  issued  and  delivered  to  a  consoli- 
dated company,  although  the  act  au- 
thorizing them  and  the  vote  under  it 
contemplated  the  issue  to  one  of  the 
consolidated  companies,  the  township 
was  estopped  to  deny  their  validity; 
County  of  Tipton  v.  Locomotive  Works, 
103  id.,  523  (1880) ;  State  v.  Green  County, 
54  Mo.,  540  (1874);  Vernon  v.  Hovey,  52 
Ind..  563  (1876).  See,  also,  Nugent  v.  Su- 
pervisors, 19  Wall.,  241  (1873);  County 
of  Henry  v.  Nicolay,  95  TJ.  S.,  619  (1877). 
In  this  case  a  railroad  company  had, 
after  the  subscription,  transferred  its 
franchises  to  another  company.  In  a 
suit  upon  the  bonds,  paid  for  the  stock, 
in  hands  of  an  innocent  purchaser,  the 
bonds  were  upheld.  County  of  Schuyler 
v.  Thomas,  98  id.,  169  (1877).  Cf.  Harsh- 
man  v.  Bates  County,  92  U.  S.,  569  (1875). 
A  municipal  aid  cannot  be  enforced 
where  the  railroad  company  sells  all  its 
property  to  another  company.  Cantillon 
v.  Dubuque,  etc,,  R  R  Co.,  35  N.  W. 
Rep,  620  (Iowa,  1887). 

1  Lynch  v.  Eastern,  etc.,  R  R  Co.,  57 
Wis.,  430  (1883).  Harshman  v.  Bates 
County,  supra,  will  hardly  be  followed. 
It  does  not  accord  with  the  current  de- 
cisions. See  Crooks  v.  State,  4  N.  E. 
Rep.,  589  (Ind.,  1886). 

2  Atchison,  etc.,  R  R  Co.  v.  Phillips 
Co.,  25  Kan.,  261  (1881);  Society,  etc,  v. 
New  London.  29  Conn..  174  (1860).  In 
this  last  case  the  new  company  was  sub- 
stantially the  same  as  the  one  to  which 


the  subscription  was  made.  The  couit 
held  the  issue  of  the  bonds  to  the  new 
company  valid  ;  Illinois,  etc.,  v.  Barnett, 
85  111.,  313  (1861),  holding  that  the  legal 
purchase  of  another  road  will  not  inval- 
idate subscriptions;  Howard  Co.  v. 
Booneville,  etc.,  108  U.  S.,  314,  holding 
that  the  defense,  after  paying  interest 
for  several  years,  that  the  road  con- 
structed was  not  the  one  to  whose  stock 
the  subscription  was  authorized,  was 
not  good,  it  appearing  that  it  was  a 
branch  of  the  road  referred  to  in  the 
act:  Commonwealth  v.  Pittsburgh,  41 
Penn.  St.,  278  (1861);  Lewis  t>.  Claren- 
don, 5  Dillon,  329  (1878);  Chickaming  v. 
Carpenter,  106  U.  S.,  063  (1882). 

3  Town  of  Reading  v.  Wedder,  66  111., 
80  (1872);  Commonwealth  v.  Pittsburgh. 
41  Pa.  St.,  278.  In  the  case  of  Marsh  v. 
Fulton  Co.,  10  Wall.,  676  (1870),  where 
the  legislature  60  amended  the  charter 
of  a  railway  company  as  to  divide  the 
road  into  three  divisions,  and  each  di- 
vision was  made  a  new  company,  so 
that  there  were  three  distinct  corpora- 
tions in  place  of  the  original  corpora- 
tion, it  was  held  by  the  federal  supreme 
court  that  a  subscription  of  stock  and 
issue  of  county  bonds,  authorized  by  a 
popular  vote  to  be  made  to  the  original 
corporation,  could  not  legally  be  made 
to  one  of  the  three  new  corporations. 
Consolidation  with  another  railroad  no 
defense  to  the  county,  where  the  statute 
authorizing  it  existed  at  time  of  county 
vole.  Chicago,  etc.,  R  R  Co.  v.  Put- 
nam, 12  Pac.  Rep.,  593  (Kan.,  1887); 
County,  etc.,  v.  Locomotive,  etc.,  103  U. 
S.,  523  (1880),  holding  that  if  a  munic- 
ipal corporation  consents  to  a  consolida- 
tion of  roads  it  is  estopped  from  denying 
the  validity  of  its  bonds  in  the  hands  of 
a  bona  fide  holder. 


156 


CHAPTER  VII. 


CALLS. 


§ 


104. 
105. 
106. 

107. 
108. 

109. 
110. 
111. 


112. 


Definition  of  call. 

CaJl  is  generally  necessary. 

"When  a  call    is    unnecessary  — 

Payment  in  advance. 
In  New  York  no  call  is  required. 
In  case  of  corporate  insolvency 

no  call  is  necessary. 
Who  has  authority  to  make  calls. 
Calls  by  directors. 
Assignment  of  subscriptions  by 

corporation    before    or    after 

call. 
Interest  runs  from  the  time  the 

call  is  due. 


§  113.  Stockholder  cannot  question  ad- 
visability of  call. 

114.  Calls  must  be  impartial  and  uni- 

form. 

115.  Method    of    making    calls  —  No 

formalities  necessary. 

116.  Time,    place,  amount    aud    per- 

son to  whom  payable. 

117.  Notice  of  calls — Cases  holding  it 

not  necessary. 

118.  Cases  holding  it  to  be  neces- 
sary. 

119.  Methods  of  serving  notice  of  calls. 

120.  Demand,  waiver,  pleadings,  etc. 


§  104.  Definition  of  call. —  A  "  call "  may  be  defined  to  be  an  offi- 
cial declaration,  by  the  proper  corporate  authorities,  that  the  whole 
or  a  specified  part  of  the  subscriptions  for  stocks  is  required  to  be 
paid.1  The  term,  however,  is  used  with  different  meanings,  and 
may  refer  to  the  resolution  of  the  officials  that  a  part  or  the  whole 
of  the  subscription  must  be  paid,  or  to  the  resolution  and  notifica- 
tion thereof,  or  the  combination  of  facts  making  the  parties  called 
on  liable  to  an  action  for  the  non-payment  of  the  money  called.- 
An  assessment  is  a  term  often  used  to  designate  the  same  thing 
as  a  call,  but  sometimes  refers  to  payments  sought  to  be  recovered 
from  the  stockholders,  above  and  in  addition  to  the  par  value  of 
the  stock.  An  instalment  is  one  of  the  several  part  payments  into 
which  a  single  call  may  be  divided. 


iBraddock  v.  Phil.,  Marlton  &  Med- 
ford  R  R  Co.,  45  N.  J.  L,  363  (1883), 
holding  also  that  a  direction  by  the  di- 
rectors to  the  president  to  collect  the 
subscriptions  is  a  call.  In  the  case  of 
Spangler  v.  Ind.  &  111.  Central  R.  R  Co.. 
21  111.,  276  (1859),  a  call  or  assessment  is 
rather  vaguely  defined  as  "a  rating  or 
fixing  of  the  proportion  by  the  board  of 
directors,  which  every  subscriber  is  to 
pay  of  his  subscription,  when  notified 
of  it  and  when  called  in."  Newry  & 
Enniskillen  Ry  Co.  v.  Edmunds,  2  Ex. 


Rep.,  118  (1848).  holds  that  a  call  is  an 
application  to  each  shareholder  for  a 
proportion  of  his  share. 

2  Queen  v.  Londonderry  &  Coleraine 
R'y  Co.,  13  Q.  B..  998.  In  Amberg 
N.  &  B.  &  E.  J.  R'y  Co.  v.  Mitchell,  4 
Ex.  Rep.,  540  (1849),  it  is  said  "the  word 
call  is  capable  of  three  meanings:  it 
may  either  mean  the  resolution,  or  its 
notification,  or  the  time  when  it  be- 
comes payable.  It  must  mean  either 
one  of  these  three." 


157 


§  105.] 


CALLS. 


[CH.  VII. 


§  105.  Callis  generally  necessary. —  As  a  general  rule  a  call  must 
be  made  in  order  to  render  a  subscription  or  any  part  thereof  due 
and  payable  to  the  corporation.  A  contract  of  subscription,  unlike 
other  contracts  to  pay  money,  is  a  promise  to  pay ;  but,  by  implica- 
tion of  law,  the  payment  is  to  be  only  at  such  times,  and  in  such 
part  payments,  as  may  be  designated  by  the  corporate  authorities 
in  a  formal  declaration  known  as  a  "  call."  l  In  other  words,  the 
subscription  is  a  debt  payable  at  a  future  time.2  The  time  when  it 
shall  be  paid  is  indefinite  until  fixed  by  a  call. 


1 "  No      action    can    be    maintained 
against  a  stockholder  for  an  instalment 
on  his  subscription  until  the  board  has 
directed  the  call  to  be  made."    Banet  v. 
Alton  &  Sangamon   R.  R  Co.,  13  111., 
504  (1851) ;  Spangler  v.  Ind.  &  111.  Cen- 
tral R.  R  Co.,  21  111.,  276  (1859);  Brad- 
dock  v.  Phil.,  Marlton  &  Medford  R  R. 
Co.,  45  N.  J.  L.,  363  (1883).     In  the  case 
of  Grosse  Isle  Hotel   Co.  v.  L' Anson's 
Ex'rs,  42  N.  J.  L,,  10  (1880);  aff'd,  43  N. 
J.  L.,  442  (1881»,  the  court  said  a  sub- 
scription for  stock  "  imports  an  agree- 
ment not  to  pay  at  once  the  whole  sum 
representing  the   value  of    the  shares 
subscribed  for,  but  a  stipulation  to  pay 
such  sum  when  called  for  by  the  direct- 
ors, in  amounts  duly  assessed."    And  in 
Bank  of  South  Australia  v.  Abrahams, 
L.  R,  6  Privy  Council  App.,  262  (1875), 
the  court  said:  "The  company  has  no 
absolute  right,  and  the  shareholder  is 
under  no  absolute  liability,  to  pay.     The 
right  only  arises  if,  and  when,  calls  are 
made  by  the  directors.    .    .    .     The  due 
making  of  the  call  by  the  resolution  of 
a  board  of  directors  is  an  essential  con- 
dition precedent."    To  the  same  effect, 
see  Wilbur  v.  Stockholders  of  the  Corpn., 
18  Bankr.  Reg.,  178.     Where,  by  statute 
or   charter,  payment  is  to  be  in  such 
manner  and  proportion  and  times  as 
the  directors   may  order,  there  can  be 
no  suit  to  collect  until  after  a  call.   Gris- 
sell's  Case,  L.  R,  1   Ch.  App.,  528,  535 
(1866) ;  Ala.  &  Fla.  R  R  Co.  v.  Rowley, 
9  Fla.,  508  (1861).    Even  where  the  stock 
is  fraudulently  issued  as  paid  up,   in 
payment  for  property,  and  the  transac- 


tion is  impeached  for  fraud,  a  call  is  nec- 
essary before  the  subscription  can  be  en- 
forced. Granite  Roofing  Co.  v.  Michael. 
54  Md.,  65  (1880).  Where,  however,  for 
failure  to  furnish  the  property  due  on 
a  subscription,  a  suit  for  damages  is 
brought  by  the  corporation,  no  call 
need  precede  such  suit  An  allegation 
of  a  general  demand  suffices.  Cheraw 
&  Chester  R  R  Co.  v.  Garland,  14  S.  C, 
63  (1879):  Ohio,  Ind.  &  111.  R  R  Co.  v. 
Cramer,  23  Ind.,  490  (1864).  A  call  is 
not  applicable  to  stock  which  was  sub- 
scribed for  after  the  call  was  made. 
Pike  v.  Shore  Line,  68  Me.,  445  (1878).  A 
subscription  payable  "  in  such  instal- 
ments and  at  such  times  as  may  be  de- 
cided by  a  majority  of  the  stockholders 
or  board  of  directors,"  etc..  is  not  collect- 
ible until  the  instalments  and  times 
have  been  so  fixed.  North,  etc.,  Co.  v. 
Spullock,  14  S.  E.  Rep.,  478  (Ga.,  1892). 

2  The  subscription  "  is  a  present  debt, 
payable  at  a  future  day."  Pittsburgh  & 
Connellsville  R  R  Co.  v.  Clark,  29  Pa. 
St,  146  (1857).  The  subscription  "  cre- 
ates a  debt,  but  the  debt  does  not  ac- 
crue due  until  a  call  is  made."  Gris- 
selFs  Case,  L.  R,  1  Ch.  App.,  528,  535 
(1866).  In  In  re  China  Steamship  &  Coal 
Co.,  38  L.  J.  (Ch.),  512  (1869),  the  court 
say :  "  The  moment  a  call  is  made  it  is 
a  debt  due  in  every  respect,"  although 
it  cannot  be  collected  by  suit  until  later. 
The  bankruptcy  act  does  not  release  an 
applicant  thereunder  from  liability  for 
calls  made  after  his  release  in  bank- 
ruptcy. Glenn  v.  Howard,  3  Atl.  Rep.r 
895  (1886). 


158 


CH.  VII.] 


CALLS. 


[§§106,  L07. 


§  10G.  When  a  call  is  unnecessary  —  Payment  in  advance.  -If, 
however,  a  subscription  contains  a  promise  to  pay  upon  a  certain 
day,  no  call  is  necessary;  but  the  subscriber  is  bound  to  pay,  at  all 
events,  upon  the  day  named.1  So,  also,  if  by  statute  or  the  charter 
the  subscription  becomes  payable  at  a  certain  specified  time,  a  call 
is  hereby  dispensed  with,  and  is  not  required.2  A  stockholder,  on 
the  other  hand,  is  not  obliged  to  wait  for  a  call  even  when  entitled 
to  it.     He  may  pay  at  any  time.3 

§  107.  Neiv  York  rale. —  In  New  York  it  seems  that  a  different 
rule  prevails.  In  that  state  there  is  a  tendency  to  hold  that  no  call 
is  necessary  before  suit  is  brought  on  a  subscription  for  stock.  The 
subscriber's  obligation  to  pay,  and  the  time  and  manner  of  pay- 
ment, must  be  sought  for  in  the  contract  itself.  Unless  the  contract 
provides  for  calls,  the  subscription  is  payable  absolutely  and  at  once, 
or  as  soon  as  the  corporation  is  duly  organized.4    Accordingly,  in  an 


1  Estell  v.  Knightstown  &  Middletown 
Turnpike  Co.,  41  Ind.,  174  (1872) ;  New 
Albany  &  Salem  R.  R  Co.  v.  Pickens, 
5  Ind.,  247  (1854) ;  Ross  v.  Lafayette  & 
Indianapolis  R.  R  Co.,  6  Ind.,  297  (1853) ; 
Breedlove  v.  Martinsville  &F.RR  Co., 
12  Ind.,  114  (1859);  Waukon  &  M.  R  R. 
Co.  v.  Dwyer,  49  Iowa,  121  (1878).  Where 
a  subscriber  gives  a  note  in  payment  of 
the  subscription  an  indorsee  may  en- 
force the  note,  although  no  calls  have 
been  made  on  subscriptions.  Ruse  v. 
Bromberg,  7  S.  Rep.,  384  (Ala.,  1889). 

2  Phoenix  Warehousing  Co.  v.  Badger, 
67  N.  Y.,  294  (1876). 

3  Marsh  v.  Burroughs,  1  Woods,  463 
(1871);  Pool's  Case,  L,  R.,  9  Ch.  D., 
322  (1878).  But  if  such  payment  is  by 
the  directors  themselves,  and  it  is  im- 
mediately repaid  to  them  for  fees,  the 
corporation  being  insolvent,  the  trans- 
action will  be  set  aside.  Syke's  Case, 
L.  ;R,  13  Eq.  Cas.,  255  (1871).  So,  also, 
a  payment  in  advance,  on  an  agreement 
that  such  payment  shall  be  only  a  loan 
if  the  corporation  is  successful,  but  shall 
be  a  payment  of  the  subscription  if  the 
corporation  becomes  insolvent,  is  held 
to  be  a  loan,  though  insolvency  occurs. 
Barge's  Case,  L.  R,  5  Eq.  Cas.,  420 
(1868).  Frequently  a  subscription  is 
paid,  before  a  call,  by  applying  to  its 
payment  money  due  the  subscriber  from 


the  corporation.  Adamson's  Case,  L.  R., 
18  Eq.  Cas.,  670  (1874).  A  subscription 
for  bonds,  the  amount  being  payable  on 
call,  may  be  paid  at  once  and  the  bonds 
demanded.  Watjen  v.  Green,  21  Atl. 
Rep.,  1028  (N.  J.,  1891).  Where  the  pur- 
chase price  of  stock  is  to  be  in  ten  equal 
payments  and  interest  is  to  be  allowed 
if  payment  is  made  in  advance,  the 
interest  may  be  collected.  Porter  v. 
Beacon,  etc.,  Co.,  26  Atl.  Rep.,  216  (Pa.. 
1893).  A  stockholder  who  offers  to  pay 
his  subscription  in  full,  which  olTer  is 
declined  by  the  corporation,  is  not 
thereby  released  from  his  obligation  if 
he  continues  to  act  as  a  stockholder. 
Potts  v.  Wallace,  146  U.  S.,  689  (1892). 

4  Lake  Ontario,  Auburn  &  N.  Y.  R.  R. 
Co.  v.  Mason,  16  N.  Y,  451  (1S59);  Phoe- 
nix Warehousing  Co.  v.  Badger,  67 
N.  Y,  294,  300  (1876).  In  the  former 
case,  however,  calls  were  made  and  no- 
tice given  by  advertisement  iu  a  news- 
paper. In  the  latter  case,  by  the  terms 
of  the  charter,  all  subscriptions  were 
due  at  the  time  when  suit  was  com- 
menced. Hence,  in  both  cases,  the 
statements  in  reference  to  calls  have  the 
appearance  of  dicta.  In  Mann  v.  Pentz, 
3  N.  Y,  415  (1850),  it  was  held  that  a 
receiver  could  not  collect  uncalled  sub- 
scriptions, since  "  the  only  condition 
upon  which  he  (the  subscriber)  could 


159 


§  108.] 


CALLS. 


[CH.  VII. 


action  brought  to  collect  a  subscription,  it  is  not  necessary  to  allege 
that  a  call  has  been  made,  unless  the  terms  of  the  subscription  or 
the  provisions  of  the  corporate  charter  expressly  provide  for  calls. 
These  rules,  however,  seem  not  to  have  been  directly  passed  upon 
in  New  York,  and  it  is  doubtful  whether  they  can  be  considered  as 
clearly  established  in  that  state.1 

§  108.  In  case  of  corporate  insolvency  no  call  is  necessary. — 
"When  a  corporation  becomes  insolvent,  and  there  exist  subscrip- 
tions which  have  not  been  fully  paid  in,  the  directors  frequently 
neglect  or  refuse  to  make  the  calls  necessary  for  the  purpose  of 
paying  the  corporate  debts.  In  such  cases  a  court  of  equity  will 
disregard  the  formality  of  a  call,  and  will  order  the  unpaid  sub- 
scriptions to  be  paid  to  a  receiver  for  the  benefit  of  the  corporate 
creditors.2     The  courts  very  properly  hold  that  it  is  not  discretion- 


have  been  made  liable  to  the  corpora- 
tion was  by  regular  calls  made  in  pur- 
suance of  tlie  charter."  See,  also, 
Bauton  v.  Dry  Dock,  etc.,  Co.,  4  E.  D. 
Smith,  420  (1855) ;  Seymour  v.  Sturgess, 
26  N.  Y.,  134  (1862) ;  Savage  v.  Medbury, 
19  N.  Y.,  32  (1859) ;  Williams  v.  Meyer, 
41  Hun,  545  (1886).  See,  also,  Howland 
v.  Edwards,  24  N.  Y.  307  (1862). 

1  These  rules  seem  to  be  peculiar  to 
New  York.  The  decisions  in  some  of 
the  other  states  hold,  however,  that  no 
notice  of  calls  is  necessary.  See  §  117. 
Practically,  such  a  rule  is  equivalent  to 
requiring  no  call  at  all,  since  in  both 
oases  collection  is  made  only  by  direc- 
tion of  the  directors  or  other  officers, 
and  in  both  cases  the  subscriber  need 
not  be  informed  of  such  directions. 

2 "  It  is  well  settled  that  when  stock 
is  subscribed  to  be  paid  upon  call  of  the 
company,  and  the  company  refuses  or 
neglects  to  make  the  call,  a  court  of 
equity  may  itself  make  the  call,  if  the 
interests  of  the  creditors  require  it" 
•Scoville  v.  Thayer,  105  U.  S,  143  (1881); 
Glenn  v.  Williams,  60  Md.,  93 ;  Glenn  v. 
Sample,  80  Ala.,  159  (1885).  "A  com- 
pany call  is  but  a  step  in  the  process  of 
collection,  and  a  court  of  equity  may 
pursue  its  own  mode  of  collection,  so 
that  no  injustice  is  done  to  the  debtor." 
Hatch  v.  Dana,  101  U.  S.,  205  (1879).  No 
call  is  necessary  before  stockholders  are 

160 


liable  to  creditors  on  their  unpaid  sub- 
scription, even  though  the  charter  pro- 
vides for  a  call.  Hill  v.  Merchants'  Ins. 
Co.,  134  U.  S.,  515  (1890).  See,  also, 
Myers  v.  Seeley,  10  Natl.  Bank.  Reg., 
411 ;  Sanger  v.  Upton,  91  U.  S.,  56  (1875) ; 
Wilbur  r.  Stockholders,  etc.,  18  Bank. 
Reg.,  178.  Where  the  corporation,  being 
indebted,  has  the  power  to  call,  and  does 
not  choose  to  exercise  it,  equity  at  the 
instance  of  creditors  will  exercise  it. 
Marsh  r.  Burroughs,  1  Woods,  463 (1871) ; 
Boeppler  t\  Menown,  7  Mo.  App.,  447 
(1885);  Adler  v.  Milwaukee  Pat  B.  Mfg. 
Co.,  13  Wis.,  57  (1860) ;  Glenn  v.  Dodge, 
3  Cent  Rep.,  283  (1886) ;  Great  W.  Tel. 
Co.  v.  Gray,  14  N.  E.  Rep.,  214  (111.,  1887); 
Ward  v.  Griswoldville  Mfg.  Co.,  16 
Conn.,  593  (1844) ;  Miller's  Case,  54  L.  J. 
(Ch.),  141  (1885);  Henry  v.  Vermilion  & 
Ashland  R.  Rv  Co.,  17  Ohio,  187  (1848) ; 
Ogilvie  v.  Knox  Ins.  Co.,  22  How.,  380 
(1859) ;  Curry  v.  Woodward,  53  Ala,  371 
(1875);  Chandler  v.  Keith,  42  Iowa,  99 
(1875);  Shackley  v.  Fisher,  75  Mo,  498 
(1882).  The  filing  of  the  bill  in  the  suit 
in  equity  is  equivalent  to  a  call.  Hatch 
v.  Dana,  101  U.  S.,  205  (1879) ;  Thomp- 
son v.  Reno  Sav.  Bank,  7  Pac.  Rep.,  68 ; 
19  Nev.,  103,  171,  242,  291,  293  (1886). 
See,  also,  Yeager  v.  Scranton,  etc.,  Bank, 
14  Weekly  N.  Cas.,  296  (1884).  A  late 
case  holds  that  a  decree  in  a  chancery 
suit  is  equivalent  to  a  call.     Glenn  v. 


OH.  VII.] 


CALL8. 


[§  103. 


ary  with  the  directors  to  say  whether  the  company's  debts  shall  be 
paid  or  not.  And  this  is  the  rule  even  though  the  statute  provides 
that  calls  shall  be  made  by  the  directors.1 

There  has  been  some  doubt  as  to  whether  the  writ  of  mandamus 
would  lie  to  compel  the  directors  to  make  the  call,2  but  the  au- 
thorities seem  to  hold  that  the  writ  will  not  lie  for  this  purpose. 
The  usual  procedure  to  collect  unpaid  subscriptions  is  an  order  of 
a  court  of  equity  made  in  a  suit  brought  by  corporate  creditors  for 
the  purpose  of  applying  corporate  assets  to  corporate  debts.3 


Saxton,  68  Cal..  353  (1886).  If  the  court 
orders  that  notice  of  the  call  be  given 
the  receiver  cannot  collect  by  suit  un- 
less such  notice  is  given.  Franklin  Sav- 
ings Bank  v.  Fatzinger,  4  Atl.  Rep.,  913 
(Pa,  1886).  Where  the  whole  of  the  un- 
paid subscriptions  are  needed  to  pay  cor- 
porate debts,  no  assessment,  even  by  the 
court,  is  necessary.  But,  unless  the  evi- 
dence clearly  shows  such  necessity,  it  is 
for  the  jury  to  say  whether  the  whole 
unpaid  subscription  shall  be  paid.  Citi- 
zens', etc.,  Co.  v.  Gillispie,  9  Atl.  Rep.,  73 
(Pa.,  1887,  citing  cases).  See  §  207. 
Where  an  assignment  is  made  by  the 
corporation  for  the  benefit  of  creditors, 
the  statute  of  limitations  begins  to  run 
within  a  reasonable  time,  even  if  no  call 
is  made.  Glenn  v.  Dorsheimer,  24  Fed. 
Rep.,  536.  Cf.  §  195.  In  Missouri  it  has 
been  held  that  there  can  be  no  garnish- 
ment of  an  unpaid  subscription  until 
after  a  call  has  been  made.  Parks  v. 
Heman,  7  Mo.  App.,  14  (1879).  In  New 
York  there  are  a  few  dicta  to  the  effect 
that  calls  by  the  directors  are  necessary 
before  unpaid  subscriptions  can  be  en- 
forced for  the  benefit  of  corporate  cred- 
itors. Seymour  v.  Sturgess,  26  N.  Y., 
134  (1862);  Mann  v.  Pentz,  3  N.  Y,  415 
(1850).  But  the  prevailing  rule  is  sus- 
tained in  Sagory  v.  Dubois,  3  Sandf.  Ch., 
466  (1846),  where  the  court  say:  "The 
articles,  it  is  true,  in  effect  require  that 
calls  should  be  made  by  the  directors, 
and  probably  the  association  could  not 
maintain  an  action  at  law  until  such 
calls  were  regularly  made ;  but  that  does 
not  impair  the  remedy  in  behalf  of  the 
receiver." 


1  Glenn  v.  Saxton,  supra;  Crawford  v. 
Rohrer,  59  Md.,  599  (1882).  Contra,  Paper 
Co.  v.  Waples,  3  Woods,  34  (1877),  where 
the  charter  prescribed  that  calls  should 
be  only  by  a  three-fourths  vote  of  the 
stockholders. 

1 "  A  chancellor  will  compel  the  di- 
rectors to  make  the  calls  required  by 
the  charter  whenever  his  aid  is  invoked 
by  creditors  or  the  representatives  of 
creditors."  Germantown  Passenger  R'y 
Co.  v.  Fitler,  60  Pa.  St,  124  (1869).  The 
three  English  cases  usually  cited  on 
this  point  do  not  hold  that  a  man- 
damus lies  herein.  Queen  v.  Victoria 
Park  Co.,  1  Ad.  &  E1.(N.  S.),544;  Queen 
v.  Ledyard,  id.,  616;  King  v.  Katharine 
Dock  Co.,  4  Barn.  &  Ad.,  360  (1832).  In 
the  case  of  Dalton  &  Morgantown  R 
R,  Co.  v.  McDaniel,  56  Ga,  191  (1876), 
the  court  held  that  a  mandamus  was 
unnecessaiy.  on  the  ground  that  the 
remedy  by  bill  was  easier  and  more 
complete,  and  that  justice  would  be 
better  administered  in  this  way  by  an 
account  of  all  the  corporate  debts,  and 
of  all  liabilities  of  solvent  stockholders, 
taken  by  a  master  in  chancery.  In 
Hatch  v.  Dana,  101  U.  S.,  205  (1879), 
the  court  say  a  mandamus  "  can  avail 
only  when  there  are  directors.  The 
remedy  in  equity  is  more  complete."  In 
Ward  v.  Griswoldville  Mfg.  Co.,  16 
Conn.,  593  (1844),  the  court  refused  a 
mandamus  because  it  would  enforce  the 
collection  of  only  a  few  debts,  whereas 
the  remedy  in  equity  would  enforce  all 
proportionately. 

3  •'  Under  such  circumstances,  before 
there  is  any  obligation  upon  the  stock- 


(11) 


161 


§§  109,  110.] 


CALLS. 


[CH.  VII 


§  109.  Who  has  authority  to  make  calls.—  A  call,  in  order  to  be 
legal  and  enforceable,  must  be  made  by  the  proper  corporate  au- 
thorities. Generally,  the  power  to  make  calls  is  vested  in  the 
directors  or  in  the  stockholders  at  large.  Unless  the  charter  or  a 
statute  makes  provision  therefor,  the  question  as  to  who  shall 
make  calls  is  a  question  of  internal  arrangement.  If  no  provision 
whatever  is  made  for  the  exercise  of  the  power  it  devolves  upon 
the  directors,  on  the  general  principle  that  they  alone  have  power 
to  manage  and  superintend  the  financial  matters  of  the  corporation 
and  to  exercise  all  corporate  powers,  except  those  required  to  be 
exercised  at  corporate  meetings.1  Even  though  the  statute  author- 
izes calls  by  the  stockholders,  yet  the  directors  also  have  the  same 
power.2 

§110.  Calls  foj  directors.—  Where  the  power  to  make  calls  is 
vested  in  the  directors,  a  call  made  by  those  who  are  •  directors  de 
facto  will  be  upheld.3    The  directors,  in  whom  the  power  to  make 


holders  to  pay  without  an  assessment 
and  call  by  the  company,  there  must  be 
some  order  of  a  court  of  competent 
jurisdiction,  or,  at  the  very  least,  some 
authorized  demand  upon  him  for  pay- 
ment." Scoville  V.  Thayer,  105  U.  S., 
143  (1881).  In  bankruptcy,  it  seems,  the 
assignee,  by  succeeding  to  all  the  rights 
of  the  corporation,  may  make  a  call  and 
enforce  it.  Hatch  v.  Dana,  101  U.  S.,  205 
(1879).  See,  also,  §§  202,  207,  infra.  At 
common  law  a  court  of  equity  could  not 
make  calls  for  benefit  of  corporate 
creditors.  Dictum,  Grain's  Case,  L.  R, 
1  Ch.  D.,  307,  323  T1875). 

i  Budd  v.  Multnomah  St  R'y  Co.,  15 
Pac.  Rep,  659  (Oreg.,  1887).  The  direct- 
ors may  make  calls  "  as  they  may  do  all 
things,  except  such  as  are  to  be  done  by 
the  shareholders  at  a  general  meeting." 
Ambergate,  N.  &  B.  &  E.  J.  R'y  Co.  v. 
Mitchell,  4  Ex.  Rep.,  540  (1849). 

2  Id.  In  Ex  parte  Winsor,  3  Story, 
C.  C,  411  (1844),  it  was  held,  however, 
that  where  the  charter  gave  to  the  cor- 
poration the  power  to  assess  stock  it 
must  be  exercised  exclusively  by  the 
stockholders  in  meeting  assembled.  On 
the  other  hand,  in  Rives  v.  Montgomery 
S.  P.  R  Co.,  30  Ala.,  92  (1857),  the  court 
held  that  stockholders  who  by  charter 
have  power  to  make  calls  may  delegate 


that  power  to  the  directors.  See,  also, 
Healey,  Law  and  Pr.  of  Companies,  109. 
3  -'An  illegal  election  of  directors  can- 
not be  set  up  in  resistance  of  the  pay- 
ment of  stock,  but  would  be  a  case  for 
a  quo  u-arranto  to  oust  the  illegally 
elected  directors."  Eakright  v.  Logans- 
port  &  N.  Ind.  R  R  Co.,  13  111.,  404 
(1859) ;  Johnson  v.  Crawfordsville  R  R 
Co.,  11  Ind.,  2S0  (1858);  Fairfield  C.  T. 
Co.  v.  Thorp,  13  Conn.,  173  (1839) ;  Stein- 
metz  v.  Versailles  R  R  Co.,  57  Ind.,  457 
(1877);  Macon  R  R  Co.  v.  Vason,  57 
Ga.,  314  (1876);  Atherton  r.  Sugar,  etc, 
Co.,  67  Ind.,  334  (1879).  In  the  case, 
however,  of  People's  Mut  Ins.  Co.  v. 
Westcott,  80  Mass.,  440  (1860),  a  call  by 
directors  elected  at  a  meeting  held 
without  notice  was  declared  invalid  and 
not  enforceable.  A  call  may  be  enjoined 
on  the  ground  that  the  directors  were 
illegally  elected.  Moses  v.  Tompkins,  4 
S.  Rep.,  763  (Ala.,  1888).  'In  England 
the  courts  will  inquire  into  the  right  of 
directors  to  their  office,  in  cases  involv- 
ing the  validity  of  calls.  Swansea  Dock 
Co.  v.  Lewien,  20  L  J.  (Ex.),  447  (1851). 
If  the  directors  were  not  legally  elected, 
their  calls  and  forfeitures  of  stock  based 
thereon  will  be  set  aside.  Garden  Gully, 
etc.,  Co.  v.  McLister,  L  R,  1  App.  Cas.. 
39  (1875).     See  Healey   on   Companies. 


162 


CH.  VII.] 


CALLS. 


[§  HI- 


calls  is  vested,  cannot  delegate  their  authority.1  It  is  a  power  the 
exercise  of  which  involves  a  discretion  which  cannot  be  exercised 
by  others.  A  call  by  a  minority  meeting  of  the  directors,  no  quo- 
rum being  present,  is  void.2 

§  111.  Assignment  of  subscription  ~by  corporation  oefore  or  after 
call. —  The  unpaid  and  uncalled  subscriptions  for  stock  cannot  be 
mortgaged  or  sold  by  the  corporation.  If  the  transfer  by  the 
directors  were  allowed,  "the  consequence  would  be  that  the  discre- 
tion which  they  are  bound  to  exercise  Avould  be  wholly  defeated 
and  put  an  end  to." 3     The  power  of  making  calls,  being  a  discre- 


110.  If  the  corporate  organization  was 
not  regular,  and  the  directors  were  not 
legally  elected,  their  call  is  not  enforce- 
able. Howbeach,  etc.,  Co.  v.  Teague,  5 
H.  &  N.,  151  (1860).  Directors  elected  at 
a  meeting  called  on  thirteen  days'  notice 
instead  of  fourteen  as  required  by  stat- 
ute may  make  calls,  where  their  elec- 
tion has  been  confirmed  by  a  subsequent 
annual  general  meeting.  Briton,  etc., 
Assoc,  v.  Jones,  61  L,  T.  Eep.,  384  (1889). 
1  Rutland  &  Burlington  R  R  Co.  v. 
Thrall,  35  Vt.  536  (1863),  the  court  say- 
ing :  ''  Where  the  charter  requires  the 
directors  to  do  some  specific  act  there 
seems  to  be  a  stronger  reason  why  they 
should  be  held  incapable  of  delegating 
such  authority  than  when  mere  general 
powers  are  conferred  on  them."  See, 
also,  Banet  v.  Alton  &  Sangamon  R  R 
Co.,  13  111.,  504  (1851);  Pike  v.  Shore 
Line,  68  Me.,  445  (1878);  Silver  Hook 
Road  v.  Greene,  12  R.  I,  164  (1878), 
where  it  was  delegated  to  the  treasurer ; 
Mut  F.  Ins.  Co.  v.  Chase,  56  N.  H,  341 
(1876),  citing  authorities;  Monmouth 
Mut  F.  Ins.  Co.  v.  Lowell,  59  Me.,  504 
(1871).  But  where  the  power  is  dele- 
gated and  exercised,  the  call  may  be 
ratified  by  the  directors,  and  will  then 
be  valid.  Read  v.  Memphis  Gayoso  Gas 
Co.,  8  Heisk.  (Tenn.),  545  (1872);  Rut- 
land &  B.  R  R  Co.  v.  Thrall,  35  Vt., 
536  (1863).  Although  the  directors  can- 
not delegate  the  power  to  make  a  call, 
yet  they  may  delegate  the  power  "to 
determine  the  amount  of  some  of  the 
instalments,  and  to  designate  the  times 


of  payment"  Banet  v.  Alton  &  S.  R  R 
Co.  (1851),  supra.  It  is  not  necessary 
to  allege  that  the  directors  were  duly 
elected.  Miller  v.  Wild  Cat  G.  Road 
Co.,  52  Ind.,  51  (1875);  Steinmetz  v. 
Versailles  &  O.  T.  Co.,  57  Ind.,  457  (1887). 
But  proof  must  be  given  that  the  proper 
authorities  made  the  call.  N.  J.  Mid- 
land R'y  Co.  v.  Strait,  35  N.  J.  L,  322 
(1872). 

2  Price  v.  Grand  Rapids  &  Ind.  R  R 
Co.,  13  Ind.,  58(1859) ;  Hamilton  v.  Same, 
13  Ind.,  347  (1859);  Bottomley's  Case,  L 
R,  16  Ch.  D.,  681  (1880).  But  may  be 
confirmed  by  a  quorum.  Phosphate  of 
Lime  Co.,  24  L.  T.,  932. 

3  Ex  parte  Stanley,  33  L  J.  (Ch.),  535 
(1864).  To  the  same  effect,  see  N.  J.  Mid- 
land R'y  Co.  v.  Strait,  35  N.  J.  L,  322 
(1872) ;  Wells  v.  Rodgers,  50  Mich.,  294 
(1883);  S.  C,  44  Mich.,  411;  27  N.  W. 
Rep.,  671  (1886),  involving  the  consolida- 
tion of  two  railroads.  See.  also.  Crooks 
v.  State,  4  N.  E.  Rep.,  589  (Ind.,  1886) ; 
Wallingford  Mfg.  Co.  v.  Fox,  12  Vt, 
304  (1840);  Bank  of  South  Australia 
v.  Abrahams,  L  R,  6  P.  C.  App.,  262 
(1875):  Hurlbert  v.  Root,  12  How.  Pr.. 
511  (1855):  Hill  v.  Reid,  16  Barb,  280 
(1853):  Hurlbert  v.  Carter,  21  Barb..  221 
(1855).-  Cf.  Smith  v.  Hallett,  34  Ind., 
519  (1870),  where  the  subscription  was 
not  for  stock,  but  as  a  bonus.  The  arti- 
cles of  incorporation  of  a  company  may 
authorize  a  mortgage  on  unpaid  and 
uncalled  subscriptions.  Re  Pyle,  etc.. 
Works,  62  L  T.  Rep.,  226  (1890).  Af- 
firmed, id.,  887.    The  subscription  may 


163 


§§  112,  113.] 


CALLS. 


[CH.  VII. 


tionary  one,  cannot  be  transferred  to  other  parties.  The  transfer 
is  void.  The  subscribers  are  bound  to  pay  their  subscriptions  only 
when,  in  the  opinion  of  the  proper  corporate  authorities,  or  of  a 
court  of  equity,  the  money  is  needed  for  corporate  purposes.  This 
power  of  ascertaining  and  determining  the  extent  of  the  corporate 
needs,  being  a  discretionary  power,  cannot  be  transferred  or  dele- 
gated to  others.  A  different  rule  prevails,  however,  after  a  call 
has  been  made  but  not  yet  collected,  and  an  assignment  of  the 
amount  already  called  is  legal  and  valid.1 

§  112  Interest  runs  from  the  time  the  call  is  due.—  A  subscriber 
who  has  failed  to  pay  for  his  shares  according  to  the  terms  of  his 
contract  is  properly  chargeable  with  interest  from  the  time  of  the 
default.2  The  company  cannot  be  compelled  to  issue  the  stock 
until  principal"  and  interest  are  paid. 

§  113.  Stockholders  cannot  question  advisability  of  calls.—  The 
necessity  or  advisability  of  making  a  call  is  a  matter  which  rests 
exclusively  within  the  discretion  of  the  corporate  authorities  who 
have  power  to  make  the  call.3     A  stockholder,  when  sued  upon  an 

J.  &  S.,  407 ;  Gardner  v.  Loudon,  etc., 
R'y  Co.,  L  R,  2  Ch.,  201,  215.  An  as- 
signee of  unpaid  subscriptions  may  as- 
sign to  still  another.  Rand  v.  Wiley,  29 
N.  W.  Rep.,  814  (Iowa,  1886).  Right  of 
one  road  built  on  line  of  abandoned  road, 
to  recover  on  private  donation  to  latter, 
see  Sickels  v.  Anderson,  30  N.  \V.  Rep., 


be  enforced  by  contractors  to  whom  it 
has  beeu  assigned.  Darnall  v.  Lyon,  19 
S.  W.  Rep.,  506  (Tex.,  1892). 

1  Humber  Iron-works  Co.,  16  Weekly 
Rep.,  474.  667  (1868) ;  Hills  v.  Rodgers,  50 
Mich.,  294  (1883) ;  Miller  v.  Maloney,  3  B. 
Monr.  (Ky.),  105  (1842),  where  the  call 
was  assigned  to  the  railroad  contractor 
who  owed  the  subscriber  for  work  done : 
Downieu  Hoover,  12  Wis.,  174  (1860); 
Morris  v.   Cheney,   51   111.,    451    (1869), 
where,  however,  it  is  not  clear  that  a 
call  had  been  made.     A  call  which  has 
been   determined  upon,   but  not    defi- 
nitely made,  may  be  transferred  if  it  is 
afterwards  duly  made  by  the  directors. 
Be  Sankey  Brook  Coal  Co.,  L.  R,  9  Eq., 
721  (1870).    See  L.  R,  10  Eq..  381.     As  to 
the  enforcement  of  a   subscription  by 
a    subsequently     created    corporation 
formed  by  consolidation,  see  ch.  53.     A 
mortgage  on  all  the  land,  property  and 
effects  of  the  corporation  does  riot  in- 
clude uncalled  subscriptions.     Pickering 
v.  Ilfracombe  R'y  Co.,   37  L  J.  (C.  P.). 
118   (1868);   Lishman's  Claim,  23  L.  T. 
Rep.  (N.  S.),  759  (1870);    King  v.  Mar- 
shall, 33  Beav.,  565  (1864;.     Cf.   Re  Ma- 
rine M.    Co.,  L.    R,  4   Eq.,    601  (1867); 
British  Prov.  L.  Ins.  Co.,  In  re,  4  De  G., 


78  (Mich.,  1886). 

2  Gould  v.  Oneonta,  71  N.  Y.,  298 
(1876) ;  Rikhoff  t>.  Brown's  Rotary,  etc., 
Co.,  68  Ind.,  388  (1879);  Casey  v.  Galli, 
94  U.  S.,  673  (1876).  See,  also,  Burr  v. 
Wilcox,  22  N.  Y.,  551  (1860).  Cf.  Stock- 
en's  Case,  L  R,  5  Eq,  6  (1867);  Cleve- 
land v.  Burnham,  55  Wis.,  598  (1886). 
In  the  case  Glenn  v.  Liggett,  51  Fed. 
Rep.,  381  (1892X  interest  was  allowed 
only  from  the  date  of  suit  and  not  from 
the  date  of  the  call.     20  Atl.  Rep.,  115. 

3  The  question  of  the  necessity  for  the 
call  "  was  a  matter  for  the  determina- 
tion of  the  board  of  directors."  Chou- 
teau Ins.  Co.  v.  Floyd,  74  Mo.,  286(1881). 
"  The  question  whether  these  necessities 
demanded  the  payment  of  the  money 
was  for  the  directors."  Judah  v.  Ameri- 
can L.  S.  Ins.  Co.,  4  Ind.,  333  (1853); 
Budd  v.  Multnomah  St  R'y  Co.,  15  Pac. 
Rep.,  659  (Oreg.,  1887). 


164 


OH.  VII.] 


CALLS. 


[§  114. 


unpaid  call,  cannot  set  up  in  defense  that  there  was  no  occasion  or 
use  for  the  money.  The  call,  however,  must  be  for  the  bona  fide 
purpose  of  raising  money  for  corporate  purposes.  It  must  not  be 
for  the  purpose  of  enabling  the  stockholders  to  use  the  money  to 
the  detriment  of  the  creditors  of  the  failing  corporation.1  More- 
over, a  court  of  equity  will  set  aside  calls  and  payments  made  ami 
managed  with  a  view  to  discharging  the  stockholders'  liability, 
and  preventing  the  proceeds  from  being  applied  to  the  general 
corporate  debts.  Equity,  however,  will  not  interfere  with  a  call 
merely  because  the  money  received  may  be  diverted  by  the  di- 
rectors to  an  act  or  enterprise  beyond  the  powers  of  the  corpora- 
tion.2 The  corporation  cannot  contract  to  postpone  indefinitely 
a  call.3  To  allow  such  postponement  would  be  unjust  to  corporate 
creditors  and  other  stockholders. 

§  114.  Culls  must  be  impartial  and  uniform. —  A  call  cannot  be 
made  so  as  to  affect  a  part  only  of  the  subscribers.  It  must  be 
made  on  all  alike,  or  it  will  be  void.4  The  courts  will  not  allow  the 
directors  of  a  company  so  to  proceed  as  to  require  some  stockhold- 
ers to  pay  calls,  and  not  to  require  others  to  do  the  same.  Any 
such  attempt  will  be  promptly  set  aside  and  rectified.5 


>  Habertson's  Case,  L.  R.,  5  Eq.,  286 
(1868).  Thus,  where  the  amount  paid 
in  is  immediately  paid  out  to  the  direct- 
ors for  fees,  the  transaction  is  fraudu- 
lent, and  is  set  aside.  Syke's  Case,  L. 
R.,  13  Eq.  Cas.,  255  (1871).  On  the  other 
hand,  the  directors  cannot  delay  calls 
in  order  to  enable  themselves  to  trans- 
fer their  stock  and  avoid  liabilities.  Gil- 
bert's Case,  L.  R.  5  Ch.,  559  (1870); 
Preston  v.  Grand  Collier  Dock  Co.,  1 1 
Sim.,  327  (1840). 

2  In  the  case  of  Bailey  v.  Birkenhead, 
L.  &  C.  J.  R'y  Co.,  12  Beav.,  433  (1850), 
the  court  said :  It  is  not  within  the  ju- 
risdiction of  courts  "to  take  the  ac- 
counts and  make  the  inquiries  necessary 
for  the  purpose  of  ascertaining  whether, 
under  the  circumstances  to  which  the 
company  is  reduced,  and  in  a  continu- 
ing concern,  it  is  proper,  in  the  due  man- 
agement of  the  affairs  of  the  company,  to 
raise  money  by  way  of  calls  from  the 
shareholders."  Corporate  meetings  are 
the  places  for  such  complaints.  See, 
also,  Yetts  v.  Norfolk  R'y  Co.,  3  De  G.  & 
Sm.,  293  (1859). 


3  McComb  v.  Credit  Mobilier  of  Amer- 
ica, etc.,  13  Phil.  Rep..  468  (1878);  Van 
Allen  v.  111.  Central  R.  R  Co.,  7  Bosw. 
(N.  Y.),  515  (1861) -the  last  case  hold- 
ing, however,  that  this  principle  does 
not  prevent  the  issue  of  bonds  convert- 
ible into  stock  whenever  the  stockholder 
desires. 

*  Pike  v.  Bangor  &  Calais  S.  L.  R  R 
Co.,  68  Me.,  445  (1878).  Cannot  object 
to  call  on  ground  that  motives  of  direct- 
ors were  wrong.  Oglesby  v.  Attrill,  105 
U.  S.,  605  (1881).  A  suit  to  collect  thirty- 
five  per  cent,  of  a  subscription  fails 
where  other  subscribers  have  paid  but 
two  per  cent.  Great  Western  Tel.  Co. 
v.  Burnham,  47  N.  W.  Rep.,  373  (Wis.. 
1890) ;  Bowen  v.  Kuehn,  id.,  374. 

6  Preston  r.  Grand  Collier  Dock  Co., 
11  Sim.,  327  (1840).  If  directors  use 
power  to  make  calls  oppressively  they 
will  be  restrained.  Cannon  v.  Trask, 
L.  R,  20  Eq..  669.  As  where  the  object 
is  to  disqualify  from  voting  those  who 
cannot  pay.  Anglo,  etc.,  Bank  v.  Barag- 
non,  45  L.  T.,  362. 


165 


§  115.] 


CALLS. 


[CH.  VII. 


§  115.  Method  of  making  call  — No  formality  necessary.—  There 
are  no  prescribed  or  established  rules  stating  how  a  call  shall  be 
made  by  the  corporate  authorities  empowered  to  make  it.  Any  act 
or  resolution  which  in  a  court  of  law  would  prove  a  clear  official 
intent  to  render  due  and  payable  a  part  or  all  of  the  unpaid  sub- 
scriptions seems  to  be  sufficient.1  The  call  need  not  indicate  when, 
or  to  whom,  or  where,  payment  is  required  to  be  made.2  These 
are  to  be  stated  in  the  notice  of  the  call.  Mere  irregularities  are 
disregarded,  and  will  not  invalidate  the  call.3  The  substantial  fact 
must  exist  that  the  proper  corporate  officers  voted  or  declared  that 
payment  be  required.  Hence  the  elements  of  a  call  seem  to  be 
that  it  shall  be  by  the  proper  persons  acting  officially ;  and  that  a 
resolution,  susceptible  of  legal  proof,4  be  passed  that  a  certain 
amount,  either  the  whole  or  part,5  of  the  subscriptions  for  stock 
shall  be  paid  in. 


i  Budd  v.  Multnomah  St  R'y  Co.,  15 
Pac.  Rep.,  659  (Oregon,  1887) ;  Citizens' 
Ins.  Co.  v.  Sortwell,  10  Allen,  110,  112 
(1865). 

2  Fox  v.  Allensville,  C.  S.  &  V.  Turn- 
pike Co.,  46  Ind.,  31  (1874);  Andrew  r. 
Ohio  &  M.  R,  R  Co.,  14  Ind.,  169  (1860). 
In  the  case  of  Great  North  of  Eng.  R'y 
Co.  n  Biddulph,  7  M.  &  W.,  243  (1840), 
Baron  Parke  held  that  the  resolution 
for  a  call  need  not  state  the  place  of 
payment  nor  the  person  to  whom  it  was 
payable.  See,  also.  Marsh  v.  Burroughs, 
1  Woods,  463  (1871),  holding  that  the 
call  need  not  specify  either  time  or  place. 
See,  also,  Rutland  &  Burlington  R  R. 
Co.  v.  Thrall,  35  Vt.,  356  (1863),  that  the 
place  need  not  be  stated.  Call  made  in 
a  new  name,  legally  assumed  by  the  cor- 
poration, is  binding  on  subscribers  who 
knew  of  the  change  of  name.  Shackle- 
ford  v.  Dangerfield,  L.  R,  3  C.  P.,  407 
(1868). 

8  Irregularities  are  no  defense.  The 
remedy  is  to  revoke  or  set  aside  the  call. 
"  Call  in  fact  made  means  that  if  made, 
and  notice  be  given,  ...  a  party 
shall  not  wait  to  take  advantage  of  any 
irregularity  at  the  trial."  Re  British 
Sugar  Ref.  Co.,  3  K.  &  J.,  408  (1857); 
Southampton  Dock  Co.  v.  Richards,  2 
Railw.  Cas.,  215,  234  (1840) ;  S.  C.  1  Man. 
&  Gr.,  448.     See.  also,  Shackleford    r. 


Dangerfield,  L,  R,  3  C.  P.,  407  (1868). 
An  error  in  the  call  may  be  corrected 
and  cured  by  a  subsequent  call  made 
after  the  first  liability  accrued  but  be- 
fore suit.  Phil.  &  West  Chester  R  R 
Co.  v.  Hickman,  28  Pa.  St.,  318  (1857). 
A  director  who  participated  in  making 
the  call  cannot  set  up  informalities  for 
the  purpose  of  defeating  it  Hays  v. 
Pittsburgh,  etc.,  R  R,  38  Pa.  St,  81 
(1860).  Payment  and  acquiescence  in 
informality  as  to  one  call  waives  it  as 
to  another  call.  Macon  &  Augusta  R 
R  Co.  v.  Vason,  57  Ga.,  314  (1876). 

4  A  call  by  the  directors  is  valid  al- 
though no  entry  of  the  resolution  is 
made  in  the  minutes  of  the  directors' 
meeting.  Hays  v.  Pittsburgh  &  S.  R  R 
Co.  (1860),  supra.  An  entry  of  the  reso- 
lution, made  by  the  secretary  in  the 
book  containing  the  minutes,  is  suffi- 
cient. Fox  v.  Allensville  C.  S.  &  V.  T. 
Co.,  46  Ind.,  31  (1874).  An  authorized 
subsequent  call  is  competent  proof  of 
the  validity  of  a  previous  call.  Barring- 
ton  v.  Pittsburgh  &  S.  R  R  Co.,  34  Pa. 
St.,  358  (1859).  The  corporate  books  are 
competent  to  prove  both  the  call  and 
the  mode  of  payment.  Barrington  v. 
Pittsburgh,  etc.,  R.  R  Co.,  supra;  Com- 
fort v.  Leland,  3  Whart  (Penn.),  81 
(1837). 

5  The  call  may  be  for  the  whole  sub- 


160 


CH. 


VII.] 


0ALL3. 


[§  119. 


§  116.  Time,  place,  amount  and  person  to  whom  payable. —  The 
time  and  place  and  person  to  whom  calls  are  to  be  paid  need  not 
necessarily  be  designated  or  fixed  by  the  persons  authorized  to  make 
the  call.1  These  are  duties  which  may  be  performed  by  other  offi- 
cers of  the  corporation,  and  frequently  either  the  president  or  treas- 
urer of  the  corporation  performs  this  work.  The  time  of  payment 
should  be  reasonable,2  as  also  should  be  the  place.  If  no  place  or 
person  to  receive  payment  is  designated,  it  is  to  be  paid  to  the 
treasurer  at  his  office.3  The  amount  called  need  not  be  made  pay- 
able in  one  sum  at  one  time,  but  may  be  made  due  in  instalments.4 


scription.  Fox  v.  Allensville  C.  S.  &  V. 
T.  Co.,  46  Ind.,  31  (1874).  May  be  for  the 
whole  or  for  part.  Harm  v.  Mulberry 
&  Jefferson  G.  R.  Co.,  33  Ind.,  103  (1870) ; 
Stone  v.  Great  Western  Oil  Co.,  41  111., 
85  (1866) ;  Spangler  v.  Ind.  &  111.  Central 
R  R  Co.,  21  111.,  276  (1859);  Ross  V. 
Lafayette  &  Indianapolis  R.  R  Co.,  6 
Ind.,  297  (1855).  Even  though  it  be  ex- 
pressly provided  that  only  a  certain 
sum  shall  be  assessed  at  one  time,  yet 
several  assessments,  each  one  not  in 
excess  of  the  stated  sum,  may  be  or- 
dered by  a  single  vote.  Penobscot  R  R. 
Co.  v.  Dummer,  40  Me.,  172  (1856) ;  Pe- 
nobscot R  R  Co.  v.  Dunn,  39  Me.,  587 
(1855). 

1  See  §  115,  note  2.  The  directors 
themselves  may  fix  the  time,  place  and 
manner  of  payment,  even  at  a  meeting 
subsequent  to  the  meeting  ordering  a 
call.  The  call  may  be  prospective.  The 
directors  may  order  that  on  a  certain 
date  a  call  payable  at  a  later  date  shall 
be  made.  Sheffield  &  Manchester  R'y 
Co.  v.  Woodcock,  7  Mees.  &  W.,  574 
(1840).  The  subscription  itself  may  reg- 
ulate the  time  of  payment  N.  J.  Mid- 
land R'y  Co.  v.  Strait,  35  N.  J.  L,  322 
(1872);  Roberts  v.  Mobile  &  O.  R  R 
Co.,  32  Miss.,  373  (1856).  Even  though 
the  statute  provides  otherwise.  Iowa  & 
Minn.  R  R  Co.  v.  Perkins,  28  Iowa,  281 
(1869). 

2  Fairfield  County  Turnpike  Co.  v. 
Thorp,  13  Conn.,  173  (1839).  The  time 
between  paj'ments  of  instalments  is  en- 
tirely within  the  discretion  of  the  di- 
rectors, there  being  no  provision  regu- 


lating the  subject   Hall  v.  United  States 
Ins.  Co.,  4  Gill  (Md.),  484  (1860X 

3  A  resolution  of  the  directors  that  the 
instalments  should  be  paid  in  at  the 
times  therein  designated  "imports  that 
payments  should  be  made  to  the  treas- 
urer, who  is  the  proper  and  only  officer 
to  receive  and  keep  the  moneys  of  the 
corporation."  Danbury  &  Norfolk  R. 
R  Co.  v.  Wilson,  22  Conn.,  435  (1853). 
As  to  a  tender  to  the  president,  see 
Mitchell  v.  Vermont,  etc.,  Co.,  67  N.  Y., 
280  (1876). 

*  London  &  North  West  R'y  Co.  v. 
McMichael,  6  Ex.,  273  (1851);  Birken- 
head L  &  C.  R'y  Co.  v.  Webster,  id., 
461  (1851);  Ambergate  R'y  Co.  v.  Nor- 
cliff,  id.,  461  (1851) ;  not  following  Strat- 
ford &  M  R'y  Co.  v.  Stratton,  2  B.  &  Ad., 
519  (1831).  In  Birkenhead  L.  &  E.  R'y 
Co.  v.  Webster,  as  reported  in  6  Ex., 
277,  the  court  say:  "We  are  unani- 
mously of  opinion  that  a  call  payable  by 
instalments  is  good,  although  debt  will 
not  lie  for  one  instalment  until  all  the 
instalments  are  due  and  payable."  In 
Hays  v.  Pittsburgh  &  Steubenville  R 
R  Co.,  38  Pa.  St,  81  (1860),  the  court 
held  that  the  directors  by  one  resolu- 
tion could  call  in  the  balance  of  the  sub- 
scriptions, making  the  call  payable  in 
instalments,  due  at  different  times.  To 
the  same  effect  see  Rutland  &  Burling- 
ton R  R  Co.  v.  Thrall,  35  Vt,  536 
(1863);  Lewis'  Case,  28  L  T.  (N.  S.),  396, 
holding  that  several  assessments,  pay- 
able at  different  times,  may  be  made 
by  one  vote,  where  the  call  was  by  the 
court 


167 


§§  117,  118.] 


CALLS. 


[CH.  VII. 


§  117.  Notice  of  calls —  Cases  holding  it  not  necessary. —  There  is 
a  wide  and  irreconcilable  difference  of  opinion  among  the  authori- 
ties on  the  question  whether  notice  of  a  call  must  be  given  to  a 
stockholder  before  suit  can  be  brought  for  the  collection  of  a  call. 

Frequently  either  the  charter,  or  a  statute,  or  the  by-laws  of  the 
corporation,  require  notice  to  be  given;  and  in  such  cases  notice  is, 
of  course,  necessary,  in  order  to  sustain  suit.1  But  where  there  is 
no  provision  in  the  charter,  or  statute,  or  by-laws,  or  subscription 
itself,  prescribing  that  notice  of  calls  shall  be  given  to  the  stock- 
holders, the  weight  of  authority  holds  that  no  notice  is  necessary, 
and  that  an  action  to  collect  the  call  may  be  maintained  without 
averring  or  proving  such  a  notice.2 

§118.  Notice  of  calls  —  Cases  holding  it  necessary. —  There  is, 
however,  strong  authority  for  the  rule  that  notice  of  calls  must  be 
given  before  suit  is  brought  for  their  collection.3     The  reason  for 


1  In  many  of  the  states  there  exist 
statutes,  very  similar  in  their  terms, 
that  notice  shall  be  given  of  calls,  and 
that  in  case  of  non-payment  the  stock 
may  be  forfeited.  These  statutes  have 
received  different  interpretations  in  dif- 
ferent states.  The  usual  construction 
is  that  the  notice  required  therein  refers 
only  to  the  forfeiture  proceedings,  and 
does  not  necessitate  notice  before  bring- 
ing a  suit  at  law  for  the  collection  of 
the  call.  Smith  v.  Indiana  &  111.  R'y 
Co.,  12  Ind.,  61  (1859);  Lake  Ontario, 
Auburn  &  N.  Y.  R  R  Co.  v.  Mason,  16 
N.  Y.,  451,  464  (1857).  In  other  states 
such  a  statute  is  construed  to  require 
notice  before  suit  Hughes  v.  Antietam 
Mfg.  Co.,  34  Md..  316  (1870);  Granite 
Roofing  Co.  v.  Michaels,  54  Md.,  65 
(1880);  Dexter  &  Mason  P.  R  Co.  v. 
Millerd,  3  Mich.,  91  (1854).  Illinois  River 
R.  R  Co.  v.  Zimmer,  20  111.,  654  (1858), 
holds  that  a  statute  regulating  notice  of 
calls  does  not  release  the  stockholder. 

2  Wilson  v.  Wills  Valley  R.  R.  Co.,  33 
Ga.,  466  (1863);  Eppes  v.  Mississippi, 
Gainesville  &  Tuscaloosa  R  R  Co.,  35 
Ala.,  33  (1859) ;  Grubb  v.  Mahoning  Nav. 
Co.,  14  Pa.  St.,  302  (1850);  Gray  v.  Mo- 
nongahela  Nav.  Co.,  2  W.  &  S.  (Pa.),  156 
(1841);  Grubbe  v.  Vicksburg  &  Bruns- 
wick R  R  Co.,  50  Ala.,  398  (1873) ;  Eak- 
right  v.  Logansport  &  Northern  Ind.  R 


R.  Co.,  13  Ind.,  404  (1859);  Johnson  v. 
(rawfordsville  R  R.  Co.,  11  Ind.,  280 
(1858);  New  Albany  &  Salem  R  R.  Co. 
v.  McCormick,  10  Ind.,  499  (1858) ;  Fisher 
v.  Evansville  &  C.  R.  R  Co.,  7  Ind.,  407 
(1856);  Ross  v.  Lafayette  &  Indianapolis 
R.  R  Co.,  6  Ind.,  297  (1855);  Hill  v.  Nis- 
bit,  100  Ind.,  341  (1884);  Smith  v.  Indiana 
&  111.  R'y  Co.,  12  Ind.,  61  (1859).  In  the 
last  case  the  court  says :  "  These  decis- 
ions rest  upon  the  ground  that  the  con- 
tract to  pa}r  by  instalments  is  in  effect 
a  promise  to  pay  on  demand,  and  the 
demand  involved  in  the  suit  itself  was 
alone  sufficient"  Notice  of  calls  is  re- 
quired by  the  Pennsylvania  railroad  act 
McCarty  v.  Selinsgrove,  etc.,  R  R,  35 
Leg.  Intel.,  410  (1878).  In  New  York, 
since  no  call  is  necessary,  no  notice  is 
necessary.  Cf.  Macon  &  Augusta  R  R. 
Co.  v.  Vason,  57  Ga.,  314  (1876). 

3  Wear  v.  Jacksonville  &  Savannah  R 
R  Co.,  24  111.,  593  (1860);  Spangler  v. 
Ind.  &  111.  Central  R.  R  Co.,  21  111.,  276 
(1859).  Cf.  Peake  v.  Wabash  R  R  Co., 
18  111.,  88  (1856),  holding  that  notice  is 
unnecessary.  In  the  case  of  Carlisle  v. 
Cahawba  &  Marion  R  R  Co.,  4  Ala.  (N. 
S.),  70  (1842),  the  court  say  that  notice 
must  be  given,  since  "  the  times,  amount 
of  instalments  and  manner  of  payment 
were  all  to  be  prescribed  by  the  presi- 
dent and  directors  of  the  corporation, 


168 


CH.  VII.] 


CALLS. 


[§119- 


this  rule  seems  to  accord  with  sound  legal  principles  and  with  busi- 
ness expediency.  It  is  a  well-established  principle  of  law  that, 
when  the  facts  or  circumstances  upon  which  the  performance  of  a 
contract  depends  lie  more  particularly  in  the  knowledge  of  the 
promisee  than  the  promisor,  the  former  must  give  the  latter  notice. 
Hence  it  would  seem  that  since  a  subscription  is  not  clue  absolutely, 
but  only  on  call,  and  the  time,  place  and  amount  of  the  call  is  fixed 
by  persons  other  than  the  subscribers,  the  better  and  more  reason- 
able rule  would  be  that  notice  of  the  call  should  be  required  and 
must  be  given. 

§  119.  Methods  of  serving  notice  of  calls. —  The  manner  and  mode 
of  giving  notice  has  given  rise  to  some  controversy.  Unless  pro- 
vision is  expressly  otherwise,  the  notice  must  be  given  by  handing 
to  the  subscriber  a  written  notice,  or  by  informing  him  orally  that 
the  call  has  been  made,  giving  the  amount,  time,  place  and  person 
to  whom  payment  is  to  be  made.1  Where  the  notice  is  served,  not 
personally,  but  by  mail,  the  notice  is  effective  only  in  case  it  is 
actually  received.2  Whether  it  was  so  received  is  a  question  for  the 
jury.3    A  publication  of  a  notice  in  a  newspaper  is  not  binding  and 


depended  upon  their  volition  and  action, 
and  consequently  were  more  properly 
within  their  knowledge."  See,  also, 
Scarlet  v.  Academy  of  Music,  43  Md.,  203 
(1875) ;  Essex  Bridge  Co.  v.  Tuttle,  2  Vt, 
393  (1830);  Rutland  &  Burlington  R.  R. 
Co.  v.  Thrall,  35  Vt,  536(1863);  Miles 
v.  Bough,  3  Q.  B.,  845  (1842) ;  Edinburgh, 
etc.,  R'y  v.  Hibblewhite,  6  M.  &  W., 
707(1840);  Alabama  &  Florida  R.  R.  Co. 
v.  Rowley,  9  Fla.,  508  (1861).  In  Hughes 
v.  AntietamManuf.  Co.,  34  Md.,  316(1870), 
the  court  say :  "  To  say  that  it  [notice] 
is  unnecessary,  because  the  subscribers, 
who  may  be  living  in  different  parts  of 
the  county,  and  perhaps  the  state,  are 
presumed  in  law  to  know  all  that  is  done 
by  the  directors,  seems  to  us  to  be  rais- 
ing a  presumption  against  the  truth 
itself." 

1  The  notice  need  not  be  written.  Ver- 
bal notification  suffices.  Smith  v.  Tal- 
lahassee Plank-road  Co.,  30  Ala.,  650, 
666  (1857).  Notice  to  pay  to  the  treasurer 
sufficiently  indicates  the  place  of  pay- 
ment. It  is  understood  to  be  at  his 
office.  Muskingum  Valley  T.  Co.  v. 
Ward,  13  Ohio,  120  (1844).    Contra,  Dex- 


ter &  Mason  P.  R.  Co.  v.  Millerd,  3  Mich., 
91  (1854).  It  must  be  proved  to  have 
been  sent  by  authorized  persons.  Miles 
v.  Bough,  3  Q.  B.,  845  (1842).  Notice  to 
various  parties  in  the  neighborhood  is 
not  sufficient.  New  Jersey  Midland  R'y 
Co.  v.  Strait,  35  N.  J.  L.,  322  (1872).  No 
particular  form  of  notice  is  necessary. 
The  only  question  is  "  whether  the  no- 
tice gives  the  shareholder  to  understand 
that  a  call  has  been  made,  and  that  he  is 
required  to  pay  the  amount  on  a  given 
day."  Shackleford  v.  Daugerrield,  L.  R, 
3  C.  P.,  407  (1868). 

2 "Constructive  notice  bj'  mail  is  not 
a  personal  notice,  although  in  some 
cases,  by  express  statutory  provision,  it 
is  sufficient  to  bind  parties."  Hughes 
v.  Antietam  Manuf.  Co.,  34  Md.,  816 
(1870). 

3  A  notice  of  a  call  may  be  by  mail. 
If  the  subscriber  denies  that  he  received 
it,  the  question  is  for  the  jury.  Brad- 
dock  v.  Phil.,  Marlton  &  Medford  R.  R 
Co.,  45  N.  J.  Law  Rep.,  363  (1883).  Ouly 
the  person  actually  mailing  the  notice 
can  testify  to  that  fact  Jones  v.  Sisson, 
72  Mass.,  288  (1856). 


169 


§  1190 


CALLS. 


[CH.  VII. 


effectual  unless  it  be  proved  that  the  subscriber  who  is  sued  actu- 
ally read  the  notice  as  published.1  A  personal  notice  is  sufficient, 
although  the  charter,  statute  or  by-laws  provide  for  notice  by  pub- 
lication.2 An  express  promise  of  the  subscriber  to  pay  a  call  which 
has  been  already  made  is  presumptive  evidence  that  he  had  notice 
of  that  call.3     Notice  by  publication,  given  under  the  authority  of 


1  In  Alabama  &  Fla.  R.  R.  Co.  v.  Row- 
ley, 9  Fla.,  508  (1861),  the  court  say  such 
a  mode  of  notice  "might  be  attended 
with  irreparable  injury  to  innocent 
parties."  See,  also,  dictum  in  Lake 
Ontario,  Auburn  &  N.  Y.  R  R.  Co.  v. 
Mason,  16  N.  Y.,  451  (1857).  In  the  case 
of  Schenectady  &  S.  R  R.  R  Co.  v. 
Thatcher,  11  N.  Y,  102  (1854),  where  the 
charter  prescribed  notice  by  publica- 
tion or  by  mail,  a  director  who  aided  in 
giving  the  notices  was  held  to  have 
had  personal  notice  and  to  be  bound. 
"  Personal  service  of  due  notice  is  clearly 
more  advantageous  to  the  defendant 
than  either  an  advertisement  in  a  news- 
paper or  a  notice  sent  by  mail."  See, 
also,  Lexington  &  West  Cambridge  R. 
R.  Co.  v.  Chandler,  13  Mete,  311  (1847). 
See,  also,  £  130.  Notice  in  a  newspaper 
is  not  good  notice  unless  the  statute  so 
prescribes.  People's,  etc.,  Assoc,  v.  Furey, 
20  Atl.  Rep.,  890  (N.  J.,  1890). 

In  the  case  of  Lincoln  v.  Wright,  23 
Pa.  St.,  76  (1854),  not  a  corporation  case, 
Judge  Jeremiah  Black  said  that  a  notice 
by  publication  in  a  newspaper  was  no 
notice  unless  actually  read  by  the  per- 
son charged  with  the  notice.  "  It  must 
be  proved  that  he  read  it;  otherwise  it 
is  no  stronger  than  proof  that  the  fact 
was  orally  and  publicly  uttered  at  a 
place  where  he  was  not  present  .  .  . 
Where  the  law  requires  notice  to  be 
given  to  a  party  before  a  liability  can 
be  fixed  upon  him,  and  the  mode  of  giv- 
ing such  notice  is  left  undetermined,  it 
should  be  given  personally  and  in  fact, 
and  so  proved."  On  the  other  hand,  in 
Hall  v.  U.  S.  Ins.  Co.,  4  Gill  (Md.^,  484 
(1847),  notice  of  a  call  by  newspaper  was 
held  sufficient    The  court  said :  "  There 


is  no  proportionate  object  attained  by 
the  great  inconvenience,  labor  and  ex- 
penses incident  to  personal  notice.  The 
substitution  of  such  newspaper  publica- 
tion in  lieu  of  personal  notice  has  so 
long  been  an  universal  usage,  and  of  a 
notoriety  equal  to  that  of  a  publication 
of  newspapers  themselves,  that  the  cus- 
tom of  doing  so  has  become  a  part  of  the 
law  of  the  land."  See.  also,  Louisville 
&  E.  T.  R  R  Co.  v.  Meriwether,  5  B. 
Monr.  (Ky.),  13  (1844),  to  the  same  effect 
and  dictum  in  Danbury  &  Norfolk  R  R 
Co.  v.  Wilson,  22  Conn.,  435  (1853),  and 
£§  130,  131,  infra. 

2  In  the  case  of  Miss.,  etc.,  R  R  Co.  v. 
Gaster,  20  Ark.,  455  (1859),  the  statute 
prescribed  sixty  days'  notice  by  publica- 
tion. Actual  personal  notice  was  given, 
and  no  publication  was  had.  The  court 
sustained  the  notice  and  said:  "One  of 
the  criterions  by  which  to  determine 
whether  the  requirements  of  a  statute 
are  imperative  or  merely  directory  is 
that  those  acts  which  are  of  the  essence 
of  the  thing  required  to  be  done  are  im- 
perative, while  those  which  are  not  of 
the  essence  are  directory.  .  .  .  The 
giving  of  sixty  days'  notice  is  imperative 
and  mu£t  be  strictly  complied  with,  be- 
cause it  is  of  the  essence  of  the  thing  re- 
quired to  be  done ;  the  mode  of  doing  so 
is  directory,  because  not  of  the  essence, 
and  may  be  either  by  publication  in  the 
manner  prescribed  by  the  charter  or  by 
actual  personal  notice."  Cf.,  semble,  in 
Tomlin  v.  Tonica  &  Petersburg  R  R 
Co.,  23  111.,  429  (I860). 

3  Miles  v.  Bough,  3  Q.  B.,  845  (1842) ; 
Fairfield  County  Turnpike  Co.  v.  Thorp, 
13  Conn.,  173  (1839). 


170 


OH.  vir.] 


CALLS. 


[§  120. 


a.  statute,  charter  or  by-law,  must  strictly  comply  with  the  provis- 
ions prescribed  as  to  the  time  and  formalities.1 

§  120.  Demand,  waiver,  -pleadings,  etc. —  After  notice  has  been 
given,  no  demand  is  necessary  before  bringing  a  suit  to  collect  the 
subscription.2  The  subscriber  may,  by  his  acts  or  express  agree- 
ment, waive  the  call  itself,  or  informalities  in  its  making,  or  notice 
thereof.3  It  is  immaterial  that  other  shareholders  have  had  no 
notice  of  the  call.4  The  proof  of  calls  and  of  notice,  when  required, 
must  be  clear  and  complete.5  The  pleadings  in  an  action  on  calls 
must  allege  the  various  facts  which  complete  the  obligation  of  the 
subscriber  to  pay.6 


1  Where  twenty  days'  notice  was  re- 
quired, proof  of  sending  notice  is  insuffi- 
cient Must  prove  the  time  of  sending. 
Cole  v.  Joliet  Opera  House  Co.,  79  111., 
96  (1875).  Notice  by  publication  "at 
least  sixty  days  "  is  satisfied  by  one  pub- 
lication sixty  days  or  more  before  the 
time  of  payment  Muskingum  Valley 
T.  Co.  v.  Werd,  13  Ohio,  120  (1844) ;  Marsh 
v.  Burroughs,  1  Woods,  463  (1871)  Fox 
v.  Allensville  Co.,  46  Ind.,  31  (1874). 
Fifty-nine  days  is  insufficient  where 
sixty  days  is  prescribed.  Macon  &  Au- 
gusta R.  R  Co.  v.  Vason,  57  Ga.,  314 
(1876).  The  printed  notice  must  be  put  in 
evidence.  Rutland  &  Burlington  R  R. 
Co.  v.  Thrall,  35  Vt.  536  (1863).  Proof 
of  several  insertions  is  by  copy  of  first 
insertion  and  the  testimony  of  the  pub- 
lisher that  the  others  were  made.  Un- 
thank  v.  Henry  County  T.  Co.,  6  Ind., 
125  (1855).  The  secretary  of  the  corpo- 
ration cannot,  by  a  certificate,  prove 
publication  of  notice.  Tomlin  v.  Tonica 
&  P.  R.  R  Co..  23  111.,  429  (1860). 

2  Penobscot  RR  Co.  v.  Dummer,  40 
Me.,  172  (1856);  Goodrich  v.  Reynolds, 
31  111..  491  (1863);  Winters  v.  Muscogee 
R.  R  Co.,  11  Ga.,  438  (1852).  Cf.  Spang- 
ler  v.  Ind.  &  111.  Central  R.  R  Co.,  21 
111.,  276  (1859\  holding  that  one  demand 
made  for  several  assessments  suffices. 

3  Macon  &  A.  R  R  Co.  v.  Vason,  57 
Ga.,  314  (1876).  Payment  of  part  of 
subscription  is  no  waiver  of  right  to 
have  a  call  made  for  the  balance  before 
payment.  Grosse  Isle  Hotel  Co.  v. 
Ex'rs  of  L'Anson,  43  N.  J.  L,  442  (1881). 


The  vote  of  a  city  to  pay  a  call  is  no 
waiver  of  its  invalidity.  Pike  v.  Bangor 
&  Calais  Shore  Line  R  R  Co.,  68  Me., 
445  (1878).  The  waiver  must  be  clearly 
proved.  Rutland  &  B.  R  R  Co.  v. 
Thrall,  35  Vt,  536  (1863).  Director  par- 
ticipating in  call  cannot  object  thereto. 
York  Tramways  v.  Willows,  L.  R,  8  Q. 
B.  D.,  685.  Where  a  subscriber,  upon 
receiving  notice  of  a  call,  denies  that  he 
is  a  stockholder,  he  thereby  waives  fur- 
ther notice.  Cass  v.  Pittsburg,  etc.,  R'y, 
80  Pa.  St.,  31  (1875\ 

4  Newry  &  Enniskillen  R'y  Co.  v.  Ed- 
munds, 2  Ex.  Rep.,  118  (1848);  Shackle- 
ford  v.  Dangerfield.  L.  R.,  3  C.  P.,  407 
(1868). 

5  Scarlett  v.  Academy  of  Music,  43 
Md.,  203  (1875).  This  case  holds  also 
that  calls  may  be  proved  by  reading  ex- 
tracts from  the  minutes  of  the  directors' 
meetings,  without  putting  the  books  in 
evidence. 

6  Must  allege  that  the  instalments  are 
all  due  and  payable,  where  several  are 
sued  on.  Bethel  &  Hanover  T.  Co.  v. 
Bean,  58  Me.,  89  (1870).  At  common 
law  the  count  set  out  in  the  declaration 
should  be  not  on  the  contract  of  sub- 
scription, but  in  indebitatus  assump- 
sit for  calls  or  instalments  due.  Peake 
v.  Wabash  R  R  Co.,  18  111.,  88  (1856). 
For  the  customary  averments,  see 
Spangler  v.  Ind.  &  111.  Central  R  R  Co.. 
21  111.,  276  (1859).  For  the  defendants' 
pleading,  see  South  Eastern  R'y  v.  Hib- 
blewhite,  12  A.  &  E,  497  (1840)." 


171 


CHAPTER  VIII. 


FORFEITURE  OF  SHARES   FOR  NON-PAYMENT. 


§  121.  The  various  remedies. 

122-123.  The  remedy  by  forfeiture  and 
sale  of  stock  is  by  statutory 
authority  only. 

124.  The  remedy  by  forfeiture  is  cu- 
mulative. 

125-126.  When  one  remedy  is  ex- 
hausted the  corporation  can- 
not resort  to  another. 

127-128.  Forfeiture  relieves  the  share- 
holder whose  shares  are  for- 
feited from  liability  to  corpo- 
rate creditors. 


129.  Statutory  formalities    and  gen- 

eral method  of  forfeiture. 

130.  Notice  in  cases  of  forfeiture. 

131.  Notice  is  not  the  same  thing  as 

forfeiture. 

132.  Tender,   by    stockholder,    before 

forfeiture. 

133.  Surplus  after  valid  forfeiture  be- 

longs to  the  corporation. 

134.  Equity  will  relieve  a  shareholder 

from  an  unauthorized  forfeit- 
ure —  Action  at  law  for  dam- 
ages. 


§  121.  The  various  remedies. —  When  a  subscriber  fails  or  refuses 
to  pay  for  the  shares  of  stock  for  which  he  has  subscribed,  the  cor- 
poration generally  has  several  methods  of  enforcing  the  contract. 
First,  there  is  the  common-law  action  to  collect  the  subscription  as 
a  debt.  This  remedy  always  exists,  except  in  a  few  states  where 
it  is  available  only  when  the  subscription  itself  or  the  charter  cre- 
ates a  liability  to  pay.1  Second,  the  corporation  may  sue  on  the 
subscription,  obtain  judgment,  and  then  proceed  to  sell  the  stock 
under  an  execution  levied  to  collect  the  judgment.2  Third,  the 
corporation  may  bring  an  action  at  law  for  breach  of  contract,  the 
measure  of  damages  being  the  difference  between  the  value  of 
the  stock  at  the  price  which  the  subscriber  was  to  pay  and  the  mar- 
ket value  «t  the  date  of  the  refusal  to  pay.3  A  fourth  and  very 
important  remedy  is  that  of  forfeiture.  It  is  the  subject  of  this 
chapter.  It  is  effected  in  one  of  two  ways :  the  forfeiture  may  be 
by  a  strict  foreclosure  of  the  stockholder's  stock  —  that  is,  the 
taking  of  his  stock  by  the  corporation  itself;  or  it  may  be  by  a 
public  sale  of  the  stock  for  non-payment  of  the  subscription. 

§§  122-123.  The  remedy  by  public  sale  of  stock  is  by  statutory 
authority  only. —  In  addition  to  the  remedy  of  an  action  at  law  to 
compel  payment  of  a  subscription  for*  stock,  there  frequently  is 
given  to  the  corporation  the  right  to  sell  the  subscriber's  stock  for 
non-payment  of  his  subscription  and  apply  the  proceeds  to  the  pay- 
ment of  that  subscription.     This  is  what  is  generally  known  as  a 


1  See  §  74,  supra. 

2  Chase  v.  East  Tenn.,  etc.,  R  R  Co., 
5  Lea,  415  (1880). 


3  Rand  v.  White  Mountains  R  R  Co., 
40  N.  H.,  79  (I860). 


172 


OH.  VIII.] 


KOKFEITUKE    OF    STOCK. 


[S  124. 


forfeiture  of  the  stock.  It  is  not  a  common-law  remedy,  and,  con- 
sequently, can  be  resorted  to  by  the  corporation  only  when  power 
to  make  the  sale  is  given  to  the  corporation  by  statute  or  by  the 
act  of  incorporation.1  The  right  to  forfeit  may,  however,  be  cre- 
ated by  the  consent  of  the  stockholders,  and  be  indorsed  on  the 
certificates  of  stock.2 

The  authority  to  forfeit  shares  for  non-payment  of  the  subscrip- 
tion cannot  be  created  by  a  by-law.3  Such  a  forfeiture  would  be 
wholly  void,  and  transfers  based  thereon  would  confer  no  rights 
upon  the  transferee.4 

§  12-L  The  remedy  utj  forfeiture  is  cumulative.  —  Frequently, 
when  a  corporation  is  authorized  by  statute  to  forfeit  shares  for 
non-payment  of  the  subscription,  the  question  arises  whether  the 
statutory  remedy  of  forfeiture  is  exclusive,  thereby  preventing  a 
resort  to  the  common-law  remedy  of  an  action  of  assumpsit  on  the 


1  Westcott  v.  Minnesota,  etc.,  Co.,  23 
Mich..  145  (1871) ;  Minnehaha,  etc.,  Ass'n 
of  Minneapolis  v.  Legg,  52  N.  W.  Rep., 
898  (Minn.,  1892) ;  Budd  v.  Multnomah 
St.   R'y  Co.,    15   Pac.    Rep.,  659  (Oreg., 
1887).     In  the  last  case  the  statute  gave 
the  corporation  power  to  make  by-laws 
for  forfeiture  of  stock.     There  being  no 
by-law,  a  forfeiture  was  attempted  by 
a  resolution  of  the  board  of  directors. 
Held,  this  could  not  be  done.     Barton's 
Case,  4  De  G.  &  J.,  46  (1859),  is  similar 
and  stronger,  as  public  notices  and  ad- 
vertisements were  made  of  the  threat- 
ened forfeiture.     Perrin  v.  Granger,  30 
Vt,  595  (1858);  Clarke  v.  Hart,  6  H.  of 
L.   Cases,  633  (1858) ;   Stanhope's  Case, 
L.   R,    1    Chan..  161  (1865).     In    Kelk's 
Case,  L.  R,  9  Eq.,  107  (1869),  the  forfeit- 
ure was  provided  for  in  deed  of  settle- 
ment, and  hence  regular.     If  the  cor- 
poration purchases  at  forfeiture  sale,  as 
it  may  by  statute  in  California,  execu- 
tion against  the  corporation  cannot  be 
levied    ou    such     stock.      Robinson     ?•» 
Spaulding,  etc.,  Co.,  72  Cat,  32   (1887). 
A  building  association  cannot  provide 
that  it  will  discount  a  subscriber's  stock, 
loan  him  the  amount  thus  discounted, 
and  forfeit  the  whole  if  he  does  not  pay. 
It  is  usury.     Henderson,  etc.,  Assoc,  v. 
Johnson,  10  S.  W.  Rep.,  787  (Ky,  1889). 


2  Weeks  v.  Silver,  etc.,  Co.,  55  J.  &  S. 
(X.  Y.),  1  (1887). 

3  Matter  of  the  Long  Island  R.  R.  Co., 
19  Wend.,  37  (1837);  S.  C,  32  Am.  Dec. 
429:  Kirk  v.  Nowill,  1  Term  Rep,  118 
(1786).  Cf.  Kennebec,  etc.,  R.  R  Co.  v. 
Kendall,  31  Me.,  470  (1850);  Rosenback 
v.  Salt  Springs  National  Bank,  53  Barb., 
495,  506  (1868). 

4  Matter  of  the  Long  Island  R  R  Co., 
s}ipra.    Yet,  where  such  a  power  was 
conferred    by  a   by-law  adopted  at  a 
meeting  of  the  stockholders,    a  stock- 
holder whose  stock  had   been  declared 
forfeited  under  the  by-law,  and  who  is 
shown  to  have  assented  to  the  by-law, 
will  not  be  heard  to  question  the  valid- 
ity of  the   forfeiture.     He  is  estopped. 
Lesseps  v.  Architects'  Co.,  4  La.  Ann., 
316  (1849).     The  corporation  cannot,  by 
a    by-law,    forfeit    shares    temporarily 
until  penalties  or  fines  shall  have  been 
paid.     Adley  v.  Reeves.  2  Maule  &  S.. 
53   (1813),   by  Lord  Ellenborough.     Cf. 
Cartan  v.  Father  Mathew,  etc..  Society, 
3  Daly,  20  (1869);  Pentz  v.  Citizens"  Fire, 
etc.,    Co.,   35  Md.,  73  (1871).      But  only 
the  stockholder  can  object  to  a  forfeit- 
ure on  the  ground  that  it  is  by  by-law. 
Detweiler  u   Breckenkamp,  83  Mo.,    I". 
(1884).     Cf  m  131,  134.     As  to  the  effe.t 
of  acquiescence  or  waiver  by  the  stock- 
holder, see  gg  129,  134,  infra. 


173 


§  124.] 


FORFEITURE    OF    STOCK. 


[CH.  VIII. 


contract.  It  is  the  well-established  rule  that  it  does  not.  A  grant 
of  the  power  to  declare  a  forfeiture  of  the  shares  of  a  subscriber 
for  non-payment  of  calls  does  not,  by  implication,  deprive  the  cor- 
poration of  its  option  of  remedies;  and  the  corporate  agents  may, 
in  their  discretion,  upon  the  failure  of  the  subscriber  to  pay  for 
his  stock,  either  proceed  against  him  by  suit  to  collect  the  unpaid 
calls,  or  may  forfeit  his  shares  of  stock.  The  corporation,  by  such 
a  statute,  is  given  its  choice  of  remedies,  and  may  pursue  either. 
The  remedy  by  forfeiture  is  additional.1 


i  Delaware,  etc.,  Co.  V.  Sansom,  1 
Binn..  70  (1803);  Instone  v.  Frankfort 
Bridge  Co.,  2  Bibb,  576  (1812);  Rens- 
selaer, etc.,  T.  Co.  v.  Barton,  16  N.  Y., 
457  (1854) ;  Lake  Ontario,  etc.,  R.  R.  Co. 
v.  Mason,  16  id.,  451  (1857) ;  Buffalo,  etc., 
R.  R,  Co.  i\  Dudley,  14  id.,  336  (1856) ; 
Tutweiler  v.  Tuscaloosa,  etc.,  Co.,  7  S. 
Rep.,  398  (Ala.,  1890);  Harlem,  etc., 
Canal  Co.  v.  Seixas,  2  Hall  (N.  Y.  Super. 
Ct.),  504  (1829);  Fort  Edward,  etc.,  Co. 
tt  Payne.  17  Barb.,  567  (1854);  Rens- 
selaer, etc.,  R.  R.  Co.  v.  "Wetsel,  21  id., 
56  (1855):  Sagory  v.  Dubois,  3  Sandf. 
Chan.,  466  (1846) ;  Troy,  etc.,  R.  R.  Co. 
v.  McChesney,  21  Wend.,  296  (1839); 
Herkimer,  etc.,  Co.  v.  Small,  21  id.,  273 
(1839);  Ogdensburgh.  etc.,  R.  R  Co.  v. 
Frost,  21  Barb..  541  (1856);  Northern 
R  R  Co.  v.  Miller,  10  id..  260  (1851); 
Troy,  etc.,  R.  R.  Co.  v.  Tibbits,  18  id., 
297  (1854);  Troy,  etc.,  v.  Kerr,  17  id., 
581  (1854);  Union  Turnpike  Co.  v. 
Jenkins,  1  Caines'  Cas.,  86,  95  (1804); 
Goshen,  etc.,  Co.  v.  Hurtin,  9  Johns., 
217  (1812);  McDonough  v.  Phelps,  15 
How.  Prac,  372  (1856) ;  Freeman  v.  Win- 
chester, 18  Miss.,  577  (1848);  Hartford, 
etc.,  R  R.  Co.  v.  Kennedy,  12  Conn., 
499  (1838);  Mann  v.  Cooke,  20  id.,  178 
(1850);  Connecticut,  etc.,  R.  R.  Co.  v. 
Bailey,  24  Vt.,  465  (1852) ;  Rutland,  etc, 
R  R.  Co.  v.  Thrall,  35  id.,  536  (1863); 
New  Hampshire,  etc.,  R.  R.  Co.  v.  John- 
son, 30  N.  H.,  390  (1855) ;  White  Mount- 
ains R  R.  Co.  v.  Eastman,  34  id.,  124, 
147  (1856);  Piscataqua  Ferry  Co.  v. 
Jones,  39  id.,  491  (1859) ;  Hightower  v. 
Thornton,  8  Ga..  486,  502  (1850);  Hughes 
v,  Antietam,  etc.,  Co.,  34  Md.,  316  (1870); 


Beene  v.  Cahawba,  etc,  R.  R.  Co.,  3 
Ala,,  660(1842);  Selma,  etc.,  R.  R.  Co. 
v.  Tipton,  5  id.,  787  (1843);  Gratz  v. 
Redd,  4  B.  Mon.  (Ky.),  178  (1848) ;  Bos- 
ton, etc.,  R  R.  Co.  v.  Wellington.  113 
Mass.,  79  (1873).  [Compare  with  this  case 
Worcester,  etc,  Co.  v.  Willard,  5  Mass. 
80  (1809);  Andover,  etc.,  Co.  v.  Gould,  6 
id.,  40(1809);  New  Bedford,  etc.,  Co.  v. 
Adams,  8  id.,  138  (1811);  City  Hotel  r. 
Dickinson,  72  Mass.,  586  (1856);  M<  - 
chanics',  etc,  Co.  v.  Hall,  121  Mass.,  272 
(1876).]  Mexican  Gulf,  etc.,  R.  R  Co.  t?. 
Viavant,  6  Rob.  (La.),  305  (1843):  New 
Orleans,  etc.,  Co.  v.  Briggs,  27  La.  Ann.. 
318(1875);  Greenville,  e*c,  R.  R.  Co.  v. 
Cathcart,  4  Rich.  Law,  89  (1850);  Klein 
v.  Alton,  etc,  R  R  Co.,  13  111.,  514 
(1851);  Peoria,  etc.,  R.  R,  Co.  v.  Elting, 
17  id.,  429  (1856);  Kirksey  v.  Florida, 
etc,  Co.,  7  Fla.,  23  (1857);  Tar  River, 
etc.,  Co.  v.  Neal,  3  Hawks  (N.  C),  520 
(1825);  Stokes  v.  Lebanon,  etc.,  Co.,  6 
Humph.,  241  (1815);  South  Bay,  etc., 
Co.  v.  Gray,  30  Me.,  547(1849);  Frank- 
lin Glass  Co.  v.  Alexander,  2  N.  H.,  380 
(1821);  S.  C,  9  Am.  Dec,  92,  and  the 
note  at  pp.  96-104.  A  subscriber  for 
stock  cannot  avoid  liability  to  the  corpo- 
ration by  setting  up  that  the  corpora- 
tion has  a  lien  on  the  stock  therefor 
and  may  enforce  it.  Lankershine,  etc. 
Co.  «,  Herberger,  23  Pac  Rep.,  134  (Cal.. 
1890).  The  corporation  may  sue  for  the 
whole  subscription  and  need  not  sue 
merely  for  the  deficiency  that  would 
result  from  selling  the  stock.  Interna- 
tional, etc.,  Ass'n  v.  Walker,  47  N.  W. 
Rep.,  338  (Mich.,  1890).  For  a  learned  dis- 
cussion of  the  general  question  how  far 


174 


OH.  VIII.] 


FORFEITURE    OF    STOCK. 


[§§  186,  120. 


It  is  to  be  borne  in  mind,  however,  that  in  the  New  England 
states  the  right  to  forfeit  stock  for  non-payment  of  assessments 
does  not  imply  a  right  in  the  corporation  to  sue  for  such  assess- 
ments. The  latter  right  does  not  exist  at  all  unless  it  is  given  by 
statute  or  by  the  express  promise  of  the  subscriber.1  But  where 
both  remedies  exist,  the  corporation  has  its  election  which  remedy 
to  pursue.2 

§§  125,  126.  When  one  remedy  is  exhausted  the  corporation  can- 
not resort  to  another. —  Although  a  corporation  having  the  right  to 
declare  a  forfeiture  of  shares  for  non-payment  of  calls  may  gener- 
ally, at  its  option,  either  forfeit  the  stock  or  bring  an  action  to  col- 
lect the  amount  due,  it  does  not  follow  that  it  can  forfeit  the  stock 
and  then  bring  an  action  for  the  unpaid  calls,  or  any  part  thereof 
that  may  remain  unsatisfied  by  the  forfeiture.  The  corporation, 
when  a  shareholder  is  in  default,  may  pursue  either  the  one  remedy 
or  the  other  in  its  discretion;  but  it  cannot  forfeit  the  stock  and 
afterwards  sue  at  law.  The  first  remedy  excludes  the  second.3  In 
order,  however,  to  bar  the  remedy  of  an  action  on  the  contract, 
the  forfeiture  must  be  complete  and  actual.     Consequently,  a  mere 

Such,  also,  seems  to  be  the  rule  iu  Eng- 
land. King's  Case,  L.  R,  2  Chan.,  714 
(1867);  Knight's  Case,  id.,  321  (1S67); 
Snell's  Case,  u.  R,  5  Chan.,  22  (1869). 
By  statute  in  England  the  right  to  for- 
feit and  the  right  to  sue  may  be  exer- 
cised together;  and  shares  may  be  for- 
feited for  non-payment  of  calls,  whether 
those  calls  have  been  sued  for  or  not 
Great  North.,  etc.,  Ry  Co.  v.  Kennedy,  4 
Ex.,  417  (1849);  Jnglis  v.  Great  North. 
Ry  Co.,  1  Macq.,  112  (1852).  But  there  is 
a  line  of  cases  in  England  where,  by 
the  terms  of  the  deeds  of  settlement 
only  an  option  is  given  to  sue  or  to  for- 
feit, and  it  is  then  held  that  the  cor- 
poration is  concluded  by  its  election. 
Inglis  v.  Great  North.  Ry  Co.,  1  Macq. 
(Scotch  Ap.),  112  (1852),  where,  notwith- 
standing the  forfeiture  and  cancellation 
of  shares  and  the  issue  of  new  ones,  the 
right  to  recover  in  an  action  for  calls 
was  held  to  remain  unimpaired  in  the 
company.  See,  also,  Birmingham,  etc.. 
Ry  Co.  v.  Locke.  1  Q.  B.,  256  (1841); 
Edinburgh,  etc.,  Ry  Co.  v.  Hebblewhite. 
6  M.  &  W.,  707  (1840);  London,  eta,  Ry 
Co.  v.  Fairclough,  2  Man.  &  Gr.,  674 
(1841). 


the  jurisdiction  of  a  court  of  equity  may 
be  affected  by  statutes  conferring  simi- 
lar jurisdiction  upon  the  courts  of  law  — 
an  inquiry  germane  to  the  matter  of  the 
present  section  —  see  the  note  to  the 
case  of  Payne  v.  Bullard,  23  Miss.,  88 
(1851),  in  55  Am.  Dec,  74,  77. 

i  See  §  74. 

*See§§125,  126. 

3  Small  v.  Herkimer,  etc.,  Co.,  2  N.  Y., 
330  (1849),  reversing  Herkimer,  etc.,  Co. 
v.  Small.  21  Wend.,  273  (1839) ;  S.  C,  2 
Hill,  127  (1841):  Northern  R  R.  Co.  v. 
Miller,  10  Barb.,  260,  271  (1851);  Ogdens- 
burgh,  etc.,  R  R  Co.  v.  Frost,  21  id., 
541  (1856);  Mills  v.  Stewart,  41  N.  Y., 
384  (1869);  Macauly  v.  Robinson,  18 
La.  Ann.,  619  (1866);  Allen  v.  Montgom- 
ery, etc.,  Co.,  11  Ala.,  437  (1847);  Athol, 
etc.,  R  R  Co.  v.  Inhabitants  of  Prescott, 
110  Mass.,  213  (1872);  Mechanics',  etc., 
Co.  v.  Hall,  121  id.,  272  (1876).  With 
these  later  Massachusetts  cases  compare 
Andover,  etc.,  Co.  v.  Gould,  6  Mass.,  40 
(1809);  Franklin,  etc.,  Co.  v.  White,  14 
id.,  286  (1817) ;  Rutland,  etc.,  R.  R  Co.  v. 
Thrall.  35  Vt,  536  (1863) ;  Macon,  etc., 
R.  R.  Co.  v.  Vason,  57  Ga.,  314  (1876); 
Ashton  v.  Burbank,  2  Dill.,  435  (1873). 


175 


§§  127,  128.] 


FORFEITURE   OF   STOCK. 


[CH.  VIII. 


threat  that  a  forfeiture  will  be  made  if  the  call  be  not  paid  on  or 
before  a  day  named,  or  an  unsuccessful  attempt  to  sell  the  shares, 
will  not  be  sufficient  to  bar  the  action.1  So  long  as  the  stock- 
holder's right  to  the  shares  and  to  the  immunities  and  emoluments 
attached  thereto  remain,  his  obligation  to  pay  is  not  extinguished.2 

There  is,  however,  a  line  of  cases  in  which  a  contrary  rule  is  sus- 
tained. In  these  cases  it  is  held  that  the  forfeiture  of  shares  of 
stock  is  like  the  foreclosure  of  a  mortgage;  and  that,  just  as  a 
mortgagee  may  have  judgment  against  the  mortgagor  for  a  de- 
ficiency, so  may  a  corporation  have  its  action  of  assumpsit  against 
a  subscriber  whose  stock,  having  been  forfeited,  has  failed  to  sell 
for  enough  to  pay  his  entire  indebtedness  to  the  corporation  on  the 
subscription.3  This  rule  is  held  to  apply  equally  to  original  sub- 
scribers or  their  transferees;  and  any  stockholder  is  liable,  under 
this  rule,  for  the  balance  due  upon  assessments,  after  deducting  the 
amount  realized  at  the  forfeiture  sale.4 

§§  127, 12S.  Forfeiture  relieves  the  shareholder  ivhose  shares  are 
forfeited  from  liability  to  corporate  creditors. —  In  the  absence  of 
fraud  and  collusion  it  is  a  settled  rule  that,  where  a  corporation 
has  authority  to  declare  a  forfeiture  of  shares  for  non-payment  of 
calls,  and  a  forfeiture  is  regularly  declared,  such  formal  declaration 


1  Macon,  etc.,  R  R  Co.  v.  Vason,  57 
Ga.,  314  (1876).  See,  also,  cases  cited 
supra  and  infra,  §  131. 

2Instone  v.  Frankfort  Bridge  Co.,  2 
Bibb,  576,  581  (1812).  Cf.  Buffalo,  etc., 
R  R  Co.  v.  Dudley,  14  N.  Y.,  336,  347 
(1856).  It  has  been  held,  also,  that  an 
action  to  collect  a  subscription,  when 
prosecuted  to  judgment,  is  a  bar  to  the 
remedy  by  forfeiture.  Giles  v.  Hutt,  3 
Ex.,  18  (1848). 

3  Carson  v.  Arctic  Mining  Co..  5  Mich., 
288  (1858);  Danbury,  etc.,  R  R  Co.  v. 
Wilson,  22  Conn.,  435  (1853);  Great 
Northern  Ry  Co.  v.  Kennedy,  4  Exch., 
417,  425  (1849). 

4  Merrimac  Mining  Co.  v.  Bagley,  14 
Mich.,  501  (1866).  Cf.  Hartford,  etc.,  R  R 
Co.  v.  Kennedy,  12  Conn.,  499  (1838); 
Brockenbrough  v.  James  River,  etc., 
Co.,  1  Patton  &  H.  (Va.),  94  (1855) ;  Mann 
v.  Currie,  2  Barb.,  294  (1848).  It  is  some- 
times so  provided  expressly  by  statute 
or  by  the  charter  of  the  company. 
Brockenbrough  v.  James  River,  etc., 
Co.,  1  Patton  &  H.,  94  (1855) ;    Danbury, 

1 


etc.,  R  R  Co.  v.  Wilson,  22  Conn.,  435, 
456  (1853);  Great  Northern  R'y  Co.  v. 
Kennedy,  4  Exch.,  417  (1849);  Mann  v. 
Cooke,  20  Conn.,  178  (1849).  But  see 
Athol.  etc..  R  R  Co.  v.  Inhabitants  of 
Prescott,  110  Mass.,  213  (1872);  Kenne- 
bec, etc.,  R  R  Co.  v.  Kendall,  31  Me., 
470  (1850);  Allen  v.  Montgomery  R  R. 
Co.,  11  Ala..  437  (1847) ;  Stokes  v.  Leb- 
anon, etc.,  Co.,  6  Humph.  (Tenu.),  241 
(1845);  Mills  v.  Stewart,  41  N.  Y.,  384 
(1S69).  Or  that  any  shareholder  whose 
shares  shall  have  been  forfeited  for  non- 
payment of  assessments  shall  neverthe- 
less be  liable  to  pay  to  the  company  all 
calls  owing  on  such  shares  at  the  time 
of  the  forfeiture.  This  seems  to  be  a 
common  provision  in  the  articles  of  as- 
sociation of  English  companies.  Creyke'.s 
Case,  L.  R,  5  Chan.,  63  (1869);  Stocken's 
Case,  L.  R,  5  Eq.,  6  (1867).  But  in  such 
a  case  interest  is  not  collectible.  Stock- 
en's  Case,  supra.  It  is  otherwise  in  or- 
dinary defaults.  Gould  v.  Oneonta.  71 
N.  Y.,  298  (1877);  Rikhoff  V.  Brown,  etc., 
Co.,  68  Iud.,  388  (1879). 
76 


CH.    VIII.] 


FORFEITURE    OF    STOCK. 


[§  128. 


puts  an  end  to  the  liability  of  the  shareholder,  and  corporate  cred- 
itors cannot  subsequently  hold  such  an  expelled  or  released  share- 
holder liable.1  This  is  the  rule  even  though  the  debt  was  contracted 
by  the  company  before  the  stock  was  forfeited.2  The  same  prin- 
ciple of  law  that  prevents  the  corporation  from  suing  on  a  sub- 
scription after  the  stock  has  been  forfeited  prevents  the  corporate 
creditors  also  from  doing  the  same.  Rut,  on  the  other  hand,  inas- 
much as  fraud  vitiates  all  acts  into  which  it  enters,  a  forfeiture  of 
shares  by  collusion  between  a  shareholder  and  the  board  of  direct- 
ors of  the  corporation  will  not  release  him  from  liability  to  con- 
tribute in  the  event  of  the  insolvency  of  the  company.3  In  such 
a  case  the  creditors  may  invoke  the  interposition  of  a  court  of 
equity  to  prevent  the  consummation  of  an  inchoate  forfeiture,  or 
to  set  aside  one  already  accomplished.4  Hence,  it  is  well  settled 
that  the  power  of  forfeiture  cannot  lawfully  be  exercised  for  the 
purpose  of  enabling  members  to  escape  from  their  liability  on  their 
stock,  either  to  the  corporation  or  its  creditors.5     A  stockholder, 


1  Allen  v.  Montgomery  R  R  Co.,  11 
Ala.,  437,  450  (1847) ;  Macauly  v.  Robin- 
son, 18  La.  Ann.,  619  (1866);  Mills  v. 
Stewart,  41  N.  Y.,  384  (1869) :  Woollas- 
ton's  Case,  4  De  G.  &  J.,  437  (1859) ;  & 
parte  Beresford,  2  Macn.  &  G.,  197 
(1850);  Kelk's  Case,  L.  R,  9  Eq.,  107 
(1869);  Dawes'  Case,  L.  R,  6  Eq..  232 
(1868);  Snell's  Case,  L.  R,  5  Chan.,  22 
(1869).  Nor,  on  the  other  hand,  can  the 
stockholder  claim,  after  the  forfeiture, 
any  of  the  rights  of  stockholdership. 
St  Louis,  etc.  Co.  v.  Sandoval,  etc..  Co., 
116  111.,  170  (1886). 

2  Mills  v.  Stewart,  supi-a. 

3Slee  v.  Bloom,  19  Johns.,  456  (1822) : 
Burke  v.  Smith,  16  Wall.,  390  (1872); 
Mills  v.  Stewart,  41  N.  Y.,  384  (1869) ; 
Walters'  Second  Case,  3  De  G.  &  Sm., 
244(1850);  Richmond's  Case,  4  Kay  & 
J.,  305  (1858);  Spackman's  Case,  11  Jur. 
(N.  S.),  207  (1865) ;  Stanhope's  Case,  L  R, 
1  Chan.,  161  (1866);  Stewart's  Case,  L  R, 
1  Chan.,  511  (1866) ;  Gower's  Case,  L  R.. 
6  Eq.,  77  (1868). 

*  Germantown,  etc.,  R'y  Co.  v.  Fitler, 
60  Pa.  St,  124  (1869).  See,  also,  Grand 
Rapids  Savings  Bank  v.  Warren,  52 
Mich.,  557  (1884).  The  fact  that  the  cor- 
poration might  have  forfeited  the  stock, 


but  in  fact  did  not  is  no  defense  as 
against  the  corporate  creditors.  If  a 
transaction  between  a  shareholder  and 
the  directors  is  irregular,  but  is  alleged 
to  have  been  acquiesced  in,  it  is  incum- 
bent upon  the  stockholder  to  support 
such  allegation  by  showing  that  the 
transaction  was  fully  made  known  to 
the  general  body  of  the  shareholders. 
Spackman's  Case,  11  Jur.  (N.  S.),  207 
(1865).  A  stockholder  whose  stock  is 
forfeited  in  a  building  association  for 
non-payment  of  dues,  as  authorized  by 
the  charter,  cannot  recover  back  the 
money  paid  by  him.  Freeman  v.  Ot- 
tawa, etc.,  Assoc,  28  N.  E.  Rep.,  611 
(111.,  1885). 

5  Spackman  v.  Evans,  L  R,,  3  H.  of  L, 
171  (1868);  Stanhope's  Case,  L  R,  1  Ch., 
161  (1866) ;  Richmond's  Case,  4  Kay  &  J., 
305  (1858) ;  Manisty's  Case,  17  Solicitor's 
Jour.,  745;  Gower's  Case,  L  R,  6  Eq., 
77  (1868) ;  Ex  parte  Jones,  27  L  J.,  Chan., 
666  (1858) ;  Hall's  Case,  L  R,  5  Chan., 
707  (1870) ;  Mills  n  Stewart  41  N.  Y, 
384  (1869).  Cf.  Dixon  v.  Evans,  L.  R,  5 
H.  of  L,  606  (1872);  Lord  Belhaven's 
Case,  11  Jur.  (N.  S.),  572  (1865) ;  S.  C,  12 
L  T.  (N.  S.),  595  (1867);  Clarke  r.  Hart 
6  House  of  Lords  Cases,  633  (1858) ;  Gar- 


(12) 


177 


§  129.] 


FORFEITURE    OF    STOCK. 


[_CH.  vnr. 


by  mere  abandonment  of  his  shares,  cannot  forfeit  them  himself, 
and  thus,  by  his  own  act,  discharge  himself  from  his  obligation  on 
the  subscription.1 

§  129.  Statutory  formalities  and  general  method  of  forfeiture.— 
The  general  method  of  forfeiting  shares  for  non-payment  of  calls 
is  usually  prescribed  in  detail  by  the  statute  authorizing  the  for- 
feiture. In  the  earlier  cases  there  may  be  observed  some  tendency 
to  hold  that  a  substantial,  in  distinction  from  a  strict,  compliance 
with  the  requirements  of  the  statute  is  all  that  is  necessary  to  a 
valid  forfeiture.2  But  in  later  cases,  English  s  and  American,4  it  is 
plainly  declared,  and  it  may  be  taken  as  a  settled  rule,  that  the 
validity  of  the  forfeiture  and  sale  of  the  shares  of  a  subscriber  in 
arrears  depends  upon  a  strict  and  formal  compliance  with  the  re- 
quirements of  the  enabling  statute.5 

Thus  a  sale  of  the  shares  at  private  sale,  when  a  sale  by  public 
auction  was  prescribed,  has  been  held  to  invalidate  the  forfeiture.'1 


den  Gully,  etc.,  Co.  v.  McLister,  L.  R,  1 
App.  Cas.,  39  (1875);  Sweny  v.  Smith. 
L.  R,  7  Eq.,  324  (1869);  Chouteau  v. 
Dean,  7  Mo.  App.,  211  (1879).  Cf.  Bed- 
ford R  R  Co.  v.  Bowser,  48  Pa.  St,  29 
(1864). 

1  Rockville,  etc.,  Turnpike  Co.  v.  Max- 
well, 2  Cranch,  C.  C,  451  (1824).  For 
sundry  illustrations  of  what  will  or  will 
not  justify  a  forfeiture,  see,  particularly, 
Sweny  v.  Smith,  L.  R,  7  Eq.,  324  (1869) ; 
Stocken's  Case,  L.  R,  3  Chan.,  412  (1867) ; 
Count  Palen's  Case,  L  R,  9  Eq.,  107 
(1869);  Thomas'  Case,  L.  R,  13  Eq.,  437. 
No  defense  that  defendant  supposed  he 
could  pay  balance  of  subscription  or 
have  a  forfeiture  of  stock.  Ross  v. 
Bank,  etc.,  19  Pac.  Rep.,  243  (Nev.,  1888). 

2  Catchpole  v.  Ambergate,  etc.,  R'y 
Co.,  1  Ellis  &  B.,  Ill  (1852):  Nolan  v. 
Arabella,  etc.,  Co.,  6  W.  W.  &  A.  B. 
(Australian),  38.  Cf.  "Woollaston's  Case, 
4  De  G.  &  J.,  437  (1859) ;  Knight's  Case, 
L.  R,  2  Ch.,  321  (1867). 

3  Clarke  v.  Hart,  6  House  of  Lords 
Cases,  633  (1858);  Johnson  v.  Lyttle's 
Iron  Agency,  46  L.  J.  (Chan.),  786  (1877). 
Cf.  Knight's  Case,  L.  R,  2  Chan.,  321 
(1867);  Garden  Gully,  etc.,  Co.  v.  McLis- 
ter, L.  R,  1  App.  Cas.,  39  (1875);  Lon- 
don &  B.  R'y  Co.  v.  Fairclough,  2  Mann. 


&  G,  674  (1841).  In  England  a  forfeit- 
ure may  be  made  after  a  call,  and  be- 
fore the  call  is  due.  The  call  is  "  owing  " 
from  the  time  when  it  is  made.  Faure, 
etc.,  Co.  v.  Phillapart,  58  L.  T.  Rep.,  525 
(1888),  where  the  forfeiture  was  made 
on  two  calls,  one  past  due  and  one  not 
yet  due. 

*  Portland,  etc.,  R  R  Co.  v.  Graham, 
52  Mass.,  1  (by  Shaw,  C.  J.,  1846) ;  Ger- 
mantown,  etc.,  R'y  Co.  v.  Fitter,  60 
Penn.  St.,  124  (1869);  Eastern,  etc., 
Plank-road  Co.  v.  Vaughan,  20  Barb.,  155 
(1855) ;  York,  etc.,  R  R  Co.  v.  Ritchie, 
40  Me.,  425(1855);  Lewey's  Island  RR 
Co.  v.  Bolton,  48  id.,  451  (1860) ;  Down- 
ing v.  Potts,  23  N.  J.  Law,  66  (1851); 
Matter  of  the  Long  Island  R  R.  Co.,  19 
Wend.,  37  (1837);  Mitchell  v.  Vermont 
Copper  Mining  Co.,  40  N.  Y.  Super.  Ct, 
406  (1876);  Occidental,  etc.,  Assoc  v. 
Sullivan,  62  Cal.,  394  (1882).  Cf.  John- 
son v.  Albany,  etc.,  R  R.  Co.,  40  How. 
Prac,  193  (1870);  Rutland,  etc.,  R  R. 
Co.  v.  Thrall,  35  Vt,  536  (1863) ;  Perrin 
v.  Granger,  30  id.,  595  (1858). 

5  Garden  Gully,  etc.,  Co.  v.  McLister, 
L.  R,  1  App.  Cas.,  39  (1875);  German- 
town,  etc.,  R'y  Co.  v.  Fitler,  60  Penn. 
St,  124  (1869). 

6  Lewey's  Island  R  R  Co.  v.  Bolton, 


178 


CH.  VIII.] 


FORFEITURE    OF    STOCK. 


[§  129. 


There  must  be  a  properly  constituted  board  of  directors  to  declare 
a  forfeiture  of  shares.1  It  is  held,  in  general,  that,  in  the  absence 
of  statutory  provisions  as  to  order  or  details,  the  mode  of  forfeit- 
ure must  be  reasonable  and  just.2  The  forfeiture  may  be  regu- 
larly effected  by  a  resolution  of  the  board  of  directors,  ordering  a 
sale  of  all  stock  on  which  assessments  shall  remain  unpaid  at  a  day 
named  in  the  future.3 

It  is  a  well-established  rule,  also,  that  a  forfeiture  of  shares, 
where  the  forfeiture  was  irregular  or  defective  in  its  form,  is  not 
void,  but  voidable,  and  that,  by  subsequent  knowledge  and  acqui- 
escence, the  shareholder  and  the  company  are  alike  estopped  to 


48  Me..  451  (1860).  As  to  what  is,  in 
general,  sufficient  to  satisfy  the  require- 
ments of  the  rule  that  powers  of  for- 
feiture are  to  be  construed  strictly  and 
exercised  or  pursued  strictty,  see  Giles 
v.  Hutt;  3  Exch.,  18  (1848);  Catchpole 
v.  Ambergate,  etc.,  R'y  Co.,  1  Ellis  & 
B.,  11  (1852);  Birmingham,  etc.,  R'y  Co. 
v.  Locke,  1  Q.  B.,  256  (1841);  Graham 
v.  Van  Diemen's  Land  Co.,  1  Hurl.  & 
N.,  541  (1856);  Sweny  V.  Smith,  L.  R, 
7  Eq.,  324  (1869) ;  .Stockton's  Case,  L.  R, 
3  Chan.,  412  (1867);  Count  Phalen's 
Case,  L.  R,  9  Eq.,  107(1869);  Thomas' 
Case,  L.  R,  13  Eq.,  437 ;  Gower's  Case, 
L  R,  6  Eq.,  77  (1868).  It  has,  however, 
been  held  in  an  English  case  —  In  re 
North  Hallenbeagle  Mining  Co.,  Knight's 
Case,  L.  R,  2  Chan.,  321  (1867):  S.  C, 
15  L.  T.  (N.  S.),  546  (1869),  —  that,  when 
it  is  a  matter  of  mere  form  rather  than 
of  substance  that  has  not  been  strictly 
followed,  in  proceedings  to  forfeit 
shares,  the  forfeiture  will  not  necessarily 
be  thereby  invalidated. 

1  Garden  Gully,  etc.,  Co.  v.  McLister, 
L.  R,  1  App.  Cases,  39,  55  (1875).  A 
stockholder  may  enjoin  a  forfeiture  on 
the  ground  that  the  directors  were  il- 
legally elected.  Moses  v.  Tompkins,  4 
S.  Rep.,  763  (Ala.,  1888). 

2  Rutland,  etc.,  R  R  Co.  v.  Thrall,  35 
Vt.,  536  (1863);  Mitchell  v.  Vermont 
Copper  Mining  Co.,  67  N.  Y.,  280  (1876). 

3  Rutland,  etc.,  R  R  Co.  v.  Thrall,  35 
Vt.,  536  (1863).  See,  also,  Woollaston's 
Case,  4  T>e  G.  &  J.,  437  (1859).     Under 


such  a  resolution  a  sale  of  the  stock  is 
not  necessary  to  complete  the  forfeiture 
where  the  effect  of  the  forfeiture  is  to 
release  the  stockholder  from  any  future 
liability,  and  where  he  is  not  entitled  to 
the  surplus,  if  any  there  be,  after  sale. 
Rutland,  etc.,  R  R  Co.  v.  Thrall,  supra. 
It  is,  however,  said  elsewhere  that  a 
general  resolution,  not  specifying  the 
stock  which  is  forfeited,  but  merely  as- 
suming to  forfeit  any  and  all  stock 
whose  owners  are  in  arrears,  does  not 
effect  a  valid  forfeiture.  Johnson  v. 
Albany,  etc.,  R  R.  Co.  40  How.  Prac, 
193  (1870).  When,  after  default  made 
in  the  payment  of  assessments,  notice 
is  given  by  the  corporation  that  the 
shares  of  owners  in  arrears  will  be  for- 
feited unless  full  payment  of  what  is 
due  be  made  by  a  day  named,  there  is 
a  presumption  that  the  subsequent  pro- 
ceedings of  the  company  looking  to 
perfecting  the  forfeiture  ai-e  valid  and 
regular.  Knight's  Case,  15  L  T.  (N.  S.), 
546  (1867),  holding  that  where,  by  the 
articles  of  association,  provision  is  made 
for  forfeiture  by  resolution  with  notice 
upon  default,  the  court  will  assume  that 
the  requisite  steps  have  been  taken  to 
make  a  valid  forfeiture,  even  though  it 
does  not  appear  that  such  resolution  was 
passed  or  that  notice  was  sent.  The 
notice  is  a  notice  that  the  forfeiture  has 
already  been  declared,  not  that  it  will  be 
made  on  further  default  That  notice 
is  a  condition  precedent. 


179 


§  130.] 


FORFEITURE    OF    STOCK. 


[CH.  VIII. 


deny  its  validity.1     Under  the  California  code  a  corporation  may 
by  suit  foreclose  a  lien  which  it  has  on  its  stock.2 

§  130.  Notice  in  cases  of  forfeiture.— A  notice  to  the  delinquent 
subscriber  that  his  shares  will  be  forfeited  at  a  day  named  is  gen- 
erally requisite  to  effect  a  forfeiture.  The  subscriber  is  entitled  to 
full  knowledge  of  the  fact  that,  unless  he  pays  up  within  a  specified 
time,  he  will  lose  his  stock.  The  requirements  of  the  statute  or 
charter,  with  respect  to  the  contents  of  the  notice,  and  the  length 
of  time  which  is  to  elapse  between  the  notice  and  the  forfeiture, 

1  King's   Case,   L.   R,  2  Ch.,  714,  731     1  iable  on  the  double  ground  of  lapse  of 

time  and  a  clear  presumption  of  knowl- 
edge and  acquiescence.  Houldsworth 
v.  Evans,  id.,  263,  where  an  irregularity 
in  the  condition  of  withdrawal  was  held 
substantial  and  the  transaction  ultra 
vires.  (One  lord  dissented,  that  years  of 
acquiescence  retrospectively  sanctioned 
it.)  Brotherhood's  Case,  31  Beav.,  365 
(1862).  Dissentient  members  were  al- 
lowed to  withdraw,  by  resolution,  upon 
terms  which  were  certainly  ultra  vires. 
The  master  of  the  rolls  said  that  the 
transaction  might  have  been  set  aside 
at  the  time ;  but  all  parties  having  had 
full  knowledge,  and  having  acquiesced 
for  more  than  twelve  years,  the  court 
would  not,  after  such  a  lapse  of  time, 
touch  the  transaction.  In  Lesseps  v. 
Architects'  Co.,  4  La.  Ann.,  316  (1849), 
the  court  regarded  a  general  acquies- 
cence in  a  by-law  for  a  forfeiture,  itself 
ultra  vires,  as  a  matter  of  contract,  and 
refused  equitable  relief.  Cf.  Lindley 
on  Partnership,  p.  750,  saying :  "  If 
there  is  power  to  forfeit,  and  the  shares 
intended  to  be  forfeited  are  treated  by 
the  company  and  the  shareholders  as 
forfeited,  the  company  will  be  pre- 
cluded from  afterwards  insisting  that 
no  forfeiture  ever  took  place."  Garden 
Gully,  etc.,  Co.  v.  McLister.  L.  R.,  1 
App.  Cas.,  39,  55  (1875),  holding  that 
mere  laches  does  not,  of  itself,  disen- 
title the  holder  of  shares  to  equitable 
relief  against  an  invalid  declaration  of 
forfeiture. 

2  Mechanics',  etc.,  Assoc,  v.  King,  23 
Pac.  Rep.,  376  (Cal.,  1890). 


(1867) ;  Woollaston's  Case,  4  De  G.  &  J., 
437  (1859) ;  Webster's  Case,  32  L.  J.,  Ch., 
135  (1862) ;  Knight's  Case,  L.  R,  2  Ch., 
321  (1867);  Kelk's  Case,  L.  R,  9  Eq., 
107  (1869);  Austiu's  Case,  24  L.  T. 
(N.  S.),  932  (1871) ;  Prendergast  v.  Tur- 
ton,  1  Y.  &  C.  (Ch.),  98  (1841).  Cf. 
Lyster's  Case,  L.  R,  4  Eq.,  233  (1867); 
Teasdale's  Case,  L.  R,  9  Ch.,  54  (1873) ; 
Phosphate,  etc.,  Co.  v.  Green,  L.  R,  7 
C.  P.,  43  (1871).  Here  the  company  had 
power  to  forfeit  shares  for  non-pay- 
ment and  to  compromise  debts,  but 
were  prohibited  from  purchasing  their 
own  shares.  The  transaction  in  issue 
was  held  to  be  such  a  purchase,  and 
hence  ultra  vires,  but  the  members 
were  estopped  by  knowledge  and  acqui- 
escence. In  this  case  it  was  also  said 
that,  to  show  assent  and  acquiescence  in 
such  a  case,  it  is  not  necessary  or  pos- 
sible to  prove  the  acquiescence  of  each 
individual  shareholder.  It  is  enough 
to  show  circumstances  which  are  rea- 
sonably calculated  to  satisfy  the  court 
or  a  jury  that  the  thing  to  be  ratified 
came  to  the  knowledge  of  all  who  chose 
to  inquire,  all  having  full  opportunity 
and  means  of  inquiry.  Houldsworth 
v.  Evans,  L.  R,  3  H.  of  L.,  263  (1868); 
Spackman  v.  Evans,  L.  R,  3  H.  of  L.,  171 
(1868).  Here  the  terms  of  the  withdrawal 
were  not  in  accordance  with  the  deed  of 
settlement,  and  it  was  held  after  years 
that  the  party  was  still  liable  as  a  con- 
tributor. Evans  v.  Smallcombe,  id., 
249,  where  a  member  withdrawing 
under  a  like  arrangement  was  held  not 


180 


CII.  VIII.] 


FORFEITURE    OF    STOCK. 


[§  130. 


must  all  be  strictly  complied  with.1  It  is  accordingly  held  that 
the  notice  must  state  correctly  the  amount  due  for  non-payment  of 
which  the  stock  is  to  be  forfeited.2  The  time,  also,  within  which 
payment  is  to  be  made  must  be  accurately  stated,3  and  also  the 
place  where  the  sale  is  to  be  made.4  The  mode  of  giving  notice 
of  a  contemplated  forfeiture  of  stock  is  generally  specified  in  the 
statute  authorizing  the  forfeiture.5 


1  Heaston  v.  Cincinnati,  etc.,  R.  R. 
Co.,  16  Ind.,  275  (1861) ;  Levvey's  Island 
R  R.  Co.  v.  Bolton,  48  Me.,  451  (1S60); 
Rutland,  etc.,  R.  R.  Co.  v.  Thrall,  35 
Vt,  536,  546  (1863);  Lake  Ontario,  etc., 
R,  R  Co.  v.  Mason,  16  N.  Y.,  451  (1854) ; 
Sands  v.  Sanders,  26  id.,  239  (1863);  Mis- 
sissippi, etc.,  R.  R.  Co.  v.  Caster,  20 
Ark.,  455  (1859);  Hughes  v.  Antietam, 
etc.,  Co.,  34  Md.,  317  (1870) ;  Johnson  v. 
Lyttle's  Iron  Agenc}r,  46  L.  J.  (Chan.), 
786  (1877);  Cockerell  v.  Van  Diemen's 
Land  Co.,  26  L.  J.  (C.  P.),  203  (1857) ; 
Watson  v.  Eales,  23  Beav.,  294  (1856). 
Cf.  Eppes  v.  Mississippi,  etc.,  R  R.  Co., 
35  Ala.,  33  (1859);  Schenectady,  etc., 
R.  R  Co.  v.  Thatcher,  11  id.,  102  (1854); 
Harlaem,  etc.,  Co.  v.  Seixas,  2  Hall  (N. 
Y.  Super.  Ct),  504  (1829);  Mitchell  v. 
Vermont  Copper  Mining  Co.,  40  N.  Y. 
Super.  Ct,  406  (1876);  New  Albany, 
etc.,  R.  R.  Co.  v.  McCormick,  10  Ind., 
499  (1858).  Cf.  Lexington,  etc.,  R.  R 
Co.  v.  Chandler,  54  Mass.,  311  (1847), 
where  notice,  provided  for  by  a  by- 
law, was  held  not  a  condition  prece- 
dent, but  only  directory,  and  substan- 
tial compliance  was  sufficient.  Knight's 
Case,  supra,  is  sometimes  wrongly  cited, 
for  the  reason  that  there  are  two  no- 
tices provided  for:  (1)  notice  that  for- 
feiture will  be  made  on  default  at 
future  time,  and  (2)  notice  after  forfeit- 
ure that  it  has  been  made.  The  former 
is  essential,  the  latter  not. 

2  So  where  the  notice  stated  that  un- 
less the  amount  of  a  certain  call,  to- 
gether with  lawful  interest  from  the 
date  of  the  call,  was  paid  on  or  before 
a  certain  day,  the  shares  would  be  liable 
to  forfeiture,  it  was  held  that,  as  inter- 
est was  only  payable  from  the  day  fixed 
for  payment,  and  not  from  the  date  of 


the  call,  the  notice  was  irregular,  and 
thit  a  forfeiture  founded  on  a  non- 
compliance with  such  a  notice  was  bad. 
Johnson  v.  Lyttle's  Iron  Agency,  46  L.  J. 
(Ch.).  786  (1877). 

8  A  notice  that  the  stock  will  be  for- 
feited "  on  Monday,  the  9th,"  when  in 
point  of  fact  the  9th  comes  on  Friday, 
is  not  a  sufficient  notice.  Watson  v. 
Eales,  23  Beav.,  294  (1856). 

4  Accordingly,  a  notice  in  all  other 
respects  regular,  which  does  not  state 
the  place  of  sale,  is  insufficient,  al- 
though it  name  the  day  of  sale,  and  the 
auctioneer,  who  was  and  had  long  been 
an  auctioneer  in  the  place  at  which  the 
notice  was  dated.  Lexington,  etc.,  R. 
R.  Co.  v.  Staples,  71  Mass.,  520  (1855). 
In  the  absence  of  a  statutory  provision 
as  to  time,  it  is  said  that  three  days' 
notice  of  the  time  and  place  of  the  sale 
of  shares  for  non-payment  of  assess- 
ments is  too  short  and  unreasonable, 
where  the  owner  of  the  shares  lives  at 
a  distance  in  another  state.  Lexing- 
ton, etc.,  R.  R  Co.  v.  Staples,  stqva. 
In  Rutland,  etc.,  R  R  Co.  v.  Thrall,  35 
Vt,  536  (1863),  a  thirty  days'  notice  is 
said  to  be  sufficient  and  reasonable. 
And  where  the  charter  provided  that 
notice  of  an  assessment  should  be  given 
to  the  subscriber  thirty  days  before  the 
order  of  the  directors  to  sell  the  shares, 
a  notice  thirty  days  before  the  sale  was 
held  insufficient.  Lewey's  Island  R.  R 
Co.  v.  Bolton,  48  Me.,  451  (1860);  Louis- 
ville, etc.,  Turnpike  Co.  V.  Meriwether, 
5  B.  Mod.,  13  (1844).  A  printed  notice 
in  designated  newspapers,  published  in 
cities  where  the  subscribers  reside,  is 
good  notice  of  a  call.  Louisville,  etc., 
Turnpike  Co.  v.  Meriwether,  supra. 

5  In    Mississippi     (Ouachita    &    Red 


181 


§§  131,  132.] 


FORFEITURE   OF    STOCK. 


[CH.  VIII. 


§  131.  Notice  is  not  the  same  thing  as  forfeiture.—  A  notice  of  a 
probable  or  certain  forfeiture  in  the  future,  or  a  threat  of  forfeiture, 
is  not  forfeiture,  and  does  not  become  forfeiture  merely  by  non- 
payment of  the  call  or  assessment  within  the  time  specified  in  the 
notice.1  A  forfeiture  is  void  if  declared  for  the  non-payment  of 
assessments,  when  all  or  any  one  of  the  assessments  were  illegal  or 
unauthorized.2 

§132.  Tender,  oy  stockholder,  hefore  forfeiture.—  Where  the 
amount  due  on  a  subscription  for  non-payment  of  which  a  forfeit- 
ure is  about  to  take  place  is  tendered  to  the  proper  officer  of  the 
corporation  at  any  time  before  the  sale  actually  takes  place,3  the 

River  E.  R  Co.  v.  Gaster,  20  Ark.  455  —  date  of  the  forfeiture,  but  not  of  the  dec- 
1859)  it  is  said  that  the  mode  of  giving  laration  itself.  All  essentials  being  reg- 
a  notice  in  these  cases  is  directory  ular,  and  there  being  no  strict  require- 
rather  that  mandatory,  and  that,  where  ment  of  a  written  resolution,  the  court 
the  charter  provided  that  notice  bo  held  the  forfeiture  valid  because  the 
given  in  certain  newspapers,  a  personal  entry  of  forfeiture  could  not  have  been 
notice  would  be  sufficient.  See,  also,  properly  made  without  a  resolution  of 
Knight's  Case,  L.  R,  2  Chan.,  321  (1867).  the  directors,  which  would  hence  be  as- 


So  where  a  by-law  provided  for  notice 
by  letter,  it  was  held  that  personal  no- 
tice sufficed.  Lexington,  etc.,  R  R 
Co.  v.  Chandler,  54  Mass.,  311  (1847). 
But  see  Lewey's  Island  R  R  Co.  v. 
Bolton,  48  Me.,  451  (1860).  In  general, 
as  to  the  effect  of  a  notice  left  at  one's 
residence  or  place  of  business,  but 
which  never  reaches  the  person  for 
whom  it  is  intended,  see  Cockerell  v. 
Van  Diemen's  Land  Co.,  26  L  J.  (C.  P.), 
203  (1857);  1  C.  B.  (N.  S.),  732.  Cf. 
Birmingham,  etc.,  R'y  Co.  v.  Locke,  1 
Q.  B.,  256  (1841);  Graham  v.  The  Van 
Diemen's  Land  Co.,  1  Hurl.  &  N.,  541 
(1856).  See,  also,  South  Staffordshire 
R'y  Co.  v.  Burnside,  5  Exch.,  129  (1850), 
aud  §  119. 

1  Macon,  etc.,  R  R  Co.  v.  Vason,  57 
Ga.,  314  (1876);  Bigg's  Case,  L  R,  1 
Eq.,  309  (1865);  Cockerell  V.  Van  Die- 
men's  Land  Co.,  26  L.  R  (C.  R).  203 
(1857) ;  Water  Valley  Manuf.  Co.  v.  Sea- 
man, 53  Miss.,  655(1876),  where  only  a 
t'ueat  was  made.  Cf.  §  125.  But  see 
Knight's  Case,  L.  R,  2  Chan.,  321 
(1867).  In  Knight's  Case  it  was  further 
provided  that  the  declaration  of  forfeit- 
ure should  be  at  once  entered  in  the 
register.    Entry  was  duly  made  of  the 


sumed.  In  Austin's  Case,  24  L.  T.  (N. 
S.),  932  (1871),  it  is  said  that  a  corpora- 
tion, after  forfeiting  shares,  cannot  set 
the  forfeiture  aside,  and  hold  the  owner 
liable  as  a  subscriber,  on  the  ground 
that  the  notice  given  him  was  irregu- 
lar. It  is  for  the  subscriber  alone  to 
raise  that  objection  to  the  validity  of 
the  forfeiture.  Cf.  §  123;  Birming- 
ham, etc.,  R'y  Co.  v.  Locke,  1  Q.  B.,  256 
(1841).  A  mere  declaration  of  forfeiture 
is  not  sufficient  to  effect  it,  and  is  no  bar 
to  an  action  on  the  subscription.  Min- 
nehaha, etc.,  Ass'n  of  Minneapolis  v. 
Legg,  52  N.  W.  Rep.,  898.  A  resolution 
of  forfeiture  does  not  constitute  forfeit-, 
ure,  and  is  no  bar  to  an  action.  Hayes 
v.  Franklin,  etc.,  Co.,  53  N.  W.  Rep.,  381 
(Nob.,  1892). 

2  Stoneham,  etc.,  R  R  Co.  v.  Gould, 
68    Mass.,    277  (1854);    Lewey's    Island' 
R  R.  Co.  u  Bolton,  48  Me.,  451  (1860). 

3  Mitchell  v.  Vermont  Copper  Min- 
ing Co.,  67  N.  Y.,  280  (1876);  Sweny  v. 
Smith,  L.  R,  7  Eq.,  324  (1869).  In 
Sweny  v.  Smith  a  bill  was  filed  to 
annul  the  forfeiture,  which  was  made 
because  the  tender  (although  in  time 
and  place)  was  accompanied  by  a  pro- 
test    Held,  the  protest  did  not  vitiate 


182 


CH.  VIII.] 


FORFEITURE    OF    STOCK. 


[§§  133,  134. 


forfeiture  is  not  valid.  This  rule  is  based  in  justice,  and,  while  pro- 
tecting the  corporation  and  the  public,  it  relieves  the  stockholder 
from  the  hardship  of  a  harsh  and  summary  remedy. 

§  133.  Surplus,  after  valid  forfeiture,  belongs  to  the  corporation. 
Upon  a  sale  of  the  stock  forfeited,  if  the  amount  realized  is  more 
than  the  debt  due  the  corporation,  the  surplus  belongs  to  the  cor- 
poration.1 The  purchaser  at  the  forfeiture  sale,  if  the  stock  has 
been  only  partially  paid  for,  must  pay  the  instalments  due  and  to 
come  due,  and  if  he  fail  to  make  these  payments  the  stock  must  be 
sold  again.2 

§  134.  Equity  will  relieve  a  shareholder  from  an  unauthorized 
forfeiture  —  Action  at  law  for  damages. —  The  share-owner  him- 
self, as  well  as  a  corporate  creditor,  may,  in  a  proper  case,  invoke 
the  aid  of  a  court  of  chancery  when  his  shares  have  been  forfeited 
in  an  unauthorized  or  unlawful  manner.  Usually,  in  such  a  case, 
the  shareholder  may,  by  bill  in  equity,  obtain  a  decree  annulling 
the  forfeiture.3     Where  an  illegal  assessment  has  been  made,  and 


the  tender.  Walker  v.  Ogden,  1  Biss., 
287  (111.,  1859),  where  the  articles  of  a 
private  joint-stock  company  provided 
for  a  forfeiture,  but  in  no  express  mode, 
and  a  forfeiture  was  declared  of  certain 
shares  which  thereafter  remained  un- 
distributed. No  rights  of  third  parties 
were  vested  in  consequence ;  and  the 
court  of  equity,  never  favoring  forfeit- 
ures, decreed  that  upon  payment  of  the 
whole  amount  due,  principal  and  in- 
terest, the  complainant  should  be  al- 
lowed to  redeem  his  stock.  The  court 
did  not  rule,  but  was  "  inclined  to  the 
opinion,"  that  "the  mere  declaration 
of  the  trustees "  could  not  "  have  the 
effect  to  foreclose  all  Walker's  inter- 
est," and  "  that  a  judicial  decree  of 
foreclosure  upon  a  bill  filed  by  the 
trustee  was  necessary  in  order  to  bar 
his  right  to  redeem  his  stock." 

1  Small  v.  Herkimer,  etc..  Co..  2  N.  Y., 
330  (1849) ;  and  see  Sturges  v.  Stetson, 
1  Biss..  246  (1858);  Gt.  North.  E'y  Co. 
v.  Kennedy,  4  Eq.,  417,  426  (1849),  by 
Rolfe,  B.  (ruling  on  the  language  of 
a  special  act) :  "  The  company  are  not 
to  sell  more  of  the  shares  than  will  be 
sufficient,  as  nearly  as  can  be  ascer- 
tained, to  pay  arrears  of  calls,  together 


with  interest  and  expenses ;  and,  if  there 
be  any  surplus,  it  is  to  be  paid  to  the 
defaulter,  who  has  a  right  to  redeem 
at  the  last  moment  before  sale.  That 
shows  that  the  forfeited  shares  are  a 
security  only  until  payment."  "  It  is 
clear  that  the  declaration  of  forfeiture 
is  in  the  nature  of  a  mortgage."  Cf. 
Freeman  v.  Harwood,  49  Me.,  195,  198 
(1859),  dictum. 

2  Sturges  v.  Stetson,  1  Biss.,  246,551 
(1858). 

3Sweny  v.  Smith,  L.  R.  7  Eq.,  324 
(1869) ;  Mitchell  v.  Vermont,  etc.,  Co.,  67 
N.  Y.,  280  (1876);  Adley  v.  Whitstable 
Co.,  17  Ves.,  315  (1810,  by  Lord  Eldon) ; 
Sloman  v.  Bank  of  England,  14  Sim., 
475  (1845);  Norman  v.  Mitchell,  5  De  G., 
M  &  G,  648  (1854\  Thus,  a  forfeiture 
of  shares  for  non-payment  of  calls,  de- 
clared at  a  meeting  held  out  of  the  state 
in  which  the  company  was  incorporated, 
the  meeting  being  in  consequence  an 
unlawful  meeting,  may  be  set  aside 
upon  a  proper  application  to  a  court  of 
chancery  at  any-  time  within  the  period 
prescribed  by  the  statute  of  limitations 
for  bringing  an  action  for  conversion. 
Ormsby  v.  Vermont,  etc.,  Co.,  56  N.  Y., 
623  (1874).     Injunction  not  granted  to 


183 


§  134.] 


FORFEITURE    OF   STOCK. 


[ch.  VIII. 


the  stock  is  about  to  be  sold,  a  stockholder  may  enjoin  the  sale  and 
cause  the  assessment  to  be  set  aside.1 

So,  also,  equity  will  sometimes  set  aside  a  forfeiture  upon  purely 
equitable  grounds;  as,  for  example,  where  a  forfeiture  was  declared 
for  non-payment  of  calls,  which,  it  was  shown,  were  not  paid  be- 
cause the  shareholder  had  died,  and  no  administrator  had  been 
appointed  before  the  time  for  payment  had  fully  elapsed.2  But  it 
seems  that  the  weight  of  authority  is  to  the  effect  that  a  forfeiture 
of  shares,  lawful  and  regular,  for  non-payment  of  assessments,  is 
one  of  those  forfeitures  from  which  equity  will  not  afford  relief 
except  in  very  exceptional  cases.3  When  the  shareholder  has  lost 
his  shares  by  an  irregular  or  unlawful  forfeiture,  his  suit  should  be 
for  the  recovery  of  his  shares,  and  not  for  an  undivided  interest  in 
the  property  of  the  company.4  Acquiescence  or  delay,  as  we  have 
seen,  on  the  part  of  the  shareholder,  will  usuall}'  bar  his  right 


restrain  sale  of  stock  for  non-payment 
of  assessments,  though  notice  thereof 
was  illegal,  where  the  plaintiff  does  not 
offer  to  pay  the  calls.  Burnham  v.  San 
F.  &  Co.,  17  Pac.  Rep.,  939  (Cal.,  1888). 
See,  also,  Same  v.  Same,  id.,  940  (Cal., 
1888).  Forfeiture  may  be  enjoined. 
Moore  v.  N.  J.,  etc.,  Co.,  5  N.  Y.  Supp., 
192  (1889).  The  forfeiture  will  not  be 
set  aside  if  the  organization  meeting  of 
the  company  was  illegal,  having  been 
held  out  of  the  state.  Smith  v.  Silver, 
etc.,  Co.,  30  Atl.  Rep.,  1032  (Md.,  1885). 

1  Green  v.  Abietine,  etc.,  Co.,  31  Pac. 
Rep.,  100  (Cal.,  1892). 

2  Glass  v.  Hope,  16  Grant  (Up.  Can. 
Chan.),  420  (1869).  Cf.  Walker  v.  Ogden, 
1  Biss..  287  (1859). 

3  Sparks  v.  The  Company  of  Proprie- 
tors of  the  Liverpool  Water-works,  13 
Ves.,  428  (1807);  Prendergast  v.  Turton. 
1  Y.  &  C.  (Ch.),  98  (1841) ;  Germantown, 
etc.,  R'y  Co.  v.  Fitler,  60  Penn.  St,  124 
(1869):  Clark  v.  Barnard,  108  U.  S,  436, 
456  (1882).  Equity  will  not  relieve 
where,  on  the  re-organization  of  a  com- 
pany, old  stockholders  fail  to  use  their 
options  for  securing  new  shares  before 
the  expiration  of  a  fixed  time  limit. 
Vatable  v.  N.  Y.  L.  E  &  W.  R  R.  96 
N.  Y,  49,  57  (1884).  Equity  will  not 
relieve  from  such  forfeiture,  because  to 


do  so  would,  it  is  said,  be  in  contraven- 
tion of  the  direct  expression  of  the  leg- 
islative will.  Small  v.  Herkimer,  etc., 
Co.,  2  N.  Y.,  330,  340  (1849).  Neither 
can  a  share-owner  have  a  forfeiture  set 
aside  merely  because  the  calls  which 
he  refused  to  pay  were  for  the  purpose 
of  paying  debts  which  the  company 
would  not  have  owed  but  for  the  pre- 
vious misappropriation  of  the  corpo- 
rate funds  of  the  trustees.  Marshall  v. 
Golden  Fleece,  etc.,  Co.,  16  Nev.,  156, 
179  (1881):  Weeks  v.  Silver,  etc.,  Co., 
55  J.  &  S.  (N.  Y),  1  (1887) ;  Taylor  v. 
North,  etc.,  Co.,  21  Pac.  Rep.,  753  (Cal.. 
1889). 

4  Smith  v.  Maine  Boys  Tunnel  Co.,  18 
Cal.,  Ill  (1861).  The  suit  to  set  aside  the 
forfeiture  must  be  brought  in  the  state 
where  the  corporation  is  incorporated. 
North  State,  etc.,  Co.  v.  Field,  64  Md.,  151 
(1885);  Sudlow  v.  Dutch  R  R  Co.,  21 
Beav.,  43  (1855).  See  Wilkins  v.  Thome, 
60  Md.,  253  (1883).  The  courts  of  Mary- 
land will  not  issue  a  mandamus  to  com- 
pel a  foreign  corporation  to  annul  a 
forfeiture  of  stock.  This  is  a  matter  to 
be  litigated  in  the  courts  of  the  state 
creating  the  corporation.  North  State, 
etc.,  Co.  v.  Field,  20  Atl.  Rep.,  1039  (Md.. 
1885). 


184 


CH.  VIII.] 


FORFEITURE    OF    STOCK. 


[§  134. 


in  a  court  of  equity  to  have  the  forfeiture  set  aside.1     If  the  for- 
feiture is  irregular  the  party  deprived  of  his  stock  may  collect 


damages.2 


1  Vide  §  129,  supra.  It  will,  more- 
over, sometimes  be  found  that  a  general 
statute,  or  the  charter  of  the  corpora- 
tion, fixes  or  limits  the  time  within 
which  a  shareholder  will  be  allowed  to 
make  such  an  application  to  a  court  of 
chancery.  Thus,  in  California,  such  an 
application  must  be  made  within  six 
months.     Civ.  Code,  §  347. 

2  Re  New  Chile,  etc.,  Co.,  Limited,  63 
L.  T.  Rep.  344  (1890).  A  corporation  is 
liable  in  damages  for  selling  the  stock  of 


a  stockholder  for  non-payment  of  dues 
where  such  sale  was  irregular  and  illegal, 
being  contrary  to  the  requirements  of  the 
by-laws,  even  though  the  corporation 
buys  the  stock  itself  at  such  sale.  The 
fact  that  a  surplus  realized  at  the  sale  is 
sent  to  the  stockholder  by  check  and  is 
received  by  him  does  not  bar  his  remedy, 
being  in  ignorance  of  the  illegal  ity.  A  lien 
v.  American  Building,  etc.,  Ass'n  et  ah,  52 
N.  W.  Rep.,  144  (Minn.,  1892). 


185 


CHAPTER  IX. 


DEFENSE  OF  PAROL  AGREEMENTS  AND   FRAUDULENT   REPRESEN- 
TATIONS INDUCING  SUBSCRIPTIONS  FOR  STOCK 


§  135.  The  subject. 

136.  Definitions. 

137-38.  Oral  agreements  and  execu- 
tor y  contracts. 

139-40.  Corporations  are  chargeable 
with  the  fraudulent  represen- 
tations of  their  agents. 

141.  The  misrepresentations  must  be 

■  by  the  authorized  agents. 

142.  Misrepresentations  at  public  meet- 

ings. 

143.  Misrepresentations    by    prospec- 

tuses. 

144.  Misrepresentations  by  reports. 

145.  What  misrepresentations  amount 

to  a  fraud. 

146.  Statements  as  to  questions  of  law. 

147.  Misrepresentations  by  suppression 

of  the  truth. 

148.  Misrepresentations  without 

knowledge  of  their  falsity. 


§  149. 
150. 

151. 

152. 

153. 

154. 

155- 
157- 

159. 

160. 
161- 
163- 

165. 


Immaterial  misrepresentations. 

Subscribers  not  bound  to  investi- 
gate. 

Subscription  not  void,  but  void- 
able. 

Remedies. 

Remedy  by  rescission  without 
legal  proceedings. 

Remedy  by  defense  to  action  for 
calls. 

56.  Remedy  by  bill  in  equity. 

58.  Remedy  by  action  at  law  for 
deceit 

Remedy  by  action  for  money  had 
and  received. 

Ratification  as  a  bar, 

62.  Laches  as  a  bar. 

04.  Corporate  insolvency  as  a 
bar. 

Necessary  allegations,  etc. 


§  135.  The  subject — Parol  agreements  and  fraudulent  represen- 
tations inducing  subscriptions  to  stock  have  been  a  prolific  source 
of  litigation  both  in  this  country  and  in  England.  As  a  defense  to 
actions  brought  for  the  collection  of  subscriptions,  and  as  the  basis 
of  suits  in  equity  to  set  aside  subscriptions  and  compel  a  repay- 
ment of  money  already  paid  on  such  subscriptions,  the  agreements 
and  representations  made  to  induce  persons  to  subscribe  for  stock 
have  given  rise  to  intricate  principles  of  law  peculiar  to  this  sub- 
ject. 

§  136.  Definitions. —  A  parol  agreement  includes  all  representa- 
tions and  stipulations  made  before  or  at  the  time  of  subscribing, 
but  not  included  in  the  written  subscription,  whereby  the  corpora- 
tion is  to  do  something  or  refrain  from  doing  something  in  the 
future.  A  fraudulent  representation,  on  the  other  hand,  is  a  state- 
ment as  to  past  acts  or  existing  facts,  or  the  omission  of  such  a 
statement,  which  amount  to  a  fraud  on  one  who,  relying  thereon, 
subscribes  to  the  stock  of  the  company.  Difficulty  sometimes  arises 
in  determining  whether  a  statement  by  a  corporate  agent  inducing 
a  subscription  is  merely  a  parol  agreement  or  is  a  fraudulent  repre- 
sentation.    This  question  is  one  which  must  be  decided  first  of  all; 

186 


CH.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§13' 


since  the  rules  of  law  applicable  to  parol  agreements,  as  a  defense 
to  an  action  on  a  subscription,  differ  greatly  from  those  applicable 
to  fraudulent  representations. 

§  137.  Oral  agreements  and  executory  contracts. —  Where  a  sub- 
scription contract  is  absolute  on  its  face,  it  is  well  settled,  both  in 
equity  and  at  law,  that  parol  evidence  of  previous  or  contempora- 
neous negotiations,  stipulations,  terms  or  agreements  is  not  admis- 
sible to  vary  or  add  to  the  contract,  except  for  the  purpose  of 
proving  that  the  parties,  at  the  time  of  consummating  the  agree- 
ment, intended  and  understood  that  such  terras  and  stipulations 
would  be  incorporated  in  the  contract,  but  omitted  the  same  by 
accident,  fraud  or  mistake.1     This  rule,  forbidding  the  introduction 


^iscataqua  Ferry  Co.  v.  Jones,  39 
N.  H.,  491  (1859) ;  Kennebec  &  Portland 
R  R  Co.  v.  Waters,  34  Me.,  369  (1852); 
Cincinnati,  Union  &  Ft.  Wayne  R.  R. 
Co.  v.  Pearce,  28  Ind.,  502  (1867) ;  Scar- 


lected  only  after  connection  had  been 
made  with  a  certain  place  is  no  defense. 
Anderson  v.  Middle,  etc.,  R  R,  17  S.  W. 
Rep.,  803  (Tenn.,  1891). 
In  Georgia,  under  section  3803  of  the 


lett  v.  Academy  of  Music,  46  Md.,  132    code,  where  the  subscription  does  not 


(1876) ;  Dill  v.  Wabash  Valley  R  R.  Co., 
21  111.,  91  (1859) ;  East  Tenn.  &  Va.  R  R 
Co.  v.  Gammon,  5  Sneed  (Tenn.),  567 
(1858);  Corwith  v.  Culver,  69  111.,  502 
(1873);  Jack  v.  Naher,  15  Iowa,  450 
(1863);  Thornburgh  v.  Newcastle  &  D. 
R  R  Co.,  14  Ind.,  499  (1860) ;  Gelpcke 
v.  Blake,  15  Iowa,  387  (1863).  holding 
that  it  is  immaterial  that  the  agent 
acted  in  good  faith ;  Johnson  v.  Pensa- 
cola  &  Ga.  R  R  Co.,  9  Fla.,  299  (1860) ; 
Miss.,  O.  &  R  R.  R  Co.  v.  Cross,  20  Ark., 
443  (1859) ;  Ridgefield  &  N.  Y.  R.  R  Co. 
v.  Brush,  43  Conn.,  86  (1875);  Phoenix 
Warehousing  Co.  v.  Badger,  6  Hun,  293 
(1875);  affirmed,  67  N.  Y.,  294;  White- 
hall &  P.  R  R  Co.  v.  Myers,  16  Abb.  Pr. 
(N.  S.),  34  (1872).  But  see  Brewers'  Fire 
Ins.  Co.  v.  Burger,  10  Hun,  56  (1877), 
holding  that  where  the  original  sub- 
scription contract  is  verbal  and  com- 
plete, and  a  part  only  of  it  is  afterwards 


purport  to  contain  the  whole  contract, 
parol  evidence  is  admissible.  Hendrix 
v.  Academy  of  Music,  73  Ga.,  437  (1884). 
In  Pennsylvania  the  case  of  McCIure 
v.  People's  Freight  R'y  Co.,  90  Pa.  St., 
269  (1879),  sustains  the  general  rule,  and 
excludes  a  parol  agreement  or  con- 
dition allowing  payment  in  property. 
But  Rinesmith  v.  People's  Freight  R'y 
Co.,  90  Pa.  St.,  262  (1879);  Caley  v. 
Phil.  &  Chester  R  R  Co.,  80  Pa.  St, 
363  (1876);  Miller  v.  Hanover  June.  & 
Sus.  R  R  Co.,  87  Pa.  St,  95  (1878) ;  and 
McCarty  v.  Selinsgrove  &  N.  B.  R.  R 
Co.,  87  Pa.  St.,  332  (1878),  allow  parol 
evidence  to  contradict  the  subscription 
contract  where  it  is  shown  that  but  for 
the  parol  agreement  the  subscription 
would  not  have  been  made ;  the  last 
two  cases  saying,  however,  that  the  evi- 
dence is  inadmissible  if  other  stock- 
holders are  interested  in  opposition  to 


reduced  to  writing,  it  is  competent  to    such  parol  agreement  This  unusual  rule 


prove  the  whole  agreement.  See,  also, 
Hendrix  v.  Academy  of  Music  (Ga., 
1885).  Cf.  Eighmie  v.  Taylor,  98  N.  Y, 
288  (1885).  An  oral  condition  to  a  sub- 
scription cannot  be  set  up.  Masonic, 
etc.,  Assoc,  v.  Channell,  45  N.  W.  Rep., 
716  (Minn.,  1890).  An  oral  statement 
that  the   subscriptions   would   be    col- 


probably  has  its  origin  in  an  old  Eng- 
lish case  (Pulsford  v.  Richards,  17  Beav., 
87,  1853),  which  holds  that  a  represen- 
tation is  to  be  considered  fraudulent 
when,  "if  the  real  truth  had  been 
stated,  it  is  reasonable  to  believe  the 
plaintiff  would  not  have  entered  into 
the  contract"    Thus  a  parol  agreement 


187 


§  138.] 


DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[CH.  IX. 


of  parol  evidence  to  explain,  contradict  or  vary  a  written  instru- 
ment, applies  to  a  subscription  contract  for  stock  in  a  corporation. 
Neither  party  is  permitted  to  prove  a  different  contract  from  that 
expressed  in  the  written  instrument.  Under  the  rule,  not  even  a 
separate  written  contemporaneous  contract  is  admissible  to  change 
the  subscription  contract.1 

§  138.  Thus,  an  agreement  that  a  certain  location  will  be  adopted,- 
or  that  payment  may  be  made  in  a  certain  way  or  at  a  certain 
time,3  or  that  the  subscription  shall  be  merely  nominal,  for  the  pur- 
pose of  inducing  others  to  subscribe,4  or  that  the  subscription  shall 


that  part  payment  in    contract  labor 
should  be  allowed  was  held  to  be  void, 
inasmuch  as  it  varied  the  terms  of  a 
written  agreement.     Ridgefleld  &  N.  Y. 
R.  R.  Co.  v.  Brush,  43  Conn.,  86  (1875). 
Contra,   Louisville  &  Nash.   R  R  Co. 
v.   Thompson,  18  B.  Monr.,  735  (1857); 
McConahy  v.  Centre  &  Kish  Turnpike 
R.  Co..  1  Penn.  &  W.,  426   (1830),  fol- 
lowed in  Swatara  R  R  v.  Brune,  6  Gill, 
41  (1847) ;  overruled  by  Nippenose  Mfg. 
Co.  v.  Stadon,  68  Pa  St.,  256  (1871).    See, 
also,  Weber   v.   Fickey,   52    Md.,   501; 
Leibke  v.    Knapp,   79    Mo.,   22    (1883). 
Parol  condition    that    others   were    to 
sign  is  not  admissible.     Minn.,  eta,  Co. 
v.   Davis,  41   N.  W.   Rep.,  1026  (Minn., 
1889).     But    it   has  been    held  that  a 
parol  agreement  herein,  made  after  the 
subscription,  and  on  a  new  considera- 
tion, is  valid.     Pittsburgh  &  Connells- 
ville  R  R  Co.  v.  Stewart,  41  Pa.  St.,  54 
(1861).     See,  also,  Tonica,  etc.,  R  R  Co. 
v.  Stein,  21  111.,  96  (1859).     Cf.  Bucher 
v.  Dillsburg,  etc.,  R  R  Co.,  76  Penn.  St. 
306  (1874);  Brewers',  etc.,  Ins.  Co.  v.  Bur- 
ger, 10  Hun,  56  (1877);  Eighmie  v.  Tay- 
lor, 98  N.  Y.,  288  (1885). 

The  subscriber's  remedy  is  against  the 
person  who  made  the  agreement  which 
has  not  been  kept  Felgate's  Case,  2 
D3  G.,  J.  &  S.,  456  (1865).  An  action  for 
damages  for  breach  of  contract  lies 
against  the  corporation  if  the  agreement 
amounts  to  a  condition  subsequent  See 
ch.  V. 

i  Brownlee  v.  O.,  Ind.  &  111.  R  R.  Co., 
18  Ind.,  68  (1862);  White  Mts.  R  R  Co. 
v.  Eastman,  34  N.  H.,  124  (1856). 


2  North  Car.  R  R.  Co.  v.  Leach,  4  Jones' 
Law  (N.  C),  340  (1857);  Wight  V.  Shelby 
R  R  Co.,  16  B.  Monr.,  4  (1855) ;  Ellison 
v.  Mobile  &  O.  R  R  Co..  36  Miss.,  572 
(1858) ;  Miss..  O.  &  R  R  R  Co.  V.  Cross,  20 
Ark.,  443  (1859) ;  Evansville,  Indianapo- 
lis   &    C.    S.    R.    R  Co.  v.    Posey,   12 
Ind.,  363  (1859);  Eakrightr.  Logansport 
&  N.  Ind.  R  R  Co.,  13  Ind.,  404  (1859); 
Carlisle  v.  Evansville,  Ind.  &  C.  S.  R.  R 
Co.,  13  Ind.,  477  (1859);  Miller  v.  Wild 
Cat  Gravel  Road  Co.,  52  Ind.,  51  (1875) ; 
S.   C,   57   id.,   241;  Miller  v.    Hanover 
June.  &  Sus.  R.  R  Co.,  87  Pa.  St,  95 
(1878) ;  Gelpcke  v.  Blake,  15  Iowa,  387 
(1863);  Braddock  v.  Phil.,  M.  &  M.  R  R 
Co.,  45  N.  J.  Law  Rep.,  363  (1883);  Killer 
v.  Johnson.  11  Ind.,  337  (1858),  holding  it 
immaterial  that  fraud  was  actually  in- 
tended.    Contra,  Rives  v.  Montgomery 
S.  P.  R  Co.,  30  Ala.,  92  (1857).     Repre- 
sentations of  an  agent  that  the  road 
will  be  built  between  the  termini  laid 
down  in  the  charter  are  representations 
relative  to  the  future  and  are  not  fraud- 
ulent   though  not  carried   out     Arm- 
strong v.  Karshner,  24  N.  E.  Rep.,  897 
(Ohio,  1890). 

»  Noble  v.  Collender,  20  Ohio  St,  199 
(1870) ;  Henry  v.  Vermilion  &  A.  R  R. 
Co.,  17  Ohio,  187  (1848) ;  Stewards  of  M. 
E.  Church  v.  Town,  49  Vt,  29(1876); 
Ridgefleld  &  N.  Y.  R  R.  Co.  v.  Brush, 
43  Conn.,  86  (1875);  Thigpen  v.  Miss. 
Central  R.  R  Co.,  32  Miss.,  347  (1856). 

*  Downie  v.  White,  12  Wis.,  176  (1860) ; 
Wetherbee  v.  Baker,  35  N.  J.  Eq.,  501 
(1882);  Kishacoquillas  &  Centre  T.  R. 
Co.  v.  McConahy,  16  S.  &  R  (Pa.),  140 


188 


CH.  IX.]   -    DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[{ 


13S. 


be  in  fact  only  a  pledge  of  stock  by  the  corporation  to  the  sub- 
scriber, or  that  the  stock  may  be  surrendered,1  or  that  certain  prop- 
erty would  be  purchased  by  the  corporation,2  or  that  the  subscriber 
might  keep  his  stock,  but  should  not  be  liable  for  the  full  par  value 
thereof,3  or  that  payment  -would  not  be  demanded  until  certain 
work  had  been  completed,4  or  that  the  money  would  be  applied  to 
a  particular  part  of  the  road,5  or  that  a  certain  part  of  the  road 
would  be  completed  within  a  certain  time,6  or  that  the  road  will  be 
extended  to  a  certain  point,7  or  other  parol  conditions,8  or  execu- 


(1827);  Phoenix  W.  Co.  v.  Badger,  6 
Hun,  293  (1875);  aff'd,  67  N.  Y.,  294; 
Psychaud  v.  Hood,  23  La.  Ann.,  732 
(1871) ;  Cleveland  Iron  Co.  v.  Ennor,  12 
Am.  &  Eng.  Corp.  Cases,  88  (III.,  1886); 
Robinson  v.  Pittsburgh  &  C.  R  R  Co., 
32  Pa.  St.,  334  (1858) ;  Graff  v.  Pittsburgh 
&  S.  R.  R  Co.,  31  Pa.  St,  489  (1858); 
Mann  v.  Cooke,  20  Conn.,  178  (1849); 
Conn.  &  Pass.  Rivers  R  R  v.  Bailey,  24 
Vt,  465 ;  Davidson's  Case,  3  De  G.  & 
S.,  21  (1849),  holding  it  to  be  a  fraud 
on  other  subscribers,  without  requiring 
proof  that  there  were  such:  Bridger's 
Case,  L  R,  9  Eq.  Cas.,  74  (1869) ;  New 
Albany  &  Salem  R.  R  Co.  V.  Slaughter, 
10  Ind.,  218  (1858) ;  Blodgett  v.  Morrill, 
20  Vt.,  509(1848);  Minor  v.  Mechanics' 
Bank  of  Alexandria,  1  Peters,  46  (1828) ; 
Bates  v.  Lewis.  3  Ohio  St,  459  (1854); 
Litchfield  Bank  v.  Church,  29  Conn., 
137  (1860);  Mangles  v.  Grand  Collier 
Dock  Co.,  10  Sim.,  519  (1840) ;  Preston 
v.  Grand  Collier  Dock  Co.,  2  Rail.  Cas., 
335  (1840);  Chouteau  Co.  v.  Floyd,  74 
Mo.,  286  (1881).  These  cases  hold  that 
parol  agreements  are  void  as  a  fraud  on 
corporate  creditors  and  on  other  sub- 
scribers, and  that  the  subscription  is  en- 
forceable absolutely.  It  is  no  defense 
that  there  was  a  prior  or  contempora- 
neous oral  agreement  that  the  stock 
was  not  to  be  issued  and  the  subscriber 
not  to  be  held  liable.  Wurtzbarger  v. 
Anniston,  etc.,  Mills,  10  S.  Rep.,  129 
(Ala.,  1891).  It  is  no  defense  that  an- 
other party  had  promised  the  stock- 
holder that  the  former  would  pay  for 
the  stock.  Williams  v.  Benet,  13  S.  E. 
Rep.,  97  (S.  C,  1891).    A  person  sued  as 


a  subscriber  cannot  set  up  that  he  sub- 
scribed at  the  solicitation  of  another 
person  who  agreed  to  take  the  subscrip- 
tion off  his  hands  at  once.  Stutz  v. 
Handley,  41  Fed.  Rep.,  531  (1890). 

1  Melvin  v.  Lamar  Ins.  Co.,  80  111.,  446 
(1875) ;  White  Mts.  R  R  Co.  v.  Eastman. 
34  N.  H,  124  (1856).  Cf.  §§  247,  465, 
infra.  Or  that  the  subscriber  be  re- 
leased.    Gill  v.  Balis,  72  Mo.,  424  (1880). 

2Kelsey  v.  Northern  Light  Oil  Co.,  45 
N.  Y.,  505  (1871). 

3Custar  v.  Titusville  Gas  &  Water 
Co.,  63  Pa.  St.,  381  (1869);  Union  Ins. 
Co.  v.  Frear  S.  Manuf.  Co.,  97  111.,  537 
(1881);  Upton  v.  Tribilcock,  91  U.  S.,  45 
(1875). 

4  La  Grange  &  M.  P.  R  Co.  v.  Mays, 
29  Mo.,  64  (1859) ;  Clem  v.  Newcastle  & 
D.  R  R  Co.,  9  Ind.,  488  (1857),  holding 
that  such  a  promise  is  contradictory  of 
the  legal  effect  of  the  subscription ;  Cin- 
cinnati U.  &  Ft.  Wayne  R  R  Co.  v. 
Pearce,  28  Ind.,  502  (1867). 

5  Smith  v.  Tallahassee  Branch  of  C.  P. 
R  Co.,  30  Ala.,  650  (1857).  An  action  to 
rescind  the  purchase  of  stock  lies  where 
the  money  paid  therefor  was  to  be  ap- 
plied to  a  certain  purpose  but  was  not 
so  applied,  but  the  receiver  will  not  be 
directed  to  give  up  the  money.  Moore 
v.  Robertson,  25  Abb.  N.  C,  173  (1890). 

e  Blair  v.  Buttolph,  33  N.  W.  Rep.,  349 
(Iowa,  1887). 

"  Low  v.  Studebaker,  10  N.  E.  Rep.,  301 
(Ind..  1887). 

8  Topeka,  etc.,  v.  Hale,  17  Pac.  Rep.,  601 
(Kan.,  1888) ;  Marshall,  etc., Co.  v.  Kellian, 
6  S.  E.  Rep.,  680  (N.  C,  1888).  Parol  can- 
not add  to  a  condition  of  a  conditional 


189 


§  139.] 


DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[CH.  IX. 


tory  contracts,—  are  held  to  be  no  defense  to  an  action  to  collect 
the  subscription.1  Where,  for  the  purpose  of  obtaining  a  subscrip- 
tion, a  promise  was  made  in  behalf  of  the  corporation  that  a  branch 
road  would  be  built,  it  was  held  that  this  promise  was  but  an  ex- 
pression of  an  existing  intention  which  was  liable  to  be  changed, 
and  was  no  defense.2  It  was  also  held  that  a  promise  which,  if 
carried  out,  would  necessitate  an  ultra  vires  act  by  the  corporation, 
is  not  binding,  and  is  no  defense.3 

§  139.  Corporations  chargeable  with  the  fraudulent  representa- 
tions of  their  agents.—  At  an  early  day  in  England  it  was  held  in 
a  number  of  cases  that  corporations  were  not  bound  by  the  frauds 
of  their  agents  in  obtaining  subscriptions  to  stock.4  This  doctrine 
rested  on  the  theory  that  the  corporation  gave  the  agent  no  power 
or  authority  to  commit  a  fraud,  and  that,  consequently,  the  fraud 
rendered  the  agent  liable  personally,  but  did  not  release  or  affect 
the  subscription. 


subscription.  Miller  v.  Preston,  17  Pac. 
Rep.,  565  (N.  M.,  1888).  An  oral  agreement 
to  take  stock  in  payment  of  a  note  is  no 
defense  to  the  note.  The  corporation 
must  pay  it.  Tuscaloosa,  etc.,  Co.  v. 
Perry,  4  S.  Rep.,  635  (Ala.,  1888).  Where 
the  agent  of  the  railroad  represented 
that  a  depot  would  be  constructed  at  a 
certain  place,  a  failure  to  so  construct 
is  good  ground  for  enjoining  the  issue 
of  municipal-aid  bonds.  Wullenwaher 
v.  Dunnigan,  47  N.  W.  Rep.,  420  (Neb., 
1890).  An  oral  contract  that  the  sub- 
scriber was  to  be  allowed  to  pay  in 
property  is  good  as  against  other  stock- 
holders who  assented  thereto,  but  such 
contract  must  be  clearly  proven.  Knoop 
V.  Bohmrich,  23  All.  Rep.,  118  (N.  J., 
1891). 

1  Piscataqua  Ferry  Co.  v.  Jones,  39 
N.  H.,  491  (1859) ;  Crossman  v.  Penrose 
Ferry  Bridge  Co.,  26  Pa.  St,  69  (1856) ; 
New  Albany  &  Salem  R.  R.  Co.  v. 
Fields,  10  Ind.,  187  (1858);  East  Tenn.  & 
Va.  R  R  Co.  v.  Gammon,  5  Sneed 
(Tenn.),  567  (1858);  Saffold  v.  Barnes, 
39  Miss.,  399  (1860) ;  •  Payson  v.  Withers, 
5  Biss.,  269  (1873);  Goff  v.  Hawkeye 
Pump  &  W.  M.  Co.,  62  Jowa,  691  (1884); 
Corwith  v.  Culver,  69  111.,  502  (1873). 
Contra,  Mahan  v.  Wood,  44  Cal.,  462 


(1872).  where  the  par  value  of  the  shares 
was  not  what  was  promised. 

-  McAllister  r.  Indianapolis  &  Cin. 
R.  R.  Co.,  15  Ind.,  11  (18G0).  No  de- 
fense that  the  subscribers  were  told 
that  branches  would  be  established  and 
that  they  had  not  been.  Guarantee, 
etc.,  Co.  v.  Weil,  21  Atl.  Rep.,  665  (Penn., 
1891). 

3  Johnson  v.  Crawfordsville,  F.  K.  & 
Ft  W.  R.  R  Co.,  11  Ind.,  280  (1858), 
where  aid  from  another  railroad  was 
promised ;  Peters  r.  Lincoln  &  N.  W.  R. 
Co.,  14  Fed.  Rep.,  319  (1882),  where  an 
ultra  vires  lease  was  promised ;  Baile  v. 
Calvert  C.  E.  Soc,  47  Md.,  117  (1877). 

*  Dodgson's  Case,  3  De  G.  &  Bin.,  85 
(1849);  Bernard's  Case,  5  De  G.  &  Sm., 
283  (1852) ;  Gibson's  Case,  2  De  G.  &  J., 
275  (1858);  Holt's  Case,  22  Beav.,  48 
(1856);  Felgate's  Case.  2  De  G.,  J.  &  S., 
456  (1865) ;  Mixer's  Case,  4  De  G.  &  J., 
575,  where  a  prospectus  was  issued  by 
the  directors;  Ayres'  Case,  25  Beav.,  513 
(1858),  the  court  holding  that  the  corpo- 
ration is  bound  by  the  misrepresenta- 
tion* only  where  it  expressly  authorized 
the  particular  statement  made.  Cf. 
Barry  v.  Craskey,  2  Johns.  &  Hem.,  1 
(1861). 


190 


CH.  IX.]    DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD.   [§§  140,  141. 

§  140.  The  modern  doctrine,  however,  both  in  this  country  and 
in  England,  has  completely  exploded  the  theory  that  corporations 
are  not  chargeable  with  the  frauds  of  their  agents  in  taking  sub- 
scriptions. The  well-established  rule  now  is  that  a  corporation 
cannot  claim  or  retain  the  benefit  of  a  subscription  which 'has  been 
obtained  through  the  fraud  of  its  agents.  The  misrepresentations 
are  not  regarded  as  having  actualty  been  made  by  the  corporation, 
but  the  corporation  is  not  allowed  to  retain  the  benefit  of  the  con- 
tract growing  out  of  them,  being  liable  to  the  extent  that  it  has 
profited  by  such  misrepresentations.1'  The  question  of  the  author- 
ity of  the  agent  taking  the  subscription  is  immaterial  herein.  It 
matters  not  whether  he  had  any  authority,  or  exceeded  his  author- 
ity, or  concealed  its  limitations.2  The  corporation  cannot  claim 
the  benefits  of  his  fraud  without  assuming  also  the  representations 
which  procured  those  benefits.  Parol  evidence  is  admissible  to 
show  the  fraud,  since  it  does  not  vary  or  contradict  the  contract, 
but  shows  that  no  contract  was  properly  formed.3 

§  141.  The  misrepresentations  must  be  by  authorized  agents. — 
False  representations  by  persons  who  do  not  act  as  intermediaries 
between  the  corporation  and  the  subscriber  in  forming  the  con- 
tract cannot  bind  the  corporation  nor  affect  the  subscription.  They 
are  statements  of  outside  parties.4     The  subscriber  may  have  his 

1  Western  Bank  of  Scotland  v.  Addie,  by  persons  legally  connected  with  the 

L.  R,  1  Sc.  App.  Cas.,  145  (1867) ;  Nat'l  taking  of  the  subscription.     An  agent 

Exchange  Co.  v.  Drew,  32  Eng.  L.  &  Eq.,  to  obtain  subscriptions  may  use  the  or- 

1  (1853);  Henderson  v.  Lacon,  L.  R,  5  Eq.  dinary    means    of   accomplishing    the 

Cas..  249  (1867) ;  Ex  parte  Linger,  5  Irish  object  of  his  appointment,  such  as  repre- 

Ch.  Rep.  (N.  S.),  174;  Montgomery  S.  R'y  senting  the  location  and  quality  of  the 

Co.  v.    Matthews,    77    Ala.,   357(1884).  lands,  and  the  like.     San dford  v.  Handy, 

The  principles  governing  these  contracts  23  Wend.,  260  (1849).     See,  also,  Nelson 

are  the  same  as  the  principles  governing  v.  Cowing.  6  Hill,  336  (1844). 

contracts  between  private   individuals.  3N.  Y.  Exchange  Co.  v.  De  Wolf,  31 

Directors,  etc.,  of  Central  R'y  v.  Kisch,  N.  Y.,  271  (1865);  Jewett  v.  Valley  R'y 

L.  R.,  2  H.  L.  App.  Cas.,  99  (1870);  An-  Co.,  34  Ohio  St.,  601  (1878).     In  Pennsyl- 

derson  v.  Newcastle  &  Richmond  R  R  vania  the  peculiar  rule  prevails  that  the 

Co.,  12  Ind.,  376  (1859) ;  Vreeland  v.  N.  agent's    misrepresentations    affect    the 

J.Stone  Co.,  29  N.   J.  Eq.,  188  (1878);  subscription,  and  are    a    defense   only 

Ranger  v.  Great  W.  R'y,  5H.  L  G,  72  when  the  agent  actually  had  or  reason- 

(1859);  Mackay  v.  Com.   Bank,  5  P.  G,  ably  appeared  to  have  authority  to  make 

394.     As  regards  representations  in  ref-  representations.     This  was  the  ancient 

erence  to    bonds  secured  by  mortgage  English  doctrine,  long  since  abandoned, 

and  the  right  of  a  purchaser  of  bonds  Custar  v.  Titusville  Gas  &  Water  Co., 

to  complain,  see  Van  Weel  v.  Winston,  63  Pa.  St,  381  (1869). 

115  U.  S.,  228  (1885).  <  Cunningham  v.  Edgefield  &  Ky.  R. 

'•*  Crumb  v.  U.  S.  Min.  Co.,  7  Graft  R.  Co.,  2  Head,  23  (1858).  The  repre- 
(Va.),  353  (1851).  Provided,  of  course,  sentations  made  to  him  by  other  sub- 
that  the  misrepresentations  were  made  scribers    or    outsiders    are    immaterial 

191 


§  142.]  DEFENSE    OF    PAROL    AGREEMENT   AND    FRAUD.  [cH.  IX. 

action  for  damages  against  such  persons  for  deceit,  but  he  cannot 
charge  the  corporation  with  their  misrepresentations.     Sometimes, 
also,°the  misrepresentations  even  of  persons  connected  with  the 
corporation  do  not  bind  the  corporation,  inasmuch  as  their  powers 
are  purely  statutory,  or  have  nothing  to  do  with  the  taking  of  sub- 
scriptions.   Thus,  while  there  has  been  considerable  controversy  in 
this  country  over  the  question  of  fraudulent  representations  by 
commissioners  having  statutory  powers  to  take  subscriptions,  it  is 
quite  well  settled  that  the  subscriber  is  bound  to  know  that  the 
commissioners  have  no  power  to  make  representations,  and  that 
the  corporation  is  not  bound  thereby.1     So,  also,  it  has  been  held 
that  the  representations  by  the  president  of  the  corporation  do  not 
bind  it  where  he  had  no  authority  to  take  subscriptions.2     In  Indi- 
ana it  is  held  that  an  agent  taking  subscriptions  before  the  incorpo- 
ration of  the  company  cannot  bind  it  by  his  misrepresentations.3 
If  there  is  conflicting  testimony  as  to  the  authority  and  status  of 
the  agent,  the  question  is  to  be  submitted  to  the  jury.4 

§  142.  Corporation  not  bound  by  misrepresentations  of  officers  at 
a  public  meeting.—  There  is  a  difference  of  opinion  among  the  au- 
thorities as  to  whether  fraudulent  representations  made  by  one  or 
more  of  the  company's  officers,  at  a  public  meeting  called  to  pro- 
mote the  procuring  of  subscriptions,  are  chargeable  against  the  cor- 
poration where  such  representations  were  not  expressly  authorized 
by  the  corporation.  In  Xew  Tork,  Iowa,  Alabama  and  Louisiana 
such  misrepresentations  do  not  bind  the  corporation.5  In  Georgia 
and  Wisconsin,  on  the  other  hand,  such  fraudulent  representations 

herein.     His    remedy  is   against    them    resentations.     It  must  assume  both  or 
personally.      Duranty's  Case,  26  Beav.,     neither. 

268  (1858):   Ex  parte  Frowd,  30  L.  J.        *  Miller  v.  Wild  Cat  Gravel  Road  Co., 
(Ch.).  322  (1860).  57  Ind.,  241  (1875). 

i  Nippenose  Mfg.  Co.  v.  Stadon,  68  Pa.        +Kelsey  v.  Northern  Light  Oil  Co.,  45 

St..  256  (1871);  Barington  v.  Pittsburgh    N.  Y„  505  (1871);  Crump  v.  U.  S.  Mining 

&  Steubenville  R  R  Co..  34  Pa.  St,  358    Co..  7  Gratt  (Va.),  353  (1851). 

(1859);  Wight  v.  Shelby  R  R  Co.,  16  B.        *  Buffalo  &  N.  Y.   City  R.  R.  Co.  v. 

Monr.,  4  (1855);  Rutz  v.  Esler  &  R  Mfg.     Dudley,  14  N.  Y.,  336  (1856);  First  Nat 

Co.,  3  Bradw.,  81  (1878):  Syracuse,  P.  &    Bank  v.  Hurford,  29  Iowa,  579  (1870); 

O.  R.  R  Co.  v.  Gere,  4  Hun,  392  (1875);     Smith  t\  Tallahassee  Branch  of  C.  P.  R 

North  Car.  R.  R  Co.  v.  Leach,  4  Jones'     R.  Co.,  30  Ala.,  650(1857),  on  the  ground 

L  (N.  C),  340  (1857).  .  of  a  want  of  authority,  which  the  sub- 

2 Crump  v.  U.  S.  Mining  Co.,  7  Gratt     scriber  is  bound  to  know;  Vicksburg, 

(Va),  353  (1851);  Rives  V.  Montgomery    S.  &  T.  R  R.  v.  McKean,  12  La,  Ann., 

South  Plank  R.  Co.,  30  Ala.,  92  (1857).    638  (1857),  on  the  ground  that,  if  the 

In  all  such  cases,  however,  if  the  corpo-    rule  were  otherwise,  "  there  will  be  very 

ration  accepts  a  subscription  taken  by     little  security  to  those  who  loan  money 

an  unauthorized  agent,  it  cannot  retain    or  render  assistance  to  institutions  of 

the  subscription  and  repudiate  the  rep-    this  kind. 

192 


CH.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§  143. 


are  held  to  be  admissible  in  evidence.1  The  former  rule  seems  to 
accord  most  with  the  modern  tendency  of  the  decisions,  which  go 
very  far  towards  the  enforcement  of  subscriptions  after  corporate 
creditors  and  other  subscribers  have  become  interested  in  the  en- 
prise. 

§143.  The  misrepresentations  may  arise  by  prospectuses. —  A 
prospectus  issued  by  the  authority  of  the  directors  or  the  stock- 
holders of  a  corporation  may  be  relied  upon  by  a  person  in  subscrib- 
ing for  stock ;  and  if  the  prospectus  contains  a  false  representation, 
and  the  subscription  is  made  by  reason  thereof,  such  representation 
is  binding  upon  the  corporation.2  In  this  class  of  corporate  instru- 
ments, however,  it  is  held  that  some  high  coloring  and  even  exag- 
geration is  allowable.  "  In  an  advertisement  of  this  description 
some  allowance  must  always  be  made  for  the  sanguine  expectations 
of  the  promotors  of  the  adventure;  and  no  prudent  man  will  accept 
the  prospects  which  are  always  held  out  by  the  originators  of  every 


i  Atlanta  &  West  Point  R  R  Co.  v. 
Hodnett,  36  Ga.,  669(1867);  McClellan  v. 
Scott,  24  Wis.,  81  (1869).  The  question 
of  representations  at  a  public  meeting 
was  submitted  to  the  jury  in  Weems  v. 
Georgia,  etc.,  R  R,  14  S.  E.  Rep.,  583 
(Ga.,  1892). 

2  0akes  v.  Turquand,  L.  R,  2  H.  L. 
App.  Cas.,  325  (1867) ;  Ross  v.  Estates  In- 
vestment Co.,  L.  R,  3  Ch.  App.,  682 
(1868);  Reese  River  Silver  Min.  Co.  v. 
Smith,  L.  R,  4  H.  L..  64  (1869) :  Blake's 
Case,  34  Beav..  639  (1865) :  Henderson  v. 
Lacon,  L.  R,  5  Eq.  Cas..  249  (1867).  In 
England  it  is  enacted,  by  section  38  of 
the  Companies  Act,  1867.  "  Every  pros- 
pectus of  a  company,  and  every  notice 
inviting  persons  to  subscribe  for  sbares 
in  any  joint-stock  company,  shall  specify 
the  dates  and  names  of  the  parties  to 
any  contract  entered  into  by  the  com- 
pany, or  the  promoters,  directors  or 
trustees  thereof,  before  the  issue  of  such 
prospectus  or  notice,  whether  subject 
to  adoption  by  the  directors  or  the  com- 
pany or  otherwise;  and  any  prospectus 
or  notice  not  specifying  the  same  shall 
be  deemed  fraudulent  on  the  part  of 
the  promoters,  directors  and  officers  of 
the  company  knowingly  issuing  the 
same,  as  regards  any  person  taking 
shares  in  the  company  on  the  faith  of 


such  prospectus,  unless  he  shall   have 
had  notice  of  such  contract."     For  the 
application  of  this  very  important  and 
commendable    statute,    see    Cornell    ?v 
Hay,  8  C.  R,  328  (1873) ;  Gover's  Case,. 
L.  R,  20  Eq.,  114  (1875):  Davidson   v.. 
Tulloch.  1   Macq.,  783  (1860);  Arkright 
r.  Newbold,  L.  R,  17  Ch.  D.,  311  (1880): 
Tu  ycross  v.   Grant,   L.   R,  2  C.  P.  D., 
469  (1877);  Emma  Min.  Co.  v.  Lewis,  L. 
R,  4  C.  P.   D..    396  (1879);  Bagnall  i\ 
Carlton.    L.    R.    6   Ch.    D..   371    (1877); 
Plynipton   Min.    Co.    v.    Wilkins,    1882, 
W.   N.  p.  69;  Sullivan  v.  Metcalf,  L.  R, 
5  C.   P.   Div..   455   (1880).     But  a  pros- 
pectus   containing     statements    based 
upon  a  report  of  the  vendor  of  property 
to  the  corporation,  which  report  is  ap- 
pended to  the  prospectus,  is  no  ground 
for  rescission,  even  though  the  report  is 
totally  false.     All  the  stockholders  and 
the  company    relied    equally    thereon. 
Ex  parte  Vickers,   56  L  T.  Rep..  815 
(1887).     Several   subscribers   who  have 
been  induced  by  the  same  misrepresen- 
tations contained  in  a  prospectus  to  sub- 
scribe for  stock  may  join  in  a  suit  in 
equity  for  the  benefit  of  themselves  and 
others   similarly   deceived,  to  set  asidf> 
their  subscriptions.  Bosherr.  Richmond, 
etc.,  Co..  16  S.  K  Rep.,  360  (Va„  1892  .   See 
66  L.  T.  Rep.,  700,  reversing  id,  184. 


(13) 


193 


§§  144,  145.]   DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD.     [CH.  IX. 

new  scheme  without  considerable  abatement."  l  So,  also,  if  the 
language  used  in  the  prospectus  admits  of  two  meanings,  the  sub- 
scriber relying  on  it  must  ascertain  which  meaning  is  intended.2 
Unless  the  representation  distinctly  refers  to  what  is  actually  exist- 
ing at  the  time,  it  must  be  taken  to  represent  what  will  result  when 
the  enterprise  is  carried  out,  and  will  then  be  merely  an  expression 
of  opinion.  Nevertheless  a  subscriber  may  have  rescission  where 
the  prospectus  is  not  an  honest,  candid,  straightforward  document, 
but  suggests  that  which  is  untrue  and  is  in  a  high  degree  mis- 
leading.3 

§  144.  Or  by  reports. —  So,  also,  a  report  made  by  the  corporate 
officers  to  the  stockholders  may  be  relied  on  by  one  who  contem- 
plates subscribing  for  stock.4  The  corporation  cannot  say  that  such 
reports  were  intended  for  the  stockholders  alone.  The  law  holds 
that  the  report  is  known,  and  is  intended  to  be  known,  to  all  per- 
sons who  contemplate  becoming  stockholders,  and  is  the  same  as 
though  published  to  the  world.5 

§  145.  Misrepresentations  amounting  to  fraudulent  representa- 
tions.—  Any  false  statement  by  the  authorized  agents  of  a  corpo- 
ration in  regard  to  the  past  or  present  status  of  the  corporate 
enterprise  or  material  matters  connected  therewith,  whereby  sub- 
scriptions are  obtained,  is  a  fraudulent  representation. 

Thus,  a  false  statement  that  a  certain  amount  of  stock  had  been 
subscribed  for ; 6  or  that  certain  property  had  been  purchased ; 7  that 

1  Directors,  etc.,  of  Central  R'y  Co.  v.  R,  3  Ch.,  682  (1868);  Henderson  v.  La- 
Kisch,  L.  R,  2  H.  L.  App.  Cas.,  99  (1870).  con,  L.   R.,  5  Eq.,  249  (1867).     A  state- 

2  Smith  v.  Chadwick,  L.  R.,  9  H.  L.,  ment  that  £200,000  had  been  subscribed. 
187:  Hallows  v.  Fermie,  L.  R,  3  Ch.  when  in  fact  owners  of  property  had 
App.,  467  (1868),  where  the  court  say :  contracted  to  convey  the  same  to  the 
"  If  they  may  be  construed  in  a  differ-  company  for  £200,000  of  stock,  is  a  ma- 
ent  manner  by  different  minds,  it  will  terial  misrepresentation.  Arnison  v. 
be  impossible  to  test  the  truth  of  any  Smith,  59  L.  T.  Rep.,  627  (1888).  It  is 
one  man's  assertion  that  he  understood  fraud  to  state  that  a  certain  person  had 
them  in  the  sense  in  which  they  in-  subscribed  for  stock  when  in  fact  his 
volved  a  misrepresentation."  See,  also,  stock  was  given  to  him.  It  is  not  fraud- 
§§  352,  353.  ulent    that   the   mine    whose  stock    is 

3  Scott  v.  The  Snyder,  etc.,  Co.,  67  L.  sold  would  not  pay  for  mining.  A  bill 
T.  Rep.,  104  (1892).  in  equity  lies  to  cancel  a  conveyance  of 

4  Western  Bank  of  Scotland  v.  Addie,  land  to  pay  for  the  stock.    Coles  v.  Ken- 
L.  R,  1  Sc.  App,  Cas.,  145;  New  Bruns-  nedy,  46  N.  W.  Rep.,  1088  (Iowa,  1890). 
wick  &  C.  R'y  Co.  v.  Conybeare,  9  H.  L.  7  Also  that  the  property  contained  val- 
Cas.,  711  (1862).  uable  mines,  in  full  operation,  and  with 

5  National  Exchange  Co.  v.  Drew,  32  large  daily  returns.  Reese  River  Silver 
Eng.  L.  &  Eq.,  1  (1855) ;  Scott  v.  Dixon,  Min.  Co.  v.  Smith,  L.  R,  4  H  L.,  64 
29  L.  J.  (Ex.),  62,  n.;  explained  and  (1869) ;  Waldo  v.  Chicago,  St.  P.  &  F.  D. 
adopted  in  L.  R,  6  H.  L.,  377.  L.  R.  R  Co.,  14  Wis.,  575  (1861);  Ross  v. 

6  Ross  v.  Estates  Investment  Co.,  L.  Estates  Investment  Co.,  sujira.    Repre- 

194 


CH.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§  H5. 


the  corporate  property  is  unincumbered ; x  that  the  corporation  is 
solvent' and  prosperous;2  that  the  directors  have  subscribed  for 
stock ; 3  that  certain  individuals  are  directors ; 4  or  as  to  the  nature  of 
the  business  to  be  undertaken;5  or,  in  England,  where  the  memo- 
randa or  articles  of  the  association  are  different  from  the  prospec- 
tus;8 or  that  work  on  the  enterprise  had  reached  a  certain  stage  of 
completion ; 7  or  that  a  certain  price  had  been  paid  for  property 
when  in  fact  a  large  part  of  the  price  went  to  promoters ; 8  or  that 


sentation  that  a  certain  patent-right 
owned  by  the  company  had  been  tested 
and  found  to  be  valuable,  held  not  a 
misrepresentation,  although  it  turns  out 
to  be  worthless.  Denton  r.  Macneil,  L. 
R,  2  Eq.,  352  (1866).  Representation  in 
cool  faith  that  title  to  land  was  good 
when  in  fact  it  was  bad  is  not  a  misrep- 
resentation. New  Brunswick  &  C.  R'y 
Co.  v.  Conybeare,  9  H.  L.  Cas.,  711 
(1862).  But  misrepresentation  that  a 
governmerit  guaranty  had  been  ob- 
tained is  material.  Kisch  v.  Central  R'y 
of  Venezuela,  34  L.  J.  (Ch.),  545. 

1  McClellan  v.  Scott,  24  Wis.,  81  (1869) ; 
Water  Valley  Mfg.  Co.  v.  Seaman,  53 
Miss.,  655. 

-'Tyler  v.  Savage,  143  U.  S.,  79  (1892); 
Bell's  Case,  22  Beav.,  35  (1856);  Melendy 
v.  Keen,  89  111.,  395  (1878);  Western 
Bank  of  Scotland  v.  Addie,  L.  R,  1  Sc. 
App.  Cas.,  145  (1877).  Not  so,  however, 
where  the  directors  honestly  figured  in 
debts  which  afterwards  turned  out  to 
be  bad.  Jackson  v.  Turquand,  L.  R., 
4  H.  L.,  305  (1869).  Directors  held 
liable  to  depositors  for  fraudulent  repre- 
sentations as  to  the  bank's  solvency. 
Scale  t\'  Baker,  7  S.  W.  Rep.,  742  (Texas, 
1888). 

3  Henderson  v.  Lacon,  L.  R,  5  Eq. 
Cas.,  249  (1867). 

4  Blake's  Case,  34  Beav.,  639  (1865); 
Menster's  Case,  14  W.  R,  957  (1866). 
Persons  who  have  accepted  are  direct- 
ors, although  without  the  qualification 
shares.  Hallows  v.  Fernie,  L.  R.,  3  Ch. 
App.,  467  (1868).  A  misrepresentation 
as  to  the  directors  is  ground  for  repudi- 
ating the  subscription.  Re  Metropolitan, 
etc.,  Aes'n,  64  L.  T.  Rep.,  561  (1891);  id., 


429.  A  misrepresentation  as  to  who  are 
the  members  of  the  council  of  adminis- 
tration is  material  and  a  rescission  may 
be  had.  Re  Metropolitan,  etc.,  Ass'n, 
62  L.  T.  Rep.,  30  (1889). 

5  Blackburn's  Case,  3  Drew.,  409  (1856). 
A  person  who  has  agreed  to  turn  in 
property  for  stock  may  have  the  con- 
tract annulled  on  the  ground  that  fraud- 
ulent representations  were  made  about 
the  process  of  manufacture  by  the  cor- 
poration. Kelley  v.  Owens  et  al.,  30 
Pac.  Rep.,  596  (Cal.,  1892). 

eDownes  v.  Ship,  L.  R,  3  H.  L.,  343 
(1868);  Ex  parte  Briggs,  L.  R.,  1  Eq. 
Cas.,  483(1866). 

7  Peel's  Case,  L.   R.,  2  Ch.  App.,  674 
(1867);  Ogilvie  v.  Currie,  37  L.  J.  (Ch.), 
541  (1868) ;  Lawrence's  Case,  L.  R.,  2  Ch. 
App.,    412  (1867);    Kincaid's    Case,   id. 
(1867);   Wilkinson's    Case,  L.  R.,  2  Ch. 
App.,  536  (1867);  Ashley's  Case,  L.  R.,  9 
Eq.  Cas.,  263  (1870):  Stewart's  Case,  L. 
R,  1  Ch.  App.,  574 :  Whitehouse's  Case, 
L.  R,  3  Eq.,  790(1867);  Taite's  Case,  L. 
R.,  3  Eq.,  795  (1867):   Upton  v.  Hans- 
braugh,  3  Biss.,  417  (1873);  Re  Cachar 
Co.,  36  L.   J.  (Ch.),  490  (1867);  Ship  v. 
Cresskill,  L.    R,  10  Eq.  Cas.,  73  (1870). 
Cf.  Ex  parte  Briggs,  L.  R.,  1  Eq.  Cas., 
483  (1866);  Stewart's  Case,  L.  R.,  1  Ch., 
574  (1866).      False    representation    that 
sufficient  funds  were  at  hand  to  build  a 
specified  part  of  the  road,  being  a  differ- 
ent part  from  that  which  the  defendant 
required  by  his  subscription  to  be  com- 
pleted before   payment,  is  immaterial. 
Blair  v.   Buttolph,  33  N.  W,  Rep.,   349 
(Iowa,  1887). 

8  Capel  v.  Sims,  etc.,  Co..  58  L.  T.  Rep., 
(1888).    See,  also,  ch.  XXXIX 


195 


§  146.] 


DEFENSE    OF    PAKOL    AGREEMENT    AND    FEACD. 


[CH. 


IX. 


steam  could  be  used  where  only  horse-power  was  allowed ; l  or  that 
the  objects  of  the  enterprise  set  forth  in  the  subscription  contract 
were  of  a  certain  nature,  the  subscriber  not  reading  or  hearing, 
and  not  being  able  to  read,  the  contract,2  or  other  material  mis- 
statements of  fact,3  have  been  held  to  constitute  a  fraudulent  rep- 
resentation, entitling  the  subscriber  induced  thereby  to  subscribe 
to  the  remedies  provided  for  him  by  law  in  such  cases.  In  all  these 
cases,  however,  the  distinction  between  statements  relative  to  the 
prospects  and  capabilities  of  the  enterprise,  and  statements  spe- 
cifically specifying  what  does  or  does  not  exist,  must  be  carefully 
borne  in  mind.  The  former  are  matters  of  opinion ;  the  latter  are 
material  representations,  and  are  fraudulent  if  false.4 

§  146.  Statements  as  to  questions  of  law. —  Where  a  subscription 
is  obtained  by  a  false  representation  as  to  the  legal  effect  of  the 
subscription  contract,  or  of  corporate  rights  or  liabilities,  the  sub- 
scriber has  no  remedy.  He  is  bound  to  take  notice  of  the  law.5 
Thus,  a  misrepresentation  as  to  the  extent  to  which  the  subscriber 
would  be  liable  on  his  stock,6  or  that  he  may  allow  his  stock  to  be 


iPeek  v.  Deny,  59  L.  T.  Rep.,  78 
(1888). 

2  West  v.  Crawf  ordsville  &  A.  T.  Co., 
19  Ind.,  242  (1862). 

3  See  ch.  XX,  §  350.  A  representation 
that  only  $3,000  of  stock  and  $12,000 
bonds  per  mile  would  be  issued  is  fraud- 
ulent where  $12,000  of  stock  and  $15,000 
of  bonds  per  mile  have  already  been 
issued.  Weems  v.  Georgia,  etc.,  R.  R, 
11  S.  E.  Rep.,  503  (Ga.,  1890).  Where 
an  apartment-house  corporation  induces 
by  prospectus  subscriptions  on  repre- 
sentations that  certain  subscriptions  en- 
title tbe  rjolder  to  a  perpetual  leasehold 
in  the  apartments  selected  by  the  sub- 
scriber, he  cannot  afterwards  be  evicted 
on  the  ground  that  the  building  cost 
more  than  was  expected  and  further 
rent  must  be  paid.  Compton  v.  Chelsea, 
8  N.  Y.  Supp.,  622  (1890).  A  statement 
of  assets  that  include  not  only  separate 
items  for  moving,  exhibiting,  etc.,  the 
aggregate  value  of  the  buildings  being 
given  also,  but  also  outstanding  accounts 
with  no  deductions  for  bad  debts;  ac- 
crued interest  with  no  allowance  for 
interest  on  liabilities;  expenses  of  per- 
fecting a  machine,  the  latter  not  yet 
being  a  success ;  and  money  paid  for  ex- 


penses, it  being  also  included  in  the 
value  of  the  property, —  is  a  false  state- 
ment and  sustains  an  action.  Hubbard 
v.  Weare,  44  N.  W.  Rep.,  914  (Iowa, 
1890). 

4  Whether  the  statement  refers  to  a 
"  possibility  or  a  contingency,  or  an  in- 
tention," or  to  an  existing  fact,  is  a 
question  sometimes  for  the  jury,  some- 
times for  the  judge ;  generally  the  latter. 
Edgington  v.  Fitzmaurice,  L.  R,  29  Ch. 
D.,  459  (1885).  All  the  statements,  to- 
gether with  the  circumstances  and  his- 
tory of  the  matter,  are  to  be  considered 
in  deciding  whether  a  misrepresentation 
was  made.  It  is  sufficient  if  the  sub- 
scriber relied  partly  on  the  misrepre- 
sentation. He  need  not  have  relied  on 
it  exclusively.  Id.  See,  also,  Nicol's 
Case,  3  De  G.  &  J.,  420  (1858).  The  sub- 
scriber may,  by  contract,  waive  his 
right  to  rely  on  a  representation. 
Brown  lee  v.  Campbell,  L.  R,  5  App. 
Cas.,  925  (1880). 

8  Parker  v.  Thomas.  19  Ind.,  213  (1862). 

6  Upton  v.  Tribilcock,  91  U.  S.,  45 
(1875),  where  the  representation  was 
that  only  a  certain  percentage  could  be 
called  for.  In  Upton  v.  Englehart,  3 
Dill.,  496  (1874),  this  representation  was 


196 


CH.  IX.]    DEFENSE  OF  PAKOL  AGREEMENT  AND  FRAUD.   [§§  147,  148. 

forfeited,1  or  that  payment  would  not  be  demanded  until  the  enter- 
prise was  partly  or  wholly  completed,2  is  a  statement  as  to  the  law. 
It  states  that  something  can  be  done  which  the  law  prohibits  from 
being  done. 

§  147.  Misrepresentation  may  be  by  suppression  of  the  truth,— 
The  misrepresentation  entitling  the  subscriber  to  his  remedies  may 
consist  in  the  suppression  of  what  is  true  as  well  as  in  the  asser- 
tion of  what  is  false.3  Where  any  statement  is  made  at  all,  it  must 
be  a  fair  and  full  statement  of  all  the  material  facts.  The  corpo- 
rate authorities,  in  issuing  a  prospectus,  are  "  bound  to  state  every- 
thing with  strict  and  scrupulous  accuracy,  and  not  only  to  abstain 
from  stating  as  fact  that  which  is  not  so,  but  to  omit  no  one  fact 
within  their  knowledge,  the  existence  of  which  might,  in  any  de- 
gree, affect  the  nature  or  extent  or  quality  of  the  privileges  and 
advantages  which  the  prospectus  holds  out  as  inducements  to  take 
shares."  4  Thus,  an  omission  to  state  that  a  very  large  sum  had 
been  paid  for  property,  the  merits  of  which  were  fully  set  forth, 
has  been  held  to  be  equivalent  to  a  fraudulent  representation.5 
On  the  other  hand,  a  failure  to  state  that  large  sums  were  paid  to 
the  directors  to  induce  them  to  act  as  such  was  held  not  to  be  a 
fraudulent  omission.6 

§  148.  Misrepresentation  may  be  by  statements  made  without 
knowledge  of  their  falsity.—  Statements  need  not  be  intentionally 
false  in  order  to  amount  to  a  fraudulent  representation.7     A  false 

held  to  be  a  defense,  where  it  was  made  court  say  the  prospectus  is  objection- 
in  one  state  with  reference  to  the  laws  able,  "not  that  it  does  not  state  the 
of  another  state.  See,  also,  Accidental  truth  as  far  as  it  goes,  but  that  it  con- 
Insurance  Co.  v.  Davis,  15  L.  T.,  182  ceals  most  material  facts  with  which 
(1866),  where  it  was  represented  that  the  public  ought  to  have  been  made 
further  calls  were  not  contemplated.  acquainted,    the    very  concealment  of 

i  N.  E.  R.  R.  Co.  v.  Rodriques,  10  Rich,  which  gives  to  the  truth  which  is  told 

(S.  C),  278  (1857").  the  character  of  falsehood." 

2  clem  v.  Newcastle  &  Danville  R.  R.  4  New  Brunswick   &  Con.  R'y  Co.  v. 

Co.,  9  Ind.,  488  (1857) ;  New  Albany,  etc.,  Muggeridge,  1  Dr.  &  Sm.,  363,  381  (1860). 

R.  R.  v.  Fields,  10  id.,  187  (1858).     For  5  Directors,  etc.,  of  Central  R'y  Co.  v. 

representation  as  to  the  route,  see  Elli-  Kisch,  supra.    In  Gover's  Case,  L.  R., 

son  v.  Mobile,  etc.,  R.  R.  Co.,  36  Miss.,  1  Ch.  D„  182  (1875),  under  different  cir- 

572  (1858) ;  Wight  v.  Shelby  R.  R.  Co.,  cumstances,  the  contrary  was  held. 

16  B.  Mon.,  4  (1855).                                     '  6  Heymann  v.  European  Central  R'y 

s  "  No  misstatement   or  concealment  Co.,  L.  R.,  7  Eq.  Cas.,  154  (1868).    State- 

of  any  material  facts  or  circumstances  ment  need  not  be  made  that  stock  had 

ought  to  be  permitted.     .     .    .    The  sup-  been  given  to  the  directors  and  promot- 

pression  of  a  fact  will  often  amount  to  ers  in  payment  for  services.     Pulsford  v. 

a    misrepresentation."     Directors,    etc.,  Richards,  17  Beav.,  87  (1853).     Nor  as  to 

of  Central  R'y  v.  Kisch,  L.  R,  2  H.  L.  the  amount  of  stock  already  subscribed. 

App.  Cas.,  99  (1867).     In  Oakes  v.  Tur-  Vane  v.  Cobbald,  1  Ex.,  798  (1848). 

quand,  L.  R,  2  H.  L.  Cas.  325  (1867),  the  '  Corporate  agents,  making  represen- 

197 


149.] 


DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[CH.  IX. 


statement,  made  in  good  faith  but  in  ignorance,  is,  in  a  legal  point 
of  view,  the  same  as  an  assertion  which  the  party  knew  to  be  un- 
true.1 Thus,  a  prospectus  issued  by  the  directors,  representing  the 
corporate  property  as  containing  valuable  mines,  all  of  which  was 
in  good  faith,  but  false,  is  the  same  as  though  the  statements  were 
made  with  knowledge  of  their  falsity.  Where,  however,  the  state- 
ment in  good  faith  was  that  the  corporation  had  a  government 
contract,  which,  upon  litigation,  was  found  to  be  untrue,  the  rep- 
resentation was  held  not  to  be  fraudulent.2 

§149.  Misrepresentations  that  are  insufficient. —  It  is  not  every 
misrepresentation  that  enables  a  subscriber  to  set  up  that  he  was 
induced  to  subscribe  by  fraud.3     Thus,  an  honest  mistake  of  judg- 


tations  in  order  to  obtain  subscriptions, 
are  bound  to  know  the  truth  or  falsity 
of  such  statements.  Reese  River  Co.  v. 
Smith,  L.R.,  4  H.  L.,  64  (1869);  affirm- 
ing L.  R,  2  Eq.,  264;  Glamorgansbire 
Iron,  etc.,  Co.  v.  Irvine,  4  F.  &  F.,  947 
(1866),  applying  the  same  rule  at  law. 
The  English  case  of  Kennedy  v.  Panama, 
N.  Z.  &  A.  R.  M.  Co.,  L.  R.  2  Q.  B.,  580 
(1867),  holds,  however,  that  "where  there 
has  been  an  innocent  misrepresentation 
or  misapprehension,  it  does  not  author- 
ize a  rescission,  unless  it  is  such  as  to 
show  that  there  is  a  complete  difference 
in  substance  between  what  was  sup- 
posed to  be  and  what  was  taken,  so  as 
to  constitute  a  failure  of  consideration," 
and  that  to  hold  otherwise  would  be  to 
make  a  warranty  out  of  the  representa- 
tion. In  the  recent  case  of  Edgington 
v.  Fitzmaurice,  L.  R.,  29  Ch.  D.,'  459 
(1885),  the  court  say  that  a  statement  of 
fact,  which  the  person  making  does  not 
know  the  truth  of,  is,  "  in  the  eye  of  the 
law,  a  fraudulent  statement  as  much  as 
if  the  parties  making  it  had  known  it  to 
be  false."  In  this  country  the  cases 
seem  to  favor  a  different  rule.  The 
party  making  the  representations  must 
be  proven  "to  have  had  a  fraudulent 
purpose  in  contemplation,  or  at  least  to 
have  known  that  the  statements  were 
untrue."  Nugent  v.  Cincinnati,  Harri- 
son &  Indianapolis  S.  L.  R.  R.  Co.,  2  Dis- 
ney, 302  (1858);  Selma,  M.  &  M.  R.  R. 
Co.  v.  Anderson,  51  Miss.,  829  (1876); 
Cunningham  v.  Edgefield  &  Ky.  R  R. 


Co.,  2  Head,  23  (1858).  See,  also,  Chitty 
on  Contracts,  682,  and  Montgomery, 
etc.,  R'y  Co.  v.  Matthews,  77  Ala.,  357 
(1884).  The  vigorous  case  of  Henderson  v. 
Railroad  Co.,  17  Tex.,  560  (1856),  however, 
effectively  presents  the  opposite  view ; 
and  see  §  356,  infra.  See,  also,  1  Story, 
Eq.  Juris.,  §  193;  Story  on  Agency, 
§§  127,  135,  137,  452. 

1  Reese  River  Co.  v.  Smith,  L.  R,  4 
H.  L.,  64  (1869). 

2  Kennedy  v.  Panama,  N.  Z.  &  O.  R 
M.  Co.,  L.  R.,  2  Q.  B.,  580  (1867). 

3  Mere  matters  of  opinion  as  to 
whether  the  enterprise  can  be  com- 
pleted, or  when  it  will  be  completed, 
or  the  prospects  of  profits,  cannot  be 
misrepresentations.  The  subscriber  is 
bound  to  know  that  these  are  all  mat- 
ters of  mere  conjecture.  Brownlee  v. 
O.,  Ind.  &  111.  R.  R  Co.,  18  Ind.,  68 
(1862);  Pickering  v.  Templeton,  2  Mo. 
App.,  424  (1876);  Hughes  v.  Antietam 
Mfg.  Co.,  34  Md.,  316  (1870);  Hardy  v. 
Merriweather,  14  Ind.,  203  (1860);  An- 
drews v.  O.  &  Miss.  R  R  Co.,  14  Ind, 
169  (1860);  Bish  v.  Bradford,  17  Ind., 
490(1861);  Walker  v.  Mobile  R  R  Co., 
34  Miss.,  245  (1857) ;  Coil  v.  Pittsburgh 
College,  40  Pa.  St,  439  (1861).  State- 
ments as  to  when  the  road  would  be 
completed  are  not  such  representations 
as  will  avoid  a  subscription  for  stock. 
Jefferson  v.  Hewitt,  30  Pac.  Rep.,  772 
(Cal.,  1892).  The  fact  that  statements  as 
to  the  affairs  of  the  company  are  not 
filed  as  required  by  statute  does  not 


198 


CH.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§  150. 


raent,  on  the  part  of  the  directors,  as  to  the  collectibility  of  certain 
debts,  whereby  a  company  represented  to  be  solvent  turns  out  to 
be  insolvent,  is  not  a  fraudulent  representation.  So,  also,  of  a 
representation  as  to  the  value  of  a  patent-right,  which,  it  was 
stated,  would  be  tested  further.  On  the  other  hand,  a  statement 
made  with  the  intent  to  defraud  the  subscriber,  but  without  that 
effect  is  immaterial ;  mere  intent  without  damage  is  insufficient.1 
A  misstatement  as  to  the  contents  of  the  subscription  contract 
which  the  subscriber  signs  is  immaterial,  where  he  can  read  but 
does  not.2  And  where  false  representations  are  made,  but  before 
the  subscription  is  completed  the  representations  are  made  good 
by  intervening  events,  the  subscribers  cannot  complain.3  Frauds 
of  the  directors  which  are  not  the  subject  of  a  representation  are 
not  to  be  remedied  by  the  principle  of  law  governing  the  subject 
of  false  representation.4 

§150.  Subscriber  is  not  bound  to  investigate  the  truth  of  repre- 
sentations.—  If  a  subscriber  has  used  reasonable  caution  and  judg- 
ment in  accepting  the  statements  of  corporate  agents,  it  is  no 
answer  to  his  claim  that  he  was  induced  to  subscribe  by  fraudulent 
representations,  to  say  that  by  proper  inquiry  he  might  have  learned 
the  truth,  or  bv  more  vigilance  he  might  have  discovered  the  de- 


amount  to  fraud  in  the  sale  of  stock ; 
nor  do  representations  that  the  stock 
will  pay  twenty  per  cent,  dividends 
amount  to  fraud.  The  question  as  to 
validity  of  stock,  having  once  been  liti- 
gated, cannot  be  again  raised  in  an  ac- 
tion for  deceit  in  the  sale  of  the  stock. 
The  mere  act  of  conspiracy  is  not  suffi- 
cient to  sustain  the  action  unless  dam- 
age is  shown.  Robinson  v.  Parks  et  al., 
24  Atl.  Rep.,  411  (Md.,  1892).  Represen- 
tations that  the  stock  would  be  a  good 
investment  and  pay  dividends,  etc.,  con- 
stitute no  defense.  Weston  v.  Colum- 
bus Southern  R'y  Co.,  15  S.  E.  Rep.,  773 
(Ga.,  1892).  In  the  cases,  however,  of 
Gerhard  v.  Bates,  17  Jur..  1097  (1853), 
and  Taylor  v.  Ashton,  11  M.  &  W.,  401 
(1843),  it  was  held  that  a  false  guaranty 
of  the  promoters  that  a  certain  divi- 
dend would  result  from  the  enterprise 
constituted  a  false  representation.  In 
re  Nat'l,  etc.,  Fuel  Co.,  Ex  parte  North, 
4  Drew.,  529  (1859),  held  that  one  sued 
as  contributory  cannot  plead  fraudulent 
misrepresentation  on  part  of  company 


because  it  was  arranged  between  di- 
rectors and  shareholders  that  certain 
shares  (of  which  these  were  a  part)  should 
have  a  preference.  A  statement  as  to 
the  purpose  for  which  the  proceeds  of 
bonds  will  be  used  by  the  company  is 
immaterial.  The  bondholder  cannot  re- 
scind. Banque,  etc.,  v.  Brown,  34  Fed. 
Rep.,  145,  198  (1888).  Stock  may  be  is- 
sued before  payment  by  machinery  is 
made.  An  action  by  another  .stock- 
holder for  cancellation  of  the  stock  on 
the  ground  of  fraud  fails  unless  there  is 
clear  proof  that  the  person  agreed  that 
the  machinery  would  succeed.  Pendle- 
ton Mfg.  Co.  v.  Mahanna,  18  Pac.  Rep., 
563  (Oreg.,  1888).  See  21  N.  R  Rep.,  12 
(111.,  1889). 

i  Kiiler  v.  Johnson,  11  Ind.,  337  (1858) ; 
Cunningham  v.  Edgefield  &  Ky.  R.  R. 
Co.,  2  Head,  23  (1858). 

2Thornburgh  v.  Newcastle  &  Danville 
R  R.  Co.,  14  Ind..  499  (I860). 

3  Ship  v.  Cresskill,  L.  R,  10  Eq.  Cas.,  73 
(1870). 

4  Hornaday  v.  Ind.  &  111.  Central  R.  R.. 


199 


§  151.]  DEFENSE    OF   PAROL    AGREEMENT    AND    FRAUD.  [cil.   IX. 

ception.1  Where  the  representations  are  by  a  prospectus,  he  is  not 
obliged  to  examine  documents  referred  to,  even  though  such  exam- 
ination would  have  shown  the  falsity  of  the  representations.2  It  is 
not  incumbent  upon  him  to  institute  inquiries,  and  to  suspect  fraud 
when  all  seems  fair.  But  where  the  means  of  information  are  open 
equally  to  both  parties,  the  subscriber  has  no  right  to  rely  upon 
the  representations  of  the  corporate  agent,  unless  the  latter  dis- 
suades the  subscriber  from  investigation.3  So,  also,  where  the  sub- 
scriber reads  several  documents,  he  cannot  rely  on  representations 
in  one  which  are  corrected  and  limited  by  statements  in  the  others, 
even  though  he  claims  to  have  overlooked  such  corrections.* 

§  151.  Subscriptions  induced  by  fraudulent  representations  are 
not  void,  but  only  voidable. —  The  principle  of  law  that  fraud  viti- 
ates all  contracts  applies  to  a  contract  of  subscription ;  but  this 
principle  means,  not  that  the  contract  is  void  per  se  from  the  for- 
mation of  the  contract,  but  that  the  contract  is  voidable  at  the 
option  or  election  of  the  person  defrauded.5  Until  such  election  is 
exercised,  the  contract  is  enforceable  by  both  or  either  of  the  par- 
ties. Hence  a  subscription  to  stock,  obtained  by  fraudulent  repre- 
sentations, is  not  void  from  the  time  when  it  was  made,  nor  is  it 
void  until  it  is  ratified  and  confirmed  by  the  defrauded  subscriber, 
but  it  is  valid  until  it  is  expressly  rescinded  and  repudiated  by  the 
subscriber.6     This  principle  is  important  in  determining  the  method 

9   Ind.,   263  (1857):  Heymann  v.  Euro  stated  to  be  that  "every  contracting  per- 

pean  Central  R'y  Co.,  L.  R.,  7  Eq.  Cas.,  son  has  an  absolute  right  to  rely  on  the 

154  (1868).  express  statement  of  an   existing  fact, 

1  New  Brunswick  &  Can.  R'y  Co.  v.  the  truth  of  which  is  known  to  the  op- 
Muggeridge,  1  Dr.  &  Sm,,  363  (1860);  posite  party,  and  unknown  to  him,  as  a 
Upton  v.  Englehart,  3  Dill.,  496(1874);  basis  of  a  mutual  engagement;  and  he 
Directors,  etc.,  of  Central  R'y  ti  Kisch,  is  under  no  obligation  to  investigate  and 
L.  R,  2  H.  L.  App.  Cas.,  99  (1870) ;  Ex  verify  statements,  to  the  truth  of  which 
parte  West,  56  L.  T.  Rep.,  622  (1887).  the  other  party  to  the  contract,  with 
Cf.  Hallows  v.  Firmie,  L.  R,  3  Ch.  App.,  full  means  of  knowledge,  has  deliber- 
467  (1868).  The  subscriber  is  not  bound  ately  pledged  his  faith."  Mead  v.  Bunn, 
to  investigate  the  truth  of  statements  32  N.  Y.,  274  (1865). 

which  the  other  party  with  full  knowl-  3  Jennings  v.  Braughtou,  22  L.  J.  (Ch.), 

edge  of  the  facts  makes.     McClellan  v.  583  (1853) ;  Walker  v.  Mobile  &  O.  R.  R. 

Scott,   24  Wis.,  81  (1869).     False  state-  Co.,  34  Miss.,  245  (1857). 

ments  as  to  who  are  the  other  subscrib-  4  Scholey  v.  Central  R'y  Co.,  L.  R,  9 

ers  are  no  defense  where  the  subscriber  Eq.  Cas.,  766,  n.  (1870). 

has  opportunity  to  ascertain.     Haskell  ^Oakes  v.  Turquand,  L.  R,  2   H.  L. 

v.  Worthington,  7  S.  W.  Rep.,  481  (Mo.,  App.  Cas.,  325  (1867) ;  Upton  v.   Engle- 

1888).  hart,   3   Dill.,   496  (1874);    Reese  River 

2  Kisch  v.  Central  R'y,  34  L.  J.  (Ch.),  Min.  Co.  v.  Smith,  L.  R,  4  H.  L.,  6-4 
545  (1865) ;  S.  C,  supra.    In  New  York  (1869). 

the  general  principle  of  law  governing        « Tennant  v.  City  of  Glasgow  Bank,  L. 
cases    of    misrepresentation   is    clearly     R,  4  App.  Cas.,  615  (1879). 

200 


CH.  IX.]  DEFENSE    OF   PAROL    AGREEMENT    AND   FRAUD.       [§§  152-154. 

of  rescission,  and  particularly  the  time  within  which  a  rescission 
must  be  made. 

§  152.  Remedies  of  a  subscriber  induced  to  subscribe  by  fraudu- 
lent representations.— There  are,  in  general,  live  different  remedies 
which  are  open  to  a  subscriber  induced  to  subscribe  by  fraud.  He 
may,  upon  discovering  the  fraud,  rescind  the  subscription  by  noti- 
fication to  the  corporate  authorities,  without  taking  legal  proceed- 
ings; or  he  may  wait  until  sued  upon  the  subscription,  and.  then 
set  up  the  fraud  as  a  defense  to  the  action  at  law;  or  he  may  file 
a  bill  in  equity  to  restrain  such  suits  at  law,  and  to  set  aside  the 
subscription  contract,  and  also,  if  he  wishes,  to  recover  back  pay- 
ments already  made  on  the  subscription;  or  he  may  bring  an  ac- 
tion at  law  against  the  parties  fraudulently  inducing  the  subscrip- 
tion, and  recover  damages  for  the  deceit;  or  he  may  sue  for  money 
had  and  received. 

§  153.  Rescission  without  legal  proceedings  — It  is  the  duty  and 
the  right  of  directors,  without  waiting  for  a  bill  in  equity  or  other 
legal  proceedings,  to  revoke  a  subscription  contract,  and  remove 
from  the  stockholders'  list  the  name  of  a  subscriber  who  reasonably 
proves  that  he  was  induced  to  subscribe  by  fraudulent  representa- 
tions chargeable  to  the  corporation,  and  who  requests  a  rescission 
of  the  subscription.1  The  directors  are  not  bound  to  make  a  hope- 
less defense.  It  is  an  ordinary  business  act  within  the  powers  of 
the  directors,  and  their  discretion  is  not  to  be  controlled  unless  un- 
reasonably exercised.  Where,  however,  upon  such  a  demand  being 
made  bv  the  subscriber,  the  directors  refuse  to  dissolve  the  sub- 
scription  contract,  the  subscriber  must  resort  to  a  bill  in  equity  to 
have  the  contract  set  aside  for  fraud.2  A  mere  notification  to  the 
corporation  is  insufficient. 

§  154.  False  representation  as  a  defense  to  an  action  at  law  for 
calls.—  The  most  common  remedy  of  a  subscriber  induced  by  fraud 
to  subscribe  is  to  wait  until  the  corporation  brings  suit  to  collect 
the  subscriptions,  and  then  to  set  up  the  fraud  as  a  defense.  Nearly 
all  of  the  cases  in  this  country  are  cases  where  this  remedy  has 
been  adopted.3     It  is  subject,  however,  to  the  danger  that  the  cor- 

i  Wright's  Case,  L.  R,  2  Eq.,  331 ;  S.  anything  more,  is  insufficient  Re  Scot- 
er, L.  R,  7  Ch.,  55  (1871);  Blake's  Case,  tish  Petroleum  Co.,  L.  R,  23  Ch.  Div.. 
34Beav.,  639  (18C5);  Reese  River  Co.  v.  413  (1882),  where  the  directors  refused 
Smith,  L.  R,  4  H.  L.,  64  (1869),  affirming  to  allow  the  rescission.  See,  also,  Hare's 
L.  R,  2  Eq.,  264 ;  JEtna  Ins.  Co.  v.  Shields,  Case,  L.  R,  4  Ch.,  503  (1869). 
Ir.  R,  7  Eq.,  264;  Bath's  Case,  8  Ch.  3  "  It  is  a  good  answer  at  common  law 
Div.,  334  (1878).  See,  also,  Fox's  Case,  '  to  an  action  for  calls  that  the  defendant 
L.  R,  5  Eq.,  118(1868).  Contra,  Steel's  was  induced  to  become  the  holder  of 
Case.  49  L.  J.  (Ch.),  176  (1879).  the  shares  by  the  fraud  of  the  plaint- 

-Mere  repudiation,  not  followed    by  iffs."      Bwlch-y-plwm  Lead  M.   Co.   v 

201 


§§  155,  156.]      DEFENSE    OF   PAROL   AGREEMENT   AND   FEATTD.  [CH.   IX. 

poration  may  become  insolvent,  and  thereby  bar  the  defense.  The 
decided  tendency  of  the  law  to  preserve  the  rights  of  third  persons 
will  probably  and  properly  tend  to  defeat  this  defense  in  all  cases 
where  the  subscriber  has  not  filed  a  bill  in  equity  promptly  upon 
discovering  the  fraud,  but  has  waited  to  be  sued  by  the  corporation. 
The  intervening  rights  of  stockholders  and  corporate  creditors  call 
for  prompt  action  on  the  part  of  a  subscriber  who  seeks  to  avoid 
his  liabilitv  on  the  ground  of  fraud. 

§  155.  Remedy  ly  hill  in  equity.—  This  is  the  fairest,  safest  and 
most  complete  remedy  that  the  subscriber  has.  It  is  a  decisive  no- 
tice to  the  corporation  and  all  third  parties  not  to  rely  upon  the  sub- 
scription in  question.  It  avoids  the  risk  of  future  corporate  insolv- 
ency. It  enables  the  subscriber  to  set  aside  the  contract,  to  enjoin 
actions  at  law  for  calls,  and  to  recover  back  payments  made  before- 
discovery  of  the  fraud.1  It  is  the  customary,  and  it  seems  favor 
ite,  remedy  in  England,  and  has  been  clearly  upheld  in  this  coun- 

trv.2 

'§  156.  The  complainant  in  a  bill  in  equity  to  set  aside  a  subscrip- 
tion obtained  by  fraud  cannot  sue  in   behalf  of  himself  and  others 


Baynes,  36  L.  J.  (Ex.),  183  (1867):  De- 
posit Life  A.  Co.  v.  Ayscough,  6  E.  & 
B.,  761  (1856);  Sandford  v.  Handy,  23 
Wend.,  260  (1840).  Cf.  21  N.  W.  Rep., 
304  (Cal.,  1889). 

i  But  the   injunction  to  restrain  the 
action  at  law  will  not  be  granted  if  the 
subscriber  delays  until  the  case  is  about 
to  be  tried.     Thorpe  v.  Hughes,  3  Myl.  & 
Ci\,  742  (18381     And   where   the  stock 
has  been  fully  paid,  and  no  injury  can 
come  from  the  delay,  equity  will  not 
sustain  the  subscriber's  bill  to  compel 
repayment,  but  will  send  him  to  a  court 
of  law,  where  a  jury  may  pass  upon  the 
question  of  fraud.     Askew's  Case,  L.  R, 
9  Ch.,  664  (1874).     Equity,  however,  un- 
questionably has  concurrent    jurisdic- 
tion if  it  cares  to  exercise   it.     Hill  v. 
Lane,  L.  R,  11  Eq.,  215  (1870),  criticis- 
ing Ogilvie  v.  Currie,  37  L.  J.,  541  (1867). 
See,   also,  §  356,   infra.     And  will  en- 
join the  collection  of  the  subscription 
pending  the  suit.    Walsh  v.  Seager,  1886 
(N.   Y.   Sup.   Ct).     And   the    equitable 
action  will  not  be  enjoined  merely  be- 
cause the  corporation  subsequently  be- 
comes insolvent,  and  a  receiver  is  ap- 
pointed.    Id. 


2  Where  a  person  is  induced  to  sub- 
scribe   for    stock     on    the    fraudulent 
representations  of  the  president  that  the 
company  is  in  a  prosperous  condition, 
the  person  may  file  a   bill  in  equity  to 
recover  back  the  money ;  and  equity  lias 
jurisdiction  on  the  grounds  of  discov- 
ery, account,  fraud,  misrepresentation 
and  concealment     Both  the   company 
and    the    president    individually    were 
made  defendants  and  held  liable.    Tyler 
v.  Savage,  143  U.  S.,  79  (1892).     A  per- 
son induced  by  fraud  to  subscribe  for 
stock  ma}'  bring  an  equitable  action  to 
procure  a  rescission  of  the  contract,  a 
cancellation  of  her  subscription,  and  the 
removal   of  the  name   from  the  stock 
books.     The  statute  of  limitations  does 
not  begin  to  run  until  the  fraud  is  dis- 
covered.    Bosley  v.  National,  etc.,  Co., 
123  N.  Y.,  550  (1890) ;  S.  C,  6  N.  Y.  Supp., 
4;  Banque,  etc.,  v.  Brown,  34  Fed.  Rep., 
145,198  (1888);  Waldo  v.   Chicago,  St 
Paul,  etc.,  R  R  Co.,  14  Wis.,  575  (1861) ; 
Henderson  v.   Railroad    Co.,    17    Tex., 
560  (1856);  Rawlins  V.  Wickham,  3  De 
G.  &  J.,  304  (1858).     And  see  the  various 
English  cases  in  this  chapter. 


232 


CH.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§  157. 


who  may  wish  to  come  in.  But  several  subscribers,  defrauded  in 
the  same  way,  may  join  in  the  bill  as  co-complainants.1  The  cor- 
poration is  to  be  a  defendant,  and  if  merely  a  cancellation  of  the 
subscription  and  an  injunction  against  suits  at  law  are  sought,  the 
corporation,  it  seems,  may  be  the  sole  defendant.2  A  court  of  equity 
in  these  actions  will  give  complete  relief  by  decreeing  that  the  di- 
rectors guilty  of  the  fraud  shall  refund  to  the  subscriber  payments 
made  by  him  before  discovering  the  fraud.3  This  relief  dispenses 
with  an  action  at  law  for  damages  for  deceit,  and  when  sought  for 
in  the  bill  in  equity  the  guilty  directors  must  be  made  parties.  The 
bill  is  not  multifarious  by  reason  of  its  blending  prayers  for  these 
various  kinds  of  relief.4 

§  157.  Remedy  by  an  action  at  law  for  deceit. —  An  action  at  law 
for  damages  for  deceit  lies  at  the  instance  of  a  subscriber  for  stock, 
fraudulently  induced  to  subscribe,  against  the  persons  guilty  of  the 
fraud.5     The  fraudulent  representation,  however,  which  must  be 


1  Several  subscribers  who  have  been 
induced  by  the  same  misrepresentations 
contained  in  a  prospectus  to  subscribe 
for  stock  may  join  in  a  suit  inequity 
for  the  benefit  of  themselves  and  others 
similarly  deceived  to  set  aside  their 
subscriptions.  Bosher  v.  Richmond,  etc., 
Co.,  16  S.  E.  Rep.,  360  (Va.,  1892).  Several 
stockholders  may  join  in  filing  a  bill  to 
rescind  a  subscription  for  stock  on  the 
ground  that  they  were  induced  to  sub- 
scribe by  false  representations  that  the 
corporation  had  a  certain  amount  of 
paid-up  capital,  was  out  of  debt  and  do- 
ing a  profitable  business,  and  that  the 
subscribers  would  be  employed.  The 
corporation  may  be  enjoined  from 
transferring  its  assets  in  the  meantime 
and  may  be  compelled  to  pay  back  the 
money  paid  by  complainants.  Sher- 
man v.  American  Stove  Co.,  48  N.  W. 
Rep.,  537  (Mich.,  1891).  A  plaintiff  may 
upon  the  trial  be  compelled  to  elect 
whether  he  sues  to  hold  the  promoters 
liable  for  fraud  or  whether  he  sues  in 
behalf  of  all  stockholders  and  for  the 
benefit  of  the  corporation.  Brewster  v. 
Hatch,  122  N.  Y.,  349  (1890). 

2  Smith  v.  Reese  River,  etc.,  Co.,  L.  R, 
4  H.  L.,  64  (1869);  Hallows  v.  Fermie, 
L.  R,  3  Ch.  App.,  467  (1868).     A  trans- 


feree of  the  shares  cannot  bring  the 


suit  The  fraud  is  personal  to  the  orig- 
inal subscriber.  Duranty's  Case,  26 
Beav.,  268  (1858). 

5  Vreland  v.  N.  J.  Stone  Co.,  29  N.  J. 
Eq.  R,  188  (1878) ;  Reese  River  Silver 
Min.  Co.  v.  Smith,  L.  R,  4  H.  L..  64 
(1869).  Where  subscribers  bring  suit  to 
set  aside  subscriptions  and  for  repay- 
ment thereof,  for  fraud,  and  join  the 
directors  as  co-defendants,  the  directors 
are  not  nominal  parties.  Seddon  v.  Vir- 
ginia, etc.,  Co.,  36  Fed.  Rep.,  6  (1888). 
If  the  suit  is  in  equity  for  damages,  in- 
tent must  be  shown.  Hubbard  v. 
Weare,  44  N.  W.  Rep.,  914  (Iowa,  1890). 

4  Nor  is  it  multifarious  because  it 
joins  such  a  suit  with  one  by  the  cor- 
poration to  compel  the  directors  to  ac- 
count to  the  corporation  for  the  same 
fraud.  Ashmead  v.  Colby,  26  Conn.. 
287  (1857). 

5  Clarke  v.  Dickson,  6  C.  B.  (N.  S.), 
453  (1859);  Miller  v.  Barber,  66  N.  Y., 
558  (1876);  Paddock  v.  Fletcher,  42  Vt, 
389  (1869).  In  England  the  liability  of 
the  directors  herein  is  enforced  gener- 
ally in  connection  with  a  suit  in  equity, 
and  as  a  part  of  the  equitable  decree. 
This  is  under  a  statute.  Western  Bank 
of  Scotland  v.  Addie,  L.  R,  1  Sc.  App. 
Cas.,  145.  A  false  affirmation,  made  by 
the   defendant  with  intent  to  defraud 


203 


§  157.] 


DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[CH.  IX. 


proved  to  sustain  this  action  must  be  a  more  intentional  fraud  than 
the  one  which  suffices  to  rescind  the  contract.  The  subscriber  must 
prove  that  a  material  false  representation  was  made  by  the  defend- 
ant; that  the  defendant  recklessly  made  it  or  knew  the  representa- 
tion to  be  false;  that  the  plaintiff  subscribed  by  reason,  partially 
at  least,  of  that  representation,  and  that  he  was  thereby  injured.1 


the  plaintiff,  whereby  the  plaintiff  re- 
ceives damage,  is  the  ground  of  an 
action  upon  the  case  in  the  nature  of 
deceit  In  such  an  action  it  is  not  nec- 
essary that  the  defendant  should  be 
benefited  by  the  deceit,  or  that  he  should 
collude  with  the  person  thus  benefited. 
1  Smith's  Leading  Cases  (8th  Eng.  ed.), 
66-94,  as  applicable  to  misrepresenta- 
tions inducing  subscriptions.  Brewster 
v.  Hatch,  10  Abb,  N.  C,  400  (1881),  aff'd 
122  N.  Y.,  349  (1890),  sustains  an  action 
by  subscribers  for  stock,  for  damages, 
for  false  representations  by  promoters 
as  to  the  real  cost  of  property  purchased 
by  the  latter  for  the  corporation.  See, 
a'so,  ch.  XXXIX.  There  is  no  remedy 
at  law  or  in  equity  against  the  estate  of 
a  deceased  director  herein  except  for 
property  received  by  him.  Peek  v. 
Gurney,  6  H.  of  L,,  377  (1873).  Sub- 
scribers to  debentures  may  recover  back 
the  difference  between  the  actual  value 
of  the  debentures  and  the  price  paid. 
Arnison  v.  Smith,  59  L.  T.  Rep.,  627 
(1888). 

1  In  the  important  case  Derry  v.  Peek, 
61  L.  T.  Rep.,  265  (1889),  the  house  of 
lords  decided  that  in  order  to  sustain  an 
action  of  deceit  there  must  be  proof  of 
fraud,  and  nothing  short  of  that  will 
suffice.  Fraud  is  proved  when  it  is 
siown  that  a  false  statement  has  been 
made  (1)  knowingly ;  (2)  without  belief 
in  its  truth ;  (3)  recklessly.  But  if  a 
man  make  a  false  statement  honestly 
believing  it  to  be  true,  it  is  not  sufficient 
to  support  an  action  of  deceit  to  show 
that  he  had  no  reasonable  grounds  for 
his  belief.  Tbe  directors  of  a  tramway 
company  issued  a  prospectus  in  which 
they  stated  that  they  were  authorized 
to  use  steam   power,  and   that  bv  this 


means  a  great  saving  in  working  would 
be  effected.     At  the  time  of    making 
this  statement  they  had  not  in  fact  ob- 
tained authority  to  use  steam   power, 
but  they   honestly  believed   that  they 
would  obtain  it  as  a  matter  of  course. 
Held  (reversing  the  judgment  of    the 
court  below),  that  they  were  not  liable 
in   an  action  of    deceit  brought  by  a 
shareholder  who  had  been  induced  to 
apply  for  shares  by  the  statement  in  the- 
prospectus.     In  an  action  for  deceit  by 
a  misrepresentation  in  a  prospectus  as 
to  the  net  profit  on  the  capital  employed, 
the  action  being  against  one  who  was  a 
promoter,  and  also  one  of  the  vendors, 
and  whose  name  appeared  in  the  pros- 
pectus, and  who  became  a  director,  the 
plaintiff  must  prove  (1)  that  the  defend- 
ant's statement  was  untrue ;  (2)  that  it 
was  dishonest;  (3)  that  he  believed  it  to 
be  untrue.  Glasier  v.  Rolls,  62  L.  T.  Rep., 
133  (1889),  reversing  60  id.,  591,  and  fol- 
lowing the  house  of  lords  in  Derry  tt 
Peek,   61   id.,    265.     See,   also,   Ship    v. 
Cresskill,  L.   R.,  10  Eq.   Cas.,  73  (1870). 
To  sustain   the    action    for   deceit  the 
plaintiff  must  show  "  that  the  defend- 
ants intended  that  people  should  act  on 
the  statements,  that  the  statements  are 
untrue  in  fact,  and  that  the  defendants 
knew  them  to  be  untrue,  or  made  them 
under  such  circumstances  that  the  court 
must  conclude  that  they  were  careless 
whether  they  were  true  or  not ; "  also 
that  the  statement  were  relied  upon, 
acted  on,  and  damage  sustained.     Ed- 
gington  v.  Fitzniaurice,  L.  R,  29  Ch.  D., 
459  (1885).     When  the  prospectus  stated 
that  the  company  were  authorized  to 
use  steam    for  propelling  street    cars, 
when  in  fact  it  could  only  use  horses,  a 
subscriber  relying  thereon  may  hold  the 


204 


CM.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§  158. 


The  gist  of  the  action  is  fraudulent  intent.1  It  cannot  be  main- 
tained against  the  corporation,  because  the  corporation,  though 
liable  to  refund  fraudulent^  acquired  property,  is  not  capable  of  a 
fraudulent  intent.2 

§  158.  The  directors  are  not  liable  to  an  action  for  deceit  by  rea- 
son of  the  frauds  of  their  agents,3  nor  is  an  innocent  director  liable 


directors  who  issued  the  prospectus  lia- 
ble for  deceit,  upon  proof  that  they 
knew  the  statement  was  false  or  were 
reckless  in  making  it  Peek  v.  Derry, 
59  L.  T.  Rep.,  78  (1888).  Must  show  re- 
liance on  the  misrepresentations.  Priest 
v.  White,  1  S.  W.  Rep.,  361  (Mo.,  1886). 

1  Scienter  is  fixed  on  the  directors, 
making  them  liable  in  damages  upon 
proof  of  incorrect  representations, 
known  to  them  to  be  incorrect,  know- 
ingly stated  by  them,  and  acted  on  by 
the  plaintiff  subscriber.  Henderson  v. 
Lacon,  L.  R.,  5  Eq.  Cas.,  249  (1867); 
Cargill  v.  Bower,  L.  R,  10  Ch.  D.,  502 
(1878).  See,  also.  Bale  v.  Cleland,  4  F. 
&  E,  113  (1864):  and  see  p.  79,  n.  3, 
supra.  Must  allege  knowledge  and  in- 
tent to  deceive  on  their  part.  "  Falsely 
and  fraudulently  represented  "  does  not 
properly  plead  the  scienter.  Mahey  v. 
Adams,  3  Bosw.,  346  (18o8).  In  case  the 
representations  are  not  fraudulent  as 
against  the  corporation,  they  are  not 
sufficient  to  entitle  the  subscriber  to  re- 
cover from  the  directors.  Heymann  v. 
European  Central  R'y  Co.,  L.  R.,  7  Eq. 
Cas.,  154  (1868).  A  subscriber  for  stock 
may  hold  the  president  liable  for  false 
representations  made  by  the  latter  to 
other  persons  with  an  intent  that  the 
plaintiff  be  induced  to  act  upon  them. 
The  representations  of  the  president 
that  a  dividend  had  been  earned  bind 
him,  and  are  false  where  he  paid  close 
attention  to  its  affairs,  and  where  such 
dividend  was  made  on  an  improper  and 
untrue  statement  of  assets  and  liabili- 
ties. It  must  be  proven  that  the  defend- 
ant president  knew  that  the  representa- 
tions were  false,  but  this  may  be  proven 
by  inference.  A  stockholder  who  is  in- 
duced to  make  still  further  subscriptions 


by  reason  of  misrepresentations  of  an 
officer  may  hold  him  liable.  Hubbard 
v.  Weare.  44  N.  W.  Rep.,  914  (Iowa,  1890). 
The  directors  are  personally  liable  in  an 
action  for  deceit  where  a  prospectus 
falsely  states  that  guarantied  dividends 
were  secured  by  a  deposit  of  certain 
securities,  and  a  person  subscribes  for 
stock  relying  upon  such  statements. 
Knox  v.  Hayman,  67  L.  T.  Rep.,  137 
(1892). 

2  Mixer's  Case,  4  De  G.  &  J.,  575 ;  Du- 
ranty's  Case,  26  Beav.,  268  (1858);  West- 
ern Bank  of  Scotland  v.  Addie,  L  R.,  1 
Sc.  App.  Cas.,  145 ;  Abrath  v.  North- 
eastern R'y  Co.,  55  L.  T.  R  (N.  S.),  63 
(1886);  Houldsworth  v.  City  of  Glasgow 
Bank,  L.  R,  5  App.  Cas.,  317;  Benja- 
min on  Sales  (4th  Am.  ed.),  §  467a. 
Contra,  Peebles  v.  Patapsco  Guano  Co., 
77  N.  C,  233  (1877) ;  Barwick  v.  English 
Joint-stock  Bank.  L.  R,  2  Ex.,  259  (1867) ; 
Mackay  v.  Com.  Bank  of  New  Bruns- 
wick, L.  R,  5  P.  C,  394,  not  stock  cases, 
but  distinctly  holding  that  a  corporation 
is  liable  to  an  action  for  damages  for 
deceit.  Where,  however,  the  old  corpo- 
ration organizes  a  new  corporation,  and 
has  the  latter  build  a  competing  road 
on  a  new  line,  a  stockholder  of  the  old, 
who  contributed  lands,  etc.,  may  have 
an  action  for  damages  against  it  Chap- 
man v.  Railroad  Co.,  6  Ohio  St.  119 
(1856).  See,  also,  article  in  1  R'y  &  Corp. 
L.  J.,  122;  Lubricating  Oil  Co.  v.  Stand- 
ard Oil  Co.,  42  Hun,  153  (1886);  also, 
§45. 

3  Weir  v.  Burnett,  26  Week.  Rep.,  147 
(1877);  Weir  v.  Bell,  L.  R,  3  Ex.  Div., 
238  (1878);  Eaglesfield  v.  Marquis  of 
Londonderry  (H.  L),  26  W.  R,  540  (1878). 
See,  also,  Cargill  v.  Bower,  L  R,  10  Ch. 
D.,  502  (1878);  Watson  v.  Earl  Charle- 


205 


§§  159,  160.]   DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD.    [cH.  IX. 

for  the  fraudulent  representations  of  his  co-directors  —  not  even 
though  the  evidences  of  their  fraud  were  entered  on  the  corporate 
books,  there  being  no  ground  for  suspicion  on  his  part.1 

A  director  cannot  be  held  liable  for  false  representations  con- 
tained in  the  articles  of  association,  which  were  made  before  he 
became  a  director.2  But  a  director  who  stands  by  and  allows  a 
co-director  to  make  the  false  representations  is  equally  chargeable 
with  the  injury  done  thereby.3  The  false  representations  support- 
ing an  action  for  deceit  may  have  been  by  corporate  reports  or 
prospectuses,  or  by  personal  statements. 

§  159.  Remedy  hy  action  for  money  had  and  received. —  Where  a 
subscriber  pays  his  subscription  in  part  or  wholly,  and  afterwards 
discovers  that  the  representations  whereby  he  was  induced  to  sub- 
scribe were  fraudulent,  he  may  bring  an  action  at  law  for  money 
had  and  received,  and  recover  back  from  the  corporation  the 
money  so  received.4  If  the  money  has  not  yet  passed  into  the 
hands  of  the  corporation  he  may  recover  it  from  the  person  who 
has  it.  If,  however,  he  would  be  barred  from  suing  in  a  court  of 
equity  by  reason  of  his  laches  or  corporate  insolvency,  he  would 
fail  equally  in  this  remedy  at  law.5 

§  160.  Ratification  as  a  Mr  to  the  subscriber's  remedies. —  A  sub- 
scription contract  obtained  by  fraudulent  representations  may  cease 
to  be  voidable  and  may  become  absolutely  binding  by  acts  of  rat- 
ification. Any  act  of  the  subscriber,  inconsistent  with  an  inten- 
tion to  disaffirm  the  contract,  will  constitute  a  ratification  of  the 
subscription  and  a  waiver  of  the  right  to  avoid  it  by  reason  of 
fraud,  provided  the  subscriber  knew  of  the  fraud  at  the  time  of 
such  ratifying  act.  Thus,  where  the  subscriber,  after  knowledge 
of  the  fraud,  receives  dividends,  sells  part  of  the  stock,6  instructs 

mont,.  12  Q.  B.,  856  (1848);   Arthur  v.  a  subscription  obtained  by  fraud,  was 

Griswold,  55  N.  Y.,  400  (1874).  sustained,  without  involving  the  ques- 

1  Re  Denham  &  Co.,  L.  R,  25  Ch.  Div.,  tion  of  a  fraudulent  intent     See  Bruce 
752  (1883).  v.  Nickerson,  5  N.  E.   Rep.,  647  (Mass., 

2  Mahey  v.  Adams,  3  Bosw.,  346  (1858).  1886).     The  action  for  money  had  and 

3  Vreeland  v.  N.  J.  Stone  Co.,  29  N.  J.  received    cannot    be    brought  against 
Eq.,  188  (1878).  other  stockholders  for  the  fraud  of  a 

4  Grangers'  Ins.  Co.  v.  Turner,  61  Ga.,  promoter.     Perry  v.  Hale,  143  Mass.,  540 
561  (1878);  Hamilton  v.  Grangers'  L.  &  (1887). 

H.  Ins.  Co.,  67  Ga.,  145  (1881).    But  the  « Scholey  v.  Central  R'y  Co.,  L.  R,  9 

subscriber  cannot  retain  the  stock  and  Eq.,  266,  n.  (1870) ;  Ayres'  Case,  25  Beav., 

also  sue.    Houldsworth  v.  City  of  Glas-  513  (1858);  Mixer's  Case,  4  De  G.  &  J., 

gow  Bank,  L.  R,  5  App.  Cas.,  317  (1880).  575. 

See  Jarrett  v.   Kennedy,  6  C.  B„  319  « Ayres'   Case,   25    Beav.,   513  (1858). 

(1848).     Assumpsit  for  money  had  and  But  a  sale  of  a  part  of  the  stock  before 

received,  brought  against  the  directors  the  subscriber  discovers  the  fraud  is  no 

to  compel  them  to  repay  money  paid  on  bar  to  a  rescission  as  to  the  rest     Ex 

206 


CH.  IX.]  DEFENSE    OF   PAKOL    AGREEMENT    AND    FEACD. 


[§  161. 


his  broker  to  sell,1  participates  in  the  meetings,2  pays  calls,3  or,  in 
general,  accepts  any  corporate  benefit  or  continues  to  act  as  a  stock- 
holder,4 he  will  be  held  to  have  waived  all  objections  to  the  fraud, 
and  to  have  ratified  the  subscription  contract.  But  mere  attend- 
ance at  a  stockholders'  meeting,5  or  demanding  a  dividend,6  or  vot- 
ing his  shares  by  proxy,7  is  insufficient. 

§  161.  Ladies  as  a  bar  to  the  subscriber's  remedies. —  Where  a 
subscriber  for  stock,  who  was  induced  to  subscribe  bv  fraud,  neg- 
lects for  an  unreasonable  time  after  the  discovery  of  the  fraud  to 
have  his  subscription  canceled,  and,  in  the  meantime,  the  interests 
of  third  persons  become  involved,  and  would  be  injured  by  the  can- 
cellation of  such  subscription,  the  subscriber's  laches  is  a  bar  to  re- 
lief, and  a  court  of  equity  will  refuse  to  set  aside  the  subscription.8 
Equity  does  not  allow  the  subscriber  to  say.  "  I  will  abide  by  the 
company  if  succcessful,  and  I  will  leave  the  company  if  it  fails."9 
Immediately  upon  receiving  information  of  the  fraud,  it  is  his 
duty  to  decide  whether  he  will  rescind  the  contract  or  waive  the 
fraud.10  Nevertheless  delay  is  not  fatal,  unless  circumstances  and 
third  parties'  rights  have  so  changed  or  been  acquired  that  the  re- 


parte  West,  56  L.  T.  Rep.,  622  (1887).  A 
subscriber  to  stock  cannot  rescind  for 
fraud,  when  he  has  had  the  stock  trans- 
ferred to  his  infant  children,  unless 
their  right  thereto  is  also  tendered  back. 
Francis  v.  New  York,  etc.,  R  R,  108 
N.  Y.,  93  (1888). 

1  Ex  parte  Briggs,  L.  R,  1  Eq.,  483 
(1866). 

2  Harrison  v.  Heathorn,  6  Man.  &  G., 
84  (1843);  Chaffin  v.  Cummings,  36  Me., 
76  (1853).  A  subscriber  who  acts  as  di- 
rector and  manager,  and  purchases  lots 
from  the  company,  cannot  rescind  his 
subscription  on  the  ground  that  certain 
newspaper  articles  prepared  by  himself 
and  others  contain  misrepresentations. 
Raymond  v.  San  Gabriel,  53  Fed.  Rep., 
883  (1893). 

a  Scholey  v.  Central  R'y  Co.,  L.  R,  9 
Eq.,  266,  n.  (1870). 

4  Ogilvie  v.  Knox  Ins.  Co.,  22  How., 
380  (1859) ;  Chubb  v.  Upton,  95  U.  S.,  665  ■ 
(1877);  Litchfield  Bank  v.  Church,  29 
Conn.,  137  (1860):  Kishacoquillas  Centre 
Co.  v.  McCanahy.  16  S.  &  R,  140  (1827). 
Waiver  of  one  misrepresentation  is  not 
a  waiver  of  others.  Ex  parte  Hale,  55 
L.  T.  Rep.,  670  (1886). 


5  Stewart's  Case,  L.  R.,  1  Ch.  App.,  574 
(1866) ;  Wontner  v.  Shairp,  4  C.  B.,  404 
(1847);  Re  Metropolitan,  etc.,  Ass'n,  64 
L.  T.  Rep.,  561  (1891). 

6  Philadelphia  R.  R.  Co.  v.  Cowell,  28 
Pa.  St.,  329  (1857). 

7McCully  v.  Pittsburgh,  etc.,  R  R. 
Co.,  32  Pa.  St.,  25  (1858);  Greenville, 
etc.,  R.  R  Co.  v.  Coleman,  5  Rich.  L., 
118  (1851). 

8  City  Bank  of  Macon  v.  Bartlett,  71 
Ga.,  797  (1883).  As  a  bar  in  an  action 
at  law.  Schwanck  v.  Morris,  7  Rob. 
(N.  Y),  658  (1868).  But  it  is  no  bar  that 
other  subscribers  ma3r  have  been  in- 
duced to  subscribe  by  reason  of  this 
subscription.  Western  Bank  of  Scot- 
land v.  Addie,  L.  R.,  1  Scotch  App.  Cas.. 
145.  Cf.  Parbury's  Case,  3  De  G.  &  Sm., 
43  (1849). 

9  Re  London  &  Staffordshire  Fire  Ins. 
Co.,  L.  R.,  24  Ch.  Div.,  149  (1883);  Ash- 
ley's Case,  L.   R,  9  Eq.  Cas.,  263  (1870). 

10  Heymann  v.  European  Central  R'y 
Co.,  L.  R.,  7  Eq.  Cas.,  154  (1868) ;  Peek 
v.  Gurney,  L.  R.,  6  H.  L,  377  (1873). 
The  last  case  overrules  Bagshaw  v.  Sey- 
mour, 18  C.  B.,  903  (1856),  and  Bedford 
v.  Bagshaw,  4  H.  &  N.,  538  (1859). 


207 


§§  162,  163.]   DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD.     [CH.  IX. 

scission  would  be  inequitable.  Consequently,  the  decision  of  each 
case  depends  largely  on  the  facts  of  the  case.  Thus  it  has  been 
held  that  a  delay  of  one,1  two,2  three,3  four4  or  six  months,5  or  of 
two0  or  six  :  years,  was  fatal  under  the  circumstances  of  the  case, 
while,  under  different  facts,  a  delay  of  two  months,8  or  even  seven 
years,9  was  held  not  to  be  a  bar.  In  the  remedies  by  actions  at  law 
the  statute  of  limitations  governs,  and,  by  analogy,  courts  of  equity 
are  inclined  to  follow  the  same  period,  unless  there  be  an  equita- 
ble reason  to  the  contrary. 

§  162.  The  date  from  which  laches  begins  to  run  is  the  time  when 
the  subscriber  is  first  chargeable  with  notice  that  a  fraud  has  been 
perpetrated  upon  him.  Mere  suspicions  or  random  statements 
heard  in  public  or  in  stockholders'  meetings  do  not  necessarily  con- 
stitute notice.10  But  after  a  subscriber's  suspicions  are  reasonably 
aroused,  it  is  his  duty  to  investigate  at  once.11  The  corporation  has 
the  burden  of  proof  in  asserting  that  the  subscriber  had  notice  and 
was  guilty  of  laches.12 

§  163.  Corporate  insolvency  as  a  bar  to  the  subscriber' s  remedies. 
In  England  the  principle  has  become  well  established  that,  after  the 
statutory  proceedings  for  winding  up  a  corporation  by  reason  of 
corporate  insolvency  have  been  commenced,  a  subscriber  cannot 
rescind  his  subscription  on  account  of  fraud.13     He  is  too  late.     It 

1  Taite's  Case,  L.  R.,  3  Eq.  Cas.,  795  holder  who  has  been  fraudulently  in- 
(1867),  the  delay  evidently  being  to  see  duced  to  subscribe  for  stock  awaits  the  re- 
which  course  would  be  most  profitable ;  suit  of  an  action  by  another  stockholder 
Peel's  Case,  L  R,  2  Ch.  App.,  674  brought  to  rescind  his  subscription  on 
(1867):  Kincaid's  Case,  L.  R,  2  Ch.,  412  the  same  ground,  the  delay  being  nearly 
(1867).  three  years,  and  then  commences  suit 

2  Wilkinson's  Case,  L.  R,  2  Ch.  App.,  for  the  same  purpose  only  after  a  meet- 
536  (1867).  ing  has  been  called  for  a  winding  up,  he 

3  Heymann  v.  European  Central  R'y  is  guilty  of  laches,  and  his  remedy  is 
Co..  L.  R,  7  Eq.  Cas.,  154  (1868).  barred.    Re  Snyder,  etc.,   Co.,  63  L.  T. 

*  Ex  parte  Lawrence,  36  L.  J.  (Ch.),  Rep.,  210  (1893\ 

490(1867).  8  Directors,    etc.,   of    Central    R'y    v. 

5  Whitehouse's  Case,  L  R,  3  Eq.  Cas.,  Kiscb,  L.  R,  2  H.  L.  App.  Cas.,  99 
790  (1867).  (1870). 

6  Farrar  v.  Walker,  3  Dill.,  506,  n.  9  McClellan  v.  Scott,  24  Wis.,  81  (1869). 
(1874);  Ashley's  Case,  L.  R.  9  Eq.  Cas.,  w  Directors,  etc.,  of  Central  R'y  Co.  v. 
263  (1870).  Three  years.  State  v.  Jef-  Kisch,  L.  R,  2  H.  L.  App.  Cas.,  99 
ferson  Turnpike  Co.,  3  Humph.  (Tenn.),  (1870). 

305  (1842).  ii  Ogilvie  r.  Currie,  37  L.  J.  (Ch.),  541 

•Denton  v.  Macneil,  L.  R,  2  Eq..  352  (1867);  Ashley's  Case,  L.  R,  9  Eq.  Cas., 

(1866).    Four  years' delay  in  complaining  263  (1870);  Bosley  v.  National,  etc.,  Co., 

of  the   fraud    inducing    the"  purchase,  123  N.  Y.,  550  (1890). 

after  knowledge  thereof,  is  fatal.  Cedar,  li  Re  London  &  S.  F.  Ins.  Co.,  L.  R, 

etc.,  Ins.  Co.  V.  Butler,  48  N.  W.  Rep,  24  Ch.  Div.,  149  (1883). 

1026  (Iowa,    1891).    Where  one  stock-  "Wright's  Case,  L   R,  12  Eq.   Cas., 

208 


CH.  IX.]      DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[§164. 


matters  not  that  he  did  not  discover  the  fraud  until  after  the  wind- 
ing up  has  commenced.  The  rights  of  corporate  creditors  prevail, 
then,  over  the  equities  of  the  subscriber.1  If,  however,  he  insti- 
tuted proceedings  to  rescind  the  contract  before  the  winding  up 
was  commenced,  he  may  be  released,  although  the  proceedings  are 
not  completed  until  after  such  winding  up.2  So,  also,  where  there 
are  several  similar  cases,  and  by  agreement  with  the  corporate 
solicitors  all  the  cases  are  to  follow  a  test  case,  this  agreement  pre- 
vails, although  a  winding  up  is  commenced  before  the  test  case  is 
fully  decided.3  The  highest  court  in  England  in  one  case  goes  fur- 
ther, and  intimates  that  corporate  insolvency  is  a  bar  to  rescission 
of  a  subscription  for  fraud,  even  though  a  winding  up  has  not  been 
commenced.4 

§  164.  In  this  country  the  effect  of  corporate  insolvency  upon 
the  right  of  a  subscriber  to  rescind  his  contract  for  fraud  has  not 
been  passed  upon  so  often  as  in  England.  The  decisions,  however, 
clearly  hold  that  corporate  insolvency  is  a  bar  to  such  rescission.5 


331 ;  Kent  v.  Freehold,  L.  &  B.  M  Co., 
L.  R.,  3  Ch.  App.,  493  (1868) ;  Hender- 
son v.  Royal  British  Bank,  7  El.  &  Bl., 
356  (1857);  Powis  v.  Harding,  1  C.  B. 
(N.  S.),  533  (1857);  Daniell  v.  Off.  Man- 
agers of  Bank,  1  H.  &  N.,  681  (1857); 
Oakes  v.  Turquand,  L.  R,  2  H.  L.  App. 
Cas.,  325  (1867);  Mixer's  Case,  4  De  G.  & 
J.,  575;  Clarke  v.  Dickson.  27  L.  J. 
(Q.  B.),  223  (1858).  So,  also,  where 
there  is  a  voluntary  winding  up  by  rea- 
son of  corporate  insolvency.  Stone  v. 
City  &  County  Bank,  L.  R,  3  C.  P.  Div., 
282  (1877);  Collins  v.  Same,  id.  But  not 
if  the  proceedings  for  rescission  were 
commenced  in  good  faith  and  in  igno- 
rance of  the  winding-up  proceedings. 
Hall  v.  Old.  T.  L.  Min.  Co.,  L.  R,  3  Ch. 
D.,  749  (1876). 

1  Turner  v.  Grangers'  L.  &  H.  Ins.  Co., 
65  Ga.,  649  (18S0). 

2  Reese  River  Co.  v.  Smith,  L.  R,   4 
H.  L.,  64  (1869):  affirming  S.  C,  L.  R,  2 

.Ch.,  604;  L.  R,  2  Eq.,  264;  reversing 
S.  G,  H.  L.,  36  L.  J.  (Ch.).  385.  A  sub- 
scriber is  liable  on  a  winding  up  al- 
though he  had  repudiated  the  subscrip- 
tion long  before  on  the  ground  of  fraud 
and  understood  that  his  name  had  been 
dropped.  Be  Lennox,  etc.,  Co.,  62  L.  T. 
Rep.,  791  (1890).     If  the  party  institutes 


legal  proceedings  to  cancel  his  subscrip- 
tion on  the  ground  of  fraud,  prior  to  the 
commencement  of  the  winding-up  pro- 
ceedings, the  insolvency  of  the  company 
is  no  bar.  Cocksedge  v.  Metropolitan, 
etc..  Ass'n.  64  L.  T.  Rep.,  826  (1891). 

3Pawles  Case,  L.  R.  4  Ch.,  497; 
McMuTs  Case,  L.  R,  10  Eq.,  503  (1870). 
But  mere  attendance  at  the  meeting 
where  such  stipulation  is  made  is  insuf- 
ficient. The  subscriber  must  plainly  in- 
dicate an  intention  to  abide  by  the  test 
case.  Ashley's  Case,  L.  R.,  9  Eq.  Cas., 
263  (1870). 

*  Tennent  r.  City  of  Glasgow  Bank,  L. 
R,  4  App.  Cas.,  615.  See,  also,  Burgess* 
Case.  L.  R,  15  Ch.  D.,  507.  But  the  fact 
that  the  company  is  unable  to  meet  its 
engagements  at  the  time  of  rescission  is 
no  bar  if  the  subscriber  is  ignorant 
thereof.  Ex  parte  Carliug,  56  L.  T. 
Rep,  115  (1887). 

SRuggles  v.  Brock.  6  Hun,  164  (1875); 
Saffold  v.  Barnes,  39  Miss.,  399  (1860). 
After  the  corporation  becomes  insolv- 
ent a  subscriber  cannot  repudiate  for 
fraud.  Duffield  v.  Barnum,  etc.,  Works, 
31  N.  W.  Rep.,  310  (Mich.,  1887).  In 
Chubb  v.  Upton,  95  U.  S.,  665,  667 
(1677),  the  court  say  it  has  often  been 
held   that   the    defense    of    false    and 


(14) 


209 


§  165.] 


DEFENSE  OF  PAROL  AGREEMENT  AND  FRAUD. 


[CH.  IX. 


In  the  bankruptcy  courts  also,  under  the  late  bankruptcy  law,  such 
a  rule  was  upheld.1 

§  165.  Essential  allegations  inJegal  proceedings  to  remedy  a  fraud 
inducing  subscription,— The  essential  allegations,  especially  in  a 
suit  in  equity,  necessarily  vary  according  to  the  peculiar  facts  of 
each  case.  Yet  there  are  certain  elements  common  to  all  the  cases. 
It  is  necessary  to  allege  that  a  material  misrepresentation  of  a 
question  of  fact  was  made,  setting  out  fully  the  fact  misrepre- 
sented; that  the  person  making  the  misrepresentation  thereby 
bound  the  corporation;  and  that,  upon  discovery  of  the  fraud,  he 
immediately  disaffirmed  the  contract,2  That  the  representation 
was  false  cannot  be  proved  by  statements  made  by  the  directors 
in  stockholders'  meetings.3  The  burden  of  proving  that  the  repre- 
sentation was  false,  and  that  the  subscriber  relied  thereon,  is  upon 
the  subscriber.4 


fraudulent  representations  will  not  pre- 
vail against  a  receiver,  especially  where 
there  has  not  been  a  prompt  discovery 
of  the  fraud,  followed  by  a  repudiation  ; 
citing  Upton  v.  Tribilcock,  91  U.  S.,  45 
(1875) ;  Webster  v.  Upton,  id.,  65  (1875) ; 
Sanger  v.  Upton,  id.,  56  (1875);  Ogilvie 
v.  Knox    Ins.  Co.,  22  Hun,  380  (1859). 
Of.  Litchfield  Bank  v.  Peck,  29  Conn., 
384  (1860).      Fraud    is    no    defense    as 
against  creditors.     Mathis   v.  Pridham, 
20  S.  \V.  Rep..  1015  (Tex.,  1892).     Fraud 
is  no  defense  as  against  creditors.     Mc- 
Dowall  v.  Sheehan,  13  N.  Y.  Supp.,  386 
(1891).     Fraud  no  defense  after  insolv- 
ency, etc.     Howard  v.  Glenn,  11  S.  E. 
Rep.,  610  (Ga..  1890).     An  action  to  re- 
scind the  purchase  of  stock  lies  where 
the  money  paid  therefor  was  to  be  ap- 
plied to  a  certain  purpose  but  was  not 
so  applied,  but  the  receiver  will  not  be 
directed  to  give  up  the  money.     Moore 
v.  Robertson,  25  Abb.  N.  C,  173  (1890). 

!Farrar  v.  Walker,  13  Nat  Bankr. 
Reg.,  82  (1876) ;  Michener  v.  Payson,  id., 
49  (1876). 

2  Quoted  aDd  approved  in  Armstrong 
v.  Karshner,  24  N.  E.  Rep.,  897  (Ohio, 
1890) ;  Bwlch-y-plwm  L.  M.  Co.  v.  Baynes, 
36  L.  J.  (Ex.),  183  (1867; ;  Deposit  Life 
A.  Co.  v.  Ayscough,  6  E.  &  B.,  761 
(1856) ;  Upton  v.  Englehart,  3  Dill,  496 


(1874) ;  Hallows  v.  Fermie,  L.  R,  3  Ch. 
App.,  467  (1868) ;  Selma,  M.  &  M.  R.  R. 
Co.  v.  Anderon.  51  Miss.,  829  (1876)  — 
the  last  case  holding  it  necessary  to  al- 
lege also  that  the  f  ct  misrepresented 
was  not  a  charter  matter.  Carey  v. 
Cin.  &  Chicago  R.  R  Co.,  5  Iowa.  357 
(1857),  indicates  that  an  allegation  that 
the  certificates  are  brought  into  court 
for  disposal  is  proper.  See,  also,  Ore- 
gon Central  R.  R.  Co.  v.  Scoggin.  3 
Oreg..  161  (1869);  Gilfillan  v.  Mawhin- 
ney,  21  N.  E.  Rep.,  299  (Mass.,  1889). 

3  In  re  Devala  Prov.  G.  M.  Co.,  L  R, 
22  Ch.  Div.,  593  (1883).     Cf.  Phil..  W.  & 

B.  R.  R.   Co.  v.  Quigley,  21  How.,  202 
(1858).     Contra,  Jarrett  v.  Kennedy,   6 

C.  B.,  319  (1848). 

4  Jennings  v.  Broughton,  22  L  J. 
(Ch.),  585  (1853).  A  subscription  will 
not  be  decreed  to  be  canceled  unless 
the  proof  of  fraudulent  representations 
is  very  clear,  especially  where  the  sub- 
scription contained  special  terms  in  writ- 
ing. Western,  etc.,  Co.  v.  Purnell,  23 
Atl.  Rep.,  134  (Md.,  1891).  In  New  York, 
proof  of  other  similar  contemporaneous 
frauds  is  admissible.  Miller  v.  Barber, 
66  N.  Y.,  558  (1876).  In  Alabama  it  is 
not  admissible.  Montgomery  S.  R'y  Co. 
v.  Matthews,  77  Ala.,  357  (1884). 


210 


CHAPTER  X. 


MISCELLANEOUS  DEFENSES  TO  SUBSCRIPTIONS  FOR  CAPITAL  STOCK. 


§  166.  Defenses  to  subscriptions  not  fa- 
vored by  the  courts. 

167-70.  Release,  withdrawal,  cancella- 
tion or  rescission. 

171.  Compromise. 

172-75.  Non-payment  of  percentage 
required  by  statute. 

176-81.  Full  capital  stock  not  sub- 
scribed. 

182.  Capital  stock  not  definitely  re- 
solved upon. 

183-86.  Irregular  incorporation. 

187.   Ultra  vires  acts. 


188. 

189. 

190. 
191. 
l'.i'J. 
193- 
195. 
196. 
197. 
198. 


Fraud  and  mismanagement  of 
directors. 

Delay  and  abandonment  of  en- 
terprise. 

Failure  of  corporate  enterprise. 

Other  subscribers  released. 

No  certificates  of  stock  issued. 

94.  Set-off  and  counter-claim. 

Statute  of  limitations. 

Ignorance  or  mistake. 

Miscellaneous  defenses. 

Waiver  of  defenses. 


§  166.  Defenses  to  subscriptions  not  favored  by  the  courts. —  It  is 
a  common  saying  and  a  well-recognized  fact  that  the  subscribers  to 
certain  corporate  enterprises,  especially  railroads,  rarely  realize  a 
profit  from  their  investment,  but,  on  the  contrary,  lose  the  whole 
amount  of  the  subscription  which  they  have  made.  These  subscrip- 
tions are  generally  not  called  in  until  after  corporate  insolvency 
has  occurred.  Then  the  reluctance  of  the  subscriber  to  pay  a  sub- 
scription from  which  there  is  no  hope  of  a  return  leads  him  to 
search  out  and  build  up  all  possible  defenses  to  defeat  any  action 
for  the  collection  of  the  amount  due  from  him.  Some  of  these  de- 
fenses are  just,  and  have  been  sustained;  but  most  of  them  have 
not  been  allowed.  On  the  theorv  that,  having  taken  the  chances 
of  large  gains,  the  subscriber  takes  also  the  risk  of  total  loss,  and 
that  the  hardship  of  the  subscriber  is  not  equal  to  the  superior 
equities  and  rights  of  corporate  creditors,  the  courts  have  uniformly 
discountenanced  such  defenses,  and  have  rigidly  enforced  the  sub- 
scriber's liability. 

§  167.  Release,  withdrawal,  surrender,  cancellation  or  rescission. 
These  terms  are  frequently  used  as  synonymous,  although  tech- 
nically they  have  different  meanings.  The  term  release,  especially, 
has  led  to  considerable  confusion.  It  has  been  applied  to  cases 
where  the  subscriber  withdraws  his  offer  to  subscribe,  the  contract 
not  yet  having  been  closed ; l  second,  to  cases  where  the  subscriber 
retains  his  stock,  but  is  not  required  to  pay  the  full  par  value 
thereof;  third,  to  cases  where  the  subscription  contract  is  dissolved 


1  For  this  class  of  cases  see  ch.  IIL 
211 


168.] 


MISCELLANEOUS    DEFENSES. 


[CH. 


X. 


by  mutual  agreement.  The  last  class  of  cases  forms  the  subject  of 
this  section.  °  The  term  rescission  is  more  properly  applied  to  the 
defense  of  fraudulent  representations.1  Probably  the  term  cancel- 
lation describes  most  accurately  the  dissolution  of  a  subscription 
contract  by  the  mutual  consent  of  all  parties  concerned.2 

§  168.  A  subscription  contract,  like  any  other  contract,  may  be 
waived,  canceled  or  dissolved  by  the  mutual  consent  of  all  the 
parties  interested.  The  interested  parties  are  the  subscriber  him- 
self, the  other  stockholders,  and  the  corporate  creditors  existing  at 
the  time  of  the  cancellation.  Frequently  the  directors  of  the  cor- 
poration attempt  to  usurp  this  right  and  power  of  the  general  stock- 
holders. The  well-established  rule,  however,  is  that  corporate 
directors  have  no  power  to  agree  with  a  subscriber  that  his  sub- 
scription shall  be  canceled,  unless  such  power  is  given  to  them  by 
charter  or  statute  or  the  by-laws  of  the  corporation.3     The  cancel- 


i  See  ch.  IX. 

2 For  a  definition  of  the  words  "sur- 
render "  and  "  cancellation,"  see  Green's 
Brice's  Ultra  Vires  (2d  ed.),  181. 189.  Re 
Dronfield  Silkstone  Coal  Co.,  L.  R..  17 
Ch.  D..  76  (1880) ;  Colville's  Case,  48  L, 
J.  (Ch.),  633  (1879).  Cancellation  cannot 
be  objected  to  on  the  ground  that  it  re- 
duces the  capital  stock.  It  no  more  re- 
duces the  capital  stock  than  a  forfeiture 
does.  Re  Dronfield  Silkstone  Coal  Co., 
supra. 

3  In  the  case  of  Bedford  R.  R.  Co.  v. 
Bowser,  48  Pa.  St,  29,  where,  just  before 
the  expiration  of  their  office,  the  direct- 
ors fraudulently  released  part  of  the 
subscribers,  the   court   said :    "  It   is   an 
abuse  of  their  trust,  wholly  unauthor- 
ized, and  at  war  with  the  designs  of  the 
charter,  to  single  out  some  of  the  stock 
subscribers  and  release  them  from  their 
liability.     No  such   authority   in  them 
has  ever  been  recognized."     The  direct- 
ors have  no  power  to  release   a   sub- 
scriber nor  to  allow  him  to  make  addi- 
tional   conditions    to   his    subscription. 
La  Fayette,   etc.,   Corp.    v.   Ryland,    49 
N.  W.  Rep.,  157  (Wis.,  1891).    To  the  sa'ie 
effect,    Rider  v.    Morrison,  54   Md.,  429 
(1880):  Hughes   v.    Antietam    Mfg.  Co., 
34  Md.,  316  (1870):  Ryder  v.  Alton,  etc., 
R.  R.  Co.,  13  111.,  516  (1851);  Tuckerman 
v.  Brown,  33  N.  Y.,  297  (1865) ;  Esparto 


Trading  Co..  L  R,  12  Ch.  D.,  191  (1879  ; 
Hall"s  Case,  L,  R.,  5   Ch..  707 ;  Re  Lon- 
don  &   Prov.  Consol.  Coal   Co.,  L.  R,  5 
Ch.  D.,  525   (1877):  Re  Argyle  C.  &  C. 
Co..    Ex   parte    Watson,    Law    Times, 
April   17,   1886 ;  Ex  parte  Fletcher,  37 
L.  J.  (Ch.),  49  (1867) ;  Addison's  Case,  L 
R..  5   Ch.,  294 ;  Spackman   v.  Evans.  L. 
R.,  3   H.  L,  171   (1868);  Thomas'  Case, 
L  R..  13  Eq.,  437  (1872),  where  the  di- 
rectors had  power  to  "  enter  into,  alter, 
rescind   or  abandon  contracts ;  "  Rich- 
mond's Case,  4  K.  &  J..  305  (1858),  hold- 
ing that  power  to  forfeit  does  not  give 
power  to  cancel :  Adam's   Case,  L.  R., 
13  Eq.;  474  (1S72\  holding  that  power  to 
compromise  gives  no  power  to  cancel. 
"  It  would  be  putting  into  the  hands  of 
directors   an  almost   unlimited   power. 
.     .     .     It  might  happen  in  cases  where 
it  would  be  impossible  to  fix  fraud  on 
them."    A  cancellation  of  shares  is  void, 
and  the  subscriber  is  liable,  though  ten 
years  have  elapsed.     Ex  parte  Watson. 
54  L  T,  233  (1885).     Cf.  Plate  Glass  Ins. 
Co.  v.  Sunley,  8  El.  &  Bl.,  47  (1857) ;  Koll- 
man's  Carriage  Co.  v.  Beresford,  2  M.  & 
G.,  197  (1850);  Lord  Belhavens  Case,  34 
L.   J.   (Ch.),   503:    Ex  parte  Blake,   32 
L.  J.  (Ch.),  278 ;  Fox's  Case,  L  R.,  5  Eq., 
118  (1868);  Dixon's  Case,  L  R,  5   Ch., 
79,  rev'd  on   another   point,  L  R.,  5  H. 
L„  606 ;  Burt  v.   Farrar,  24  Barb.,  518 


212 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  168. 


lation  of  a  subscription  differs  little  from  a  purchase  by  the  corpo- 
ration of  shares  of  its  own  stock.  The  rules  of  law  governing:  such 
a  transaction  are  laid  down  elsewhere.1 


(1857);  Gregory   v.  Lamb,  16   Neb.,  305 
(1884);  Erskine    v.    Peck,    83    Mo.,  465 
(1884).     See.  also,  §  158.     The  directors 
may  release  a  subscription   payable  in 
property,  part  of  whicb  has  been  deliv- 
ered.    Nettles  v.  Marco,  11   S.   E.   Rep., 
595  (S.  C.  1890).     Before  organization  a 
subscriber  probably  can  be  released  by 
the  promoters  and  his  subscription  can- 
celed, but  after  organization  the  officers 
have  no  power  to  release  him  and  take 
other  subscriptions  in  his  stead.     Noth- 
ing but  a  transfer  is  then  available.    The 
officers  cannot  repay  to  him  the  amount 
paid  in  by  him.     He  is  and  remains  lia- 
ble.    Cartwright  v.  Dickinson,  12  S.  W. 
Rep,  1030  (Tenn.,  1890).     A  subscription 
may  be  canceled  by  and  with  the  con- 
sent of  the  directors  when  fraud  is  in- 
volved.    Four  years  afterwards  corpo- 
rate creditors  cannot  attack  it.     McDer- 
mott   v.    Harrison,   9   N.  Y.    Supp.,  184 
(1890).     The  express  power  of  the  direct- 
ors to  do  all  things   "  conducive  to  the 
attainment  of  the  objects  for  which  it 
was  established  "  does  not  enable  them 
to  agree  to  a  cancellation.    Be  Dronfield 
Silkstone  Coal  Co.,  L.  R.,  17  Ch.  D.,  76 
(1880).     Cannot  be  canceled  by  a  corpo- 
rate   solicitor,   although    the    work   in 
which   the  subscription  is  due  can  no 
longer  be  done.     Wheatcroft's  Case,  29 
L.  T.,  324  (1873).    Sometimes  the  directors 
agree  in  advance  to  release  or  cancel  a 
part  or  all  of  the  subscriber's  contract. 
Such  agreements  are  void,  not  only  as 
ultra  vires,  but  as  frauds  on  other  sub- 
scribers.    Melvin  v.  Lamar  Ins.  Co.,  80 
III.,  446  (1875);  Robinson  v.  Pittsburgh  & 
Connellsville  R.    R.  Co.,  32   Pa.  St.,  334 
(1858);  Minor?;.  Bank  of  Alexandria.   1 
Pet.  65  (1828) ;  Jewett  v.  Valley  R'y  Co., 
34  0hioSt,  601  (1878);  White  Mountains 
R.  R  Co.  v.  Eastman,  34  N.  H.,  124  (1856). 
See,  also,  Pickering  v.  Templeton,  2  Mo. 
App.,425;  Downier.  White.  12  Wis.,  176 
(1860);  Blodgett  v.  Morrill,  20  Yt.  509 


(1848);  Davidson's  Case,  3  De  G.  &  S., 
21 :    Bridger's   Case,    L.    R,  9   Eq..  74 : 
Litchfield   Bank   v.    Church,  29    Conn., 
137  (1860).     Where,  however,  the   issue 
itself  is  ultra  vires,  being  fictitious  paid- 
up  stock,  the  directors  may  agree  to  a 
cancellation.     Barnett's   Case,  L.  R..  18 
Eq.,  507(1874).     Or  an  ultra  vires  stock 
dividend.     Hollingshead  v.  Woodward, 
35  Hun,  410  (1885).     They  may  cancel  it 
for   mistake   in    registering  the   wrong 
man.     Ex  parte  Knightley,  W.  M.  (1874  \ 
18,  47.     See  Hartley's  Case,  L.  R,  10  <  h.. 
157.     The  agreement  of  a  stockholder 
to  surrender  his  stock  in  liquidation  of 
an    unpaid   assessment  is  without  con- 
sideration and  does  not  bind  a  purchaser 
of  the  certificate.     Hill   v.  Atoka,  etc., 
Co.,  21  S.  W.  Rep.,  508  (Mo..  1893).     The 
secretary  cannot  accept  a  surrender  and 
cancellation  of  the  subscription.     Min- 
nehaha, etc.,  Ass'n  v.  Legg.  52  N.   W. 
Rep.,  898  (Minn.,  1892).     In  England  an 
express  power  given  by  the  articles  of 
association  of  the  corporation  may  au- 
thorize cancellation   by   the    directors. 
Colville's  Case.  48  L.  J.  (Ch.).  633;  Snell's 
Case,  Wright's  Case.  L.    R.,   12  Eq..  334, 
reversed  in  L.  R,  7  Ch.,  55  (1871) ;  Teas- 
dale's  Case,  L.  R,  9  Ch.,  54  ;  Whiteley's 
Case,  60  L  T.  Rep.,  807  (1889).     Healey 
on  Companies   Law  &   Practice  (Eng.) 
says  :     '•  There  is  no  inherent  power  in 
directors  to  accept  a  surrender  of  shares, 
nor  is  the  acceptance  of  a  surrender  a 
matter  lying  between  the  majority  and 
minority.     Every,  shareholder  must  ex- 
pressly   ...     or  impliedly  join  iu  the 
release;  though  a  company  may  be  pre- 
cluded by  knowledge  and  acquiescence 
from  disputing  the  validity  of  the  sur- 
render."    Citing  many  cases,   and   dis- 
cussing    what    constitutes    notice    and 
acquiescence. 

'See  §§251,  309,  310.  etc.,  infra.  A 
scheme  whereby  the  corporation  takes 
back  the  stock  and  issues  certificates  of 


213 


169.] 


MISCELLANEOUS    DEFENSES. 


[CH. 


§  169.  A  subscriber  for  stock  in  a  corporation  cannot  obtain  a 
cancellation  of  his  subscription  except  by  the  unanimous  consent 
of  the  other  subscribers.1  Even  a  majority  of  the  stockholders  can- 
not withdraw  and  refuse  to  proceed.2  These  rules  are  just,  and 
based  upon  a  sound  public  policy.  A  subscriber  may,  however, 
withdraw  at  any  time  prior  to  the  filing  of  the  articles  of  incorpo- 
ration.3 


indebtedness  for  it  is  invalid  as  against    are  incurred.   Hill  v.  Silvey,  8  S.  E.  Rep., 


creditors.  The  latter  are  entitled  to  the 
assets  in  preference  to  the  former. 
Heggie  V.  Building,  etc.,  Ass'n,  12  S.  E. 
Rep..  275  (N.  C.  1890). 

•  K'd  welly  Canal  Co.  v.  Raby,  2  Price, 
93  (1816);  Lake  Ontario,  etc.,  R,  R.  Co. 
v.  Mason,  16  N.  Y.,  451,  463  (1857); 
Hughes  v.  Antietam  Mfg.  Co.,  34  Md., 
316  (1870):  Johnson  v.  Wabash  &  Mt. 
Vernon  P.  R.  Co..  16  Ind.,  389  (1861); 
United  Soc.  r.  Eagle  Bank,  7  Conn.,  457 
(1829);  Bishop's  Fund  v.  Eagle  Bank,  id., 
476:  Selraa  &  Tenn.  R.  R.  Co.  v.  Tip- 
ton, 5  Ala.  (N.  S.),  787  (1843).  The  plea 
in  defense  need  not  allege  that  the  other 
stockholders  assented  to  the  cancellation. 
Gelpcke  v.  Blake,  19  Iowa,  263  (1863). 
Where,  however,  by  the  articles  of  as- 
sociation, acts  of  the  directors  ratified 
at  stockholders'  meetings  were  to  be 
valid,  a  cancellation  so  ratified  is  legal, 
and  the  unanimous  consent  is  not  nec- 
essary. Marshall  v.  Glamorgan  Iron  & 
Coal  Co.,  L.  R.,  7  Eq..  129  (1868).  Cor- 
poration is  bound  by  agreement  of 
agent  that  a  person  taking  stock  in  the 
corporation  and  giving  note  in  payment 
may  return  the  stock  at  any  time  and 
be  released  from  payment  Bank  of 
Lyons  v.  Demmon,  Hill  &  Denio  Supp. 
(N.  Y.),  398  (1844).  In  Pennsylvania  a 
subscriber  for  stock  may  withdraw  at 
any  time  before  the  charter  is  applied 
for.  Muncy,  etc..  Co.  v.  De  La  Green, 
13  Atl.  Rep.,  747  (Pa.,  1888).  It  is  legal 
for  a  corporation,  by  common  consent, 
to  issue  to  its  stockholders  full-paid 
stock  to  the  amount  of  cash  actually 
paid  iu  on  a  larger  subscription,  the 
first  subscription  being  canceled;  such 
arrangement  being  made  before  debts 


808  (Ga.,  1889).  Where  property  is  sold 
to  a  corporation  for  stock,  and  other 
stockholders  are  dissatisfied,  the  bargain 
may  be  rescinded.  The  stockholder  will 
then  no  longer  be  liable.  Morgan  v. 
Lewis,  17  N.  E.  Rep.,  558  (Ohio,  1888). 
Cancellation  is  a  question  of  fact  If 
there  is  no  record  of  it,  and  the  stock- 
holder continues  to  act,  he  is  bound. 
Topeka,  etc.,  Co.  v.  Hale,  17  Pac.  Rep, 
601  (Kan.,  1888).  An  offer  or  agreement 
to  subscribe  is  revoked  by  death  where 
it  has  not  yet  been  accepted  by  the  cor- 
poration. Wallace  v.  Townsend,  43  Ohio 
St,  537  (1885);  Sedalia,  W.  &  S.  R'y  Co. 
v.  Wilkinson,  83  Mo.,  235  (1884).  The 
company  may  be  compelled  to  issue  a 
certificate  to  one  who  acquires  his  in- 
terest by  the  death  of  the  original  sub- 
scriber. State  v.  Crescent  City,  etc.,  Co., 
24  La.  Ann.,  318  (1872).  Although  the 
directors  cannot,  yet  the  stockholders  by 
unanimous  consent  may  allow  subscrip- 
tions to  be  reduced  one-half  by  cancella- 
tion of  one-half,  creditors'  rights  not 
intervening.  Glenn  v.  Hatchett,  8  S. 
Rep.,  656  (Ala.,  1890). 

2Busey  v.  Hooper,  35  Md.,  15  (1871). 

3  Auburn,  etc..  Works  v.  Schult^  22 
Atl.  Rep.,  904  (Pa.,  1891).  Up  to  the  time 
of  incorporation  a  subscriber  for  stock 
may  withdraw.  Hudson,  etc.,  Co.  r. 
Tower,  30  N.  E.  Rep.,  465  (Mass.,  1892). 
Prior  to  incorporation  a  subscriber  may 
withdraw,  especially  if  his  subscription 
was  informal  and  was  merely  to  see 
what  could  be  done.  Planks,  etc.,  Co.  v. 
Burkhard,  49  N.  W.  Rep.,  562  (Mich., 
1891);  Garrett  v.  Dillsburg,  etc.,  R.  R. 
Co.,  78  Penn.  St.,  465  (1875),  holding  that 
at  any  time  before  the  filing  of  the  arti- 


214 


CH.  X.] 


MISCELLANEOUS    DEFENCES. 


[§  169. 


The  consent  of  all  the  other  stockholders,  however,  need  not  be 
express.  If  the  means  of  notice  are  sufficient,  so  as  to  raise  a  clear 
presumption  of  knowledge  and  acquiescence,  and  the  arrangement 
is  left  un impeached  by  any  one  for  many  years,  no  objection  can 
be  made.  The  stockholders  are  bound  by  the  cancellation.1  But 
where  a  subscription  has  been  canceled,  and  calls  already  paid  are 
refunded  without  the  consent  of  the  other  stockholders,  any  stock- 
holder may,  by  a  bill  in  equity,  have  the  money  refunded  to  the 
corporation,  and  the  subscriber  made  liable  upon  his  canceled  sub- 
scription.2 Moreover,  the  directors  are  personally  liable  to  the  cor- 
poration for  loss  occasioned  by  their  improper  cancellation  of 
subscriptions.3  When,  however,  a  subscriber  fails  to  pay  his  sub- 
scription or  exercise  his  rights,  it  has  been  held  that  the  corpora- 
tion may  take  his  subscription  as  abandoned  and  allow  others  to 
fill  it.4  An  alteration,  however,  of  the  subscription  list  by  substi- 
tution of  different  stockholders  may  release  dissenting  stockholders.5 
Where  a  subscription  is  not  paid,  and  the  stock  is  transferred  to 
the  corporation  as  "  treasury  stock""  and  then  sold  below  par,  the 
purchaser  is  liable  for  the  unpaid  par  value.6  Where  a  subscrip- 
tion for  stock  is  paid,  the  stockholder  is  entitled  to  his  stock  and 
past  dividends  although  for  thirty  years  he  sleeps  on  his  rights.7 


cles  a  subscriber  may  withdraw.  Cook 
v.  Chittenden,  25  Fed.  Rep.,  544  (1885), 
allowing  a  withdrawal  where  no  others 
have  subscribed  in  reliance  thereon,  nor 
creditors'  debts  incurred.  Gulf,  C,  etc., 
R'y  Co.  v.  Neely,  64  Texas,  344  (1885), 
holding  that  there  can  be  no  withdrawal 
after  an  acceptance  by  the  corporation. 
Cf.  Tilsonburg,  etc.,  Co.  v.  Goodrich,  8 
Ontario  (Q.  B.  Div.),  565  (1885);  Ross  v. 
San  Antonio,  etc.,  R.  R.  Co.,  31  Tex.,  49 
(1868).  See,  also,  Goff  v.  Flesher,  33 
Ohio  SL,  107  (1877). 

1  Evans  v.  Sraallcombe,  L.  R.,  3  H.  L., 
249  (1868).  So,  also,  where  the  corpora- 
tion retains  the  benefits  of  a  cancella- 
tion, no  objection  can  be  made.  Miller 
v.  Second  J.  B.  Ass'n,  50  Pa.  St.,  32 
(1865).  Proof  of  cancellation  need  not 
necessarily  be  by  the  corporate  records. 
May  be  proved  by  evidence  that  the 
subscriber  was  not  regarded  "by  him- 
self or  by  the  company  as  a  stock- 
holder." Stuart  v.  Valley  R.  R  Co.,  32 
Gratt.,  146  (1879). 


2  Melvin  v.  Lamar  Ins.  Co.,  80  111.,  446 
(1875). 

3Hodgkinson  v.  Nat'l  Co.,  26  Beav., 
473  (1859);  Bank  of  St.  Mary's  v.  St 
John,  25  Ala.,  566  (1882).  The  subscriber, 
also,  may  set  up  this  defense.  Southern 
Hotel  Co.  v.  Newman,  30  Mo..  118  (1860). 

*  Perkins  v.  Union  B.  H.  &  E.  M.  Co.. 
12  Allen,  273  (1866).  Cancellation  may 
be  by  the  substitution  of  another  person 
for  the  subscriber  at  the  latter's  request. 
This  occurs  where  regular  transfer  is 
not  yet  possible.  The  signature  of  the 
first  subscriber  must  be  erased  and  that 
of  his  substitute  inserted.  Otherwise 
the  substitution  fails.  Ryder  v.  Alton 
&  S.  R.  R  Co.,  13  III.,  516  (1851).  And 
see  §  62. 

5  See  §§  53,  62,  supra. 

6  Ailing  v.  Ward,  24  N.  E.  Rep.,  551 
(111.,  1890). 

7  Where,  in  1845,  an  Indian  chief  dis- 
closed an  iron  mine  under  promise  of 
being  compensated,  and  the  officers  of 
the  unincorporated  company  gave  him 


215 


170.] 


MISCELLANEOUS    DEFENSES. 


[CH\ 


§  170.  A  cancellation  of  a  subscription,  to  the  detriment  of  cor- 
porate creditors,  may  be  impeached  by  the  latter  and  set  aside.1 
Especially  is  this  the  rule  when  the  cancellation  is  made  after  the 


a  paper  recognizing  his  right  to  twelve 
thirty-one  one-hundredths  interest,  and 
after  incorporation  in  1848  eighteen 
full-paid  shares  of  stock  were  set  aside 
for  the  Indians,  and  twelve  of  such 
shares  corresponded  to  the  twelve 
thirty-one  one-huudredths  interest,  the 
descendants  of  the  chief  are  entitled  to 
the  stock  although  neither  he  nor  they 
made  any  claim  thereto  until  1877.  Back 
profits  may  also  be  recovered.  The  stat- 
ute of  limitations  is  no  bar.  A  new 
corporation  assuming  the  property  and 
liabilities  of  the  old  one  is  liable.  Ko- 
bogum  v.  Jackson  Iron  Co.,  43  N.  VV. 
Rep.,  602  (Mich.,  1889).  To  same  effect, 
Bedford  County  v.  Nashville,  etc.,  R  R, 
14  Lea  (Tenn.),  525  (1884). 

1  One  who  is  a  corporate  creditor  be- 
fore the  cancellation  is  made  may  object 
to  it.  Vick  v.  La  Rochelle,  57  Miss.,  602 
(1880);  Appeal  of  Miller,  1  Pa.  Sup.  Ct, 
120,  in  which  stock  in  an  insurance 
company  was  subscribed  for  in  order  to 
enable  the  company  to  undergo  an  ex- 
amination by  the  commissioner,  a  divi- 
dend being  paid  on  it  during  their  hold- 
ing, and  the  notes  given  in  payment 
being  published  as  assets.  It  was  held 
that,  although  after  the  emergency  had 
passed  the  stock  was  taken  back  by  the 
company  and  the  notes  canceled,  the 
subscribers  were  liable  to  its  creditors, 
the  transaction  being  looked  upon  as  a 
fraud  upon  them.  Cancellation  by  with- 
drawal is  not  legal  as  against  corporate 
creditors  existing  at  the  time  of  the 
withdrawal,  even  though  all  the  stock- 
holders assent  thereto.  Farusworth  v. 
Robbins,  31  N.  W.  Rep.,  349  (Minn., 
1887).  Where  a  corporation  takes  land 
in  payment  for  stock,  then  rescinds,  and 
eighteen  months  afterwards  becomes 
insolvent,  rescission  is  binding.  San- 
derson v.  JEtna,  etc.,  Co.,  8  Cent.  L.  J., 
266  (Ohio,  1879).  So,  also,  if  the  debt  was 


incurred  after  the  cancellation.  John- 
son v.  Sullivan,  15  Mo.  App.,  55;  Ers- 
kine  v.  Peck.  13  Mo.  App.,  280;  21  N.  E. 
Rep.,  514  (111.,  1889).  The  plea  in  de- 
fense, it  has  been  held,  need  not  allege 
that  there  were  no  corporate  creditors 
at  the  time  of  the  cancellation.  Gelpcke 
v.  Blake,  19  Iowa.  263  (1803).  In  England 
a  different  rule  prevails.  "  If  the  com- 
pany could  not  question  it,  neither  can 
a  creditor :  for  he  can  obtain  nothing 
but  what  the  company  can  get  from  the 
shareholders."  Re  Dronfield  Silkstone 
Coal  Co..  L.  R..  17  Ch.  D.,  76  (1880).  A 
bona  fide  cancellation  of  a  subscription 
is  valid  and  corporate  creditors  cannot 
have  it  set  aside.  WaUgericu  v.  Aspell, 
24  X.  E.  Rep..  405  (Ohio,  1890).  Where 
the  directors  rescind  a  subscription  at 
the  request  of  the  subscriber  he  cannot 
be  made  liable  five  years  later.  Re  West 
London,  etc.,  Bank,  60  L.  T.  Rep.,  807 
(1889).  Subscribers  whose  stock  is  taken 
back  by  the  corporation  are  not  liable 
thereon  either  at  common  law  or  by 
statute  relative  to  transfers.  Ailing  v. 
Ward.  24  N.  E.  Rep,  551  (111.,  1890).  A 
fraudulent  release  by  a  corporation  of 
an  unpaid  subscription  to  an  increase  in 
the  capital  stock  of  a  corporation  is 
void  even  against  a  debt  arising  before 
the  increase.  Carter  ?•.  Union  Printing 
Co.  et  al,  15  S.  W.  Rep.  579  (Ark.,  1891). 
This  case  holds  also  that  a  corporate 
creditor  may  object  to  the  corporation  n  - 
leasing  a  stockholder  from  his  stock  and 
repaying  to  him  the  subscription  which 
he  has  paid  in.  The  transaction  may  be 
set  aside.  It  is  legal  for  the  corporation 
to  make  an  agreement  with  stockholders 
whereby  the  latter  surrender  their  stock 
upon  which  they  have  paid  twenty  per 
cent,  and  receive  full-paid  stock  to  the 
amount  of  twenty  per  cent,  of  the  stock 
surrendered.  A  receiver  cannot  attack 
this  agreement  even  in  behalf  of  credit- 


216 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  171. 


corporation  has  become  insolvent.1  In  the  United  States  courts  it 
is  established  that  the  governing  officers  of  a  corporation  cannot, 
by  agreement  or  other  transaction  with  the  stockholder,  release  the 
latter  from  his  obligation  to  pay,  to  the  prejudice  of  its  creditors, 
except  by  fair  and  honest  dealing,  and  for  a  valuable  considera- 
tion.2 

§171.  Compromise. —  A  compromise  differs  from  a  cancellation 
in  that  the  subscriber  pays  to  the  corporation  a  part  of  the  subscrip- 
tion price  in  order  to  be  released  from  the  balance.  The  stock  is 
delivered  back  to  the  corporation.  The  corporate  authorities  —  gen- 
erally the  directors  —  have  power  to  compromise  any  corporate  debt ; 
and  if,  in  the  collection  of  subscriptions,  there  is  reasonable  doubt 
as  to  the  liability  of  the  subscriber,3  or  if  the  subscriber  is  insolv- 
ent, the  corporation  may  compromise  the  liability,  and  release  a 
part  for  the  purpose  of  securing  the  residue.  All  that  is  required 
is  good  faith.4  A  receiver,  however,  cannot  compromise  a  subscrip- 
tion; nor  can  a  court  of  equity  give  him  power  so  to  do,  unless  all 
the  stockholders  are  parties  to  the  equitable  suit  in  connection  with 
which  the  receiver  is  appoiuted.5  A  compromise  is  not  binding  if 
there  is  no  controversv.6 


ors.  Republic  Life  Ins.  Co.  v.  Swigert, 
25  X.  E.  Rep.,  680  (111.,  1890).  The  "  trust 
fund"  theory  is  denied  in  Hospes  v. 
Northwestern,  etc.,  Co.,  50  N.  W.  Rep., 
1117  (Minn.,  1892). 

1  Chouteau  Ins.  Co.  v.  Floyd,  74  Mo., 
286 :  Gill  v.  Balis,  72  Mo.,  424,  holding, 
also,  that  it  is  immaterial  that  enough 
subscriptions  x-emain  to  pay  the  corpo- 
rate debts. 

2  "  The  governing  officers  of  a  corpo- 
ration cannot,  by  agreement  or  other 
transaction  with  the  stockholder,  re- 
lease the  latter  from  his  obligation  to 

•  pay,  to  the  prejudice  of  its  creditors, 
except  by  fair  and  honest  dealing  and 
for  a  valuable  consideration."  Potts  v. 
Wallace,  146  U.  S.,  689  (1892) :  Burke  v. 
Smith,  16  Wall.,  390  (1872) ;  New  Albany 
v.  Burke,  11  Wall.,  96  (1870).  So.  also, 
in  Illinois.  See  Zirkel  v.  Joliet  Opera 
House  Co.,  79  111.,  334  (1875). 

3  Bath's  Case,  L.  R..  8  Ch.  D„  334 
(1878) ;  Lord  Belhaven's  Case,  3  De  G., 
J.  &  S.,  41  (1865).  An  unaccepted  offer 
of  compromise  is  no  defense,  and  com- 
promises with  other  stockholders  are  no 


defense.  Howard  v.  Glenn,  11  S.  E. 
Rep.,  610  (Ga.,  1890). 

<  Phil.  &  W.  C.  R.  R.  Co.  v.  Hickman, 
28  Pa.  St.,  318(18571  Power  may  be 
given  by  statute.  Pearson's  Case,  L 
R.,  7  Ch.,  309,  holding  that,  under  the 
English  statute,  the  court  may  allow, 
but  cannot  compel,  a  receiver  to  com- 
promise. Where  a  stockholder  denies 
his  liability,  and  the  directors  compro- 
mise with  him  by  reducing  the  amount 
of  his  subscription,  the  compromise  is 
binding  on  all  parties.  Whitaker  v. 
Grummond,  36  N.  W.  Rep.,  62  (Mich., 
1888). 

5  Chandler  v.  Brown,  77  111.,  333  (1875\ 
The  fact  that  the  court  authorized  the 
receiver  to  compromise  with  some  of 
the  stockholders  is  no  defense  to  others. 
Hambleton  v.  Glenn,  20  Atl.  Rep.,  115 
(Md.,  1890).  • 

6 Phosphate,  etc.,  Co.  v.  Green,  L.  R.,  7 
C.  P.,  43  (1871);  Sp:tckman  v.  Evans,  L  R, 
3  H.  L,  171,  188,  231  (1868).  In  Dixon  v. 
Evans,  L.  R.,  5  H.  L,  606  (1872),  the  sub- 
scription was  made  upon  a  condition, 


which 


unfulfilled   a    corn- 


217 


§§  172,   173.]  MISCELLANEOUS    DEFENSES.  [CH.  X. 

§  172.  Non-payment  of  a  percentage  required  by  statute. —  The 
charter  or  statute  governing  a  corporation  often  prescribes  that 
each  subscriber  to  the  capital  stock  shall,  at  the  time  of  subscrib- 
ing, pay  to  the  corporation  a  fixer!  sum  or  a  specified  proportion  of 
the  subscription.  These  statutes  vary  somewhat  in  their  provisions, 
some  declaring  the  subscription  to  be  void  unless  the  percentage  is 
paid,  others  merely  prescribing  that  it  shall  be  paid. 

In  the  actual  taking  of  the  subscriptions,  it  frequently  happens 
that  the  subscriber  has  not  the  ready  money  requisite,  and  is  al- 
lowed to  subscribe  without  paying  the  same.  "When  an  attempt  is 
made  to  collect  such  a  subscription,  the  subscriber,  if  the  enter- 
prise has  resulted  disastrously,  sets  up  the  defense  that  he  did  not 
pay  the  statutory  percentage,  and  that  the  subscription  is  void  and 
not  enforceable.  A  long  list  of  cases,  dating  from  the  early  litiga- 
tion over  railroads,  has  turned  upon  this  defense.  In  some  of  the 
states  the  defense  has  been  held  insufficient;  in  others  a  contrary 
rule  prevails ;  and  in  still  others,  first  one  rule  and  then  the  other 
has  been  adopted. 

§  173.  The  decided  weight  of  authority  and  the  most  carefully 
considered  cases  hold  that  a  subscriber  for  stock  cannot  escape  the 
responsibilities  of  a  stockholder  by  showing  that  he  never  paid  the 
percentage  or  fixed  amount  required  by  the  charter  or  statute  to  be 
paid  at  the  time  of  subscribing.1     He  will  not  thus  be  permitted  to 

promise  was  made  permitting  the  with-  so  vitally  affect  the  public,"  but  not  to 

drawal  of  the  subscriber.    Held,  after  change  the  liability  of  stockholders  to 

two  appeals,  that  directors  had  power  corporations.     Minnesota  &  St  L.  R'y 

to  enter  into  such  a  compromise,  and  Co.  v.  Bassett,  ?0  Minn.,  535(1874),  where 

the  subscriber  was  not  held  in  the  wind-  the  court  said  of  the  statute :  "  While  it 

ing  up.  confers  upon  plaintiff  the  right  to  insist 

1  Webb  v.  Baltimore,  etc.,  Co.,  26  Atl.  upon  the  payment,  it  does  not  make  the 

Rep.,  113  (Md.,  1893);  Illinois  River  R  R.  successful  exercise  of  this  right  indis- 

Co.  v.  Zimmer,  20  111.,  654  (1858),  hold-  pensable  to  the  validity  of  the  subscrip- 

ing  that  the  commissioners  may  waive  tion."      Water    Valley    Manuf.  Co.    v. 

payment.     The  court  say:  "Thisindul-  Seaman,  53  Miss.,  655  (1876),  where  tue 

gence  is    a  most    ungracious  defense,  requirement  was  provided   for  in   the , 

which  should  not  be  allowed  unless  it  is  subscription  itself.      Barrington  v.  Miss. 

6trictly  required  by  some  inflexible  rule  C.  R  R  Co.,  32  Miss.,  370  (1856),  where 

of  law."     Haywood  &  P."  P.  R  Co.  v.  payment  was  made  before  the  subscrip- 

Bryan,  6  Jones'  L.  (N.  C),  82  (1858),  the  tion.     See,  also,  Vicksburg,  S.  &  T.  R.  R 

court  saying:   "It  would  be  a  strange  Co.  v.  McKean,  12  La.  Ann.,  638  (1857); 

rule  which  would  allow  him  to  take  ad-  Wright  v.  Shelby  R  R.  Co.,  16  B.  Monr. 

vantage  of  the  other  stockholders'  for-  (Ky.),  4  (1855);  Smith  v.  Plank-road  Co., 

bearance  and  his  own  neglect."    Pitts-  30  Ala.,  650  (1857) ;  Mitchell  v.  Rome  R 

burgh,  W.  &  K.  R  R.  Co.  v.  Applegate,  R.  Co.,  17  Ga.,  574  (1855);  Henry  v.  Ver- 

21  W.  Va.,   172  (1882).     On  the  theory  million   &   A.   R.   R  Co.,   17  Ohio,  191 

that  the  statute  is  "to  insure  good  faith,  (1848);  Chamberlain  v.  Painesville  &  H. 

and  to  avoid  shams  in  enterprises  that  R.  R  Co.,  15  Ohio  St.,  225  (1864) ;  Napier 

218 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  ira- 


take  advantage  of  bis  own  wrong  and  default  to  the  prejudice  of 
others.  In  some  instances  the  percentage  was  paid  in  notes l  or 
checks2  instead  of  cash;  in  others,  payment  in  cash  was  made  at 
some  period  subsequent  to  the  act  of  subscribing;3  in  still  others, 
no  payment  at  all  was  made  on  the    subscription,  and  suit  was 


v.  Poe,  12  Ga„  170  (1852);  Fiser  v.  Miss. 
&  Tenn.  R.  R.  Co.,  32  Miss.,  359  (1856) ; 
Ryder  v.  Alton  &  S.  R.  R.  Co.,  13  111., 
516  (1851).  where  the  subscriber  was  one 
of  the  commissioners;  Klein  v.  Alton  & 
S.  R  R  Co.,  13  111.,  514  (1851),  where 
payment  was  made  before  the  subscrip- 
tion books  were  closed :  Stuart  v.  Valley 
R  R  Co.,  32  Graft,  (Va.),  146  (1879); 
Southern  L.  Ins.  Co.  v.  Lanier,  5  Fla., 
110(1853);  Selma  &  Tenn.  R.  R  Co.  v. 
Rouudtree,  7  Ala.  (N.  S.),  670  (1845); 
Spartanburg  &  A.  R  R  Co.  v.  Ezell,  14 
S.  C,  281  (1880',  where  a  few  subscribers 
paid  in  more  than  their  percentage,  and 
enough  to  make  up  for  those  not  pay- 
ing; Oler  v.  Baltimore  R  R  Co.,  41  Md, 
583  (1874),  where  the  percentage  was 
"payable,"  the  court  saying  that  this 
merely  made  it  "due  and  collectible," 
like  a  call.  To  the  same  effect,  Ashta- 
bula &  N.  L.  R  R  Co.  v.  Smith,  15  Ohio 
St.,  328  (1864).  Payment  by  the  sub- 
scriber's agent  is  sufficient.  Litchfield 
Bank  v.  Church,  29  Conn.,  137  (1860). 
The  following  cases  hold  that  non-pay- 
ment of  the  required  percentage  is  a 
good  defense :  Charlotte  &  S.  C.  R  R. 
Co.  v.  Blakeley,  3  Strobh.  Eq.  (S.  C),  245 
(1848) :  State  Ins.  Co.  v.  Redmond,  1  Mc- 
Crary,  308  (1880).  The  requirement 
herein  was  by  by-law.  People  v.  Cham- 
bers. 42  Cat,  201  (1871),  holding  a  check 
to  be  insufficient;  Farmers' &  M.  Bank 
v.  Nelson,  12  Md.,  35  (1857);  Taggart  v. 
Western  Md.  R  R  Co.,  24  Md.,  588 
(1866);  Wood  v.  Coosa  &  C.  R.  R  Co., 
32  Ga.,  273  (1861),  the  statute  prescrib- 
ing that  the  subscription  should  be 
"void."  A  provision  that  only  ten  per 
cent,  of  the  stock  shall  be  paid  up  until 
certain  contingencies  arise  is  strictly 
construed  by  the  courts.  City  of  Bur- 
lington v.    Burlington   Water  Co.,    53 


N.  W.  Rep.,  246  (la.,  1892).  Although  the 
statute  requires  that  a  certain  percent- 
age of  subscriptions  shall  be  paid  upon 
incorporation,  yet  one  subscriber  may 
pay  the  proportion  of  others.  Beattys 
v.  Town  of  Solon,  64  Hun,  120  (1892). 
It  is  no  defense  that  the  corporation 
commenced  business  before  twenty-five 
per  cent,  of  its  capital  stock  had  been 
paid  in  as  required  by  the  charter.  Nau- 
gatuck,  etc.,  Co.  v.  Nichols,  20  Atl.  Rep., 
315  (Conn.,  1890). 

i  Yt.  Central  R.  R  Co.  v.  Clayes,  21 
Vt,  30  (1848).  A  bond  so  given  is  col- 
lectible, as  it  would  be  if  given  to  carry 
out  a  parol  contract  for  the  sale  of  land 
void  by  statute  of  frauds.  McRea  v. 
Russell,  12  Ired.  (N.  C),  224  (1851),  the 
court  saying  that  the  statute  "  was  meant 
to  protect  stockholders  from  men  of 
straw.  It  was,  moreover,  meant  to  pro- 
tect men  from  the  consequences  of 
making  such  subscriptions  under  the  in- 
fluence of  momentary  excitement, 
which  they  could  not  fulfill."  The  stat- 
ute made  the  subscription  void.  In  the 
case  of  Home  Stock  Ins.  Co.  v.  Sher- 
wood, 72  Mo.,  461  (1880),  payment  by 
note  and  mortgage  was  sustained. 
Hayne  v.  Beauchamp,  13  Miss.,  515 
(1846),  holds  that  the  payment  by  note 
amounted  to  an  informal  subscription, 
the  statutory  subscription  being  void. 
Pine  River  Bank  v.  Hadsdon,  46  N.  H., 
114  (1865). 

-'  People  v.  Stockton  &  V.  R  R.  Co.,  45 
Cal.,  306  (1873).  there  being  funds  in  the 
bank  to  meet  it. 

3  Payment  of  a  judgment,  in  an  ac- 
tion for  one  call,  estops  the  subscriber 
from  setting  up  this  defense.  Hall  v. 
Selma  &  Tenn.  R  R.  Co.,  6  Ala.  (N.  S.\ 
741  (1844). 


219 


174.] 


MISCELLANEOUS   DEFENSES. 


[CH.    X. 


brought  for  the  whole  amount.1  Where  the  directors  commence 
business  before  ten  per  cent,  of  the  capital  is  paid  in  as  required 
by  statute,  the  directors  are  personally  liable  as  agents  transacting 
business  without  authority  from  the  principal.2  In  England  a  fail- 
ure to  pay  such  a  percentage  is  held  not  to  affect  the  liability  of 
the  subscriber,  but  to  restrict  his  right  of  transferring  his  stock.3 

§  174.  In  New  York  there  has  been  doubt  and  a  strong  tendency 
to  change  the  rule  laid  down  at  an  early  day  by  the  court.  The 
case  of  Jenkins  v.  The  Union  Turnpike  Company,  in  1S04,4  decided 
that  a  failure  by  the  subscriber  to  pay  a  required  percentage  at 
the  time  of  subscribing  was  a  good  defense  to  an  action  on  the  sub- 
scription. This  decision  has  been  distinguished,  questioned  and 
doubted  by  the  courts.5     The  latest  authority,  however,  in  New 


1  In  the  case  of  Piseataqua  Ferry  Co.  v. 
Jones,  39  N.  H.,  491  (1859),  the  require- 
ment was  by  by-law,  not  by  charter. 
The  subscription  was  to  be  void  for  non- 
payment. The  court  thought  otherwise. 
The  effect  of  non-payment  is  that  "  it  is 
due  and  liable  to  be  called  for  at  any 
time  —  payable  on  demand,  whenever 
needed  by  the  corporation."  Greenville 
&  C.  R  R  Co.  v.  Woodsides,  5  Rich.  L. 
(S.  C),  145  (1851),  where  the  subscriber 
also  voted  the  stock. 

2  Farmers',  etc.,  Co.  v.  Floyd,  26  N.  E. 
Rep.,  110  (Ohio,  1890).       • 

3  East  Gloucestershire  R'y  Co.  v.  Bar- 
tholomew, L.  R,  3  Ex.,  15  (1867) ;  Pur- 
dy's  Case,  16  W.  R,  660  (1868);  McEwen 
v.  West,  L.  W.  &  W.  Co.,  L.  R,  6  Ch. 
655  (1871)  —  the  statute  stating  that  the 
stock  should  not  "issue"  or  "vest" 
until  one-fifth  should  be  paid.  See, 
also,  Morton's  Case,  L.  R,  16  Eq.,  104 
(1873). 

4 1  Caines'  Cases  in  Error,  86,  reversing 
Union  Turnpike  Co.  v.  Jenkins,  1  Caines' 
Rep.,  381. 

5  Highland  Turnpike  Co.  v.  McKean, 
11  Johns.,  98  (1814),  the  court  saying: 
'•It  is  a  little  difficult  to  ascertain  the 
point  upon  which  the  court  of  errors 
grounded  their  decision."  A  subscriber, 
who  is  also  the  commissioner,  need  not 
pay  the  required  percentage  to  himself. 
In  Crocker  v.  Crane,  21  Wend.,  211 
(1839),  payment  in  checks  was  held  not 


to  be  good,  they  evidently  not  having 
been  given  in  good  faith.  The  court 
say :  "  Receiving  an  occasional  check 
might  have  been  a  fair  substitute." 
Thorp  v.  Woodhull,  1  Sandf.  Ch.,  411 
(1844\  sustains  the  validity  of  a  bond 
and  mortgage  in  payment  of  a  subscrip- 
tion in  which  the  percentage  had  been 
paid  by  a  worthless  check.  Eastern 
Plank-road  Co.  v.  Vaughan,  14  N.  Y., 
546  (1856),  holds  it  not  to  be  necessary 
"  that  each  subscriber  should  pay  five 
per  cent,  upon  his  subscription,  but 
only  that  five  per  cent  on  the  amount 
of  the  stock  subscribed  should  be  actu- 
ally paid  by  some  one."  To  the  same 
effect,  Lake  Ontario,  A.  &  N.  Y.  R  R 
Co.  v.  Mason,  16  N.  Y.,  451  (1857),  the 
court  saying  that  the  object  was  "  to 
insure  the  organization  of  real  substan- 
tial companies  in  good  faith,  animated 
by  an  honest  purpose,  and  having  some 
degree  of  abilitj^  at  least  to  undertake 
the  proposed  improvement."  In  the 
case  of  Rensselaer  &  W.  P.  R.  Co.  v. 
Barton,  16  N.  Y..  457,  n.  (1857),  the  court, 
in  speaking  of  the  decision  in  Jenkins 
v.  Union  T.  Co.,  say :  "  It  may  well  be 
doubted  whether  the  reasoning  upon 
which  it  was  based  is  sound,  and 
whether,  were  the  question  to  be  again 
directly  presented,  this  court  would 
feel  bound  to  follow  it."  Black  River 
&  Union  R  R  Co.  v.  Clarke,  25  N.  Y.. 
208  (1862),  holds  that  "the  subscription 


220 


CII.  X.] 


MIS< ' E  I- 1.  A  N  EOUS    DEFEN8  ES. 


[§  W5. 


York,  undoubtedly  holds  that  if  the  subscriber  merely  signs  the 
subscription  contract  and  does  not  pay  the  percentage,  he  may 
thereby  defeat  his  liability  on  such  subscription.1 

§  175.  In  Pennsylvania  a  similar  state  of  doubt  has  existed.  The 
case  of  Hibernia  Turnpike  Co.  v.  Henderson,2  in  1822,  decided  that 
a  failure  by  the  commissioners  taking  subscriptions  to  stock  to 
require  payment  of  the  statutory  percentage  made  the  subscription 
void  and  not  enforceable.  Later  decisions  do  not  overthrow  the 
rigid  rule,  but  distinguish  and  practically  destroy  it  by  holding 
that  this  defense  is  barred  by  a  subsequent  statute  curing  the  de- 
fect;3 or  by  a  waiver  in  attending  corporate  meetings  and  voting; ; 
or  by  transferring  the  shares;5  or  that  the  provision  applies  only 
to  subscriptions  taken  by  the  commissioners;6  or,  under  the  act  of 
1868,  that  the  percentage  must  be  paid  on  subscriptions  after,  but 
not  on  those  before,  incorporation;7  or  that  the  requirement  does 
not  apply  to  a  conditional  subscription;3  or  that  it  is  waived  by 
any  acts  indicating  an  intent  to  be  bound  as  a  stockholder.9 


one  day,  with  payment  the  next,  would 
satisfy  the  statute,  and  so  would  act- 
ual payment  at  any  period  after  sub- 
scription with  intent  to  effectuate  and 
complete  the  subscription."  See,  also, 
Beach  v.  Hazard,  as  stated  in  30  N.  Y., 
lis.  Ogdensburgh.  C.  &  R.  R.  R.  Co. 
v.  Wooley,  3  Abb.  Ct.  of  App.,  398 
(1864),  holds  that  the  requisite  percent- 
age for  all  may  be  paid  by  a  few  sub- 
scribers, and  that  a  promissory  note  is 
good  payment.  Beach  v.  Smith,  30 
N.  Y.,  116  (1864),  affirming  S.  C,  28 
Barb.,  254,  holds  that  payment  in  serv- 
ices performed  under  a  contract  with 
the  company  suffices.  Excelsior  G.  B. 
Co.  v.  Stayner,  25  Hun,  91  (1881),  holds 
that  payment  by  check,  on  which  pay- 
ment is  stopped,  is  insufficient.  Syra- 
cuse, P.  &  O.  R.  R.  Co.  v.  Gere,  4  Hun, 
392  (1875),  sustains  a  suit  by  the  cor- 
poration to  collect  such  a  check.  See, 
also,  Ogdensburgh  R.  &  C.  R.  R.  Co. 
v.  Frost,  21  Barb.,  541  (1856).  Certified 
check  is  good  payment  Re  Staten  I. 
R.  T.  R.  R.  Co.,  37  Hun,  422  (1885) ;  38 
Hun,  381. 

i  New  York  &  O.  M.  R  R.  Co.  v.  Van 
Horn,  57  N.  Y.,  473  (1874),  holding  also 
that  a  subsequent  statute  cannot  cure 
such  omission  to  pay,  and  thereby  ren- 


der the  subscriber  liable.  See,  also, 
Perry  v.  Hoadley,  N.  Y.  Daily  Reg..  May 
6,  1887. 

2  8  S.  &  R.,  219.  See,  also.  Leighty 
v.  Pres.  of  S.  &  W.  T.  Co.,  14  S.  &  R, 
434. 

3  Clark  v.  Monongahela  Nav.  Co.,  10 
Watts,  364  (1840). 

4  Erie  &  W.  P.  R.  Co.  v.  Brown,  25 
Pa.  St,  156  (1855),  the  court  saying: 
"There  is  no  merit  in  such  a  defense. 
.  .  .  The  subscriber  himself  is  under 
the  highest  moral  obligations  faithfully 
to  perform  the  promise  he  has  distinctly 
made."  In  the  case  of  Cam  v.  West- 
chester R.  R.  Co.,  3  Grants  Cas.,  200 
(1855),  the  court  held  that  failure  to  pay 
the  percentage  did  not  render  the  char- 
ter forfeitable. 

5  Everhart  v.  Westchester  &  Phil.  R. 
R.  Co.,  28  Pa.  St.,  339  (1857). 

6  Phil.  &  W.  C.  R.  R.  Co.  v.  Hickman, 
28  Pa.  St  318  (1857).  Contra,  under  the 
act  of  1868.  See  Butcher  v.  Dillsburg 
&  M.  R.  R.  Co.,  76  Pa.  St.  306  (1874). 

•  Garrett  v.  Dillburg  &  M.  R.  R  Co., 
78  Pa.  St,  465  (18751 

8  Hanover  J.  &  S.  R.  R  Co.  v.  Halde- 
man,  82  Pa.  St.,  36  (1876). 

s  Boyd  v.  Peach.  B.  R'y  Co.,  90  Pa. 
St,  169  (1879),   holding,   however,  that 


221 


176.] 


MISCELLANEOUS    DEFENSES. 


[CH.  X. 


§  176.  Failure  of  the  corporation  to  obtain  subscriptions  to  the 
extent  of  the  full  capital  stock  —  It  is  an  implied  part  of  a  contract 
of  subscription  that  the  contract  is  to  be  binding  and  enforce- 
able against  the  subscriber  only  after  the  full  capital  stock  of  the 
corporation  has  been  subscribed.  This  condition  precedent  to  the 
liability  of  the  subscriber  need  not  be  expressed  in  the  corporate 
charter  nor  the  subscription  itself.  It  arises  by  implication  from 
the  just  and  reasonable  understanding  of  a  subscriber  that  he  is 
to  be  aided  by  other  subscriptions.  This  rule  is  supported  also  by 
public  policy,  in  that  corporate  creditors  have  a  right  to  rely  upon 
a  belief  that  the  full  capital  stock  of  the  corporation  has  been  sub- 
scribed.1    If  the  corporation  commences  business  before  the  full 


payment  cannot  be  by  promissory  note, 
although  a  demand  note. 

1  The  leading  case  on  this  defense  is 
Salem  Mill-dam  Corporation  v.  Ropes, 
23  Mass.,  23  (1827),  and  26  Mass.,  187 
(1829).  In  the  case  of  Livesey  v.  Omaha 
Hotel,  5  Neb.,  50  (1876),  Judge  Redfield 
in  the  brief  says :  "  This  rule  has  been 
held  inflexible  in  all  cases,  both  for  the 
security  of  the  public  and  also  of  the 
subscribers;"  Shurtz  v.  Schoolcraft  & 
T.  R  R  Co.,  9  Mich..  269  (1861);  New 
York,  H.  &  N.  R.  R.  Co.  v.  Hunt,  39 
Conn.,  75  (1872) ;  Hale  v.  Sanborn,  16 
Neb.,  1  (1884) ;  Haskell  v.  Worthington. 
7  S.  W.  Rep.,  481  (Mo.,  1888);  Halsey, 
etc.,  Co.  v.  Donovan,  57  Mich.,  318 
(1885) ;  Peoria  &  R  I.  R.  R  Co.  v.  Pres- 
ton, 35  Iowa,  118  (1872),  the  court  say- 
ing that  this  is  the  rule,  "  unless  a  con- 
trary intention  appears,  expressly  or 
by  implication,  either  in  the  charter  or 
the  contract  of  subscriptions;"  Stone- 
ham  Branch  R.  R  Co.  v.  Gould,  68 
Mass.,  277  (1854),  the  court  saying: 
"  This  is  no  arbitrary  rule ;  it  is  founded 
on  a  plain  dictate  of  justice,  and  the 
strict  principles  regulating  the  obliga- 
tion of  contracts ;  "  Bray  V.  Farwell,  81 
N.  Y.,  600,  608  (1880),  where  the  court 
say  the  directors  "  had  no  authority  to 
go  on  with  insufficient  means,  and  thus 
wreck  the  company;"  Selma,  M.  &  M. 
R  R  Co.  v.  Anderson,  51  Miss.,  829 
(1876);  Hughes  v.  Antietam  Manuf.  Co., 
34  Md.,  318,  332  (1870);  Topeka  Bridge 
Co.   v.   Cummings,   3  Kan.,   55  (1864); 


Allman  v.  Havana  R.  &  E.  R  R  Co.,  88 
111.,  521  (1878);  Temple  v.  Lemon,  112 
111.,  51  (1884);  Littleton  Manuf.  Co.  V. 
Parker,  14  N.  H.,  543  (1844);  Hendnx  v. 
Academy  of  Music,  73  Ga.,  437  (1884); 
Contoocook  Valley  R.  R.  Co.  v.  Barker, 
32  N.  H.,  363  (1855);  Prop,  of  N.  Bridge 
v.  Story,  6  Pick.,  45  (1827);  Belfast  & 
M.  L  R  R.  Co.  v.  Cottrell,  66  Me..  185 
(1875);  Rockland,  etc.,  Co.  v.  Sewall,  14 
Atl.  Rep.,  939  (Me.,  1888);  Memphis 
Branch  R  R  Co.  v.  Sullivan.  57  Ga., 
240;  Fox  v.  Allensville,  C.  S.  &  V.  % 
Co.,  46  Ind.,  31  (1874);  Hain  v.  North 
W.  G.  R  Co.,  41  Ind.,  196  (1872',  hold- 
ing also  that  the  corporation  in  suing 
must  aver  that  the  full  capital  stock  has 
been  subscribed :  Central  Turnpike  Co. 
v.  Valentine,  10  Pick.,  142  (1830),  hold- 
ing also  that  the  corporation  has  the 
burden  of  proving  subscriptions  for  the 
full  capital  stock ;  Warwick  R.  R.  Co. 
v.  Cady,  11  R  I.,  131  (1877),  where  the 
charter  said  that  the  capital  stock 
should  not  exceed  a  specified  sum ; 
Fry's  Ex'rs  v.  Lexington  &  B.  S.  R  R 
Co.,  2  Met  (Ky.),  314  (1859),  holding 
also  that  the  corporation  must  aver  full 
subscription ;  Lewey's  Island  R.  R  Co. 
v.  Bolton,  48  Me.,  451  (1860);  Lail  v. 
Mt  Sterling  C.  R  Co.,  13  Bush  (Ky.), 
34  (1877).  holding  that  the  corporation 
need  not  aver  full  subscriptions.  Cf. 
Monroe  v.  Fort  W.,  J.  &  S.  R  R  Co.,  28 
Mich..  272  (1873).  Where,  also,  the  cor- 
poration is  incorporated  with  a  less 
capital  stock  than  was  proposed  when 


222 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  1 77. 


capital  stock  is  subscribed,  the  state  may  bring  an  action  for  the 
forfeiture  of  its  charter.1  The  subscriber,  however,  is  liable  for 
his  proportion  of  the  necessary  expenses,  preliminary  to  the  incor- 
poration and  organization  of  the  company.2 

§  177.  The  act  of  incorporation  may,  of  course,  vary  this  rule. 
Thus,  it  is  well  established  that,  where  the  charter  authorizes  the 
organization  of  the  company,  and  the  commencement  of  corporate 


the  defendant  subscribed,  he  is  not 
bound  by  the  subscription.  Santa  Cruz 
R.  R  Co.  v.  Schurtz,  53  Cal.,  106  (1878). 
A  few  cases  seem  to  hold  a  contrary 
doctrine.  New  Castle  &  A.  T.  Co.  v. 
Bell,  8  Blackf.  (Ind.),  584  (1847);  Ore- 
gon Central  R.  R  Co.  v.  Scoggin,  3 
Oreg.,  161  (1869);  York  &  C.  R  R  Co. 
v.  Pratt.  40  Me.,  447(1855);  Cheraw  & 
C.  R  R  Co.  v.  White,  10  S.  C,  155  (1878). 
See,  also,  Chubb  v.  Upton,  95  U.  S., 
665.  668  (1877),  probably  a  dictum.  In 
the  case  of  Skowhegan  &  A.  R  R. 
Co.  v.  Kinsman,  77  Me.,  370  (1885),  the 
court  seem  to  hold  that,  where  there  is 
in  the  subscription  an  express  promise 
to  pay,  it  is  enforceable  even  though 
the  whole  capital  stock  is  not  subscribed. 
If  such  a  condition  is  expected,  the  court 
says  it  must  be  inserted  in  the  subscrip- 
tion. It  has  been  held  that,  where  a 
subscription  is  made  before  incorpora- 
tion, on  a  paper  not  fixing  the  capital 
stock,  a  failure  to  secure  full  subscrip- 
tion to  the  capital  stock  as  fixed  in  the 
charter  is  no  defense.  Belton,  etc., 
Co.  v.  Sanders.  6  S.  W.  Rep..  134  (Tex., 
1887).  Subscribers  are  not  liable  until 
the  whole  amount  is  subscribed.  They 
may  recover  back  what  they  have  paid. 
Winters  v.  Armstrong,  37  Fed.  Rep ,  508 
(1889).  See,  also,  42  N.  W.  Rep.,  226 
(Wis.,  1889).  A  full  subscription  is  not 
necessary  if  the  subscriptions  are  pajr- 
able  to  an  agent  and  nothing  is  said 
about  full  subscription.  West  v.  Craw- 
ford, 21  Pac.  Rep.,  1123  (Colo.,  1889).  A 
stockholder  may  defend  on  the  ground 
that  the  amount  required  by  the  sub- 
scription list  to  be  subscribed  shall  be 
subscribed  before  he  is  held  liable,  es- 
pecially  where    misrepresentations  are 


made  as  to  the  amount  which  had  been 
subscribed  when  the  defendant  sub- 
scribed. The  question  is  one  for  the 
jury.  Spellier,  etc.,  Co.  v.  Leedom,  24 
Atl.  Rep.,  197  (Pa.,  1892).  When  the 
capital  is  increased  after  the  defendant 
subscribed  he  cannot  insist  on  the  sub- 
scription of  the  capital  stock  as  in- 
creased. Port  Edwards,  etc.,  R'y  v. 
Arpin,  49  N.  W.  Rep..  828  (Wis.,  1891). 
Cf.  S  288.  Full  capital  necessary.  Ex- 
position, etc.,  R'y  v.  Canal,  etc.,  R'y.  7 
S.  Rep.,  627  (La.,  1890).  The  ques- 
tion must  be  clearly  raised  by  the  find- 
ings, otherwise  it  will  not  be  considered 
on  appeal.  Arthur  v.  Clarke,  49  N.  W. 
Rep.,  252  (Minn.,  1891).  Where  stock- 
holders proceed  to  business  before  the 
minimum  capital  prescribed  by  statute 
is  subscribed  and  before  the  requisite 
amount  is  subscribed,  they  are  liable  to 
corporate  creditors  for  such  minimum 
capital.  The  creditors  may  sue  them 
and  the  corporation  in  the  same  action. 
Burns  v.  Beck,  10  S.  E.  Rep.,  121  (Oa.. 
1889).  The  defense  of  non-full  subscrip- 
tions is  available  agaiust  creditors  of 
the  corporation.  Exposition,  etc.,  R'y  v. 
Canal,  etc.,  R'y.  7  S.  Rep..  627  (La.. 
1890).  The  text  above  was  approved  in 
Portland,  etc.,  Co.  v.  Spillman,  32  Pac. 
Rep.,  688  (Ore.,  1893),  and  Denuy,  etc., 
Co.  v.  Schram,  32  Pac.  Rep..  1002  (Wash., 
1893).  No  defense  that  the  full  capital 
stock  was  not  subscribed  where  creditor 
sues.  Hamilton  v.  Clarion,  etc..  R.  R.,  23 
Atl.  Rep.,  53  (Pa.,  1891). 

i  People  v.  Nat.  Saw  Bank,  11  N.  E. 
Rep.,  170  (III.,  1887);  affirmed,  22  id., 
288. 

2  Salem    Mill-dam   Corp.   v.  Ropes,  23 
Mass.,  23  (1827). 
23 


§  its.] 


MISCELLANEOUS    DEFENSES. 


[CH. 


work  after  a  certain  amount  of  the  capital  stock  has  been  sub- 
scribed, such  a  charter  provision  is  equivalent  to  an  express  author- 
ity to  the  corporation  to  call  in  the  subscriptions  as  soon  as  this 
organization  is  effected.1  Subscriptions  to  the  full  amount  of  the 
capital  stock  are  held  not  to  be  necessary.  The  defense  is  not 
good. 

§  178.  Where  the  subscription  itself  specifies  how  much  of  the 
capital  stock  must  be  subscribed  before  payment  may  be  enforced, 
such  specifications  are  legal  and  effective,  and  until  they  are  fully 
complied  with  the  subscriber  is  not  liable.2     A  subscription  of  this 


i  Schenectady  &  S.  P.  R.  R.  Co.  v. 
Thatcher,  11  N.  Y.,  102  (18r,4);  Rensse- 
laer &  W.  P.  R.  Co.  v.  Wetsel,  21  Barb., 
56  (1855);  Hamilton  &  D.  P.  R.  Co.  v. 
Rice,  7  Barb.,  166  (1849);  Sedalia,  War- 
saw, etc..  R'y  Co.  v.  Abell.  17  Mo.  App.. 
645  (1885);  Perkins  v.  Saunders.  56  Miss., 
733  (1879);  Hunt  v.  Kansas  &  M.  B.  Co., 
11  Kan.,  412  (1873),  the  court  saying  that 
otherwise  there  would  be  no  propriety 
in  allowing  the  organization  before  the 
full  capital  was  subscribed :  Hoagland 
v.  Cin.  &  F.  W.  R.  R  Co.,  18  Ind.,  452 
(1862):  Hanover  J.  &  S.  R.  R  Co.  0. 
Haldeman,  82  Pa.  St.,  36  (1876);  Penob- 
scot &  K.  R.  R  Co.  v.  Bartlett,  12  Gray, 
244  (1858),  holding  so,  even  though  no 
contracts  for  building  the  road  were  to 
be  made  until  a  larger  subscription  was 
obtained ;  Boston,  B.  &  G.  R.  R.  Co.  v. 
Wellington,  113  Mass.,  79  (1873);  Minor 
v.  Mechanics'  Bank,  1  Peters,  46;  New 
Haven  &  D.  R.  R.  Co.  v.  Chapman.  38 
Conn.,  65  (1871) ;  Illinois  River  R  R.  Co. 
v.  Zimmer,  20  111.,  654  (1858);  Lexington 
&  W.  C.  R  R.  Co.  v.  Chandler,  54  Mass., 
311;  Willamette  F.  Co.  v.  Stannus,  4 
Oreg.,  261  (1872);  Jewett  v.  Valley  R'y 
Co..  34  Ohio  St.,  601  (1878).  A  vigorous 
case  to  the  contrary  is  Galveston  Hotel 
Co.  v.  Balton,  46  Tex.,  633  (1877).  The 
court  says  :  "  There  were  good  reasons 
for  organizing  the  company  to  be  found 
in  the  increased  facility  of  thereby  rais- 
ing the  subscriptions  to  the  amount 
fixed  for  the  capital  stock  and  of  other 
preliminary  preparations  for  the  execu- 
tion of  the  work,  when  the  subscription 
should  reach  that  amount"  A  contrary 


rule  "  would  render  nugatory  the  most 
important  provision  of  the  charter, 
which  is  the  amount  of  its  capital 
stock."'  When  the  capital  stock  is  to 
be  fixed  by  the  corporation  between 
two  limits,  the  subscription  of  the  full 
amount  as  fixed  is  a  subscription  of  the 
full  capital  stock.  Kennebec  &  P.  R. 
R.  Co.  v.  Jarvis,  34  Me.,  360  (1852).  There 
need  not  be  a  full  subscription  where 
the  statutes  authorize  an  organization 
as  soon  as  one-half  is  subscribed.  As- 
toria, etc.,  R  R.  v.  Neill,  25  Pac.  Rep., 
379  (Oreg.,  1890).  The  statutes  may 
allow  the  corporation  to  proceed  with 
business  and  collect  subscriptions  be- 
fore the  full  capital  stock  is  subscribed. 
Schloss  v.  Montgomery,  etc.,  Co.,  6  S. 
Rep..  360  (Ala.,  1889). 

2  Where,  by  its  terms,  it  is  not  to  be 
binding  until  a  certain  amount  is  sub- 
scribed, it  is  enforceable  when  that 
amount  is  secured,  although  less  than 
the  full  capital  stock.  Bucksport  &  B. 
R.  R  Co.  v.  Buck,  65  Me.,  536  (1876). 
See,  also,  Iowa  &  Minn.  R.  R.  Co.  v. 
Perkins,  28  Iowa,  281  (1869).  Organiza- 
tion authorized  where  "250  to  any  one 
mile  "'  has  been  subscribed  is  satisfied  by 
a  $250  subscription  in  general.  Fitch  v. 
Poplar,  etc.,  Co.,  13.S.  W.  Rep.,  791  (Ky., 
1890).  Where  the  subscription  list  or 
articles  of  association  signed  by  defend- 
ant expressly  provide  for  the  commence- 
ment of  bussiness  before  the  full  capital 
is  subscribed,  the  defense  is  waived. 
Arkadelphia,  etc.,  Mills  v.  Trimble,  15 
S.  W.  Rep.,  776  (Ark.,  1891). 


224 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  m 


kind  is  a  conditional  subscription.1  A  condition  that  the  subscrip- 
tion shall  be  payable  only  when  sufficient  subscriptions  for  the 
corporate  purpose  have  been  secured  has  been  held  to  require  funds 
sufficient  to  put  the  enterprise  in  full  operation.2  On  the  other 
hand,  a  subscription  to  pay  "when  required"  renders  the  sub- 
scribers liable  before  the  full  capital  stock  is  subscribed.3 

§  179.  In  England  statutory  provisions  have  almost  entirely  dis- 
placed the  common-law  rule.  The  principle  that  a  subscriber  is 
not  liable  until  the  full  capital  stock  has  been  subscribed  is  recog- 
nized as  having  been  the  original  rule  at  law.  A  few  cases,  how- 
ever, seem  to  favor  an  opposite  rule.  Yet  an  eminent  English 
authoritv  says  that,  in  all  the  cases  in  which  the  subscribers  were 
held  bound,  they  "  had  entered  into  a  contract  which  precluded 
them  from  maintaining  that  the  subscription  of  the  whole  of  the 
originally  proposed  capital  was  an  express  or  implied  condition  to 
their  becoming  shareholders."  The  English  courts  seem  to  have 
no  clearlv  defined  rule  in  this  matter,  but  allow  each  case  to  turn 
largely  on  its  own  facts;  releasing  the  subscriber  if  the  discrepancy 
in  the  subscriptions  is  very  large,  and  holding  him  liable  if  it  is 
small,  or  if  he  in  any  way  has  aided  the  company  in  beginning 
business.4 


i  See  ch.  V. 

2  People's  Ferry  Co.  v.  Balch,  74  Mass., 
203  (1857),  the  court  holding  that  funds 
for  the  land,  structures  and  boats  must 
be  in  hand  before  the  defendant  becomes 
liable. 

3  Cheraw  &  C.  R  R  Co.  v.  Garland,  14 
S.  C,  63  (1880). 

4  Norwich  &  L.  Navigation  v.  Theo- 
bold,  1  Moody  &  M.,  151  (1828),  required 
full  subscription  in  accordance  with  a 
statute.  Fox  v.  Clifton,  6  Bing.,  776 
(1830),  the  earliest  common-law  English 
case  on  this  subject,  holds  that  the  sub- 
scriber is  not  liable  to  corporate  cred- 
itors unless  the  full  capital  stock  has 
been  subscribed.  Pitcbford  v.  Davis.  5 
Mees.  &  W.,  2  (1839),  also  fully  agrees 
with  the  rule  that  prevails  in  this 
country.  Wontner  v.  Shairp,  4  C.  B., 
404  (1847),  sustained  a  recovery  back  of 
amounts  paid  on  a  subscription,  under 
misrepresentations  that  the  whole  stock 
had  been  subscribed.  Waterford,  W. 
W.  &  B.  R'y  Co.  v.  Dalbiac,  4  Eng.  L. 
■&  Eq.,  452  (1S50),  refused  to  allow  the 


defense,  since  the  charter  allowed  the 
corporation  to  purchase  lard  before  the 
full  capital  stock  was  subscribed.  Watts 
v.  Salter,  10  G  B.,  447  (1856),  holds  the 
same,  the  subscriber  having  aided  in 
the  incorporation,  and  given  the  direct- 
ors power  to  proceed.  Galvanized  Iron 
Co.  v.  Westoby,  21  L.  J.  (Ex.),  302  (1852), 
per  B.  Parke,  says  that  at  common  law 
the  subscriber  is  not  liable  unless  the 
full  capital  stock  is  subscribed.  Contra, 
Lyons'  Case,  35  Beav.,  646  (1866).  John- 
ston v.  Goslett,  3  C.  B.  (N.  S.),  569  (1851 1, 
makes  the  directors  liable  to  the  sub- 
scriber for  his  deposit  when  they  so  pro- 
ceed. London  &  C.  Ins.  Co.  V.  Redgrave. 
4  C.  B.  (N.  S.),  524  (1858),  holds  the  sub- 
scriber liable,  he  having  aided  in  the 
incorporation.  Ornamental  P.  W.  Co. 
v.  Browne,  2  Hurl.  &  C,  63  (1863),  holds 
the  subscriber  liable,  under  the  statute 
of  19  and  20  Vic,  ch.  47.  similar  to  the 
American  statutes.  See,  also,  McDou- 
gall  v.  Jersey  I.  H.  Co..  10  Jur.  (X.  S.\ 
1043  (1864).  Peirce  r.  Jersey  W.  Co., 
L  R,  5  Ex.,  2C9  (1870).  re  quired  a  cer- 


(15) 


225 


§  ISO.] 


MISCELLANEOUS    DEFENSES. 


[CH.  X. 


§  ISO.  Some  difficulty  has  been  experienced  in  determining  what 
subscriptions  shall  be  counted  in  ascertaining  whether  the  full  cap- 
ital stock  has  been  subscribed.  Conditional  subscriptions,  the  con- 
dition to  which  has  not  yet  been  performed  by  the  corporation,  are 
clearly  not  to  be  counted  among  the  rest,  since  such  subscriptions- 
may  never  become  enforceable.1  This  rule,  if  strictly  insisted  upon, 
would  probably  occasion  great  inconvenience  to  the  corporation  in 
enforcing  the  subscriptions  for  stock. 

The  subscriptions  of  married  women,  infants  or  persons  of  un- 
sound mind  are  to  be  excluded  from  the  count.2  So,  also,  the  sub- 
scriptions of  insolvents  are  exeluded,  unless  at  the  time  of  subscribing 
they  were  apparently  able  to  pay  the  subscription.3     Considerable 

subsequently  ratified  by  tbe  principal. 
Conditional  subscriptions,  tbe  condition 
of  which  cannot  be  fulfilled  until  after 
incorporation,  are  not  to  be  counted  in 
ascertaining  whether  tbe  requisite  cap- 
ital stock  has  been  subscribed.     Port- 


tain  amount  to  be  subscribed,  tbe  char- 
ter itself  so  prescribing.  Elder  v.  New 
Zealand  L.  I.  Co.,  30  L.  T.  (N.  S.),  285 
(1875),  the  most  important  case  on  this 
subject,  holds  that,  where  the  directors 


are  about   to    proceed  with   only  one- 
fourteenth   of    the  capital    stock    sub-    land,  etc.,  Co.  v.  Spillman,  32  Pac.  Rep, 
scribed,  'a  subscriber  may  apply  to  the    688  (Ore..    1893).     Subscription  on  con- 


court  and  have  his  name  removed  from 
the  subscribers'  list.  The  court  say  that 
the  case  of  McDougall  v.  Jersey  I.  H. 
Co.,  supra,  would  have  been  decided 
otherwise  had  not  two-thirds  of  the 
stock  in  that  case  been  subscribed.  See, 
also,  Howbeach  Coal  Co.  v.  Teague,  5 
H.  &  N.,  151  (1860) ;  dictum  in  Re  Jen- 
nings, 1  Irish  (Ch.),  654  (1851). 

i  Troy  &  G.  R.  R  Co.  v.  Newton,  74 
Mass.,  596  (1857),  the  condition  being 
that  the  subscriber  be  allowed  to  pay  in 
construction  work ;  Oskaloosa  Agricult- 
ural Works  v.  Parkhust,  54  Iowa,  357 
(1880) ;  Brand  v.  Lawrenceville,  etc.,  R 
R  Co.,  1  S.  E.  Rep.,  255  (Ga.,  1887);  New 
York,  etc.,  R  R  Co.  v.  Hunt,  39  Conn., 
75  (1872) ;  Cabot  &  W.  S.  B.  v.  Chapin, 
60  Mass.,  50  (1850),  where  a  subscription 
payable  in  other  stock  at  par,  when  the 
market  value  was  less,  was  not  counted ; 
Ticonic  Co.  v.  Lang,  63  Me.,  480  (1874). 
Subscriptions  payable  in  property  are 
not  to  be  counted  in  ascertaining 
whether  the  full  capital  stock  is  sub- 
scribed. California,  etc.,  Co.  v.  Russell, 
26  Pac.  Rep.,  105  (1891),  holding,  also, 
that  an  agent's  unauthorized  subscrip- 
tion is  not  to  be  counted  even  though 


dition  that  interest  shall  be  paid  is 
counted.  Rutland  &  B.  R  R  Co.  r. 
Thrall.  35  Tt,  536  (1863).  Cf.  Greenville 
&  C.  R  R  Co.  v.  Coleman,  5  Rich.  (S.  C). 
118(1851).  Invalid  subscriptions  are  not 
counted.  Belfast  &  M.  L.  R  R  Co.  v. 
Cottrell,  66  Me.,  185  (1875).  Cf.  Swart- 
wout  v.  Michigan  Air  Line  R  R  Co.,  24 
Mich.,  389  (1872) ;  §  79,  supra. 

2  Phillips  v.  Covington  &  Cin.  Bridge 
Co.,  2  Mete.  (Ky.),  219  (1859),  holding 
that  subscriptions  of  infants,  married 
women  or  insolvents  are  not  to  be 
counted  unless  already  paid  in.  Ficti- 
tious paid-up  stock,  and  stock  converti- 
ble into  corporate  bonds,  counted.  See, 
also,  Appeal  of  Hahm,  7  Atl.  Rep.,  482 
(Pa.,  1886),  excluding  subscriptions  of 
married  women.  Cf.  Litchfield  Bank 
v.  Church,  supra.  Payment  of  part 
with  knowledge  that  married  woman's 
subscription  was  counted  is  a  waiver. 
Appeal  of  Cornell,  6  Atl.  Rep.,  258  (Pa, 
1886).  Ultra  vires  subscriptions  of  other 
corporations  are  not  counted.  Berry  v. 
Yates,  24  Barb.,  199  (1857). 

3  Lewey's  Island  R.  R.  Co.  v.  Bolton. 
48  Me.,  451  (1860);  Belfast,  etc.,  R'y  Co. 
v.  Inhabitants  of  Brooks,  60  Me.,  568 

226 


CII.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  181. 


difference  of  opinion  exists  as  to  whether  subscriptions  payable  by 
their  terras  in  labor  or  materials  or  contract  work  are  to  be  in- 
cluded in  the  count.1  The  better  rule  seems  to  be  that  the  necessity 
of  employing  this  method  of  carrying  out  many  modern  corporate 
enterprises  requires  that  such  subscriptions  should  be  counted  if 
the  contract  is  made  in  good  faith  and  the  contractors  are  reason- 
ably responsible  men.2  The  weight  of  authority,  however,  holds 
otherwise.  The  records  of  the  corporation  are  sufficient  and  com- 
petent evidence  that  the  full  capital  stock  has  been  subscribed.3 

The  directors  and  stockholders  are  not  liable  for  corporate  debts 
merely  because  they  commence  business  before  the  capital  stock 
was  subscribed.     The  incorporation  was  legal  without  it.4 

§  181.  A  subscriber  may  waive  the  defense  that  the  full  capital 
stock  of  the  corporation  has  not  been  subscribed.  This  waiver 
may  be  either  express  or  implied  from  the  acts  or  declarations  of 


(1872),  32  Pac.  Rep.,  1002.  The  subse- 
quent failure  of  some  of  the  subscribers 
is  immaterial.  Salem  M.  D.  Corporation 
v.  Ropes,  26  Mass.,  187  (1829). 

1  Not  counted  where  the  contractor 
failed  to  complete  the  work.  New  York, 
H.  &  N.  R  R  Co.  v.  Hunt,  39  Conn.,  75 
(1872);  Troy  &  G.  R.  R  Co.  v.  Newton, 
74  Mass.,  596  (1857),  the  court  saying: 
"  The  receipt  of  the  stock  by  them  de- 
pended entirely  upon  a  contingency,  as 
the  contractors  might  fail  to  do  the 
work,  and  so  no  stock  be  earned ; "  Old- 
town  &  Lincoln  R.  R.  Co.  v.  Veazie,  39 
Me.,  571  (1855),  where  the  contract  work 
was  not  completed.  In  the  case  of 
Ridgefield  &  N.  Y.  R.  R.  Co.  v.  Brush, 
43  Conn.,  86  (1875),  such  subscriptions 
were  counted,  the  contract  for  payment 
in  work  being  parol,  and  not  allowed  to 
vary  the  apparently  absolute  subscrip- 
tion. 

2  Phillips  v.  Covington  &  Cin.  Bridge 
Co.,  2  Mete.  (Ky.),  219  (1859). 

3  Penobscot  R  R  Co.  v.  Dummer,  40 
Me.,  172  (1855) ;  Same  v.  White,  41  Me., 
512  (1856).  Unless  proof  be  introduced 
to  destroy  their  effect.  A  call  is  notice 
that  the  full  amount  has  been  sub- 
scribed. Harlem  Canal  Co.  v.  Seixas,  2 
Hall  (N.  Y),  504  (1829) ;  Same  v.  Spear,  2 
Hall,  510;  Litchfield  Bank  v.  Church,  29 
Conn.,  137  (1860),  holding  that  the  cer- 


tificate of  the  commissioners  that  the 
full  stock  had  been  subscribed  would 
not  be  questioned,  even  though  they 
had  counted  married  women's  subscrip- 
tions. To  same  effect,  see  Lane  v. 
Brainerd,  30  Conn.,  565  (1862);  Marl- 
borough Branch  R.  R  Co.  v.  Arnold,  9 
Gray,  159  (1857).  If  the  corporate 
ords  are  destroyed  or  lost  there  should 
be  other  clear  evidence.  Central  Turn- 
pike Co.  v.  Valentine,  10  Pick.,  142 
(1830). 

4  National  Bank  v.  Texas,  etc.,  Co.,  12 
S.  W.  Rep.,  101  (Tex.,  1889).  It  is  not 
actionable  negligence  in  directors  to 
proceed  to  business  because  only  a  small 
part  of  the  capital  is  subscribed.  Re 
Liverpool,  etc.,  Ass'n,  62  L.  T.  Rep.,  873 
(1890).  Paying  in  half  of  the  subscrip- 
tion with  a  view  to  incorporation,  and 
then  abandonment  of  incorporation,  do  « 
not  render  a  subscriber  liable  as  a  part- 
ner. Hendson  v.  Spaulding,  6  N.  Y. 
Supp.,  877  (1889).  Where  stockholders 
proceed  to  business  before  the  minimum 
capital  prescribed  by  statute  is  sub- 
scribed and  before  the  requisite  amount 
is  subscribed,  they  are  liable  to  corporate 
creditors  for  such  minimum  capital. 
The  creditors  may  sue  them  and  the 
corporation  in  the  same  action.  Bums 
v.  Beck,  10  S.  E.  Rep.,  121  (Ga..  1889  , 
Cf.  §  243. 


227 


§  1SL] 


MISCELLANEOUS    DEFENSES. 


[CH.  X. 


the  subscriber.1  Many  different  facts  have  been  passed  upon  by 
the  courts,  and  held  either  to  constitute  or  not  to  constitute  a 
waiver  of  this  defense.  Thus,  it  has  been  held  to  amount  to  a 
waiver  for  the  subscriber  to  act  as  a  director,  attend  meetings  and 
contract  corporate  debts;2  or  to  pay  assessments  for  several  years, 
with  full  knowledge  of  all  the  facts; 3  or  to  write  to  the  directors, 
requiring  them  to  call  a  meeting ; 4  or  to  participate  as  a  stock- 
holder and  committee-man  for  several  months;5  or  to  act  as  presi- 
dent of  the  corporation.6  But  a  subscriber  does  not  waive  this 
defense  by  paying  a  deposit;7  or  by  attending  a  meeting;8  or  by 
participating  in  preliminary  work  and  paying  a  statutory  percent- 


lEmmitt  v.  Springfield.  J.  &  P.  R  R 
Co.,  31  Ohio  St.  23  (1876);  Hager  v. 
Cleveland,  36  Md.,  476  (1872);  Masonic, 
etc.,  Assoc,  v.  Channell,  45  N.  W.  Rep., 
716  (Minn.,  1890).  In  Anderson  v.  Mid- 
dle, etc.,  R  R,  17  S.  W.  Rep.,  803  (Tenn., 
1891),  a  special  agreement  was  held  to 
be  a  waiver  of  the  full  capital  being 
subscribed,  but  not  as  to  those  who  had 
not  signed  the  agreement.  A  subscriber 
by  paying  calls  may  waive  objections 
to  the  full  capital  stock  being  sub- 
scribed. California,  etc.,  Hotel  Co.  v. 
Callender,  29  Pac.  Rep.,  859  (Cal.,  1892). 
The  wbole  capital  stock  must  be  sub- 
scribed before  subscriptions  are  en- 
forced, unless  the  subscription  contract 
provides  otherwise.  A  subscriber  may 
waive  this,  and  the  question  of  waiver 
is  for  the  jury.  Hards  v.  Platte,  etc.,  Co., 
53  N.  W.  Rep.,  73  (Neb.,  1892).  Where 
the  subscribers  have  induced  a  con- 
tractor to  proceed  on  the  theory  that 
the  full  capital  has  been  subscribed,  it  is 
no  defense  that  one  subscription  was  in- 
valid. Gibbons  v.  Ellis,  53  N.  W.  Rep., 
701  (Wis.,  1892). 

2  Hager  v.  Cleveland,  supra.  A  de- 
fendant waives  the  defense  that  the  full 
capital  stock  was  not  subscribed  where 
he  serves  as  a  director,  is  present  when 
calls  are  made,  votes  in  favor  of  buying 
a  building  lot,  serves  on  committees, 
prepares  plans,  etc.  Auburn,  etc.,  Ass'n 
v.  Hill,  32  Pac.  Rep.,  587  (Cal.,  1893). 

3  Morrison  v.  Dorsey,  48  Md.,  461 
(1377> 

4  Tredwen  v.  Bourne,  6  Mees.  &  W., 


461  (1840),  holding  it  to  be  evidence  of 
waiver. 

s  Sharpley  v.  Louth  &  E  C.  R'y  Co., 
L.  R.  2  Ch.  Div.,  663  (1876).  A  stock- 
holder who  receives  and  retains  a  cer- 
tificate for  increased  stock  cannot,  after 
corporate  insolvency,  set  up  that  the 
full  increased  capital  was  not  subscribed. 
Butler  v.  Aspinwall,  33  Fed.  Rep.,  217 
(1887).  By  organizing  and  proceeding, 
stockholders  waive  the  defense  that  the 
full  capital  stock  was  not  subscribed. 
Dallemand  v.  Odd  Fellows',  etc.,  Bank, 
16  Pac.  Rep.,  497  (Cal.,  1888). 

GCorwith  v.  Culver,  69  111.,  502  (1873). 

"<  Pitchf ord  v.  Davis,  5  Mees.  &  W.,  2 
(1839). 

3  Wontner  v.  Shairp,  4  C.  B.,  404  (1847) ; 
New  H.  Central  R  R  Co.  v.  Johnson, 
30  N.  H.,  390  (1855) ;  Orynski  v.  Lous- 
tannan,  15  S.  W.  Rep.,  674  (Tex.,  1890), 
holding  that  this  defense  is  not  waived 
by  attending  a  corporate  meeting,  the 
subscriber  not  knowing  all  the  facts ; 
nor  is  it  waived  by  paying  part  of  the 
subscription.  Power  in  the  directors  to 
make  calls  when  they  see  fit  does  not 
destroy  this  defense.  A  subscriber  who 
attends  meetings  and  participates  in 
the  organization  waives  the  defense 
that  the  full  capital  stock  has  not  been 
subscribed ;  but  if  he  does  so  without 
knowledge  of  the  fact  that  the  full  cap- 
ital stock  has  not  been  subscribed  he 
does  not  waive  such  defense.  Portland, 
etc.,  Co.  v.  Spillman,  32  Pac.  Rep.,  688 
(Ore.,  1893);  International,  etc.,  Assoc 
v.  Walker,  49  N.  W.  Rep.,  1086  (Mich., 


228 


en.  x.] 


MISCELLANEOUS    DEFENSES. 


[§  182. 


age  required  to  be  paid  at  the  time  of  subscribing;1  or  by  paying 
assessments  for  surveys.2 

§  182.  Failure  to  fix  definitely  the  capital  stock,  where  the  amount 
is  left  in  the  discretion  of  the  corporation. —  Sometimes  corporate 
charters,  especially  in  the  New  England  states,  are  granted  with- 
out specifying  the  exact  amount  of  the  capital  stock,  but  either 
fixing  the  outside  limit  or  allowing  the  corporate  authorities  to  fix 
it  between  certain  specified  limits.  "Where  the  charter  leaves  the 
amount  of  the  capital  stock  indefinite,  it  is  the  duty  of  the  proper 
corporate  authorities  to  determine  what  it  shall  be;  and  no  sub- 
scriber can  be  held  liable  on  his  subscription  until  such  determina- 
tion is  made.3  After  the  capital  stock  is  once  fixed,  there  seems 
to  be  no  rule  preventing  its  being  varied  subsequently,  provided 
the  specified  charter  limits  are  observed.4  It  has  been  held  that 
even  subscriptions  to  the  amount  of  the  lowest  limit  allowed  by 
the  charter  are  insufficient,  unless  that  limit  has  been  designated 
by  the  corporate  authorities  as   the  amount  of  the  capital  stock.' 

After  the  capital  stock  is  so  determined,  the  full  amount  thereof 
must  be  subscribed  before  any  subscriber  is  liable.6  It  is  not  nec- 
essary that  the  amount  of  the  capital  stock   be  fixed   by  formal 


1891),  holding  that  attendance  at  a  meet- 
ing and  voting  are  not  necessarily  a 
waiver. 

1  Livesey  v.  Omaha  Hotel,  5  Neb.,  50 
(1876);  Oldtown  &  L.  R.  R  Co.  v.  Vea- 
zie,  39  Me.,  571  (1855),  where  as  an  officer 
the  subscriber  aided  in  preliminary 
work.  This  case  goes  further,  and  holds 
that  there  can  be  no  waiver  under  any 
state  of  facte.  Full  capital  stock  neces- 
sary. Acts  and  facts  prior  to  the  sign- 
ing of  the  subscription  do  not  constitute 
a  waiver.  Curry  Hotel  Co.  v.  Mullins, 
53  N.  W.  Rep.,  360  (Mich.,  1892). 

2  Memphis  Branch  R  R  Co.  v.  Sulli- 
van, 57  Ga.,  240  (1876).  Atlantic  Cotton 
Mills  v.  Abbott,  63  Mass.,  423  (1852), 
holds  that  paying  assessments  and  at- 
tempting to  transfer  is  not  a  waiver. 
May  v.  Memphis  B.  R  R  Co.,  48  Ga., 
109  (1873),  holds  that  paying  an  assess- 
ment with  notice  of  this  defense  is  no 
waiver  of  it. 

3  Worcester-*  N.E.R  Co.  v.  Hinds,  62 
Mass.,  110  (1851);  Troy  &  G.  R.  R  Co.  v. 
Newton,  74  Mass.,  596  (1857);  Pike  v. 
Shore  Line,  68  Me.,  445  (1878);  Somerset 
R  R  Co.  v.  Clarke,  61   Me.,  384  (1871  \ 

320 


Contra,  Warwick  R  R.  Co.  v.  Cady.  11 
R.  I,  131  (1875);  City  Hotel  v.  Dickin- 
son, 72  Mass.,  5R6  (1862).  In  the  case  of 
Kirksey  v.  Florida  &  G.  P.  R.  Co..  7 
Fla.,  23  (1857),  it  was  held  that  the  cor- 
porate charter  need  not  mention  any 
capital  stock  or  shares  of  stock,  and  yet 
subscriptions  may  be  taken  and  en- 
forced. In  the  case  of  Ward  v.  Gris- 
woldville  Mfg.  Co.,  16  Conn.,  593  (1844), 
where  the  charter  allowed  the  capital 
stock  to  vary  from  $5,000  to  $50,000.  it 
was  assumed  that  the  subscriptions  were 
enforceable,  although  no  fixed  capital 
stock  had  been  settled  upon.  In  the 
case  of  White  Mts.  R  R  Co.  v.  East- 
man, 34  N.  H.,  124  (1856),  the  charter 
allowed  assessments  when  the  lower 
limit  of  the  capital  stock  was  reached. 

*  Somerset  &  K.  R  R  Co.  r.  Cashing, 
■15  Me.,  524  (1858);  Troy  &  G.  R.  R  Co. 
v.  Newton,  74  Mass.,  596  (1857)  —dicta, 
however,  in  both  of  these  cases. 

5 Pike  v.  Shore  Line,  68  Me..  445  (1878). 

e  Somerset  &  K.  R  R.  Co.  r.  Cashing, 
45  Me..  524  (1858);  Kennebec,  etc.,  R  R 
Co.  a  Jarvis,  34  Me.,  360  (1852). 


§§  183,  184.]  MISCELLANEOUS   DEFENSES.  [CH.  X. 

declaration  of  the  corporate  authorities.  It  may  be  done  by  acts 
equivalent  thereto.  Thus,  a  resolution  to  close  the  books  on  a 
given  day,1  or  limiting  the  time  of  subscription  and  then  closing 
the  subscription  books,2  or  voting  that  a  certain  amount  of  stock 
in  addition  to  existing  subscriptions  shall  be  issued,3  are  the  same 
as,  and  are  equivalent  to,  an  express  resolution  that  the  capital 
stock  shall  be  the  amount  of  subscriptions  thus  taken. 

§  183.  Irregular  incorporation  of  the  company. —  Under  the  laws 
of  most  of  the  states,  charters  of  incorporation  are  obtained  by  com- 
plying with  the  provisions  of  what  are  called  general  incorporating 
acts.  Usually  these  acts  provide  that  a  specified  number  of  persons, 
by  filing  at  a  public  registry  a  certificate  setting  out  certain  facts, 
may  thereb}7  form  a  corporation  for  the  purposes  named  in  such  cer- 
tificate. The  various  steps  to  be  taken,  and  the  contents  of  each  certif- 
icate, are  prescribed  by  the  statute.  It  frequently  happens,  however, 
that  in  the  formation  of  a  corporation  under  the  statute  some  part 
of  the  proceeding,  through  inadvertence  or  mistake,  is  not  strictly 
complied  with.  The  same  thing  happens,  also,  under  a  special  act 
incorporating  a  certain  company,  and  requiring  it  to  perform  speci- 
fied things  in  order  to  render  the  incorporation  complete.  These 
defects  may  render  the  corporate  charter  forfeitable  at  the  instance 
of  the  state.  Accordingly  the  question  has  arisen  whether  such 
defects  in  the  process  of  becoming  incorporated  are  a  good  and  suffi- 
cient defense  to  an  action  by  the  corporation  to  collect  subscrip- 
tions to  its  stock. 

§  184.  When  an  action  is  brought  to  collect  a  subscription,  either 
directly  or  indirectly  for  the  benefit  of  corporate  creditors,  it  is 
well  established  that  the  subscribers  cannot  defeat  such  action  by 
the  defense  that  the  corporation  was  not  an  incorporation,  by  rea- 
son of  its  not  having  fully  complied  with  the  terms  of  the  statute 
providing  for  such  an  incorporation.4     Not  only  is  the  subscriber 

1  Lexington  &  W.  C.  R.  R,  Co.  v.  in  fact  so  defective  as  to  be  incapable  of 
Chandler,  54  Mass.,  311  (1847).  supporting  the  corporation  as  against 

2  Bucksport  &  B.  R.  R  Co.  v.  Buck,  65  the  state,  they  are,  as  against  a  sub- 
Me.,  536  (1876).  scriber  to  its  capital,  held  sufficient  to 

3  Penobscot  &  K.  R.  R  Co.  v.  Bartlett,  constitute  a  corporation  de  facto,  if  sup- 
7S  Mass.,  244  (1858).  ported  by   proof    of    user ;  "    Clark    v. 

4  Hickling  v.  Wilson,  104  111.,  54  (1882) ;  Thomas,  Rec.  etc.,  34  Ohio  St.,  46 
tVheelock  v.  Kost,  77  111.,  296  (1875);  (1874);  Voorhees  n  Receiver  of  Bank, 
Casey  i\  Galli,  94  U.  S.,  673;  Upton  v.  etc.,  18  Ohio,  464  (1850);  Ossippee  Co.  v. 
Hansbrough,  3  Biss.,  317  (1873),  the  court  Canney,  64  N.  H.,  295  (1874) ;  McCune 
saying:  "I  understand  the  rule  to  be  Min.  Co.  v.  Adams,  10  Pac.  Rep.,  468 
well  settled  that,  where  papers  having  (Kan.,  1886) ;  Hamilton  v.  Clarion,  eta, 
color  of  compliance  with  the  statutes  R.  R,  23  Atl.  Rep,  53  (Pa.,  1891). 
have  been  filed  with  the  proper  state  Thompson  v.  Reno  Sav.  Bank,  7  Pac. 
officers  and  meet  their  approval,  but  are  Rep.,  68  (Nev.,  1885),  says :  "  The  certifi- 

230 


en.  x.] 


MISCELLANEOUS    DEFENSES. 


[§  135. 


estopped,  by  the  act  of  subscribing,  from  setting  up  this  defense, 
but  he  is  bound  also  by  the  rule  that  the  existence  of  a  corporation 
cannot  be  inquired  into  except  by  a  direct  proceeding  in  behalf  of 
the  state.  It  is  sufficient  that  the  corporation  exists  de  facto.  If 
there  is  no  authority  of  law  for  such  a  corporation,  the  members 
are  liable  as  partners.1 

§  185.  As  between  the  corporation  itself  and  the  subscribers 
there  is  more  difficulty  and  doubt  in  determining  the  rule.  The 
great  weight  of  authority  lays  down  the  broad  rule  that  "  where 
there  is  a  corporation  de  facto,  with  no  want  of  legislative  power 
to  its  due  and  legal  existence;  where  it  is  proceeding  in  the  per- 
formance of  corporate  functions,  and  the  public  are  dealing  with  it 
on'the  supposition  that  it  is  what  it  professes  to  be;  and  the  ques- 
tions suggested  are  only  whether  there  has  been  exact  regularity 
and  strict  compliance  with  the  provisions  of  the  law  relating  to  in- 
corporations,—  it  is  plainly  a  dictate  alike  of  justice  and  of  public 
policy,  that,  in  controversy  between  the  de  facto  corporation  and 
those  who  have  entered  into  contract  relations  with  it,  as  cor- 
porators or  otherwise,  such  questions  should  not  be  suffered  to 
be  raised."2     This,  doubtless,  is  the  law  of  the  land,  although  a 

cate  is  made    for    the  benefit  of   the    tion  shall  be  taken  as  performed."    In 


public,  not  for  the  corporation  or  its 
stockholders.  Those  who  participated 
in  the  incorporation  of  this  bank,  and, 
by  a  certificate  made  in  pursuance  of 
the  statute,  announced  the  amount  of 
its  capital  stock,  cannot,  as  against  the 
creditors  of  the  corporation,  contradict 
their  own  certificate."  The  creditors  of 
the  consolidated  company  may  enforce 
subscriptions  to  the  stock  of  the  constit- 
uent companies,  and  the  irregularity  of 
the  incorporation  of  the  consolidated 
company  is  no  defense.  Hamilton  v. 
Clarion,  etc.,  R  R,  23  Atl.  Rep.,  53  (Pa., 
1891).     See,  also,  ch.  XIII. 

i  See  ch.  XIII. 

2  Cooley,  J.,  |in  Swartwout  v.  Mich. 
Air  Line  R.  R.  Co.,  24  Mich.,  389  (1872). 
An  important  case  on  this  subject  is  Tar 
River  Nav.  Co.  v.  Neal,  3  Hawks  (N.  C), 
520  (1825;,  where  the  court  say  that 
"even  where  it  is  shown  that  such 
charter  has  been  granted  upon  a  condi- 
tion precedent,  and  persons  are  found 
in  the  quiet  possession  and  exercise  of 
those  corporate  rights  as  against  all 
but  the  sovereign,  the  precedent  condi- 


this  case  the  subscriber  had  participated 
in  corporate  meetings.  Wilmington  C. 
&  R  R  R  Co.  v.  Thompson.  7  Jones' 
L.  (N.  C),  387  (1860) ;  Brookville  &  G. 
T.  Co.  v.  McCarthy,  8  Ind.,  392  (1856), 
holding  also  that  the  subscriber  cannot 
set  up  that  the  corporation  had  for- 
feited its  charter  for  misuser  and  non- 
user.  Central  A.  &  M.  Ass'n  v.  Alabama 
G.  L.  Ins.  Co.,  70  Ala.,  120  (1881),  where 
the  court  say :  "  Whoever  contracts 
with  a  corporation  having  a  de  facto 
existence,  the  reputation  of  a  legal 
corporation,  in  the  actual  exercise  of 
corporate  powers  and  franchises,  is 
estopped  from  denying  the  legality  of 
the  existence  of  the  corporation,  or  in- 
quiring into  irregularities  attending  its 
formation,  to  defeat  the  contract,  or  to 
avoid  the  liability  he  has  voluntarily 
and  deliberately  incurred."  It  also 
holds  that  a  subsequent  statute  curing 
the  defect  is  constitutional  and  effect- 
ive. Appleton  Mut  Fire  Ins.  Co.  v. 
Jesser,  87  Mass.,  446  (1862),  the  court 
saying  that  where  "persons  were  found 
with  the  consent  and  under  the  author- 


231 


§  185.] 


MISCELLANEOUS   DEFENSES. 


[CH. 


carefully-considered  case  in  Missouri  held  to  the  contrar}^,  and  al- 
lowed a  subscriber  who  had  not  done  more  than  merely  subscribe 
to  set  up  this  defense  against  the  corporation,  no  creditor's  rights 
being  involved;  and  the  court  declared  that  all  the  cases  denying 


ity  of  the  designated  corporators,  and 
without  objection  on  the  part  of  the 
sovereign  power,  actually  exercising 
the  corporate  powers  and  claiming  and 
using  the  franchise,  they  constituted  a 
corporation  de  facto;  and  the  lawful- 
ness of  their  organization  cannot  be 
impeached  collaterally  in  an  action  to 
recover  an  assessment."  McCarthy  v. 
Lavasche,  89  111.,  270  (1878),  holding 
that  the  defense  is  not  allowable,  even 
though  the  statute  creating  the  corpo- 
ration be  unconstitutional.  See  St. 
Louis  Ass'n  v.  Hennessey,  11  Mo.  App., 
555 ;  Slocum  v.  Prov.  S.  &  G.  P.  Co.,  10 
R.  I.,  112  (1871);  McHose  v.  Wheeler, 
45  Pa  St.,  32  (1863);  Tarbell  v.  Page,  24 
111.,  48  (1860),  where  no  certificate  was 
filed ;  Wallworth  v.  Brackett,  98  Mass., 
98  (1867) ;  Hanover  J.  &  S.  R  R  Co.  v. 
Haldeman.  82  Pa.  St.,  36  (1876),  hold- 
ing that  non-user  rendering  the  charter 
forfeitable  is  no  defense;  Rowland  v. 
Meader  Furniture  Co.,  38  Ohio  St.,  269 
(1882),  holding  that  actual  judgment  of 
forfeiture  is  no  defense ;  Meadow  v. 
Gray,  30  Me.,  547  (1849) ;  Danbury  &  N. 
R  R.  Co.  v.  Wilson,  22  Conn.,  435  (1853), 
where  the  subscriber  acted  as  a  director ; 
Central  Pr.  Co.  v.  Clements,  16  Mo., 
359  (1852) ;  Maltby  v.  Northwestern  Va. 
R  R  Co.,  16  Md.,  422  (1860),  where  the 
subscriber  had  already  paid  calls ;  Craw- 
ford R  R  Co.  v.  Lacey,  3  Y.  &  J.,  80 
(1829),  where  incorporation  was  ob- 
tained by  a  false  representation  to  par- 
liament ;  Rockville  &  W.  T.  Co.  v.  Van 
Ness,  2  Cranch,  C.  C,  449  (1824),  where 
the  subscriber  had  taken  part  in  an 
election ;  Monroe  v.  Fort  W.,  J.  &  S.  R 
R  Co.,  28  Mich.,  272  (1873),  where  only 
three  instead  of  five  signed  the  certifi- 
cate :  Rice  v.  Rock  L  &  A.  R  R.  Co.,  21 
111.,  93  (1859);  Hunt  v.  Kansas  &  M. 
Bridge  Co.,  11  Kan.,  412  (1873),  where 
the  subscriber  acted  as  director ;  Home 


Stock  Ins.  Co.  v.  Sherwood,  72  Mo..  460 
(1880);  Evansville.  etc.,  Co.  v.  Evans- 
ville,  15  Ind.,  395  (1860);  Stoops  v. 
Greensburgh,  etc.,  Co.,  10  Ind.,  47 
(1857);  Kishacoquillas,  etc.,  Co.  v. 
McConahy,  16  S.  &  R.,  140  (1827),  and 
cases  in  ch.  XXXVIII  on  this  subject. 
Gill  v.  Ky.  &  C.  G.  &  S.  Min.  Co.,  7 
Bush,  635  (1870);  Wood  v.  Coosa  &  C. 
R  R.  Co.,  32  Ga.,  273  (1861);  Hager  v. 
Bassett,  36  Md.,  476  (1872) ;  East  P.  Hotel 
Co.  v.  West,  13  La.  Ann.,  545  (1858). 
See,  also,  Oregon,  etc.,  v.  Scoggin.  3 
Oreg.,  161,  holding,  under  a  statute,  that 
the  subscription  may  be  sued  on  before 
the  organization  is  completed.  It  is  no 
defense  that  the  corporation  was  organ- 
ized on  a  fourteen-day  notice  instead  of 
fifteen  days.  Ofsipee,  etc.,  Co.  v.  Canney, 
54  N.  R,  295  (1874).  Stockholders,  when 
sued  on  their  statutory  liability,  cannot 
impeach  the  organization  of  the  com- 
pany. Aultman  v.  Waddle,  19  Pac.  Rep., 
730  (Kan.,  1888).  The  subscriber  cannot 
set  up  that  the  charter  was  unconstitu- 
tional. Dows  v.  Napier,  91  111.,  44  (1878). 
In  New  York  the  first  case  is  Dutchess 
Cotton  Manufactory  v.  Davis,  14  Johns., 
238  (1817);  then  came  Schenectady  & 
S.  P.  R.  Co.  v.  Thatcher,  11  N.  Y,  102 
(1854);  Eaton  v.  Aspinwall,  19  N.  Y, 
119  (1859);  Methodist  E.  U.  Ch.  v.  Pick- 
ett, 19  N.  Y,  482  (1859),  the  court  say- 
ing it  is  sufficient  for  the  corporation  to 
be  de  facto.  "  Two  things  are  necessary 
in  order  to  establish  the  existence  of  a 
corporation  de  facto,  viz. :  (1)  The  exist- 
ence of  a  charter,  or  some  law  under 
which  a  corporation  with  the  powers 
assumed  might  lawfully  be  created ; 
and  (2)  a  user,  by  the  party  to  the  suit, 
of  the  rights  claimed  to  be  conferred  by 
such  charter  or  law.  The  rule  estab- 
lished by  law  as  well  as  by  reason  is, 
that  parties  recognizing  the  existence  of 
corporations  by  dealing  with  them  have 


232 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  186. 


the  defense  were  cases  where  the  subscriber  had  acquiesced,  "  either 
by  the  payment  of  part  of  the  subscription  or  by  becoming  a  di- 
rector, or  by  attending  meetings  of  stockholders,  or  by  any  other 
act  indicating  an  acquiescence  in  the  validity  of  his  subscription."  l 
§  186.  There  is  a  different  class  of  cases  in  which  a  subscriber 
for  stock  is  allowed  to  make  the  defense  that  the  corporation  has 
not  been  regularly  and  legally  incorporated.  Where  the  subscriber 
made  his  contract  of  subscription  previous  to  and  in  anticipation 
of  the  incorporation,  and  does  not,  by  his  subsequent  acts,  acquiesce 
in  the  mode  of  incorporation,  he  may  set  up  that  the  corporation 
has  not  been  incorporated,  and  that  he  is  not  liable.    The  rule  that 


no  right  to  object  to  any  irregularity  in 
their  organization."  Black  R.  &  U.  R 
R.  Co.  v.  Clarke,  25  N.  Y.,  208  (1862); 
Leonardsville  Bank  v.  Willard,  25  N.  Y., 
574  (1862);  Buffalo  &  Allegany  R.  R 
Co.  v.  Cary,  26  N.  Y.  75  (1852);  Aspin- 
wall  v.  Sacchi,  57  N.  Y,  331  (1874);  Dor- 
ris  v.  French,  4  Hun.  292  (1875).  Not, 
however,  where,  at  the  time  of  signing 
the  articles,  the  names  of  the  directors, 
required  to  be  inserted,  were  not  in- 
serted. Dutchess  &  C.  C.  R.  R.  Co.  v. 
Mabbett.  58  N.  Y.,  397  (1874);  Cayuga 
Lake  R.  R.  Co.  v.  Kyle,  64  N.  Y„  185 
(1876);  Phoenix  Warehousing  Co.  v. 
Badger,  67  N.  Y,  294  (1876) ;  De  Witt  v. 
Hastings.  69  N.  Y,  518  (1877),  admitting 
the  defense  on  the  ground  that  there 
was  no  user  of  a  corporate  franchise; 
Ruggles  v.  Brock,  6  Hun,  164  (1875); 
Mead  v.  Keeler,  24  Barb.,  20  (1857);  Ab- 
bott v.  Aspinwall.  26  Barb.,  202  (1857); 
Childs  v.  Smith,  55  Barb.,  45  (1869);  and 
see  Childs  v.  Smith,  46  N.  Y,  34  (1871) ; 
McFareon  v.  Triton,  4  Denio,  392  (1847). 
This  is  also  the  rule  in  the  federal  courts. 
Webster  v.  Upton,  91  U.  S.,  65  (1875); 
Chubb  v.  Upton,  95  U.  S.,  665  (1877). 
Contra,  Thompson  v.  Guion.  5  Jones' 
Eq.  (N.  C),  113  (1859).  Cf.  Katama 
Land  Co.  v.  Holly,  129  Mass.,  540  (1880). 
The  lapse  of  the  charter,  by  limitation 
of  time  within  which  work  must  be 
commenced,  is  good  defense.  McCully 
v.  Pittsburgh  &  C.  R  R  Co.,  32  Pa  St, 
25  (1858).  Subscribers  to  increased  cap- 
ital stock  cannot  escape  liability  there- 
for by  setting  up  that  the  notice  of  in- 


crease was  not  published  as  required  by 
statute.  Handley  v.  Stutz,  139  U.  S., 
417(1891).  A  subscriber  to  stock  in  a 
West  Virginia  corporation  doing  all  its 
business  in  Minnesota  cannot  set  up  that 
the  company  was  not  legally  incorpo- 
rated, and  cannot  set  up  that  the  plaint- 
iff is  not  a  corporation,  he  having  par- 
ticipated in  its  incorporation.  Minn., 
etc.,  Co.  v.  Denslow,  48  N.  W.  Rep.,  771 
(Minn.,  1891).  It  is  no  defense  that  the 
charter  was  not  registered  in  all  the 
counties  through  which  the  road  run?. 
Anderson  v.  Middle,  etc.,  R  R,  17  S.  W. 
Rep.,  803  (Tenn.,  1891).  Concerning  the 
question  of  who  can  complain  of  mis- 
takes, irregularities  and  illegalities  in 
the  corporation,  see  §  5.  Where  the 
general  railroad  act  provides  that  unless 
work  is  commenced  within  two  years 
the  charter  shall  be  void,  a  subscriber 
for  stock  prior  to  incorporation  may  set 
up  the  defense  that  two  years  have 
elapsed  and  the  charter  is  void.  By- 
waters  v.  Paris,  etc.,  R'y,  11  S.  W.  Rep., 
856  (Tex.,  1889).  Cannot  deny  incorpo- 
ration when  sued  on  a  note  given  to  it. 
Columbia  Electric  Co.  v.  Dixon,  49  N. 
W.  Rep.,  244  (Minn.,  1891).  A  note  given 
to  be  applied  in  payment  of  a  subscrip- 
tion in  a  company  to  be  formed  has 
been  held  to  be  good  even  though  the 
corporation  was  not  legally  formed,  an 
attempt  at  incorporation  having  been 
made.  Smith  v.  Gillen,  12  S.  W.  Rep., 
1073  (Ark.,  1890). 

1  Kansas  City  Hotel  Co.  v.  Hunt,  57 
Mo.,  126  (1874)." 


233 


§  1ST.] 


MISCELLANEOUS   DEFENSES. 


[CH. 


a  person  contracting  with  a  corporation  recognizes  thereby  its 
capacity  to  contract,  and  cannot  afterwards  deny  it  in  that^ trans- 
action, does  not  apply  to  one  who  subscribes  before  incorporation. 
He  may  insist  upon  the  organization  of  a  regular  and  legal  corpo- 
ration.1 

§187.  Ultra  vires  acts  of  the  directors  of  the  corporation.— A. 
subscriber  for  stock  in  a  corporation  cannot  defeat  an  action  to  col- 
lect such  subscription  by  the  defense  that  the  directors  or  the  cor- 
poration itself  have  done  corporate  acts  which  are  beyond  the 
corporate  powers.2  There  are  other  remedies  open  to  the  sub- 
scriber. He  may  either  enjoin  such  ultra  vires  acts,  or  may  have 
them  set  aside  if  already  accomplished.3     This  defense  is  clearly 


iDorris    v.   Sweeney,   60   N.   Y.,   463 
(1875);    Rikhoff  v.  Browne  R.  S.  S.  M. 
Co.,  68  Ind.,  388  (1879) ;  Indianapolis  F. 
&   Min.  Co.  v.  Herkimer,  46  Ind.,   142 
(1874);  Nelson  v.   Blakey,   47    Ind.,   38 
<1874);  Mclntyre  v.  McLane  D.  Ass'n, 
40  Ind.,  104  (1872);  Richmond  Factory 
Ass'n  v.  Clarke,  61  Me.,  351  (1873) ;  Reed 
v.  Richmond  Street  R  R.  Co.,  50  Ind., 
342    (1875);    Taggart    v.   Western    Md. 
R.  R.  Co.,  24  Md.,  563  (1866).  the  court 
saying:     "The    preponderance    of   au- 
thority in  favor  of  a  strict  compliance 
with   the  provisions  of  the  charter,  in 
cases  of  subscriptions  prior  to  the  or- 
ganization of  the  company,  is  such  as  is 
not   to   be   disregarded."      Cf.   Buffalo, 
etc.,  v.  Hatch,  20  N.  Y.,  157  (1859).     The 
"  records,  books  and  minutes  "  of  a  cor- 
poration  are  sufficient  evidence  of  its 
incorporation.     Glenn    v.   Orr,   2  S.  E. 
Rep,   538  (N.    Q,   1887).     A  subscriber 
may  deny  that  a  consolidated  company 
which  succeeds  his  own  was    legally 
incorporated.     Mansfield,   etc.,  R.  R  v. 
Stout,  26  Ohio  St.,  241  (1875):  Brown  r. 
Dibble,  32  N.  W.  Rep.,  565  (Mich.,  1887). 
In  suing  on  an  original  subscription  the 
corporation  must  allege  that  it  has  been 
duly  incorporated.  The  payment  of  part 
of  the  subscription  is  no  waiver  of  the 
defense.     Schloss  v.  Montgomery,  etc., 
Co.,  6  S.  Rep.,  360  (Ala.,  1889).  Indefmite- 
ness  in  the  statement  of  the  objects  of 
incorporation  is  no  defense.     Owenton, 
etc.,  Co.  v.  Smith,  13  S.  W.  Rep.,  426  (Ky., 

1890). 


a  Cravens  v.  Eagle,  etc.,  Co.,  21  N.  E 
Rep.,  981  (Ind.,  1889);  First  Municipality 
of  N.  O.  v.  Orleans  Theater  Co.,  2  Rob. 
(La.),  209  (1842);  Hannibal  R  C.  &  P.  P. 
R.  Co.  v.  Menifee,  25  Mo.,   547  (1857); 
Vicksburg,  S.  &  T.  R.  R  Co.  v.  McKean, 
12  La.  Ann.,  638  (1857) ;  Smith  v.  Talla- 
hassee,  etc.,    Plank-road    Co.,   30    Ala., 
650  (1857) ;  Prop,  of  City  Hotel  v.  Dick- 
inson, 72  Mass.,  586  (1856);  Courtright 
v.  Deeds,  37  Iowa,  503  (1873);  111.  Grand 
T.  R  R  Co.  v.  Cook,  29  111.,  237  (1862); 
Hammett  n  Little  Rock  &  N.  R  R.  Co., 
20  Ark.,  204  (1859).     In  the  case,  how- 
ever, of  Macedon  &  B.  P.  R  Co.  v.  Lap- 
ham,  18  Barb.,  315  (1854),  an  ultra  vires 
extension  of  the  line  was  held  to  be  a 
good    defense.     Subscriber    cannot  set 
up  that  corporation   has  not  complied 
with  charter.     Toledo,  etc.,  R  R.  Co.  v. 
Johnson,   49  Mich.,   148   (1882).     Ultra 
vires  acts  and  no  notice  of  meetings  are 
not  good  defenses.    Cartwright  v.  Dick- 
inson, 12  S.  W.  Rep.,  1030  (Tenn.,  1890). 
If  a  manufacturing  corporation  does  not 
locate  its  works  in  the  place  prescribed 
by  its  articles  of  incorporation,  a  sub- 
scriber to  stock  may  withdraw  his  sub- 
scription.     Auburn,     etc.,     "Works     v. 
Schultz,  22  Atl.  Rep.,  904  (Pa.,  1891). 

3  "  The  stockholder  has  his  remedy  by 
injunction  not  to  enjoin  the  collection 
of  calls  due  upon  his  stock,  but  to  re- 
strain the  corporation  from  the  partic- 
ular violation  or  abuse  of  its  charter 
complained  of."  Miss.,  O.  &  Red  R 
R  R  Co.  v.  Cross,  20  Ark.,  443  (1859). 


234 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  1S3. 


distinguishable  from  the  common  defense  of  amendments  to  the 
charter,  by  the  fact  that  the  acts  here  complained  of  have  no  sanc- 
tion from  the  legislative  authorities.1  Thus,  it  has  been  held  that 
a  subscriber  cannot  defeat  an  action  to  collect  his  subscription  by 
showing  that  the  corporation  has,  without  authority  of  law,  and 
in  excess  of  its  powers,  executed  a  lease  or  sale  of  the  road ; 2  or 
illegally  issued  its  bonds;3  or  purchased  shares  of  its  own  stock,4 
or  the  stock  of  another  corporation;3  or  changed  the  location  or 
route  of  the  road.6  The  last  instance,  especially,  has  been  a  fre- 
quent defense;  but  it  has  been  uniformly  discountenanced  by  the 
courts  where  the  change  in  the  route  was  made,  not  by  an  amend- 
ment to  the  charter,  but  by  the  arbitrary,  unauthorized  act  of  the 
corporate  authorities. 

§  18S.  Frauds  and  mismanagement  of  directors.—  This  defense 
is  very  similar  to  the  preceding  one,  and  is  governed  by  the  same 
rules  of  law.  A  stockholder  cannot  defeat  an  action  to  collect  his 
subscription  by  the  defense  that  the  corporate  affairs  have  been 
managed  fraudulently  or  recklessly  or  negligently.7     The  stock- 


In  Ex  parte  Booker,  18  Ark.,  338  (1857), 
an  application  for  an  injunction  to  re- 
strain the  corporation  from  enforcing 
the  payment  of  a  subscription,  on  the 
ground  that  the  corporation  had  com- 
mitted ultra  vires  acts,  was  refused. 
And  see,  also,  ch.  52,  infra. 

i  Caley  v.  Phil.  &  C.  C.  R.  R.  Co.,  80 
Pa.  St.,  363  (1876).  A  change  in  the  law 
between  the  time  of  making  a  subscrip- 
tion and  the  obtaining  of  the  charter 
may  release  or  render  illegal  the  sub- 
scriptions. Knox  v.  Childerburg  Land 
Co.,  5  S.  Rep..  578  (Ala.,  1889).  Where 
the  statutes  under  which  the  company 
is  organized  allow  the  objects  of  the 
company  to  be  changed  on  a  vote  of 
the  stockholders,  a  dissenting  stockholder 
is  not  released  from  his  subscription  by 
such  change.  Mercantile  Statement 
Co.  v.  Kneal,  53  N.  W.  Rep.,  632  (Minn., 
1892).  For  the  principles  of  law  herein 
relative  to  amendments  to  the  charter, 
see  §  502,  etc. 

2  Hays  v.  Ottawa,  O.  &  F.  R  V.  R,  R. 
Co.,  61  111.,  422  (1871) ;  Ottawa,  O.  &  F. 
R.  V.  R  R.  Co.  v.  Black.  79  111.,  262 
(1875);  Chicago,  B.  &  Q.  R  R.  Co.  v. 
McGinnis,  79  111.,  269  (1875);  111.  Mid 
R'y  Co.  v.  Supervisors,  etc.,  85  111.,  313 


(1877);  South  Ga.  &  Fla.  R.  R  Co.  v. 
Ayres.  56  Ga.,  230  (1876).  See,  also, 
Tuttle  v.  Mich.  Air  Line  R  R  Co.,  35 
Mich.,  247 ;  Troy  &  Rutland  R.  R  Co.  V. 
Kerr,  17  Barb.,  581  (1854).  Or  the  whole 
of  a  business.  Plate  Glass  Ins.  Co.  v. 
Sunley,  8  El.  &  BL,  47  (1857). 

3  Merrill  v.  Reaver,  50  Iowa,  404  (1879). 

4i?e  Republic  Ins.   Co.,   3  Biss.,   452 
(1873). 

5Cheltain  v.  Republic  Life  Ins.  Co., 
86  111.,  220  (1877). 

6  Central  P.  R,  Co.  v.  Clemens,  16  Mo., 
359  (1852) ;  Miss.,  O.  &  Red  R.  R.  R.  Co. 
v.  Cross,  20  Ark.,  443  (lSr.9):  Rives  v. 
Montgomery,  South  P.  R  Co.,  30  Ala.,  92 
(1857).  Where,  however,  the  terminus 
was  made  two  thousand  feet  away  from 
the  location  designated  by  charter,  this 
fact  was  held  to  constitute  2»'i"M  facie 
a  good  defense.  Chartiers  R.  R  Co.  v. 
Hodgens,  77  Pa.  St.  187.  See,  also.  §  82, 
siijira.  A  change  in  the  route  under 
statutes  existing  before  the  incorporation 
does  not  release  subscribers.  Armstrong 
v.  Karslmer,  24  N.  E.  Rep,  897  (Ohio, 
1890). 

■  People  v.  Barnett,  91  III..  422  (1879); 
Cheltain  v.  Republic  Life  Ins.  Co.,  86 
Til..   220  (1877);    Merrill   v.   Reaver,   50 


235 


§  1S9.] 


MISCELLANEOUS    DEFENSES. 


[CH.  X. 


holder's  remedies  for  such  evils  are  of  a  different  nature.  For 
fraud,  he  may  bring  the  guilty  parties  to  an  accounting;1  for  mis- 
management, his  only  remedy  is  the  corporate  elections.  In  no 
case  has  he  been  allowed  to  escape  liability  on  his  subscription  by 
reason  thereof.  Thus,  it  is  no  defense  that  the  corporate  authori- 
ties fraudulently  placed  an  overvaluation  on  property  purchased  by 
them  for  the  corporation ; 2  nor  that  they  have  made  a  fraudulent 
contract  with  a  construction  company.3 

§  139.  Delay  and  abandonment  of  the  enterprise. —  As  a  general 
rule,  it  is  no  defense  to  an  action  on  a  subscription  to  allege  that 
the  enterprise  has  been  unduly  delayed.4  The  defense  frequently 
is  that  there  has  been  a  non-user  of  the  corporate  franchises.5  It 
is,  however,  a  well-established  principle  that  non-user  of  corporate 
franchises  can  be  complained  of  only  by  the  state  or  in  the  name 
of  the  state.  A  subscriber  has  been  held  not  to  be  discharged  by 
the  fact  that  the  corporation  was  engaged  thirteen  years  in  com- 
pleting the  enterprise  —  a  turnpike."  Nor  does  a  temporary  aban- 
donment of  the  work  release  the  subscriber.7  But  when  the  cor- 
porate work  was  not  commenced  for  nine  years,  and  in  the  meantime 
the  subscriber  had  acted  on  the  supposition  of  an  abandonment 
and  had  sold  property  which  the  road  was  expected  to  benefit,  he 


Iowa,  404  (1879).  Depreciation  of  the 
stock,  by  reason  of  mismanagement,  no 
defense.  People  v.  Barnett,  91  111.,  422 
(1879). 

JSee  ch.  XXXIX.  In  the  case  of 
Hodgkinson  v.  Nat.  Live  Stock  Ins.  Co., 
26  Beav.,  473  (1859),  equity  restrained 
the  enforcement  of  calls  already  made, 
by  reason  of  the  fraud  of  the  directors ; 
but  it  was  conceded  in  this  case  that 
the  subscriber  was  still  liable  on  his  sub- 
scription. 

2  Hornaday  v.  Ind.  &  111.  Central  R. 
R.  Co.,  9  Ind.,  263  (1857);  Dorris  v. 
French,  4  Hun,  292  (1875),  where  a  pat- 
ent-right was  purchased  by  the  direct- 
ors from  themselves,  for  the  corpora- 
tion, at  an  exorbitant  price. 

3  People  v.  Logan  County,  63  111.,  374, 
387  (1872). 

4  Pickering  v.  Templeton,  2  Mo.  App., 
424  (1876);  Miller  v.  Pittsburgh  &  C.  R. 
R  Co.,  40  Pa.  St.,  237  (1861),  where  there 
was  a  delay  of  two  and  one-half  years, 
the  court  saying:  "Until  it  can  be 
shown  how  railroads  can  be  built  with- 


out money,  no  such  defense  as  is  here 
set  up  can  prevail."  First  Nat'l  Bank  v. 
Hurford,  29  Iowa.  579  (1870),  where  there 
was  a  delay  in  the  performance  of  a 
condition  subsequent  to  the  subscription. 
See,  also,  Union  Hotel  Co.  v.  Hursee,  79 
N.  Y.,  454  (1880) ;  reversing  15  Hun,  371. 
Boyle's  Case,  54  L.  J.  (Ch.),  550  (1885), 
holds  that  after  a  winding-up  has  com- 
menced there  can  be  no  withdrawal ; 
but  the  court  in  a  dictum  clearly  says 
that  an  unreasonable  delay  in  organiz- 
ing will  authorize  a  withdrawal  by  the 
subscriber.  But  where  the  charter  has 
lapsed  by  reason  of  not  complying  with 
its  terms,  the  stockholder  is  not  liable. 
Sod  us  Bay,  etc.,  R  R  Co.  v.  Lapham,  43 
Hun,  314  (1887). 

s  Ouachita  &  Red  R  R  R  Co.  v.  Cross, 
20  Ark,  443  (1855);  Hammett  v.  Little 
Rock  &  N.  R  R  Co.,  20  Ark.,  204  (1859). 

«  Gibson  v.  Columbia  &  N.  R,  T.  &  B. 
Co.,  18  Ohio  St.,  396  (1868). 

"  McMullen  v.  Maysville  &  Lex.  R  R 
Co.,  15  B.  Monr.  (Ky.),  218  (1854). 


236 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  190. 


was  held  not  liable  on  the  subscription.1  An  abandonment  of  part 
of  the  enterprise,  however,  is  no  defense.2 

A  subscriber  cannot  defeat  the  subscription  by  the  fact  that  the 
corporation  has  not  completed,  and  has  no  intention  of  completing, 
the  road  in  its  entirety;3  nor  bv  the  fact  that  the  road  has  been 
sold  under  foreclosure.4  In  Pennsylvania  a  failure  on  the  part  of 
the  corporation  to  make  a  call  for  the  subscription  within  six  years, 
the  statutory  time  of  limitations  on  the  collection  of  parol  debts, 
is  held  to  constitute  an  abandonment  of  the  subscription,  and  to  be 
a  ^ood  defense.5  If  the  corporation  is  insolvent,  and  the  subscrip- 
tion is  needed  to  pay  corporate  creditors,  abandonment  cannot  In- 
set up.6 

§  190.  Failure  of  the  corporate  enterprise. —  The  entire  failure  of 
the  enterprise  and  the  insolvency  of  the  corporation  constitute  no 
defense  to  an  action  on  calls.7  This  defense  would  seem  on  the 
face  of  it  to  be  frivolous,  and  yet  is  occasionally  set  up.  Under  the 
American  doctrine  a  subscription  is  enforceable  most  of  all  when 
it  is  needed  to  pay  corporate  creditors.  This  defense  is  closely 
allied  to  those  that  precede,  and  differs  in  little  from  the  defense  of 
abandonment  of  the  enterprise. 

1  Fountain  Ferry  T.  R.  Co.  v.  Jewell,  8    (1858),  where  the  court  say,  "if  the  de- 


B.  Mour.  (Ky.),  147  (184S).  A  note  in 
payment  of  a  subscription,  payable  by 
its  terms  after  the  road  had  been  partially 
completed,  is  not  enforceable  where  the 
enterprise  was  abandoned  and  fourteen 
years  afterwards  was  revived  and  the 
road  built.  Blake  v.  Brown,  44  N.  W. 
Rep.,   751  (Iowa,  1890). 

2  Dorman  v.  Jacksonville  &  A.  P.  R 
Co.,  7  Fla.,  265  (1857).  No  defense  that 
the  company  had  abandoned  a  part  of 
its  business  nor  that  the  company  was 
organized  for  the  sole  benefit  of  the 
charter  members.  Dallas,  etc.,  Mills  v. 
Clancy,  15  S.  W.  Rep.,  194  (Tex.,  1891). 

3  Buffalo  &  J.  R  R.  Co.  v.  Gifford,  87 
N.  Y.,294  (1882)  affirming  22  Hun,  359.  No 
defense  that  road  not  fully  completed. 
Armstrong  v.  Karshner,  24  N.  E.  Rep., 
897  (Ohio,  1890) ;  Lesher  v.  Karshner,  id., 
882. 

*  Id. 

5  Pittsburgh  &  C.  R.  M.  Co.  v.  Byers, 
32  Pa.  St,  22  (1858).  The  same  rule  is 
stated  less  broadly  in  McCully  v.  Pitts- 
burgh, etc.,  J.  R  R  Co.,  32  Pa.  St.,  25 


lay  was  not  satisfactorily  accounted  for, 
subscribers  would  be  at  liberty  after 
that  lapse  of  time  to  consider  the  enter- 
prise abandoned."  In  this  case  an  act- 
ual abandonment  and  return  of  sub- 
scription money  to  other  subscribers 
was  held  to  release  all  the  subscribers. 
In  Delaware,  etc.,  R.  R  Co.  v.  Row- 
land, 9  Atl.  Rep.,  929  (Penn.,  1S87),  it 
was  submitted  to  the  jury  whether  the 
subscriber  had  been  released  by  an 
abandonment  of  the  enterprise.  See, 
also,  §  195.  infra. 

6  Phoenix  Warehousing  Co.  v.  Badger, 
67  N.  Y.,  294  (1876):  Smith  v.  Gower,  2 
Duv.  (Ky.),  17  (1865);  Hardy  v.  Merri- 
wether,  14  Ind.,  203;  and  see  the  de- 
fense in  §  190. 

7Bish  v.  Bradford,  17  Ind.,  490  (1861): 
Morgan  County  v.  Thomas,  76  III..  120, 
141  (1875);  Four-mile  V.  R  R  Co.  v. 
Bailey,  18  Ohio  St..  208  (1868).  Assess- 
ments are  collectible  though  the  work 
is  not  completed.  Red  W.  Hotel  Co.  v. 
Friedrich.  26  Minn.,  112  (1879).  See 
Buffalo,  etc.,  R.  R.  Co.  v.  Gifford,  supra. 


237 


§§  191,  192.]  MISCELLANEOUS    DEFENSES.  [CH.  X. 

§  191.  Subsections  of  other  subscribers  released  or  canceled,  or 
<liven  on  special  terms.— It  is  no  defense  for  one  subscriber,  when 
sued  upon  his  subscription,  to  allege  that  the  subscriptions  of 
others  have  been  canceled,  or  that  secret  and  more  favorable 
terms  were  given  to  them  than  to  him.  If  there  has  been  a  legal 
cancellation  of  other  subscriptions  the  defendant  cannot  complain.1 
If  he  has  the  same  right  to  a  cancellation  he  may  obtain  it  by  a 
suit  for  that  purpose.2  Moreover,  a  secret  agreement  of  the  corpo- 
ration with  certain  subscribers  to  stock,  whereby  they  are  to  be  re- 
leased from  payment,  or  to  have  some  other  advantage  not  common 
to  all  the  subscribers,  is  no  defense  to  a  subscriber  who  was  not 
promised  the  same  advantages.3  All  such  secret  agreements  are 
void,  and  the  subscribers  receiving  them  are  liable  on  their  sub- 
scriptions absolutely,  as  though  no  special  advantages  had  been 
promised.  Being  so,  a  subscriber,  though  he  did  not  participate 
therein,  cannot  complain.  The  fact  that  the  corporation  has  for- 
feited the  stock  of  other  subscribers,  and  has  compromised  with 
still  others,  is  no  defense  to  a  subscriber  sued  for  calls.4  So,  also, 
the  failure  of  another  subscriber  to  pay  the  percentage  required 
bv  statute  is  not  a  defense.5 

§192.  Failure  of  the  corporation  to  tender  a  certificate. —  It  is  no 
defense  to  an  action  on  a  subscription  to  allege  that  the  corpora- 
tion has  not  delivered  nor  tendered  to  the  defendant  the  certificate 

1  Rensselaer  &  W.  P.  R.  Co.  v.  Wetsel,  other  subscribers,  and  was  void  and  of 
21  Barb.,  56  (1855).  If,  however,  the  no  avail,  and  the  subscription  is  to  be 
cancellation  is  on  account  of  an  aban-  regarded  as  a  valid  one  for  the  amount 
donment  of  the  enterprise,  any  other  subscribed."  See,  also,  Thompson  v. 
subscriber,  when  sued  subsequently  on  Reno  Sav.  Bank,  19  Nev.,  103,  171,  242, 
his  subscription,  may  set  up  such  aban-  291,  293  (1885).  The  subscriber  has  the 
donment  and  cancellation,  and  thereby  burden  of  proof  that  other  subscriptions 
defeat  the  action.  McCully  v.  Pitts-  are  colorable  and  fictitious.  Hayden  v. 
burgh  &  Erie  R  R  Co.,  32  Pa.  St.,  25  Atlanta  Cotton  Factory,  61  Ga,,  233 
(1858).  (1878).     The  case  of  Rutz  v.  Ester  &  R 

2  County  of  Crawford  v.  Pittsburgh  &  Mfg.  Co.,  3  Bradw.  (III.),  83  (1878),  is 
Erie  R  R  Co.,  32  Pa.  St.,  141  (1858).  contrary  to  the  general  rule.     The  case 

3  Anderson  v.  Newcastle  &  R,  R  R  of  New  York  Exchange  Co.  r.  De  Wolf, 
Co.,  12  Ind.,  376  (1859);  Jewett  v.  Val-  31  N.  Y.,  270  (1865),  reversing  5  Bosw., 
ley  R'y  Co.,  34  Ohio  St..  601 ;  Agri.  C.  593,  holds  that  a  subscriber  may  defeat 
Ins.  Co.  v.Fitzgerald,  15  Jur.,  489(1850);  an  action  on  his  subscription  by  show- 
Memphis  Branch  R  R  Co.  v.  Sullivan,  ing  that  other  subscriptions  were  unau- 
57  Ga.,  240  (1876);  Hall  v.  Selma  R  R  thorized  and  not  enforceable.  See,  also, 
Co.,  6  Ala.,  74 ;  Conn.,  etc.,  R.  R  Co.  v.  Berry  v.  Yates,  24  Barb,  199 ;  Nicker- 
Bailey,  24  Yt.,  465 ;  Jewell  v.  Rock  R.  son  v.  English,  142  Mass.,  267  (1886). 

P.  Co.,  101  111.,  57  (1881).     In  the  case        *Dorman  v.  Jacksonville  &  A.  P.  R. 
of  Galena  Iron  Co.  v.  Ennor,  116  111.,  55    Co.,  7  Fla..  265  (1857). 
(1886),   the   court    said:    "Such    secret        5Swartwout  v.   Mich.  Air  Line  R  R 
agreement  was    fraudulent   as    to  the    Co.,  24  Mich.,  389  (1872). 

238 


CH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  102. 


of  stock  to  which  he  is  entitled.1  The  certificate  is  merely  the 
stockholder's  evidence  of  title  to  his  stock.  It  is  not  the  stock  it- 
self, but  only  a  convenient  representative  of  it.  He  would  be  a  full 
stockholder,  with  all  the  rights  of  one,  even  if  the  certificates  were 


i  Burr  v.  Wilcox,  22  N.  Y.  551  (18G0), 
affirming  6  Bos.,  198 ;  Chandler  v.  North- 
ern Cross  R  R.  Co.,  18  111.,  190  (1856); 
Miller  v.  Wild  Cat  G.  R.  Co.,  52  Ind., 
51  (1875) ;  New  Albany  &  S.  R.  R  Co.  v. 
McCormick,  10  Ind.,  499  (1858);  Slipher 
v.  Earhart,  83  Ind.,  173  (1882) ;  Paducah, 
etc.,  Bank  v.  Parks,  8  S.  W.  Rep.,  842 
(Tenn.,  1888) ;  Heaston  v.  Cincinnati  & 
Ft.  W.  R  R  Co.,  16  Ind.,  275  (1861); 
Kennebec,  etc.,  R  R,  Co.  v.  Jarvis,  34 
Me.,  360 ;  Chaffin  v.  Cummings,  37  Me., 
76  (1853).  In  behalf  of  corporate  cred- 
itors, where  the  corporation  is  insolv- 
ent, a  person  is  often  held  to  be  a  stock- 
holder although  no  certificate  has  been 
issued  to  him,  and  the  ordinary  indicia 
of  stockholdership  do  not  indicate  that 
he  is  a  stockholder.  Sanger  v.  Upton, 
91  IT.  S.,  56  (1875);  Upton  v.  Tribilcock, 
91  U.  S.,  45  (1875);  Slee  v.  Bloom,  13 
Johns.,  456  (1822);  Dorris  v.  French,  4 
Hun,  292  (1875);  Hamilton,  etc.,  R  R 
Co.  v.  Rice,  7  Barb.,  157-167  (1849); 
Clark  v.  Farrington,  11  Wis.,  306,  327 
(1860);  Haynes  v.  Brown,  36  N.  H., 
545-563  (1858);  Chesley  v.  Cummings, 
37  Me.,  76-83  (1853);  Griswold  v.  Selig- 
man,  72  Mo.,  110;  Boggs  v.  Olcott,  40 
111.,  303  (1866);  Re  South  Mountain,  etc., 
7  Sawy.,  20(1881);  Upton  v.  Burnham, 
3  Biss.,  431  (1873) ;  Johnson  v.  Albany, 
etc..  R  R  Co.,  40  How.  Pr.,  193 ;  Payne 
v.  Elliot,  54  Cal.,  339  (1880).  The  sub- 
scriber may  stipulate  otherwise  in  his 
subscription.  Summers  v.  Sleath,  43 
Ind.,  598  (1874);  Schaeffer  v.  Mo.  Home 
Ins.  Co.,  46  Mo.,  248  (1870);  South  Ga. 
&  Fla.  R  R.  Co.  v.  Ayers,  56  Ga.,  234 
(1876);  Vawter  v.  Ohio  &  Miss.  R  R 
Co.,  14  Ind.,  174(1860);  Spear  v.  Craw- 
ford, 14  Wend.,  20  (1835) ;  Chester  Glass 
Co.  v.  Dewey,  16  Mass.,  94  (1819);  Ful- 
gam  v.  Macon  &  B.  R.  R.  Co.,  44  Ga., 
597  (1872) ;  Minnesota  Harvester  Works 
v.  Libby,  24  Minn.,  327  (1877);  Blyth's 


Case,  L.  R,  4  Ch.  Div.,  140  (1876);  Ag- 
ricultural Bank  v.  Burr,  24  Me.,  256 
(1844);  Hawley  v.  Upton,  102  U.  S.,  314 
(1880) ;  Wheeler  v.  Miller,  90  N.  Y.,  353 
(1882),  affirming  24  Hun,  541 ;  Wemple 
v.  St.  Louis,  etc.,  R  R  Co.,  11  N.  E.  Rep., 
906  (111..  1887).  The  case  of  Clark  v. 
Continental  Imp.  Co.,  57  Ind.,  135  (1877), 
holds  that,  where  the  action  is  for  the 
whole  subscription  or  the  last  instal- 
ments, a  tender  of  the  certificate,  on 
condition  of  payment,  is  necessary.  St. 
Paul,  etc.,  R.  R  Co.  r.  Robbins,  23 
Minn.,  440  (1S77),  holds  that  a  tender  is 
necessary  where  the  issue  is  of  pre- 
ferred stock,  after  the  whole  original 
capital  stock  has  been  issued.  Where  a 
subscriber  has  tendered  his  subscription 
and  demanded  a  certificate  and  is  re- 
fused, a  receiver  cannot,  upon  insolv- 
ency of  the  company,  hold  him  liable. 
Potts  v.  Wallace,  32  Fed.  Rep.,  272 
(1887).  A  certificate  of  stock  need  not 
be  tendered  before  suit  is  brought. 
Webb  v.  Baltimore,  etc.,  Co.,  26  Atl. 
Rep.,  113  (Md.,  1893);  Astoria,  etc..  R.  R 
v.  Hill,  25  Pac.  Rep.,  379  (Ore.,  1890); 
California,  etc.,  Hotel  Co.  v.  Callender, 
29  Pac.  Rep.,  859  (Cat,  1892);  Columbia 
Elec.  Co.  v.  Dixon,  49  N.  W.  Rep.,  244 
(Minn.,  1891);  Dallas,  etc..  Mills  v. 
Clancy,  15  S.  W.  Rep.,  194  (Tex..  1891); 
Marson  v.  Deither,  52  N.  W.  Rep.,  38 
(Minn.,  1892).  A  subscriber  to  the  in- 
creased capital  stock  who  has  actually 
paid  part  of  the  price  cannot  recover 
back  the  money  upon  the  corporate  in- 
solvency on  the  ground  that  no  certifi- 
cate was  issued.  Pacific  Nat  Bank  v. 
Eaton,  141  U.  S.,  227(1891);  Thayer  r. 
Butler,  id.,  234:  Butler  v.  Eaton,  id., 
240.  A  consolidated  company  claiming 
a  subscription  made  to  one  of  the  con- 
stituent companies  must  prove  a  tender 
of  the  stock.  Pope  v.  Board  of  Com'rs, 
51  Fed.  Rep.,  769  (1892).     A  corporation 


239 


§  193.] 


MISCELLANEOUS   DEFENSES. 


[CH.  X. 


never  issued  at  all.1  Consequently,  since  it  is  for  him  to  demand 
the  certificate  when  he  wishes  it,  and  not  for  the  corporation  to 
tender  it,  it  is  no  defenseior  him  to  allege  that  he  has  never  received 
the  paper  representative  of  his  stock.  The  corporation  must,  how- 
ever, be  in  a  position  to  issue  such  certificate.2  If  certificates  for 
the  whole  capital  stock  have  already  been  issued,  the  defendant 
subscriber,  by  this  fact,  may  defeat  the  action  to  collect  his  sub- 
scription.3 It  has  also  been  held  that  the  plaintiff  corporation 
must  aver  a  readiness  and  willingness  to  deliver  the  certificate  of 
stock.4  The  duty  of  a  corporation  to  issue  certificates  of  stock  is 
considered  elsewhere.5 

§  193.  Set-off  and  counter-claim. —  It  seems  to  be  well  established 
tbat,  Avhen  a  corporation  has  become  insolvent,  and  the  subscrip- 
tions for  stock  are  being  enforced  for  the  benefit  of  corporate  cred- 
itors, a  subscriber  cannot,  in  the  suit  brought  to  collect  his  subscrip- 
tion, set  up  a  counter-claim  or  set-off.6    This  rule  is  founded  in  equity 


cannot  be  compelled  by  the  subscriber 
for  stock  to  issue  a  certificate  therefor 
before  it  has  been  fully  paid  up,  the 
stock  being  a  part  of  the  increased  cap- 
ital stock.  Baltimore,  etc.,  Co.  v.  Ham- 
bleton,  26  Atl.  Rep.,  279  (Md.,  1893). 
The  issue  of  certificates  of  stock  is  not 
necessary  to  render  the  subscriber  lia- 
ble. Mathis  V.  Pridham,  20  S.  W.  Rep., 
1015  (Tex.,  1892). 

1  Fulgam  v.  Macon,  etc.,  R.  R  Co.,  44 
Ga.,  597  (1872).  The  issuing  of  a  certifi- 
cate is  not  necessary  to  constitute  stock- 
holdership.  Cartwright  v.  Dickinson, 
12  S.  W.  Rep.,  1030  (Tenn.,  1890). 

2  McCord  v.  Ohio  &  Miss.  R  R.  Co.,  13 
Ind.,  220  (1859).  The  subscriber  may 
compel  the  corporation  to  issue  a  certifi- 
cate to  him.  Buffalo,  etc.,  R  R  Co.  v. 
Dudley,  14  N.  Y.,  336,  347  (1856);  Mitch- 
ell v.  Beckman,  64  Cal.,  117  (1883). 

3  Burrows  v.  Smith,  10  N.  Y.,  550 
(1853). 

4  James  v.  Cincinnati,  H.  &  D.  R  R 
Co.,  2  Disney,  261  (1858). 

5  See  §  61. 

«Handley  v.  Stutz,  139  U.  S.,  417 
(1891) ;  Sawyer  v.  Hoag,  17  Wall,  610 
(1873) ;  Shickle  v.  Watts,  7  S.  W.  Rep., 
274  (Mo.,  1888);  Government  S.  Ins.  Co. 
v.  Dempsey,  50  L.  J.  (Q.  B.),  199  (1881). 
The  leading  case  in  England  on  this  sub- 


ject is  Grissell's  Case,  L.  R,  1  Ch.,  528 
(1866),  where  the  court  say,  "if  a  set-off 
were  attained  against  a  call,  it  would  have 
the  effect  of  withdrawing  altogether 
from  the  creditor's  part  of  the  funds 
applicable  to  the  payment  of  debts." 
See,  also,  Black's  Case,  L.  R,  8  Ch.,  254 
(1872);  Mudford's  Case,  L.  R,  14  Ch.  D., 
634  (1880),  spoken  of  in  Government  S. 
I.  Co.  v.  Dempsey,  supra,  as  holding 
that  no  counter-claim  is  to  be  allowed ; 
Gill's  Case,  L.  R,  12  Ch.  Div.,  755  (1879) ; 
Calisher's  Case,  L  R,  5  Eq.,  214  (1868) ; 
Barnett's  Case,  L,  R,  19  Eq.,  449  (1875); 
Re  Whitehouse  &  Co.,  L.  R,  9  Ch.  Div., 
595  (1878),  disapproving  Brighton  Ar- 
cade Co.  v.  Dowling,  L.  R,  3  C.  P.,  175. 
See,  also,  Matthews  v.  Albert,  24  Md., 
527  (1866).  Garnett  &  M.  G.  Min.  Co.  v. 
Sutton,  3  B.  &  S,  321,  allowing  set-off, 
was  based  on  a  statute  repealed  by  Com- 
panies Act,  1862.  See  Hiller  v.  Alle- 
gheny Mutual  Ins.  Co.,  3  Pa.  St.,  470 
(1846);  Long  v.  Penn.  Ins.  Co.,  6  Pa.  St, 
421  (1847).  Cf.  Scammon  v.  Kimball,  92 
U.  S.,  362  (1875);  Osgood  v.  Ogden,  4 
Keyes,  70  (1868) ;  Lawrence  v.  Nelson,  21 
N.  Y,  158  (I860).  A  subscriber  cannot 
set  off  against  his  unpaid  subscription  a 
judgment  lien  where  there  are  prior 
liens  which  would  take  the  money  due 
on  his  subscription  if  he  should  first  pay 


240 


OH.  X.] 


MISCELLANEOUS    DEFENSES. 


[§  193. 


and  wise  public  policy.  The  stockholder  is  not  deprived  of  his 
remedy  for  the  debt  due  him  from  the  corporation ;  but  he  is  obliged 
to  proceed  in  the  same  manner,  and  is  allowed  to  participate  in  the 
final  corporate  assets  to  the  same  extent  and  at  the  same  time  as 
other  creditors.1 

Where,  however,  payment  of  a  subscription  is  demanded  or  en- 
forced for  the  benefit  of  the  corporation  itself,  and  not  for  corpo- 
rate creditors,  it  is  competent  for  the  subscriber  to  set  up,  in  defense 
of  the  action,  a  set-off  or  counter-claim.2 


it  in.  Nor,  on  the  other  hand,  if  there 
are  other  debts  of  the  company,  will  the 
obligation  of  the  company  to  the  stock- 
holders be  canceled  by  the  company's 
offsetting  the  subscription  against  the 
debt  unless  the  subscriber  is  insolvent. 
Gilchrist  v.  Helena,  etc.,  R.  R..  49  Fed. 
Rep.,  519  (1892) ;  Boulton  Carbon  Co.  v. 
Mills,  43  N.  W.  Rep.,  290  (Iowa,  1889). 
In  this  case  the  learned  court  refers  to 
§  227d  (1st  ed.)  of  this  work,  and  dis- 
sents from  the  statement  of  law  laid 
down  herein.  Ifc  will  be  noticed,  how- 
ever, that  §  227d  stated  the  law  as  to 
set-off  in  cases  of  statutory  liability  of 
stockholders.  The  right  of  set-off  in 
cases  of  subscription  liability  of  stock- 
holders is  stated  in  this  work  in  §  193, 
supra,  and  the  law  as  there  laid  down 
agrees  with  the  decision  in  the  above 
case  —  a  case  of  subscription  liability. 
Where  set-off  is  a  good  defense  to  the 
action  of  a  creditor  who  is  also  a  stock- 
holder and  is  liable,  it  is  a  good  defense 
as  against  the  assignee  of  his  claim. 
Callanan  v.  Windsor,  42  N.  W.  Rep..  652 
(Iowa,  1889).  Unpaid  salaries  voted  to 
its  officers  by  an  insolvent  corporation 
which  has  never  made  any  profits  can- 
not be  offset  as  against  the  stockholders' 
liability  to  creditors.  Burns  v.  Beck,  10 
S.  E.  Rep.,  121  (Ga.,  1889).  A  set-off  is 
not  allowed.  Hoby  &  Co.,  Lim.,  v.  Birch, 
62  L  T.  Rep.,  404  (1890),  reviewing  the 
various  contradictory  decisions:  ap- 
proved, Mathis  v.  Pridham,  20  S.  W. 
Rep.,  1015  (Tex.,  1892).  No  set-off  al- 
lowed as  regards  subscription  liability. 
Tama,  etc.,  Co.  v.  Hopkins,  44  N.  W, 
Rep.,  797  (Iowa,  1890).  In  a  suit  in 
equity   by   a  receiver    against   all   the 


stockholders,  individual  stockholders 
cannot  plead  in  set-off  debts  due  from 
the  corporation.  Mathis  v.  Pridham,  20 
S.  W.  Rep.,  1015  (Tex.,  1892).  In  Scovill 
v.  Thayer,  105  TJ.  S.,  143,  152  (1881),  the 
say  :  "  It  is  a  general  rule  that  a  holder 
of  claims  against  an  insolvent  corpora- 
tion cannot  set  them  off  against  his  lia- 
bility for  an  assessment  on  his  stock  in 
the  corporation  in  a  suit  by  an  assignee 
in  bankruptcy."  To  same  effect,  Thebus 
v.  Smiley,  110  111.,  316  (1884);  Williams 
v.  Traphagen,  38  N.  J.  Eq.,  57  (1884).. 
Payment  of  subscriptions  in  advance  of 
calls,  by  turning  in  a  debt  thereon,  is 
not  payment  upon  corporate  insolvency 
and  winding-up.  Ex  parte  Kent,  58 
L.  T.  Rep.,  372  (1888) ;  59  id.,  449  (1888). 
Cf.  Healey  on  Law  &  Pr.  of  Companies, 
117,  729,  560,  599.  Creditors  who  are 
stockholders  cannot  claim  any  part  of 
the  assets  until  their  unpaid  subscrip- 
tion is  paid,  but  may  claim  their  part 
before  it  is  certain  that  any  of  the  stat- 
utory liability  will  be  required.  Appeal 
of  Sahlendecker,  14  Atl.  Rep.,  229  (Pa., 
1888).  A  counter-claim  which  the  com- 
pany had,  but  which  has  been  adjudi- 
cated against  it,  cannot  be  set  up  by 
stockholders  when  they  are  sued  on  their 
subscriptions.  Stutz  v.  Handley,  41  Fed. 
Rep.,  531  (1890).  A  subscriber  sued  on 
his  subscription  may  set  off  a  debt  due 
from  the  company  to  him.  Appleton  v. 
Turnbull,  24  Atl.  Rep.,  592  (Me.,  1891). 
Concerning  set-off  as  against  the  stat- 
utory  liability  of  stockholders,  see  §  225, 
infra. 

1  Grissell's  Case,  supra.     Cf.  Lang  v. 
Penn.  Ins.  Co..  svpra, 

-  Barnett's  Case,  suprcu 


(16) 


241 


§§  194,  195.] 


MISCELLANEOUS    DEFENSEE. 


[CH. 


§  194.  In  New  York  it  has  recently  been  established  that,  where 
a  corporate  creditor  brings  an  action  at  law  to  enforce  an  unpaid 
subscription,  the  subscriber  may  set  up,  in  defense  to  the  action,  a 
set-off  or  counter-claim  consisting  of  a  debt  due  from  the  corpora- 
tion to  him,  but  that  such  a  defense  is  not  allowable  in  a  suit  in 
equity.1  The  distinction  is  based  on  the  fact  that  a  general  ac- 
counting of  all  corporate  debts  and  assets  is  possible  by  the  latter 
remedy,  but  is  impossible  in  the  action  at  law.2 

§  195.  Statute  of  limitations.—  After  a  call  has  been  made,  and 
the  subscription  or  a  part  of  the  subscription  is  thereby  rendered 
due  and  payable,  the  statute  of  limitations  begins  to  run.  Difficulty, 
however,  arises  in  determining  whether  the  statute  begins  to  run 
before  the  call  is  made.  In  Pennsylvania  there  formerly  was  an 
inclination  to  hold  that  the  call  must  be  made  before  six  years 
have  elapsed  after  the  call  is  possible ;  otherwise  the  right  of  col- 
lection is  barred.3  But  the  better  rule,  and  the  one  supported  by 
the  weight  of  authoritv,  is  that  the  statute  of  limitations  begins  to 
run  on  a  subscription  for  stock  only  after  a  call  has  been  made  and 


i  Richards  v.  Kinsley,  N.  Y.  Daily  Reg., 
Dec.  27,  1887  (Com.  PL,  Gen.  Term), 
where  the  rule  is  clearly  laid  down; 
also,  Christensen  v.  Colby,  43  Hun,  362 
(1887).  In  both  of  these  cases  the  rule 
is  based  on  analogous  decisions  in  re- 
gard to  the  stockholder's  statutory  lia- 
bilities.    See  §  225,  infra. 

-Tallmadge  v.  Fishkill  Iron  Co.,  4 
Barb.,  382  (1848).  In  the  case  of  Wheeler 
v.  Millar,  90  N.  Y.,  353  (1882),  the  stock- 
holder's subscription  and  statutory  lia- 
bility combined  were  sufficient  to  pay 
his  own  and  the  other  debts  involved  in 
the  case. 

See  Sacketts  Harbor  R.  R  Co.  v. 
Blake,  3  Rich.  Eq„  225  (1851);  Grose  v. 
Hilt.  36  Me.,  22  (1853) ;  Whitman  v.  Por- 
ter, 107  Mass.,  522  (1871),  a  joint-stock 
company  case ;  Poole's  Case,  L.  R,  9  Ch. 
Div.,  322.  Cf.  Eastman  v.  Crosby,  90 
Mass.,  206  (1864). 

»McCully  v.  Pittsburgh  &  C.  R.  R  Co., 
32  Pa.  St.,  25  (1858) ;  Pittsburgh  &  C.  R 
R  Co.  v.  Byers,  32  id.,  22  (1858) ;  Same  v. 
Graham,  36  id.,  77  (1859) ;  Shackamason 
Bank  v.  Disston,  2  R'y  &  Corp.  L.  J., 
62  (Pa.,  1887).  Cf.  Pittsburgh  &  C.  R 
R  Co.  v.  Plummer,  37  Pa.  St.,  413(1860). 
A  contrary  rule  seems  to  have  been  fol- 


lowed in  Appeal  of  Mack,  7  Atl.  Rep., 
481  (1886).  And  it  is  now  held  in  Penn- 
sylvania that  the  statute  of  limitations 
runs  against  an  unpaid  subscription 
from  the  date  of  the  assignment  by  the 
corporation  for  the  benefit  of  creditors, 
and  not  from  the  time  of  a  call.  Frank- 
lin Sav.  Bank  v.  Bridges,  8  Atl.  Rep, 
611  (Pa.,  18S7).  Cf.  Allibone  v.  Hagar, 
46  Pa.  St,  48,  where  a  plea  of  the  statute 
of  limitations  in  a  6uit  for  unpaid  sub- 
scriptions was  not  allowed,  because  by 
statute  the  liability  of  stockholders  con- 
tinued until  the  whole  capital  wife  paid 
in.  In  Shackamason  Bank  v.  Dough- 
erty, 20  Weekly  Notes  Cas.,  297,  it  was 
held  that  a  mere  delay  of  six  years  in 
making  calls  barred  all  recovery,  and 
obviously  the  bar  of  the  statute  was  ap- 
plied when  no  action  was  brought  for 
six  years  after  assessment  made,  or  six 
years  after  the  corporation  assigned  for 
the  benefit  of  its  creditors.  The  statute 
of  limitations  begins  to  run  when  the 
subscription  is  made  even  though  a  call 
is  not  made  until  long  afterwards. 
Great  Western  T.  Co.  v.  Purdy,  50  N. 
W.  Rep.,  45  (Iowa,  1891).  See,  also,  §  189, 
sujira. 


242 


CH.  X.] 


MISCELLANEOUS   DEFENSES. 


[§  195. 


is  due.1  It  has  been  held  that  where  the  statute  is  a  bar  against 
the  corporation,  it  is  a  bar  against  corporate  creditors.2  But  a  more 
just  rule  prevails  in  Xew  York,  to  the  effect  that,  inasmuch  as  the 
corporate  creditor's  right   Lo  enforce  the  unpaid  subscription  ac- 


JThe  statute  of  limitations  runs  only 
from  the  time  of  a  call.  Glenn  v.  Mar- 
bury,  145  U.  S.,  449  (1892);  Hawkins  v. 
Glenn,  131  U.  S.,  319  (1889);  Glenn  v. 
Liggett,  135  id.,  533  (1890);  Semple  v. 
Glenn,  9  S.  Rep.,  265  (Ala.,  1891);  Sem- 
ple v.  Glenn,  6  S.  Rep.,  46  (Ala.,  1889) ; 
Lehman  v.  Semple,  6  S.  Rep.,  44  (Ala., 
1889);  Glenn  v.  Priest,  48  Fed.  Rep.,  19 
(1891);  Priest  v.  Glenn,  51  Fed.  Rep.,  405 
(1892).  Where  by  statute  the  assignor 
is  liable,  the  statute  of  limitations  does 
not  commence  to  run  until  there  has 
been  a  call.  Priest  r.  Glenn.  51  Fed. 
Rep.,  400  (1892);  Taggart  v.  Western 
Md.  R.  R  Co.,  24  Md.,  563  (1866): 
Western  R  R  Co.  v.  Avery,  64  N.  C, 
489  (1870) ;  Glenn  v.  Williams.  60  Md.,  93 
(1882);  Baltimore,  etc.,  Turnpike  Co.  v. 
Barnes,  6  H.  &  J.  (Md.),  57  (1823) :  Salis- 
bury v.  Black's  Adm'r,  id.,  293 :  Curry 
v.  Woodward,  53  Ala.,  376  (1875);  Glenn 
v.  Soule,  22  Fed.  Rep.,  417  (1884);  Glenn 
v.  Foote,  36  id.,  824  (1888);  Great  West- 
ern Tel.  Co.  v.  Gray,  14  N.  E.  Rep.,  214 
(111.,  1887).  Cf.  §  227,  infra;  Glenn  v. 
Howard,  8  S.  E.  Rep.,  636  (Ga.,  1889).  If 
a  subscription  is  conditional,  the  statute 
of  limitations  runs  only  from  the  time 
of  performance.  Appeal  of  Cornell.  6 
Atl.  Rep.,  258  (Pa.,  1886).  In  New  York, 
since  no  call  is  necessary,  but  subscrip- 
tions are  due  at  once  without  it,  the  stat- 
ute of  limitations  begins  to  run  from 
the  time  of  subscription,  even  against 
corporate  creditors.  Williams  v.  Meyer, 
41  Hun,  545  (1886).  Merely  authorizing 
a  receiver  to  collect  subscriptions  held 
not  a  call  sufficient  to  set  the  statute  of 
limitations  running.  Glenn  v.  Macon, 
32  Fed.  Rep.,  7  (1887).  The  statute  of 
limitations  begins  to  run  on  unpaid  sub- 
scriptions from  the  dissolution  of  the 
corporation.  Garesche  v.  Lewis,  6  S.  W. 
Rep.,  54  (Mo.,  1887).  Statute  of  limita- 
tions runs  against  unpaid  subscriptions 


only  from  the  time  of  a  call  by  the 
court,  not  from  the  time  of  an  assign- 
ment to  a  trustee.  Vanderwerken  i\ 
Glenn,  6  S.  E.  Rep.,  806  (Va.,  1888) ;  Lewis, 
Adm'r,  v.  Glenn,  6  S.  E.  Rep.,  866  (Va.. 
1888).  The  state  statute  of  limitations  as 
to  executors  and  estates  will  beapplied  by 
the  federal  courts  to  suits  by  a  receiver 
for  the  enforcement  of  a  stockholder's 
liability  in  a  national  bank.  Butler  v. 
Poole,  44  Fed.  Rep.,  5S6  (1890).  Although 
the  statute  of  limitations  bars  the  action 
by  the  creditor  against  the  corporation, 
yet  if  a  lien  exists  by  trust  deed,  the 
debt  may  be  enforced  against  unpaid 
subscriptions.  Hambleton  v.  Glenn,  9 
S.  E.  Rep.,  129  (Va.,  1889).  If  the  stock- 
holder is  a  non-resident  the  statute  of 
limitations  does  not  run.  Tama,  etc., 
Co.  v.  Hopkins.  44  N.  W.  Rep.,  797 
(Iowa,  1890).  The  statute  of  limitations 
is  no  bar.  Lehman  v.  Glenn.  6  S.  Rep.,  44 
(Ala.,  1889).  The  statute  of  limitations 
begins  to  run  in  favor  of  stockholders 
against  the  creditor's  debt  at  the  same 
time  it  commences  to  run  in  favor  of 
the  company,  even  though  the  company 
is  sued  before  the  statute  is  a  bar  as  to 
it  The  statute  runs  against  the  liability 
of  subscribers  from  the  time  of  the  sub- 
scription, where  no  call  is  made  before 
the  statute  becomes  a  bar.  Hamilton  v. 
Clarion,  etc.,  R  R.,  23  Atl.  Rep.,  53  (Pa.. 
1891).  The  statute  of  limitations  does 
not  begin  to  run  as  against  creditor? 
until  they  have  exhausted  their  remedy 
against  the  company,  and  have  estab- 
lished the  amount  due  from  the  stock- 
holders and  necessary  to  pay  the  debt. 
Mathis  r.  Pridham,  20  S.  W.  Rep.,  1015 
(Tex.,  1892). 

2  Stelphen  r.  Ware,  45  Cal.,  110  (1872) ; 
Davidson  v.  Rankin,  34  Cal.,  503(1868), 
in  probate  matters;  Thompson  v.  Reno 
Sav.  Bank,  19  Nev.,  103,  171,  242,  291. 
293  (1885);   South  Car.   Manuf.    Co.  v. 


243 


§  196.] 


MISCELLANEOUS    DEFENSES. 


[CH. 


crues  only  after  judgment  against  the  corporation  is  obtained,  the 
statute  of  limitations  runs  only  from  the  date  of  such  judgment.1 
Courts  of  equity  will  generally  apply  the  same  period  of  limitation, 
unless  there  be  special  and  equitable  reasons  for  doing  otherwise.2 
"Where  a  subscriber  defeats  even  a  part  of  the  action  on  his  sub- 
scription by  setting  up  the  statute  of  limitations,  he  cannot  claim 
the  stock,  at  least  unless  he  pays  the  part  which  was  barred  by  the 
statute.3 

§  196.  Ignorance  or  mistake. —  It  is  no  defense  to  an  action  for 
a  subscription  that  the  subscriber  at  the  time  of  subscribing  was 


Bank  of  S.  C,  6  Rich.  Eq.  (S.  C),  227 
(1854);  First  Nat.  Bank  v.  Greene,  17 
N.  W.  Rep.,  86  (Iowa,  1883) ;  affirmed  on 
rehearing,  20  id.,  754  (1884).  The  statute 
applicable  to  written  contracts  applies, 
although  the  subscription  is  partly  in 
writing.  Falmouth,  etc.,  Co.  v.  Shaw- 
han,  5  N.  E.  Rep.,  408  (Ind.,  1886).  It  is 
well  to  suggest  here  that  the  creditor, 
before  enforcing  this  liability,  must  first 
obtain  judgment  against  the  corpora- 
tion. (See  §  200,  infra.)  The  corporation 
can  defeat  the  action  against  it  by  set- 
ting up  the  statute  of  limitations,  if  suf- 
ficient time  has  elapsed.  If  the  corpo- 
ration fails  to  set  up  that  defense,  the 
stockholder  may  set  it  up  in  behalf  of 
the  corporation  when  he  is  sued.  Such, 
at  least,  is  the  rule  in  some  jurisdictions. 
(See  §  209,  infra.)  The  statute  of  lim- 
itations, by  commencing  to  run  against 
one  call,  does  not  thereby  commence  to 
run  against  the  whole  subscription. 
Dorsheimer  v.  Glenn,  51  Fed.  Rep.,  400 
(1892) ;  Priest  v.  Glenn,  id.,  405. 

1  Christensen  v.  Quintard,  36  Hun,  334 
(1885) ;  Christensen  v.  Colby,  43  Hun,  362 
(1887).     See,  also,  §  225,  infra,  notes. 

2  Bank  of  United  States  v.  Dallam,  4 
Dana  (Ky.),  574  (1836).  In  the  cases, 
however,  of  Payne  v.  Ballard,  23  Miss., 
88  (1851),  and  Hightower  v.  Thornton,  8 
Ga.,  486  (1850),  it  was  held  that  the  stat- 
ute of  limitations  has  no  application  by 
analogy  to  the  equitable  actions  to  col- 
lect subscriptions.  In  Terry  v.  Bank  of 
Cape  Fear,  20  Fed.  Rep.,  777  (1884),  the 
court  said,  in  a  similar  case :  "  In  ad- 
justing equitable  rights,  courts  of  equity 


will  never  allow  the  statute  of  limita- 
tions to  have  a  manifestly  inequitable 
and  unjust  operation.  In  Scovill  v. 
Thayer,  105  U.  S.,  143,  155  (1881),  a  case 
in  equity,  the  court  say :  "  Before  there 
is  any  obligation  upon  the  stockholder 
to  pay  without  an  assessment  and  call 
by  the  company,  there  must  be  some 
order  of  a  court  of  competent  jurisdic- 
tion, or,  at  the  very  least,  some  author- 
ized demand  upon  him  for  payment 
And  it  is  clear  the  statute  of  limitations 
does  not  begin  to  run  in  his  favor  until 
such  order  or  demand,"  citing  cases.  A 
decree  of  a  court  of  equity  that  the  sub- 
scription be  paid  is  equivalent  to  a  call, 
and  the  statute  commences  to  run. 
Glenn  v.  Saxton,  68  Cal.,  353  (1886).  An 
assignment  by  the  corporation  for  the 
benefit  of  creditors  starts  the  statute 
within  a  reasonable  time  thereafter. 
Glenn  v.  Dorsheimer,  24  "Fed.  Rep.,  536 
(1885);  Glenn  v.  Priest,  28  Fed.  Rep.,  907 
(1886).  For  an  explanation  of  the  origin 
of  the  Glenn  cases,  see  Baltimore,  etc., 
R  R  Co.  v.  Glenn,  28  Md.,  287  (1867). 
Where  a  decree  is  made  assessing  the 
stockholders  on  their  subscriptions,  the 
statute  of  limitations  begins  to  run  from 
the  entry  of  the  decree.  Glenn  v.  Mc- 
Allister's Ex'rs,  46  Fed.  Rep.,  883  (1891). 
'Johnson  v.  Albany  &  Susquehanna 
R.  R  Co.,  54  N.  Y.,  416,  426  (1873),  where 
the  court  say :  "The  claim  of  the  plaint- 
iff is  not  supported  by  any  principle 
that  should  give  it  any  consideration  in 
either  a  court  of  law  or  equity.  The 
statute  of  limitations  never  paid  a  debt, 
although  it  barred  a  remedy." 


244 


CH.  X.]  MISCELLANEOUS    DEFENSES.  [§§  197,  19S. 

ignorant  of  the  actual  condition  of  the  corporation.1  Nor  is  it  a 
defense  that  he  was  ignorant  of  the  legal  effect  of  the  subscription 
contract  which  he  signed.2 

§197.  Miscellaneous  defenses.— A  subscriber  cannot  defeat  an 
action  for  the  collection  of  his  subscription  by  alleging  that  the 
charter  was  obtained  in  bad  faith;3  or  that,  where  a  corporate 
creditor  is  enforcing  payment,  such  creditor  is  also  a  director  of 
the  corporation ; 4  or  that  other  subscribers  have  paid  their  subscrip- 
tions in  Confederate  money ; 5  or  that  he  has  paid  the  subscription 
by  note  instead  of  by  cash,  as  required  by  the  charter;6  or  that  the 
promoters  sold  to  the  corporation  a  patent-right  at  an  overvalua- 
tion ; 7  or  that  the  officers  were  illegally  elected : 8  or  that  an  illegal 
by-law  prevents  his  voting  until  calls  are  paid;9  or  that,  by  the 
charter,  the  whole  capital  stock  should  have  been  paid  in  before 
the  commencement  of  business,  which  was  not  done; lu  or  that  the 
corporation  has  been  ousted  from  its  franchises.11  A  material  alter- 
ation, however,  in  a  subscription  contract  is  a  good  defense,  unless 
the  corporation  proves  it  to  have  been  made  without  its  knowledge 
or  procurement.12  The  defense  that  the  corporate  charter  has 
been  amended  by  the  legislature  without  the  consent  of  the  de- 
fendant subscriber  is  considered  elsewhere;13  as  also  the  right  of  an 
assignee  of  the  corporation  to  collect  subscriptions ; u  and  the  de- 
fense that  the  stockholder  did  not  know  the  legal  effect  of  his  sub- 
scription.15 Various  other  defenses  are  referred  to  in  the  notes 
below.16 

§  198.  Waiver  of  defenses.—  A  subscriber  to  stock  in  a  corpora- 
tion may  waive  any  defense  he  may  have  to  the  subscription.    The 

*Payson    v.     Withers,    5    Biss.,    269  defense  that    the    directors    were  not 

(1873).  stockholders,   as    required    by  statute. 

2  New  Albany  &  S.  R.  R.  Co.  v.  fields,  Ross    v.   Bank,  etc.,   19  Pac.  Rep.,  243' 

10  Ind.,  187  (1858) ;  Clear  v.  Newcastle  &  (Nev.,  1888). 

D.  R.  R  Co.,  9  Ind.,  488  (1857).      See,  » Chandler  v.    Northern  Cross  R  R 

also,  cases  in  §  146.  Co.,  18  111.,  190  (1856). 

3Peychaud  v.  Love,  24  La.  Ann.,  404  10  McDermott  v.   Dongan,  44  Mo.,   85 

(1872);  Garrett  v.  Dillsburg  &  M.  R.  R.  (1869). 

Co.,   78    Pa.   St.,   465   (1875);   Smith  v.  »  Gaff  v.  Flesher,  33  Ohio  St,  107 ;  Row- 

Heindecker,  39  Mo.,  157  (1866).  land  v.  Meader  Furniture  Co.,  38  Ohio 

4  Chouteau  Ins.  Co.  v.  Floyd,  74  Mo.,  St.  269  (1882). 

286  (1881).  12  Bery  v.  Marietta,  etc.,  R.  R  Co.,  26 

5  Mason  <fe  Augusta  R  R  Co.  v.  Vason,  Ohio  St.,  673  (1875).  Cf.  Ellison  v.  Mobile 
57  Ga.,  314  (1876).  &  O.  R,  R.  Co.,  36  Miss.,  572  (1858).    See, 

6  Little  17.  O'Brien,  9  Mass.,  423  (1812).     also.  §  53,  supra. 
"Dorris  v.  French,  4  Huu,  292  (1875).       13See  ch.  XXVIII. 

Sec,  also,  ch.  Ill  and  notes.  ,4  See  £  111.  and  ch.  LIL 

s  Trustees  of  Vernon  v.  Hills,  6  Cowen,       15  See  §  146,  supra. 
23(1826).     See,  also,  §  110,  sitjjra.     No       le  Change  of  name  is  no  defense.  Ho w- 

245 


198.] 


MISCELLANEOUS   DEFENSES. 


[CH.  X. 


waiver  may  be  express,  or  it  may  arise  by  implication  from  the 
acts  and  declarations  of  the  subscriber.  Thus  a  payment  of  a  call, 
with  full  knowledge  of  the  defense,  is  held  to  be  a  waiver;1  and 
any  act  indicating  a  clear  intent  to  abide  by  or  accept  or  pass  over 
an  objection  which  the  subscriber 'might  make  will  be  held  to  be  a 
waiver.2 

ard  v.  Glenn,  11 S.  E.  Eep.,  610  (Ga.,  1890). 
A  change  of  name  during  organization 
is  no  defense.  Priest  v.  Glenn,  51  Fed. 
Eep.,  400  (1892).  A  slight  change  in  the 
name  as  incorporated  is  no  defense. 
Joseph  v.  Davis,  10  S.  Rep.,  830  (Ala.,  1892). 
A  slight  change  in  the  name  is  no  de- 
fense where  the  subscriber  has  already 
paid  assessments.  McCormick,  etc.,  Co.,  29 
Pac.  Rep.,  1147  (Kan.,  1892).  An  increase 
of  the  capital  stock  as  allowed  by  the 
charter  does  not  release  subscribers. 
Port  Edwards,  etc.,  R'y  v.  Arpin,  49  N. 
W.  Rep..  828  (Wis.,  1891).  It  is  no  de- 
fense to  a  subscription  that  the  sub- 
scriber did  not  read  the  paper.  Stutz  v. 
Handley,  41  Fed.  Rep.,  531  (189U).  Al- 
though a  corporation  has  taken  more 
subscriptions  than  its  capital  stock  and 
has  issued  certificates  therefor,  yet  this 
does  not  release  subscribers  up  to  the 
correct  amount.  Cartright  V.  Dickin- 
son, 12  S.  W.  Rep.  1030  (Tenn.,  1890).  It 
is  no  defense  that  a  greater  capital 
stock  is  provided  for  in  the  charter  than 
in  the  preliminary  agreement,  nor  that 
the  subscriptions  have  not  all  been  paid 
in,  where  the  defendant  acquiesced  in 
all  this  by  attending  meetings  and  vot- 
ing.   International,  etc.,  Ass'n  v. Walker, 


47  N.  W.  Rep.,  338  (Mich.,  1890).  A  sub- 
scription to  stock  is  enforcable  severally 
although  signed  by  several.  A  change 
in  it  by  several  of  the  subscribers  does 
not  release  the  others.  An  increase  in 
the  capital  upon  incorporation  does  not 
release.  Gibbons  v.  Grinsel,  48  N.  W. 
Rep.,  255  (Wis.,  1891).  Sale  under  stat- 
utes existing  at  time  of  subscription  is 
valid  and  does  not  release  subscriber. 
Armstrong  v.  Karshner,  24  N.  E.  Rep., 
897  (Ohio,  1890).  A  person  who  has 
been  discharged  under  the  bankrupt  act 
is  not  liable  on  subscriptions  made 
previous  to  his  application  in  bank- 
ruptcy. Glenn  v.  Abell,  39  Fed.  Rep., 
10  (1889) ;  but  see  Sayre  v.  Glenn,  6  S. 
Rep.,  45  (Ala.,  1889). 

i  Miss.  &  Tenn.  R  R  Co.  v.  Harris,  36 
Miss.,  17(1858);  Inter.  Mountain  P.  Co. 
v.  Jack,  6  Pac.  Rep.,  20  (Montana,  1885) ; 
Hamilton  v.  Grangers'  Life  &  H.  Ins. 
Co.,  67  Ga.,  145  (1881). 

2  See  May  v.  Memphis  Branch  R  R. 
Co.,  48  Ga,  109  (1873) ;  Middlesex  Turn- 
pike Co.  v.  Seman,  10  Mass.,  385  (1813); 
McCully  v.  Pittsburgh  &  C.  R  R  Co.,  32 
Pa  St,  25  (1858).  See,  also,  §§  160,  161, 
and  ch.  XLIV. 


246 


CHAPTER  XI. 


THE  STOCKHOLDERS'   LIABILITY  TO  CORPORATE   CREDITORS  UPON 

UNPAID  SUBSCRIPTIONS. 


199. 


200. 


201. 


Unpaid  subscriptions  a  trust  fund 
for  the  benefit  of  creditors. 

Can  be  reached  only  after  judg- 
ment against  the  corporation, 
and  execution  returned  unsat- 
isfied. 

The  remedy  by  garnishment  or 
attachment,  or  by  notice  to  the 
stockholder. 

202.  The  remedy  by  mandamus. 

203.  The  remedy  by  action  at  law. 

204.  The  remedy  by  bill  in  equity. 
205-206.  Parties  to  the  bill  in  equity. 
207.  A  court  of  equity,  may  make  a 

call. 


§  208.  Receivers  and  assignees  in  bank- 
ruptcy or  for  the  benefit  of 
creditors — Their  duties,  powers 
and  liabilities  as  to  shares  not 
paid  up. 

209.  The  judgment  against  the  corpo- 

ration impeachable  only  for 
fraud  or  want  of  jurisdiction. 

210.  Defenses   available  against   cor- 

porate creditors  in  actions  to 
compel  payment  of  balances  of 
subscriptions. 

211.  Contribution. 


§  199.  Unpaid  subscriptions  a  trust  fund  for  tlw  benefit  of  cred- 
itors.—The  capital  or  capital  stock  of  a  corporation  is  the  aggre- 
gate of  the  par  value  of  all  the  shares  into  which  the  capital  is 
divided  upon  the  incorporation;  it  is  the  fund  or  resource  with 
Avhich  the  corporation  is  enabled  to  act  and  transact  its  business, 
and  upon  the  faith  of  which  persons  give  credit  to  the  corporation 
and  become  corporate  creditors.  The  public,  in  dealing  with  a  cor- 
poration, has  the  right  to  assume  that  its  actual  capital,  in  money 
or  money's  worth,  is  equal  to  the  capital  stock  which  it  purports  to 
have,  unless  it  has  been  impaired  by  business  losses.  The  public 
has  a  right  also  to  assume  that  the  capital  stock  has  been  or  will 
be  fully  paid  up,  if  it  be  necessary,  in  order  to  meet  corporate  lia- 
bilities. Accordingly,  the  American  courts  go  very  far  to  protect 
corporate  creditors;  and  in  this  country  it  is  a  well-settled  doctrine 
that  capital  stock,  and  especially  unpaid  subscriptions  to  the  capital 
stock,  constitute  a  trust  fund  for  the  benefit  of  the  creditors  of 
the  corporation.1     There  are  three  methods  by  which  stockholders 


1 "  Though  it  be  a  doctrine  of  modern 
date,"  says  Mr.  Justice  Miller  in  Sawyer 
v.  Hoag,  17  Wall.,  610,  620  (1873),  "  we 
think  it  now  well  established  that  the 
capital  stock  of  a  corporation,  especially 
its  unpaid  subscriptions,  is  a  trust  fund 
for  the  benefit  of  the  general  creditors  of 
the  corporation.   And  when  we  consider 


the  rapid  development  of  corporations 
as  instrumentalities  of  the  commercial 
and  business  world  in  the  last  few  years, 
with  the  corresponding  necessity  of 
adapting  legal  principles  to  the  new  and 
varying  exigencies  of  this  business,  it  is 
no  solid  objection  to  such  a  principle  that 
it  is  modern,  for  the  occasion  for  it  could 


24" 


199.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[CH. 


XI. 


seek  to  avoid  their  liability  to  corporate  creditors:  first,  by  a  can- 
cellation or  withdrawal  from  the  contract;1  second,  by  a  release 
from  their  obligation  to  pay  the  full  par  value  of  the  stock; 2  third, 
by  a  transfer  of  the  stock.3  In  each  of  these  cases,  however,  a 
court  of  equity  does  its  utmost  to  protect  the  corporate  creditors, 
and  a  rigid  scrutiny  will  be  made  in  the  interest  of  creditors  into 
every  transaction  of  such  a  nature.4 


not  sooner  have  arisen."  This  seems  to 
be  a  distinctively  American  doctrine. 
It  is  not  known  to  the  English  law,  and 
was  first  clearly  announced  by  Mr.  Jus- 
tice Story  in  Wood  v.  Dummer,  3  Ma- 
son, 308  (1824).  See,  also,  the  cases  of 
Hightower  v.  Thornton,  8  Ga.,  486  (by 
Lumpkin,  J.,  1850) ;  Germantown,  etc., 
R'y  Co.  v.  Fitler,  60  Penn.  St,  124  (1869); 
Crawford  v.  Rohrer,  59  Md.,  599  (1882); 
Lewis  v.  Robertson,  21  Miss.,  558  (1850); 
Bunn's  Appeal,  105  Penn.  St..  49 
(1884);  Curran  v.  Arkansas,  15  How., 
304  (1853);  Mumma  v.  Potomac  Co.,  8 
Peters,  281(1834);  Sanger  v.  Upton.  91 
U.  S.,  56  (1875) ;  County  of  Morgan  v. 
Allen,  103  id.,  498  (1880) ;  Osgood  v.  Lay- 
tin,  3  Keyes  (N.  Y.),  521 ;  S.  C,  5  Abb. 
Pr.  (N.  S.),  1  (1867).  Cf.  Vose  v.  Grant, 
15  Mass.,  505  (1819) ;  Spear  v.  Grant,  16 
id,  9  (1S19);  Baker  v.  Atlas  Bank.  9 
Mete,  182  (1845);  Osgood  v.  King,  42 
Iowa,  478  (1876) ;  Chisholm  v.  Forny,  65 
id.,  333;  Jackson  v.  Traer,  64  id.,  469 
(1884).  In  New  York  many  decisions  to 
this  point  have  been  rendered,  especially 
in  actions  under  the  General  Manufact- 
uring Act  (£  10,  ch.  40,  Laws  of  1848). 
They  are  fully  cited  and  considered  in 
the  chapter,  infra,  on  Statutory  Lia- 
bility, q.  v.  See  Gillet  v.  Moody.  5  Barb., 
184.  189  (1849);  Mills  v.  Stewart,  41 
N.  Y,  384,  389  (1869);  Morgan  v.  New 
York,  etc.,  R  R  Co.,  10  Paige,  Chan., 
290  (1843).  To  the  same  effect,  see  Sal- 
mon v.  The  Hamborough  Company,  1 
Cases  in  Chan.,  204  (1671);  Nevitt  v. 
Bank  of  Port  Gibson,  6  Smed.  &  M.,  513 
(1846). 

i  See  §§  167-170. 

-  Id.  ;  also  ch.  III. 

3  See  ch.  XV. 

*  Sawyer  v.  Hoag,  17  Wall.,  610  (1873) ; 


County  of  Morgan  v.  Allen,  103  U.  S., 
498  (1880);  Chouteau  v.  Dean,  7  Mo. 
App.,  211  (1879^;  Gill  v.  Balis,  72  Mo, 
424  (1880) ;  Putnam  v.  City  of  New  Al- 
bany, 4  Biss.,  365  (Ind.,  1869);  Be  South 
Mountain,  etc.,  Mining  Co..  7  Sawyer, 
30  (Cal.,  1881) ;  Union  Ins.  Co.  v.  Frear 
Stone  Manuf'g  Co.,  97  111.,  537  (1881): 
Singer  v.  Given,  61  Iowa,  93  (1883); 
Jackson  v.  Traer,  64  Iowa,  469  (1884); 
Mathis  v.  Pridham.  20  S.  W.  Rep.,  1015 
(Tex.,  1892).  In  one  case  it  is  said  that 
it  is  not  within  the  ingenuity  of  man  to 
devise  a  scheme  to  prevent  courts  of 
equity  from  enforcing  the  payment  of 
unpaid  subscriptions  to  capital  stock 
for  the  benefit  of  corporate  creditors. 
Upton  v.  Hansbrough,  3  Biss..  417,  421 
(1873).  Cf.  Chisholm  v.  Forny,  65  Iowa. 
333  (1884).  Unfortunately  this  cannot 
be  said  to  be  always  the  result  of  corpo- 
rate creditors'  suits  to  enforce  such  lia- 
bility. Generally,  however,  the  courts 
are  able  to  give  relief.  Thus  an  arrange- 
ment entered  into  between  the  corpora- 
tion and  its  stockholders,  for  the  purpose 
of  defeating  the  claims  of  creditors,  in 
pursuance  of  which  the  stockholders  are 
allowed,  after  it  is  ascertained  that  the 
corporation  is  insolvent,  to  buy  in  de- 
preciated and  repudiated  claims  against 
the  company,  and  thus  to  extinguish 
their  indebtedness  for  stock  subscribed, 
is  held  fraudulent  and  void.  Goodwin 
v.  McGehee,  15  Ala.,  232  (1849) ;  Thomp- 
son v.  Meisser,  108  111.,  359  (1884).  And 
a  payment  in  full  for  stock,  followed 
by  an  immediate  loan  of  part  or  all  of 
the  purchase  price  by  the  corporation 
back  to  the  subscriber,  is  a  fraud  as  (o 
creditors  and  the  public,  and  will  be  set 
aside.  Sawyer  v.  Hoag.  17  Wall.,  610 
(1873).     A  fraudulent  device  by  which 


248 


CH.  XI.]  SUBSCRIPTIONS    AND    CORPORATE    CREDITORS.  [§  200. 

§  200.  Can  be  reached  only  after  judgment  against  the  corpora- 
tion and  execution  returned  unsatisfied, —  Although  it  may  be  con- 
sidered settled  law,  at  least  in  the  United  States,  that  unpaid 
subscriptions  to  the  capital  stock  of  corporations  constitute  a  trust 
fund  for  the  benefit  of  corporate  creditors,  yet  such  unpaid  bal- 
ances of  subscription  are  not  the  primary  or  regular  fund  for  the 
payment  of  corporate  debts.  Persons  transacting  business  with 
the  corporation  look  to  the  corporation  itself  for  the  payment  of 
their  debts.  Credit  is  given  to  the  corporation,  not  to  the  stock- 
holders; and  it  is  the  natural  order  of  business  that  the  creditors 
of  the  corporation  are  to  be  paid  by  the  corporation  from  funds  in 
the  corporate  treasury.  Ordinarily,  corporate  creditors  have  no 
knowledge  or  concern  about  the  subscription  list,  and  unpaid  or 
partially  paid  subscriptions  are  a  matter  entirely  between  the  cor- 
poration and  the  subscribers.  So  long  as  the  corporation  meets  its 
obligations  in  the  ordinary  course  of  business,  corporate  creditors 
have  no  need  to  concern  themselves  about  unpaid  subscriptions  to 
the  stock.  But  when  the  corporation  is  in  default  and  embarrassed, 
or  for  any  reason  fails  to  pay  its  debts,  then  its  creditors  have 
rights  with  reference  to  such  unpaid  subscriptions.  They  then 
have  the  right  to  know  whether  all  the  subscriptions  for  stock  have 
been  fully  paid  in,  and,  if  not,  they  have  the  right  to  compel  such 
payment. 

It  accordingly  becomes  important  to  know  at  what  point,  in  their 
efforts  to  collect  what  is  due  them,  corporate  creditors  may  cease 
to  pursue  the  corporation  and  proceed  directly  against  its  delin- 
quent members.  The  well-established  rule  upon  this  point  is  that 
a  corporate  creditor's  suit  to  enforce  payment  of  unpaid  subscrip- 
tions can  be  properly  brought  only  after  a  judgment  at  law  has 

a  stockholder  pays  his  subscription  by  v.  Mudgett,  95  N.  Y.,  295  (1884) ;  Pacific 
a  note,  and  subsequently  obtains  the  National  Bank  Cases,  118  U.  S.,  635. 
note  at  a  large  discount,  may  be  valid  The  filing  of  the  statutory  certificate 
as  against  the  company,  but  will  be  set  declaring  that  the  whole  amount  of  the 
aside  as  regards  corporate  creditors,  capital  stock  has  been  paid  in  is  not 
Bouton  v.  Dement,  14  N.  W.  Eep.,  62  conclusive  of  the  fact,  and  will  not  pre- 
(111.,  1887).  A  subscriber  cannot  pay  vent  proof  to  the  contrary.  Barre  Na- 
for  his  stock  by  purchasing  full-paid  tional  Bank  v.  Hingham  Manuf'g  Co., 
stock  and  having  this  substituted  for  127  Mass.,  563  (1879);  Wheeler  v.  Millar, 
his  subscription.  Marshall,  etc.,  Co.  v.  90  N.  Y.,  353  (1882);  Yeeder  v.  Mudgett, 
Killian,  6  S.  E.  Eep.,  680  (N.  C,  1888).  95  id.,  295  (1884);  Thompson  v.  Reno 
The  stockholder's  liability  in  this  re-  Sav.  Bank  (Nev.,  1885).  The  question 
spect  is  not  confined  in  general  to  the  whether  a  stockholder  may  limit  or  en- 
original  capital  stock,  but  it  attaches,  tirely  do  away  with  his  liability,  by  an 
upon  an  authorized  increase  of  the  cap-  express  contract  to  that  effect  with  cor- 
ital,  to  such  increase.  Chubb  v.  Upton,  porate  creditors,  is  considered  elsewhere. 
93   U.  S.,  665  (1877).     See,  also,  Veeder  See  §  216. 

249 


§  200.] 


SUBSCRIPTIONS    AND   CORPORATE    CREDITORS. 


[CH.  XI. 


been  obtained  against  the  corporation,  and  an  execution  returned 
unsatisfied.1  This  rule  is  of  such  importance  that,  by  statute,  in 
many  of  the  states,  a  creditor's  right  to  proceed  against  a  stock- 
holder on  his  unpaid  subscription  is  allowed  only  after  the  remedy 
against  the  corporation  itself  has  been  exhausted.2  By  this  is  meant 
that  judgment  shall  have  been  duly  recovered  against  the  corpora- 
tion, and  execution  issued  and  regularly  returned  unsatisfied.  Noth- 
ing short  of  that  exhausts  the  remedy  against  the  corporation.3 


1  Bank  of  the  United  States  v.  Dallam, 
4  Dana,  574  (1836) ;  Walser  v.  Seligman, 
21  Blatch.,  130  (1882);  Wetherbee  v. 
Baker,  35  N.  J.  Eq.,  501  (1882);  Cutright 
v.  Stanford,  81  III.,  240  (1876);  Baxter  v. 
Moses,  77  Me.,  465  (1885);  Terry  v.  An- 
derson, 95  U.  S.,  628,  636  (1877);  Cleve- 
land v.  Burnham,  55  Wis.,  598  (1882) ; 
Freeland  v.  McCullough,  1  Denio,  414 
(1845).  The  suit  is  to  be  brought  for  this 
purpose  in  the  courts  of  the  state  where 
the  corporation  exists.  Barclay  v.  Tall- 
man,  4  Edw.  Chan.,  123  (1842) ;  Murray 
v.  Vauderbilt,  39  Barb.,  140,  147  (1863) ; 
Bank  of  Virginia  v.  Adams,  1  Pars.  Eq., 
534  (1850);  Patterson  v.  Lynde,  112  111., 
196  (1884) ;  Harris  v.  Pullman,  84  id.,  20, 
25  (1876);  Bayliss  v.  Swift,  40  Iowa,  648 
(1875).  See,  also,  §219,  infra.  Cf.  Claflin 
v.  McDermott.  12  Fed.  Eep.,  375  (1882). 

2  Thornton  v.  Lane,  11  Ga.,  459  (1852); 
Lane  v.  Harris,  16  id.,  217  (1854);  Mc- 
Claren  v.  Franciscus,  43  Mo.,  452  (1869) ; 
New  England,  etc.,  Bank  v.  Newport 
Steam  Factory,  6  R  I.,  154  (1859) ;  Priest 
v.  Essex  Manuf'g  Co.,  115  Mass.,  380 
(1874);  Cambridge  Water-works  v.  Som- 
erville  Dyeing,  etc.,  Co.,  4  Allen,  239 
(1862);  Lindsley  v.  Simonds,  2  Abb. 
Prac.  (N.  S.),  69  (1866) ;  Blake  v.  Hinkle, 
10  Yerg.,  218  (1836);  Shellington  v. 
Howland,  53  N.  Y.,  371  (1873) ;  Wehr- 
man  v.  Reakirt,  1  Cin.  Super.  Ct.,  230 
(1871);  Dauchy  v.  Brown,  24  Vt,  197 
(1852);  Drinkwater  v.  Portland  Marine 
R'y,  18  Me.,  35  (1841);  Handy  v.  Draper, 
89  N.  Y.,  334  (1882);  Richards  v.  Coe, 
N.  Y.  Daily  Reg.,  August  2,  1887;  and 
Richards  v.  Beach,  id.,  December  12, 
1887;  Burch  v.  Taylor,  24  Pac.  Rep.,  438 
(Wash.,    1890);    Baines  v.    Babcock.    27 


Pac.  Rep.,  674  (Cal.,  1891).     Cf  Perkins 
v.  Church,  31  Barb.,  84  (1859). 

3  Rocky  Mountain  National  Bank  v. 
Bliss,  89  N.  Y,  338  (1882).  In  this  case 
it  is  held  that  a  proceeding  in  rem,  af- 
fecting only  the  property  of  the  corpo- 
ration attached,  and  execution  against 
that  property,  is  not  what  the  rule  re- 
quires ;  and  again,  that  the  recovery  of 
a  judgment  and  issue  of  execution  in 
another  state  is  not  a  compliance  with 
the  rule,  but  that  a  judgment  in  and 
execution  issued  out  of  a  court  of  the 
state  where  the  statute  is  in  force  is 
necessary.  To  the  same  effect  see  Brice 
v.  Munro,  5  Canadian  Law  Times,  130, 
Ontario  high  court  of  justice,  queen's 
bench  division  (1885),  in  which  case  it 
is  held  that  an  execution  issued  and  re- 
turned in  Quebec  is  not  sufficient  as 
against  a  company  incorporated  and 
existing  in  Ontario.  Contra,  Shickle  v. 
Watts,  7  S.  W.  Rep.,  274  (Mo.,  188$.  See 
note  1,  p.  252. 

In  England  a  scire  facias  is  a  necessary 
preliminary,  unless  there  is  some  statu- 
tory enactment  to  the  contrary.  2  Lind- 
ley  on  Partnership,  520;  Bartlett  v. 
Pentland,  1  Barn.  &  Ad.,  704  (1831); 
Clowes  v.  Brettell,  10  Mees.  &  W.,  506 
(1842);  Winfield  v.  Barton,  2  Dowl. 
(N  S.),  355  (1872);  Wingfield  v.  Peel,  12 
L.  J.  (N.  S.,  Q.  B.),  102  (1842).  In  a  suit 
by  a  corporate  creditor  against  a  corpo- 
ration to  obtain  judgment  before  suing 
stockholders  on  their  liability,  the  stock- 
holders are  not  allowed  to  come  in  as 
parties.  Hambleton  v.  Glenn,  9  S.  E. 
Rep.,  129  (Va.,  1889).  Proof  that  a  cred- 
itor has  exhausted  his  legal  remedy 
against  the  corporation  is  shown  by  the ' 


250 


ill.  XI.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[§  200. 


This  rule  is  founded  in  reason  and  a  wise  public  policy  relative 
to  the  transaction  of  business,  since  the  corporate  funds  are  the  cor- 
porate creditors'  primary  resource,  even  where  the  liability  of  the 
individual  shareholder  is  declared  to  be  primary,  like  that  of  an 
original  contractor  or  partner.1  AVhere,  however,  the  corporation 
has  been  adjudged  a  bankrupt,  and  a  dissolution  has  in  this  way 
been  brought  about,  the  remedy  against  the  corporation  need  not 
first  be  exhausted.2  Such,  also,  has  been  held  to  be  the  rule  where 
the  corporation  is  notoriously  insolvent,3  or  is  formally  dissolved.4 


judgment  and  an  execution  thereon 
returned  unsatisfied.  Evidence  that  the 
company  owns  a  large  amount  of  per- 
sonal property  besides  its  road  and  fran- 
chise is  inadmissible.  Baines  v.  Babcock 
et  al,  27  Pac.  Rep.,  674  (CaL,  1891). 

i  Stone  v.  Wiggin,  5  Mete,  316  (1842) ; 
Stedman  v.  Eveleth.  6  id..  114  (1843). 

2  State  Savings  Association  v.  Kellogg. 
52  Mo.,  583  (1873) ;  Dryden  v.  Kellogg,  2 
Mo.  App,  87  (1876) ;  Shellington  v.  How- 
land,  53  N.  Y.,  371  (1873).  Cf.  Ansonia 
Brass  &  Copper  Co.  v.  New  Lamp  Chim- 
ney Co.,  53  N.  Y.,  123  (1873);  S.  C,  91 
U.  S.,  656 ;  Walser  v.  Seligman,  21  Blatch., 
130  (1882).  See  §  219.  And  see,  contra, 
Birminghan  National  Bank  v.  Moser,  14 
Hun,  605  (1878) ;  Fourth  Nat'l  Bank  v. 
Francklyn,  120  U.  S,  747  (1887). 

3  Hodges  v.  Silver  Hill  Mining  Co.,  9 
Oreg..  200  (1881);  Terry  v.  Tubman,  92 
U.  S-,  156  (1875);  Camden  v.  Doremus, 
3  How.,  515,  533  (1845) ;  Stutz  v.  Hand- 
ley,  41  Fed.  Rep.,  531  (1890).  It  has  been 
held  that  the  right  of  action  accrues  to 
the  creditor  whenever  it  is  clear  that 
the  corporation  has  no  property  from 
which  the  claim  can  be  paid.  A  judg- 
ment is  not  necessary  for  the  beginning 
of  an  action  against  the  stockholder, 
though  it  may  be  necessary  as  evidence 
in  such  action  to  determine  the  measure 
of  damages.  First  Nat  Bank  of  Gar- 
rettsville  v.  Greene,  64  Io%va,  445  (1884). 
Cf.  Cleveland  v.  Marine  Bank,  17  Wis., 
545  (1863).  A  creditor  of  an  insolvent 
corporation  may  bring  a  creditor's  bill 
against  the  assignee  for  the  benefit  of 
creditors  of  a  subscriber,  even  though 
no  judgment  against    the  corporation 


had  been  obtained,  and  no  other  stock- 
holders are  made  co-defendants.  Sa- 
mainego  v.  Stiles,  20  Pac.  Rep.,  607 
(Ariz.,  18S9). 

4Kincaid  v.  Dwinelle,  59  N.  Y,  548 
(1875).     Cf.  Hollingshead  v.  Woodward, 
35  Hun,  410  (1885).     As  to  what  is  suffi- 
cient to  dissolve  a  corporation  for  this 
purpose,  see  Kincaid  v.  Dwinelle,  supra. 
Under  a  statute  requiring  dissolution  of 
the  corporation  before  corporate  cred- 
itors can  reach  unpaid  subscriptions,  the 
corporation  is  deemed  to  be  dissolved 
when  it  has  ceased  to  exercise  its  proper 
functions,  is  without  funds  and  is  in- 
debted.    Penniman  v.   Briggs,  1   Hopk. 
Chan.  (N.  Y),  300  (1824);  Slee  v.  Bloom, 
19  Johns.,  456  (1822) ;  Bank  of  Pough- 
keepsie  v.  Ibbotson,  24  Wend.,  473.  47'J 
(1840).     Cf.  Terry  v.  Anderson,  95  U.  S.. 
628  (1877).     Remington  v.  Samana  Bay 
Co.,  140  Mass.,  494  (1886),  holds  that  the 
judgment  herein  against    the  corpora- 
tion is  void  if  the  corporation  has  been 
dissolved.     It  has  been  said  that  corpo- 
rate creditors  need  not  await  the  collec- 
tion   by   the    corporation   of    doubtful 
claims,  but  may  compel  the  payment  of 
their  claims  by  the  shareholders,  and  let 
the  latter    take    the    risk    and    delay. 
"  Creditors,"'  say  the  supreme  court  of 
Tennessee,    "  will    not    be    required   to 
await  the  collection  of  doubtful  claims 
or  claims  in  litigation.  The  stockholders 
must    pay   promptly,    and    take    upon 
themselves  the  onus  of  delay  and  risk 
as  to  all  such  cases."    Moses  v.  Ocoee 
Bank,  1  Lea,  398,  413  (1878).     See,  also, 
Stark  v.  Burk,  9  La.  Ann.,  341,  343(1854). 
General  creditors  may  also  reach  un- 


251 


§  201.] 


SUBSCRIPTIONS    AND   CORPORATE    CREDITORS. 


[CH.  XI. 


A  corporate  creditor  must  obtain  judgment  against  the  corpora- 
tion in  the  state  where  he  brings  his  action  to  enforce  the  stock- 
holder's subscription,  or  he  must  show  that  it  was  impossible  to 
obtain  one.1 

§  201.  The  remedy  by  garnishment  or  attachment  or  by  notice  to 
the  stockholder. —  There  are  various  remedies  which  corporate  cred- 
itors may  employ  to  enforce  the  payment  of  partially  paid  up  sub- 
scriptions. Among  these  is  that  of  garnishment.  Thus,  where  a 
subscription  has  been  called  in,  in  part  or  wholly,  and  has  not  been 
paid  by  the  subscriber,  it  is,  at  least  to  the  extent  of  such  calls,  an 
asset  of  the  corporation,  and,  like  other  assets,  is  subject  to  gar- 
nishment at  the  instance  of  a  corporate  creditor.2 

When,  therefore,  a  stockholder  is  in  default  for  instalments  of 
stock  for  which  calls  have  been  made,  he  stands  in  the  attitude  of 
any  other  debtor  to  the  corporation,  and  may  be  garnished  in  the 
usual  way,  upon  the  theory  of  the  authorities  just  cited,  for  the 
purpose  of  collecting  the  debt  due  from  the  corporation.  But  this 
remedy  is  not  available  to  reach  that  part  of  the  unpaid  subscrip- 
tion for  which  calls  have  not  been  made.3 

Still  another  remedy  is  often  given  by  statute.     The  statute  may 

paid  subscriptions,  although  another  tachment  creditor  will  be  preserved, 
corporate  creditor  has  a  mortgage  lien  Re  Queensland,  etc.,  Co.,  58  L.  T.  Rep., 
on  the  corporate  property,  rights,  privi-    878  (1888). 


leges  and  franchises.  Dean  v.  Biggs,  25 
Hun.  122  (1881).     See,  also,  §  631. 

1  National,  etc.,  Co.  v.  Ballou,  146  U.  S. 
517  (1892);  S.  CL,  42  Fed.  Rep.  749.  See, 
also,  §  219,  and  note  3,  p.  250. 

2 Kern  v.  Chicago,  etc.,  Ass'n,  29  N.  E. 
Rep.,  1035  (111.,  1892);  Joseph  v.  Davis, 
10  S.  Rep.,  830  (Ala.,  1892) ;  Meints  v.  East 
St  Louis,  etc.,  Co.,  89  111.,  48  (1878); 
Hannah  v.  The  Moberly  Bank.  G7  Mo . 
678  (1878) ;  Simpson  v.  Reynolds.  71  id, 
594  (1880) ;  Faull  v.  Alaska,  etc.,  Mining 
Co.,  8  Sawyer,  420  (1882);  Curry  v. 
Woodward,  53  Ala.,  371  (1875) ;  Bingham 
v.  Rushing,  5  Ala.,  403(1843);  Hays  tt 
Lycoming,  etc.,  Co.,  99  Pa,  St,  621  (1882). 
Cf.  Rand  v.  "White  Mountains  R  R.  Co., 
40  N.  H,  79  (1860);  Brown  v.  Union 
Insurance  Co.,  3  La.  Ann.,  177  (1848); 


3  Bingham  v.  Rushing,  5  Ala.,  403 
(1843);  Brown  v.  Union  Insurance  Co., 
3  La.  Ann.,  177  (1848):  Bunn's  Appeal, 
105  Pa.  St.,  49(1884).  See.  also,  Coal- 
field Coal  Co.  v.  Peck,  98  111.,  139  (1881). 
In  Nevada  the  right  of  garnishment  in 
a  case  where  calls  had  not  been  made 
was  expressly  denied.  McKelvey  v. 
Crockett.  18  Nev.,  238  (18S4).  Cf.  Meints 
v.  East  St  Louis,  etc.,  Co.,  89  III,  48 
(1878):  Hughes  v.  Oregonian  R'y  Co.,  11 
Ore.,  158  (1883);  Peterson  v.  Sinclair, 
83  Pa.  St,  250  (1877) ;  Langford  v.  Ot- 
tumwa  Water-power  Co.,  59  la.,  283 
(1882);  Chandler  v.  Siddle,  10  N.  B.  R, 
236  (1874).  In  New  York  there  is  no 
process  of  garnishment,  but  instead 
thereof  an  attachment  is  allowed. 
Under  an  attachment  against  a  foreign 


Angell  and  Ames  on  Corp.,  §  517.     See  corporation  not  chartered  by  the  United 

Dean  v.  Biggs,  25  Hun,  122  (1881).     An  States,  the  sheriff  may  levy  upon  the 

attachment  of  unpaid  subscriptions  due  sivms  remaining  unpaid  upon  a  subscrip- 

to  a  foreign  corporation  will  be  stayed  tion  to  the  capital  stock  of  the  corpora- 

where    sequestration    proceedings    are  tion,    the   subscriber  being   within   the 

commenced,  but  the  priority  of  the  at-  county   and  having  property  therein ; 

252 


OH.  XI.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[§  201. 


provide  that  after  the  remecty  is  exhausted  against  the  corporation, 
the  stockholders  may  by  summons  be  brought  into  that  same  suit 
and  compelled  to  pay.1 


"or  upon  one  or  more  shares  of  stock 
therein  held  by  such  a  person,  or  trans- 
ferred by  him  for  the  purpose  of  avoid- 
ing payment  thereof."  New  York  Code 
of  Civil  Procedure,  §  646.  It  has  also 
been  held  that  a  corporate  creditor,  by 
an  execution  against  the  corporation, 
may  reach  an  unpaid  subscription 
though  no  call  has  been  made.  In  re 
Glen  Iron  Works,  17  Fed.  Rep.,  324 
(1883);  S.  C,  20  id.,  674  (1884);  Cucullu 
v.  Union  Insurance  Co.,  2  Rob.  (La.), 
"371  (1842).  Of.  Bunn's  Appeal,  14  Week. 
Notes  Cases,  193;  and  see  Hannah  v. 
The  Moberly  Bank,  67  Mo.,  678(1878). 
But  this  is  a  somewhat  questionable 
rule,  and  the  remedy  proposed  by  it  is 
probably  very  seldom  invoked.  For  the 
remedy  in  Pennsylvania,  where  by  stat- 
ute, after  execution  returned  unsatis- 
fied against  the  corporation,  on  order 
of  the  court,  execution  arises  against 
the  stockholders,  see  Lander  v.  Tillia, 
11  Atl.  Rep.,  86  (Pa.,  1887)..  Bank  of 
Virginia  v.  Adams,  1  Par.  Sel.  Eq.  Cas., 
534  (1850),  holding  that  a  court  of  equity 
in  Pennsylvania  has  no  jurisdiction  to 
compel  stockholders  of  a  foreign  corpo- 
ration residing  there  to  pay  a  subscrip- 
tion to  its  stock  on  the  application  of  its 
creditors.  A  judgment  against  a  non- 
resident stockholder  served  outside  of 
the  jurisdiction  is  not  enforceable.  Wil- 
son v.  Seligman,  36  Fed.  Rep.,  154  (1888). 
As  regards  the  statutory  remedy  of  a 
creditor  in  enforcing  an  unpaid  sub- 
scription in  Maine,  see  Libby  v,  Tobey, 
19  Atl.  Rep.,  904  (Me.,  1890). 

In  the  case  of  Ogilvie  v.  Knox  Ins.  Co., 
22  How.,  380  (1859).  the  court  said: 
"  The  creditors  of  the  corporation  are 
seeking  satisfaction  out  of  the  assets  of 
the  company  to  which  the  defendants 
are  debtors.  If  the  debts  attached  are 
sufficient  to  pay  their  demands  the 
creditors  need  look  no  further.  They 
are  not  bound  to  settle  up  all  the  affairs 


of  this  corporation,  and  the  equity  be- 
tween its  various  stockholders  or  part- 
ners, corporators  or  debtors." 

1  A  state  statute  may  provide  that  a 
judgment  creditor  of  a  corporation  may 
summon  in  a  stockholder  who  has  not 
paid  his  subscription  and  compel  him 
to  pay  such  subscription  to  such  judg- 
ment creditor.  Hill  v.  Merchants'  In- 
surance Co.,  134  U.  S.,  515  (1890).  Where 
the  stockholder's  liability  attaches  upon 
a  notice  served  upon  him,  the  cred- 
itor who  first  serves  the  notice  ac- 
quires a  prior  right  to  collect  Wells 
v.  Robb,  23  Pac.  Rep.,  148  (Kan.,  1890). 
Although  the  stockholder's  subscription 
liability  may  be  enforced  by  levy  of  ex- 
ecution against  his  property  on  a  judg- 
ment against  the  corporation,  "  after 
sufficient  notice,"  yet  notice  to  a  non- 
resident stockholder  by  publication  is 
not  sufficient.  Wilson  v.  St.  Louis,  etc., 
R.  R,  18  S.  W.  Rep.,  286  (Mo..  1891). 
Where  the  statutory  mode  of  collecting 
subscriptions  is  by  motion  based  on  a 
judgment  against  the  corporation,  notice 
of  the  motion  being  given  to  the  stock- 
holder, such  notice  is  not  good  when 
served  out  of  the  state  on  a  non-resident. 
A  judgment  based  on  such  notice  is  not 
good.  Wilson  v.  Seligman,  144  U.  S.,  41 
(1892).  In  Missouri  it  is  held  that  a  "pro- 
ceeding by  motion  for  execution  against 
a  stockholder  of  an  insolvent  corpora- 
tion is  in  no  sense  the  institution  of  an 
independent  suit,  but  a  mere  supple- 
mentary proceeding  in  aid  of  the  execu- 
tion against  the  corporation."  Kohn  r. 
Lucas,  17  Mo.  App.,  29(1885);  Paxon  r. 
Talmage,   2  West  Rep.,  105  (Mo.,  1885). 

The  statutory  remedy  of  issuing  exe- 
cution against  stockholders  for  their 
unpaid  subscriptions  on  a  judgment 
against  the  corporation  ceases  when  a 
receiver  is  appointed.  Showalter  v. 
Laredo,  etc.,  Co.,  18  S.  W.  Rep.,  491 
(Tex.,  1892).     In  England  this  plan  has 


253 


§§  202,  203.]      SUBSCRIPTIONS  AND  corporate  creditors. 


[CH. 


XI. 


§  202.  The  remedy  by  mandamus. —  It  is  doubtful  whether  cor- 
porate creditors  can,  in  this  country,  have  recourse  to  the  writ  of 
mandamus  to  compel  the  officers  of  the  corporation  to  make  a  call 
for  the  purpose  of  raising  money  to  meet  corporate  obligations.1 

In  the  English  courts  ^mandamus  is  sometimes  awarded  in  these 
cases.2  But  in  this  country  the  question  of  calls  is  not  usually  of 
much  importance  in  such  cases.  The  corporation  is  generally  in- 
solvent; a  bill  is  filed  in  a  court  of  equity  to  collect  and  distribute 
all  the  assets,  and  calls  on  the  subscriptions  are  made  bv  the  court 
itself.3 

§  203.  The  remedy  by  action  at  laiv. —  Another  remedy  is  by  an 
action  at  law.  It  has  been  held  that  unpaid  subscriptions,  after 
call,  may  be  enforced  by  an  action  at  law  brought  directly  hj  the 
creditor  against  the  delinquent  subscriber,  and  that  in  such  an  ac- 
tion each  subscriber  is  liable,  not  for  his  proportionate  share,  but 
to  the  full  extent  of  his  unpaid  subscription.4 


been  tried  and  was  unsatisfactory. 
Creditors,  when  they  could  not  obtain 
satisfaction  from  companies,  singled  out 
some  unfortunate  shareholder,  and  com- 
pelled him  to  pay  the  whole  amount  for 
which  judgment  had  been  recovered. 
Tin's  course  was  in  the  highest  degree 
cruel;  and  parliament  was  induced, 
when  legislating  on  joint-stock  com- 
panies, in  1856,  to  leave  out  all  those 
clauses,  found  in  the  preceding  acts,  en- 
abling creditors  to  execute  judgments 
against  individual  shareholders,  and  to 
provide,  instead,  that  creditors  should 
have  the  power,  upon  non-payment  of 
the  debts  due  to  them  from  the  company, 
to  cause  it  to  be  wound  up.  The  same 
view  prevailed  when  the  acts  relating  to 
joint-stock  companies  were  remodeled 
in  1862.  Consequently,  a  creditor  of  a 
company  registered  under  the  Com- 
panies Act,  1862,  can  only  execute  a  judg- 
ment obtained  against  the  company  by 
proceeding  against  the  corporate  prop- 
erty, and,  if  necessary,  by  having  re- 
course to  a  petition  for  winding  up  the 
company.  In  Lowry  v.  Inman,  46  N.  Y., 
119,  a  charter  permitting  the  property 
of  stockholders  to  be  taken  upon  execu- 
tion on  a  judgment  against  the  corpora- 
tion, and  providing  that  such  stockhold- 
ers may  use  the  same  powers  against 


others  to  enforce  contribution,  was  held 
not  to  create  such  a  general  individual  lia- 
bility as  would  sustain  a  personal  action. 

1  Dalton,  etc..  R  R  Co.  v.  McDauiel, 
56  Ga.,  191  (1876) ;  Hatch  v.  Dana,  101 
U.  S.,  205,  215  (1879).  Cf.  Cucullu  u 
Union  Insurance  Co.,  2  Rob.  (La.),  571, 
573  (1842);  Allen  v.  Montgomery,  etc., 
R  R.  Co.,  11  Ala.,  437  (1847). 

2  Queen  v.  Victoria  Park  Co.,  1  Ad.  & 
El.  (N.  S.),  288  (1841);  Queen  v.  Ledgard, 
id.,  616;  The  King  v.  Katherine  Dock 
Co.,  4  Barn.  &  Ad.,  360  (1832). 

3  See  §  108,  supra. 

*  Bank  of  the  United  States  v.  Dallam, 
4  Dana,  574  (1836) ;  Allen  v.  Montgom- 
ery, etc.,  R  R  Co.,  11  Ala.,  437  (1847); 
Persch  v.  Simmons,  3  N.  Y.  Supp.,  783 
(1889).  An  action  to  recover  unpaid 
subscriptions  may  be  at  law.  Faull  v. 
Alaska,  etc.,  Mining  Co.,  8  Sawyer,  420 
(1883);  Tama,  etc..  Co.  v.  Hopkins,  44  N. 
W.  Rep.,  797  (Iowa,  1890);  Wilbur  v. 
Stockholders,  18  Bank.  Reg.,  178  (1879) ; 
White  v.  Blum,  4  Neb,  555  (1876);  Mc- 
Carthy v.  Lavasche,  89  111.,  270  (1878) ; 
Freeman  v.  Winchester,  18  Miss.,  577 
(1848).  Contra,  Griffith  v.  Mangam,  73 
N.  Y,  611  (1878).  Cf  Glenn  v.  Lancas- 
ter, 109  N.  Y,  641  (1888).  Concerning 
the  pleadings  in  suit  at  law  to  collect 
subscriptions,  see  Glenn  v.  Sumner,  132 


254 


CH.  XI.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[§  W+- 


The  tendency  of  the  law,  however,  is  to  do  away  with  this  rem- 
edy, and  to  compel  the  creditor  in  all  cases  to  seek  his  remedy  in  a 
court  of  equity.  This  tendency  is  in  accord  with  the  best  interests 
of  corporate  creditors  and  stockholders  and  the  prevention  of  a 
multiplicit}7  of  suits,  and  is  to  be  emphatically  commended.1 

§  204.  The  remedy  by  bill  in  equity. —  The  remedy  most  usually 
adopted  by  corporate  creditors  to  obtain  the  payment  of  their 
claims  against  the  corporation  from  the  unpaid  balances  of  sub- 
scriptions due  the  corporation  by  the  subscribers  to  the  capital  stock 
is  by  a  bill  in  equity.  This  is  in  the  nature  of  a  creditor's  bill, 
reaching  the  equitable  assets  of  the  principal  debtor.  It  is  the 
most  effectual,  simple  and  just  remedy,  and  is  not  only  the  favorite 
remedy  of  the  courts,  but  is  generally  resorted  to  by  the  corporate 
creditors  themselves.2     Some  of  the  courts  have  even  o;one  to  the 


U.  S.,  152  (1889).  The  legislature  may 
modify  a  summary  remedy  to  collect 
subscriptions.  Ex  parte  Northeast,  etc., 
R  R.  Co.,  37  Ala.,  679  (1861);  Howard  v. 
Kentucky,  etc.,  Ins.  Co.,  13  B.  Mon. 
(Ky.),  282  (1852).  See,  also,  cases  in  §  208. 
A  statutory  remedy  of  one  state  is  not 
available  in  another  state.  Christensen 
v.  Eno,  106  N.  Y.,  97  (1887). 

See,  also,  §  223,  n.,  infra.  A  corpo- 
rate creditor  may  bring  a  common-law 
action  to  collect  a  subscription  to  a  for- 
eign corporation.  Savings  Assoc,  v. 
O'Brien,  51  Hun,  45  (1889).  A  subscrip- 
tion paper,  "We  agree  to  pay,"  is  sev- 
eral and  not  joint.  A  suit  against  all 
the  subscribers  will  fail.  Davis,  etc., 
Co.  v.  Barber.  51  Fed.  Rep.,  148  (1892). 

i  See  §  204. 

2Pfohl  v.  Simpson,  74  N.  Y.,  137 
(1878);  Mathez  v.  Neidig,  72  id.,  100 
(1878) ;  Dayton  v.  Borst,  31  id.,  435  (1865) ; 
Mann  v.  Pentz,  3  id.,  415  (1850);  Ste- 
phens V.  Fox,  83  id.,  313  (1881);  S.  C, 
17  Hun,  435;  Griffith  v.  Mangam,  73 
N.  Y.,  611  (1878);.  Christensen  v.  Eno, 
106  id.,  97,  100  (1887);  Ward  v.  Gris- 
woldville  Manuf'g  Co.,  16  Conn.,  593 
(1844);  Bank  of  the  United  States  v. 
Dallam,  4  Dana,  574  (1836);  Shickle  v. 
Watts,  7  S.  W.  Rep.,  274  (Mo.,  1888); 
Crawford  v.  Rohrer,  59  Md.,  599  (1882) ; 
Hightower  v.  Thornton,  8  Ga.,  486 
(1850);  Hightower  v.  Mustian,  8  id.,  506 


(1850);  Dalton,  etc.,  R.  R.  Co.  v.  McDan- 
iel,  56  id.,  191  (1876);  Germantown,  etc., 
R'y  Co.  v.  Fitler,  60  Penn.  St.,  124  (1869) ; 
Adler  v.  Milwaukee,  etc.,  Co.,  13  Wis., 
57  (1860) ;  Curry  v.  Woodward,  53  Ala., 
371  (1875);  Allen  v.  Montgomery,  etc., 
R  R.  Co.,  11  id.,  437  (1847);  Wincock  v. 
Turpin,  96  111.,  135  (1880);  Hickling  v. 
Wilson,  104  111.,  54  (1882);  Henry  r. 
Vermillion,  etc.,  Turnpike  Co.,  17  Ohio, 
187  (1848) ;  Miers  v.  Zanesville  and  Mays- 
ville  Turnpike  Co.,  11  id.,  273  (1842); 
Judson  v.  Rossie  Galena  Co.,  9  Paige, 
598  (1842) ;  Van  Pelt  v.  U.  S.,  etc.,  Co., 
13  Abb.  Prac.  (N.  S.),  331  (1872).  [Com- 
pare with  this  case  Sherwood  v.  Buffalo, 
etc.,  R.  R.  Co.,  12  How.  Prac,  137  (1855), 
and  Hammond  v.  Hudson  River,  etc.. 
Co.,  11  id.,  33  (1854).]  Marsh  v.  Bur- 
roughs, 1  Woods,  463  (1871);  Louisiana 
Paper  Co.  v.  Waples,  3  id.,  34  (1877); 
Faull  v.  Alaska  Mining,  etc.,  Co..  8 
Sawyer,  420  (1883);  Holmes  v.  Sher- 
wood, 3  McCrary,  405  (1881);  S.  C,  16 
Fed.  Rep.,  725;  Chandler  v.  Siddle,  10 
Bank.  Reg.,  236;  Myers  v.  Seeley,  10  id., 
411  (1874);  Wilbur  v.  Stockholders,  18 
id.,  178  (1878);  Harmon  v.  Page,  62'Cal., 
448  (1882);  Ogilvie  v.  Kuox  Insurance 
Co.,  22  How.,  380  (1859);  Sanger  v. 
Upton,  91  U.  S.,  56,  60  (1875) ;  Hatch  v. 
Dana.  101  id.,  205  (1879);  Salmon  v. 
Hamborough  Co.,  1  Cas.  in  Chan. 
(Eng.),  204  (1671);  Patterson  v.  Lynde, 


255 


§  204.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[CH.  XI. 


extent  of  holding  a  bill  in  equity  to  be  the  exclusive  remedy  for  the 
corporate  creditor  in  these  cases.1  Occasionally,  also,  statutes  are 
enacted  prescribing  that  a  creditor  who  seeks  to  apply  such  assets 
to  the  payment  of  his  claim  can  do  so  only  by  a  suit  in  equity.-7 
The  right  to  proceed  by  a  suit  in  equity  herein  has  been  held  to 
exist,  even  where  the  general  equitable  remedy  b,y  creditor's  bill 
has  been  abolished  by  statute.3 


106  U.  S.,  519  (1882),  saying  that  "no 
one  creditor  can  assume  that  he  alone 
is  entitled  to  what  any  stockholder 
owes,  and  sue  at  law  so  as  to  appropri- 
ate it  exclusively  to  himself."  A  bill  in 
equity  may  be  filed  in  the  federal  courts 
to  collect  unpaid  subscriptions  and  ap- 
ply them  to  the  payment  of  claims  of 
complainants  who  are  corporate  cred- 
itors. If  the  sums  due  the  original 
complainants  amount  to  more  than 
$'3,000,  the  court  has  jurisdiction.  If 
the  aggregate  collections  are  more  than 
$5,000  an  appeal  lies.  Handley  v.  Stutz, 
137  U.  S.,  366  (1890).  It  seems  to  be  well 
settled  that,  in  the  United  States  courts, 
unpaid  subscriptions  can  be  reached  by 
a  corporate  creditor  in  a  court  of  equity 
only.  Brown  v.  Fisk,  23  Fed.  Rep.,  228 
(1885).  In  Ohio  it  was  held  that  an 
action  for  unpaid  assessments  on  sub- 
scription for  stock  might  be  joined  in  an 
action  on  the  statutory  liability  of  stock- 
holders. Warner  v.  Callender,  20  Ohio  St, 
190  (1870).  A  bill  in  equity  is  the  proper 
remedy.  Johnston  v.  Markle  Paper  Co., 
25  Atl.  Rep.,  560  (Pa.,  1893);  Baines  v. 
Babcock,  27  Pac  Rep.,  674  (Cal..  1891). 
The  remedy  is  in  equity  alone.  Hamil- 
ton v.  Clarion,  etc.,  R.  R,  23  Atl.  Rep., 
53  (Pa.,  1891) ;  Burcle  v.  Taylor,  24  Pac, 
Rep.,  438  (Wash.,  1890) ;  Universal,  etc., 
Co.  v.  Tabor,  27  Pac.  Rep.,  890  (Colo., 
1891).  A  bill  may  be  filed  by  a  judg- 
ment creditor  whose  execution  has  been 
returned  unsatisfied  to  enjoin  execu- 
tions, have  a  receiver  appointed,  have 
subscriptions  collected,  etc.  Ballin  v.  J., 
etc.,  Imp.  Co.,  47  N.  W.  Rep.,  516  (Wis., 
1890).  A  corporate  creditor,  where  the 
corporate  property  has  been  exhausted, 
may  file  a  bill  in  the  nature  of  a  credit- 


or's bill  to  collect  unpaid  subscriptions. 
The  suit  may  be  against  one  subscriber. 
But  the  bill  must  be  so  framed  that 
other  creditors  may  come  in.  Gilchrist 
v.  Helena,  etc.,  R.  R,  49  Fed.  Rep.,  519 
(1892).  The  fund  realized  from  the  suit 
in  equity  is  distributed  ratably  among 
all  the  creditors.  Mathis  v.  Pridham, 
20  S.  W.  Rep.,  1015  (Tex.,  1892). 

i  Jones  v.  Jarman,  34  Afk.,  323  (1879); 
Harris  v.  First  Parish  in  Dorchester,  23 
Pick.,  112  (1839):  Knowlton  v.  Ackley, 
8  Cush.,  93  (1851) ;  Erickson  v.  Nesmith, 
15  Gray,  221  (1860) ;  Smith  v.  Huckabee, 
53  Ala,  191  (1875);  Umsted  v.  Buskirk, 
17  Ohio  St,  113;  Pollard  u  Bailey,  20 
Wall.,  520  (1874);  Terry  v.  Little,  101 
U.  S.,  216  (1879).  Cf.  Spear  v.  Grant  16 
Mass.,  9  (1819);  Hodges  v.  Silver  Hill 
Mining  Co.,  9  Oreg,  200  (1881).  In 
Bunn's  Appeal  and  Lane's  Appeal,  14 
Weekly  Notes,  192  (Pa.,  1884),  the  su- 
preme court  of  Pennsylvania  clearly 
held  that  upon  corporate  insolvency  no 
creditor  can  sue  at  law  for  the  applica- 
tion of  unpaid  subscriptions  to  his  debt. 
His  remedy  is  in  equity  alone.  As  to 
discovering  the  names  of  stockholders, 
see  Hippie  v.  Fire,  etc.,  Co.,  8  Oentral 
Rep.,  462  (N.  J.,  1886);  also,  §§  519,  520, 
infra. 

2  Hadley  v.  Russell,  40  N.  H„  109  (1860). 

3Adler  v.  Milwaukee,  etc.,  Manuf'g 
Co.,  13  Wis.,  57  (1860).  The  equitable 
jurisdiction  herein  seems  to  have  been 
based  on  various  grounds.  See  Wilbur 
v.  The  Stockholders,  18  Bank.  Reg,  178. 
In  one  case  the  bill  in  equity  has  been 
held  to  be  in  the  nature  of  an  equitable 
attachment  in  which  the  subscribers 
are  in  effect  called  on  to  answer  as  gar- 
nishee of  the  principal  debtor.    Ogilvie 


256 


CH.  XL! 


SUBSCRIPTION;    AND    CORPORATE    CREDITORS. 


_  5.  Partus  in  the  hill  in  equity  —  Parties  plaintiff . —  A  cor- 
porate ere  10  seeks  in  this  way  to  obtain  payment  of  his 
claim  from  the  unpaid  subscriptions  to  the  capital  stock  of  the 
corporation  should  file  his  bill  on  behalf  of  himself  and  such  other 
creditors  as  may  wish  to  come  in.1     The  general  rule  is  that  such 
a  suit  is  and  should  be  for  the  benefit  of  any  or  all  creditors  who 
elect  to  come  in  as  parties  complainant,  and  establish  their  d- 
according  to  the  course  and   practice    of    a    court   of   chanc> 
Whi            bill  must.be  so  framed  as  to  permit  other  creditor-, 
they  elect,  to  come  in  and  be  made  parties  to  the   -  -  in  no 
way  necessary  to  join  them  as  parties.     The  other  creditors  are 
proper  but   not    necessary  parties.3      Several  creditors,  however, 


Knox  Insurance   C     ,22    How..  I  - 
:•:  591     In  practice  a  receiver  is  usually 
appoir:  amount  of  t be  corporate 

debts  and  tbe  amount  necessary  to  be 
contributed   by  the  holders  of  shares 
I  paid  up  i-  :  lined  by  proof,  or 

through  a  referee  and  master's  report, 
and  then  there  is  a  final  decree  afford- 
ing, so  far  as  the  ase  -  .mit.  adequate 
relief,  and,  in  any  e  jportional 

relief  to  a.  -.     Dalton,  etc..  R  R 

Co.  n  McDanieL  56  Ga..  191  (1876  :  Wil- 
I       -     :kholders,  IS  Bank  Reg  . 
ITS:  Ogilvie  v.  Knox  Insurax.  i? 

How.,  380  (1359). 

I  Handle;    a    Statz     I   ]    U.   S, 
(1890);  Crease  ■:.  Babcock.  51  Mass.,  525 
(1846);  Holme-      -  r  :y. 

(1881);  Sawyer  a  Hoag,  17  Wall, 
610  (1ST?  :  Kffls  n  Scott  99  U.  BL,  BS 
(1878);  Patterson  n  Lynde,  106  id.,  519 
(1882).  A  creditor's  suit  to  collect  un- 
paid subscriptions  must  n  I  only  be  in 
equity  but  must  be  for  the  benefit  of  all 
creditors.  Bickley  r.  Schlag.  SO  Al 
Rep.  25     K  J-  1880). 

>therbee  V.  Baker.  35   K    J.    E-:.. 
501  (1882  :  Coleman  r.  White,  14  W  - 

968);  Carpenter   v.  Marine  Bank. 

14   :.."•"     :       1862);    Morgan  n  New 

York.    etc..    R    R    Co..    10    Paige.   290 

184     :  Masters  v.  Rossie   Lead   Mining 

.  8  Sandf.  Chan..  301  (1845):  Mann  . 
Pentz.  3  N.  Y„  415     1850);  Hmsted 
Buskirk.  IT  Ohio  St..  11  ase 

.  Babcock.  51  Ma ^-    52S    1846);  Pollard 
•  Bailey.  30  Wall..  580  (1974  :  TVrry  r. 
-.7 


e,  101  C .  S  .  1879)  Any  cred- 
itor has  a  right  to  come  in,  establish 
his  claim  and  share  pro  rata  in  the  dis- 
tribution of  the  assets,  even  though  the 
bill  was  not  filed  for  the  benefit  of  such 
as  should  choose  to  come  in  and  share 
the  expense.  Turnbull  r.  Prentiss  Lum- 
ber C  37(1884).  See,  also. 
Tallmadge  r.  Fishkill  Iron  Co..  4  Barb., 
393  (184S);  Wal-  rain.  IT  id..  1 

In  consequence  thereof  no  one 
creditor  can,  by   superior  diligence  in 
filing  a  bill,  obtain  a  preference 
other  creditors  in  respect  of  the  unpaid 
balances    of  iptions.      Vide   the 

-  in  preceding  note.     There  is.  how- 
ever, an  earlier  case  in  the  Ohio  re- 

-  which  e  bo  recognize  such  a 
preference.     Miers  r.  Zanesville  &  Mays- 
ville  .Turnpike  Co.,  13  Ohio.  197    U 
See  Adler   a.   Milwaukee,  etc.,   Co.  13 
Wis..  57    1868  :  Wright  ::  McCormack, 

-     ^(1866).     There  mustbe  an 

account  taken  of  the  amount  of  debts, 

assets  and  unpaid  capital  and  a  decree 

for  an  assessment  of  the  amount  due  by 

each  stockholder.     Bell's  Appeal  S  Ati 

".77    Penc.  1887  .    Ofcha 

he  jury  to  say  whether  the  whole 

b  unpaid  subscriptions  are  needed 

to  pay  corporate  debts.     Citizens',  etc., 

•.    Gillespie.  9    Atl  Rep..  T3  (Pa., 

1SST       The  pleadings  may  be  of  such  a 

nature  that  the   trial  must  be  at  law. 

Glenn  a  Lancas: 

s  Marsh  v.  Burroughs.  1  Woods.  463 
1871);  Crease  r.  Babcock,  51  Mas 


§  206.] 


SUBSCRIPTIONS   AND    CORPORATE    CREDITORS. 


[CH.  XI. 


cannot  bring  separate  suits  of  this  nature.  They  must  all  join 
in  one  proceeding.1  The  stockholders  need  pot  wait  to  be  made 
parties  defendant  to  a  creditors'  bill  before  moving  for  contribu- 
tion, but  may,  in  a  proper  case,  before  a  suit  in  the  nature  of  a 
creditors'  bill  is  filed  against  them  by  creditors  of  the  corporation, 
file  a  bill  in  equity  upon  their  own  account,  making  the  corpora- 
tion a  party,  to  enforce  the  payment  of  unpaid  balances  of  sub- 
scription, for  the  payment  of  corporate  indebtedness,  and  for 
contribution.2 

§  206.  Parties  defendant. —  The  defendants  to  such  a  suit  should 
be  the  corporation  itself,3  and  all  from  whom  an  unpaid  subscrip- 


(1846);  Hatch  v.  Dana,  101  U.  S.,  205 
(1879).  Cf  Adler  v.  Milwaukee,  etc., 
Co.,  13  Wis.,  57  (1860).  Corporate  cred- 
itor suing  need  not  join  all  the  corpo- 
rate creditors  as  co-cornplainantsnor  all 
the  stockholders  liable  as  defendants. 
Appeal  of  Cornell,  6  Atl.  Rep.,  258  (Pa., 
1886).  Other  creditors  may  come  in  on 
a  bill  by  a  creditor  to  collect  unpaid 
subscriptions.  Bailey  v.  Pittsburg,  etc., 
Co.,  21  Atl.  Rep,  72  (1891). 

1  Crease  v.  Babcock,  51  Mass.,  525 
(1846).  But  see  Perry  v.  Turner,  55  Mo., 
418  (1874).  And  an  action  to  compel 
the  pa3rment  of  an  unpaid  subscription 
may  be  joined  by  a  creditor  with  an 
action  to  enforce  a  statutory  liability. 
Warner  v.  Callender,  20  Ohio  St.,  190 
(1870).  Accordingly,  where  a  bill  is 
filed,  on  behalf  of  all  the  creditors  who 
chose  to  come  in,  against  all  the  stock- 
holders in  default,  the  courts  will  en- 
join a  separate  creditor's  suit  Pierce  v. 
Milwaukee  Construction  Co.,  38  Wis., 
253  (1875).  Cf.  Coleman  v.  White,  14 
id..  700  (1862);  Carpenter  v.  Marine 
Bank,  id.,  705,  n.  (1862);  Ballston  Spa 
Bank  v.  Marine  Bank,  18  id.,  490  (1864). 
A  stockholder  who  is  also  a  creditor 
may  file  a  bill  as  a  creditor  to  reach  un- 
paid subscriptions.  He  must,  however, 
pay  his  own  subscription  in  full.  Bick- 
ley  v.  Schlag,  20  Atl.  Rep.,  250  (N.  J., 
1890) ;  Bissit  v.  Kentucky  River  Naviga- 
tion Co.,  15  Fed.  Rep.,  353  (1882),  and  the 
valuable  note ;  Thompson  v.  Reno  Sav- 
ings Bank  (Nev.,  1885).  Cf.  Hogg's  Ap- 
peal. 88  Penn.  St,  195  (1878) ;  Calhoun 


v.  The  Steam  Ferry  Boat,  etc.,  27  Int 
Rev.  Rec,  273  (1881),  in  which  case  it 
is  held  he  cannot  sue  the  corporation. 
But  see  Milvain  v.  Mather,  5  Exch.,  55 
(1850).  in  which  it  is  held  that  a  corpo- 
ration sued  by  a  stockholder  may  set 
off  any  amount  due  by  him  on  calls. 
Cf.  Ex  parte  Windsor,  3  Story's  CO, 
411  (1S44);  Weber  v.  Fickey,  47  Md., 
196  (1877),  holding  that  a  stockholder 
who  is  also  a  creditor  and  who  has  not 
fully  paid  his  subscription  cannot  re- 
cover from  another  stockholder  the  full 
amount  of  his  claim.  Emmert  v.  Smith, 
40  id.,  123,  to  same  effect.  In  distrib- 
uting the  proceeds  of  sale  of  the  prop- 
erty of  a  corporation  the  claims  of  such 
creditors  as  are  stockholders  should  bo 
reduced  by  the  amount  unpaid  upon 
their  stock. 

2  Fiery  v.  Emmert,  36  Md.,  464  (1872). 

3  The  corporation  is  ordinarily  a  nec- 
essary party.  Mann  v.  Pentz,  3  N.  Y., 
415  (1850);  Walsh  v.  Memphis,  etc.,  R. 
R  Co.,  2  McCrary,  156(1881);  S.  C,  19 
Fed.  Rep.,  152;  Wilbur  v.  The  Stock- 
holders, 18  Bank.  Reg.,  178  (1846) ; 
Wetherbee  v.  Baker.  35  N.  J.  Eq.,  501 
(1882) ;  First  Nat  Bank  v.  Smith,  6  Fed. 
Rep.,  215  (1879);  Brinkerhoff  v.  Brown, 
7  Johns.  Chan.,  217  (1823).  But  see, 
contra,  Walser  v.  Seligman,  21  Blatch, 
130  (1882),  a  well-considered  case,  and 
Wellman  v.  Howland  Coal  &  Iron 
Works,  19  Fed.  Rep..  51  (1884).  In  the 
former  of  these  cases  the  court  say :  "Suf- 
ficient reason  for  not  making  it  (the 
corporation)  a  party  is  found    in   the 


258 


CH. 


XI.] 


SUBSCRIPTIONS   AND    CORPORATE   CREDITORS. 


[§  200. 


tion  is  due,  except  such  as  are  unknown  or  insolvent,  or  be\7ond  the 
jurisdiction.1 

The  stockholders  against  whom  the  bill  is  filed  may,  however,  it 
seems,  when  all  are  not  made  parties,  file  a  cross-bill,  obtain  a  dis- 


fact  that  it  is  beyond  the  jurisdiction 
of  this  court,  and  also  in  the  fact  that 
it  is  practically  defunct"  In  the  case 
last  cited  it  was  Held  that,  where  a  cor- 
poration is  without  property  or  officers 
or  place  of  business,  it  need  not  be  made 
a  party  of  record. 

i  Vick  v.  Lane.  56  Miss..  681  (1879) ; 
"Walsh  v.  Memphis,  etc..  R  R  Co.,  2 
McCrary,  156  (1881);  Hadley  tt  Russell, 
40  N.  H.,  109  (18601;  Erickson  v.  Ne- 
smith,  46  id.,  371  (1860);  Pierce  tt  Mil- 
waukee, etc.,  Co.,  38  Wis.,  253  (1875); 
Coleman  v.  White,  14  id.,  700  (1862); 
Carpenter  v.  Marine  Bank,  14  id.,  705, 
n.  (1862);  Umsted  tt  Buskirk,  17  Ohio 
St,  113(1866);  Mann  tt  Pentz.  3  N.  Y., 
415  (1850).  Cf.  Young  tt  New  York  & 
Liverpool  Steamship  Co.,  10  Abb.  Prac, 
229  (1860),  holding  that  judgment  cred- 
itors are  not  proper  parties  defend- 
ant without  showing  why  they  were 
not  made  parties  plaintiff.  The  bill 
should  contain  an  appropriate  allega- 
tion as  to  the  shareholders  unknown, 
insolvent,  or  out  of  the  jurisdiction,  and 
a  prayer  that,  upon  discovery,  they  be 
made  parties  when  possible.  Bogardus 
v.  Rosendale  Manufacturing  Co.,  7  N. 
Y.,  147(1852\  "Where  the  attempt  is 
to  reach  the  liability  of  the  shareholders 
on  their  subscription  to  capital  stock,  all 
the  solvent  stockholders  within  the  ju- 
risdiction must  be  joined,  except  where 
this  will  be  excused  upon  an  allegation 
that  the  number  is  too  great"  Chal- 
mers, J.,  in  Vick  v.  Lane,  56  Miss.,  681, 
684  (1879).  Cf.  Bonewitz  tt  Van  Wert 
Co.  Bank,  41  Ohio  St,  78  (1884).  But  on 
the  other  hand,  with  respect  to  the 
matter  of  joining  all  the  solvent  share- 
holders who  are  in  arrears  as  parties  de- 
fendant to  the  bill,  provided  they  are 
within  the  jurisdiction,  we  find  a  line 
of  authorities  in  support  of  the  proposi- 
tion that  all  such  stockholders  are  not 


always  necessary  parties  to  the  bill, 
that  such  a  suit  may  properly  be  brought 
against  one,  or  any,  of  the  delinquent 
stockholders  as  well  as  against  all,  and 
that  a  bill  will  not  be  hold  defective 
merely  because  it  fails  to  include  all  the 
delinquent  stockholders  as  parties  de- 
fendant. Ogilvie  v.  Knox  Insurance 
Co.,  22  How.,  380  (1859);  Hatch  v.  Dana, 
101  U.  S.,  205  (1879);  Marsh  tt  Bur- 
roughs, 1  Woods,  463  (1871);  Holmes  tt 
Sherwood,  3  McCrary,  405  (1881);  Glenn 
v.  Williams,  60  Md.,  93  (1882) ;  BartL  tt 
tt  Drew,  57  N.  Y.,  587  (1874) ;  Griffith  tt 
Mangam,  73  id..  611  (1878);  Brundage  v. 
Monumental,  etc.,  Mining  Co..  12  Ore- 
gon, 322  (1885).  Cf.  Von  Schmidt  tt 
Huntington,  1  Cal.,  55  (1855);  Lamar 
Insurance  Co.  tt  Gulick,  102  111.,  41 
(1882).  Any  other  rule  would  place 
upon  the  creditor  a  burden  which  would 
be  unjust  and  perhaps  destructive  of 
the  remedy  itself.  In  Hatch  v.  Dana, 
supra,  there  was  a  bill  to  compel  pay- 
ment of  a  debt  out  of  the  unpaid  sub- 
scription of  a  single  stockholder.  It 
was  not  sought  to  wind  up  the  com- 
pany. It  being  urged  that  a  creditor 
of  an  insolvent  corporation  is  not  at  lib- 
erty to  proceed  against  one  or  more 
delinquent  subscribers  to  recover  the 
amount  of  his  debt,  without  an  account 
being  taken  of  c.ther  indebtedness,  and 
without  bringing  in  all  the  stockholders 
for  contribution,  the  court,  by  Mr.  Jus- 
tice Strong,  said:  "The  liability  of  a 
subscriber  for  the  capital  stock  of  a 
company  is  several  and  not  joint.  By 
his  subscription  each  becomes  a  several 
debtor  to  the  company,  as  much  so  as 
if  he  had  given  his  promissory  note  for 
the  amount  of  his  subscription.  At  law, 
certainly,  his  subscription  may  be  en- 
forced against  him  without  joinder  of 
other  subscribers,  and  in  equity  his  lia- 
bility does  not  cease  to  be  several     A 


259 


§  206.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[ch.  XL 


covery  of  the  remaining  delinquent  stockholders,  bring  them  in  as 
parties,  and  thus  enforce  contribution.1  If  all  the  parties  who  are 
liable  have  not  been  brought  before  the  court,  it  has  been  held  that 
those  who  are  defendants  of  record  cannot  be  charged  with  liabil- 
ity which  should  fall  upon  those  who  are  absent,  unless  it  be  shown 
that  the  absentees  are  insolvent  or  beyond  the  jurisdiction  of  the 
court.2    There  is  doubt,  however,  as  to  the  soundness  of  this  rule. 


creditor's    bill    merely  subrogates    the 
creditor  to  the  place  of  the  debtor,  and 
garnishes  the  debt  due  to  the  indebted 
corporation.     It   does    not  change  the 
character  of  the  debt  attached  or  gar- 
nished.    It  may  be  that,  if  the  object 
of  the  bill  is  to  wind  up  the  affairs  of 
this  company,  all  the  shareholders,  at 
least  so  far  as  they  can  be  ascertained, 
should  be  made  parties,  that  complete 
justice  may  be  done  by  equalizing  the 
burdens,  and  in  order  to  prevent  a  mul- 
tiplicity of  suits.     But  this  is  no  such 
case.     The  most  that  can  be  said  is  that 
the   presence    of    all  the    stockholders 
might  be  convenient,  not  that  it  is  nec- 
essary.    When  the  only  object  of  a  bill 
is  to  obtain   payment  of  a  judgment 
against  a  corporation  out  of  its  credits 
or  intangible  property,  that  is,  out  of  its 
unpaid  stock,  there  is  not  the  same  rea- 
son for  requiring  all  the  stockholders  to 
be  made  defendants."    See,  also,  Bone- 
witz  v.  Van  Wert  Co.  Bank,  41  Ohio  St., 
78  (1884),  where  it  was  held  error  to  give 
judgment  against  the  defendants  prop- 
erly before  the  court,  when  the  return 
of  the  summons  was  entirely  silent  as 
to  two  of  the  defendants.     As  to  when 
bills  brought  by  creditors  in  these  cases 
are  and  are  not  multifarious,  see  Allen 
v.  Montgomery  R  R  Co.,  11  Ala.,  437 
(1847):  Cambridge,  etc.,  Co.  v.  Somer- 
ville,  etc.,  Co.,  14  Gray,  193  (1860),  where 
the  liability  of  some  of  the  defendants 
was  as  directors  and  of  others  as  stock- 
holders, and   the   bill   was  held   to  be 
multifarious.     Barre  National  Bank  r. 
Hingham    Manuf.    Co.,   127  Mass.,   563 
(1879);    Popo  v.   Leonard,   115  id.,   286 
(1874);  Deaderick  v.  Wilson,  8  Baxter, 
108  (1874) ;  Holmes  v.  Sherwood,  infra. 


260 


Executors  of  a  deceased  stockholder 
may  be  joined  with  other  stockholders 
as  defendants  where  the  suit  is  in  equity. 
Hamilton  v.  Clarion,  etc.,  R  R,  23  Atl. 
Rep.,  53  (Pa.,  1891).  A  creditor's  bill 
filed  to  collect  the  unpaid  subscriptions 
of  stockholders  will  be  dismissed  where 
only  a  few  of  the  stockholders  are  made 
party  defendants  and  no  allegation  is 
made  showing  clearly  and  in  detail  that 
the  other  stockholders  cannot  be  reached 
and  brought  in.  Dunstonr.  HoptonieCo., 
47  N.  W.  Rep..  322  (Mich.,  1890).  An  in- 
solvent stockholder  is  not  necessarily  a 
party  to  a  suit  by  corporate  creditors  to 
collect  subscriptions.  Wilson  v.  Cali- 
fornia, etc.,  Co.,  54  N.  W.  Rep.,  643  (Mich., 
1893).  All  the  stockholders  need  not 
be  joined  as  defendants.  Baines  v.  Bab- 
cock,  30  Pac.  Rep,  776  (Cal.,  1892);  Gib- 
bons v.  Trinsel,  48  N.  W.  Rep.,  255  (Wis., 
1891).  A  stockholder  may  be  held  liable 
on  a  subscription,  although  the  corpora- 
tion is  not  made  a  party  defendant  and 
other  stockholders  are  not  joined.  A 
court  of  equity  has  jurisdiction.  Potter 
v.  Dear,  30  Pac.  Rep.,  777  (Cal.,  1892). 

1  Hatch  v.  Dana,  101  U.  S.,  205  (1879). 
In  the  original  bill  itself  there  may 
properly  be  a  prayer,  when  some  of  the 
delinquent  shareholders  are  unknown, 
for  a  discovery,  in  order  that  such  un- 
known stockholders  may  be  made  par- 
ties by  amendment.  Hippie  v.  Five,  etc., 
Imp.  Co.,  3  Atl.  Rep,  682  (N.  J.,  1886); 
Bogardus  v.  Rosendale  Manuf.  Co.,  7 
N.  Y.,  147  (1852) ;  Morgan  v.  New  York, 
etc.,  R  R.  Co.,  10  Paige,  290. 

2  Wood  v.  Du miner,  3  Mason,  308 
(1824),  But  see  Marsh  v.  Burroughs,  1 
Woods,  463  (1871).  Cf.  Erickson  v. 
Nesmith,  46  N.  H,  371  (1866).     Contra, 


CH.  XI. j 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS.       [§§  207,  208. 


§207.  A  court  of  equity  may  make  a  call. —  It  is  well  settled 
that,  when  stock  is  subscribed  to  be  paid  in  upon  call  by  the  cor- 
porate authorities,  and  the  company  neglects  or  refuses  to  make 
such  calls  as  are  necessary  to  raise  funds  to  meet  the  just  cor- 
porate obligations,  a  court  of  equity  will  itself  make  the  necessary 
calls  if  the  interests  of  the  creditors  require  it.1  The  court  will,  in 
behalf  of  the  creditors,  do  what  it  is  the  duty  of  the  corporation 
to  do  in  respect  of  calls.2  And  the  court  may  make  the  call  al- 
though the  statute  says  calls  shall  be  made  by  the  trustees,  direct- 
ors or  managers.3  The  question  of  whether  interest  on  the  call 
may  be  collected  is  considered  elsewhere.4 

§  208.  Receivers  and  assignees  in  bankruptcy  for  the  benefit  of 
creditors  — Their  duties,  powers  and  liabilities  as  to  unpaid  sub- 
scriptions.—  When  a  corporation  becomes  insolvent,  with  corporate 


Appeal  of  Cornell,  6  Atl.  Rep..  258  (Pa., 
1886),  citing  Strong's  Appeal,  10  W.  N. 
Cases,  409.  "When  there  are  delinquent 
stockholders  beyond  the  jurisdiction, 
the  stockholders  who  have  been  sued 
and  compelled  to  pay  more  than  their 
due  proportion  must  look  to  them  for 
contribution.  Holmes  v.  Sherwood,  3 
McCrary,  405  (1881). 

!See  §  108,  supra. 

2  Scovill  v.  Thayer,  105  U.  S.,  143,  155 
(1881);  Hatch  v.  Dana,  101  id.,  205,  214 
(1879);  Curry  v.  Woodward,  53  Ala., 
371  (1875);  Wilbur  v.  Stockholders,  18 
Bank.  Reg.,  178  (1878);  Marsh  v.  Bur- 
roughs, 1  Woods,  463  (1871):  Myers  v. 
Seeley,  10  Bank.  Reg,  411  (1874) ;  Henry 
v.  Vermillion,  etc.,  R  R.  Co.,  17  Ohio, 
187  (1848);  Robinson  v.  Bank  of  Darien, 
18  Ga.,  65  (1855);  Ward  v.  Griswolds- 
ville  Mfg.  Co.,  16  Conn.,  593  (1844); 
Sanger  v.  Upton,  91  U.  S.,  56  (1875); 
Chubb  v.  Upton,  95  id.,  665  (1877); 
Glenn  v.  Williams,  60  Md.,  93  (1882). 
Cf.  Germantown,  etc.,  R'y  Co.  v.  Fitler, 
60  Pa.  St.,  124  (1869);  Chandler  v.  Keith, 
42  Iowa,  99  (1875);  Mann  v.  Pentz,  3 
N.  Y.,  415  (1850);  Ogilvie  v.  Knox  In- 
surance Co.,  22  How.,  380  (1859) ;  Adler 
v.  Milwaukee  Mfg.  Co.,  13  Wis.,  57 
(1860).  And  see  Seymour  v.  Sturgess,  26 
N.  Y.,  134  (1862);  Wheeler  v.  Millar,  90 
id.,  353  (1882).  The  court  itself  may 
make  a  call.     Marson  v.  Deither,  52  N. 


W.  Rep.,  38  (Minn.,  1892).  A  call  is 
necessary,  or  the  equivalent,  where  the 
receiver  sues.  Chandler  v.  Siddle,  3 
Dill.,  477  (1874).  No  call  is  necessary 
where  creditors  file  a  bill  to  reach  un- 
paid subscriptions.  Hamilton  v.  Clarion, 
etc.,  R  R,  23  Atl.  Rep.,  53  (Pa.,  1891). 
Non-resident  stockholders  are  bound  by 
the  decree  of  the  court  levying  the  as- 
sessment Howard  v.  Glenn,  11  S.  E. 
Rep.,  610  (Ga.,  1890).  Where  the  stat- 
ute requires  twenty  days'  notice  to 
stockholders  before  calls  are  made,  cred- 
itors must  give  this  notice  before  claim- 
ing and  collecting  the  unpaid  subscrip- 
tion. Universal,  etc.,  Co.  v.  Tabor,  27 
Pac.  Rep.,  890  (Colo.,  1891). 

3  Crawford  v.  Rohrer,  59  Md.,  599 
(1882).  Cf.  Glenn  v.  Saxton,  68  Cal., 
353  (1886).  A  call  may  be  made  in  be- 
half of  corporate  creditors  although  the 
company  had  contracted  with  the  stock- 
holders not  to  call  in  the  subscriptions 
until  a  later  date.  Re  Cordova,  etc.,  Co., 
64  L.  T.  Rep.,  772  (1891).  Where,  how- 
ever, it  was  provided  by  the  charter  of 
the  corporation  that  all  calls  are  to  be 
made  only  upon  a  three-fourths  vote  of 
the  stockholders,  it  was  held  that  a  call 
by  the  court  was  irregular.  Trustees  of 
the  Louisiana  Paper  Co.  v.  Waples,  3 
Woods,  34  (1877). 

*  See  S  112. 


261 


§  20S.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[CH.  XT. 


creditors  on  the  one  hand  pressing  their  claims,  and  subscriptions 
to  the  capital  stock  wholly  or  partially  uncollected  on  the  other 
hand,  it  is  usual  to  place  the  assets  of  the  company,  including  the 
claims  against  delinquent  share-owners,  in  the  hands  of  a  third  per- 
son for  the  benefit  of  all  concerned.  Such  a  person  may  be  an 
assignee  under  state  insolvent  laws,  a  receiver,  or  an  assignee  for 
the  benefit  of  creditors.  A  receiver  in  such  a  case  may  be  defined 
to  be  a  third  person  appointed  by  a  court  of  equity  to  act  as  the 
representative  alike  of  creditors  and  stockholders  for  the  purpose 
of  collecting  the  corporate  assets  and  paying  the  corporate  debts.1 
It  is  the  right  and  duty  of  such  a  receiver  to  collect  the  unpaid 
subscriptions,  so  far  as  may  be  necessary,  for  the  purpose  of  pay- 
ing the  corporate  debts  in  full.2 


1  Johnson  v.   Laflin,  5  Dill.,  65  (1878) ; 
High  on  Receivers  (2d  ed.),  1. 

2  Dayton  v.  Borst,  31  N.  Y.,  435  (1865); 
Nathan  v.  Whitlock,  9  Paige,  152  (1841); 
Mean's  Appeal,   85   Pa.   St.,   75   (1877); 
Dorris  v.  French,  4  Hun,  292  (1875) ;  Van 
Wagenen  v.   Clark,  22   id.,   497  (1880); 
Frank   v.   Morrison,  58   Md.,  423(1882); 
Chandler  v.    Brown,  77  111.,  333(1875); 
Cnlkins  v.  Atkinson,  2  Lans.,  12  (1870). 
Of.    Tucker    v.    Gilman,   45    Hun,    193 
(1887).     Assignee    for    benefit  of  cred- 
itors of  an  insolvent  corporation  may 
enforce   unpaid   subscriptions.      Cham- 
berlain   v.    Bromberg,    3    S.   Rep.,  434 
(Ala.,  1888);  Tobey  v.   Russell,  9  R  I., 
58(1868);  Stewart  v.  Lay,  45  Iowa,  604 
(1877):  Clark  v.  Thomas,  34  Ohio  St.,  46 
(1877) ;  Phoenix,  etc.,  Co.   v.   Badger,  67 
N.  Y.,  294  (1876).     As   incidental  to  the 
receiver's  power  to  collect  unpaid  bal- 
ances of  subscription,  it  is  held  that  he 
may,  as  an  officer  of  the  court,  make 
calls    for    the    amount    due.      Hall    v. 
United   States  Ins.  Co.,  5  Gill  (Md.),  484 
(1847);  Rankine  v.  Elliott,  16  N.  Y.,  377 
(1857).     Lionberger   v.   Broadway,   etc., 
10  Mo.  App.,  499  (1881),  holds  that  an  as- 
signee for  benefit  of  creditors  may,  by  a 
bill  in  equity,  compel  the  directors  of  the 
insolvent  corporation  to  make  an  assess- 
ment upon  the  capital  stock,  payable  to 
him ;  such  a  suit  is  not  affected  by  the 
fact  that  certain  creditors  are  proceed- 
ing against  the  stockholders  by  motion 


under  the  statute,  since  the  proceeding 
by  motion   is  cumulative  merely  and 
not  exclusive.     Chandler  v.   Keith,   42 
Iowa,   99    (1875),   holds    that    a    stock- 
holder who  had  paid  all  regular  assess- 
ments could  not  be  called  upon  by  the 
receiver,  in  an  action  at   law,  to   pay 
the  remainder  of  his  subscription  until 
a  general  call  is  made  upon  the  stock- 
holders for  the  amount  assessed  upon 
their  shares,   and  this    call  should   be 
preceded  by  the  fact  that  losses  have 
been    sustained    by     the    corporation, 
showing  a  necessity  for  an  assessment 
and  call  upon  the  stockholders.     Under 
the  English  Railway  Companies  Act  of 
1867,  a  receiver  has  no  such  power.     In 
re  Birmingham,  etc.,  R'y  Co.,  L.  R.,  18 
Chao.  Div.,  155  (1881).     In  New  York, 
by  statute,  the  receiver  may  sue.     See 
Dayton  v.   Borst,  31  N.  Y,  434  (1865); 
and  see,  previous  to  the  statute,  Mann 
v.  Pentz,  3  N.  Y,  415'  (1850),  reversing 
2  Sandf.  Ch.,  257.     The  receiver  cannot 
enforce  the  subscription  where  the  de- 
fendant had  transferred  his  stock  and 
been    discharged    by    the    corporation. 
Cutting  v.  Damerel,  88  N.  Y,  410  (1882). 
It  may  be  remarked  here  that  the  re- 
ceiver has  no  power  to  enforce  statutory 
liability,  this  liability  not  being  an  asset 
of  the  corporation.     See  Farnsworth  v. 
Wood,   91    N.    Y,   308   (1883),   and  the 
chapter  on  Statutory   Liability,  infra. 
The  receiver  of  a  foreign  corporation, 
262 


CH.  XI.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[§  20S. 


As  long  as  the  authority  of  the  receiver  exists,  a  creditor  can- 
not directly  bring  suit  against  delinquent  shareholders,  but  the  re- 
ceiver may  be  compelled  to  act  in  the  matter  at  the  instance  of 
creditors.1 

An  assignee  for  the  benefit  of  the  creditors  of  a  corporation,  like 
a  receiver,  represents  both  the  corporation  and  the  creditors,  and 
should  collect  unpaid  subscriptions ; 2  and,  in  like  manner,  an  as- 


duly  empowered  to  sue  at  home,  may- 
sue  resident  stockholders  for  the  bal- 
ances due  the  company,  provided  the 
corporation  itself  could  have  done  so  if 
it  had  remained  solvent.  Dayton  v. 
Borst,  31  N.  Y.,  435  (1865),  a  case  where 
a  receiver  appointed  by  the  court  of 
chancery  in  New  Jersey  was  held  com- 
petent to  maintain  a  suit  of  this  nature 
in  New  York  against  a  citizen  thereof. 
Mann  v.  Cook,  20  Conn.,  178  (1850) ;  Mc- 
Donough  v.  Phelps,  15  How.  Prac,  372 
(1856):  Seymour  v.  Sturges,  26  N.  Y., 
134  (1862).  It  has  been  held  that  a  re- 
ceiver may  collect  unpaid  balances  due 
on  subscriptions,  although  the  other 
corporate  assets  have  not  been  collected 
and  the  amount  of  the  liabilities  is  un- 
determined. Starke  v.  Burke,  9  La. 
Ann.,  341  (1854).  And  that  if,  on  the 
final  settlement,  there  is  a  surplus,  it  is 
to  be  returned  pro  rata  to  the  share- 
holders. Pentz  v.  Hawley,  1  Barb. 
Chan.  (N.  Y),  122  (1845).  But  the  more 
modern  and  better  rule  is  that  a  receiver 
has  no  authority  to  call  upon  a  sub- 
scriber for  his  unpaid  balance  until  the 
court  have  determined  the  amount  of 
the  corporate  indebtedness  and  fixed 
definitely  the  liability  of  each  share  of 
the  stock.  Chandler  v.  Keith,  42  Iowa, 
99  (1875).  See,  also,  Mills  v.  Scott,  99 
U.  S.,  25  (1878>  After  a  transfer,  the 
transferrer  is  not  liable  to  the  receiver 
any  more  than  he  would  have  been  to 
the  corporation.  Billings  v.  Robinson, 
94  N.  Y,  415  (1884) ;  affirming  28  Hun, 
122.  The  court  cannot  give  a  receiver 
power  to  compromise  claims  upon  un- 
paid subscriptions.  Chandler  v.  Brown, 
77  111.,  333  (1875).  See  §§  167-171,  210. 
It  has  been  held  that  the  assignee  can- 


not sue  to  set  aside  a  fraudulent  device 
by  which  a  stockholder  has  escaped 
payment  of  his  subscription.  Boutou  v. 
Dement,  14  N.  E.  Rep,  62  (111.,  1887). 
Receiver  cannot  enforce  subscriptions 
which  the  corporation  could  not  enforce. 
Winters  v.  Armstrong,  37  Fed.  Rep.,  508 
(1889).  The  receiver  may  sell  the  sub- 
scription at  auction  and  the  subscriber 
may  buy  it.  Dean  v.  Biggs,  25  Hun,  122 
(1881). 

1  It  is  the  receiver's  duty  to  act 
promptly  and  vigilantly  in  the  collec- 
tion of  the  assets,  and  to  compel  pay- 
ment of  balances  due  by  subscribers  on 
unpaid  stock,  if  such  a  course  is  neces- 
sary to  meet  the  demands  of  creditors. 
If  the  receiver  fails  to  do  his  duty  in 
this  respect  the  creditors  may  compel 
him  to  act,  inasmuch  as  they  cannot  act 
directly  themselves.  Gas  Light  Co.  v. 
Haynes,  7  La.  Ann.,  114  (1852);  New 
Orleans  Gas  Light  Co.  v.  Bennett,  6  id., 
457  (1851);  Starke  v.  Burke,  9  id,  341 
(1854);  Atwood  v.  Rhode  Island  Agric. 
Bank,  1  R.  I,  376  (1850);  Rankine  v.  El- 
liott, 16  N.  Y,  377,  holding  that  when  a 
receiver  of  an  insolvent  railroad  is  ap- 
pointed in  an  action  in  behalf  of  all  its 
creditors,  the  right  to  proceed  for  the 
collection  of  unpaid  subscriptions  vests 
in  him,  and  a  judgment  creditor  will  be 
enjoined  from  proceeding  against  a 
stockholder  in  an  action  begun  after  the 
order  was  made  but  before  the  appoint- 
ment is  perfected.  "While  the  receiver 
is  in  charge,  a  corporate  creditor  cannot 
sue  to  enforce  a  stockholder's  liability 
on  an  unpaid  subscription.  Merchants', 
etc.,  Bank  v.  Northwestern,  etc.,  Co.,  51 
N.  W.  Rep,  119  (Minn.,  1892). 

2  Shockley  v.  Fisher,  75  Mo.,  498  (1882) ; 


263 


§  208.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[CH.  XI. 


signee  in  bankruptcy  could  recover  the  amounts  due  by'  stockhold- 
ers on  account  of  their  subscriptions,  and  his  proper  remedy  was 


'Vanderwerker  v.  Glenn,  6  S.  E.  Rep., 
806  (Va.,  1888>.  Of.  Germantown,  etc., 
R'y  Co.  v.  Fitler,  60  Pa.  St.,  124  (1869): 
Eppright  v.  Nickerson,  78  Mo.,  482  (1883), 
holding  that  an  insolvent  corporation 
may  include  in  an  assignment  for  the 
heneflt  of  its  creditors  the  liability  of 
its  stockholders  for  unpaid  stock  for 
which  no  call  has  been  made.  An  action 
at  common  law  on  subscriptions  must 
be  in  the  company's  name  and  not  in 
the  name  of  the  assignee  of  the  com- 
pany. Glenn  v.  Marbury,  145  U.  S.,  499 
(1892).  An  assignee  of  the  corporation 
for  the  benefit  of  creditors  may  sue. 
Cartright  v.  Dickinson,  12  S.  W.  Rep., 
1080  (Tenn.,  1890).  An  assignment  for 
the  benefit  of  creditors  made  by  order 
of  a  directors'  meeting  at  which  three 
directors  were  present  and  the  other  two 
were  not  notified  is  invalid  and  no  bar  to 
a  creditor's  action  to  collect  unpaid  sub- 
scriptions. Docrubecher  v.  Columbia, 
etc.,  Co.,  28  Pac.  Rep.,  899  (Oreg.,  1892). 
In  Indiana  a  creditor  of  a  manufactur- 
ing corporation  can  collect  his  debt 
from  unpaid  subscriptions  through  a 
receiver,  and  in  that  way  only.  Wheeler 
v.  Thayer,  22  N.  E.  Rep,  972  (Ind.,  1889). 
The  United  States  district  court  has 
jurisdiction  of  an  action  by  the  receiver 
of  an  insolvent  national  bank  to  collect 
assessments  on  stock.  Stephens  v. 
Bernays,  44  Fed.  Rep.,  642  (1890).  A  re- 
ceiver may  cause  to  be  assessed  and 
may  collect  assessments  on  parties  liable 
therefor  to  pay  insurance  losses.  Mc- 
Donald v.  Ross-Lewin,  29  Hun,  87  (1883). 
Where  a  receiver  is  appointed  to  take 
charge  of  the  "  whole  property  "  he  may 
sue  to  collect  unpaid  subscriptions. 
Showalter  v.  Laredo,  etc.,  Co.,  18  S.  W. 
Rep.,  491  (Tex.,  1892).  In  a  judgment 
creditor  s  suit  for  sequestration  and  a 
receiver,  both  the  corporation  and  a 
stockholder  liable  on  his  subscription 
being  made  parties,  the  receiver  may 
have  judgment  against  the  stockholder. 


Spooner  v.  Bay,  etc.,  50  N.  W.  Rep,  601 
(Minn.,  1891).  Although  some  fraudu- 
lent claims  have  been  allowed  in  the 
court  which  appointed  the  receiver  and 
made  the  calls,  yet  a  stockholder  who 
is  sued  in  another  state  cannot  enjoin 
the  collection  of  the  judgment  on  that 
ground.  Foote  v.  Glenn,  52  Fed.  Rep., 
529  (1892).  Although  the  statute  of 
limitations  is  a  bar,  unless  the  court  al- 
lows creditors  to  be  substituted  in  place 
of  a  receiver,  who  has  brought  suits  to 
enforce  the  liability  of  stockholders  and 
is  held  not  to  have  had  authority  to  do 
so,  yet  such  substitution  will  not  be 
granted.  Fairbanks  v.  Farwell,  30  N.  E. 
Rep.,  1056  (111.,  1892).  The  position  of 
the  receiver  as  regards  the  collection  of 
subscriptions  is  thus  stated  in  Republic 
Life  Ins.  Co.  v.  Swigert,  25  N.  E.  Rep., 
680  (111.,  1890).  "We  understand  the 
rule  to  be  that,  where  a  receiver  is  ap- 
pointed for  the  purpose  of  taking 
charge  of  the  property  and  assets  of  a 
corporation,  he  is,  for  the  purpose  of  de- 
termining the  nature  and  extent  of  His 
title,  regarded  as  representing  only  the 
corporate  body  itself,  and  not  its  cred- 
itors or  shareholders,  being  vested  by 
law  with  the  estate  of  the  corporation 
and  deriving  his  own  title  under  and 
through  it;  and  that,  for  purposes  of 
litigation,  he  takes  only  the  rights  of 
the  corporation,  such  as  could  be  as- 
serted in  his  own  name ;  and  that  upon 
that  basis  only  can  he  litigate  for  the 
benefit  of  either  stockholders  or  credit- 
ors. .  .  .  Almost  all  of  the  causes 
cited  by  defendants  in  error  fall  in  one 
or  another  of  the  four  classes  following : 
Where  the  receiver  by  force  of  some 
statute  can  act  for  the  creditors;  where 
the  act  complained  of  was  ultra  vires 
and  not  binding  upon  the  corporation  ; 
where  the  receiver  was  appointed  in  a 
proceeding  prosecuted  by  creditors, 
which  was  supplemental  to  execution, 
and  the  receiver  had  the  rights  of  the 


264 


CIL 


XI.] 


SUBSCRIPTIONS    AlfD    CORPORATE    CREDITORS. 


[§  209. 


by  bill  in  equity,  making  all  the  delinquent  shareholders  parties  to 
the  bill.1 

§  209.  The  judgment  against  the  corporation  impeachable  only 
for  fraud  or  want  of  jurisdiction. —  That  a  judgment  conclusively 
settles  all  matters  of  controversy  involved  in  the  suit,  so  far  as  par- 
ties or  their  privies  are  concerned,  excepting  where  it  may  be  im- 
peached for  fraud  or  want  of  jurisdiction,  is  well-established  law. 
When,  therefore,  a  corporate  creditor  has  obtained  judgment  against 
the  corporation,  and  execution  is  returned  unsatisfied,  and  he  then 
proceeds  to  enforce  his  remedy  against  the  holders  of  stock  not 
paid  up,  the  question  arises  whether  the  stockholders  ma}^  set  up  in 
defense  matters  which  the  corporation  might  have  set  up  or  did  set 
up  to  defeat  the  creditor's  claim  against  the  corporation. 

It  has  been  strenuously  insisted  that  he  might.  This  was  Chan- 
cellor Kent's  famous  contention  in  the  case  of  Slee  v.  Bloom ; 2  but 
the  authorities  have  firmlv  established  the  rule  that,  in  the  absence 
of  fraud  and  collusion,  judgments  against  the  corporation,  if  the 
court  had  jurisdiction,  are  conclusive  against  the  stockholders  as  to 
the  validity  and  amount  of  the  creditor's  claim.3 


Thus,  it  is  held 


creditors  at  whose  instance,  and  to  se- 
cure whose  claims,  he  was  appointed ; 
and  where  the  receiver  was  suing  for 
property  or  assets  that  belonged  to  the 
debtor.  .  .  .  We  think  the  decided 
weight  of  authority  sustains  the  rule 
in  respect  to  the  powers  of  receivers, 
where  there  has  been  no  enlargement  of 
their  powers  by  legislative  enactment, 
that  they  have  such  rights  of  action 
only  as  were  possessed  by  the  persons 
or  corporations  upon  whose  estates  they 
administer."  The  court  referred  to  and 
considered  many  authorities.  "The  re- 
ceiver represents  the  creditors  as  well 
as  all  other  parties  interested  in  the 
corporation."  A  subscriber  sued  by 
him  on  the  subscription  cannot  set  up 
fraudulent  representations  inducing  him 
to  subscribe.  Ruggles  v.  Brock,  6  Hun, 
164  (1875).  Where  the  bonds  are  invalid 
a  receiver  appointed  in  the  foreclosure 
suit  has  no  power  to  collect  subscrip- 
tions. Farmers'  L.  &  T.  Co.  v.  San 
Diego,  etc.,  St  Car  Co.,  49  Fed.  Rep.,  188 
(1892).  A  receiver  may  collect  the  un- 
paid par  value  of  stock  issued  for  cash 
at  less  than  par,  even  though  the  cor- 
poration agreed  with  the  stockholders 


that  no  more  than  the  amount  already 
paid  should  ever  be  required.  Such  an 
agreement  does  not  bind  the  receiver 
in  so  far  as  it  is  necessary  for  him  to  col- 
lect the  money  to  pay  creditors.  Mathis 
v.  Pridham,  20  S.  W.  Rep.,  1015  (Tex., 
1892). 

i  Sawyer  v.  Hoag,  17  Wall.,  610,  621 
(1873) ;  Upton  v.  Tribilcock,  91  U.  S.,  4!> 
(1S75);  Sanger  v.  Upton,  id.,  56:  Web- 
ster v.  Upton,  id.,  65 ;  Chubb  v.  Upton, 
95  id.,  665  (1877) ;  Payson  v.  Stoever,  2 
Dill.,  427  (1873) ;  Upton  v.  Hansbrough, 

3  E-iss.,  417  (1873).  Cf.  County  of  Mor- 
gan v.  Allen,  103  U.  S,  498  (1880).  The 
principles  of  equity  applicable  to  actions 
by  a  receiver  in  cases  of  this  nature 
will,  in  general,  unless  some  statute  has 
changed  the  law,  be  found  applicable  to 
these  actions  when  brought  by  assignees 
at  common  law  or  in  bankruptcy. 

'•i5  Johns.  Chan.,  366  (1820);  reversed 
by  19  Johns.,  456,  473  (1822),  by  Spencer, 
C.  J. 

3 Sleet'.  Bloom,  20  Johns.,  669(1822); 
Hawkins  r.  Glenn,  131  U.  S.,  319  (ISM); 
Henry  r.  Vermillion,  etc.,  R  R.  Co.,  17 
Ohio,    187  (1S48);    Hampson  v.  Weare, 

4  Iowa,    13  (1856);  Millikin   v.   White- 


265 


§  209.] 


SUBSCRIPTIONS    AND   CORPORATE   CREDITORS. 


[cn. 


XI. 


that  the  stockholder  cannot  take  advantage,  in  the  suit  against 
him,  of  a  defect  in  the  service  of  process  upon  the  corporation  in 
the  original  suit.  His  remedy  in  such  a  case  is  by  a  direct  pro- 
ceeding.1 In  New  York  the  conclusiveness  of  the  judgment  in  these 
cases  has  been  much  questioned.2 


house,   49    Me.,   527  (1860);    Wilson  v. 
Pittsburgh,    etc.,   Coal  Co.,  43    Pa.  St., 
424  (1862) ;  Bank  of  Wooster  v.  Stevens, 
1  Ohio  St.,  233  (1853);  Stevens  v.  Fox, 
83    N.    Y.,    313  (1881);    Marsh  v.   Bur- 
roughs, 1  Woods,  463  (1871);  Grund  v. 
Tucker,  5  Kan.,  70  (1869) ;  Bissitu.  Ken- 
tucky  River  Navigation   Co.,    15    Fed. 
Rep.,  353,   and  the  note,  p.  360  (1882); 
Havves  v.  Petroleum  Co.,  101  Mass.,  385 
(1869).     So,  also,  in   actions  to  enforce 
statutory    liability    of    stockholders,    a 
judgment    against    the  corporation    is 
equally  conclusive.     Donworth  v.  Cool- 
baugh,    5    Iowa,    300  (1857);  Came    v. 
Brigham,  39  Me.,  35  (1854);   Havves  v. 
Anglo-Saxon  Petroleum  Co.,  101   Mass., 
385  (1869),  holding  that  a  judgment  by 
default     is    prima    facie    conclusive; 
Stephens  v.  Fox,  83  N.  Y.,  313  (1881); 
Holyoke  Bank  v.  Goodman  Paper  Mfg. 
Co..  63  Mass.,  576  (1852),  holding  that  a 
judgment    by    default    is     conclusive; 
Bigelow  on  Estoppel,  129,  4th  ed. ;  Free- 
man on  Judgments,  §  177,  3d  ed.     The 
stockholder  may,  of  course,  set  up  that 
he  is  not  a  stockholder,  and  other  sim- 
ilar defenses,  such  as  ai-e  specified  in 
chapter  X.     See  infra,  $%  210,  224.     See, 
also,  Merrill  v.  Suffolk   Bank,   31   Me., 
57  (1849);  Johnson  v.    Somerville,  etc., 
Co.,    81    Mass.,    216    (1860);     Glenn    v. 
Springs,   26  Fed.    Rep.,  494;  Powell  v. 
Oregonian  R'y,  38  Fed.  Rep.,  187  (1889); 
Barron  v.  Paine,  22  Atl.  Rep.,  218  (Me., 
1891).     The  decree  of  the  court  where 
the  corporation  is  located  is  conclusive 
as   to  whether    service    was    properly 
made  on  the  corporation,  such  service 
being  on  two  directors  and  the  cashier. 
The  decree  is  also   conclusive   that  no 
laches   existed  in   bringing   suit;   that 
the  statute  of  limitations  was  no  bar 
to  the  decree;  that  the  court  had  au- 
thority  to   make  an  assessment;   that 


the  change  in  the  coi-porate  name  did 
not  discharge  the  stockholders'  liability  ; 
and  that  the  trustee,  Glenn,  might  sue 
the  stockholders.  Lehman  v.  Glenn,  6 
S.  Rep.,  44  (Ala.,  1889).  Nor  can  he  set 
up  that  the  creditors'  rights  are  based 
on  purchases  made  ultra  vires  by  the 
corporate  officers.  Sumner  v.  Marcy,  3 
Woodb.  &  M.,  105  (1847).  The  judgment 
against  the  corporation  is  conclusive, 
and  it  cannot  be  shown  that  it  arose 
on  a  contract  which  was  ultra  vires. 
Baines  v.  Babcock,  30  Pac.  Rep.,  776 
(Cal.,  1892).  Cannot  attack  the  debts 
upon  which  the  judgment  was  obtained. 
Hambleton  v.  Glenn,  20  Atl..  Rep.,  121 
(Md.,  1890).  No  defense  that  the  judg- 
ment against  the  corporation  was  ob- 
tained by  collusion  with  one  of  the 
directors.     Id. 

i  Came  v.  Brigham,  39  Me.,  35  (1854). 
The  stockholder  sued  on  his  subscription 
may  set  up  that  the  judgment  against 
the  corporation  was  obtained  by  service 
on  one  who  had  ceased  to  be  an  officer. 
Beardsley  v.  Johnson,  121  N.  Y.,  224 
(1890).  Cf.  Wheeler  v.  Millar,  24  Hun, 
541  (1881).  In  Chesnut  v.  Pennell,  92  111., 
55  (1879),  it  was  held  that  a  decree 
against  the  corporation  is  not  admissi- 
ble in  evidence  against  a  stockholder 
who  was  not  a  party  to  the  bill  or  de- 
cree, actually  or  constructively,  and 
that  in  such  a  case  proof  of  the  liability 
of  the  corporation  to  the  creditor  should 
be  given. 

2  New  York  is  practically  the  only% 
state  where  this  question  presents  any 
difficulty,  and  the  confusion  which  there 
reigns  is  largely  due  to  the  failure  to 
distinguish  between  cases  of  liability 
for  unpaid  subscriptions  and  liabilities 
created  by  statute.  In  some  of  the 
cases  the  meaning  of  the  court  is  not 
clear,  and  often  the  question  did  not 


266 


CTT.   XI.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


210. 


Where  the  stockholders  are  liable  only  on  a  particular  class  of 
corporate  debts,  or  to  certain  classes  of  creditors  only,  the  court 
will  not,  of  course,  reject  evidence  tending  to  show  either  that  the 
debt  recovered  belongs  or  does  not  belong  to  the  class  on  which 
the  shareholder  is  liable.1 

§  210.  Defenses  available  against  corporate  creditors  in  actions 
to  compel  payment  of  balances  of  subscriptions.  —  There  are,  of 
course,  certain  defenses  which  subscribers  may  set  up  when  actions 
are  brought  against  them  on  behalf  of  corporate  creditors.  These 
defenses  are  the  same  as  those  which  may  be  set  up  to  defeat  an 
action  by  the  corporation  to  enforce  the  subscription.2  But  both 
in  England  and  in  this  country  the  courts  do  not  favor  such  de- 


come  up  directly  for  decision.   The  gen-     paratively  little  from  the  general  law. 


eral  rule  was  originally  stated  essen- 
tially as  in  the  text,  hy  Spencer,  C  J., 
in  Slee  v.  Bloom,  20  Johns.,  669  (1822), 
reversing  S.  C,  5  Johns.  Ch.,  366  (1821). 
This  was  followed  by  Moss  v.  Oakley,  2 
Hill,  265  (1842).  Moss  v.  McCullough,  5 
Hill,  131  (1843),  started  a  new  theory, 
that  the  case  was  the  ordinary  one  of 
principal  and  surety,  and  hence  a  judg- 
ment against  the  corporation  was  not 
even  prima  facie  evidence  against  the 
stockholder.  Although  this  ruling  was 
overturned  on  the  final  determination, 
S.  C,  7  Barb.,  279  (1849),  it  was  followed 
in  Strong  v.  Wheaton,  38  Barb.,  616 
(1861).  In  T3elmont  v.  Coleman,  21  N.  Y, 
96  (1860),  on  appeal  from  1  Bosw.,  188, 
three  justices  affirmed  the  ruling  below 
that  the  judgment  was  prima  facie  evi- 
dence, while  the  other  four  refused  to 
commit  themselves  to  that  doctrine. 
Conklin  v.  Furman,  8  Abb.  Pr.  (N.  S.),  161 
(1865),  accepts  the  original  rule  as  stated 
by  Spencer,  C.  J.  Then  follow  two  later 
cases.  Miller  v.  White,  50  N.  Y.,  137 
(1872),  aud  McMahou  v.  Macy,  51  id., 
155,  which  reject  that  rule  in  strong 
terms.  But  both  these  cases  are  easily 
distinguishable  on  the  principle  stated 
supra.  They  were  suits  to  enforce  a 
statutory  penalty  against  trustees  for 
failure  to  file  a  certain  report.  It  may 
be  said,  then,  that  after  all,  the  New 
York  rule,  in  the  cases  really  covered  by 
the  language  of  the  text,  differs  com- 


The  courts,  under  the  influence  of  some 
of  the  earlier  decisions,  hesitate  to  ac- 
cept the  rule  of  conclusiveness ;  but  the 
latest  case  in  the  court  of  appeals, 
Rapallo,  J,  uses  this  language:  "The 
creditor  thus  claims  through  the  corpo- 
ration, and  to  entitle  him  to  this  statu- 
tory subrogation  or  transfer  he  need 
only  show  that  he  is  a  creditor.  If  he 
shows  this  fact  by  evidence  which  is 
binding  and  conclusive  against  the  cor-' 
poration,  such  evidence  should  be  com- 
petent against  the  stockholder  to  estab- 
lish the  title  of  the  creditor  to  succeed 
to  the  rights  of  the  corporation.  A 
judgment  against  the  corporation,  being 
the  highest  evidence  against  it,  should 
be  as  effectual  to  pass  its  title  to  the 
fund  in  question  as  a  deed  or  any  other 
form  of  transfer."  Stephens  v.  Fox,  83 
N.  Y,  313,  317  (1881).  Cf.  Wheeler  v. 
Millar,  supra.  See,  also,  Grund  v. 
Tucker,  5  Kan.,  70  (1869);  Merchants' 
Bank  v.  Chandler,  19  Wis.,  434  (1865). 

1  Wilson  v.  The  Stockholders,  43  Pa. 
St.,  424  (1862) ;  Conant  v.  Van  Schaick,  24 
Barb.,  87  (1857) ;  Larrabee  v.  Baldwin,  35 
Cal.,  155  (1868).  Cf.  Hudson  v.  Carman, 
41  Me.,  84  (1856),  holding  that  the  judg- 
ment obtained  may  not  be  conclusive 
evidence  of  the  organization  and  exist- 
ence of  the  corporation,  and  if  denied 
they  must  be  proved. 

2  See  ch.  X 


267 


211.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[ch.  xi. 


fenses,  especially  after  the  corporation  has  become  insolvent.  More- 
over, there  are  many  defenses  which  might  defeat  an  action  by  the 
corporation,  but  which  do  not  prevent  the  corporate  creditor  from 
enforcing  the  subscription.1 

§  211.  Contribution. —  Corporate  creditors  compelling  stockhold- 
ers to  pay  their  subscriptions  are  under  no  obligation  to  see  that 
the  payments  made  by  the  subscribers  are  proportionally  equal.2 
A  court  of  chancery  will  compel  subscribers  to  pay  in  full  the 
amount  of  their  unpaid  subscriptions  if  the  corporate  indebtedness 
make  it  necessary,  leaving  them  to  seek  contribution  from  the 
other   shareholders.3     The  rule,  moreover,  is  well  settled  that  a 


1  Such  as  fraud  on  the  part  of  the 
corporation,  inducing  a  subscription. 
See  §§  163,  164,  supra.  So,  also,  fraud 
and  mismanagement  on  the  part  of  the 
directors  and  corporate  officers  is  not  a 
valid  defense  herein.  In  re  Republic 
Insurance  Co.,  3  Biss.,  452  (1873).  The 
stockholder  may  set  up  that  the  corpo- 
ration had  no  stock  to  offer  him.  Lath- 
rop  v.  Kneeland,  46  Barb.,  432  (1866). 
Of.  Mackley's  Case,  L.  R.,  1  Chan.  Div., 
247  (1875).  Acts  that  estop  the  subscriber 
as  against  the  corporation  estop  him  as 
to  corporate  creditors.  Griswold  v.  Selig- 
man,  72  Mo.,  110  (1880).  But  mere  en- 
tries in  corporate  books  are  not  admis- 
sible in  evidence  to  prove  the  creditor's 
claim.  Neilson  v.  Crawford,  52  Cal.,  248 
(1877). 

Where  a  firm  or  partnership  becomes 
a  subscriber  in  the  copartnership  name, 
corporate  creditors  may  have  execution 
against  any  one  of  the  partners.  The 
partnership  subscription  is  not  a  de- 
fense of  which  any  single  partner  can 
avail  himself  to  escape  liability.  Bray's 
Adm'r  v.  Seligman's  Adm'r,  75  Mo.,  31 
(1881).  It  is  no  defense  that  judgment 
against  the  defendant  stockholder  for 
the  full  amount  of  his  liability  has  been 
recovered  by  other  creditors,  and  that 
he  settled  the  same  at  a  discount.  Kuo- 
kelman  v.  Rentchler,  15  Brad.  (111.),  271 
(1884).  Prominent  among  these  de- 
fenses is  the  defense  that  the  corpora- 
tion contracted  with  the  defendant 
that  his  stock  should  be  deemed  fully 
paid-up  stock,  although  in  fact  the  full 


par  value  had   never  been  paid.    See 
ch.  III. 

The  unpaid  subscription  may  be  col- 
lected in  payment  of  damages  for  a  tort 
the  same  as  for  a  contract  debt.  Powell 
v.  Oregonian  R'y,  36  Fed.  Rep.,  726 
(188G);  38  id.,  187.  In  Maine  this  rule 
is  declared  by  statute.  Grindle  v.  Stone. 
4  East  Rep,  623  (1886).  For  many  other 
defenses,  see  ch.  XII,  where  defenses 
were  set  up  to  defeat  the  statutory 
liability. 

2  Pentz  v.  Hawley,  1  Barb.  Chan.,  122 
(1845). 

3  Pentz  v.  Hawley,  supra  (1845) ;  Evaus 
v.  Coventry,  25  L.  J.,  Chan.,  489  (1856); 
Marsh  v.  Burroughs,  1  Woods,  463(1871). 
As  to  whether  solvent  stockholders  are 
required  to  make  up.  for  the* benefit  of 
creditors,  the  deficiency  of  defaulting 
or  insolvent  subscribers  to  the  full 
amount  of  the  former's  own  unpaid 
subscriptions,  see  South  C.  Mfg.  Co.  v. 
Bank  of  S.  C,  6  Rich.  (Eq.),  227  (1854). 
But  actual  subscribers  are  not  liable  for 
that  part  of  the  capital  stock  which  was 
never  subscribed.  Evans  v.  Coventry, 
25  L.  J.,  Chan.,  489  (1856).  It  is  no  de- 
fense to  show  that  notes  were  given 
in  payment  of  subscriptions,  or  that 
notes  by  insolvent  persons  were  pro- 
cured to  be  given,  when  it  appears  that 
nothing  was  ever  realized  from  the 
notes.  Nathan  v.  Whitlock,  9  Paige. 
Chan.,  152  (1841).  When  it  is  made  to 
appear  by  proof  that  some  of  the  stock- 
holders are  insolvent,  the  solvent  must 
pay   the   proportion  of   the   insolvent, 


268 


•CH.  XI.] 


SUBSCRIPTIONS    AND    CORPORATE    CREDITORS. 


[§211. 


shareholder  who  has  been  compelled  to  pay  more  than  his  propor- 
tion of  the  debts  of  the  company  may  maintain  an  action  against 
his  co-stockholders  for  contribution.1 

Contribution  may  properly  be  enforced  in  the  corporate  cred- 
itor's suit.  It  is  largely  for  this  purpose  that  all  the  delinquent 
shareholders  may  be  and  should  be  made  parties  defendant.2 

to    be    apportioned    among    them    ac-  Pennsylvania  the  right  to  contribution 

cording  to  and  up  to  the  amount  of  their  is  said  to  be  purely  statutory.     Brinham 

stock  subscribed  and  unpaid.     Such  is  v.  Wellersburg  Coal  Co.,  supra;  Allen  v. 

the  rule  in  Oregon.     Hodges  v.  Silver,  Fairbanks,  45  Fed.  Rep.,  4  1  5|  1891  i.    Alia- 

etc,  Co.,  9  Oregon,  200  (1881).    Cf.  g  243.  bility  for  contribution  on  subscriptions 

All  of  the  stockholders  who  are  defend-  does  not  cease  upon  the  death  of  the 

ants  will  have  judgment  entered  against  stockholders.     Allen    v.    Fairbanks,    40 

them   for  their  full  liability,  and  they  Fed.  Rep.,  188  (1889).     The   remedy  of 

must    seek      contribution     themselves,  one  stockholder  against  another  for  con- 


Hamilton  ?'.  Clarion,  etc.,  R.  R.,  23  Atl. 
Rep.,  53  (Pa.,  1891). 

i  Wincock  v.  Turpin,  96  111.,  135  (1880) ; 
Millaudon  v.  New  Orleans,  etc.,  R.  R. 
Co.,  3  Rob.   (La.),  488  (1843);  Marsh  v. 


tribution  is  in  equity  and  not  at  law. 
Koons  v.  Martin,  66  Hun,  554  (1893). 

2N.  Y.  Code  of  Civil  Procedure. 
§§  1791-1794;  Masters  v.  Rossie  Lead 
Mining  Co.,  2  Sandf.  Chan.,  301  (1845); 


Burroughs,  1  "Woods,  463(1871);  Holmes  Holmes  v.  Sherwood,  3  McCrary,  405 
v.  Sherwood,  3  McCrary,  405  (1881);  (1881);  Hadley  tt  Russell.  40  N.  H,  109 
Umsted  v.  Buskirk,  17  Ohio  St  113  (1860);  Umsted  v.  Buskirk,  17  Ohio  St., 
<1866);  Matthews  v.  Albert,  24  Md.,  527  113  (1866);  Hodges  v.  Silver  Hill  Min- 
<1866);  Stewart  v.  Lay,  45  Iowa.  604  ing  Co.,  9  Oregon,  200(1881).  Where  the 
(1877);  Handley  v.  Russell,  40  N.  H.,  articles  of  incorporation  provide  that 
109  (1860) ;  Erickson  v.  Nesmith,  46  id.,  the  indebtedness  shall  not  exceed  a  cer- 
371  (1866);  Masters  v.  Rossie  Lead  Min-  tain  sum,  but  debts  are  contracted  in 
ing  Co.,  2  Sandf.  Chan.,  301  (1845);  excess  of  the  limit,  and,  the  corporation 
Aspinwall  u.  Torrence,  1  Lans., 381  (1870);  being  insolvent,  the  officer  who  con- 
Stover  v.  Flack,  30  N.  Y.,  64  (1864);  Far-  tracted  the  debt  pays  it  off  out  of  his 
row  v.  Bivings,  13  Rich.  (Eq.),  25  (1866);  own  individual  funds,  he  cannot  claim 
Brinham  v.  "Wellersburg  Coal  Co.,  47  contribution  unless  the  debt  in  excess 
Pa.  St,  43  (1864).  Cf.  Andrews  v.  of  the  limit  was  contracted  by  the  unan- 
Collender,  30  Mass.,  484  (1833);  Gray  v.  imous  assent  of  the  stockholders.  Hal- 
Coffin,  63  Mass.,  192  (1852);  Sutton's  deman  v.  Ainslie,  82  Ky.,  395  (1884). 
Case,   3  De  G.  &  Sm.,   262  (1850).     In 

259 


CHAPTER  XII. 


STATUTORY   LIABILITY  OF  STOCKHOLDERS  TO   CORPORATE  CRED- 
ITORS. 


A.   EXTENT  OP  THE  LIABILITY. 

212,  213.  Statutory  liability  in  general. 

214.  The  liability  is  strictly  construed 

and  limited. 

215.  Particular  statutes  construed  as 

to  the  extent  of  the  liability. 

216.  Waiver  by  corporate  creditors  of 

their  statutory  rights  against 
stockholders. 

217.  Statutory    liability   not   enforce- 

able to  pay  damages  recovered 
against  the  corporation  in  tort. 


ENFORCEMENT      OP     THE 
LIABILITY. 


STATUTORY 


218.  The  statutory  liability  can  be  en- 

forced by  corporate  creditors 
only  —  Stockholders  and  direct- 
ors as  creditors. 

219.  Judgment,  execution,  etc.,  against 

the  corporation,  a  condition 
precedent  to  the  right  to  en- 
force the  statutory  liabdity. 


§  220.  Difficulty  in  determining 
whether  the  creditor's  remedy 
is  at  law  or  in  equity. 

221.  The  remedy  at  law. 

222.  The  remedy  in  equity. 

223.  Enforcement  of  the  statutory  lia- 

bility by  means  of  courts  in 
other  states  —  Penal  liabilities. 

224.  How  far  the  .judgment  agaiust 

the  corporation  is  conclusive 
of  the  creditor's  claim. 

225.  Stockholder's    miscellaneous   de- 

fenses against  his  statutory 
liability  —  Defense  of  release  — 
Defense  of  liability  already 
paid  —  Defense  of  set-off  —  De- 
fense as  to  iuterest  —  Defense 
of  costs  —  Defense  of  statute 
of  limitations  —  Other  de- 
fenses. 

226.  Priority  among  creditors. 
227-229.  Contribution    among   stock- 
holder* 


A.    EXTENT   OF   THE   LIABILITY. 

§212,  213.  Statutory  liability  in  general. —  Probably  the  most 
characteristic  feature  of  a  corporate  existence  is  the  fact  that,  by 
being  a  corporation,  its  stockholders  are  liable  only  for  the  par 
value  of  the  stock  held  by  them,  and  when  that  is  once  paid  in 
money  or  property  there  is  no  further  liability.  This  exemption 
from  liability  need  not  be  declared  in  the  charter,  but  arises  from 
the  ver}7  fact  of  incorporation.  For  this  reason  legislatures  are 
very  careful,  in  giving  joint-stock  companies  special  powers,  to 
distinctly  declare  that  the  company  shall  not  thereby  become  a 
corporation.  The  very  fact  of  incorporation  by  itself  releases 
subscribers  for  stock  from  all  liability  for  corporate  debts,  except  to 
the  extent  of  their  unpaid  subscriptions.  It  has  been  deemed  wise, 
however,  by  the  state  legislatures,  in  many  instances,  to  increase 
the  liability  of  stockholders  to  corporate  creditors.  Accordingly, 
statutes  are  passed  expressly  declaring  that  the  stockholders  shall 
be  liable  for  a  specified  sum,  in  addition  to  their  unpaid  subscrip- 
tions.    This  is  called  the  statutory  liability  of  stockholders.     It 

270 


CH.  XII.]  STATUTORY    LIABILITY    OF    STOCKHOLDER.  .'.'   214,   215. 

rarely  exists  as  regards  stockholders  in  railroad  corporations,  but 
frequently  exists  in  the  case  of  manufacturing  and  various  other 
corporations,1  and  nearly  always  exists  as  against  the  stockholders 
in  banks. 

This  additional  liability  may  be  imposed  by  the  state  constitu- 
tion, or  by  the  charter,  or  by  a  general  statute.  Where  this  liabil- 
ity is  imposed  by  a  provision  existing  at  the  time  of  the  creation 
of  the  corporation,  there  is  no  doubt  of  its  constitutionality.  But 
where  the  liability  is  created  by  a  statute  or  constitutional  provis- 
ion enacted  after  the  corporation  was  incorporated,  then  there 
arise  difficult  questions  of  constitutional  validity.  A  full  discus- 
sion, however,  of  the  constitutionality  of  such  a  statute  is  consid- 
ered elsewhere.2 

§  214.  This  Viability  is  strictly  construed  and  limited. —  Inasmuch 
as  all  statutes  creating  an  additional  liability  on  the  part  of  stock- 
holders are  in  derogation  of  the  common  law,  they  are  to  be  strictly 
construed.  They  are  a  wide  departure  from  established  rules,  and, 
though  founded  on  considerations  of  public  policy  and  general  con- 
venience, are  not  to  be  extended  beyond  the  plain  intent  of  the 
words  of  the  statute.3 

§  215.  Particular  statutes  construed. —  The  character,  nature  and 
extent  of  the  liability  imposed  by  constitutional  provisions  or  by 
statute  upon  stockholders,  in  addition  to  their  common-law  liabil- 
ity, vary,  of  course,  widely,  and  the  extent  of  the  liability  created 
by  each  statute  will  depend,  entirely  upon  the  particular  words  of 

1 A  complete  statement  of  the  liabil-  293  (1872);  Youghiogheny  Shaft  Co.  v. 

ity  of  stockholders  in  various  corpora-  Evans,  72  id.,  331  (1872) ;  Diven  v.  Lee, 

tions  in  all  the  states  and  territories  is  36  N.  Y.,  302  (1867);  Lowry  v.  Ionian,  46 

given  in  Part  VII,  infra.  id.,  119  (1871);  Salt  Lake  City  National 

2  See  §  497,  infra.  It  is  constitutional  Bank  v.  Hendrickson,  40  N.  J.  Law,  52. 
for  the  legislature  at  the  time  of  enact-  Cf.  Priest  v.  Essex  Hat  Mfg.  Co.,  115 
ing  a  general  incorporating  act  to  pro-  Mass.,  380  (1874);  Ripley  v.  Sampson,  10 
vide  for  an  extra  liability  of  directors  Pick,  371  (1830);  Knowlton  r.  Ackley, 
who  make  false  reports.  Huntington  8  Cush.,  93  (1851) ;  Bassett  v.  St.  Albans 
v.  Attrill,  118  N.  Y,  365  (1890).  Hotel   Co.,   47  Vt,    313  (1875);    David- 

3  Gray  v.  Coffin,  9  Cush.,  192  (1852);  son  v.  Rankin,  34  Cal.,  503  (1868);  Moke- 
O'Reilly  v.  Bard,  105  Pa.  St.,  569  lumne  Hill,  etc.,  Co.  v.  Woodbury,  14 
(1884);  Chaser.  Lord,  77  N.Y,  1(1879);  id.,  265  (1859);  Dewey  v.  St.  Albans 
Mean's  Appeal,  85  Pa.  St.,  75  (1877);  Trust  Co.,  57  Vt,  332  (1885).  A  con- 
Dane  v.  Dane  Mfg.  Co.,  14  Gray,  489  trary  rule  seems  to  have  been  adopted 
(1859);  Chamberlin  v.  Huguenot  Mfg.  in  Carver  v.  Braintree  Mfg.  Co.,  2  Story, 
Co.,  118  Mass.,  532  (1875);  Grose  v.  Hilt,  432  (1843).  where  liability  for  debts  con- 
36  Me.,  22  (1853);  Coffin  v.  Rich.,  45  id.,  tracted  during  membership  was  held 
511;  Windham  Provident  Institution,  to  include  "dues  owing."  Also  in  Rider 
etc.,  v.  Sprague,  43  Vt.,  502  (1871);  r.  Tritchey,  30  N.  E.  Rep.,  692  (Ohio, 
Dauchy  v.  Brown,  24  id.,  197;  Moyer  v.  1892);  Freeland  v.  McCullough,  1  Denio, 
Pennsylvania  Slate    Co.,    71     Pa.     St,  414(1845). 

271 


§  215.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


the  enactment.1  Occasionally,  however,  a  provision  imposing  addi- 
tional liability  is  found  to  be  substantially  repeated  in  the  statutes 
of  many  states.  Such  is  the  case  with  the  provision  that  stock- 
holders shall  be  liable  "  to  an  amount  equal  to  their  stock."  This 
is  construed  to  impose  a  double  liability.2  "When  it  has  been  en- 
forced, each  subscriber  will  have  paid  double  for  his  stock  —  once 
on  the  subscription  and  once  on  the  statutory  liability. 

Stockholders  in  national  banks  are  subject  to  this  double  liabil- 
ity.    ]STot  only  that,  but  if  at  any  time  the  capital  stock  of  the  bank 


i  Root  v.  Sinnock,  11  N.  E.  Rep.,  339 
(III.,  1887),  citing  many  cases;  Wheeler 
V.  -Millar,  90  N.  Y.,  353,  359  (1882) ;  Mat- 
ter of  the  Empire  City  Bank,  18  N.  Y., 
199,  218  (1858);  Ohio  Life  Ins.  Co.  v. 
Merchants'  Ins.  Co.,  11  Humph.  (Tenn.), 
1.  23  (1850);  Lewis  v.  St.  Charles  Co.,  5 
Mo.  App.,  225  (1878).  Cf.  Briggs  V. 
Penniman,  8  Cow.,  387  (1826) ;  Bank  of 
Poughkeepsie  v.  Ibbotson,  24  Wend.,  473 
(1840). 

2 A  liability  "to  an  amount  equal  to 
the  amount  of  stock  held  by  them  re- 
spectively "  has  been  construed  to  create 
the  double  liability.  Booth  v.  Camp- 
bell, 37  Md.,  522  (1872);  Matthews  v. 
Albert,  24  id.,  527  (1866) ;  Morris  v.  John- 
son, 34  id.,  485  (1871);  Hager  v.  Cleve- 
land, 36  id.,  476,  491  (1872).  The  former 
constitutional  provision  in  Alabama  that 
stockholders  were  "  liable  to  the  extent 
of  their  stock "  meant  a  double  liabil- 
ity. McDonnell  r.  Alabama,  etc.,  Ins. 
Co.,  5  S.  Rep.,  120  (Ala.,  1888).  A  lia- 
bility of  stockholders  for  "double"  the 
amount  of  their  stock  means  a  liability 
once  for  the  unpaid  subscriptions  and 
then  an  additional  liability  of  twice  the 
par  value  of  the  stock,  making  a  triple 
liability  altogether.  Parrish's  Appeal, 
19  Atl.  Rep.,  569  (Pa.,  1890).  A  liability 
"equally  and  ratably  to  the  extent  of 
their  respective  shares  of  stock"  does 
not  authorize  a  judgment  against  one 
for  any  more  than  his  proportion. 
Buenz  v.  Cook,  24  Pac.  Rep.,  679  (Col., 
1890).  The  constitution  of  Missouri 
formerly  contained  a  provision,  now  re- 
pealed, imposing  a  double  liability.  See 
Perry  v.  Turner,  55  Mo.,  418  (1877).     By 


the  constitution  of  1875,  a  provision 
taken  from  amendment  of  1S70  provides, 
''  in  no  case  shall  any  stockholder  be  in- 
dividually liable  in  any  amount  over 
and  above  the  amount  of  stock  owned 
by  him  or  her."  Construed  in  Schricker 
v.  Ridings,  65  Mo.,  208,  to  limit  liability 
to  unpaid  subscriptions.  Prov.  Sav. 
Inst.  v.  Jackson,  etc.,  52  Mo.,  552  (1873); 
Miller  v.  Marion,  50  id.,  55  (1872);  Perry 
v.  Turner,  55  id.,  418  (1874).  See,  also, 
Ochiltree  v.  Railroad  Co.,  21  Wall.,  249 
(1874).  A  statute  imposing  a  liability  to 
the  amount  of  the  stock  has  been  held 
in  Texas  to  be  merely  declaratory  of  the 
subscription  liability.  Walker  v.  Lewis, 
49  Tex.,  123.  A  liability  "  to  the  amount 
of  what  remains  unpaid  upon  his  sub- 
scription to  the  capital  stock"  is  declar- 
atory and  creates  no  liability  beyond  the 
subscription  price.  Burch  v.  Taylor,  24 
Pac.  Rep,  438  (Wash.,  1890).  In  Massa- 
chusetts, by  statute,  stockholders  in 
manufacturing  corporations  are  liable 
as  tenants  in  common  to  creditors  to 
the  extent  of  the  capital  stock,  until  it 
has  been  divided  into  shares.  Hawes  v. 
Anglo-Saxon  Petroleum  Co.,  101  Mass., 
385  (1869);  Same  v.  Same,  111  id.,  200 
(1872).  Cf.  Burnape  v.  Haskins  Steam- 
engine  Co.,  127  Mass.,  586  (1879).  Cf. 
Hager  v.  Cleveland,  srqyra;  Morris  r. 
Johnson,  sujira.  But  where  some  of 
the  stock  is  held  by  the  corporation  it- 
self, this  will  not  compel  the  other  share- 
holders to  bear  the  statutory  liability  as 
to  the  stock  so  held  by  the  corporation. 
Crease  v.  Babcock,  10  Mete,  525,  568 
(1846). 


272 


en.  xii.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[§  215. 


becomes  diminished  by  losses,  the  comptroller  of  the  currency  may 
compel  the  stockholders  to  discontinue  business  or  to  assess  them- 
selves to  replace  the  loss.1 

A  very  common  statutory  liability  is  that  which  makes  stock- 
holders liable  for  debts  due  from  the  corporation  to  its  servants  or 
laborers.  There  has  been  difficulty  in  determining  what  persons 
are  to  be  classed  as  servants,  but  the  courts  are  not  inclined  to  give 
a  broad  application  to  the  word.- 


i  See  R  S.  of  U.  S.,  §  5205. 

2  It  may  be  stated  as  the  rule,  that 
only  those  who  perform  menial  or  man- 
ual services  are  within  the  class  contem- 
plated in  the  statute ;  "  that  he  who  per- 
forms them  must  be  of  a  class  whose 
members  usually  look  to  the  reward  of 
a  day's  labor  or  service  for  immediate 
or  present  support,  from  whom  the 
company  does  not  expect  credit,  and  to 
whom  its  future  ability  to  pay  is  of  no 
consequence."  Wakefield  v.  Fargo,  90 
N.  Y.,  213,  217  (1882).  Cf.  Adams  v. 
Goodrich,  55  Ga.,  233  (1875).  This  over- 
rules some  of  the  earlier  New  York 
cases,  e.  g.,  Vincent  v.  Bramford,  1  Jones 
&  Sp.,  506;  S.  C,  12  Abb.  Prac.  (N.  S.), 
252.  which  held  an  engineer  and  fore- 
man, who  sometimes  also  acted  as  su- 
perintendent, to  be  a  servant  within  the 
meaning  of  the  rule ;  Harris  v.  Norvell, 
1  Abb.  N.  C,  127  (1876),  which  held  a  re- 
porter employed  by  a  newspaper  com- 
pany, and  a  city  or  assistant  editor,  if 
not  an  officer  of  the  company,  to  be  a 
servant ;  Hovey  V.  Ten  Broeck,  3  Rob- 
ertson,  316  (1865),  holding  an  overseer 
and  book-keeper  within  the  protection 
of  the  act  A  master  mechanic  and  su- 
perintendent of  works  is  a  servant  or 
laborer.  Sleeper  v.  Goodwin,  31  N.  W. 
Rep.,  335  (Wis.,  1887).  A  superintendent 
of  laborers  is  a  "  laborer"  himself.  Pen- 
dergast  v.  Yandes,  24  N.  E.  Rep.,  724 
(Ind.,  1890).  An  expert  employed  to  ad- 
just and  start  the  machinery  is  entitled 
to  the  statutory  lien  for  "labor."  In  re 
Black,  47  N.  W.  Rep.,  342  (Mich.,  1890). 
A  traveling  salesman  is  a  "  clerk " 
within  the  meaning  of  the  statute  ren- 
dering stockholders  liable  for  debts  to 
(18)  % 


"  clerks,"  etc.     Hand  v.  Cole,  12  S.  W. 
Rep.,  922  (Tenn.,  1890). 

The  following  employees  have  been 
held  not  servants  or  laborers  within  the 
protection  of  the  rule :  The  secretary  of 
a  manufacturing  company.  Coffin  v. 
Reynolds,  37  N.  Y,  640  (1868),  overruling 
Richardson  v.  Abendroth,  43  Barb.,  163, 
and  perhaps  Williamson  v.  Wadsworth, 
49  id.,  294  (1867),  which  is  the  case  of  a 
civil  engineer  and  traveling  agent  at  a 
fixed  salary.  A  civil  engineer.  Penn- 
sylvania, etc.,  R  R  Co.  v.  Leuffer,  84 
Pa.  St.,  168  (1877).  Contra,  Conant  v. 
Van  Scbaick,  24  Barb.,  87.  Cf.  William- 
son v.  Wadsworth,  49  Barb.,  294  (1861). 
A  consulting  engineer.  Ericsson  v. 
Brown,  38  Barb.,  390  (1862).  An  assist- 
ant chief  engineer.  Brockway  v.  Innes, 
39  Mich.,  47  (187S).  Cf.  Peck  v.  Miller, 
39  Mich.,  594  (1878).  An  overseer  on  a 
plantation.  Whitaker  v.  Smith,  84  N. 
G,  340  (1879).  Contra,  Hovey  v.  Ten 
Broeck,'  3  Robertson  (N.  Y.  Super.  Ct.). 
316  (1875).  A  contractor.  Boutwell  v. 
Townsend,  37  Barb.,  205  (1860) ;  Aikin  v. 
Wasson,  24  N.  Y,  482  (1862) ;  Balch  r. 
New  York,  etc.,  R  R  Co.,  46  id.,  521 
(1871);  Atcherson  v.  Troy,  etc.,  R.  R 
Co.,  6  Abb.  Prac.  (N.  S.),  329.  Cf.  Kent 
v.  New  York,  etc.,  R  R  Co.,  12  N.  Y. 
628  (1855);  McCluskey  v.  Cromwell,  11 
id.,  593.  An  agent  of  a  mining  corpora- 
tion employed  to  take  charge  of  its 
mines  in  a  foreign  country.  Hill  v. 
Spencer,  61  N.  Y.,  274  (1874);  Dean  v. 
De  Wolf,  16  Hun,  186  (1878);  Krauser 
v.  Ruckel,  17  id.,  463  (1879).  A  book- 
keeper and  general  manager.  Wake- 
field v.  Fargo,  90  N.  Y,  213  (1882).  A 
superintendent  Kincaid  v.  Dwindle, 
73 


§215.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


Many  of  the  states  have  statutes  rendering  stockholders  or  di- 
rectors liable  to  creditors  unless  certain  reports  or  certificates  are 
filed.1    Directors  are  sometimes  made  personally  liable  for  making 


59  N.  Y.,  548  (1875).     Cf.  Gordon  v.  Jen- 
nings, L,  R,  9  Q.  B.  Div.,  45  (1882).    And 
compare,  also,  Gurney  v.  Atlantic,  etc., 
Ry  Co.,  58  N.  Y.,  358  (1874).    Counsel  is 
not  an  "employee."    Louisville,  etc.,  R 
R  v.  Wilson,  138  U.  S.,  501   (1891).     A 
contractor  is  not  an  employee  under  the 
Indiana  statute.     Vane  v.   Newcombe, 
132  U.  S.,  220  (1889).     A  statutory  pref- 
erence to  servants  and  employees  gives 
no  preference  to  the  secretary.     Wells 
v.  Southern,  etc.,  Ry,  1   Fed.  Rep.,  270 
(1880).     In  general  only  manual  or  men- 
ial laborers  are  protected  by  the  statute. 
Adams  v.  Goodrich,  55  Ga.,  335 ;  People 
v.  Remington,  45  Hun,  329  (1887).     Cf. 
Heebner  v.  Chave,  5  Pa.  St,  115  (1847) ; 
Harrod  v.  Hamer,  32  Wis.,  162  (1873). 
Under  the  mechanics'  lien  laws  of  the 
several  states,  a  wider  meaning  has  been 
given  to  the  word   "laborers."    These 
cases  are  frequently  confused  with  the 
statutes  considered  herein.     Stryker  v. 
Cassidy,   76  N.   Y,   50  (1879);    Mutual 
Benefit  Ins.  Co.  v.  Rowood,  26  N.  J.  Eq., 
389    (1875);  Bank    of    Pennsylvania  v. 
Gries,  35  Pa.  St.,  423  (1860);  Arnoldi  v. 
Gonin,  22  Grant's  Chan.  (Up.  Can.),  314 
(1875);    Mulligan    v.   Mulligan,   18    La. 
Ann.,   21    (1866);   Knight  v.   Norris,  13 
Minn.,  475  (1868):  Raeder  v.  Bensberg, 
6    Mo.    App.,    445    (1878);    Foushee|  v. 
Grigsby,  12  Bush,  75  (1876);  Smallhouse 
v.  Kentucky,    etc.,    Co.,    2  Mont,    443 
(1876);  Capron  v.   Stout,   11   Nev.,  304 
(1881).     The  mere  fact  that  one    does 
some   manual    labor  incidental  to  his 
position  as  manager  or  foreman  or  su- 
perintendent will  not  constitute  him  a 
laborer  within  the  intent  of  these  stat- 
utes.    Krauser  v.  Ruckel,  17  Hun,  463 
(1879):  Ericsson  v.  Brown,  38  Barb.,  390 
(1862).     Cf  Wakefield  v.  Fargo,  90  N.  Y, 
213  (1882).     But  where  a  foreman  did  so 
much  manual  labor  that  it  was  not  a 
mere  incident  of  his  foremanship,  it  was 
held  that  he  might  recover  as  a  laborer. 


Short  v.  Medberry,  29  Hun,  39  (1883). 
See,  also,  Poor  on  N.  Y  Mfg.  Act,  p.  70. 
In  construction  of  the  Pennsylvania  lia- 
bility for  labor  and  supplies,  see  Weiss 
v.  Mauch  Chunk  Iron  Co.,  58  Pa.  St,  295 
(1868) ;  Reading  Industrial  Manuf'g  Co. 
v.  Graeff,  64  id.,  395  (1870) ;  Moyer  v 
Pennsylvania,  etc.,  71  Pa.  St,  293  (1872), 
where  a  statute  imposing  liability  for 
debts  due  workmen,  etc.,  and  materials 
furnished  was  construed  not  to  include 
debts  for  hauling,  repairing  wagons, 
lumber  for  erecting  machinery,  powder 
for  blasting,  eta  ;  Weigley  v.  Coal  Oil 
Co.,  5  Phila.,  67  (1862).  A  claim  against 
stockholders  on  their  statutory  liability 
to  laborers  is  assignable.  Day  v.  Vin- 
son, 47  N.  W.  Rep.,  269  (Wis.,  1890). 

1  As  to  whether  this  liability  is  a  penal 
liability,  see  §  223,  infra.  Cases  on  stat- 
utes of  this  character  are  given  through- 
out this  chapter.  The  following  recent 
cases  may  also  aid  in  giving  an  idea  of 
this  kind  of  liability :  Under  a  statute 
rendering  the  stockholders  liable  to  cor- 
porate creditors  to  the  extent  of  the 
unpaid  portion  of  the  par  value  of  their 
stock  unless  a  true  statement  of  the 
affairs  of  the  company  is  made  annu- 
ally, the  stockholders  are  so  liable  if  the 
statement  which  is  filed  is  a  false  state- 
ment. Condon  v.  Winsor,  21  Atl.  Rep., 
540  (R  I,  1891),  refusing  to  follow  Sted- 
man  v.  Eveleth,  6  Mete,  1 14.  Directors 
are  not  liable  by  statute  requiring  an 
annual  report,  where  such  report  is 
filed,  even  though  it  be  false.  If  the 
statute  makes  them  liable  for  know- 
ingly making  a  false  report,  knowledge 
must  be  averred.  Matthews  v.  Patter- 
son, 26  Pac.  Rep.,  812  (Colo.,  1891).  This 
statutory  liability  of  directors  for  fail- 
ure to  file  reports  is  not  avoided  by  the 
fact  that  the  company  is  insolvent  and 
has  gone  out  of  business.  Gans  v. 
Switzer,  24  Pac.  Rep,  18  (Mont,  1890 . 
A   statutory   liability  of  officers   for  a 


274 


CU.   XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[§21* 


loans  in  excess  of  the  capital  stock.1  A  liability  imposed  Iry  a  con- 
stitution may  or  may  not  be  self-executing  without  any  statutory 
provision,  according  to  the  wording  of  the  provision  itself.2  An 
increase  or  reduction  of  the  capital  stock  leads  often  to  complica- 
tions in  addition  to  the  usual  ones  incident  to  the  statutory  lia- 
bility.3 Various  decisions  on  the  liability  of  stockholders  and 
directors  under  particular  statutes  are  given  in  the  notes  below.4 

It  remains  to  add  that  this  class  of  statutes,  except  in  the  case  of 
banks,  have  on  the  whole  proved  lamentable  failures.  They  drive 
corporations  from  a  state;  are  rarely  relied  upon  by  creditors,  and 
are  productive  of  incessant  litigation. 


false  report  applies  only  to  debts  cre- 
ated after  the  false  report  is  made.  Tor- 
bett  v.  Godwin,  62  Hun,  407  (1891). 

1  Where  directors  are  liable  for  corpo- 
rate debts  in  excess  of  the  subscribed 
capital  stock,  the  capital  stock  includes 
that  paid  for  by  property  as  well  as  in 
cash.  Moore  v.  Lent,  22  Pac.  Rep.,  S75 
(Cal.,  1889).  In  enforcing  a  liability  of 
directors  for  debts  in  excess  of  the  capi- 
tal a  creditor  must  sue  for  the  benefit 
of  all,  and  can  recover  only  a  propor- 
tion of  the  excess  over  such  capital 
stock.  Anderson  v.  Speei-s,  21  Hun,  568 
(1880).  A  director  cannot  enforce  a  stat- 
utory liability  of  tbe  directors  for  debts 
contracted  by  the  corporation  in  excess 
of  the  capital  stock,  the  directors  being 
liable  "  jointly  and  severally  "  by  stat- 
ute, but  such  debt  due  to  the  director  is 
counted.  Thacher  ?•.  King,  31  N.  K 
Rep.,  648  (Mass.,  1892).  The  statutory 
liability  of  stockholders  for  a  failure  to 
file  a  certificate  that  the  capital  stock 
has  been  fully  paid,  and  the  statutory 
liability  of  directors  for  debts  in  excess 
of  the  capital  stock,  do  not  apply  to  a 
judgment  in  an  action  of  tort.  Leighton 
v.  Campbell,  20  Atl.  Rep.,  14  (R  I,  1890). 
Liability  of  director  in  national  bank  for 
loans  in  excess  of  amount  allowed  by 
law.  Witters  v.  Sowles,  43  Fed.  Rep. 
405  (1890) :  Stephens  v.  Overstolz,  43  Fed. 
Rep.,  771  (1890). 

2  A  constitutional  liability  may  not  be 
enforceable  where  no  statute  has  been 
passed  to  enforce  it;  as,  for  example, 
the  provision  that  "  dues  from  corpora- 


tions shall  be  secured  by  individual 
liability  of  the  stockholders  to  an  addi- 
tional amount  equal  to  the  stock  owned 
by  each  stockholder,  and  such  other 
means  as  shall  be  provided  by  law.'' 
Morley  v.  Thayer,  3  Fed.  Rep.,  737  (1880). 
Under  the  Ohio  constitutional  provision 
imposing  a  liability  on  stockholders,  a 
general  act  authorizing  incorporations 
must  contain  a  provision  to  that  effect 
or  the  act  will  be  void.  State  v.  Sher- 
man, 22  Ohio  St.,  411  (1872).  A  con- 
stitutional provision  that  stockholders 
shall  be  liable  to  the  extent  of  their 
stock  is  self-executing  and  applies  to  all 
corporations.  It  renders  them  liable  to 
the  extent  of  the  par  value  of  their 
stock  in  addition  to  the  liability  on  sub- 
scriptions. A  release  to  the  corporation 
does  not  release  this  statutory  liability. 
Willis  v.  St.  Paul,  etc.,  Co.,  50  N.  W. 
Rep..  1110  (Minn.,  1892). 

3  See  g§  288,  289,  concerning  this  sub- 
ject 

4  Under  the  Iowa  statutes  the  stock- 
holders are  liable  as  partners  where  the 
certificate  of  incorporation  failed  to 
state  the  highest  amount  of  indebted- 
ness which  the  company  might  incur. 
Heuer  v.  Carmichael,  47  N.  W.  Rep., 
1034  (Iowa,  1891).  "Dues"  include  in- 
surance policies.  McDonnell  v.  Ala., 
etc.,  Co.,  5  S.  Rep..  120  (Ala,  1888).  The 
constitutional  liability  of  stockholders 
applies  if  a  part  of  the  business  as  set 
forth  in  the  charter  consists  of  mercan- 
tile business.  The  objection  that  all 
stockholders  and  creditors  are  not  joined 


275 


§216.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


§  216.  Waiver  ~by  corporate  creditors  of  their  statutory  rights 
against  shareholders. —  A  corporate  creditor  may,  by  express  con- 
tract, when  the  debt  is  incurred,  waive  his  right  to  collect  from  the 
stockholder  debts  which  the  corporation  fails  to  pay.1  And  the 
corporation  in  its  contracts  with  third  persons  may,"it  is  held  in 
England,  lawfully  stipulate  for  the  exemption  of  its  members  from 
the  liability  imposed  upon  them  by  statute  in  the  event  of  the  in- 
solvency of  the  corporation.2 

It  has  been  held  to  be  competent  for  any  one  dealing  with  the 
company  to  contract  to  hold  the  shareholders  responsible  to  only  a 
limited  extent,  to  no  extent  at  all,  or  to  any  specified  extent  mutu- 
ally agreed  upon.3 


must  be  raised  by  answer.     Densmore  v. 
Red  Wing,  etc.,  Co.,  48  N.  W.  Rep.,  528 
(Minn.,  1891).    The  case  of  Austin  v.  Ber- 
lin, 22  Pac.  Rep.,  433  (Colo.,  1889),  holds 
that  new  directors  are  not  liable  for 
the  statutory  delinquencies  of  the  old. 
Policy-holders'  claims  come  within  the 
meaning  of  the  words  "  debts  due,"  for 
which  stockholders  are  held  liable.    Mc- 
Donnell v.  Ala.,  etc.,  Ins.  Co.,  5  S.  Rep, 
120  (Ala.,  1S88).     A  debt  contracted  in 
the  midst  of  acts  for  which  directors 
are  liable  by  statute  is  contracted  "  after 
such   violation."      Patterson    v.   Minn., 
etc.,  Co.,  42  N.  W.  Rep.,  926  (Minn.,  1889). 
In   Maine  by  statute  stockholders  are 
liable  as  subscribers  if  their  stock  is  paid 
for  by  property  taken  at  an  overvalua- 
tion.    Libby  v.  Tobey,  19  Atl.  Rep.,  904 
(Me.,   1890).      Under  the  Iowa   statute 
rendering  officers,  etc.,  liable  for  diver- 
sion of  funds,  a  policy-holder  may  re- 
cover, where  a  consolidation  with  an- 
other   company  has    been    made    and 
plaintiff  was  excluded  from   the  new 
company.     Grayson  v.  Willoughby,  42 
N.  W.  Rep,  591  (Iowa,  1889).     A  com- 
plaint to  enforce  a  stockholder's  liabil- 
ity for  labor  done  in  the  construction  of 
the  road  is  not  good  if  it  omits  the  alle- 
gation as  to  the  construction    of  the 
road.    Toner  v.  Fulkerson,  25  N.  E.  Rep, 
218  (Incl,    1890).      Where  stockholders 
are  liable  for  debts  other  than  mortgage 
debts,  an  agreement  of  the  company  to 
pay  another  company's  mortgage  debt 
is  not  a  mortgage  debt.  Barron  v.  Paine, 


22  Atl.  Rep.,  218  (Me.,  1891).  Where 
stockholders  in  manufacturing  corpora- 
tions are  not  liable,  but  in  other  compa- 
nies are  liable,  under  a  statute,  yet,  if 
the  charter  authorizes  other  business 
than  manufacturing,  they  are  liable  al- 
though only  the  manufacturing  busi- 
ness is  pursued.  Arthur  v.  Willius,  46 
N.  W.  Rep.,  851  (Minn.,  1890). 

1  Robinson  v.  Bidwell,  22  Cal,  379 
(1863);  French  v.  Teschemaker,  24  id., 
518  (1864);  Basshor  v.  Forbes,  36  Md., 
154(1872);  Brown  v.  Eastern  Slate  Co., 
134  Mass.,  590  (1883),  where  the  waiver 
was  oral. 

2  Re  Athenaeum,  etc.,  Society,  3  De  G. 
&  J.,  660  (1859);  Halket  v.  Merchant 
Traders',  etc.,  Association,  13  Q.  B.,  960 
(1849);  Durham's  Case,  4  Kay  &  J.,  517 
(1858).  Cf.  Shelford  on  Joint-stock 
Companies  (2d  London  edition),  4.  Al- 
though the  subscribers  themselves  may 
stipulate  with  each  other  for  such  a  re- 
stricted liability,  nothing  is  more  clear 
than  that,  as  to  the  rest  of  the  world, 
each  shareholder  is  liable  for  the  whole 
amount  of  the  debts  of  the  company. 
Nor  will  notice  that  astipulation  of  this 
kind  has  been  entered  into  between  the 
shareholders  prevent  a  creditor  from 
holding  each  of  them  liable  to  the  full 
extent  of  his  demand.  See  Greenwood's 
Case,  3  De  G.,  M.  &  G,  459 ;  The  State 
Fire  Ins.  Co.,  Meredith's  Case,  and  Con- 
vert Case,  1  K  R,  510,  V.  C.  W. 

3  In  re  State   Fire   Insurance   Co.,  1 
Hem.  &  M.,  457  (1863) ;  S.  C,   1  De  G., 


276 


CH.  XII.] 


STATUTORY    LIAT.IMTY    OF    6TOCKIIOLDKK-. 


[§21 


(. 


§  217.  Statutory  liability  not  enforceable  to  j)aj/  damages  recov- 
ered against  the  corporation  in  tort. —  The  statutory  liability  im- 
posed upon  the  shareholders  in  corporations  is  a  liability  exclusively 
for  debts  and  demands  accruing  against  the  corporation  by  reason 
of  its  contracts.  It  cannot,  therefore,  be  enforced  to  pa}7  damages 
recovered  against  the  corporation  in  an  action  in  tort.1 


J.  &  J.,  634:  35  L.  J..  Chan.,  834;  34  id., 
436 ;  Hassell  v.  Merchant  Traders'  Asso- 
ciation, 4  Exch.,  525:  Lord  Talbot's 
Case,  5  De  G.  &  9m.,  386  (1852);  S.  C, 
21  L.  J.,  Chan.,  846.  See,  also,  Reid  v. 
Allan,  4  Exch.,  326  (1849);  S.  C,  19  L, 
J.,  Exch.,  39.  And  compare  hi  re  In- 
dependent Assurance  Co.,  Ex  parte 
Cope,  1  Sim.  (N.  S.),  54;  Sunderland 
Marine  Insurance  Co.  v.  Kearney.  16 
Q.  B.,  925  (1851);  S.  C,  20  L.  J.  (Q*!  B.), 
417;  Pedell  v.  Gwynn,  1  Hurl.  &  N., 
590  (1857);  S.  C,  26  L.  J.,  Exch.,  199; 
Gordon  v.  Sea,  Fire  and  Life  Assurance 
Society,  1  Hurl.  &  N.,  599  (1857) :  S.  C, 
29  L.  J.,  Exch.,  202.  And  see  Hess  v. 
Werts,  4  Serg.  &  R,  361  (1818) :  King  v. 
Accumulation,  etc..  Assurance  Co.,  3 
C.  B.  (N.  S.),  151  (1857).  Of.  Hallett  v. 
Dowdall,  18  Q.  B.  D.  (1852).  The  mere 
fact  that  the  articles  of  association  of 
an  unincorporated  company  provide 
against  personal  liability  is  no  defense, 
even  though  the  contracts  say  that  they 
are  subject  to  the  provisions  in  such  arti- 
cles. Sullivan  v.  Campbell.  2  Hall 
(N.  Y.),  271  (1829) ;  Hess  v.  Wirts,  4  Serg. 
&R.  (Pa. \  356(1818);  Greenwood's  Case. 
3  De  G,  M.  &  G,  459  (1854).  The  same 
rule  prevails  in  an  ordinary  copartner- 
ship. Bromley  v.  Elliot,  38  N.  H.,  287 
(1859).  Directors  ai'e  bound  to  know 
of  the  restriction  and  have  no  recourse 
to  the  stockholders ;  nor  does  a  firm  in 
which  a  director  is  a  member.  In  re 
Worcester,  etc.,  Co.,  3  De  G,  M.  & 
G,  180  (1853).  Contract  that  promot- 
ers shall  not  be  liable  binds  an  en- 
gineer. Lard  man  v.  Entwistle.  7  Ex., 
632  (1852).  Where  promoters  stipu- 
late that  they  shall  not  be  liable  the 
party  who  tacitly  assents  to  that  condi- 
tion is  bound.     Giles  v.  Smith,  11  Jar., 


334  (1847).  See,  also,  ch.  XLTIT,  infra; 
Kent's  Com.,  vol.  Ill,  p.  27:  Story  on 
Partn.,  §  164.  A  contrary  doctrine  seems 
to  have  prevailed  in  Davis  v.  Beverly,  2 
Cranch,  C.  C.  (U.  S.),  35  (1811);  Riggs  v. 
Swann,  3  id.,  183  (1827);  reversed  on 
another  point  by  Mandeville  v.  Riggs,  2 
Pet.,  482.  The  exemption  from  liability 
must  be  clearly  proved.  Skinner  v. 
Dayton,  19  John..  513,  537  (1822).  A 
stipulation  against  holding  stockholders 
liable  has  been  held  to  refer  to  statu- 
tory liability  and  not  the  subscription 
liability.  Preston  v.  Cincinnati,  etc., 
R.  E..  36  Fed.  Rep.,  54  (1888).  A  pro- 
vision in  an  insurance  policy  that  the 
directors  shall  not  be  liable,  although 
the  statute  makes  them  liable,  is  not 
good.  Greene  v.  Walton,  13  N.  Y.  Supp.. 
147  (1891).     See  28  N.  E.  Rep.,  874. 

1  Heacock  v.  Sherman.  14  Wend.,  59 
(1835).  In  this  case  the  stockholders  in 
a  company  which  owned  a  bridge,  and 
against  which  a  judgment  had  been  re- 
covered for  damages  because  the  bridge 
was  out  of  repair,  were  held  not  to  be 
liable  upon  such  a  demand,  since  the 
act  imposing  a  personal  liability  upon 
them  contemplated  a  liability  only  for 
demands  arising  ex  contractu.  In  gen- 
eral, the  word  "  debt,"  as  used  in  stat- 
utes imposing  a  personal  liability  upon 
stockholders  is  construed  to  include 
only  liabilities  arising  ex  contractu,  and 
not  to  include  liability  for  damages  re- 
covered against  the  corporation  in  ac- 
tions sounding  in  tort.  Child  v.  Boston, 
etc..  Iron  Works.  187  Mass.,  516  (1884): 
S.  G,  50  Am.  Rep..  828,  where  a  Judg- 
ment for  infringement  of  patent  was 
not  enforced.  Leighton  v.  Campbell.  20 
Atl.  Rep.,  14  (R.  I,  1890);  Mill  Dam 
Foundry  Co.  v.  Hovey,  21  Pick.,  417,455 


§  218.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CE 


XII. 


B.    THE    ENFORCEMENT    OF    THE    LIABILITY. 

§  218.  The  statutory  liability  can  he  enforced  by  corporate  cred- 
itors only —  Stockholders  and  directors  as  creditors. —  The  statu- 
tory liability  of  the  stockholder  is  created  exclusively  for  the  benefit 
of  corporate  creditors.  It  is  not  to  be  numbered  among-  the  assets 
of  the  corporation,  and  the  corporation  has  no  right  or  interest  in 
it.  It  cannot  enforce  it  by  an  assessment  upon  the  shareholders.1 
Nor  can  the  corporation  upon  the  insolvency  assign  it  to  a  trustee 
for  the  benefit  of  creditors.2  It  is  a  liability  running-  directly  and 
immediately  from  the  shareholders  to  the  corporate  creditors.3 
Accordingly,  a  receiver  of  an  insolvent  corporation,  invested  with 
"all  the  estate,  property  and  equitable  interests"  of  the  concern, 
has  no  power  to  enforce  such  a  liability  as  this.4     The  action  to 


(1839),  sustaining  an  unliquidated  claim 
for  damages ;  Dry  den  v.  Kellogg,  2  Mo. 
App.,  87  (1876),  enforcing  a  judgment 
for  breach  of  warranty  of  title ;  Doolit- 
tle  v.  Marsh,  11  Neb.,  243;  Esmond  v. 
Bullard,  16  Hun,  65  (1878) ;  S.  C.  affirmed, 
sub  nom.  Losse  v.  Bullard,  79  N.  Y.,  404 
(1880);  Archer  v.  Rose,  3  Brewster 
(Pa.),  264  (1871);  Cable  v.  McCune,  26 
Mo.,  371  (1858),  defeating  a  judgment  for 
damages  for  loss  of  a  steamboat ;  Bohn 
v.  Brown,  33  Mich.,  257,  263  (1876).  Cf. 
Stanton  v.  Wilkeson,  8  Ben.,  357,  refus- 
ing to  enforce  herein  a  judgment  against 
a  common  carrier  for  negligence;  Chase 
v.  Curtis,  113  U.  S.,  452  (1884).  Cf.  Car- 
ver v.  Braintree  Mfg.  Co.,  2  Story,  432, 
448 ;  Wyman  v.  American  Powder  Co., 
8  Cush.,  168,  182:  Zimmer  v.  Schleehauf, 
115  Mass.,  52.  But  the  stockholders' 
subscription  liability  may  be  enforced 
to  pay  damages  arising  from  torts. 
Powell  v.  Oregonian  R'y,  36  Fed.  Rep., 
726  (1888) ;  38  id.,  187.  The  word  "  dues," 
as  contained  in  the  Ohio  constitution, 
rendering  stockholders  individually  lia- 
ble, renders  them  liable  not  only  in  con- 
tracts of  the  corporation  but  on  torts 
committed  by  the  corporation.  Rider 
v.  Fritchey,  30  N.  E.  Rep.,  692  (Ohio, 
1892). 

1  Umsted  v.  Buskirk,  17  Ohio  St,  113 
(1866) ;  Liberty  Female  College  Associa- 
tion v.  Watkins,  70  Mo.,  13  (1879). 

'Wright  v.   McCormick,  17  Ohio  St, 


86,  95  (1866) ;  Dutcher  v.  Marine  National 
Bank,  12  Blatch..  435  (1S75).  See,  also, 
Cuykendall  v.  Corning,  88  N.  Y.,  129 
(1882). 

3  Bristol  v.  Sanford,  12  Blatch..  341 
(1874);  Lane  v.  Morris,  8  Ga.,  468  (1850); 
Arenz  v.  Weir,  89  111.,  25.  This  was  an 
action  by  a  judgment  creditor  against 
a  stockholder  after  a  distribution  of  cor- 
porate assets  by  a  receiver.  The  cred- 
itor was  held  to  stand  "  on  an  independ- 
ent platform,  above  that  cf  a  receiver, 
having  no  concern  with  the  corporation, 
and  the  stockholder  is  bound  under  the 
law  to  answer  to  him."    Breese,  J. 

4  Billings  v.  Robinson,  94  N.  Y.,  415 
(1884);  Farnsworth  v.  Wood,  91  N.  Y, 
308(1883);  Jacobson  v.  Allen,  12  Fed. 
Rep.,  454  (1882) ;  Cuykendall  v.  Corning, 
88  N.  Y,  129  (1882);  Arenz  v.  Weir.  89 
III.,  25;  Jacobson  v.  Allen,  29  Blatch.. 
525  (1882);  Cutting  v.  Damerel,  88  N.  Y, 
410  (1882).  Cf.  Davis  v.  Gray,  16  Wall., 
203  (1872);  Attorney-General  v.  Guard- 
ian Mutual,  etc.,  Ins.  Co.,  77  N.  Y,  272 
(1879).  Receivership  of  corporation 
does  not  prevent  creditors  enforcing  di- 
rectors' liability.  Patterson  v.  Minn., 
etc..  Co.,  42  N.  W.  Rep.,  926  (Minn.,  18S9). 
Doubtful  whether  corporate  creditors 
may  sue  to  enforce  directors'  statutory 
liability  after  a  receiver  has  gone  in. 
Minn.,  etc.,  Mfg.  Co.  v.  Langdon,  46  N. 
W.  Rep.,  310  (Minn.,  1890).  The  receiver 
of  a  national   bank  may  sue  a  stock- 


278 


CH.  XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[§  219. 


enforce  can  be  maintained  only  by  the  creditors  themselves,  in 
their  own  right  and  for  their  own  benefit.1 

It  has  been  held  that  statutory  liability  of  stockholders  cannot 
be  enforced  by  the  directors  as  "  creditors."2 

It  is  uncertain  whether  a  stockholder,  who  is  also  a  creditor  of 
the  corporation,  can  bring  an  action  at  law  against  his  co-stock- 
holders to  enforce  a  statutory  liability.  In  Massachusetts,3  Illinois4 
and  New  York  s  the  rule  is  settled  that  such  an  action  cannot  be 
maintained.  In  those  jurisdictions  the  only  reined}'-  for  such  a 
creditor  in  such  a  case  is  by  a  bill  in  equity  for  contribution.6  But 
in  Pennsylvania 7  and  in  Maine  8  the  rule  is  otherwise,  and  it  is  no 
objection  to  the  creditor's  action  that  he  is  himself  also  a  share- 
holder.9 

§  219.  Judgment  and  execution  must  he  obtained  against  the  cor- 
poration hefore  the  stockholders  statutory  liability  can  he  enforced. 
Even  when  not  expressly  provided  by  statute,  it  is  the  rule,  accord- 


holder  in  the  state  courts  to  recover  an 
assessment  Peters  v.  Foster,  56  Hun, 
607  (1890).  The  creditor  may  proceed 
to  judgment  though  a  receiver  has  been 
appointed.  Mason  v.  N.  Y.,  etc.,  Mfg. 
Co.,  27  Hun,  307  (1882). 

i  Farnsworth  v.  Wood,  91  N.  Y.,  308 
(1883).  See,  also,  Mason  v.  New  York 
Silk,  etc.,  Co.,  27  Hun,  307  (1882) ;  Bill- 
ings v.  Trask,  30  id.,  314  (1883).  See,  also, 
Walker  v.  Crain,  17  Barb.,  128  (1853); 
Story  v.  Furman,  25  N.  Y,  215  (1862): 
Cuykendall  v.  Corning,  88  N.  Y,  129 
(1882) ;  Herkimer  Co.  Bank  v.  Furman, 
17  Barb.,  116  (1853);  Hurd  v.  Tallman, 
60  id.,  272  (1871). 

2McDowall  v.  Sheehan,  129  N.  Y,  200 
(1891).  A  director  who  is  a  creditor 
cannot  in  certain  cases  share  with  the 
other  creditors  and  prove  a  claim  due 
to  him  from  the  corporation.  Neither  can 
such  claim  be  proved  where  it  belongs 
to  a  firm  or  company  of  which  the  di- 
rector was  a  member,  or  to  the  assignee 
of  such  firm  or  company.  Thacher  v. 
King,  31  N.  E.  Rep.,  648  (Mass.,  1892). 

a  Thayer  v.  Union  Tool  Co.,  4  Gray, 
75  (1855). 

4  Meisser  v.  Thompson,  9  Brad.  (111.), 
368 ;  108  111.,  359. 

s  Mathez  v.  Neidig,  72  N.  Y,  100  (1878) ; 
Clark  v.   Myers,   11    Hun,   608    (1877): 


Bailey  r.  Bancker,  3  Hill,  188  (1842) 
(overruling  upon  this  point  Simonson  v. 
Spencer,  15  Wend.,  548  —  1836) ;  Beers  v. 
Waterbury,  8  Bosw.,  396  (1861) ;  Richard- 
son v.  Abendroth,  43  Barb.,  162  (1864); 
Deming  v.  Puleston,  33  Super.  Ct.,  231. 
Cf.  Sanborn  v.  Lefferts,  58  N.  Y,  179 
(1874);  .Garrison  v.  Howe,  17  N.  Y,  458 
(1858).  To  same  effect,  Perkins  v.  San- 
ders, 56  Miss.,  733  (1879).  Cf.  Slee  v. 
Bloom,  5  Johns.  Ch.,  366,  382  (1821). 

6  But  see  Potter  v.  Stevens  Machine 
Co.,  127  Mass.,  592  (1879),  and  Sav.  Ass'n 
v.  O'Brien,  51  Hun.  46  (1889). 

7  Brinbam  v.  Wellersburg  Coal  Co., 
47  Pa.  St,  43(1°'U). 

3  Fowler  v.  Robinson,  31  Me.,  1S9(1850). 

9  In  a  suit  in  equity  to  enforce  stock- 
holders' statutory  liability,  a  plea  that 
the  decedent  of  one  of  the  complain- 
ants was  also  a  stockholder  and  no  offer 
to  pay  his  liability  had  been  made  is  not 
a  good  plea.  Newbury  v.  Robinson,  41 
Fed.  Rep.,  458  (1890).  In  New  York  it 
seems  that  the  assignee  of  a  judgment 
may  bring  the  suit  to  enforce  statutory 
liability,  though  the  assignee  be  a  stock- 
holder. Woodruff  &  Beach  Iron  Works 
v.  Chittenden,  4  Bosw.,  406  (1859).  See, 
also,  Garrett  v.  Sayles,  1  Fed.  Rep,  371 
(1880),  aff'd  110  U.  S.,  288;  Potter  v.  Ste- 
vens Machine  Co.,  127  Mass.,  592  (1879). 


279 


§  219.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH. 


XIT. 


ing  to  the  weight  of  authority,  that  corporate  creditors,  before  they 
can  proceed  against  the  shareholders  upon  their  statutory  liability, 
must  first  exhaust  their  remedy  against  the  corporation  and  its  as- 
sets.1 This  rule  arises  from  the  fact  that  the  liability  of  the  stock- 
holders is  not  the  usual  fund  for  the  payment  of  corporate  debts, 
but  that  the  corporate  treasury  is  the  primary  resource.  Accord- 
ingly, the  statutory  liability  of  the  stockholders  is  not  to  be  resorted 
to,  if  the  assets  of  the  corporation,  including  the  unpaid  subscrip- 
tions for  stock,  "will  suffice  to  pay  the  debts.2 


i  Means'  Appeal,  85  Pa.  St.,  75  (1877); 
Fourth  Nat.  Bank  v.  Francklyn,  120 
U.  S.,  747  (1887);  Bayliss  v.  Swift,  40 
Iowa,  648  (1875) ;  McCIaren  v.  Francis- 
cus,  43  Mo.,  452  (1869);  Wright  v.  Mc- 
Cormack,  17  Ohio  St.,  86  (1866);  Wehr- 
man  v.  Reakirt,  1  Cinn.  Super.  Ct.,  230 
(1871) ;  Lane  v.  Harris,  16  Ga.,  217  (1854) ; 
Drinkwater  v.  Portland,  etc.,  R'y,  18 
Me.,  35  (1841);  Dauchy  v.  Brown,  24  Vt, 
197  (1852);  Cambridge  Water-works  v. 
Somerville  Dyeing  Co.,  4  Allen,  239 
(1862);  Toucey  v.  Bowen,  1  Biss.,  81 
(1855).  Cf.  Patterson  v.  Wyomissing 
Manuf.  Co.,  40  Pa.  St.,  117  (1861);  Har- 
per v.  Union  Manuf.  Co.,  100  111.,  225 
(18S1);  Hatch  v.  Burroughs,  1  Woods, 
439  (1870).  In  Colorado  stockholders 
liable  by  statute  may  be  joined  as  party 
defendants  in  the  original  suit  against 
the  corporation.  Tabor  v.  Goss,  etc., 
Co.,  18  Pac.  Rep.,  537  (Colo.,  1888). 
Judgment  against  the  corporation  is  first 
necessary.  Where  some  of  the  credit- 
ors are '  proceeding  against  the  stock- 
holders without  first  obtaining  judg- 
ment against  the  corporation,  but  one 
creditor  has  procured  a  judgment  and 
exhausted  his  remedy  against  the  cor- 
poration, the  latter  may  enjoiu  the  other 
creditors  from  pursuing  their  remedy. 
Hoyt  v.  Bunker,  32  Pac.  Rep,  126  (Kan., 
1893).  If  no  judgment  has  been  ob- 
tained, the  stockholders  can  set  up 
such  defenses  as  would  have  been  avail- 
able to  the  company.  Railroad  Co.  v. 
Smith,  31  N.  E.  Rep,  743  (Ohio,  1891). 
In  an  action  by  a  judgment  creditor  to 
enforce  a  statutory  liability,  claims  by 


himself  and  others  not  yet  reduced  to 
judgment  may  be  proved.  Thacher  v. 
King,  31  N.  E.  Rep,  648  (Mass.,  1892). 

2  Stewart  v.  Lay,  45  Iowa,  604  (1877); 
Wright  v.  McCormack,  17  Ohio  St.,  86 
(1866).  There  is,  however,  a  line  of  au- 
thorities in  support  of  the  proposition 
that  a  judgment  against  the  corpora- 
tion is  not  a  prerequisite  to  the  enforce- 
ment of  the  shareholders'  statutory 
liability.  Perkins  v.  Church,  31  Barb., 
84  (1859) ;  Southinayd  v.  Russ,  3  Conn., 
52  (1819) :  Culver  v.  Third  National  Bank. 
64  111.,  528  (1871) ;  Davidson  v.  Raukin, 
34  Cal.,  503  (1868);  Young  v.  Rosen- 
baum,  39  id.,  646  (1870) ;  Morrow  v.  Su- 
perior Court,  64  Cal.,  383  (1883);  Bird  v. 
Calvert,  22  S.  C,  292  (1884).  No  pre- 
vious judgment  against  the  corporation 
is  necessary  in  enforcing  directors'  stat- 
utory liability.  Patterson  v.  Minn.,  etc., 
Co.,  42  N.  W.  Rep,  926  (Minn.,  1889).  In 
Alabama  the  remedy  against  the  cor- 
poration need  not  be  first  exhausted 
unless  the  statutes  expressly  require  it. 
McDonnell  v.  Alabama,  etc.,  Ins.  Co.,  5 
S.  Rep,  120  (Ala.,  1888).  Cf.  §  200, 
supra.  In  these  cases  it  is  held  in  gen- 
eral that  the  shareholder's  liability 
under  the  statute  is  unconditional,  orig- 
inal and  immediate,  not  dependent  on 
the  insufficiency  of  the  corporate  assets, 
and  not  collateral  to  that  of  the  corpo- 
ration upon  the  event  of  its  insolvency. 
Thus,  in  the  case  of  Manufacturing 
Company  v.  Bradley,  105  U.  S.,  17S 
(1881),  it  was  held  that,  upon  a  bill  being 
filed  against  the  corporation  for  the  col- 
lection of  a  debt,  the  shareholders  might 


280 


CH.  XII. J 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[§  219. 


Frequently  the  statutes  which  impose  this  extraordinary  or  extra 
common-law  liability  upon  shareholders  provide  that  a  creditor 
shall  obtain  judgment  against  the  corporation,  and  that  an  execu- 
tion duly  levied  thereunder  shall  have  been  returned  wholly  or 
partially  unsatisfied,  before  the  creditor  has  a  right  to  proceed 
against  the  stockholders  individually.1  But,  in  general,  proceed- 
ings against  the  corporation  are  not  to  be  required  when  they 
would  be  nugatory  or  impossible.2 


properly  be  made  parties  in  order  to 
avoid  a  multiplicity  of  suits.  ancTupon 
the  ground  that  the  shareholders  were 
immediately  liable  under  that  provision 
of  their  charter  which  made  "members 
of  the  coinpan}-  .  .  .  jointly  and 
severally  liable  for  all  debts  and  con- 
tracts made  by  the  company  until  the 
whole  amount  of  the  capital  stock  fixed 
and  limited  by  the  corporation  "  is  paid 
in.  Under  the  New  York  act  of  1875  a 
stockholder  may  be  sued  before  judg- 
ment against  the  corporation,  but  can- 
not be  held  liable  until  after  such 
judgment.  Walton  v.  Coe,  110  N.  Y., 
109  (1888). 

i  See  Laws  of  1848,  New  York.  ch.  40, 
§  24,  commonly  known  as  "The  Gen- 
eral Manufacturing  Act."  Handy  v. 
Draper,  89  N.  Y,  334  (1882).  But  a  con- 
trary rule  prevailed  under  the  Business 
Corporation  Act  of  1875.  See  Walton 
v.  Coe,  110  N.  Y,  109  (1888).  See,  also, 
Rocky  Mountains  National  Bank  v. 
Bliss,  89  N.  Y,  338  (1882);  Dean  v.  Mace, 
19  Hun,  391  (1879).  Sometimes  the  stat- 
ute provides  that  a  specific  demand 
shall  have  been  made.  Haynes  r. 
Brown,  36  N.  H,  545  (1858).  In  Wiscon- 
sin, by  statute,  there  need  be  no  prece- 
dent judgment  against  the  corporation. 
Sleeper  v.  Goodwin,  31  N.  W.  Rep.,  335 
(Wis.,  1887).  The  case  of  Patterson  r. 
Lynde,  112  111.,  196  (1884),  holds  that  the 
judgment  must  be  obtained  in  the  state 
where  enforcement  is  sought,  and  that 
not  even  a  judgment  in  the  federal  cir- 
cuit court  for  that  district  will  suffice. 
Cf.  §  200,  supra. 

2  Cf.  Shellington  v.  Howlaud,  53  N.  Y. 
371  (1873),  where  proceedings  required 


as  conditions  precedent  to  liability  were 
rendered  impossible  by  the  operation  of 
United  States  bankruptcy  law.  See,  also. 
State  Sav.  Ass'n  v.  Kellogg,  52  Mo.,  583 
(1873);  Dryden  v.  Kellogg,  2  Mo.  A  pp.. 
87.     Cf.  Ansonia  Brass  &  Copper  Co.  v. 
New  Lamp  Chimney  Co..  5:3  N.  Y..  123 
I  B73) :  S.  C.  affirmed,  91  U.  S.,  650  (187.-)) ; 
Fourth  Nat'l  Bank  v.  Fraucklyn.  120  U. 
S..  747  (1887 1 :  Paine  v.  Stewart,"  33  Conn., 
516   (1866),  where,  under  a  statute  pro- 
viding that  the  property  of  stockholders 
could  not  be  levied  upon  while  corpo- 
rate property  could  be  found  to  satisfy 
the  debt,  it  was  held  that  evidence  that 
the  corporate  property  was  in  the  hands 
of  a  receiver  was  sufficient  to  prove  the 
condition.     Chamberlain   v.   Huguenot, 
etc.,  118  Mass.,  532  (1875),  holding  that 
proceedings   in   bankruptcy  do  not.  in 
Massachusetts,  prevent  recovering  judg- 
ment against  the  bankrupt  corporation 
for  the  purpose  of  perfecting  the  liabil- 
ity  of  stockholders.     It   has  been  held 
in  New  Hampshire,  that,  before  suit  is 
brought    against    the     stockholder,   he 
should  be  given  noticp  of  the  default  of 
the  corporation,  and  a  demand  should 
be  made.     Hecks  v.  Burns.  ;?s  N.  H,  141 
(1839).     Even  where  the  statute  requires 
it,  a  suit  to  enforce  a  statutory  liability 
need  not  be  delayed  until  the  corporate 
property  has  all  been  applied  to  the  pay- 
ment of  debts,  if  it  be  clear  that  such 
property  will  be  insufficient  to  pay  every- 
thing.    Munger  r.  Jacobson,  99  111.,  349 
(1881).      Or    where    the  corporation   is 
clearly  insolvent,  and  it  would  be  idle  to 
wait  the  return  of  the  execution.    Flash 
v.  Connectk-ut.  109  U.  S.,  371  (1883) ;  Km- 
caid  v.   Dwinelle,  59  N.  Y,  548  (1875> 


281 


§  220.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


A  judgment  must  be  obtained  and  execution  issued  and  returned 
in  the  state  where  suit  is  brought,  or  good  reason  must  be  shown 
why  they  are  not.1 

Where  the  statutes  provide  for  an  enforcement  of  the  share- 
holder's statutory  liability  only  upon  the  dissolution  of  the  corpo- 
ration, it  is  held  that  a  dissolution,  in  the  sense  in  which  that  term 
is  here  used,  takes  place  when  the  corporation  comes  into  the  con- 
dition of  having  debts  and  no  assets,  or  has  ceased  to  act  and  exer- 
cise its  corporate  functions,  or  has  suffered  acts  to  be  done  which 
end  the  object  for  which  it  was  created.2 

§  220.  Difficulties  in  determining  whether  the  creditor  s  remedy  is 
at  law  or  in  equity. —  Perhaps  the  most  difficult,  unsettled  and  un- 
satisfactory question  concerning  the  statutory  liability  of  stock- 
holders is  the  question  whether  that  liability  must  be  enforced  at 
law  or  must  be  in  equity,  or  may  be  in  either  a  court  of  law  or  of 
equity.  After  determining  this  point  there  arises  the  further  diffi- 
culty of  ascertaining  who  shall  be  parties  plaintiff  and  parties  de- 
fendant —  whether  one  corporate  creditor  may  sue,  or  all  must 
join ;  whether  one  stockholder  may  be  pursued  as  a  single  de- 
fendant, or  all  the  stockholders  must  be  brought  in.     The  law  on 


Cf.  Toucey  v.  Bowen,  1  Biss.,  81  (1855): 
Munger  v.  Jacobson,  supra.  Or  the  cor- 
poration is  dissolved.  Patterson  v.  Lynde, 
112  111.,  196  (1884).  A  judgment  against 
the  corporation  is  not  necessary  to  en- 
force the  stockholder's  liability  when 
the  corporation  is  insolvent,  has  ceased 
to  do  business,  and  has  made  an  assign- 
ment for  the  benefit  of  creditors.  Mor- 
gan v.  Lewis,  17  N.  E.  Rep.,  558  (Ohio, 
1888).  Judgment  against  the  corpora- 
tion need  not  first  be  obtained  if  the 
corporation  has  been  dissolved.  Hard- 
man  v.  Sage,  124  N.  Y.,  25  (1890).  The 
issue  and  return  of  an  execution  unsat- 
fied  against  the  corporation  is  necessary 
where  the  corporation  is  a  going  con- 
cern, but  not  where  it  is  insolvent  and 
has  assigned  for  the  benefit  of  its  cred- 
itors. Barrick  v.  Gifford,  24  N.  E.  Rep., 
259  (Ohio,  1890). 

1  See  §  223. 

2  Bank  of  Poughkeepsie  v.  Ibbotson, 
24  Wend.,  473  (1840) ;  Slee  v.  Bloom.  19 
Johns.,  456  (1822);  Penniman  v.  Briggs. 
Hopkins'  Chan.,  300  (1825);  S.  G,  sub 
nom.  Briggs  v.  Penniman,  8  Cowen,  387 


(1826) ;  State  Savings  Association  v.  Kel- 
logg, 52  Mo.,  583  (1873);  Dryden  v.  Kel- 
logg, 2  Mo.  App.,  87  (1876);  Perry  v. 
Turner,  55  Mo.,  418  (1874);  Central 
Agric,  etc.,  Association  v.  Alabama, 
etc.,  Ins.  Co.,  70  Ala.,  120  (1881);  Mc- 
Donnell v.  Ala.,  etc.,  Ins.  Co.,  5  S.  Rep., 
120  (Ala.,  1888).  Cf.  Morley  v.  Thayer, 
3  Fed.  Rep.,  737  (1880).  holding  that 
bankruptcy  of  the  corporation  is  not  a 
dissolution  of  a  corporation  within  the 
meaning  of  the  statute  of  Massachusetts 
imposing  liability  upon  stockholders. 
In  Florida  upon  dissolution  the  stock- 
holders are  liable  "  to  an  extent  equal  in 
amount  to  the  amount  of  stock  by  him 
owned,  together  with  any  amount  un- 
paid thereon."  The  dissolution  need  not 
be  a  judicial  decree  to  that  effect.  It  is 
sufficient  if  there  are  debts  and  no 
assets,  and  the  corporation  has  ceased  to 
act  and  exercise  its  corporate  functions, 
or  has  suffered  acts  to  be  done  which 
end  the  object  for  which  it  was  created. 
Suit  against  the  corporation  first  is  not 
necessary  in  such  a  case.  Gibbs  v. 
Davis,  8  S.  Rep.,  633  (Fla.,  1891). 


282 


CH.  XII. J 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[§221. 


these  points  is  in  a  transition  stage.  The  question  is  largely  one  of 
practice,  and  from  experience  the  courts  will  doubtless  evolve  that 
rule  which  is  most  just  and  convenient.  At  present,  however,  not 
only  must  the  decisions  of  the  state  in  which  the  action  is  brought 
be  examined,  but  it  is  necessary  also  to  note  carefully  the  wording 
of  the  statute  creating  the  liability.  Where  the  statute  prescribes 
expressly  the  form  of  the  remedy,  it  is  the  well-established  rule  that 
that  remedy  was  intended  by  the  legislature  to  exclude  every  other, 
and  it  must  be  strictly  pursued.1 

§  221.  The  remedy  at  law. —  In  New  York  the  shareholder's  lia- 
bility, imposed  by  the  statute  relative  to  miscellaneous  corpora- 
tions, is  held  to  be  such  that  any  creditor  who  has  recovered  a 
judgment  against  the  compan}',  and  sued  out  an  execution  thereon, 
which  has  been  returned  unsatisfied,  may  sue  any  stockholder  and 
recover  to  the  extent  provided  by  the  statute  in  an  action  at  law.2 


1  Lowry  v.  Inmau,  46  N.  Y.,  119,  127 
(1871);  Movley  v.  Thayer,  3  Fed.  Rep., 
737,  741  (1880);  Haskins  v.  Harding,  2 
Dillon,  99  (1873);  Allen  v.  Walsh,  25 
Minn.,  543  (1879):  Windham  Provi- 
dent Savings  Institution  v.  Sprague,  43 
Vt.,  502  (1871);  Dauchy  v.  Brown,  24 
Vt,  197;  Bassett  v.  St.  Albans  Hotel 
Co.,  47  id.,  313  (1875);  Pollard  v.  Bailey, 
20  Wall..  520  (1874) ;  Knowlton  v.  Ack- 
ley,  8  Cush.,  93,  98  (1851) ;  Erickson  v. 
Nesmith,  15  Gray,  221  (1860);  Brinham 
v.  Wellersburg  Coal  Co.,  47  Pa.  St, 
43  (1864);  Hoard  v.  Wilcox,  47  id.,  51 ; 
Youghiogheny  Shaft  Co.  v.  Evans,  72 
id.,  331  (1872).  Cf.  Andrews  v.  Cal- 
ender, 13  Pick.,  484  (1833);  Potter  v. 
Stevens  Machine  Co.,  127  Mass.,  592 
(1879);  Grose  v.  Hilt.  36  Me.,  22  (1853); 
Diven  v.  Lee,  36  N.  Y,  302  (1867) ;  Wehr- 
man  v.  Reakirt,  1  Cinn.  Super.  Ct.,  230. 

2  Abbott  v.  Aspinwall,  26  Barb.,  202 
(1857);  Wiles  v.  Suydam,  64  N.  Y,  173 
(1876):  Shellington  v.  Howland,  53  id., 
371  (1873) :  Handy  v.  Draper,  89  id.,  334 
(1882);  Rocky  Mountain  National  Bank 
v.  Bliss,  id.,  338  (1882) ;  Mathez  v.  Neidig, 
72  id.,  100  (1878);  Flash  v.  Conn,  109 
U.  S,  371,  380  (1883);  Weeks  v.  Love, 
50  N.  Y,  568  (1872).  And  this  was  the 
rule,  also,  under  the  earlier  statute  of 
March  22,  1811,  R.  S.,  7th  ed.,  p.  1726. 
Bank  of  Poughkeepsie  v.   Ibbotson,  24 


Wend.,  473  (1840).  Cf.  Van  Hook  v. 
Whitlock,  3  Paige,  409  (1832) ;  Simonson 
v.  Spencer,  15  Wend.,  548  (1836);  Rich- 
ards v.  Coe,  N.  Y  Daily  Reg.,  Aug.  2, 
1 887.  But  when  the  action  is  to  enforce 
the  statutory  liability  to  employees, 
"laborers,  servants  and  apprentices," 
in  New  York,  it  has  been  held  that  all 
the  shareholders  should  be  made  par- 
ties. Strong  v.  Wheaton,  38  Barb.,  616 
(1861).  The  creditor  must  sue  one  or 
all.  Dean  v.  Whiton,  16  Hun.  203  (1878). 
In  Illinois,  under  the  charter  provision 
that  "each  stockholder  shall  be  liable 
to  double  the  amount  of  stock  "  owned, 
it  was  held  that  the  stockholders  were 
severally  and  individually  liable;  that 
is,  that  an  action  at  law  against  one 
or  all  of  them  would  lie.  McCarthy  v. 
Lavasche,  89  111.,  270  (1878);  Hull  v. 
Burtis,  90  id.,  213  (1878);  Fuller  v.  Led- 
den,  87  id.,  310  (1877).  In  Pennsylvania, 
under  the  statute  relating  to  the  incor- 
poration of  manufacturing  companies, 
the  corporate  creditor  proceeds  against 
the  shareholders  in  an  action  at  law 
upon  the  original  contract,  making  the 
corporation  and  all  the  shareholders 
parties  defendant  Brinham  v.  Wellers- 
burg Coal  Co.,  47  Pa  St,  43  (1864); 
Mansfield  Iron  Works  v.  Willcox,  52  id., 
377  (1866);  Hoard  v.  Wilcox,  47  id.,  51 
(1S64):  McHose  v.   Wheeler,  45  id.,  33 


2S3 


§221.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


So,  also,  when  it  is  provided  by  statute  that  the  shareholders  "  shall, 
to  the  amount  of  the  stock  by  them  held,  be  jointly  and  severally 
liable  for  all  the  debts  and  responsibilities  of  such  compan}',"  it  is 
held  that  an  action  at  law  may  be  maintained  on  the  individual 
liability  by  any  corporate  creditor  against  an}'  individual  share- 
holder.1 

Where  an  action  at  law  can  be  maintained,  and  the  shareholder's 
liability  is  limited  and  several,  each  shareholder  being:  made  liable 
for  a  sum  certain,  a  separate  action  will  lie  against  each  one.2  And 
unless  the  remedy  at  law  has  been  enlarged  by  statute,  so  as  to 
allow  judgment  separately  against  each  one  of  several  defendants 
before  the  court  in  the  same  proceeding,  each  creditor  must  sue 
each  shareholder,  or  each  creditor  must  sue  some  one  or  more 
shareholders  separately.3 


(1863).      See  Patterson  v.   Wyomissing    (1S66);  Cuhcr  v.  Third  National  Bank, 


Manuf'g  Co.,  40  Pa.  St..  117  (1861).  And 
to  same  effect,  Thompson  v.  Jewell, 
43  Midi.,  240  (1880);  Pope  v.  Leonard, 
1 15  Mass..  286  (1874).  Under  a  Georgia 
statute,  by  the  provisions  of  which  each 
shareholder  in  banking  corporations  in 
that  state  is  made  liable  to  redeem  his 
proportionate  share  of  the  outstanding 
circulation,  a  single  creditor  may  have 
his  action  at  law  against  any  individual 
shareholder.  Lane  v.  Han  is,  16  Ga., 
217  (1854):  Lane  v.  Morris,  8  Ga.,  468 
(1850):  Branch  v.  Baker,  53  id.,  502 
(1874);  Hatch  v.  Burroughs,  1  Woods, 
439  (1870).  Cf.  Bank  of  Poughkeepsie 
v.  Ibbotson,  24  Wend.,  473  (1840). 

!Grud  v.  Tucker,  5  Kan.,  70  (1869): 
Norris  v.  Johnson,  34  Md.,  485  (1871). 
See  Bullard  v.  Bell,  1  Mason,  243  (1817, 
by  Story,  J.).  Cf.  Matthews  v.  Albert, 
24  Md..  527(1866):  Culver  v.  Third  Na- 
tional Bank,  64  111.,  52S  (1871);  Bond  v. 
Appleton,  8  Mass..  472.  The  Missouri 
statute  may  be  enforced  at  law.  Sav- 
ings Assoc,  v.  O'Brien,  51  Hun,  45  (1889). 
By  statute  in  California  the  remedy  may 
be  at  law.  Borland  v.  Haven,  37  Fed. 
Rep.,  394(1888). 

2  Bank  of  Poughkeespie  v.  Ibbotson, 
24  Wend.,  473  (1840);  Perry  v.  Turner, 
55  Mo.,  418  (1874) ;  Boyd  v.  Hall,  56  Ga., 
563  (1876),  where  the  liability  was  pro 
rata;  Paine  v.   Stewart,  33   Conn.,  516 


64  111.,  528  (1S71);  Abbott  r.  AspinwaU, 
26  Barb,  202  (1857);  Garrison  v.  Howe, 
17  N.  Y..  458  (1858) ;  Terry  v.  Little,  101 
U.  S.,  216  (1879). 

3  Abbott  i'.  AspinwaU,  26  Barb.,  202 
(1857);  Paine  v.  -Stewart,  33  Conn.,  516 
(1866) ;  Matter  of  the  Hollister  Bank,  27 
N.  Y.,  393  (1863);  Perry  v.  Turner,  55 
Mo.,  418  (1874);  Bank  of  Poughkeepsie 
v.  Ibbotson,  24  Wend.,  473.  Cf.  Milroy 
v.  Spurr  Mountain  Iron  Mining  Co.,  43 
Mich.,  231  (1880).  Where  the  share- 
holder's liability  is  held  to  be  like  that 
of  a  partner,  then  all  must  be  joined  as 
defendants,  and  the  omission  of  any 
one  is  ground  for  a  plea  in  abatement 
Allen  v.  Sewall,  2  Wend.,  327  (1829), 
but  holding  that  it  cannot  be  taken 
advantage  of  on  the  trial ;  Strong  v. 
Wheaton,  38  Barb.,  616  (1861),  holding 
that,  under  the  New  York  code,  defect 
of  parties  herein  must  be  objected  to  by 
demurrer  or  answer;  Reynolds  v.  Fe- 
liciana Steamboat  Co.,  17  La.  Rep.,  397 
(1841);  Dean  v.  Whitory,  16  Hun,  205 
(1878) ;  Bonewitz  v.  Bank,  41  Ohio  St,  78, 
holding  that  the  sheriff's  return  show- 
ing clearly  that  other  stockholders  are 
out  of  the  jurisdiction  must  be  in  proof. 
Cf.  Dodge  v.  Minnesota,  etc.,  Slate 
Roofing  Co.,  16  Minn.,  368(1871);  Cul- 
ver r.  Third  National  Bank,  64  111..  528 
(1871);  Branson  v.  Oregonian  R'y  Co., 


284 


CH.  XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


§  221, 


Under  a  statute  providing  that  u  each  shareholder  shall  be  indi- 
vidually and  personally  liable  for  his  proportion  of  all  the  debts 
and  liabilities  of  the  company  contracted  or  incurred,  .  .  .  for 
the  recovery  of  which  joint  or  several  actions  may  be  prosecuted," 
it  has  been  held  that  the  liability  of  the  shareholders  is  substantially 
that  of  partners.1  So,  also,  a  general  joint  and  several  liability 
for  all  the  corporate  debts  makes  the  stockholders  liable  as  partners 
as  though  there  had  been  no  incorporation.2     Under  the  provisions 

10    Oregon,    278    (1882;;    Hoag    v.    La-    6  id.,  80(1856);  Adkins  v.  Thornton.  19 


mont,  60  N.  Y.,  96  (1875);  Abbott  v. 
Aspinwall,  26  Barb.,  202,  207.  As  to 
the  joinder  of  parties  in  Pennsylvania, 
see  Mansfield  Iron  Works  v.  Willcox,  52 
Pa.  St.,  377  (1866) ;  McHose  v.  Wheeler, 
45  id.,  32  (1863) ;  Hoard  v.  Wilcox,  47  id., 
51  (1864).  Creditor  suing  directors  on  a 
statutory  liability  need  not  join  all  cred- 
itors nor  all  directors.  Patterson  v. 
Minn.,  etc.,  Co.,  42  N.  W.  Rep.,  926  (Minn., 
1889).  The  corporation  need  not  be 
joined  as  a  party  defendant.  The  suit 
may  be  against  the  estate  of  a  deceased 
stockholder.  It  may  be  a  separate  suit 
from  that  against  the  corporation. 
Nolan  v.  Hazen,  47  N.  W.  Rep,  155 
(Minn.,  1890).  In  Pennsylvania  the  cor- 
poration also  should  be  made  a  party 
defendant.  Hoard  v.  Wilcox,  47  Pa.  St., 
51 ;  Mansfield  Iron  Works  v.  Willcox,  52 
Pa.  St.,  377  (1866).  Cf.  Deming  v.  Bull. 
10  Conn.,  409  (1835);  Middletown  Bank 
v.  Magill,  5  id.,  28  (1823).  In  Vermont  a 
provision  that  shareholders  "shall  be 
personally  holden  "  is  held  to  create  only 
a  joint  liability.  Windham  Provident 
Savings  Institution  v.  Sprague,  43  Yt., 
502  (1871).  The  suit  may  be  at  law  and 
by  one  creditor  against  one  stockholder. 
The  corporation  need  not  be  joined. 
Gibbs  v.  Davis,  8  S.  Rep,  633  (Fla.,  1891). 
The  liability  of  stockholders  under  the 
Kansas  statute  is  several  and  not  joint. 
The  creditors  cannot  join  several  stock- 
holders in  one  suit  Each  must  be  sued 
separately.  Abbey  v.  W.  B.,  etc.,  Co., 
24  Pac.  Rep,  426  (Kan.,  1890). 

1  Davidson  v.  Rankin,  34  Cal.,  503 
(1868).  Cf.  Young  v.  Rosenbaum,  39  id., 
646  (1870);  Larrabee  v.  Baldwin,  35  id.. 
155  (1868) ;  McAuley  v.  York  Mining  Co.. 


Ga.,  326  (1856)  [this   case  is   frequently 
miscited,   owing   to   a   misprint   in   the 
original  report,  as  Dozier  v.  Thornton] ; 
Branch    v.    Baker,    53   Ga..    502   (1874); 
Dane  v.  Young,  61  Me.,  160  (1872);  Cas- 
tleman  v.  Holmes,  4  J.  J.  Marsh.,  1  (1830). 
Cf.  Fuller  v.  Ledden,  87  111..  312;  Brown 
v.    Hitchcock,    36    Ohio    St.,  678.     The 
constitutional  and  statutory  liability  of 
stockholders  in  California  is  a  contract 
obligation,  and  may  be  enforced  by  at- 
tachment.    Kennedy  v.  California,  etc., 
Bank,  31  Pac.  Rep,  846  |  Cat,  1892).     The 
liability  of  a  stockholder  in  a  California 
bank  for  his  proportion  of  a  corporate 
debt  was  enforced  at  law  in  Barling  r. 
Bank  of  B.  N.  A.,  50  Fed.  Rep.  260  (1892). 
2  Planters'  Bank,  etc.,  v.  Bivingsville, 
etc.,    Manuf.    Co.,    10    Rich.    Law,    95 
(1856);  Southmayd  v.  Russ,  3  Conn.,  52 
(1819);  Middletown   Bank  v.    Magill,    5 
id.,  28,  45  (1823);  Deming  v.  Bull,  10  id., 
409  (1835);  Conant  v.  Van   Schaick.   24 
Barb!,    87    (1857);    Allen    v.   Sewall,    2 
Wend.,   327  (1829);  Moss  v.   Oakley,  2 
Hill,  265  (1842);  Harger  v.  McCullough, 
2  Denio,  119(1846);  McCullough  v.  Moss, 
5  id,  567  (1846);  Corning  v.  McCullough, 
IN.  Y,  47(1847);  Moss  v.  Averell,    10 
id.,  449  (1853);  Wyles  v.  Suydam,  64  id.. 
173,  176  (1876);  Conklin   v.   Furman,   8 
Abb.   Pr.  (N.   S.),   164;  S.   C,   57   Bail... 
487  ;  Abbott  v.  Aspinwall,  23  Barb.,t207  : 
Erickson    v.    Nesmitb,    46    X.    EL,    371 
(1866);    White    v.    Blum.    4    Neb.    555 
(1876):  New  England  Commercial  Bank 
v.  Newport  Steam   Factory,  6  R  I.,  154 
(1859) ;  Moies  v.  Sprague,  9  id.,  541  (1870) ; 
Witherhead    v.    Allen,    28    Barb.,   6C7 ; 
Chase  v.  Lord,  77  N.  Y,  3a 


S85 


§  221.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[cu  XII. 


of  the  constitution  and  statutes  of  Ohio,  and  of  other  states,  it  is 
held  that  while  the  undertaking  of  the  shareholder  is  not  primary, 
and  is  to  be  resorted  to  only  in  case  of  the  insolvency  of  the  corpo- 
ration, still  the  liability,  when  it  does  properly  arise,  is  essentially 
that  of  partners.1  This  class  of  cases  holds  that,  unless  the  statute 
prescribes  otherwise,  the  common-law  rules  as  to  the  liability  of 
partners,  and  the  remedies  for  enforcing  that  liability,  apply  to  the 
statutory  liability  of  shareholders  in  incorporated  companies.2 


1  And  that  although  the  stated  extent 
of  the  shareholder's   liability,   as   pro- 
vided   by   the    statute,    cannot  be  ex- 
ceeded, still,  up  to  the  full  measure  of 
his    liability,   he   may  be  charged,   al- 
though it  be  shown  that,  if  other  solv- 
ent shareholders  had  contributed  their 
full  proportion,  it  would  not  be  neces- 
sary  for    him    to   pay.      Wehrman    v. 
Reakirt,   1  Cinn.  Super.  Ct,  230(1871): 
Brown  v.  Hitchcock,  36  Ohio  St,  678. 
Cf.  Stewart  v.  Lay,  45  Iowa,  604  (1877) ; 
Crease  v.  Babcock,  10  Mete,  525  (Mass., 
1846).      Iu    AViscousin    stockholders    in 
banking  corporations  are  liable  by  stat- 
ute as  original    and  principal   debtors, 
substantially  as  though  they  were  part- 
ners,  except,  as  in   Ohio,  that  the   re- 
sponsibility of  each  is  limited  to  a  sum 
equal  to  his  shares  of  stock.     Coleman 
v.  White,  14  Wis.,  700  (1862).    Under  the 
Wisconsin  statute  making  stockholders 
liable  for  the  debts  where  business  is 
commenced  before  one-half  the  capital 
stock  is  subscribed  and  twenty  per  cent, 
paid  in,  the  statute  allows  suit  without 
joining  the  corporation  as  a  defendant. 
Flour  City  Nat  Bank  v.  Wechselberg,  45 
Fed.  Rep.,  547  (1891). 

2  Story  v.  Furman,  25  N.  YM  214,  221, 
222  (1862);  New  England  Commercial 
Bank  v.  Newport  Steam  Factory,  6  R  I., 
154,  189  (1859);  Moies  v.  Sprague,  9  id., 
541  (1870).  It  is  sometimes  held  that  a 
general  statutory  liability  means  a  lia- 
bility on  the  part  of  the  stockholder 
only  in  the  proportion  which  his  inter- 
est bears  to  the  total  indebtedness  of  the 
corporation.  Boyd  v.  Hall,  56  Ga.,  563 
(1876);  Reynolds  v.  Feliciana  Steamboat 
Co.,  17  La.  Rep,  397  (1841).     In  such  a 


case,  where  the  shareholders  are  jointly 
and  severally  personally  liable  for  debts 
contracted  by  the  corporation,  which  it 
cannot  or  does  not  pay,  in  proportion  to 
the  number  of  shares  they  own,  it  seems 
to  be  settled  that  they  are   to  be   held 
principal  debtors,  and  not  mere  sureties 
for  the  corporation.     Harger  v.  McCul- 
lough,    2    Denio,    119    (1846);     Corning 
v.    McCullough,  1  N.  Y.,  47  (1847),  the 
court  saying  that  the  stockholders  stand 
towards    the    creditors  "on    the  same 
ground  and  under  the  same  responsibil- 
ity   ...     as  they  would,  if  unincor- 
porated, have  stood  ;  "  Moss  v.  Averell. 
10  id.,  450  (185:5);  Simonson  v.  Spencer, 
15  Wend.,  548(1836),  sustaining  the  ac- 
tion for  debt;  Bailey  t>.  Bancker,  3  Hill. 
188  (1842),  holding,  also,  that  a  creditor 
must  sue  a  stockholder  upon  the  orig- 
inal demand  and  not  upon    the  judg- 
ment against  the  company;  Southmayd 
v.  Russ,  3  Conn.,  52  (1819),  holding  that 
since  the  liability  is  original,  scire  facias 
will  not  lie  against  a  stockholder,  but  he 
must  be  sued  as  if  there  were  no  incor- 
poration; Marcy  v.  Clark,  17  Mass.,  330 
(1821).     In  Michigan  it  is  held  that  they 
are  sureties.     Hanson  v.  Donkersley,  37 
Mich.,    184    (1877).     Cf.   Grand    Rapids 
Savings    Bank    v.  Warren,    52    id.,  557 
(1884).     It  has  been  held,  also,  that  they 
are  not  sureties  for  each  other.    Lane  v. 
Harris,  16  Ga.,  217,  234  (1854);  Crease  v. 
Babcock.  10  Mete.  525  (18461     Cf.  Lar- 
rabee  v.    Baldwin,   35   Cal.,  155   (1868). 
This  seems  to  be  the  rule,  in  general,  as 
to  all  statutory  liability.     Young  v.  Ro- 
senbaum,  39  Cal.,  646  (1870) ;  Taylor  on 
Corporations,   £§  714,   715;  Erickson   v. 
Nesmith,  46  N.  BL,  371  (1866);   Thomp- 


286 


CH.  XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[$  222. 


The  liability  of  stockholders  in  national  banks  is  fixed  by  an 
order  of  the  comptroller  of  the  currency.1 

§  222.  The  remedy  in  a  court  of  equity. —  The  remedy  in  equity 
is  the  favorite  remedy  of  the  courts.  It  is  just,  certain,  impartial 
and  clear.  It  enforces  once  for  all  the  liability  of  the  stockholders, 
and  at  the  same  time  provides  for  contribution.  It  distributes  the 
assets  equally  and  equitably  among  all  the  corporate  creditors. 
It  prevents  a  multiplicity  of  suits,  and  avoids  the  difficult  question 
as  to  whether  a  suit  at  law  will  lie.  The  only  and  great  objection 
to  the  remedy  in  equity  is  that  it  is  protracted,  vexatious  and  ex- 
pensive.2 

Frequently  the  courts  have  held  that  an  action  at  law  to  enforce 
a  statutory  liability  is  not  a  proper  proceeding,  but  that  the  rights 
of  all  parties  can  be  properly  adjusted  only  in  a  court  of  equity, 
and  that  the  latter  remedy  is  exclusive  of  all  others.3 


son  v.  Meisser,  108  111.,  359  (1884).  It  is 
obvious  that  the  question  whether  the 
creditor,  in  pursuing  his  remedy  against 
the  shareholder,  may  sue  one  or  any  of 
the  shareholders  at  his  option,  Or  must 
sue  all,  in  a  joint  action,  is  of  the  high- 
est importance.  It  goes  to  the  very  form 
and  essence  and  content  of  his  action ; 
but  it  is  a  point  upon  which,  as  has  been 
already  intimated,  a  text-writer  cannot 
deduce  from  the  reported  cases  any 
clearly-settled  rule  of  general  applica- 
tion. It  is,  in  every  case  where  the  stat- 
ute does  not  contain  an  explicit  pro- 
vision, a  question  of  construction  to  be 
determined  by  the  courts  in  expounding 
the  words  of  the  statute. 

1  It  is  for  him  to  determine  whether 
and  to  what  extent  the  statutory  liabil- 
ity of  the  stockholders  sTiall  be  enforced. 
Casey  v.  Galli,  94  U.  S..  673  (1876) ;  Ken- 
nedy v.  Gibson.  8  Wall.,  498  (1869); 
Strong  v.  Southworth,  8  Ben.,  331 ;  Na- 
tional Bank  v.  Case,  99  U.  S.,  628  (1878). 
A  voluntary  assessment  of  the  stock- 
holders by  themselves  does  not  affect 
or  decrease  this  statutory  liability.  118 
U.  S.,  634  (1886).  The  United  States  dis- 
trict court  has  jurisdiction  of  an  action 
by  the  receiver  of  an  insolvent  national 
bank  to  collect  assessments  on  stock. 
Stephens  v.  Bernays,  44  Fed.  Rep.,  642 
(1890).     The  statutory  liability  of  stock- 


holders in  a  national  bank  may  be  en- 
forced by  an  action  at  law,  and  the  as- 
sessment as  made  by  the  comptroller  is 
conclusive.  Young  v.  Wempe,  46  Fed. 
Rep.,  354  (1891).  The  liability  of  direct- 
ors under  the  National  Banking  Act  for 
loans  to  separate  persons  of  amounts 
in  excess  of  one-tenth  of  the  capital 
stock  can  be  enforced  only  in  a  court  of 
equity.  Welles  v.  Graves,  41  Fed.  Rep.. 
459  (1890);  Peters  v.  Foster,  56  Hun,  607 
(1890).  As  regards  the  remedy  under 
the  National  Bank  Act,  see  Kennedy  v. 
Gibson,  8  Wall.,  498  (1869);  Casey  v. 
Galli,  94  U.  S.,  673  (1876),  and  act  of 
June  30,  1876,  ch.  44;  Witters  v.  Sowles, 
32  Fed.  Rep.,  767  (1887) ;  Richmond  v. 
Irons,  121  U.  S.,  27  (1887),  as  to  joinder 
of  causes  of  action. 

2  Thus,  with  reason,  the  court  said,  in 
Mason  v.  Alexander,  44  Ohio  St.,  318: 
"  By  reason  of  the  great  number  of 
stockholders,  the  frequent  transfers  of 
stock,  the  decease  of  parties,  and  of 
other  causes,  delays,  vexatious,  expen- 
sive and  almost  interminable,  seem  to 
be  inevitable  in  all  such  proceedings;  so 
much  so.  indeed,  that  such  liability  has 
grown  to  be  looked  upon  as  furnishing 
next  to  no  security  at  all  for  the  debts 
of  corporations." 

3  Thus,  under  a  charter  provision  that 
stockholders  shall   "  be  bound  respect- 


287 


222.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH. 


XII. 


In  many  jurisdictions  the  rule  prevails  that  creditors  in  these 
oases  have  a  concurrent  remedy,  either  at  law  or  in  equity.  The 
action  at  law  will  lie  upon  the  debt,  while,  on  the  other  hand,  the 
equitable  jurisdiction  arises  from  the  power  of  a  court  of  chancery 
to  compel  contribution  among  the  shareholders  and  to  effect  an 
equitable  distribution  among  the  creditors.1 

In  the  courts  of  the  United  States  it  is  the  rule  that,  where  a 
stockholder's  statutory  liability  is  by  the  terms  of  the  statute  a 
joint  and  several  or  several  liability,  the  creditor  may,  after  the 
remedy  against  the  corporation  has  been  exhausted,  enforce  his 
rights  in  an  action  at  law;  but,  in  all  other  cases  of  statutory  lia- 
bility, the  remedy  must  be  in  equity,  as  in  cases  of  unpaid  subscrip- 
tions.2    In  several  of  the  state  courts  it  is  held  that  a  creditor's 


ively  for  all  debts  of  the  bank  in  pro- 
portion to  their  stock  holden  therein," 
it  was  held  that  an  action  at  law  by  a 
single  creditor  against  a  single  stock- 
holder would  not  lie.  Pollard  v.  Bailey, 
20  Wall.,  520  (1874);  Hatch  v.  Dana,  101 
U.  S  ,  205  (1879) ;  Terry  v.  Little,  id.,  216 ; 
Smith  v.  Huckabee,  53  Ala.,  191  (1875); 
Jones  v.  Jarman,  34  Ark.,  323  (1 879).  Cf. 
Wright  v.  McCormack,  17  Ohio  St.,  86 
(1866);  Sands  v.  Kimbark,  37  Barb.,  108, 
120  (1863) ;  Cushman  v.  Shepard,  4  id., 
113  (1848).  Nor  under  a  statute  making 
the  stockholders  of  a  banking  company 
"  individually  responsible  to  the  amount 
of  their  respective  share  or  shares  of 
stock  for  all  its  indebtedness  and  liabil- 
ities of  every  kind."  Coleman  v.  White, 
14  Wis..  700  (1862);  Carpenter  v.  Marine 
Bank,  id.,  705,  n.  (1862). 

Also  upon  the  ground  that  at  law  the 
indebtedness  of  the  corporation  and  the 
several  liabilities  of  the  members  could 
not  be  equitably  adjusted.  Low  v.  Bu- 
chanan, 94  111.,  76  (1879),  where  the  di- 
rectors were  held  liable  for  an  excess  of 
indebtedness;  Queenan  v.  Palmer,  34 
Alb.  L.  J.,  117  (111.,  1886);  Stewart  v. 
Lay,  45  Iowa,  604  (1877) ;  Norrisr.  John- 
son, 34  Md.,485  (1871) ;  Garrison  v.  Howe, 
17  N.  Y.,  458  (1858);  Story  v.  Furman,  25 
id.,  214  (1862).  Cf.  Flash  v.  Conn,  109 
U.  S.,  371  (1883). 

Where,  in  South  Carolina,  the  charter 
of  a  bank  provided  that  upon  the  failure 


of  the  bank  "  each  stockholder  shall  be 
liable  and  held  bound  .  .  .  for  any 
sum  not  exceeding  twice  the  amount  of 
.  .  .  his  .  .  .  shares,"  it  was  held 
by  the  supreme  court  of  the  United 
States  that  a  suit  in  equity  by  or  on  be- 
half of  all  the  creditors  is  the  only  ap- 
propriate mode  of  enforcing  the  liability 
incurred  by  such  a  failure.  Terry  v. 
Little,  101  U.  S.,  216  (1879). 

1  Bank  of  the  United  States  v.  Dallam. 
4  Dana,  574  (1836);  Van  Hook  v.  Whit- 
lock,  3  Paige,  409  (1832) ;  Bank  of  Pough- 
keepsie  v.  Ibbotson,  24  Wend.,  473  (1840) ; 
Masters  v.  Rossie  Lead  Mining  Co.,  2 
Sandf.  Chan.,  301  (1845);  Pfohl  v.  Simp- 
son, 74  N.  Y.,  137(1878);  Eamesv.  Doris, 
102  111.,  350  (1882);  Culver  v.  Third  Na- 
tional Bank,  64  id.,  528  (1871);  Perry  v. 
Turner,  55  Mo.,  ^18  (1874);  Norris  v. 
Johnson,  34  Md.,  485,  489  (1871);  Mat- 
thews v.  Albert?  24  id.,  527  (1866).  Cf. 
Weeks  v.  Love,  50  N.  Y,  568  (1872) ;  Gar- 
rison v.  Howe,  17  id.,  458  (1858).  And 
see  the  following  New  York  cases, 
wherein  it  is  held  that  a  remedy  in 
equity  is  preferable :  Morgan  v.  New 
York,  etc.,  R  R,  Co.,  10  Paige,  290(1843) ; 
Sherwood  v.  Buffalo,  etc.,  R  R  Co.,  12 
How.  Prac,  136  (1855);  Hinds  v.  Canan- 
daigua,  etc.,  R  R  Co.,  10  id.,  487  (1855); 
Courtois  v.  Harrison,  12  id.,  359  (1856)  — 
the  last  three  cases  relating  to  supple- 
mentary proceedings. 

2  Pollard  v.  Bailey,  20  Wall.,  520  (1874) ; 


288 


CH.  XII.] 


STATUTORY    LIABILITY    OF   STOCKHOLDERS. 


[§  222. 


remedy  against  a  shareholder  upon  the  statutory  liability  is  in 
equity  alone.1  In  New  York  and  Illinois  a  stockholder  sued  at 
law  for  the  enforcement  of  this  liability  may  institute  an  equitable 
proceeding  to  bring  in  all  the  parties.2 


Terry  v.  Little.  101  IT.  S.,  216  (1879). 
Cf.  Terry  v.  Tubman,  92  U.  S.,  156  (1875) ; 
Andrews  v.  Bacon,  38  Fed.  Rep.,  777 
(1889) ;  Cuykendall  v.  Miles,  10  Fed.  Rep., 
342  (1882),  where  the  court  said:  "The 
supreme  court  hold  that  the  mode  in 
which  a  liability  of  this  kind  is  to  be 
enforced  depends  entirely  upon  the  par- 
ticular law  governing  the  corporation. 
If  that  law  merely  provides  for  a  pro- 
portionate liability  of  all  stockholders 
for  all  debts  there  should  be  a  bill  in 
equity  for  the  benefit  of  all  the  cred- 
itors and  against  all  the  stockholders. 
(Citing  cases.)  But  if  the  law  of  the 
state  authorizes  an  action  by  one  cred- 
itor against  one  stockholder,  that  rem- 
edy may  be  pursued."  Patterson  v. 
Lynde,  106  U.  S.,  519  (1882).  As  to 
joinder  of  parties,  see  R.  S.  of  U.  S., 
§  737.  An  action  at  law  lies  in  the  fed- 
eral courts,  herein,  when  that  remedy 
is  appropriate.  Bullard  v.  Bell,  1  Mason, 
243  (1817).  Or  where  the  courts  of  the 
state  creating  the  liability  hold  that  an 
action  at  law  will  lie.  Mills  v.  Scott,  99 
U.  S.,  25  (1878).  In  the  federal  courts  a 
suit  to  enforce  a  director's  statutory  lia- 
bility is  in  equity.  Stone  v.  Chisolm, 
113  U.  S.,  302  (1884). 

1  Harris  v.  First  Parish,  40  Mass.,  112 
(1839);  Coleman  v.  White,  14  Wis.,  700 
(1862) ;  Ladd  v.  Cartwright,  7  Oreg.,  329 ; 
Smith  v.  Huckabee,  55  Ala.,  191  (1875). 
See  Patterson  v.  Lynde,  106  U.  S.,  519 
(1882).  In  Illinois  there  was  some  doubt 
as  to  whether  the  bill  in  equity  would 
lie;  but  the  late  case  of  Tunesma  v. 
Schuttler,  114  111.,  156  (1885),  holds  that, 
in  case  the  corporation  is  insolvent  and 
the  corporate  creditors  numerous,  a  bill 
in  equity  is  the  proper  remedy.  Under 
the  Manufacturing  Company's  Act  of 
Illinois,  the  creditor's  remedy  is  held 
to  be  clearly  in  equity.  Rounds  v. 
McCormick,  114  III,  252  (1885);  Harper 


v.  Union  Mfg.  Co.,  100  111.,  225  (1881) ; 
Low  v.  Buchanan,  94  III,  76  (1879).  See 
Pierce  v.  Milwaukee,  etc.,  Co.,  38  Wis., 
253  (1875),  for  the  rule  in  that  state. 
Where  under  a  creditor's  bill  a  receiver 
is  appointed  and  the  assets  administered, 
and  then  by  a  supplemental  bill  the 
stockholder's  liability  enforced,  a  cred- 
itor who  received  a  dividend  under  the 
original  bill  cannot  sue  a  stockholder 
at  law.  Tunesma  v.  Schuttler,  28  N. 
E.  Rep.,  605  (111.,  1885).  The  remedy  is 
in  equity  alone,  and  non-joinder  of  any 
stockholders  as  defendants  will  render 
the  bill  demurrable.  Friend  v.  Powers, 
9  S.  Rep.,  392  (Ala.,  1891). 

2  Pfohl  v.  Simpson,  74  N.  Y.,  137  (1878) ; 
Cochran  v.  American  Opera  Co.,  N.  Y. 
Daily  Reg.,  Jan.  5,  1888.  In  Wiscon- 
sin a  long  line  of  decisions  hold  that  the  , 
creditor's  remedy  against  stockholders 
can  be  in  equity  only.  Sleeper  v.  Good- 
win, 31  N.  W.  Rep.,  335  (Wis.,  1887),  cit- 
>ing  many  cases;  Garrison  v.  Howe,  17 
N.  Y,  458  (1858).  Semble,  Thebus  v. 
Smiley,  110  III.,  316  (1884);  Eames  v. 
Doris,  102  111.,  350  (1882).  All  the  stock- 
holders should  be  made  parties,  but  the 
defect  may  be  waived.  Arthur  v.  Will- 
ius,  46  N.  W.  Rep.,  851  (Minn.,  1890\  The 
liability  of  stockholders  under  the  Ohio 
laws  is  several  and  to  all  creditors.  New- 
bury v.  Robinson,  41  Fed.  Rep.,  458  (1890). 
When  the  equitable  remedy  is  pursued, 
the  corporation  and  all  the  solvent 
shareholders  within  the  jurisdiction 
who  are  known  must  be  made  defend- 
ants. Contribution  among  the  share- 
holders is  of  the  essence  of  the  proceed- 
ing, and  that  is  best  effected  when  all 
are  made  parties.  Walsh  v.  Memphis, 
etc.,  R  R  Co.,  2  McCrary,  156  (1881); 
S.  O,  6  Fed.  Rep.,  797 :  Umsted  v.  Bus- 
kirk,  17  Ohio  St.,  113  (1866),  holding,  also, 
that  defendant  stockholders  may  insist 
on  joinder  of  co-stock  holders.    Erickson 


(19) 


289 


223.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


A  still  different  remedy  from  all  these  exists  where  the  judgment 
creditor  of  the  corporation,  after  execution  returned  unsatisfied, 
may  issue  execution  against  any  stockholder  without  being  obliged 
to  institute  a  new  action.1 

Another  remedy  still  is  to  allow  the  plaintiff  creditor  to  join 
stockholders  as  defendants  in  his  original  suit  against  the  corpo- 
ration.2 

§  223.  Enforcement  of  the  statutory  liability  in  the  courts  of  an- 
other state — Penal  liabilities. —  The  stockholders  of  a  corporation 
are  generally  widely  scattered,  and  reside  in  many  states.  Accord- 
ingly, when  some  or  all  of  them  are  non-residents  of  the  state  in 
which  the  corporation  exists,  the  important  question  arises  whether 

v.  Nesmith,  46  N.  H.,  371  (1866) ;  Hadley     amount  of  recovery  may  thereby  exceed 


v.  Russell,  40  N.  H.,  109  (1860).  The 
joinder  of  all  the  shareholders  may  be 
dispensed  with  in  a  case  where  it  is 
shown  to  be  impracticable.  Umsted  v. 
Buskirk,  17  Ohio  St,  113  (1866);  Petti- 
bone  v.  McGraw,  6  Mich.,  441  (1859); 
Piei'ce  i\  Milwaukee  Construction  Co.,  38 
Wis.,  253  (1875);  Coleman  v.  White,  14 
Wis.,  700  (1862);  Crease  v.  Babcock,  10 
Mete,  525  (1846);  Brundage  v.  Monu- 
mental, etc.,  Mining  Co.,  12  Oregon,  322 
(1885),  holding,  also,  that  a  defendant 
stockholder  desiring  to  bring  in  other 
stockholders  must  do  that  by  an  appro- 
priate cross-proceeding.  And  an  action 
to  enforce  statutory  liability  may  be 
joined  with  an  action  to  collect  unpaid 
subscriptions.  Warner  v.  Callender,  20 
Ohio  St.,  190  (1870).  But  a  claim  against 
stockholders  upon  a  liability  imposed  by 
statute  cannot  be  joined  in  one  bill  in 
equity  with  a  penal  claim  against  the 
directors  of  the  company.  Cambridge 
Water-works  v.  Somerville  Dyeing,  etc., 
Co.,  14  Gray,  193(1859);  Poper.  Leonard, 
115  Mass.,  286  (1874);  Nappier  v.  Morti- 
mer. 11  Abb.  Pr.  (N.  S.),  455.  Cf.  Wiles 
v.  Suydam,  64  N.  Y.,  173  (1876).  The 
late  case  of  Mason  v.  Alexander,  13  Am. 
&  Eng.  Corp.  Cas.,  54  (Ohio,  1886),  holds 
that  the  corporation  is  a  necessary  party 
to  the  creditor's  suit  in  equity;  that 
judgment  against  the  stockholders  is 
to  be  against  them  severally ;  and  that 
interest  is  to  be  allowed  from  the  com- 
mencement of  the  suit,  "although  the 

290 


the  stockholder's  original  liability." 
See,  also,  §  226,  infra,  to  the  effect 
that  any  creditor  may  enjoin  the  pro- 
ceeding at  law  and  bring  all  parties  into 
a  suit  in  equity.  In  a  corporate  cred- 
itor's action  against  a  few  stockholders, 
to  enforce  their  liability  and  to  obtain 
discovery  of  other  stockholders,  the 
discovery  may  be  compelled.  Hippie 
v.  Fire,  etc.,  Co.,  3  Central  Rep.,  462 
(N.  J.,  1886).  See,  also,  §§  519,  520, 
infra.  A  married  woman  in  Arkansas 
may  own  stock  and  be  liable  thereon. 
Her  liability  may  be  enforced  in  equity. 
Bundy  v.  Cocke,  128  U.  S.,  185  (1888). 
Proceedings  to  enforce  the  statutory 
liability  are  made  elastic,  and  applica- 
tions of  creditors  who  come  in  may 
cure  defects  in  the  original  papers. 
Arthur  v.  Willius,  46  N.  W.  Rep.,  851 
(Minn.,  1890). 

1  See  §  201,  supra. 

2Milroy  v.  The  Spurr,  etc.,  43  Mich., 
231,  holding  that,  if  the  statute  author- 
izes a  suit  against  the  corporation  alone 
or  jointly  with  one  or  more  stockhold- 
ers, a  creditor  who  elects  to  sue  it  alone 
cannot  afterwards  proceed  upon  the 
same  debt  against  the  corporation  and 
stockholders  jointly.  One  of  the  cred- 
itors who  is  a  party  to  the  sequestra- 
tion proceedings  may  in  those  proceed- 
ings enforce  the  stockholder's  statutory 
liability.  McKeesick  i\  Seymour,  etc., 
Co.,  50  N.  W.  Rep.,  1110  (Minn.,  1892). 


CH.  XII.] 


STATUTORY    LIABILITY    OF   STOCKHOLDERS. 


[§  223. 


the  courts  of  one  state  will  enforce  a  stockholder's  statutory  liabil- 
ity created  by  the  statutes  of  another  state.  If  not,  then  non- 
resident stockholders  practically  escape  the  liability  which  they 
assumed  when  they  became  members  of  the  corporation. 

The  cases  are  uniform  in  holding  that  the  extent  of  the  stock- 
holder's statutory  liability  and  the  character  of  that  liability  de- 
pend upon  and  are  determined  by  the  charter  of  the  corporation 
or  the  statute  of  the  state  which  created  it.1 

In  general,  when  the  courts  of  one  state  are  asked  to  enforce  the 
statutory  liability  of  stockholders  in  a  corporation  created  by  an- 
other state,  two  things  are  to  be  considered :  First,  is  the  statutory 
liability  itself  a  contract  liability  or  a  mere  penalty?  Second,  are 
the  remedies  provided  by  the  laws  of  the  state  where  suit  is  sought 
to  be  brought  adequate  to  the  just  enforcement  of  the  liability? 

The  law  is  clear  that  the  courts  of  one  state  will  not  enforce 
penalties  imposed  by  another  state.2  But  the  usual  statutory  liabil- 
ity of  stockholders  is  not  a  penalty.  The  courts  are  unanimous  in 
holding  that  where  by  statute  the  stockholders  in  a  corporation, 
instead  of  being  relieved  entirely  from  liability  to  corporate  credit- 


i  Payson  v.  Withers,  5  Biss.,  269  (1873) ; 
Seymour  v.  Sturgess,  26  N.  Y.,  134 
(1862);  McDonough  v.  Phelps,  15  How. 
Prac,  372  (1856) ;  Ex  parte  Van  Piper, 
20  Wend..  614  (1839);  Aultman's  Ap- 
peal, 98  Pa.  St,  505.  Cf.  Hill  v.  Beach, 
12  N.  J.  Eq.,  31  (1858);  Nabob  of  Car- 
riage v.  East  India  Co.,  1  Vesey,  Jr.,  371 
(1791);  Dutch  West  India  Co.  v.  Hen- 
riquez,  1  Strange,  612.  See,  also,  ch.  I, 
supra.  This  principle  applies,  of  course, 
only  to  corporations  which  were  legally 
incorporated.  For  the  liability  where 
the  incorporation  was  not  legal,  see 
chapter  XIII.  An  administrator  may 
enforce  the  statutory  liability  even  in  a 
foreign  jurisdiction.  The  United  States 
courts  take  judicial  notice  of  the  stat- 
utes of  the  various  states.  Newberry  v. 
Robinson,  36  Fed.  Rep.,  841  (1888).  In 
Bateman  v.  Service,  L.  R.,  6  App.  Cas., 
386  (1881),  the  ground  is  taken  that  a 
liability  created  by  statute  remains  the 
same  wherever  the  corporation  may 
transact  its  business,  or  wherever  the 
shareholders  may  happen  to  live,  and 
that  the  fact  of  doing  business  in  a  for- 
eign state  does  not  subject  the  share- 


holders of  the  corporation  to  the  opera- 
tion of  laws  which  create  statutory 
liability  in  such  foreign  state.  In  ac- 
cordance with  this  view  it  was  held  in 
Ohio,  where  a  foreign  corporation,  with- 
out statutory  liability  of  its  stockhold- 
ers, did  business  in  Ohio,  where  the 
statutes  prescribe  a  personal  liability  for 
stockholders  in  domestic  corporations  of 
similar  character,  that  the  shareholders 
of  the  foreign  corporation  ai-e  protected 
by  the  exemption  they  enjoy  at  home. 
Second  National  Bank  v.  Hall,  35  Ohio 
St.,  158  (1878).  See,  also,  Jessup  v.  Car- 
negie, 80  N.  Y.,  441  (1880);  and  see 
§  243,  infra. 

2  Story  on  the  Conflict  of  Laws,  £§  620, 
621 ;  Wharton  on  the  Conflict  of  Laws, 
§  853  et  seq.;  Rorer  on  Interstate  Laws, 
148,  149.  See,  also,  Lowry  v.  Inman,  46 
N.  Y,  119  (1871);  Patterson  r.  Baker.  :'! 
How.  Prac,  180  (1867) ;  Howell  v.  Man- 
glesdorf,  33  Kan.,  194  (1885).  "Penal 
laws  are  strictly  local,  and  cannot  -have 
any  operation  beyond  the  jurisdiction 
of  the  country  where  they  were  en- 
acted." Scoville  v.  Canfield,  14  Johns., 
338  (1817). 


291 


223.] 


STATUTOKY    LIABILITY    OF    STOCKHOLDEKS. 


[CH.  XII. 


ors,  are  only  partially  relieved  therefrom,  the  additional  liability 
is  a  contract  liability,  and  will  be  enforced  by  the  courts  of  any 
state.  In  other  words,  the  ordinary  statutor}>-  liability  of  stock- 
holders is  a  contract  liability,  and  will  be  enforced  as  such  by  the 
courts  of  all  the  states.1 


i  Corning  v.  McCullough,  1  N.  Y.,  47 
(1847);  S.  G,  49  Am.  Dec,  287;  Free- 
land  v.  McCullough,  1  Denio,  414  (1845) ; 
S.  C,  43  Am.  Dec,  685;  Hodgson  v. 
Cheever,  8  Mo.  App.,  321  (1880) ;  Man- 
ville  v.  Edgar,  8  id.,  324  (1880) ;  Queenan 
V.  Palmer,  117  111.,  619  (1886) ;  Aultman's 
Appeal,  98  Pa.  St.,  505  (1881) ;  Sacketts 
Harbor  Bank  v.  Blake,  3  Rich.  Eq.,  225 ; 
Woods  v.  Wicks,  7  Lea  (Tenn.),  40  (1881) ; 
Ex  parte  Van  Riper,  20  Wend.,  614 
(1839) ;  McDonough  v.  Phelps,  15  How. 
Prac,  372  (1856);  Lowry  v.  Inman,  46 
N.  Y.,  119  (1871).  See,  also,  Paine  v. 
Stewart,  33  Conn.,  516  (1866) ;  Bond  v. 
Appleton,  8  Mass.,  472  (1812);  Hutchins 
v.  New  England  Coal  Mining  Co.,  4 
Allen,  580  (1862) ;  Grand  Rapids  Bank  v. 
Waren,  52  Mich.,  537.  Cf.  Bateman  v. 
Service,  L.  R.,  6  App.  Cas.,  386  (1881); 
Norris  v.  Wrenschall,  34  Md.,  492  (1871); 
Terry  v.  Calnan,  13  S.  C,  220  (1879); 
Tinker  v.  Van  Dyke,  1  Flippin,  532 
(1876).  Cf.  Lowry  v.  Inman,  46  N.  Y., 
119,  127  (1871);  Strong  v.  Wheaton,  38 
Barb.,  625(1861);  Brown  v.  Hitchcock, 
36  Ohio  St.,  678  (1879) ;  Hatch  v.  Bur- 
roughs, 1  Woods,  443  (1870);  Flash  v. 
Conn,  109  U.  S.,  371  (1883) ;  Fourth  Nat'l 
Bank  v.  Francklyn,  120  U.  S.,  747  (1887); 
Cuykendall  v.  Miles,  10  Fed.  Rep.,  342 ; 
Nimick  v.  Mingo  Iron  Works,  25  West 
Va.,  184  (1884).  Cf.  Woods  v.  Wicks,  7 
Lea  (Tenn.),  40  (1881) ;  Lawler  v.  Burt,  7 
Ohio  St.,  340  (1857).  A  Maryland  case 
holds  that  the  statutory  liability  of  a 
stockholder  in  a  New  York  manufactur- 
ing corporation  is  a  penalty,  and  cannot 
be  enforced  in  that  state.  Attrill  v. 
Huntington,  70  Md.,  191  (1889).  But  in  the 
case  of  Huntington  v.  Attrill,  146  U.  S., 
657  (1892),  the  court  reversed  the  court 
of  appeals  of  Maryland  (70  Md.,  191), 
which  refused  to  enforce  in  Maryland  a 
judgment  obtained  in  New  York  by  a 


corporate  creditor  against  an  officer  of 
the  corporation,  who,  under  the  statutes 
of  New  York,  was  rendered  liable  to  cor- 
porate creditors  by  reason  of  signing  a 
false  certificate  as  to  the  amount  of  the 
capital  stock  of  the  company.  The  su- 
preme court  of  the  United  States  held 
that  such  a  liability  was  not  penal  in 
the  international  sense.  And  when  the 
suit  is  maintainable,  the  construction 
placed  upon  the  statute  of  the  state  in 
which  the  corporation  exists,  by  the 
courts  of  that  state,  is,  as  a  general  rule, 
controlling,  and  will  be  followed  by  the 
courts  of  the  state  where  the  suit  to  en- 
force is  brought.  Jessup  v.  Carnegie, 
80  N.  Y,  441  (1880);  Chase  v.  Curtis,  113 
U.  S.,  452  (1884);  Sav.  Assoc,  v.  O'Brien, 
51  Hun,  45  (1889).  In  the  case  of  New 
Haven,  etc.,  Co.  v.  Linden  Spring  Co., 
6  East  Rep.,  663  (Mass.,  1886),  the  court, 
in  refusing  to  enforce  a  subscription 
made  to  a  foreign  corporation,  without 
an  express  promise  to  pay,  said  :  "  That 
the  statutes  of  a  state  do  not  operate  ex- 
traterritorial ly,  2)roprio  vigore,  will  be 
conceded.  How  far  they  should  be  en- 
forced beyond  the  limits  of  the  state 
which  has  enacted  them  must  depend 
on  several  considerations  —  as,  whether 
any  wrong  or  injury  will  be  done  to  the 
citizens  of  the  state  in  which  they  are 
sought  to  be  enforced  ;  whether  the  pol- 
icy of  its  own  laws  will  be  contravened 
or  impaired ;  and  whether  its  courts  are 
capable  of  doing  complete  justice  to 
those  liable  to  be  affected  by  their  de- 
crees." To  same  effect,  Halsey  v.  Mc- 
Lean, 94  Mass.,  438  (1866).  The  statutory 
liability  of  stockholders  in  California  is 
a  contract  liability.  Dennis  v.  Superior 
Court,  27  Pac  Rep.,  1031  (Cal.,  1891). 
The  statutory  liability  of  stockholders 
in  New  York  business  corporations  to 
the  extent  of  their  stock  until  a  certifi- 


292 


CH.  XII.] 


STATUTORY    LIABILITY    OF   STOCKHOLDERS. 


[§  223. 


A  different  rule  prevails  as  to  the  statutory  liability  of  corpo- 
rate officers  for  failure  to  file  reports,  or  give  certain  notices,  or 
make  certain  contracts.  Such  liability  is  generally  construed  to 
be  penal,  and  will  not  be  enforced  by  the  courts  of  other  States.1 

This  question  of  whether  the  liability  is  a  penalty  arises  often  in 
ascertaining  what  particular  statute  of  limitations  applies.2    There 


cate  is  filed  that  the  whole  capital  stock 
is  paid  in  is  not  a  penal  liability  and  it 
survives  the  death  of  a  stockholder. 
Cochran  v.  Wieehers,  119  N.  Y.,  399 
(1890). 

1  Derrickson  v.  Smith,  27  N.  J.  Law, 
166  (1858) ;  First  National  Bank  v.  Price, 
33  Md.,  487  (1870),  where  a  statute  of 
Pennsylvania  imposing  liability  upon 
directors  and  officers  contracting  or  as- 
senting to  an  indebtedness  in  excess  of 
the  amount  of  capital  was  held  to  be 
penal.  (But  see,  contra,  Field  v.  Haines, 
28  Fed.  Rep.,  919  —  1886.)  Halsey  v. 
McLean,  12  Allen,  438  (1866);  Bird  v. 
Hayden,  1  Robertson  (N.  Y.  Super.  Ct), 
383  (1863) ;  Union  Iron  Co.  v.  Pierce,  4 
Biss.,  327  (1869).  The  twelfth  section  of 
the  New  York  Manufacturing  Compa- 
nies Act),  to  the  effect  that  the  corporate 
officers  shall  be  liable  for  the  debts  of 
the  corporation  in  case  they  fail  to  make 
an  annual  public  report  of  the  business 
of  the  corporation  (Laws  of  1848,  ch.  40), 
is  universally  held  to  be  penal  in  its 
character.  Chase  v.  Curtis,  113  U.  S., 
452  (1885) ;  Stokes  v.  Stickney,  96  N.  Y.t 
323  (1884) ;  Pier  v.  Hanmore,  86  id.,  95 
(1881);  Pier  v.  George,  86  id.,  613  (1881); 
Veeder  v.  Baker,  83  id.,  156  (1880) ;  Knox 
v.  Baldwin,  80  id.,  610  (1880) ;  Easterly 
v.  Barber,  65  id.,  252  (1875);  Wiles  v. 
Suydam,  64  id.,  173  (1876) ;  Jones  v.  Bar- 
low, 62  N.  Y.  202  (1875);  Merchant's 
Bank  of  New  Haven  v.  Bliss,  35  id.,  412 
(1866) ;  Gadsden  v.  Woodward,  103  N.  Y, 
244.  In  New  York  if  the  suit  is  com- 
menced by  summons  only  to  recover  a 
penalty,  a  reference  must  be  made  on 
the  summons  to  the  statute.  Nordell  v 
Wahlstedt,  N.  Y.  L.  J.,  Jan.  16,  1890.  A 
stockholder's  liability  for  failure  to  file  a 
certificate  each  year  is  a  penal  liability 


and  cannot  be  enforced  in  a  foreign  ju- 
risdiction. Sayles  v.  Brown,  40  Fed. 
Rep.,  8  (1889).  Foreign  stockholders  can- 
not be  sued  in  their  state  for  contribu- 
tions towards  a  penal  liability  paid  by 
domestic  stockholders.  Id.  The  liabil- 
ity of  stockholders,  for  a  failure  to  file  a 
certificate  to  the  effect  that  the  capital 
stock  is  fully  paid  up,  is  a  penal  liability. 
Sayles  v.  Brown,  4  Fed.  Rep.,  8 ;  Howell 
v.  Roberts,  45  N.  W.  Rep.,  923;  Halsey  n 
McLean,  12  Allen,  438 ;  Erickson  v.  Ne- 
smith,  4  Allen,  233 ;  Mitchell  v.  Hotch- 
kiss,  48  Conn.,  9 ;  Steam  Engine  Co.  v. 
Hubbard,  101  U.  S.,  188;  Savings  Ins. 
Co.  of  St.  Louis  v.  O'Brien,  5  R'y  <fe 
Corp.  L.  J.,  318.  The  statutory  liability 
of  a  director  in  a  national  bank  is  not  a 
penal  liability  and  it  survives  the  death 
of  the  director  who  is  liable.  Stephens 
v.  Overstoltz,  43  Fed.  Rep.,  465  (1890). 
The  statutory  liability  of  trustees  of 
clubs  for  all  debts  contracted  during 
their  term  of  office  is  a  contract  liability. 
Rogers  v.  Decker,  131  N.  Y,  490  (1892). 

2Gridley  v.  Barnes,  103  111.,  211;  Di- 
versey  v.  Smith,  id,  378  (1882).  See,  also, 
Cable  v.  McCune,  26  Mo.,  380 ;  Lawlor  v. 
Burt,  7  Ohio  St.,  341  (1857);  Cady  v. 
Smith,  12  Neb.,  628  (1882) ;  Knox  v.  Bald- 
win, 80  N.  Y,  610  (1880).  Cf.  Duckworth 
v.  Roach,  81  N  Y,  49  (1880) ;  Wiles  v, 
Suydam,  69  N.  Y,  173.  The  federal 
courts  follow  the  state  decisions.  Price 
v.  Yates,  7  Weekly  Notes,  51  (U.  S.  C.  C, 
Pa.,  1879).  The  three  years'  statute 
of  limitations  relative  to  penalties  ap- 
plies to  an  action  to  hold  directors  liable 
under  a  statute  making  them  liable  for 
all  debts  if  they  commit  ultra  vires  acts 
which  result  in  insolvency.  Merchants', 
etc.,  Bank  v.  Northwestern,  etc.,  Co.,  51 
N.  W.  Rep.,  117  (Minn.,  1892).    A  statu- 


293 


§  223.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH. 


XII. 


can  never  be  such  a  thing  as  a  vested  right  to  enforce  a  penalty.1 
Until  judgment  is  obtained  the  legislature  may  relieve  the  parties 
from  this  penalty.2 

The  second  question  is  whether  the  courts  of  one  state  will  en- 
force a  statutory  liability  created  by  another  state,  when  the  legal 
procedure  for  enforcing  that  liability  is  prescribed  by  the  latter 
state  and  is  not  feasible  in  the  former  state.  As  already  stated, 
when  the  statute  creating  the  liability  prescribes  the  procedure  for 
enforcing  it,  that  procedure  is  exclusive  of  all  other  remedies.3 
Hence,  instances  have  occurred  in  which  the  enforcement  of  this 
statutory  liability  in  another  state  has  failed,  by  reason  of  difficul- 
ties attending  the  legal  procedure  to  be  used  in  enforcing  that  lia- 
bility.4 The  liability  will  be  enforced  only  when  it  may  be  enforced 
by  the  procedure  of  the  state  wherein  the  enforcement  is  sought.5 


tory  liability  of  directors  for  failure  to 
file  reports  is  penal  and  subject  to  the 
statute  of  limitations  on  penalties.  A 
judgment  need  not  be  obtained  against 
the  corporation  first  Larson  v.  James, 
29  Pac.  Rep.r  183  (Colo.,  1892).  A  penal 
liability  of  a  director  ends  in  case  of  his 
death,  unless  it  is  already  merged  into  a 
judgment,  in  which  case  it  survives. 
Carr  v.  Rischer,  119  N.  Y.,  117  (1890). 
The  statutory  liability  of  officers  for 
corporate  debts  for  failing  to  publish  an 
annual  notice  is  not  a  penalty  and  is  not 
barred  by  the  one  year  statute  of  limita- 
tions. Coy  v.  Jones,  47  N.  W.  Rep.,  208 
(Neb.,  1890).  The  statutory  liability  of 
stockholders  in  case  the  articles  are  not 
published  as  required  by  statute  is  not 
such  a  penal  liability  as  to  be  barred  by 
the  one  year  statute  of  limitations. 
Howell  v.  Roberts,  45  N.  W.  Rep.,  923 
(Neb.,  1890).  The  statutory  provision  in 
Illinois  making  officers  liable  for  debts 
in  excess  of  the  capital  stock  is  not  a 
penal  liability,  and  is?  not  barred  by  the 
two  year  statute  of  limitations.  It  may 
be  enforced  in  equity.  Wolverton  v. 
Taylor.  23  N.  E.  Rep.,  1007  (111.,  1890). 

iYeaton  v.  United  States,  5  Cranch, 
281  (1809);  Norris  v.  Crocker,  13  How., 
429  (1851). 

2 Id.;  also  §497,  note. 

3  See  §  220,  supra. 

<  Lowry  v.  Inman,  46  N.  Y.,  119  (1871), 


where  the  renredy  prescribed  by  the 
Georgia  corporation  was  an  execution 
levied  on  stockholders'  property,  and 
based  on  the  judgment  against  the  cor- 
poration only ;  Third  Nat'l  Bank  i\ 
Gregory,  N.  Y.  L.  J.,  Dec.  8,  1890; 
Nimick  v.  Mingo  Iron  Works,  25  W. 
Va.,  184  (1884).  See,  also,  Sav.  Assoc,  v. 
O'Brien,  51  Hun.  45  (1889).  Where  the 
statute  provides  that  the  creditor's  rem- 
edy shall  be  by  bill  in  equity,  and  that 
all  stockholders  shall  be  joined,  the  lia- 
bility cannot  be  enforced  in  a  state 
where  this  remedy  is  not  possible. 
Erickson  v.  Nesmith,  4  Allen,  233  (1862); 
S.  C,  15  Gray,  221  (1860).  Of.  S.  Q,  46 
N.  H,  371  (1866). 

5  Lowry  v.  Inman,  supra;  Driukwater 
v.  Portland,  etc.,  R  R.  Co.,  18  Me.,  35 
(1841);  Nimick  v.  Mingo,  etc.,  Works, 
supra;  Christensen  v.  Eno,  106  N.  Y, 
97  (1887);  Erickson  v.  Nesmith,  15  Gray, 
221.  Cf.  Taft  v.  Ward,  106  Mass.,  518 
(1871).  The  Illinois  courts  will  not  en- 
force the  statutory  liability  of  Illinois 
stockholders  in  a  Michigan  corporation 
where  the  Michigan  courts  have  never 
construed  the  statute  and  no  bill  has 
been  filed  there  to  determine  the  debts, 
assets  and  various  liabilities.  Young  v. 
Farwell,  28  N.  E.  Rep.,  845  (111.,  1891). 
A  Wisconsin  court  will  not  enforce  the 
statutory  liability  of  a  resident  stock- 
holder in  a  Michigan  mining  company 


294 


CH.  XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[§  224. 


Generally,  the  statute  creating  the  liability  must  be  pleaded 
Where  the  action  is  in  another  state.1  The  United  States  courts, 
however,  take  judicial  notice  of  the  statutes  of  all  the  states;  and 
in  those  courts  this  part  of  the  pleading  may  be  omitted.2  The 
courts  of  one  state  will  entertain  a  bill  of  discovery  filed  by  cor- 
porate creditors  to  obtain  the  names  of  stockholders  in  a  corpora- 
tion in  another  state,  with  a  view  to  enforcing  their  statutory 
liability  in  the  latter  state.3 

Before  suit  can  be  brought  against  a  stockholder  a  judgment  must 
be  obtained  and  execution  returned  unsatisfied  in  the  state  where 
suit  is  brought  unless  it  is  impossible.4 

§  224.  How  far  the  judgment  against  the  corporation  is  con- 
clusive of  the  creditor's  claim. —  In  general,  the  judgment  in  these 
cases  against  the  corporation  is  conclusive  as  to  the  amount  and 
validity  of  the  creditor's  claim.  Consequently,  in  most  of  the 
states,  when  suit  is  brought  to  enforce  the  stockholder's  statutory 
liability,  that  judgment  can  be  impeached  by  him  only  for  fraud 
and  collusion,  or  for  want  of  jurisdiction.5 


for  debts  due  to  laborers  where  the 
Michigan  statute  gives,  as  a  remedy  for 
enforcing  such  liability,  a  joint  action 
at  law  against  both  the  corporation  and 
the  stockholder.  May  v.  Block,  45  N. 
W.  Rep.,  940  (Wis.,  1890).  A  resident  of 
New  York  cannot  bring  suit  in  Massa- 
chusetts against  a  resident  of  California 
to  hold  him  liable  as  a  stockholder  in  a 
Kansas  corporation  under  a  statute 
making  him  liable  when  the  remedy 
against  the  corporation  has  been  ex- 
hausted, even  though  judgment  against 
the  latter  was  obtained  in  Kansas.  The 
courts  of  Massachusetts  have  uniformly 
refused  to  enforce  the  statutory  liability 
in  corporations  organized  in  other  states. 
Bank  of  North  Am.  v.  Rindge,  27  N.  E. 
Rep.,  1015  (Mass.,  1891). 

1  Salt  Lake,  etc.,  v.  Hendrickson,  40 
N.  J.  Law,  52,  holding  that  the  foreign 
statute,  when  pleaded,  must  be  set  forth 
in  substance;  and  an  averment  "pursu- 
ant to  the  statute"  is  insufficient. 

2  Fourth  National  Bank  v.  Francklyn, 
1 20  U.  S.,  747  (1887) ;  Newberry  v.  Robin- 
son, supra.  In  New  Hampshire  it  is 
held  to  be  necessary  to  set  out  in  the 
pleading  the  remedy  provided  by  the 
laws  of  the  state  creating  the  corpora- 


tion and  the  liability,  and  to  show  that 
this  remedy  can  be  emplojred  in  the 
court  where  suit  is  brought.  Rice  v. 
Merrimack  Hosiery  Co.,  56  N.  H,  114 
(1875). 

3  Post  v.  Toledo,  etc.,  R.  R  Co.,  11 
N.  E.  Rep.,  540  (Mass.,  1887). 

4  See  §  200;  also  p.  281,  n.  1.  An  ac- 
tion in  New  York,  to  enforce  the  stat- 
utory liability  of  a  stockholder  in  a  New 
York  corporation,  does  not  lie,  where 
the  only  execution  issued  was  in  Col- 
orado. Rocky  Mountain  Bank  v.  Bliss, 
89  N  Y,  338  (1882);  Dean  v.  Mace,  19 
Hun,  391  (1879);  Summer  v.  Marcy,  3 
Woodb.  &  M.,  105.  See,  also,  §  219, 
supra.  If  the  execution  is  issued  in  the 
county  of  the  chief  place  of  business  as 
required  by  statute  it  need  not  be  issued 
in  other  counties  to  enforce  stockhold- 
er's liability  for  labor  debts.  Ripley  v. 
Evans,  49  N.  W.  Rep.,  504  (Mich.,  1891). 

5  Thayer  v.  New  England  Lithographic 
Co.,  108  Mass.,  523  (1871);  Borland  v. 
Haven,  37  Fed.  Rep.,  394  (1888) ;  Came  r. 
Brigham,  39  Me.,  35  (1854);  Millikin 
v.  Whitehouse,  49  id.,  527  (1860) ;  Wilson 
v.  The  Stockholders,  etc.,  43  Pa.  St.,  424 
(1862);  Don  worth  v.  Coolbaugh,  5  Iowa, 
300  (1857) ;  Farnum  v.  Ballard,  etc.,  Ma- 


295 


§  224] 


STATUTORY   LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


In  some  jurisdictions,  however,  this  judgment  against  the  corpo- 
ration is  only  prima  facie  evidence  of  the  validity  and  amount  of 
the  creditor's  claim.1  And  in  New  York  judgment  against  the 
corporation  and  the  execution  returned  wholly  or  partially  unsat- 
isfied are  evidence  only  that  the  corporation  cannot  pay  its  debts. 
They  only  serve  to  show  that  the  creditor  has  taken  the  necessary 
precedent  steps  to  collect  his  claim  from  the  corporate  assets. 
But  he  cannot  rely  upon  the  judgment  obtained  against  the  corpo- 
ration to  establish  his  right  to  recover  against  the  shareholder.  It 
is  not  even  prima  facie  evidence  either  of  the  amount  or  validity 
of  his  claim.  The  stockholder  may  set  up  any  defense  that  the 
corporation  might  have  set  up.2     This  means  that  the  corporate 


chine  Shop,  12  Cush.,  507(1853);  Hand- 
rahan  v.  Cheshire  Iron  Works,  4  Allen, 
396  (1862);  Gaskill  v.  Dudley,  6  Mete, 
546;  Hampson  v.  Weare,  4  Iowa,  13 
(1856) ;  Bullock  v.  Kilgour,  39  Ohio  St, 
543  (1883).  Cf.  Merrill  v.  Suffolk  Bank, 
31  Me.,  57  (1849);  Holyoke  Bank  v. 
Goodman,  etc.,  Mfg.  Co.,  9  Cush.,  576 
(1852);  Bank  of  Australasia  v.  Nias,  16 
Q.  B.,  711;  S.  C,  20  L,  J.  (C.  B.),  284 
(1851),  and  §  209,  supra.  Stockholders 
sued  on  their  liability  may  show  that 
the  judgment  was  obtained  by  default, 
and  that  a  valid  defense  exists  to  the 
original  claim.  Irons  v.  Mfrs.  Bank,  36 
Fed.  Rep.,  843  (1888).  A  stockholder 
cannot  attack  the  debt  on  the  ground  of 
fraud  where  the  debt  was  incurred  in 
the  adjustment  of  claims,  and  the  stat- 
ute of  limitations  is  a  bar  to  any  fraud 
in  the  settlement  Railroad  Co.  v.  Smith 
et  at.,  31  N.  E.  Rep.,  743  (Ohio,  1891).  In 
the  case  of  Schrader  v.  Manuf'rs  Bank, 
133  U.  S.,  67  (1890),  the  supreme  court 
allowed  stockholders,  who  had  been 
sued  on  their  statutory  liability  on  na- 
tional bank  stock,  to  go  back  of  the 
judgment  against  the  bank,  such  judg- 
ment having  been  rendered  after  the 
bank  had  gone  into  liquidation. 

1  Grund  v.  Tucker,  5  Kan.,  70  (1869) ; 
Hawes  v.  Anglo-Saxon,  etc.,  Co.,  101 
Mass.,  385  (1869) ;  Grand  Rapids  Savings 
Bank  v.  Warren,  52  Mich.,  557;  Mer- 
chants' Bank  v.  Chandler,  19  Wis.,  435 
(1865).  And  see  Neilson  v.  Crawford,  52 
Cal.,  248  (1871),  passing  also  on  the  ad- 


missibility of  the  books  of  the  corpora- 
tion to  prove  its  indebtedness  to  a  cred- 
itor in  an  action  against  a  stockholder. 
2  Moss  v.  McCullough,  5  Hill,  131 
(1843).  [This  case  was  reversed  upon 
another  point  in  McCullough  v.  Moss, 
5  Denio,  567  (1846).]  McMahon  v.  Macey, 
51  N.  Y.,  155  (1872);  Miller  v.  White,  50 
id.,  137  (1872);  Chase  v.  Curtis.  113  U.  S., 
452  (1884) ;  Esmond  v.  Bullard,  16  Hun, 
65  (1878);  Conant  v.  Van  Schaick,  24 
Barb.,  87  (1857).  But  see  Slee  v.  Bloom, 
20  Johns.,  669  (1822);  Belmont  v.  Cole- 
man, 21  N.  Y.,  96  (1860);  Hastings  v. 
Drew,  76  id.,  9(1879);  Lawler  v.  Rose- 
brook,  48  Hun,  453  (1888);  Moss  v.  Oak- 
ley, 2  Hill,  265  (1842);  Berridge  v. 
Abernethy,  24  N.  Y.  Week.  Dig,  513 
(1886) ;  Stephens  v.  Fox,  83  id.,  313  (1881), 
in  which  the  ground  is  taken  that  the 
judgment  in  these  cases  is  prima  facie 
evidence  or  more,  without,  however, 
overruling  the  earlier  cases;  Trippe  v. 
Huncheon,  82  Ind.,  307  (1882),  where  a 
complaint  founded  on  the  judgment 
was  held  bad  on  demurrer  because  the 
liability  of  the  stockholder  was  looked 
upon  as  being  upon  the  original  debt 
and  not  upon  the  judgment;  South- 
mayd  v.  Russ,  3  Conn.,  52  (1819),  where, 
for  the  same  reason,  a  proceeding  by 
scire  facias  was  not  allowed  to  be 
maintained;  Whitney  Arms  Company 
v.  Barlow,  63  N.  Y,  62  (1875).  Practi- 
cally the  corporate  creditor  must  bring 
his  action  anew  against  the  sharehoidt  r 
upon  his  original  demand.     Bailey   r. 


296 


CH.  XII.] 


STATUTORY    LIABILITY   OF    STOCKHOLDERS. 


[§  225. 


creditor  is  obliged  to  prove  his  cause  of  action  over  again,  and  re- 
peat what  he  has  already  proved  in  his  action  against  the  corpora- 
tion.    Such,  also,  seems  to  be  the  rule  in  Illinois.1 

In  any  jurisdiction  where  the  stockholders  are,  by  statute,  made 
liable  for  only  a  certain  class  of  the  corporate  indebtedness,  it  is 
plain  that  they  cannot  be  charged  upon  a  judgment  recovered 
against  the  corporation,  unless  it  be  shown  that  the  claim  in  con- 
troversy comes  within  the  class  upon  which  they  are  liable.2 

§  225.  Stockholder's  miscellaneous  defenses  against  his  statutory 
Mobility. —  There  are  two  classes  of  defenses  that  may  occur  to 
a  stockholder  to  defeat  his  statutory  liability.  One  class  is  of 
defenses  that  the  corporation  itself  might  have  set  up,  or  did  set 
up,  against  the  plaintiff  when  he  sought  to  collect  his  debt  from 
the  corporation.  As  already  explained  herein,  in  some  jurisdic- 
tions, particularly  New  York,  the  stockholder  may  set  up  these 
defenses,  although  the  corporation  has  failed  to  establish  them.  In 
other  and  most  jurisdictions  he  cannot. 

A  second  class  of  defenses  include  those  which  are  personal  to 


Bancker,  3  Hill,  188  (1842);  Kincaid  v. 
Dwindle,  59  N.  Y.,  548  (1875);  Moss  v. 
Averell,  10  id.,  449  (1853) ;  Witherhead 
v.  AlleD,  4  Abb.  App.  Dec,  628  (1867).  As 
to  tbe  effect  of  recitals  in  a  decree 
against  the  corporation,  see  Chesnut  v. 
Pennell,  92  111.,  55  (1879).  This  judgment 
against  the  corporation  is  admissible 
only  as  evidence  that  the  condition  pre- 
cedent to  his  right  to  recover  from  the 
shareholder  has  been  complied  with. 
Wheeler  v.  Miller,  24  Hun,  541  (1881); 
S.  C,  sub  nom.  Wheeler  v.  Millar,  90 
N.  Y,  353  (1882);  Strong  v.  Wheaton, 
38  Barb.,  616  (1861).  But  ef.  Tyng  v. 
Clarke,  9  Hun,  269  (1876).  See,  also, 
Bissit  v.  Kentucky,  etc.,  Navigation 
Co.,  15  Fed.  Rep.,  353  (1882),  and  the 
annotation ;  Union  Bank  v.  Wando 
Mining,  etc.,  Co.,  17  S.  C,  339  (1881). 
The  judgment  may  avail,  however,  in 
these  cases  to  prevent  the  statute  of 
limitations  from  barring  the  action. 
Van  Cott  v.  Van  Brunt,  2  Abb.  N.  C, 
283,  294  (1877);  reversed  on  other  points, 
82  N.  Y,  535  (1880). 

1  Chesnut  v.  Pennell,  92  111..  55. 
In  Quick  v.  Lemon,  105  111.,  578  (1883), 
where  the  corporation  had  not  pleaded 
a  counter-claim  against  a  creditor  in  a 


suit  at  law,  a  stockholder  was  permit- 
ted to  file  a  cross-bill  in  a  chancery 
suit  brought  by  judgment  creditors 
against  the  corporation  and  certain 
stockholders.  The  stockholder  may  set 
up  that  the  plaintiff's  claim  grew  out 
of  business  transacted  by  the  corpora- 
tion after  it  had  been  put  into  liquida- 
tion by  the  court  Richmond  v.  Irons, 
121  U.  S.,  27  (1887). 

2  Bohn  v.  Brown,  33  Mich.,  257  (1876) ; 
Wilson  v.  The  Stockholders,  etc.,  43 
Pa.  St.,  424  (1862);  Conant  v.  Van 
Sehaick,  24  Barb.,  87  (1857).  Cf.  Lar- 
rabee  v.  Baldwin,  35  Gal.,  155  (1868); 
Farnsworth  r.  Wood,  91  N.  Y,  308(1883). 
Where  stockholders  are  liable  for  cor- 
porate debts  existing  on  a  certain  date, 
the  existence  of  a  corporate  creditor's 
debt  on  that  date  may  be  found  by  evi- 
dence other  than  his  judgment  against 
the  corporation.  Congdon  v.  Winsor,  21 
Atl.  Rep.,  540  (R.  I.,  1891).  A  statutory 
liability  of  directors  for  debts  of  the  cor- 
poration does  not  render  them  liable  on 
an  accommodation  indorsement  by  the 
corporation  —  the  indorsement  being 
non-enforceable.  Nat'l  Park  Bank  v. 
Remsen,  43  Fed.  Rep.,  226  (1890). 


297 


§  225.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


the  particular  stockholder,  and  not  siHi  as  the  corporation  mio-ht 
have  set  up.  They  are  largely  such  defenses  as  the  stockholder 
might  set  up  against  the  corporation  to  defeat  his  subscription. 
They  do  not  refer  to  the  validity  of  the  creditor's  debt,  but  they 
deny  that  that  particular  defendant  is  one  of  those  who  are  liable 
for  the  corporate  debts.  There  are,  in  addition  to  the  defenses 
specified  in  a  previous  chapter,1  several  defenses  which  are  pecul- 
iar to  this  statutory  liability. 

(a)  Release  or  extension. —  A  release  by  the  corporate  creditor  of 
one  shareholder  from  his  proportion  of  the  corporate  indebtedness 
will  not  operate  to  release  the  other  shareholders.2  Thus,  where  the 
shareholders  are  held  to  bo  severally  and  not  jointly  liable  under 
the  statute,  one  may  be  released  without  releasing  the  others.3 
But  whether  an  extension  given  to  the  corporation  by  a  creditor 
will  not  discharge  a  shareholder  as  to  his  liability  by  statute  seems 
uncertain.4 


1  Ch.  X,  supra. 

2  Hemes  v.  Piatt,  21  Hun.  132  (1880). 
See,  also,  Prince  v.  Lynch,  38  Cal.,  528 
(1869).  holding  that  the  other  stock- 
holders liable  only  proportionately  are 
released  only  proportionately.  The  as- 
sumption of  the  corporate  debt  by  a 
third  party  may  be  rescinded.  Borland 
v.  Haven,  37  Fed.  Rep.,  394  (1888). 

3  Bank  of  Poughkeepsie  v.  Ibbotson, 
5  Hill,  4G1  (1843).  Cf.  Herries  v.  Piatt, 
21  Hun,  132  (1880). 

4  In  the  case  of  Harger  v.  McCulloiii;h, 
2  Denio,  119  (1846),  it  was  held  that  it 
would  not;  while  in  the  later  case  of 
Parrott  v.  Colby,  6  Hun,  55  (1875);  S.  C. 
affirmed,  71  N.  Y,  597  (1877),  without 
expressly  overruling  Harger  v.  McCul- 
lough.  it  is  plainly  declared,  in  making 
an  application  of  the  short  statute  of 
limitations  provided  by  the  General 
Manufacturing  Act  of  New  York  (N.  Y. 
Laws  of  1848,  ch.  40,  §  24),  that  the 
liability  of  shareholders  in  these  cases 
cannot  be  revived  or  extended  by  any 
renewal  or  extension  of  the  indebted- 
ness which  the  creditors  may  make  with 
the  corporation.  And  in  accordance 
with  that  view,  where  the  effect  of  the 
extension  granted  by  the  creditor  to  the 
corporation  had  been  to  postpone  the 
action  against  the  shareholder  beyond 


the    time    prescribed    by    the    statute 
within  which  such  an  action  is  main- 
tainable—that  is,  one  year  from  the  time 
tin-  corporate  debt  was  first  due  —  it  was 
held  that  the  shareholder  was  thereby 
diM-harged.     Parrott    V.    Colby,   supra; 
Jaeger   Iron   Co.   v.  Walker,  76  N.  Y., 
521  (1879);  Hardman  v.  Sage.  47  Hun, 
230  (1888);  Stilphen  v.  Ware,  id  Cat,  110 
(1872>     See,  also,  Jones  v.  Barlow,  62  X. 
Y„  202  (1875);  Bolen  r.  Crosby,  49  N.  Y, 
183  (1872;.    In  Aultman's  Appeal,  98  Pa. 
St,  505  (1881),  it  was  held   that,  where 
the  extension  was  granted  at  the  request 
of  the  directors,  the  stockholders  had 
assented,  and  there  was  no  release.     A 
release  of  the  corporation  under  an  in- 
solvency statute  is  a  release  of  the  stock- 
holder's   statutory    liability.      Mohr   v. 
Minn.,  etc.,  Co.,   41    N.  W.  Rep.,   1074 
(Minn.,  18S9).    See,  also,  Hanson  v.  Donk- 
ersley.  37  Mich.,  184  (1877),  ruling  that 
the  Michigan    statute  does    not  make 
stockholders  primarily  liable,  and  hold- 
ing that  the  individual  liability  for  cor- 
porate debts  is  discharged  by  an  exten- 
sion of   time  and  the  acceptance  of  a 
corporate   note.     A  laborer's  statutory 
right  to  collect  from  the  stockholders  is 
not   waived    by   taking    the    corporate 
note.     Jackson  v.  Meek,  9  S.  W.  Rep., 
225  (Tenn.,  1888>     See  §  225  (/)  sub. 


298 


GH.  XII. J 


STATUTORY    LIABILITY    OF   STOCKHOLDERS. 


[§  225. 


(Z>)  LioMlity  already  paid. —  It  is  a  defense  to  the  stockholder 
to  prove  that  his  full  statutory  liability  has  already  been  paid  by 
him.  A  stockholder  who  has  voluntarily  paid  corporate  debts  to 
the  full  extent  of  his  corporate  liability  is  entitled  to  set  up  that 
fact.  And  when  such  a  payment  was  bona  fide  it  is  a  bar  to  an 
action  to  collect  any  further  amount.1 

(c)  Set-off. —  Closely  related  to  the  defense  of  payment  already 
made,  there  is  the  defense  that  the  defendant  stockholder  has 
claims  against  the  corporation,  and  that  he  is  to  be  credited  to  that 
amount  as  a  set-off.2 

It  has  been  held  that,  where  the  statute  creates  a  fund  out  of 
which  the  creditors  are  to  be  paid  ratably,  then  the  stockholder 


1  Garrison  v.  Howe,  17  N.  Y.,  458 
(1858) ;  Mathez  v.  Neidig,  72  N.  Y.,  100 
(1878) ;  Lane  v.  Harris,  16  Ga.,  217  (1851) ; 
Belcher  v.  Willcox,  40  id.,  391  (1869); 
Robinson  v.  Bank  of  Darien,  18  id.,  65, 
109  (1855);  Woodruff  &  Beach  Iron 
Works  v.  Chittenden,  4  Bosw.,  406 
(1859);  Boyd  v.  Hall,  56  Ga.,  563  (1S76); 
San  Jose  Savings  Bank  v.  Pharis,  58 
Cat,  380.  Cf.  Thebus  v.  Smiley,  110 
111.,  316  (1884),  where  fraud  was  in- 
volved; Delano  v.  Butler,  118  U.  S., 
634  (1886).  Contra,  Fowler  v.  Robinson, 
31  Me.,  189  (1850);  Grose  v.  Hilt,  36  Me., 
22.  But  when  a  creditor  has  actually 
commenced  a  suit  to  enforce  the  statu- 
tory liability  of  any  individual  share- 
holder, it  is  then  too  late  for  that  share- 
holder to  defeat  the  action  by  paying 
some  other  corporate  creditor's  claim. 
Jones  v.  Wiltberger,  42  Ga.,  575  (1871). 
See,  also,  Lane  v.  Harris,  16  Ga.,  217 ; 
Thebus  v.  Smiley,  110  111.,  316  (1884). 
A  contrary  conclusion  was  reached  m 
Richards  v.  Brice,  3  N.  Y.  Supp.,  941 
(Com.  PI.,  1889; ;  but  the  plain  injustice 
of  allowing  the  stockholder  to  defeat  an 
action  by  such  a  device  will  not  com- 
mend this  decision.  Nor  will  a  share- 
holder who  has  employed  an  agent  to 
buy  up  claims  at  a  discount,  and  then 
confessed  judgment  in  favor  of  that 
agent,  be  permitted  to  plead  such  a 
judgment  in  bar  of  an  action  by  other 
creditors.  Manville  v.  Karst,  16  Fed. 
Rep,  173  (1883).  A  mortgage  by  an  in- 
solvent stockholder  in  an  insolvent  cor- 


poration to  one  of  the  corporate  cred- 
itors is  a  preference  to  the  extent  of 
the  stockholder's  liability  for  corporate 
debts.  Gatch  v.  Fitch,  34  Fed.  Rep,  566 
(1888) ;  Ingalls  v.  Cole.  47  Me.,  530,  541, 
holding  that  the  mere  pendency  of  suits 
is  not  a  defense  for  a  stockholder  in  a 
later  action,  unless  the  prior  claims  have 
been  legally  established  and  his  liability 
exhausted.  Payment  of  the  judgments 
at  a  discount  is  no  exhaustion  of  the  lia- 
bility, though  the  judgments  at  full  value 
would  have  exhausted  it.  Kunkelman 
v.  Rentchler,  15  Bradw.  (111.),  271  (1884). 
2  A  shareholder  cannot  himself  buy  in 
claims  at  a  discount,  and  then  set  them 
off  at  their  face  value  in  an  action  to  en- 
force his  statutory  liability  to  creditors. 
Gauch  v.  Harrison,  12  Bradw.  (111.),  457 
(1883).  See,  also,  Thompson  v.  Meisser, 
108  111.,  359  (1884);  Diven  v.  Phelps,  34 
Barb.,  224  (1861).  A  stockholder  can  de- 
feat his  statutory  liability  by  offsetting 
judgments  against  the  corporation  pur- 
chased by  himself,  but  only  to  the  ex- 
tent that  he  paid  for  the  judgments. 
Bulktey  v.  Whitcomb,49  Hun,  290  (1888) ; 
Lingle  v.  National  Ins.  Co.,  45  Mo.,  109 
(1869);  Holland  v.  Heyman,  60  Ga.,  174 
(1878).  Where  a  stockholder  is  liable  by 
statute  and  is  also  a  creditor  of  the  in- 
solvent corporation,  the  court  will  order 
a  set-off.  Sowles  v.  Witters,  40  Fed.  Rep., 
413(1889).  Cf.  Id.,  403.  Cf.  Boulton  Car- 
bon Co.  v.  Mills,  43  N.  W.  Rep,  290  (Iowa, 
1889).  See  a  criticism  on  this  case  in 
§  193,  n.,  supra. 


299 


225.] 


STATDTOKT    LIABILITY   OF   STOCKHOLDERS. 


[CH.  XIL 


cannot  set  off  an  indebtedness  of  the  corporation  to  him.  He  must 
pay  in  what  the  statute  requires,  and  then  prove  his  claim  against 
the  corporation  like  any  other  creditor.1  But  where  the  share- 
holder's liability  by  statute  is  immediate  and  personal  and  several, 
and  any  creditor  may  sue  any  shareholder,  then  the  shareholder 
may  set  off  a  debt,  owing  to  him  from  the  corporation,  when  he  is 
sued  by  a  corporate  creditor.2 
(d)  Interest. —  In  South  Carolina,3  Maine  and  Illinois,4  the  share- 


1  Matter  of  the  Empire  City  Bank.  18 
N.  Y.,  199,  227  (1858):  Matthews  v.  Al- 
bert, 24  Md.,  527  (1866);  Briggs  v.  Corn- 
well,  9  Daly,  436;   Hobart  v.  Gould,  8 
Fed.  Rep.,  57  (1881);  Hillierr.  Allegheny 
Mutual  Ins.  Co.,  3  Pa,  St.,  470;   Law- 
rence v.  Nelson,   21   N.  Y.,  158  (1860); 
Thebus  v.  Smiley,  110  111.,  316  (1884); 
Witters  v.   Sowles,    32    Fed.    Rep,    130 
(1887).     See,   also,    Clapp  v.  Wright,  21 
Hun,  240  (1880;;  Buchanan  v.  Meisser, 
105  111.,  638  (1883).    A  stockholder  sued 
on  his  statutory  liability  cannot  offset 
judgments  which    he    has    purchased 
against  the  corporation,  except  to  the 
extent  that  he  paid  for  them.     Bulkley 
v.  Whitcomb,  1  N.  Y.  Supp.,  748  (1888) ; 
aff'd,  121  N.  Y,  107.    The  stockholder 
cannot  purchase  claims  against  the  cor- 
poration at  a  discount  and  set  them  off, 
but  can  set  them  off  for  the  amount 
paid  by  him  for  them,  even  though  they 
are    purchased    in    an    agent's    name. 
Abbey  v.  Long,  24  Pac.  Rep.,  1111  (Kan., 
1890).     A  stockholder  who  is  also  a  di- 
rector and  is  sued  on  his  statutory  lia- 
bility as  a  stockholder  cannot  set  off  a 
judgment  against  the  insolvent  com- 
pany,   which    judgment  he  purchased 
for  a  nominal  sum.     Bulkley  v.  Whit- 
comb, 121  N.  Y,  107  (1890).    For  cases 
where  the  stockholder  brings  action  as  a 
corporate  creditor,  see  Terry  v.  Bank  of 
Cape  Fear,  20  Fed.  Rep.,  777 ;  Weber  v. 
Fickey,  47  Md.,  196.    See,  also,  Emmert 
v.  Smith,  40  id.,  123;  and  §§  193,  194, 
supra;  Hollister  v.   Hollister    Bank,   2 
Abb.  App.  Dec,  367  (1865).    In  this  case 
stockholders  of  an  insolvent  bank,  after 
paying  the  judgments  had  against  them 
to    enforce  their  individual  liabilities, 


turned  around  and  asked  to  be  made,  to 
the  extent  of  those  judgments,  creditors 
of  the  bank,  and  thus  entitled  to  partici- 
pate pro  rata  with  other  creditors. 
Held,  nothing  is  to  be  repaid  to  the 
stockholders  until  all  the  debts  of  the 
bank  are  paid. 

2  Mathez  v.  Neidig,  72  N.  Y,  100  (1878) ; 
Agate  v.  Sands,  73  id.,  620  (1878); 
Wheeler  v.  Millar,  90  id.,  353,  362  (1882) ; 
Richards  v.  Crocker,  N.  Y  Daily  Reg., 
April  22,  1887 ;  Christensen  v.  Colby,  43 
Hun,  362  (1887);  Tallmadge  v.  Fishkill,  4 
Barb.,  382  (1848);  Boyd  v.  Hall,  56  Ga, 
563  (1876);  Remington  v.  King,  11  Abb. 
Prac,  278  (1858).  This  defense  is  allowed 
by  the  courts  of  New  York  in  actions  to 
enforce  the  liability  imposed  by  the 
statute  of  that  state  known  as  the  Man- 
ufacturing Companies  Act  of  1848. 
N.  Y.  Laws  of  1848,  ch.  40,  §§  10,  24. 
See  Wheeler  v.  Millar,  90  N.  Y,  353 
(1882),  a  case  in  which  the  right  to  set- 
off under  this  statute  is  fully  considered. 
The  shareholder's  right  to  set  off  his 
claim  against  the  corporation  in  defense 
to  an  action  against  him  to  enforce  his 
statutory  liability  may  sometimes  be  a 
matter  of  bona  fides.  Boyd  v.  Hall,  56 
Ga.,  563  (1876);  Belcher  v.  Willcox,  40 
id.,  391  (1869) ;  Thompson  v.  Meisser,  108 
111.,  359;  Buchanan  v.  Same,  105  id., 
638  (1883) ;  Welles  v.  Stout,  38  Fed.  Rep., 
807  (1889). 

3Sacketts  Harbor  Bank  v.  Blake,  8 
Rich.  Eq.,  225  (1849) ;  Cole  v  Butler,  43 
Me.,  401  (1857).  See  Grand  Rapids  Sav- 
ings Bank  v.  Warren,  52  Mich.,  557 
(1884);  Cleveland  v.  Burnham,  64  Wis., 
347  (1885) ;  20  &  W.  Rep.,  1015. 

<  Munger  v.  Jacobson,  99  111.,  849  (1881). 


300 


«CH.  XII.] 


STATUTORY    LIABILITY   OF    STOCKHOLDERS. 


[§  225. 


holder  is  not  liable  for  interest  on  the  amount  for  which  the  statute 
makes  him  answerable,  and  when  he  pays  the  principal  sum  the 
whole  liability  is  discharged.  In  New  York  interest  is  collectible 
from  the  time  the  suit  to  enforce  is  commenced,  instead  of  bef>in- 
ning  from  the  time  when  judgment  is  entered.1 

(e)  Costs. —  Although  it  is  a  condition  precedent  to  the  action 
against  the  shareholder  that  a  judgment  be  recovered  against  the 
corporation,  it  has  been  held  no  part  of  the  shareholder's  statutory 
liability  to  pay  the  costs  of  obtaining  that  judgment.  Accordingly 
a  judgment  against  the  shareholder  was  held  not  to  include  any 
part  of  the  costs  of  the  proceeding  against  the  corporation ;  but 
there  has  been  strong  dissent  from  this  doctrine.2 

(/)  Statute  of  limitations. —  Where  the  liability  of  the  share- 
holder is  immediate  and  primary,  and  not  contingent  on  the  ob- 
taining of  a  judgment  against  the  corporation,  it  is  clear  that  the 
statute  of  limitations  begins  to  run  in  favor  of  the  shareholder 
when  the  debt  matures  against  the  corporation.3 


i  Handy  v.  Draper,  89  N.  Y.,  334  (1882) ; 
Burr  v.  Wilcox.  22  id.,  551  (1860).  Cf. 
€asey  v.  Galli,  94  U.  S.,  673  (1876) ;  Rich- 
mond v.  Irons,  121  U.  S.,  27  (1887). 
Where  a  referee  computed  the  interest 
on  the  plaintiff's  claim  from  the  date 
on  which  it  became  due  from  the 
company  instead  of  from  the  day  the 
suit  against  the  shareholder  was  com- 
menced, it  appearing  that  the  indebted- 
ness was  less  than  the  amount  of  the 
shareholder's  liability,  and  that  the  al- 
lowance of  interest  did  not  swell  it  be- 
yond that  limit,  the  court  of  appeals 
held  such  a  computation  no  error. 
Wheeler  v.  Millar,  90  N.  Y.,  353,  362 
(1882).  Interest  on  the  judgment  is  al- 
lowed in  suit  to  enforce  a  stockholder's 
liability.  Shickle  v.  Watts,  7  S.  W.  Rep., 
274  (Mo.,  1888>  Interest  is  allowed  from 
the  day  when  the  referee  ascertains  and 
reports  the  debts  of  the  corporation. 
Nat'l  Com.  Bank  v.  McDonnell,  9  S.  Rep., 
149  (Ala.,  1891). 

2  Bailey  v.  Baneker,  3  Hill,  188  (1842) ; 
Richmond  v.  Irons,  121  U.  S.,  27  (1887) ; 
Rorke  v.  Thomas,  56  N.  Y,  559,  565 
(1874);  Miller  v.  White,  50  N.  Y,  137 
(1872).  Cf.  Veeder  v.  Mudgett,  27  Hun, 
519  (1882).  It  is  possible  that  the  rule 
might  be  otherwise  in  a  case  where  the 


judgment  is  held  to  be  conclusive  as 
against  the  shareholder.  So  in  Michigan. 
Grand  Rapids  Savings  Bank  v.  Warren, 
52  Mich.,  557  (1884).  A  judgment  for 
costs  against  a  corporation  may  be  en- 
forced against  the  director's  statutory 
liability.  Allen  v.  Clark,  108  N.  Y,  269 
(1888).  Costs  may  be  collected  against 
stockholders  in  suits  to  enforce  this  lia- 
bility. Irons  v.  Manufacturers'  Bank, 
36  Fed.  Rep.,  843  (1888),  holding  that  a 
creditor  enforcing  the  stockholder's  lia- 
bility in  behalf  of  himself  and  other 
creditors  may  have  his  costs. 

3  Davidson  v.  Rankin,  34  Cat,  503 
(1868) ;  Lindsay  v.  Hyatt,  4  Edw.  Chan. 
(N.  Y),  97  (1842);  Godfrey  v.  Terry,  97 
U.  S.,  171  (1877) ;  Conklin  v.  Furman,  8 
Abb.  Pr.  (N.  S.),  164  (1865) ;  Schalucky 
v.  Field,  16  N.  E.  Rep.,  904  (111.,  1888). 
Compare  Carrol  v.  Green,  92  U.  S.,  509 
(1875);  Terry  v.  Tubman,  92  id,  156 
(1875);  Terry  v.  McLure,  103  id.,  442 
(1880) ;  Corning  v.  MeCullough,  1  N.  Y, 
47  (1847) ;  Jagger  Iron  Co.  v.  Walker,  70 
N.  Y,  522  (1879).  See,  also,  Terry  v. 
Calnan,  13  S.  C,  220 ;  Lawler  v.  Burt.  7 
Ohio  St.,  340;  King  v.  Duncan,  38  Hur, 
461  (1886);  Stilphen  v.  Ware,  45  Cal., 
110  (1872),  holding  that,  under  California 
statute  of  limitations,  the    three  j-ears 


301 


225.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


But  when  the  creditor  must  first  obtain  a  judgment  against  the 
corporation  and  sue  out  an  execution,  which  must  be  duly  returned 
wholly  or  partially  unsatisfied  before  the  cause  of  action  arises 
against  the  shareholder  of  his  statutory  liability,  then  the  statute 
of  limitations  commences  to  run  upon  the  return  of  the  execution.1 


begin  to  run  from  the  time  the  debt 
was  clue,  and  is  not  extended  by  a  judg- 
ment obtained  against  the  corporation. 
The  stockholder's  liability  under  the 
California  statute  being  a  liability  as  a 
priucipal  debtor,  the  statute  of  limita- 
tions begins  to  run  as  soon  as  the  cred- 
itor's right  of  action  against  the  corpo- 
ration commences.  An  extension  of  the 
time  as  to  the  corporation  by  renewal 
notes  does  not  stop  the  statute  of  limita- 
tions as  regards  the  stockholder's  liabil- 
ity. Hyman  v.  Coleman.  23  Pac.  Rep., 
62  (Cal.,  1890).  The  statute  of  limita- 
tions begins  to  run  against  a  bank  stock- 
holder's statutory  liability  from  the 
closing  of  the  doors  of  the  bank.  It  be- 
gins to  run  against  the  corporation  and 
stockholders  at  the  same  time.  Mitchell 
v.  Eeckman,  28  Pac.  Rep.,  110  (Cal.. 
1883).  The  liability  in  California  of 
stockholders  by  statute  for  corporate 
debts  begins  when  the  debt  is  contracted 
and  cannot  be  extended  by  the  corpora- 
tion so  as  to  extend  this  stockholder's 
liability.  Redington  v.  Cornwall,  27 
Pac.  Rep..  40  (Cal.,  1891).  The  extension 
of  a  debt  by  taking  a  note  does  not 
delay  the  application  of  the  statute  of 
limitations  so  fai  as  a  stockholder's  lia- 
bility is  concerned.  Hardman  v.  Sage, 
121  X.  Y.,  2.1  (1890).  The  state  statute 
of  limitations  as  to  executors  and  estates 
will  be  applied  by  the  federal  courts  to 
suits  by  a  receiver  for  the  enforcement 
of  a  stockholder's  liability  in  a  national 
bank.  Butler  v.  Poole,  44  Fed.  Rep., 
586  (1890).  The  stockholder's  statutory 
liability  dates  from  and  is  based  upon 
the  original  debt  created  by  the  corpo- 
ration and  not  from  or  upon  the  judg- 
ment against  the  corporation.  New- 
berry v.  Robinson,  41  Fed.  Rep.,  458 
(1890).  An  action  based  on  the  notes  is 
not  on   the  debt  for  which   the  notes 


were  given.  Griffith  v.  Green,  13  N.  Y. 
Supp.,  470  (1891).  The  statute  of  lim- 
itations under  the  Ohio  law  begins  to 
run  against  the  stockholder's  liability 
from  the  time  when  the  corporation 
makes  an  assignment  for  the  benefit  of 
creditors,  even  though  no  judgment 
has  been  obtained  by  the  creditor.  Bar- 
rick  v.  Gifford,  24  N.  E.  Rep.,  259  (Ohio, 
1890).  In  a  suit  by  one  creditor  for  the 
benefit  of  all,  other  creditors  may  come 
in  although  the  statute  of  limitations 
would  be  a  bar  against  a  separate  suit 
by  them.  Id.  See,  also,  §  225  (a),  supra. 
i  Handy  v.  Draper,  89  N.  Y.,  334 
(1882);  Merritt  v.  Reid,  13  Week.  Dig. 
(N.  Y),  453  (1882) :  Longley  r.  Little,  26 
Me.,  162  (1846).  In  Terry  v.  Tubman,  92 
U.  S.,  156  (1ST-")),  where  the  charter  of  a 
bank  contained  a  provision  making  the 
shareholders  individually  liable  for  the 
ultimate  redemption  of  its  bills,  the 
liability  of  the  shareholders  was  held  to 
arise,  and  hence  the  statute  of  limita- 
tions to  commence  to  run  in  their  favor, 
upon  the  open  and  notorious  insolvency 
of  the  bank.  So.  likewise,  where  share- 
holders were  made  individually  liable 
"  upon  the  failure  of  the  bank,"  it  was 
held  that,  the  liability  arising  upon  the 
failure,  the  statute  of  limitations  began 
to  run  at  that  time.  Carrol  v.  Green, 
92  U.  S.,  509,  511  (1875).  To  the  same 
effect  is  Baker  v.  Atlas  Bank,  9  Mete, 
182(1845);  Terry  v.  McLure,  103  U.  S.. 
412  (1880);  Godfrey  r.  Terry,  97  id.,  171 
(1S77).  The  case  of  Terry  v.  Anderson, 
95  U.  S.,  628  (1877),  sustains  the  consti- 
tutionality of  a  statute  shortening  the 
statute  of  limitations  herein.  The  case 
In  re  Bank  of  Sing  Sing,  32  Hun,  462 
(1884) ;  affirmed,  96  N.  Y.  672,  held  that 
twenty  years'  delay  by  receiver  in 
making  report  bars  any  assessment  on 
stockholders.     A  statute  of  limitations 


302 


CH.  XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDKU-. 


.'    22 


). 


It  is  a  general  rule  of  law  that  the  statute  of  limitations  appli- 
cable to  any  ordinary  action  to  enforce  a  contract  is  the  one  appli- 
cable to  the  action  to  enforce  the  statutory  liability  of  sharehold- 
ers in  incorporated  companies.1 

Accordingly,  the  suit  must  usually  be  commenced  within  six 
years  after  the  cause  of  action  has  accrued.2 


running  from  the  time  of  dissolution 
of  the  company  is  not  set  running  by 
corporate  insolvency  and  cessation  of 
business.  Sleeper  v.  Goodwin,  31  N.  W. 
Rep.,  335  (Wis.,  1887).  Cf.  §  195.  The 
statute  of  limitations  begins  to  run  only 
from  the  time  when  the  creditors  right 
to  sue  the  stockholders  begins.  McDon- 
ald v.  Alabama,  etc.,  Ins.  Co.,  5  S.  Rep., 
120  (Ala.,  1888);  Powell  v.  Oregonian 
R'y,  38  Fed.  Rep.,  187  (1889);  33  N.  E. 
Rep.  233. 

1  Green  v.  Beckman,  59  Cal.,  545 
(1881);  Corning  v.  McCullough,  1  N.  Y., 
47  (1847) ;  Wiles  v.  Suydam,  64  id.,  173, 
176(1876);  Mappier  v.  Mortimer,  11  Abb. 
Prac.  (N.  S.),  455  (1871);  Baker  v.  The 
Atlas  Bank,  9  Mete,  182  (1845);  The 
Commonwealth  v.  The  Cochituate  Bank, 
3  Allen,  42  (1861) ;  N.  Y.  Code  of  Civil 
Proa,  §  382. 

2  The  citations  in  the  preceding  note. 
See,  also,  Phillips  v.  Therasson,  11  Hun, 
141  (1877),  holding  that  where  by  stat- 
ute the  capital  must  be  paid  in  within 
two  years  upon  pain  of  dissolution,  and 
imposes  liability  upon  stockholders  for 
debts  of  the  corporation  until  the  cap- 
ital is  fully  paid,  the  statute  of  limita- 
tions begins  to  run  at  the  expiration  of 
the  two  years  allowed  for  paying  the 
capital.  Under  the  New  York  Manu- 
facturing Act  relative  to  the  two-year 
statute  of  limitations  to  a  stockholder's 
statutory  liability,  it  begins  to  run 
upon  the  dissolution  of  the  corporation. 
The  creditor  must  sue  within  that  time. 
Hollingshead  v.  Woodward,  107  N.  Y, 
96  (1887);  King  v.  Duncan,  38  Hun,  461 
(1886),  holding  that  under  that  statute 
the  creditor  is  not  recmired  to  delay  his 
suit  until  the  two  years  has  expired  ; 
Knox  v.  Baldwin,  80  N.  Y,  610  (1880); 
Hawkins  v.  Furnace  Co.,  40  Ohio  St.,  507 


(1884).  In  South  Carolina,  under  the 
statute  of  limitations  of  1712  in  that 
state,  this  action  must  be  begun  within 
four  years.  Carrol  v.  Green,  92  U.  S., 
509  (1875)-  Terry  v.  McLure,  103  id  ,  442 
(1880).  And,  on  the  other  extreme,  in 
some  of  the  older  cases,  it  is  held  that 
an  obligation,  such  as  this,  to  pay 
money,  arising  under  a  statute,  is  a 
debt  by  specialty,  and  accordingly  that 
it  is  barred  only  b}r  a  lapse  of  twenty 
years.  Bullard  v.  Bell,  1  Mason.  243, 
289  (1817,  by  Judge  Story);  Thornton  v. 
Lane,  11  Ga..  459  (1852);  Lane  v.  Morris, 
10  id.,  162  (1851).  But  see  this  view  con- 
demned in  Carrol  v.  Green,  92  U.  S..  509, 
515  (1875),  in  an  opinion  by  Justice 
Swayne,  construing  the  South  Carolina 
statute  of  1712.  Cf.  Green  v.  Beckman, 
59  Cat,  545  (1881),  construing  ^  359,  Cal- 
ifornia Code  of  Civil  Procedure.  38  Fed. 
Rep.,  777.  Sometimes  there  is  a  provis- 
ion that  the  action  must  have  been  com- 
menced by  the  creditor  against  the  cor- 
poration within  a  given  limited  time 
after  the  maturity  of  the  debt,  in  order 
to  hold  the  share-owner  on  his  statutory 
liability.  N.  Y.  Laws  of  1848.  ch.  40, 
§  24 ;  Shellington  v.  Howlan-1,  53  N.  Y, 
371  (1873);  Birmingham  National  Bank 
v.  Mosser,  14  Hun,  605  (1878);  Lindsley  v. 
Simonds,  2  Abb.  Prac.  (N.  S),  69  (1S66). 
Cf.  State  Sav.  Ass'n  v.  Kellogg.  52  Mo., 
583  (1873).  See,  also,  Freeland  v.  McCul- 
lough, 1  Denio,  414,  422  (184."));  Mer- 
chants', etc.,  Co.  v.  Bliss,  21  How.  Pr., 
366;  affd,  35  N.  Y.  414  (I860);  Lewis  v. 
Ryder,  13  Abb.  Pr.,  1 ;  Kuykendall  v. 
Draper,  19  Hun.  577  :  Moore  v.  Boyd,  15 
Pac.  Rep.,  670  (Cat,  1887).  Frequently, 
also,  there  is  a  limitation  applicable 
particularly  to  transfers  of  stock.  Paine 
v.  Stewart.  33  Conn.,  516  (18S2).  In  this 
case  a  statute  of  Minnesota   imposing 


303 


§  225.] 


STATUTORY   LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


If  a  statutory  liability  be  held  to  be  a  penalty,  then  of  course  it 
will  be  held  to  come  within  that  provision  of  the  statute  of  limita- 
tions which  provides  for  actions  to  enforce  penalties.1 

In  general,  whatever  the  statute  be,  it  is  the  rule  that  a  lapse  of 
time  sufficient  to  constitute  a  bar  at  law  will  in  equity  be  given  the 
same  effect ;  in  other  words,  in  these  cases  there  is  the  same  statute 
of  limitations  both  at  law  and  in  equity.2 

Other  defenses. —  The  cause  of  action  against  a  stockholder,  aris- 
ing from  his  statutory  liability,  is  not  defeated  by  his  death.  The 
action  may  proceed  against  his  estate.3  The  liability  of  solvent 
stockholders  is  not  extended  beyond  the  limit  fixed  by  statute,  even 
though  other  stockholders  are  insolvent.4  A  petition  in  bankruptcy 
by  a  stockholder  is  no  bar  to  the  enforcement  of  his  liability,  unless 
the  corporate  creditor  was  a  party  to  the  bankruptcy  proceeding.5 
The  admissions  of  one  stockholder  cannot  bind  another  stockholder 
herein.6    Various  other  defenses  are  considered  in  the  notes  below.7 


liability  upon  stockholders  while  they 
were  such,  and  for  one  year  thereafter, 
'was  held,  in  an  action  in  Connecticut,  not 
to  be  operative  against  one  who  had  not 
been  a  stockholder  for  more  than  a  year 
before  the  action  was  brought.  In  New 
York  this  limitation  is  two  years.  See 
Handy  v.  Draper,  89  N.  Y.,  334,  and  ch. 
XV,  infra. 

1  See  §  223,  supra, 

2  Bank  of  Poughkeepsie  v.  Ibbotson, 
24  Wend..  473  (1840);  Carrol  v.  Green, 
92  U.  S.,  509  (1875);  Baker  v.  The  Atlas 
Bank,  9  Mete,  182  (1845);  Lindsay  v. 
Hyatt,  4  Edw.  Chan.  (N.  Y.\  104  (1842); 
Van  Hook  v.  Whitlock,  3  Paige,  409 
(1832);  Commonwealth  v.  Cochituate,  3 
Allen,  42(1861);  Terry  v.  McLure,  103 
U.  S.,  442  (1880).  When  the  statute 
prescribes  the  limitation,  there  is  of 
course  no  controversy.  Baker  v.  Bachus' 
Adm'r,  32  111.,  99. 

3  Richmond  v.  Irons,  121  U.  S.,  27 
(1887) ;  Chase  v.  Lord,  77  N.  Y,  1.  But 
see  Dane  v.  Dane  Mfg.  Co.,  80  Mass.,  489 
(1860). 

4  Crease  v.  Babcock,  51  Mass.,  525. 
See,  also,  under  the  National  Bank  Act, 
United  States  v.  Knox,  102  U.  S.,  422 
(1880). 

5  Birmingham  Bank  v.  Mosser,  14  Hun, 
605. 


6  Simmons  v.  Sisson,  26  N.  Y.,  264 
(1863). 

7  The  court  will  not  authorize  the  re- 
ceiver of  a  national  bank  to  compromise 
with  the  stockholders  on  their  liability, 
even    though    more    can    be    realized 
thereby,  the  stockholders  having  fraudu- 
lently conveyed  away  their  property  in 
order  to  avoid  liability.    In  re  Certain 
Stockholders  of  Cal.  Nat'l  Bank,  53  Fed. 
Rep.,  38  (1892).    Stockholders  cannot  set 
up  that  their  corporation  was  not  au- 
thorized by  Jaw.     McDonnell  v.  Ala., 
etc.,  Ins.  Co.,  5  S.  Rep.,  120  (Ala.,  1888); 
Nat'l  Com.  Bank  v.  McDonnell,  9  S.  Rep., 
149  (Ala.,  1891).    The  defendant  cannot 
set  up  that  he  intended  his  subscription 
as  a  gift,  where  he  received  and  retained 
the  certificate.    McDowall  v.  Sheehan, 
13  N.  Y  Supp.,  386  (1891).    It  is  no  de- 
fense that  the    corporation  had  com- 
mitted an  ultra  vires  act  in  buying  out 
another    corporation ;    nor   that    other 
stockholders  had  not  paid  for  their  stock 
in  full,  such  unpaid  portion  being  in- 
sufficient to  pay  the  debts ;  nor  that  no 
certificates  of  stock   had   been  issued. 
Mitchell  v.  Beckman,  28  Pac.  Rep.,  110 
(1883).     A  corporation  is  not  liable  on  a 
contract  of  its   promoters  to  pay  for 
drawings,  plans,  etc.     Hence,  although 
by  statute  stockholders  are  personally 


304 


CH.  XII.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS.        [§§  226-229. 


§  226.  Priority  among  creditors. —  When  the  creditor  is  entitled 
to  an  action  at  law  against  an  individual  shareholder  for  an  en- 
forcement of  a  statutory  liability,  in  order  to  collect  a  claim 
against  the  corporation  it  has  been  held  that  the  creditor  first 
suing  any  shareholder  is  entitled  to  priority  in  enforcing  his  claim 
as  against  that  particular  shareholder.  The  diligent  creditor  is  en- 
titled to  the  payment  of  his  claim,  although  other  creditors  are 
thereby  deprived  of  payment.1  The  right  to  a  priority,  however, 
in  these  cases,  is  in  general  one  of  questionable  propriety,  and  the 
courts  are  not  inclined  to  favor  it.2  And  one  creditor  may,  at 
the  instance  of  the  rest,  be  restrained  from  the  prosecution  of  his 
individual  suit  where  it  is  in  prejudice  of  the  equal  rights  of  all 
the  others.3 

§§  227-229.  Contribution  among  shareholders. —  Upon  general 
principles  of  equity,  where  a  shareholder  has  been  held  liable,  under 
the  provisions  of  a  statute,  for  a  debt  of  the  corporation  of  which 
he  is  a  member,  he  may  maintain  an  action  against  his  co-share- 
holders for  contribution.4     "Where  the  stockholders'  statutory  lia- 


liable  on  corporate  contracts,  if  the  cor- 
poration commences  business  before 
one-half  of  its  capital  is  subscribed  and 
twenty  per  cent,  is  paid  in,  they  are 
not  liable  on  such  a  contract.  Buffing- 
ton  v.  Bardon,  50  N.  W.  Ren.,  776  (Wis., 
1891).  Under  the  California  statute  it 
seems  that  a  mere  subscriber  for  stock 
is  not  liable  where  he  did  not  fulfill  the 
subscription.  Bank  of  Yolo  i:  Weaver, 
31  Pac.  Rep.,  160  (Gal.,  1892). 

iCole  v.  Butler,  43  Me.,  401  (1857), 
holding,  also,  that  the  rights  of  a  cred- 
itor who  moves  first  cannot  be  affected 
by  the  fact  that  another  creditor,  pursu- 
ing a  shorter  remedy,  obtains  judgment 
before  him ;  Ingalls  v.  Cole,  47  id.,  530, 
541  (1860);  Jones  v.  Wiltberger,  42  Ga., 
575  (1871);  Robinson  v.  Bank  of  Darien, 
18  id.,  65,  108  (1855);  Thebus  v.  Smiley, 
110  III.,  316  (1884).  Cf.  Weeks  v.  Love, 
50  N.  Y.,  568  (1872);  Miers  v.  Zanesville, 
etc..  Turnpike  Co.,  13  Ohio,  197  (1842). 
See,  also,  £  225  (b). 

2  Wright  v.  McCormack,  17  Ohio  St., 
86,  holding  that,  if  part  of  the  creditors 
institute  an  action  to  enforce  the  lia- 
bility of  all,  no  creditor  can  acquire 
priority  or  institute  a  separate  suit  on 
his  own  behalf;  Smith  v.  Huckabee,  53 


Ala.,  191  (1875);  Chicago  v.  Hall,  103 
111..  342  (1882),  holding  that,  if  a  suit  at 
law  by  a  creditor  against  a  stockholder 
be  enjoined  by  other  creditors  who  seek 
to  enforce  the  liability  for  the  benefit  of 
all  the  creditors,  and  the  stockholders 
dischai'ge  their  liability,  the  creditor  so 
enjoined  has  no  prior  lien  upon  the 
fund. 

3Eames  v.  Doris.  102  111..  350  (1882); 
Pfohl  v.  Simpson.  74  N.  Y,  137  (1878). 
Cf.  Garrison  v.  Howe,  17  N.  Y.,  458 
(185*). 

*  Aspinwall  v.  Sacchi,  57  N.  Y.  331 
(1874);  Stewart  v.  Lay,  45  Iowa,  604 
(1877);  Umsted  v.  Buskirk.  17  Ohio  St., 
113(1866);  Matthews  v.  Albert,  24  Md., 
527(1866);  Hadley  v.  Russell,  40  N.  H., 
109.  112  (1860);  Erickson  v.  Nesmith,  46 
id.,  371  (1866):  Gray  v.  Coffin,  9  Gush., 
192  (1852);  Middletowu  Bank  v.  Magill, 
5  Conn.,  61  (1823);  Brinham  v.  Wellers- 
burg  Coal  Co.,  47  Pa.  St,  43  (1864); 
Masters  t\  Rossie  Lead  Mining  Co.,  2 
Sandf,Chan.,  301  (1845):  Farrow  v.  Biv- 
ings,  13  Rich.  Eq.,  25 ;  Clark  v.  Myers, 
11  Hun,  608  (1877),  holding  that  the  ac- 
tion cannot  be  against  one  only ;  O'Reilly 
v.  Bard,  105  Pa.  St,  569  (1884),  holding 
that  a  stockholder  who  pays  a  judgment 


(20) 


305 


§  229.] 


STATUTORY    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XII. 


bility  is  enforced  by  a  suit  in  equity,  contribution  is  of  course 
enforced,  in  that  suit,  so  far  as  the  parties  can  be  found  within  the 
jurisdiction.1 


against  the  corporation  is  confined  to 
the  remedy  provided  in  the  act.  and  in 
this  case  could  not  maintain  assumpsit 
for  contribution   against   other    stock- 
holders who  were  not   parties   to  the 
judgment.  As  to  the  Pennsylvania  stat- 
utory method  of  obtaining  contribution, 
see.  also,  Brinham  v.  Wellersburg,  etc., 
Co.,  47  Pa.  St.,  43  (1864).     Stockholders 
seeking  to  enforce   contribution   from 
co-stockholder  in   foreign    corporation 
must    show   that  he,    the    plaintiff,   is 
legally  liable.     Eastman    v.   Crosby,   8 
Allen,    206.     See,   also,   Ladd    v.   Cart- 
wright.  7  Oreg.,  329 ;  Patterson  v.  Lynde, 
106  U.  S.,  519  (1882).     A  shareholder,  it 
is  said,  being  also  a  creditor  of  the  cor- 
poration,   may  make  use  of  whatever 
advantage  his  position  as  shareholder 
gives  him  to  secure  the  payment  of  his 
claim,  even   to  the  exclusion   of  other 
creditors    who    are    not    shareholders. 
Whitwell  v.Warner,   20  Vt,   425,444; 
Reichwald  v.  Commercial  Hotel  Co.,  106 
111..  439,  holding  that  the  securing  of  a 
large  debt  to  a  stockholder  for  money 
advanced,  by  means  of  a  deed   of  real 
property,  with  agreement  that  it  should 
be  considered  security,  was  not  fraudu- 
lent    See,  also,  Bristol  Milling,  etc.,  Co. 
v.  Probasco,  64  Ind.,  406 ;  Terry  v.  Bank 
of  Cape  Fear,  20  Fed.  Rep..  777.    See, 


stockholder  sued  at  law  may  enjoin  the 
suit  and  bring  all  parties  into  a  suit  in 
equity.  Officer  paying  statutory  lia- 
bility may  have  contribution.  Nicker- 
son  v.  Wheeler,  118  Mass.,  295.  Of.  Ray 
v.  Powers,  134  Mass.,  22:  Hartman  v. 
Ins.  Co.  of  Valley  of  Va.,  32  Gratt.,  242 
(1879) ;  Chandler  v.  Brown,  77  111..  334 
(1875);  Bronson  v.  Wilmington,  etc.. 
Ins.  Co.,  85  N.  C,  411  (1881);  Perry  v. 
Turner.  55  Mo.,  418  (1874);  Lindley  on 
Partnership,  pp.  1223-1474  A  stock- 
holder and  director  who  pays  his  lia- 
bility under  the  California  statute  may 
have  contribution  from  other  stockhold- 
ers. Redington  v.  Corn  well,  27  Pac. 
Rep.,  40  (Cal.,  1891). 

i  Harpold  v.  Stobart,  21  N.  E.  Rep., 
i;:;7  (Ohio,  1889).  This  case  holds  also 
that  a  stockholder  in  Ohio  "is  liable  to 
creditors  of  the  corporation  for  such 
portion  only  of  the  debts  existing  while 
he  held  the  stock  and  remaining  due 
(not  in  excess  of  the  amount  of  stock 
assigned)  as  will  be  equal  to  the  propor- 
tion which  the  capital  stock  assigned 
by  him  bears  to  the  entire  capital  stock 
held  by  solvent  stockholders,  liable  in 
respect  to  the  same  debts,  who  are 
within  the  jurisdiction,  to  be  ascer- 
tained at  the  time  judgment  is  ren- 
dered." 


also,  §  226,  supra,  to  the  effect  that  a 


306 


CHAPTER  XIII. 


LIABILITY  OF  STOCKHOLDERS  WHERE  THE  SUPPOSED  INCORPORA- 
TION DOES  NOT  PROTECT  THEM,  AND  FOR  ASSESSMENTS  BEYOND 
THE  PAR  VALUE  OF  THE  STOCK 


§  230.  Different  liabilities  of  a   stock- 
holder. 
231-34.  Liability  as  partners  by  rea- 
son of  deficient  incorporation. 

235.  Extent  of  the  liability. 

236.  Liability  as  partners  by  reason  of 

unauthorized  incorporation. 


§  237-40.  Liability  as  partners  by  reason 
of  the  fact  that  the  corporation 
is  incorporated  in  one  state  but 
does  all  its  business  in  another 
state. 
241-42.  Assessments  in  excess  of  par 

value  of  stock. 
243.  Miscellaneous  cases  of  liability. 


§  230.  Differen  t  liabilities  of  a  stockholder  on  his  stock. —  A  stock- 
holder may  be  said  to  be  liable  on  his  stock  in  three  different  ways. 
First,  he  is  liable  to  the  corporation  and  corporate  creditors  until 
the  full  par  value  of  his  stock  has  been  pai'd.1  Second,  he  may 
have  an  additional  liability  imposed  upon  him  by  statute.2  Third, 
it  may  happen  that  by  some  accident,  mistake  or  neglect,  the  sup- 
posed corporation  was  never  duly  incorporated,  or  for  some  other 
reason  the  members  become  liable  as  partners  in  a  copartnership; 
or  it  may  be  within  the  power  of  the  corporation  to  assess  the 
stockholder  for  sums  over  and  above  and  in  addition  to  the  par 
value  of  the  stock.  This  third  kind  of  liability  is  unusual  in  its 
character,  and  is  the  subject  of  this  chapter. 

§  231.  Liability  as  partners  by  reason  of  material  defects  in  be- 
coming incorporated. —  The  statutes  under  which  incorporations 
are  generally  made  provide  that  a  corporation  may  be  formed  by 
taking  certain  steps,  usually  the  making  and  filing  with  the  state, 
and  also  with  the  local  authorities,  a  certificate  signed  by  the  cor- 
porators, and  containing  a  statement  of  the  business,  of  the  capital 
stock,  and  other  facts  materia!  to   he  organization  of  the  corporation. 

Occasionally,  however,  it  happens  that  this  certificate  is  not  fully 
made  out,  as  required  by  the  statute,  or  is  not  filed,  or  some  other 
step  prescribed  by  law  is  not  complied  with.  The  corporation  is 
then  not  duly  incorporated;  and  the  state,  by  quo  warranto,  may 
oust  it  from  its  user  of  corporate  franchises.  But  it  is  a  very  dif- 
ferent and  difficult  question  to  determine  whether  a  private  indi- 
vidual may  take  advantage  of  such  facts,  and  claim  that  the  sup- 
posed corporation  is  not  a  corporation,  but  only  a  partnership. 


i  See  chs.  XI  and  III. 


2  See  ch.  NIL 


307 


§§  232,   233.]       PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS.  [dr.   XIII. 

§  232.  When  the  regularity  of  acts  in  becoming  incorporated  can- 
not be  questioned  by  a  private  individual —  As  already  explained,1 
a  subscriber  for  stock  in  a  corporation  cannot,  when  sued  for  calls 
on  bis  stock,  set  up  that  the  corporation  was  not  duly  incorporated. 
He  is  estopped  from  so  doing.  Xor  can  a  stockholder,  who  has 
funds  of  the  corporation  in  his  hands,  defeat  an  action  bv  the  cor- 
poration therefor  by  setting  up  that  the  corporation  was  not  duly 
incorporated.2  And,  in  general,  a  party  contracting  to  pay  money 
to  a  corporation,  or  to  transfer  property  to  it  as  a  corporation,  can- 
not avoid  the  obligation  of  that  contract  by  alleging  the  fact  that 
the  corporation  was  not  duly  incorporated,  provided  that  such  cor- 
porations were  allowed  by  law.3  Xor,  on  the  other  hand,  can  the 
corporation  itself  avoid  its  contracts  on  such  grounds.4 

§  233.  Corporate  creditors  cannot  hold  stockholders  liable  as  part- 
ners by  reason  of  irregularities,  mistakes  or  omissions  in  the  incorpo- 
ration of  a  de  facto  corporation. —  There  are  many  cases  to  the 
effect  that  a  corporate  creditor  seeking  to  enforce  the  payment 
of  his  debt  may  ignore  the  existence  of  the  corporation,  and  may 
proceed  against  the  supposed  stockholders  as  partners,  by  prov- 
ing that  the  prescribed  method  of  becoming  incorporated  was 
not  complied  with  by  the  company  in  question.  For  instance,  it 
has  been  held  that  where  the  articles  of  association  were  signed, 
but  not  filed  until  some  time  subsequently,  debts  contracted  in  the 
interim  might  be  collected  from  the  stockholders  as  partners.5  So, 
also,  a  total  failure  to  file  or  record  the  certificate  or  articles  of 
incorporation  has  been  held  to  render  the  members  liable  as  part- 
ners;6 as  also  an  omission  of  the  members  to  sign  and  publish  the 

!See§§  183-186;  Buffalo  &  A.  R  R  facto  corporation  cannot  be  questioned  in 

Co.  v.  Cary,  26  N.  Y..  75.  an  action  by  it  for  damages  for  an  injury 

2  Krutz  v.  Paola  Town  Co.,  20  Kan.,  to  property.  Golden,  etc.,  Co.  v.  Joshua, 
397  (187S).  etc.,  Works,  23  Pac.  Rep.,  45  (Cat,  1890). 

3  See  19  Am.  Dec,  67,  notes;  Lesseeof  Concerning  the  question  of  who  can 
Frost  v.  Frostburg  Coal  Co.,  24  How.,  complain  of  mistakes,  irregularities  and 
278  (1860),  where  the  grantor  of  land  to  illegalities  in  the  corporation,  see,  also. 
a    corporation    claimed    that    no    title  ch.  I,  sujwa. 

passed ;  Pope  v.  Capital  Bank,  20  Kan.,  4  Hoi  brook  v.  St.  Paul  Fire  &  M.  Ins. 

440  (1878),  where  the  plaintiff  corpora-  Co.,  25  Minn.,  229  (1878). 

tion  sued  the  defendant  on  a  promissory  5  Bigelow  v.  Gregory,  73  111.,  197  (1874) ; 

note ;  Fay  v.  Noble,  7  Cush.,  188,  where  a  MoVicker    v.    Coue,   28   Pac.    Rep.,   76 

third  person  was  not  allowed  to  impeach  (Oreg.,  1891).     See,  also,  Bergen  v.  Por- 

a  transfer  of  property  by  a  corporation  poise  F.  Co.,  13  Am.  &  Eng.  Corp.  Cas., 

to  another  person  setting  up  that  the  1   (N.   J.,    1886).      Contra,   Whitney    tt 

transfer  was  invalid  owing  to  informal-  Hyman,   101   U.   S.,   392  (1879).     Cf.   17 

ities    in     the     corporation.       See     ch.  Atl.  Rep..  840  (Vt.  1889). 

XXXVIII.     Under  the  California  Code,  fi  Field    v.   Cooks,    16    La.    Ann.,   153 

§  358,  the  regular  incorporation  of  a  de  (1861);  Abbott  v.  Omaha  Smelting  Co., 

308 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[§  233. 


articles  of  association ; '  or  an  indefinite  statement  of  where  the 
principal  place  of  business  of  the  corporation  is  to  be.2  In  Iowa 
and  Nebraska  the  statutory  law  makes  the  stockholders  liable  if 
the  incorporation  was  irregular.3 


4  Neb.,  416  (1876);  Garnett  v.  Richard- 
son, 35  Ark.,  144  (1879) ;  Ferris  v.  Thaw, 
72  Mo.,  449  (1880) ;  Coleman  v.  Coleman, 
78  Ind.,  344  (1881);  Martin  v.  Fewell,  79 
Mo.,  401,  410  (1883).  In  the  case  of 
Hurt  v.  Salisbury,  55  Mo.,  310  (1874), 
corporate  officers  were  held  personally 
liable  on  a  promissory  note  signed  by 
them  as  officers,  where  the  certificate  of 
incorporation  was  not  filed  as  required. 
In  Richardson  v.  Pitts,  71  Mo..  128 
(1879),  the  same  officers  were  held  to 
be  entitled  to  contribution  from  other 
members  of  the  supposed  corporation. 
Cf  Blanchard  v.  Kaull,  44  CaL,  440 
(1872);  Western,  etc.,T.  Co.  v.  U.  P.  R'y, 
3  Fed.  Rep.,  721,  729  (1880).  In  Garnett 
r.  Richardson,  35  Ark.,  144,  the  court 
held  stockholders  liable  as  partners  until 
the  certificate  was  filed  with  the  secre- 
tary of  state.  Cf.  Harrod  v.  Hamer,  32 
Wis.,  162  (1873),  where  the  statute  ef- 
fected an  incorporation  without  fil- 
ing, but  prohibited  organization  until 
after  the  articles  were  filed.  The  fil- 
ing of  the  certificate  in  the  county  clerk's 
office,  as  required  by  statute,  is  essen- 
tial to  incorporation.  Childs  v.  Hurd, 
9  S.  E.  Rep.,  362  (W.  Va.,  1889).  In 
Bigelow  v.  Gregory,  73  I1L,  197  (1874). 
the  court  held  that  there  was  no  corpo- 
ration until  the  certificate  was  filed, 
and  that  a  creditor  might  recover  from 
a  stockholder  as  a  partner.  In  Indian- 
apolis Min.  Co.  v.  Herkimer,  46  Ind., 
142  (1874),  the  court  held  that  there  was 
no  corporation  until  the  certificate  was 
filed,  and  that  a  subscriber  to  the  arti- 
cles who  had  agreed  to  pay  the  corpo- 
ration his  dues  when  it  was  organized 
could  successfully  resist  its  suit  until 
the  certificate  was  filed.  In  State  v. 
Cent.  O.  Mut.  R.  Ass'n,  29  Ohio  St,  399, 
the  court  ousted  an  association  whose 
notice  of  acceptance  to  the  state  was  in- 
definite and  ambiguous. 


1  Unity  Ins.  Co.  v.  Cram,  43  N.  H, 
636  (1862) ;  Kaiser  v.  Lawrence  S.  Bank. 
50  Iowa,  104  (1881),  where  the,  articles 
were  not  properly  signed  and  acknowl- 
edged. This  case  also  disapproves  the 
decision  in  Humphrey  V.  Mooney,  1  Col., 
282  (1880).  In  enforcing  this  partner- 
ship liability,  the  assumed  corporation 
is  not  to  be  made  a  party  defendant 
with  the  members  thereof.  Smith  v. 
Colorado  Fire  Ins.  Co.,  14  Fed.  Rep.,  399 
(1882). 

2  Harris  v.  McGregor,  29  Cal..  124 
(1865).  The  fact  that  the  party  con- 
tracted with  them  under  a  corporate 
name  is  immaterial,  since,  at  common 
law,  parties  may  carry  on  business 
under  any  name  they  may  choose. 
Lauferty  v.  Wheeler,  11  Abb.  N.  C. 
223 ;  Lindley  on  Partn.,  182  (Callaghan 
&  Co.,  1881).  The  case  of  Chaffe  v. 
Ludeling,  27  La.  Ann.,  607  (1875),  well 
says:  "Obligors  are  bound,  not  by  the 
style  which  they  give  to  themselves,  but 
by  the  consequences  which  they  incur 
by  reason  oi  their  acts.  It  matters  not 
what  they  choose  to  call  themselves." 
See,  also,  Nat*l  Bank,  etc.,  v.  LanJon, 
45  N.  Y.,  410,  414  (1871);  Ridenour  v. 
Mayo,  40  Ohio  St,  9  (1883).  Cf.  Wentz 
i\  Lowe,  3  Atl.  Rep.,  878  (Pa,  1886). 
An  individual  may  enforce  a  contract 
which  he  makes  for  himself  but  in  the 
name  "  The  National  Associated  Press, 
James  H.'Goodsell,  President."  Goodsell 
v.  Western,  etc.,  Tel.  Co.,  130  N.  Y..  430 
(1892).  Corporate  creditors  may  attack 
the  validity  of  the  corporate  organization. 
Empire  Mills  V.  Alston,  etc.,  Co.,  15  S. 
W.  Rep.,  505  (Tex.,  1891).  Insufficient 
statement  in  the  papers  to  be  filed  as  to 
the  property  which  is  turned  in  for 
stock  renders  the  stockholders  liable  as 
partuers.  Van  Horn  v.  Corcoran,  18 
Atl.  Rep..  16  (Pa..  1889). 

3  In  C!egg  v.  Hamilton  Co.,  61  Iowa, 


309 


§  231.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS.  [CH.  XIII. 


§  234.  During  the  past  few  years,  however,  the  great  weight  of 
authority  has  clearly  established  the  rule  that  where  a  supposed 
corporation  is  doing  business  as  a  de  facto  corporation,  the  stock- 
holders cannot  be  held  liable  as  partners,  although  there  have  been 
irregularities,  omissions  or  mistakes  in  incorporating  or  organizing 
the  company.  The  corporation  is  a  de  facto  corporation  where 
there  is  a  law  authorizing  such  a  corporation  and  where  the  com- 
pany has  made  an  effort  to  organize  under  that  law  and  is  trans- 
acting business  in  a  corporate  name.1  This  rule  applies  to  claims 
based  on  tort  the  same  as  to  those  based  on  contract.2 

It  must  be  admitted  that  this  conclusion  of  the  law  is  reasonable 


121,  the  court  held  that  publishing  the 
articles,  which  did  not  contain  all  the 
requirements  of  the  statutory  notice, 
was  insufficient,  and  stockholders  were 
liable  as  partners.  In  Iowa  stockhold- 
ers are  liable  as  partners,  by  statute,  if 
the  incorporation  is  not  regular.  Eisfield 
V.  Kenworth.  50  Iowa,  389  (1879).  In 
First  Nat.  Bauk  v.  Davies,  43  Iowa.  424 
(1876).  the  court  held  that,  where  the 
state  waived  notice  by  permitting  the 
filing  to  be  made  with  its  secretary 
within  ninety,  days,  vested  rights  ac- 
crued which  would  not  be  affected  by 
failure  to  file  within  that  time.  See, 
also.  Jcssup  v.  Carnegie,  80  N.  Y.,  441 
(1880).  Under  the  Iowa  statutes  the 
st>  >ckholders  are  liable  as  partners  where 
the  certificate  of  incorporation  failed  to 
state  the  highest  amount  of  indebted- 
ness which  the  company  might  incur. 
Heuer  v.  Carmichael,  47  N.  W.  Rep., 
1034  (Iowa,  1891).  Although  the  articles 
are  not  recorded  as  required  by  statute, 
yet  as  between  themselves  the  parties 
are  stockholders  and  not  partners. 
Heald  r.  Owen,  44  N.  W.  Rep,  210  (Iowa, 
1890).  Under  the  Iowa  statutes  an  in- 
sufficient incorporation  of  the  plaintiff 
foreign  corporation  is  not  put  in  issue 
by  a  denial  of  ii  corporation.  The  de- 
ficiency must  be  specifically  alleged. 
Warder,  etc.,  Co.  v.  Jack,  48  N.  W.  Rep, 
729  (Iowa,  1891).  In  an  action  against 
individual  stockholders  to  charge  their 
property  with  a  judgment  rendered 
against  the  corporation,  the  plaintiff  is 
not  estopped  to  allege  defects  in  its  or- 


ganization by  reason  of  having  recog- 
nized the  corporation  in  dealing  with  it 
and  in  bringing  suit  against  it  as  such. 
Heuer  v.  Carmichael  (Iowa),  47  N.  W. 
Rep.,  1034,  followed.  Stivers  v.  Car- 
michael, 49  N.  W.  Rep.  984  (Iowa,  1891). 
Failure  to  complete  the  publication  as 
required  by  statute  does  not  render  the 
stockholders  liable  under  the  Iowa  stat- 
ute to  a  creditor  who  entered  into  his 
contract  before  the  time  allowed  for 
publication  had  expired.  Thornton  v. 
Balcom  et  al,  52  N.  W.  Rep.,  190  (Iowa, 
1892).  Although  the  statute  requires 
the  articles  to  state  the  amount  of  in- 
debtedness which  may  be  incurred,  the 
articles  may  fix  the  amount  with  the 
rig) it  to  the  stockholders  to  increase  it 
up  to  the  statutory  limit.  Thornton  v. 
Balcom  et  at..  52  N.  W.  Rep.,  190  (Iowa, 
1892).  The  fact  that  the  whole  capital 
stock  is  not  subscribed  is  not  a  failure 
to  comply  with  the  law  relative  to  or- 
ganizations so  as  to  render  the  stock- 
holders liable  as  partners  under  the 
Iowa  statute.  Sweney  et  al.  v.  Talcott 
et  a/..  52  N.  W.  Rep.,  106  (Iowa,  1892).  Al- 
though the  statute  renders  stockholders 
liable  as  partners  unless  there  has  been  a 
substantial  compliance  with  the  statute 
relative  to  organization,  yet  the  courts 
are  not  inclined  to  enforce  sucn  liabil- 
ity. Porter  v.  Sherman,  eta,  Co.,  54  N. 
W.  Rep.,  424  (Neb.,  1893). 

1  See  cases  in  notes  below ;  also  §  185, 
note. 

2  Demarest  v.  Flack,  32  N.  Y.  St  Rep., 
675  ;  affirmed,  128  N.  Y,  205. 


310 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


L§  234. 


and  just.  There  is  no  reason  why  parties  who  have  dealt  with  a 
corporation  as  a  corporation  should  afterwards  be  allowed  to 
claim  more  than  fchev  originally  bargained  for  and  to  hold  the 
stockholders  personally  liable.  Such  a  rule  would  be  disastrous 
in  the  extreme.  The  dangers  to  business,  the  hardship  to  inno- 
cent parties  and  the  disinclination  to  invest  in  corporate  enter- 
prises would  be  such,  if  stockholders  were  subject  to  this  un- 
known peril,  that  the  courts  have  gradually  departed  from  the  old 
decisions  on  this  subject  and  have  wisely  refused  to  hold  the  stock- 
holders liable.  Recent  cases  have  so  settled  the  law  beyond  rea- 
sonable controversy.1 


i  Whitney  v.  Wyraan,  101  U.  S.,  392. 
The  members  of  a  supposed  corporation 
are  not  liable  individually  on  a  loan  of 
money  made  to  it,  even  though  it  was 
irregularly  incorporated.  Larned  v. 
Beal,  23  Atl.  Rep.,  149  (N.  H.,  1889). 
"  Where  there  is  a  statute  authorizing 
the  creation  of  a  corporation,  an  attempt 
to  comply  with  the  statute,  and  an  act- 
ual exercise  of  corporate  functions,  the 
existence  of  the  corporation  can  only 
be  destroyed  b}'  a  direct  proceeding." 
Crowder  v.  Town  of  Sullivan,  28  N.  E. 
Rep.,  94  (Ind.,  1891).  Where  the  articles 
were  riled  with  the  county  clerk  on 
November  9,  1886,  and  goods  were  pur- 
chased of  plaintiff  soon  after,  and  the 
articles  were  not  filed  with  the  secretary 
of  state  until  August  17,  1887.  the  plaint- 
iff cannot  ignore  the  corporation  and 
hold  the  parties  liable  as  partners.  The 
plaintiff  made  the  contract  supposing  he 
was  dealing  with  a  corporation.  Van- 
nemare  v.  Young,  20  Atl.  Rep.,  53  (N.  J., 
1890).  Under  the  Colorado  statute  re- 
quiring the  certificate  to  set  forth  by 
whom  the  corporate  affairs  shall  be  con- 
ducted, a  provision  that  they  shall  be 
conducted  by  the  president,  vice-presi- 
dent and  attorney,  instead  of  providing 
for  directors,  is  insufficient.  The  corpo- 
ration is  only  de  facto,  but  an  incorpo- 
rator aud  a  vendor  of  property  to  it 
cannot  question  the  incorporation. 
Bates  v.  Wilson,  24  Pac.  Rep.,  99  (Colo., 
1890).  Though  the  provision  in  the 
Kentucky  statutes  requiring  publication 
of  the  charter  is  not  complied  with,  yet 

31 


the  corporation  is  valid  and  complete, 
except  that  the  state  may  proceed  to 
annul  the  charter.  No  other  party  can 
raise  the  objection.  Stutz  v.  Handley, 
41  Fed.  Rep..  531  (1890) ;  Walton  v.  Riley, 
85  Ky.,  413,  421,  overruling  Heinig  v. 
Manufacturing  Co.,  81  Ky,  300.  Fail- 
ure to  file  the  articles  with  the  secretary 
of  state  is  not  fatal.  Portland,  etc.,  Co. 
v.  Bobb,  10  S.  W.  Rep.,  794  (Ky.,  1889). 
In  proving  incorporation  it  is  not  nec- 
essary to  prove  publication  as  required 
by  statute.  Brown  v.  Corbin,  42  N.  W. 
Rep.,  481  (Minn.,  1889).  Although  there 
are  less  stockholders  and  less  directors 
than  the  statute  or  charter  require,  yet 
the  acts  of  these  are  sufficient  to  sustain 
obligations  incurred  by  the  corporation 
with  third  persons.  Welch  v.  Importers', 
etc.,  Bank,  122  N.  Y.,  177  (1890)'.  The 
grantor  of  land  cannot  claim  that  the 
grantee  was  unincorporated  aud  not 
qualified  to  hold  land,  the  incorporation 
being  only  partially  completed.  Rein- 
hard  v.  Virginia,  etc.,  Co.,  18  S.  W.  Rep., 
17  (Mo.,  1891).  The  failure  to  specify 
the  term  of  existence  is  not  fatal  where 
the  general  act  limits  the  time.  Albright 
v.  Lafayette,  etc.,  Ass'n,  102  Pa.  St.,  411, 
423  (1883) ;  Becket  u  Uuiontovvn,  etc., 
Assn,  88  id.,  211  (1878). 

In  the  case  Seacord  v.  Pendleton,  55 
Hun,  579  (1890),  there  was  no  pretense 
of  any  attempt  to  incorporate  the  bank 
and  yet  the  stockholders  were  held  not 
liable.  See  S.  C,  sub  nam.  Merchants' 
Nat'l  Bank  v.  Pendleton,  9  N.  Y.  Supp.,  46. 
In  Christian  v.  Bowman,  51  N.  W.  Rep.' 
1 


234.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XIII. 


The  mere  assumption  of  corporate  powers,  without  any  attempt 
at  incorporation,  cannot,  of  course,  exempt  the  members  from  full 
liability  as  partners.1 

The  corporation  itself  cannot  set  up  the  defense  that  it  was 
irregularly  incorporated,2  nor  can  a  foreign  corporation.3 


663  (Minn.,    1892),    where  there  was  a 
failure   to   file   the   proper  affidavit   of 
prblication,  the  directors  were  held  per- 
sonally liable  for   debts,  but  the  court 
stated  that  if  the  case  had  been  properly- 
tried  a  different  conclusion  might  have 
been  reached.     One  who  takes  part  in 
organizing  the  company  cannot  hold  its 
members    liable    as    partners    on     the 
ground  that  it  was  irregularly  organized# 
Allegheny  Nat']  Bank  v.  Bailey,  23  Atl. 
Rep.,   439  (Pa,  1892).     Nor  can   one  to 
whom  he  assigns  a  leasehold.     Egbert  v. 
Kimberly,  id.,  436.     Where  a  creditor  of 
a  bank  sues  the  stockholders  as  partners 
the  burden  of  proof  is  on  him  to  prove 
that    no  corporation   existed,   it  being 
shown  that  the  bank  always  acted  as  a 
corporation  and  held   itself  out  as  such 
ami  was  supposed  so  to  be  by  the  stock- 
holders.     Hallstead   v.    Curtis,   22   Atl. 
Rep.,  977  (Pa.,  1891).    Although  a  major- 
ity of  the  incorporators  assume   to  be 
residents,  but  are  not  and  the  charter  is 
forfeited,  yet  stockholders  who  become 
such   after  incorporation   and   without 
knowledge  of  the  fraud  cannot  be  held 
liable  as  partners.     American  Salt  Co. 
v.    Heidenheimer,  15  S.  W.  Rep.,  1038 
(Tex.,  1891).     A  stockholder  cannot  sus- 
tain a  bill  in  equity  to  have  the  de  facto 
going  corporation  wound  up  as  a  part- 
nership  by   proving   that    the    articles 
were  not  filed  in  the  office  of  the  re- 
corder of  deeds  for  the  county,  nor  by 
proof  that  his  subscription  was  not  in 
good   faith.     "The  general  rule  is  that 
one  who  deals  with  a  corporation  as  ex- 
isting de  facto  is  estopped  to  deny  that 
as    against    it    it    has  been  legally  or- 
ganized." Bushnell  v.  Consolidated,  etc., 


Co.,  27  N.  E.  Rep.,  596  (111.,  1891).  A 
failure  to  organize  does  not  render  the 
stockholders  liable  as  partners,  business 
having  been  carried  on  without  organi- 
zation after  the  filing  of  the  papers. 
Cory  v.  Lee,  8  S.  Rep.,  694  (Ala.,  1891). 
The  failure  to  insert  in  the  certificate  a 
provision  as  to  the  residences  of  the 
persons  does  not  render  the  stockholders 
liable  as  partners.  The  defendant  in 
this  case  alleged  that  it  was  a  corpora- 
tion de  facto  and  that  plaintiff  sold 
goods  to  and  contracted  with  defendant 
as  a  corporation,  knowing  that  it  was 
doing  business  as  such.  The  contract 
was  made  with  it  in  its  corporate  name 
and  capacity.  Sniders,  etc.,  Co.  v.  Troy, 
8  S.  Rep.,  658  (Ala.,  1890). 

In  Alabama  the  stockholders  are  not 
liable  for  the  debts,  merely  because  the 
articles  of  incorporation  do  not  specify 
the  instalments  by  which  the  unpaid 
capital  stock  shall  be  paid  in.  Boiling 
v.  Le  Grand,  6  S.  Rep..  332  (Ala.,  18S9). 
Where  a  corporation  has  been  author- 
ized by  a  judge  as  provided  by  statute, 
but  no  certificate  has  been  issued,  the 
corporation  is  sufficiently  formed  to  de- 
feat the  plea  of  nul  tiel  corporation. 
Sparks  t'.  Woodstock,  etc.,  Co.,  6  S.  Rep., 
195  (Ala.,  1889).  If  proof  is  given  by 
plaintiff  that  a  copartnership  existed 
and  the  defense  is  that  it  was  a  corpo- 
i-ation,  the  defendant  must  prove  that 
fact.  Although  the  company  had  a 
president  and  secretary,  this  in  itself 
does  not  raise  a  presumption  of  a  corpo- 
ration. Clark  v.  Jones,  6  S.  Rep.,  362 
(Ala.,  1889).  Failure  to  file  the  articles 
of  association  with  the  county  clerk,  as 
required  by  statute,  does  not  render  the 


'Pettis  v.  Atkins,  60  III,  454   (1871); 
Fuller  v.  Rowe,  57  N.  Y.,  23  (1874). 
2  See  §  637,  infra. 


3  Liter  v.  Ozokerite  Min.  Co.,  27  Pac. 
Rep.,  690  (Utah,  1891J. 


312 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[§  235. 


§  235.  Extent  of  the  liability  l>y  reason  of  deficient  incorpora- 
tion.—  The  mere  fact  that  an  attempted  incorporation  has  failed 
does  not  necessarily  render  all  the  participants  therein  liable  ab- 
solutely for  the  debts  of  the  concern.     At  the  most,  each  is  liable 


stockholders  liable  as  partners.   Granby, 
eta,  Co.  v.  Richards,  8  S.  W.  Rep.,  246 
(Mo.,  1888).      Where  the  certificate  or 
articles  arc   to  be  filed  both  with  the 
state  and  the  local  authorities,  a  failure 
as  to  the  former  does  not  render  the 
stockholders  liable  as  partners,  provided 
the  articles  or  certificate  are  filed  with 
the  local  authorities.     Mokelumne  Hill 
Min.    Co.   v.   Woodbury,    14    Cal.,    424 
(1859) ;  Raisbeck  v.  Oesterricher,  4  Abb. 
N.  C,  444  (1878) ;  Cross  v.  Pinckney  ville 
Mill  Co.,  17  II].,  54.     The  creditor  cannot 
sue    the  directors  for    damages   for  a 
fraudulent  conspiracy  herein,  especially 
when  he  was  informed  that  the  corpo- 
ration   had    been    irregularly    incorpo- 
rated.    Nelson  v.  Luling,  62  N.  Y.,  645 
(1875).   Stating  place  of  business  suffices 
for  principal  place  of  business.     In  re 
Spring,  etc.,  Works,  17  Cat,  132  (1860). 
That  a  failure  to  file  the  certificate  with 
the  secretary  of  state  does  not  invalidate 
the  corporation,  see  Tarbell  v.  Page,  24 
111.,  46  (1860).     See,  also,  to  same  effect, 
Planters',  etc..  Bank  v.  Padgett,  69  Ga., 
159  (1882);    Humphreys  v.   Mooney,   5 
Col.,  282  (1880);    Gartside  Coal  Co.  v. 
Maxwell,  22  Fed.  Rep.,  197  (1884);'Mer- 
riman  v.  Magivennis,  12  Heisk.  (Tenn.), 
494    (1873);    Merchants',   etc.,   Bank  v. 
Stone,   38  Mich.,   779  (1878):  Jessup  v. 
Carnegie,  80  N.  Y.,  441  (1880),  applying 
an  Iowa  decision  to  an  Iowa  case,  First 
Nat.  Bank-*  Davies,  43  Iowa,  424  (1876). 
In   Holmes  v.  Gilliland,  41  Barb.,  568, 
the  court  held  that  failure  to  give  notice 
to  the  community  by  publication  does 
not  make  the  stockholders  partners.    In 
the  case  of  De  Witt  v.  Hastings,  69  N.  Y, 
518  (1877),  where  no  certificate  was  filed 
owing  to  an  abandonment  of  the  enter- 
prise, it  was  held  that  a  subsequent  fil- 
ing of  it  could  not  render  liable  one  of 
the  original  promoters  who  took  no  part 
in  the  filing  of  the  articles  of  associa- 


tion, although  his  name  was  attached 
thereto.  In  People  v.  Sel fridge,  52  Cal, 
331,  an  action  was  brought  on  the 
ground  that  the  certificate  filed  did  not 
show,  as  required,  that  a  majority  of  the 
stockholders  were  present  at  the  meet- 
ing to  organize.  The  defendant  offered 
to  prove  that  a  majority  were  in  fact 
present,  but  the  court  refused  to  receive 
the  evidence  and  rendered  judgment  of 
ouster.  Such  facts,  however,  are  no  de- 
fense to  subscriptions.  See  §§  183-186, 
supra,  and  §  637,  infra.  See,  also, 
ch.  XLI,  relative  to  foreign  corpora- 
tions. And  see  ch.  XXXVIII,  as  to  who 
can  attack  the  legality  of  a  de  facto  cor- 
poration. 

A  failure  to  notify  each  member  of 
the  meeting  to  organize  is  immaterial. 
McClinch  v.  Sturgis,  72  Me.,  288  (1881). 
See,  also,  Judah  v.  America,  etc.,  Co.,  4 
Ind.,  333  (1853) ;  Russell  v.  McLellan,  31 
Mass.,  63  (1833);  Newcomb  v.  Reed,  12 
Allen,  362.  A  failure  to  give  the  stat- 
utory notice  of  the  first  meeting  is  im- 
material where  all  but  one  stockholder 
was  present  and  he  afterwards  ratified 
all  that  was  done.  Babbitt  v.  East,  etc., 
Co.  (N.  J.,  1876),  Stew.  Dig.,  p.  208, 
§  13.  The  omission  of  an  immaterial 
part  of  the  acknowledgment  by  an  in- 
corporator, and  the  omission  of  a  certifi- 
cate of  notaryship,  do  not  render  the 
incorporators  liable  as  partners.  Stout 
v.  Zulick,  7  Atl.  Rep.,  362  (N.  J.,  1886). 
A  failure  to  commence  the  principal 
business  does  not  invalidate  the  incor- 
poration. Trowbridge  v.  Scudder,  66 
Mass.,  83  (1853).  Nor  does  an  ultra  vires 
act  or  fraud  of  the  corporation  have 
that  effect.  Langan  v.  Iowa  &  Minn. 
Con.  Co.,  49  Iowa,  317  (1878);  Second 
Nat'l  Bank  of  Cin.  v.  Hall,  35  Ohio  St, 
158  (1878).  Where,  however,  an  incor- 
porated society  used  all  its  funds  to  con- 
test a  debt,    the    court  compelled   the 


313 


236.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS.  [CJ.  XIII. 


only  in  case  he  would  be  liable  if  the  original  plan  had  been  to 
form  a  partnership.  If  he  was  not  a  member  when  the  debt  was 
contracted  he  cannot  be  held  liable  on  that  particular  debt.1  One 
case  goes  still  further,  and  holds  that  one  who  becomes  a  member 
subsequently  to  the  attempted  incorporation,  but  takes  no  part  in 
the  organization  or  management  of  the  company,  cannot  be  held 
liable  for  its  debts.2 

§  236.  Liability  as  'partners  by  reason  of  fact  that  corporations 
cannot  he  organized  for  the  business  involved. —  The  general  incor- 
porating acts  common  to  most  of  the  states  usually  specify  the 
particular  kinds  of  business  for  the  prosecution  of  which  corpora- 
tions may  be  formed  thereunder.  It  follows  that  no  business  can  be 
carried  on  by  persons,  as  a  corporation,  under  the  incorporating  act, 
unless  that  particular  business  is  specified  therein.  Many  decisions 
on  what  kinds  of  business  are  included  in  the  words  used  in  various 
statutes  of  the  different  states  are  given  in  the  notes  below.3 


members  to  replace  the  money  so  used. 
Adm'r  of  Bigelow  v.  Cong.  Society  of 
M.,  11  Vfe,  283  (1839).  In  the  case  of 
Meuill  v.  Collier,  16  Ohio  St  599,  613 
(1866),  the  court  said :  "  When  the  entire 
business  carried  on  by  persons  in  the 
name  of  a  corporation  is  such  as  tbe 
corporation  is  prohibited  by  law  from 
doing,  tlie)r  caunot  interpose  the  corpo- 
rate privileges  between  them  and  the 
liabilities  which  the  law  imposes  upon 
individuals  in  the  transaction  of  similar 
business  without  the  use  of  the  corpo- 
rate name."  Where  the  articles  of  in- 
corporation are  signed  and  filed,  but 
no  organization  ever  had,  a  part  of  the 
subscribers  are  not  liable  for  debts  con- 
tracted by  another  part  in  the  corporate 
name.  Rutherford  v.  Hill,  29  Pac  Rep., 
546  (Oreg.,  1892).  Although  the  corpo- 
ration is  apparently  abandoned  and  an 
agreement  as  to  contributions  is  signed, 
yet  the  courts  are  inclined  to  hold  that 
the  business  is  still  that  of  the  corpora- 
tion. Rio  Grande,  etc.,  Co.  v.  Burns,  17 
S.  W.  Rep.,  1043  (Tex.,  1891).  Stock- 
holders cannot  be  held  liable  as  part- 
ners on  the  ground  of  illegal  incorpora- 
tion where  there  is  a  law  authorizing 
incorporation  for  that  purpose,  and  an 
attempt  was  made  to  organize  there- 
under, and  there  was  user.     Finnegan 


v.  Knights,  etc.,  Ass'n,  53  N.  W.  Rep.. 
1150  (Minn.,  1893).  Although  the  stat- 
utes require  the  directors  to  be  residents 
of  the  state,  nevertheless,  even  though 
the  directors  are  non-residents,  the  in- 
corporation is  valid  and  the  corporation 
is  not  dissolved,  nor  are  the  stockholders 
liable  as  partners.  Demarest  v.  Flack, 
128  N.  Y.,  205  (1891).  Statutory  provis- 
ions as  to  notice  of  the  first  meeting  are 
directory.  They  need  not  be  observed 
if  the  stockholders  acquiesce.  Brain- 
tree,  etc.,  v.  Braintree,  16  N.  E.  Rep.,  420 
(Mass.,  1881). 

1  Fuller  v.  Rowe,  57  N.  Y.,  23  (1874> 
See,  also,  §  508,  infra.  In  a  suit  against 
stockholders  as  partners,  the  defendants 
may  require  the  joinder  of  their  asso- 
ciates. De  "Witt  v.  Hastings,  69  N.  Y., 
518  (1877). 

2  Stafford  Bank  r.  Palmer,  47  Conn., 
443  (1880).  Cf.  Richardson  v.  Pitts,  71 
Mo.,  128  (1879). 

3  Thus,  where  a  rifle  club  attempted 
incorporation  under  the  statute  allow- 
ing incorporation  for  "  literary,  scien- 
tific and  charitable  purposes,"  the  mem- 
bers were  held  individually  liable  for 
damages  to  the  widow  of  a  man  who 
was  killed  by  a  bear  which  the  club  was 
keeping.  Vredenburg  v.  Behan,  33  La. 
Ann.,   627   (1881).      See,    also,    Glen  u 


314 


CH, 


XIII.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[§  236. 


If  a  general  incorporating  act  is  unconstitutional,  all  supposed 
corporations  formed  thereunder  are  merely  partnerships  and  the 
members  are  liable  as  partners.1     If  the  business  itself,  for  which 

Breard,  35  La.  Ann.,  875  (1883).  Many  10  S.  E.  Rep.,  327  (Va.,  1889).  A  corpo- 
business  purposes  may  be  specified  in 
one  charter.  Bird  v.  Daggett,  97  Mass., 
494  (1867).  A  bank  cannot  incorporate 
under  act  for  "  any  species  of  trade  or 
commerce."  Bank  of  California  v.  Col- 
lins, 7  Hun,  336  (1876).  A  purchaser  of 
stock  from  one  of  the  supposed  stock- 
holders cannot  recover  back  the  pur- 
chase price  from  all  of  such  stockhold- 
ers. His  remedy  is  other  than  this. 
Perry  v.  Hale,  10  N.  E.  Rep.,  174  (Mass., 
1887).  Several  objects  may  be  included 
in  the  same  articles  of  incorporation. 
West  v.  Crawford,  21  Pac.  Rep.,  1123 
(Colo.,  1889).  An  application  for  a  char- 
ter for  "  the  mining  for  and  manufact- 
uring of  oil  and  gas  "  is  too  general  and 
indefinite  to  be  granted.  An  applica- 
tion should  express  singleness  of  pur- 
pose, but  two  pursuits  may  be  combined 
when  kindred  and  cognate.  Op.  Atty.- 
Gen.,  Re  Newton  Hamilton  Oil  and  Gas 
Co.,  10  Pa.  Co.  Ct  Rep.,  452.  Under  the 
words  "or  other  lawful  business,"  in 
the  general  incorporating  statute,  a  com- 
pany may  be  organized  to  buy  and  sell 
real  estate.  Brown  v.  Corbin,  42  N.  W. 
Rep.,  481  (Minn.,  1889).  Indefiniteness 
in  the  statement  of  the  objects  of  incor- 
poration is  no  defense.  Owentou,  etc., 
Co.  v.  Smith,  13  S.  W.  Rep.,  426  (Ky., 
1890).  A  company  may  incorporate  to 
buy,  use  and  deal  •'  in  real  estate,  live- 
stock, bonds,  securities,  and  other  prop- 
erties of  all  kinds,  on  its  own  account 
and  for  commission,  in  the  United 
States  and  elsewhere,"  under  the  Texas 
statute  authorizing  incorporation  for  pur- 
poses of  "  mutual  profit  or  benefit."  Na- 
tional Bank  v.  Texas,  etc.,  Co.,  12  S.  W. 
Rep.,  101  (Tex.,  1889).  A  constitutional 
prohibition  against  the  incorporation  of 
any  church  does  not  prevent  the  incorpo- 
ration of  the  "  General  Assembly  of  the 
Presbyterian  Church  in  the  United 
States."     Guthrie  v.  Guthrie's  Executor. 


ration  for  mining  and  trading  cannot 
come  under  an  act  for  mining.  Isle, 
etc.,  Co.  v.  Sec'y  of  State.  43  N.  W.  Rep., 
14  (Mich.,  1889).  A  medical  college  can- 
not be  incorporated  under  an  act  to  in- 
corporate benevolent,  charitable,  scien- 
tific and  missionary  societies.  People  v. 
Gunn,  98  N.  Y.,  317  (1884).  A  mutual 
reliance  society  cannot  be  incorporated 
under  an  act  for  incorporating  benevo- 
lent, charitable,  scientific  and  mission- 
ary societies.  People  v.  Nelson,  46  N.  Y., 
477  (1871).  Where  the  general  act  au- 
thorizes incorporation  for  manufactur- 
ing gas  "  or  "  manufacturing  electric- 
ity, a  company  may  be  organized  for 
both  of  these  purposes.  People  v.  Rice, 
33  N.  E.  Rep.,  846  (N.  Y.,  1893).  Ex- 
press business  is  an  "  industrial  pursuit," 
as  used  in  the  federal  statute  allowing 
incorporation  in  territories.  Wells,  etc., 
Co.  v.  Northern  Pac.  R'y  Co.,  23  Fed. 
Rep.,  469  (1881).  A  mercantile  enter- 
prise may  be  incorporated  under  an  act 
authorizing  incorporation  for  any  "  in- 
dustrial or  productive  industry."  Car- 
ver, etc.,  Co.  v.  Hulme,  19  Pac.  Rep., 
213  (Mont.,  1888).  An  elevator  com- 
pany cannot  incorporate  under  a  manu- 
facturing company  act  Mohr  v.  Minn., 
etc.,  Co.,  41  N.  W.  Rep.,  1074  (Minn., 
1889).  Printing  and  publishing  a  news- 
paper is  not  a  manufacturing  business. 
Press,  etc.,  Co.  v.  State  Board,  16  Atl. 
Rep..  173  (N.  J.,  1888).  Under  an  act 
authorizing  incorporations  for  ''trade," 
an  incorporation  for  buying  and  selling 
land  is  sustained.  Finnegan  v.  Knights, 
etc.,  Ass'n,  53  N.  W.  Rep.,  1150  (Minn., 
1893). 

i  Kennedy  v.  McLellan,  43  N.  W.  Rep., 
638  (Mich.,  1889).  There  may  be  a  ques- 
tion as  to  the  validity  of  the  law  itself 
allowing  the  incorporation.  Williams 
v.  Bank  of  Michigan,  7  Wend.,  540 
(1831);  State  of  Michigan  v.  Howard,  1 


315 


§  237.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS.  [CH.  XIII. 


a  corporation  is  attempted,  is  illegal  the  charter  is  no  protection.1 
Frequently  certain  kinds  of  business  are  not  mentioned  in  the  act 
for  the  reason  that  it  is  not  deemed  wise  public  policy  to  allow  a 
limited  liability  in  that  class  of  business,  such  as  construction  com- 
panies for  the  building  of  railroads.2  Accordingly,  where  the  busi- 
ness for  which  incorporation  is  sought  is  not  within  the  classes  of 
business  mentioned  in  the  act  itself,  the  attempted  incorporation  is 
void  and  the  participants  are  liable  as  copartners. 

§  237.  Liability  as  partners  by  reason  of  the  fact  that  the  corpo- 
ration is  incorporated  in  one  state,  but  docs  all  its  business  in  another 
state. —  By  the  comity  of  states  the  rule  has  become  well  established 


Mich.,  512  (1846) ;  Chenango  Bridge  Co. 
v.  Paige,  83  N.  Y.,  178,  190  (1880).  As  to 
a  corporation  incorporated  by  a  state, 
as  a  state,  before  it  was  admitted  to  the 
Union,  see  Mayers  v.  Manhattan  Bank, 
20  Ohio,  283  (1851).  Contra,  Scott  v. 
Detroit,  etc.,  Society,  1  Doug.  Rep. 
(Mich.),  119  (1843). 

1  Notes  given  in  the  purchase  of  stock 
in  a  corporation  whose  sole  business  is 
to  carry  on  an  infringing  telephone 
business  are  without  consideration  and 
void.  Clemshire  v.  Boone,  etc.,  Bank, 
14  S.  W.  Rep.,  901  (Ark.,  1890).  Where 
a  lottery  scheme  is  organized  under  the 
act  authorizing  the  organization  of 
benevolent  and  charitable  institutions, 
a  court  of  equity  will  enjoin  the  con- 
tinuance of  business  and  will  wind  it 
up,  the  officers  being  guilty  of  illegal 
conduct  Peltz  v.  Supreme,  etc.,  Union, 
19  Atl.  Rep.,  668  (N.  J.,  1890).  The  or- 
ganization of  a  company  to  carry  on 
the  lottery  business  in  foreign  countries 
was  held  legal  in  Macuee  v.  Persian, 
etc.,  Corp.,  62  L.  T.  Rep.,  894  (1S90). 
Cf.  Le  Warne  v.  Meyer,  38  Fed.  Rep., 
191  (18S9).  The  secretary  of  state  will 
not  be  compelled  to  accept  articles  of 
incorporation  for  bookmaking,  i.  e., 
gambling  on  races,  even  though  the 
statute  legalizes  and  regulates  race 
tracks.  In  re  New  York  Booking  Co., 
N.  Y.  L.  J.,  April  29,  1892.  The  courts 
will  refuse  a  charter  to  a  company 
whose  business  is  to  be  "  to  promote  the 
business  of  such  retail  dealers  as  be- 
come members  thereof  and  to  protect 


them,"  etc,  the  interest  being  to  com- 
bine the  retail  coal  dealers.  Matter  of 
Richmond  Retail  Coal  Co.,  9  R'y  & 
Corp.  L.  J.,  31  (Phila.,  1890).  Persons 
incorporated  for  the  purpose  of  doing 
a  grain  gambling  business  have  been 
held  jointly  and  severally  liable  for 
money  obtained  from  a  customer.  The 
corporate  character  does  not  protect 
them.  McGrew  v.  City  Produce  Ex- 
change, 4  S.  W.  Rep.,  38  (Tenn.,  1887). 

2  See  Part  VII,  infra,  concerning  the 
statutes.  It  has  been  held,  however, 
that,  under  the  general  act  for  the  in- 
corporation of  companies  for  construct- 
ing and  operating  a  railroad,  a  com- 
pany for  the  construction  alone  of  the 
road  may  be  incorporated.  "  That  there 
can  be  a  railroad  company  which  does 
nothing  but  construct  the  road,  and  a 
railroad  company  which  does  nothing 
but  operate  the  constructed  road,  can- 
not be  doubted.  It  is  not  essential  to 
the  idea  of  a  railroad  company  that  it 
should  both  construct  and  operate  a  rail- 
way." First  National  Bank  of  Davenport 
v.  Davies,  43  Iowa  424  (1876),  followed  in 
Jessup  v.  Carnegie,  80  N.  Y.,  441  (1880): 
Langan  r.  Iowa  &  Minn.  Construction 
Co.,  49  Iowa,  317  (1878).  Where  the 
general  incorporating  act  does  not  pro- 
vide for  the  incorporation  of  railroad 
of  banking  corporations  under  it,  a 
corporation  organized  under  it  to  buy 
and  sell  railroad  stock  and  bonds  and  to 
lease  railroads  and  operate  and  aid 
them  is  void.  Clarke  v.  Central  R  R, 
eta,  50  Fed.  Rep.,  338  (1892). 


310 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[§  237. 


that  a  corporation  organized  under  the  laws  of  a  state  may  trans- 
act business  beyond  the  borders  of  that  state.1 

A  broad  and  liberal  view  of  the  comity  of  states  and  the  inter- 
ests of  business  was  taken  by  the  New  York  court  of  appeals  in 
the  cases  of  Demarest  v.  Flack,2  and  Merrick  v.  Van  Santvoord,3 
where  the  court  refused  to  hold  the  stockholders  liable  as  partners, 
although  the  companies  were  clearly  organized  for  the  purpose  of 
doing  all  of  their  business  outside  of  the  state  wherein  they  took  out 
their  charters.  This  rule  of  law  has  been  laid  down  by  the  courts 
of  Ohio  also,  and  is  established  by  the  great  weight  of  authority.4 


1  •'  It  is  very  true  that  a  corporation 
can  have  no  legal  existence  out  of  the 
boundaries  of  the  sovereignty  by  which 
it  is  created.  .  .  .  But  although  it 
must  live  and  have  its  being  in  that 
state  only,  yet  it  does  not  by  any  means 
follow  that  its  existence  there  will  not 
be  recognized  in  other  places ;  and  its 
residence  in  one  state  creates  no  insu- 
perable objection  to  its  power  of  con- 
tracting in  another."  C'h.  J.  Marshall, 
in  Bank  of  Augusta  v.  Earle,  13  Pet., 
521  (1839). 

2  It  is  legal  for  citizens  of  New  York 
to  take  out  a  charter  in  West  Virginia, 
even  though  all  the  corporate  business 
is  to  be  transacted  in  New  York.  The 
stockholders  are  not  liable  as  partners. 
Demarest  v.  Flack,  128  N.  Y,  205  (1891). 
The  court  said  (p.  217) :  "  If  in  an}r  par- 
ticular case  it  is  thought  by  those  in- 
terested in  the  matter  that  the  business 
can  be  done  in  our  own  state  and  by  our 
own  citizens  with  greater  facility  under 
the  form  of  a  foreign  corporation  than 
under  that  of  a  domestic  one,  there  is 
no  public  policy  which  forbids  its  trans- 
action under  such  form."  Affirming 
11  N.  Y.  Supp.,  83. 

3  Merrick  v.  Van  Santvoord,  34  N.  Y, 
207  (1866),  reversing  Merrick  v.  Brainerd, 
38  Barb.,  574,  where,  although  a  Con- 
necticut corporation  did  all  its  corpo- 
rate business  and  performed  all  its 
corporate  acts  in  New  York  excepting 
the  holding  of  elections,  jret  the  court, 
in  a  well-considered  and  ably-written 
opinion,  held  that  the  corporation  did 
not   thereby    lose    its    corporate    char- 


acter, and  that  its  members  were  not 
liable  as  partners,  saying:  "We  think 
the  recognition,  in  our  state,  of  the 
rights  hitherto  conceded  in  our  courts 
to  foreign  corporations  is  neither  in- 
jurious to  our  interests,  repugnant  to 
oux  policy,  nor  opposed  to  the  spirit  of 
our  legislation.  ...  It  would  be 
neither  provident  nor  just  to  inaugurate 
a  rule  which  would  unsettle  the  secu- 
rity of  .corporate  property  and  rights, 
and  exclude  others  from  the  enjoyment 
here  of  privileges  which  have  always 
been  accorded  to  us  abroad.  ...  A 
corporation  is  an  artificial  being,  and 
has  no  dwelling,  either  in  its  office,  its 
warehouses,  its  depots  or  its  ships. 
.  .  .  The  grant  of  franchises  without 
restriction  is  equivalent  to  a  specific  au- 
thority to  exercise  them  wherever  the 
company  might  find  it  convenient  or 
profitable,  whether  within  or  without 
the  limits  of  the  state  of  Connecticut." 
4  Although  parties  incorporated  in 
Kentucky,  by  reason  of  the  greater  lib- 
erality of  the  Kentucky  corporation 
statutes,  and  although  the  corporation 
does  all  its  business  in  Ohio,  nevertheless 
its  corporate  charter  is  recognized,  and 
the  stockholders  are  not  liable  as  part- 
ners on  a  corporate  note.  Second  Nat'l 
Bank  v.  Lovell,  2  Cin.  Rep.,  397  (1873) ; 
Second  Nat'l  Bank  of  Cin.  v.  Hall.  35 
Ohio  St.,  158  (1878;,  the  court  holding  it 
to  be  no  fraud  on  the  Ohio  laws  for  a 
corporation  organized  under  the  laws  of 
Kentucky  to  do  all  its  business  in  Ohio, 
even  though  thereby  the  stockholders 
escape  a  personal  liability.    See,   also, 


317 


238.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[CH.  XIII. 


§  23S.  There  are,  however,  decisions  to  the  contrary.  In  Massa- 
chusetts it  has  been  held  that  where  a  citizen  of  Massachusetts  in- 
corporates a  company  in  New  Hampshire,  and  states  in  the  certificate 
of  incorporation  that  the  chief  place  of  business  is  in  a  city  in  New 
Hampshire,  and  that  he  and  his  associates  are  jointly  interested, 
the  corporation  is  fraudulent  and  void  —  it  being  proved,  in  fact, 
that  all  the  business  was  carried  on  in  Massachusetts,  and  that  the 
associates  were  "dummies,"  having  one  share  of  stock  each.1 


Danforth  v.  Penny,  3  Mete,  564  (1842). 
A  subscriber  to  stock  in  a  West  Virginia 
corporation  doing  all  its  business  in 
Minnesota  cannot  set  up  that  the  com- 
pany was  not  legally  incorporated,  and 
caDnot  set  up  that  the  plaintiff  is  not  a 
corporation,  he  having  participated  in 
its  incorporation.  Minn.,  etc.,  Co.  v. 
Denslow,  48  N.  W.  Rep..  771  (Minn.,  1891). 
In  Wright  V.  Lee.  51  N.  W.  Rep.,  706 
(S.  D.,  1892),  it  appears  that  a  Minnesota 
corporation  did  all  its  business  in  South 
Dakota.  The  court  held  this  to  bs  legal. 
See,  also,  35  Kan.,  242-244.  Concerning 
the  legality,  purpose  and  effect  of  per- 
sons incorporating  in  one  state  with  the 
intention  of  doing  all  of  the  corporate 
business  in  another  state,  see  Cook  on 
The  Corporation  Problem,  pp.  107-110. 
See,  also,  article  in  25  Am.  Law  Rev., 
352,  criticising  the  law  as  laid  down 
above,  and  another  article  in  35  Am. 
Law  Rev.,  commending  the  law  as  laid 
down  above.  Bateman  v.  Service.  L  R, 
6App.,  386  (1881);  Stevens  v.  Phoenix 
Ins.  Co.,  41  N.  Y.,  149  (1869).  A  party 
contracting  with  a  foreign  corporation 
to  pay  it  in  oil  from  land  assigned  by  it 
to  him  cannot  defeat  the  suit  of  the  cor- 
poration by  alleging  that  it  was  incor- 
porated in  another  state  to  do  all  its 
business  in  the  state,  and  thereby  was 
guilty  of  a  fraud.  Newburg  Petroleum 
(Jo.  v.  Weare,  27  Ohio  St,  343  (1875).  A 
corporation  of  one  state  "  lawfully  may, 
as  they  often  actually  do,  remove  their 
officers,  agents,  offices  and  effects  into 
another  sovereignty,  and  there  exercise 
their  functions  and  franchises."  Pa. 
Co.  v.  Sloan,  1  Bradw.  (111.),  364  (1878). 
A  Connecticut  corporation  may  hold 
land   in   New   Hampshire,   although  it 


does  little  or  no  business  in  Connecticut 
New  Hampshire  Land  Co.  v.  Tilton,  19 
Fed.  Rep.,  73  (1884).  A  corporation  may 
sell  its  products  in  any  state  and  collect 
notes  given  in  payment.  Hall  v.  Tanner, 
etc.,  Co.,  8  S.  Rep.,  348  (Ala.,  1890).  "  Com- 
ity between  the  states  authorizes  a  corpo- 
ration to  exercise  its  charter  powers 
within  another  state,  but  it  does  not  per- 
mit the  exercise  of  a  power  where  the 
policy  of  that  state,  distinctly  marked  by 
1'  igislative  enactments  or  constitutional 
provision,  forbids  it"'  In  this  case  the 
consolidation  of  competing  hues  of  rail- 
way was  involved.  Clarke  v.  Central  R. 
R,  etc.,  50  Fed.  Rep.,  338  (189&/.  A  lim- 
ited partnership  formed  under  the  laws 
of  Spain  will  be  recognized  and  upheld 
by  our  courts.  King  v.  Sarria,  69  N.  Y., 
24  (1877),  where  the  court  discusses  the 
comity  of  states.     21  S.  W.  Rep.,  488. 

1  Montgomery  v.  Forbes,  19  N.  E.  Rep., 
342  (Mass.,  1889).  In  this  case  the  holder 
of  a  note  signed  in  the  corporate  name, 
and  given  for  goods  sold,  sued  a  stock- 
holder for  the  price  of  the  goods.  The 
court  sustained  the  suit  and  said  :  "  Tbe 
apparent  corporation  was  not  a  corpo- 
ration. .  .  .  The  defendant's  pre- 
tended associates  were  associates  only 
in  name ;  he  alone  was  interested  in  the 
enterprise.  The  articles  of  agreement 
were  recorded  in  Nashua,  N.  H.,  and 
stated  that  the  business  was  to  be  car- 
ried on  there;  but  it  was  not  in  fact 
carried  on  there,  and  was  not  intended 
to  be.  This  is  not  a  case  where  a  cor- 
porate charter  has  been  granted,  but 
the  organization  of  the  corporation 
under  the  charter  has  been  defect- 
ive. .  .  .  The  business  was  his  per- 
sonal   business,    which    he    transacted 


318 


CH. 


XIII.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


.   238. 


In  New  Jersey,  at  an  early  da}T,  it  was  held  that  a  corporation 
could  not  become  incorporated  under  the  laws  of  New  York  for 
the  purpose  of  carrying  on  all  its  corporate  transactions  in  the 
state  of  New  Jersey.1  The  stockholders  were  decided  to  be  merely 
partners.  Likewise  it  was  held  that  where  a  corporation  was  in- 
corporated to  do  business  in  a  certain  city  in  the  state,  but  actually 
does  all  its  business  in  another  city  of  that  state,  the  incorporation 
is  a  fraud  upon  the  law,  and  the  company  is  the  same  as  though 
unincorporated.2 

In  these  days,  however,  when  New  Jersey  is  the  favorite  resort 
for  the  class  of  corporations  now  under  consideration,  the  laws  of 
that  state  having  been  framed  especially  for  the  purpose  of  attract- 
ing them,  it  is  not  at  all  probable  that  the  old  decisions  in  that 
state  on  this  subject  would  be  adhered  to. 

In  Texas  it  has  been  held  that  its  citizens  are  liable  as  partners 
where  they  incorporate  in  another  state  to  carry  on  a  mercantile 
business  in  Texas,  the  legislature  having  substantially  forbidden 
incorporation  for  that  purpose.3 


nuder  that  name."  Cf.  Saltmarsh  v. 
Spaulding,  17  N.  E.  Rep.,  316  (Mass., 
1888). 

1  The  corporation  "  cannot  be  recog- 
nized by  any  court  in  New  Jersey  as  a 
legally  constituted  corporation,  nor  be 
dealt  with  as  such.  If  it  can  be,  what 
need  is  there  of  any  general  or  special 
law  in  our  state?  Individuals  desirous 
of  carrying  on  any  manufacturing  busi- 
ness may  go  into  the  city  of  New  York, 
organize  under  the  general  laws  of  that 
state,  erect  all  their  manufacturing  es- 
tablishments here,  and  under  their  as- 
sumed name  transact  their  business,  not 
only  free  from  all  personal  responsibil- 
ity, but  under  cover  of  a  corporation 
not  amenable  to  our  laws."  Hill  r. 
Beach,  12  N.  J.  Eq.  Rep.,  31  (1858). 

2  The  corporation  was  incorporated  to 
do  business  in  Trenton,  but  actually 
transacted  all  its  business  in  Jersey 
City.  The  court  said:  "The  doctrine 
that  the  organization  cannot  be  inquired 
into  collaterally  has  no  application  as 
the  case  stands,  because  the  charter 
does  not  fit  this  company,  and  was  not 
intended  for  it."  Booth  V.  Wonderly,  36 
N.  J.  L.,  250  (1873).  This  doctrine  was 
followed  in  a  New  York  case  in  an  in- 


ferior court,  the  facts  being  that  a  New 
Jersey  corporation  had  no  office  or  place 
of  business  in  New  Jersey,  and  did  no 
business  there,  but  transacted  its  busi- 
ness in  New  York.  "  It  was  not  an  ex- 
isting corporation  within  the  meaning 
of  the  statute  of  New  Jersey,  under 
which  it  purports  to  have  been  incor- 
porated. ...  It  was  a  fraud  upon 
the  laws  of  New  Jersey,  and  cannot 
screen  defendants  and  its  organizers 
from  personal  responsibility  as  partners 
for  contracts  made  in  New  York  under 
the  assumed  name."  Kruse  v.  Dusen- 
bury,  19  Weekly  Dig.  (N.  Y.  Com.  PI.), 
201  (1884).  This  last  case  seems  to  have 
been  decided  without  noticing  Merrick 
v.  Van  Santvoord,  supra,  and  the  case 
certainly  is  not  the  law  of  New  York. 
Chief  Justice  Beasley,  in  Erie  Railway 
Co.  v.  State,  31  N.  J.  L„  544,  says :  "  A 
statute  (and  by  parity  of  reason  we 
might  add  a  decision  by  the  court),  that 
should  abolish  the  rule  of  comity  and 
should  refuse  a  recognition  of  foreign 
corporations,  would,  it  is  conceived, 
have  this  effect,  aud  no  more,  i.  e.,  to 
convert  corporations,  as  to  that  state, 
into  a  partnership  of  individuals." 
3  Stockholders  are  liable  as  partners  in 


319 


§£  239-241.]       PARTNEKSHIP    LIABILITY    OF    STOCKHOLDERS.  [CH.  XIII. 


In  Canada,  also,  at  an  early  day,  the  same  rule  seems  to  have 
been  laid  down.1 

§§  239-240.  There  certainly  is  a  limit  beyond  which  the  courts 
will  not  go.  In  order  that  such  contracts  may  be  upheld  and  the 
corporate  character  be  sustained,  it  is  necessary  that  both  the  state 
creating  the  corporation  and  the  corporation  so  created  shall  have 
acted  in  good  faith  in  conferring  and  taking  the  corporate  privi- 
leges. Thus,  where  a  corporation  was  incorporated  by  the  leg- 
islature of  Pennsylvania,  and  authorized  to  do  business  anywhere 
but  in  that  state,  the  court  of  Kansas  refused  to  recognize  its  cor- 
porate character.2  The  comity  of  states  does  not  prevail  to  that 
extent. 

§  241.  Assessments  by  the  corporation  in  excess  of  the  par  value 
of  the  stock  -  Stockholders  are  not  liable  then  for. —  It  is  a  principle 
of  law,  coeval  with  the  existence  of  corporations  having  a  capital 


Texas  on  business  done  in  Texas  where 
they  organized  a  corporation  in  Iowa  to 
do  a  mercantile  business,  the  laws  of 
Texas  not  authorizing  incorporation  for 
that  purpose.  Empire  Mills  v.  Alston, 
etc..  Co.,  15  S.  W.  Rep.,  200  (Tex.,  1891). 
It  appeared  in  this  case,  however,  that 
the  legislature  had  expressly  declared 
the  policy  of  the  state  by  repealing  a 
statute  that  authorized  incorporation 
for  mercantile  purposes.  See  S.  C,  15 
S.  W.  Rep.,  505,  on  rehearing.  T!ie  fact 
that  the  company  is  doing  all  its  busi- 
ness in  another  state  does  not  release 
the  company  from  its  obligation  to  issue 
certificates  of  stock  to  its  stockholders. 
Rio  Grande,  etc.,  Co.  v.  Burns,  17  S.  W. 
Rep.,  1043  (Tex.,  1391). 

1  In  Canada  it  is  held  that  no  state  can 
validly  authorize  a  body  corporate  to 
transact  business  out  of  its  own  terri- 
tory. Bank  of  Montreal  v.  Bathune,  4 
Up.  Can.,  Q.  B.,  341 ;  Genesee  Mutual  Ins. 
Co.  v.  Westman.  8  id.,  487;  Union  Rub- 
ber Co.  v.  Hibbard,  6  Up.  Can..  C.  P.,  77. 
If  carefullj-  examined,  these  cases  decide 
that  a  corporation  formed  to  carry  on  a 
particular  busiuess  in  one  country  ex- 
ceeds its  powers  if  it  carries  on  a  similar 
business  out  of  that  country.  At  the 
same  time  the  judges  who  decided  those 
cases  based  their  judgments  on  supposed 
grounds  of  international  law.     The  first 


case  mentioned  above  held  that  a  bank 
chartered  in  Lower  Canada  has  no 
power  to  discount  a  note  in  Upper  Can- 
ada and  sue  upon  the  same,  but  may  re- 
cover for  money  had  and  received.  In 
the  case  of  Genesee,  etc.,  Mut.  Ins.  Co. 
v.  Westman,  8  Up.  Can.,  Q.  B.,  487(1852), 
the  court  held  that  a  New  York  corpo- 
ration had  no  right  or  power  to  enter 
into  any  contract  at  all  or  transact  any 
business  in  a  corporate  capacity  in  that 
province.  In  the  case  of  ReynoMs  r. 
Galliher,  etc.,  Co.,  7  R  &  G,  466  (Can., 
1886),  it  appears  that  a  Massachusetts 
corporation  o%vned  a  mine  in  Nova 
Scotia.  The  decision  was  concerning 
an  attachment,  and  the  legality  of  the 
company's  acts  was  not  questioned. 

2  Land  Grant  R'y  &  Trust  Co.  v.  Coffey 
County,  6  Kan.,  245  (1870),  the  court 
saying :  "  No  rule  of  comity  will  allow 
one  state  to  spawn  corporations,  and 
send  them  forth  into  other  states  to  be 
nurtured  and  do  business  there,  when 
said  first-mentioned  state  will  not  allow 
them  to  do  busiuess  within  its  own 
boundaries."  And  see  opinion  of  At- 
torney-General of  Texas  (1887),  2  R'y  & 
Corp.  L  J.,  433,  to  the  effect  that  a 
Scotch  corporation,  authorized  to  pur- 
chase 1  nd  anywhere  excepting  at  home, 
cannot  hold  lands  in  Texas. 


320 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[§  241. 


stock,  that,  unless  the  corporate  charter  or  a  constitutional  statute 
provides  otherwise,  a  stockholder,  the  full  par  value  of  whose  stock 
has  been  paid  in,  is  not  liable  and  cannot  be  made  to  pay  any  suras 
in  addition  thereto.1     The  mere  legislative  act  of  creating  a  corpo- 


»  Great  Falls  &  C.  R  R  Co.  v.  Copp, 
38  N.  H.,  124  (1859) ;  State  v.  Morristown 
Fire  Ass'n,  3  Zab.,  195  (1851):  Morley  v. 
Thayer,  3  Fed.  Rep.,  737  (1880) ;  Chase  v. 
Lord,  77  N.  Y.,  1  (1879) ;  Slee  v.  Bloom, 
19  Johns.,  453,  473  (1822):  Shaw  v.  Boy- 
Ian,  16  Ind.,  384 :  Coffin  v.  Rich,  45  Me., 
511  (1858);  Gray  v.  Coffin,. 63  Mass.,  192, 
199  (1852);  French  v.  Teschi maker,  24 
Cal.,  518,  540  ;  Inhabitants  of  Norton  v. 
Hodges,  100  Mass.,  241  (1868).  "The 
creation  of  the  corporation  necessarily 
destroys  the  common-law  liability  of 
the  individual  members  for  its  debts." 
People  v.  Coleman,  133  N.  Y.,  279  (1892). 
"  After  the  full  par  value  of  the  stock 
subscribed  for  has  been  paid,  the  com- 
mon-law liability  of  the  stockholders, 
both  as  respects  the  corporation  and  its 
creditors,  is  at  an  end."'  Toner  v.  Ful- 
kerson,  25  N.  E.  Rep.,  218  (Ind..  1890). 
"  Liability  of  stockholders  in  a  corpora- 
tion is  undoubtedly  a  creature  of  stat- 
ute. It  does  not  exist  at  common  law." 
Buenz  v.  Cook,  24  Pac.  Rep.,  679  (Col., 
1890).  The  chief  stockholders  cannot 
be  held  liable  for  the  corporate  debts  on 
the  theory  of  a  "general  understand- 
ing "  that  they  would  be  responsible. 
The  corporation  alone  is  liable.  Circu- 
lars, bill-heads,  letters,  etc.,  used  in  the 
business  and  containing  the  corpora- 
tion's name  are  admissible  to  show  that 
the  business  was  conducted  in  corporate 
name  and  on  the  corporate  responsibil- 
ity. Butte  Hardware  Co.  v.  Wallace,  22 
Atl.  Rep.,  330  (Conn.,  1890).  Stockhold- 
ers are  not  liable  for  services  rendered 
to  the  company,  even  though  they  in- 
duce the  party  to  render  such  services. 
Davidson  v.  Westchester,  etc.,  Co.,  99 
N.  Y.,  558  (1885) ;  Oliver  v.  Liverpool  & 
LL  &  F.  Ins.  Co..  100  Mass.,  531,  539 
(1868),  holding  that,  in  order  to  prevent 
this  limited  liability,  the  English  parlia- 
ment expressly  declared  joint-stock  com- 


panies not  to  be  incorporations;  Myers 
v.  Irwin,  2  Serg.  &  R,  371  (1816),  the 
court  saying  :  "  The  personal  responsi- 
bility of  the  stockholder  is  inconsistent 
with  the  nature  of  a  body  corporate ; " 
Liverpool  Ins.  Co.  v.  Massachusetts,  10 
Wall.,  566,  576  (1879) ;  New  Eng.  Bank 
v.  Stockholders  of  N.  S.  Factory,  6  R.  I, 
188(1859);  WTaiker  v.  Lewis.  49  Texas, 
123(1878):  Green  v.  Beckman,  59  Cal., 
545  (1881);  Jones  v.  Jarman,  34  Ark., 
323  (1879):  Windham  Prov.  Inst.  v. 
Sprague,  43  Vt..  502  (1871);  Woods  v. 
Hicks,  7  Lea  (Tenn.),  40,  on  the  ground 
that  the  corporate  creditor  contracts 
not  with  the  stockholders  but  with  the 
corporation ;  Terry  v.  Little,  101  TJ.  S.,_ 
216  (1879),  the  court  saying:  "The  in- 
dividual liability  of  stockholders  in  a 
corporation  is  always  a  creature  of  stat- 
ute. It  does  not  exist  at  common  law  ;  ' 
Smith  v.  Huckabee,  53  Ala.,  191  (1875). 
where  the  court  said :  "  Immunity  from 
such  liability  is  one  of  the  inducements 
which  has  led  to  multiplication  of 
private  corporations,  and  caused  them 
to  supersede,  to  a  great  extent,  in  haz- 
ardous enterprises,  or  enterprises  re- 
quiring large  capital,  partnerships;" 
Spense  v.  Iowa  Valley  Construction  Co.. 
36  Iowa,  407  (1873),  the  court  saying: 
"  It  is  one  of  the  distinguishing  features 
of  incorporation  that  the  individual 
property  of  its  members  may  be  ex- 
empt from  liability  for  corporate  debts. 
Therein  consists  the  great  superiority  of 
a  corporation  over  a  partnership  or  an 
unincorporated  joint-stock  company ;  " 
Salt  Lake  City  Nat.  Bank  v.  Hendrick- 
son,  40  N.  J.  L.  Rep,  52  (1878);  Van 
Sandan  v.  Moore,  1  Russ.  Ch.,  392,  408 
(1826);  Atwood  v.  Rhode  I.  Agri.  Bank, 
1  R  I.,  376  (1850).  the  court  saying:  "At 
common  law  the  stockholders  in  a  cor- 
poration are  not  liable  individually  for 
the  corporate  debts.     The  capital  stock 


(21) 


321 


§  242.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS.  [CH.  XIII. 

0 

ration  produces  by  implication  this  limited  liability  of  its  mem- 
bers. For  this  reason  the  statutes  regulating  joint-stock  companies 
are  frequently  careful  to  state  that  nothing  therein  contained  shall 
give  such  companies  the  character  of  corporations.1  The  older 
text-books  and  the  earlier  reports  did  not  emphasize  or  probably 
appreciate  the  vitality  of  this  principle  of  law.  Of  such  importance 
is  it  that  it  would  seem  to  be  the  great  and  distinguishing  charac- 
teristic of  corporations,  and  not  a  subsidiary  or  unimportant  one. 
It  seems  to  have  been  assumed  rather  than  established  by  direct 
adjudication.2  In  the  early  turnpike  company  cases  of  New  Eng- 
gland  a  contrary  rule  appears  to  have  been  assumed,  and  the  sub- 
scriber appear  to  have  been  open  to  assessments  indefinitely,  ex- 
cept that  he  might  forfeit  his  stock.3  Such  companies,  however, 
had  no  fixed  par  value  of  their  stock.  At  present  the  rule  of  non- 
liability at  common  law,  be}7ond  the  par  value  of  the  stock,  is  es- 
tablished beyond  question,  and  forms  the  chief  inducement  in  the 
formation  of  the  many  corporations  of  the  day. 

§  242.  Attempts  have  been  made  in  various  ways  to  authorize 
the  assessment  of  stockholders  for  amounts  after  the  par  value  of 
their  stock  has  been  paid  in.  Such  efforts  have  generally  failed. 
It  cannot  be  done  by  a  majority  vote  of  the  stockholders,  nor  of 
the  directors,  nor  by  a  by-law.4     The  liability  is  sometimes  created 

is  the  fund  to  which  alone  the  creditors  holder  will  be  liable  to  contribute,  re- 
must  resort,  unless  in  cases  of  fraud."  spectively,  the  unpaid  amount  on  his 
5  N.  Y.  Supp.,  192  (1889).  The  case  shares,  or  to  the  extent  of  the  com- 
of  Atlantic  De  Laine  Co.  v.  Mason,  pany's  guaranty,  or  indefinitely."  Cav- 
5  R.  T.,  463  (1858),  holds  that  the  pay-  anagh's  Law  of  Money  Securities  (2d 
ment  of  one  invalid  assessment  is  no  ed.),  494,  citing  Lion,  etc.,  Ins.  Co.  v. 
waiver  of  the  right  to  object  to  another.  Tucker,  L  R.,  12  Q.  B.  D.,  176;  In  re 
Cf.  Field  v.  Pierce,  102  Mass.,  253  (1869).  Norwich  Ius.  Society,  K  R.,  13  Ch.  D., 
If  the  stockholders  voluntarily  contrib-  693;  In  re  City,  etc.,  Bank,  L  R,  4 
ute  to  the  corporate  treasury  in  order  to  App.  Cas.,  337.  550,  567,  581,  583,  598, 
make  it  a  success,  such  gifts  are  not  607,  615,  624,  632;  City,  etc.,  Bank  v. 
corporate  debts  and  cannot  be  recov-  Houldsworth,  L  R.,  5  App.  Cas.,  317. 
•;red  back.  Bid  well  v.  Pittsburgh,  etc.,  l  Oliver  v.  Liverpool,  etc.,  Ins.  Co., 
R'y  Co.,  6  Atl.  Rep.,  729  (Pa.,  1887);  supra;  Laws  of  N.  Y.,  1854,  ch.  245, 
Leavitt  v.  Oxford,  etc  Co.,  3  Utah,  265  §  3.  And  see  ch.  XXIX. 
(1883).  In  England  "  the  liability  of  a  2  Tn  tbe  case  of  Carr  v.  Iglehart,  3  Ohio 
shareholder  in  a  corporate  body  is  de-  St.,  457  (1854),  the  court  took  counsel  to 
termined  by  the  conditions  of  incor-  task  for  questioning  this  principle  of 
poration.  Without  express  provision,  law.  For  an  opinion  that  at  common 
no  member  of  a  corporate  body  is  indi-  law  the  stockholders  were  liable  for  all 
vidually  liable  for  the  corporate  debt  corporate  debts,  see  Harvard  Law  Re- 
A  company  may  be  registered  under  the  view,  Nov.,  1888,  p.  160. 
Companies  Act,  1862,  with  limited  or  3  Middlesex  Turnpike  Co.  v.  Swan,  10 
unlimited  liability.     According  to   the  Mass.,  384. 

nature  of    such  registration    a  share-  *  Flint  v.  Pierce,  54  Mass.,  539  (1868) ; 

322 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[§  242. 


by  statute.1  Where  the  state  has  reserved  the  power  to  alter,  re- 
peal or  amend  the  charter,  it  may  authorize  the  corporation  to 
levy  assessments  on  its  stockholders,  in  addition  to  the  subscrip- 
tion of  their  stock.  The  reasoning  of  this  rule  is  clear.  The  lim- 
ited liability  is  a  part  of  the  corporate  privileges  conferred.  A 
right  to  repeal  the  franchises  includes  the  right  to  repeal  in  part 
or  altogether  the  franchise  or  privilege  of  limited  liability.  On 
such  grounds,  laws  of  this  character,  however  harsh  in  their  opera- 
tion, are  upheld  as  constitutional.2 


Kennebec  &  Portland  R.  R.  Co.  v.  Ken- 
dall, 31  Me.,  470  (1850) ;  Trustees  of  Free 
School  v.  Flint,  54  Mass.,  539  (1847); 
Roid  v.  Eatonton  Mfg.  Co.,  40  Ala.,  98 
(1869).  In  the  first-nientioned  case  the 
defendant  subscribed  to  such  a  by-law, 
among  other  by-laws,  when  he  sub- 
scribed for  stock.  Placing  the  words 
"individual  property  of  stockholders 
liable"  on  the  face  of  corporate  liabil- 
ities has  no  effect  in  itself.  Stockhold- 
ers are  liable  only  as  prescribed  by  law. 
Lowry  v.  Inman,  46  N.  Y.,  119  (1871). 
An  agreement  of  a  vendee  of  stock  with 
the  vendor  to  pay  the  corporate  debts  is 
not  enforceable  by  corporate  creditors. 
Free  Schools  v.  Flint,  54  Mass.,  543 
(1847).  But  the  agreement  is  enforce- 
able if  made  directly  with  creditors. 
Maxwell's  Case,  L.  R,  20  Eq.,  585  (1874). 
By  consent  of  the  stockholders  each 
share  may  be  subject  to  further  assess- 
ment; and,  when  this  agreement  is 
printed  on  the  certificates,  the  purchaser 
is  bound  by  it  Weeks  v.  Silver,  etc., 
Co..  55  J.  &  S.  (N.  Y.),  1  (1887).  The  case, 
however,  of  Hume  v.  Winyah  &  W. 
Canal  Co.,  Carolina  Law  Journal,  217, 
held,  at  an  early  day,  that  where  a  cor- 
poration, not  professing  to  have  any 
fixed  capital,  made  a  by-law  by  which 
each  of  the  corporators  was  bound  to 
contribute  equally  or  ratably  to  all  ex- 
penses incurred,  the  corporators  were 
liable  personally.  See  21  S.  W.  Rep.,  556. 
1  In  California,  under  sections  331, 
333,  of  the  Civil  Code,  a  corporation 
may  assess  its  members  to  any  extent 
"for  the  purpose  of  paying  expenses, 


conducting  business  or  paying  debts." 
Santa  Cruz  R.  R  Co.  v.  Spreckies,  65 
Cal.,  193  (1884).  In  California  all  shares 
of  stock  are  assessable  even  though  they 
have  once  been  fully  paid.  Green  v. 
Abietine,  etc.,  Co.,  31  Pac.  Rep.,  100 
(Cal.,  1892).  A  better  construction  of 
such  a  statute  prevails  in  Vermont. 
Under  a  charter  provision  that  "  if  at 
any  time  the  stock  paid  into  said  corpo- 
ration shall  be  impaired  by  loss  or  other- 
wise, the  directors  shall  forthwith  re- 
pair the  same  by  assessment,"  a  receiver 
was  not  allowed  to  assess,  since  the  pro- 
vision is  only  to  pi-event  a  continuance 
of  business  with  an  impaired  capital. 
Dewey  v.  St  Albans  Trust  Co.,  59  Vt, 
332  (1886).  In  Pennsylvania  it  is  held 
that,  though  the  corporation  has  power 
to  assess  beyond  the  par  value  of  the 
stock,  yet  such  power  may  be  restricted 
by  by-law.  Price's  Appeal,  106  Pa.  St., 
421  (1884).  In  Texas  it  is  possible  to 
form  a  corporation  wherein  assessments 
may  be  made  on  members  ratably  to 
any  amount  for  corporate  purposes. 
Guadalupe,  etc.,  Ass'n  v.  West,  7  S.  W. 
Rep.,  817  (1888) —  a  stock-protecting  cor- 
poration. In  Idaho  it  is  held  that  the 
statutory  provisions  rendering  stock- 
holders jointly  and  severally  liable  for 
debts  authorizes  the  directors  to  levy 
assessments  to  pay  for  improvements 
already  made.  Sparks  v.  Lower,  etc., 
Ditch  Co.,  29  Pac.  Rep,  134  (Idaho,  1892). 
2  Gardner  v.  Hope  Ins.  Co.,  9  R  I., 
194  (1869) ;  Meadow  Dam  Co.  v.  Gray, 
30  Me.,  547  (1849).  See,  also,  §§  280, 
497,  infra. 


323 


§  243.] 


PARTNERSHIP    LIABILITY    OF    STOCKHOLDERS. 


[CH. 


XIII. 


§  243.  Miscellaneous  cases  of  liability  or  non-liability. —  It  has 
been  held,  on  grounds  of  public  policy,  that  although  a  corporation 
is  advertised  as  having  a  capital  stock  of  a  fixed  amount,  the  share- 
holders and  directors  are  not  liable  personally,  even  though  sub- 
scriptions have  not  been  taken  to  that  amount.  They  are  not  liable 
either  for  the  untaken  stock,  or  on  the  ground  of  false  representa- 
tions, since  the  capital  stock  is  understood  to  represent  what  the 
corporation  hopes  to  obtain  in  subscriptions.1     An  oral  promise  to 


i  First  Nat'l  Bank  v.  Almy,  117  Mass., 
476  (1875) ;  Wakeman  v.  Dalley,  51  N.  Y., 
27,  30 ;  Evans  v.  Coventry,  25  L.  J.  (Ch.), 
489  (1856);  Crease  v.  Babcock,  51  Mass., 
525,  557  (1846).  Contra,  Haslett  v. 
Wotherspoon,  Strob.  Eq.  (S.  C),  209, 
229  (1847).  In  Illinois  there  is  a  statu- 
tory liability  in  a  case  like  this.  Stat 
of  111.,  ch.  32,  §  18.  Where,  upon  incor- 
poration, the  capital  stock  is  fixed  at 
$25,000,  and  is  subscribed,  but  no  part 
thereof  is  paid  in,  and  business  is  com- 
menced, the  participators  are  liable  as 
partners  under  the  Pennsylvania  stat- 
ute. It  is  a  fraud  on  the  law.  Hill,  etc., 
Co.  v.  Stetler,  13  Atl.  Rep.,  306  (Pa., 
1888).  A  corporation  may  commence 
business  before  any  stock  is  subscribed 
unless  the  charter  forbids.  Johnson  v. 
Kessler,  41  N.  W.  Rep.,  57  (Iowa,  1888). 
Where,  by  the  charter,  a  certain  amount 
of  the  capital  stock  must  be  paid  in  be- 
fore business  is  commenced,  it  is  suffi- 
cient that  that  amount  was  paid  in  by  a 
few  stockholders  paying  their  subscrip- 
tions in  full.  Lander  v.  Logan,  16  Atl. 
Rep.,  44  (Pa.,  1889).  See,  also,  §  180. 
Subscribers  for  stock  are  not  liable  for 
such  part  of  the  capital  stock  as  has  not 
been  subscribed  for  by  any  one,  no  fraud 
being  involved.  Sweeney  et  al.  v.  Tal- 
cott  et  al...  52  N.  W.  Rep.,  106  (Iowa, 
1892).  Stockholders  are  not  liable  as 
partners  merely  because  the  whole  capi- 
tal stock  has  not  been  subscribed.  Thorn- 
ton v.  Balcom  et  al,  52  N.  W.  Rep.,  190 
(Iowa,  1892).  The  directors  are  not  lia- 
ble for  corporate  debts  merely  because 
they  commence  business  before  the  capi- 
tal stock  was  subscribed.    The  incorpo- 


ration was  legal  without  it  National 
Bank  v.  Texas,  etc.,  Co.,  12  S.  W.  Rep., 
101  (Tex.,  1889).  Where  the  directors 
commence  business  before  ten  per  cent 
of  the  capital  is  paid  in  as  required  by 
statute,  the  directors  are  personally  lia- 
ble as  agents  transacting  business  with- 
out authority  from  the  principal.  Farm- 
ers', etc.,  Co.  v.  Floyd,  26  N.  E.  Rep.,  110 
(Ohio,  1890).  Paying  in  half  of  sub- 
scriptions with  a  view  to  incorporation, 
and  then  abandonment  of  incorporation, 
does  not  render  a  subscriber  liable  as  a 
partner.  Hudson  v.  Spaulding,  6  N.  Y. 
Supp.,  877  (1889).  Where  stockholders 
proceed  to  business  before  the  minimum 
capital  prescribed  by  statute  is  sub- 
scribed and  before  the  requisite  amount 
is  subscribed,  they  are  liable  to  corpo- 
rate creditors  for  such  minimum  capi- 
tal. The  creditors  may  sue  them  and 
the  corporation  in  the  same  action. 
Burns  v.  Beck,  10  S.  E.  Rep.,  121  (Ga.. 
1889).  Where  the  alleged  directors  of 
an  athletic  association  enter  into  con- 
tracts in  its  name  after  the  charter  is 
acknowledged  and  tiled  with  the  secre- 
tary of  state,  but  no  capital  stock  is  sub- 
scribed and  no  steps  taken  to  complete 
the  organization  or  comply  with  the 
law,  the  directors  are  personally  liable 
on  such  contracts.  Walton  v.  Oliver,  30 
Pac.  Rep.,  172  (Kan.,  1892).  In  the  case 
Consolidated,  etc.,  Co.  v.  Kansas,  etc.,  Co., 
45  Fed.  Rep.,  7  (1891),  the  court  said: 
"  It  is  true,  as  contended  by  counsel, 
that  the  statute  did  not  require  that 
this  increment  of  stock  should  be  actu- 
ally paid  up.  Yet  the  public  deals  with 
such  concerns  on  the  faith  of  such  capi- 


324 


CH.  XIII.]  PARTNERSHIP    LIABILITY    OF    ST  (CKIIOLDERS.  [§  24:3. 

pay  corporate  debts  is  void  by  the  statute  of  frauds.1  Partners,  by 
becoming  incorporated,  do  not  thereby  cease  to  be  partners  as  to 
all  the  debts  of  the  former  partnership.2  A  stockholder  is  not  lia- 
ble as  a  partner  by  reason  of  misrepresentations  that  the  corpora- 
tion is  solvent,  though  probably  he  would  be  liable  in  damages  for 
false  representations.3  Upon  the  dissolution  of  the  corporation  the 
liability  of  the  stockholder  ceases.  If  the  business  is  carried  on 
thereafter  by  the  agents,  no  liability  therefor  attaches  to  the  former 
stockholders,4  unless  they  expressly  authorize  it.5  Persons  who 
purchase  a  railroad  at  an  execution  sale  thereof  cannot  continue  to 
run  it  in  the  name  of  the  old  railroad  corporation,  and  thereby  be 
protected  from  liability  as  partners.6  They  do  not  succeed  to  its 
corporate  character,  although  they  purchase  its  property.  In  all 
cases,  however,  in  which  the  members  of  an  association  might  have 
been  held  liable  as  partners,  the  right  of  the  creditor  to  enforce 
that  liability  is  barred  by  his  bringing  suit  and  obtaining  judgment 
against  the  supposed  corporation.7 

Although  there  are  less  stockholders  and  less  directors  than  the 
statute  or  charter  requires,  yet  the  acts  of  these  are  sufficient  to 
sustain  obligations  incurred  by  the  corporation  with  third  persons.8 

Questions  relative  to  the  mode  of  organizing  under  a  special 
charter  are  considered  elsewhere.9  Stockholders  sometimes  guar- 
anty the  liabilities  of  the  company.  This  class  of  contracts  is  con- 
sidered elsewhere.10  Where  a  corporation  is  a  mere  "  dummy,"  the 
courts  will  sometimes  ignore  its  existence  and  reach  the  stock- 
holders and  officers.     This  class  of  cases  also  is  considered  else- 

tal  in  esse,  and  it  is  that  which  chiefly  tract  made  by  the  officers  after  the  char- 
gives  it  ci'edit.  It  is  to  be  imputed  to  ter  has  been  forfeited  does  not  bind  the 
these  directors  and  stockholders  that  stockholders.  Wilson  v.  Terson,  12  Ind., 
they  pretended  and  claimed  all  along  285  (1859). 

that  the  stock  subscribed  by  them  was  5  Nat'l  Union  Bank  of  Watertown  v. 

paid  up."  London,  45  N.  Y.,  410  (1871). 

1  Trustees  of  Free  School  v.  Flint,  54  «  Chaffe  v.  Ludeling,  27  La.  Ann.,  607 
Mass.,  539  (1868).  (1875). 

2  Broyles  v.  McCoy,  5  Sneed  (Tenn.),  1  Cresswell  v.  Oberly,  17  Brad.  (111.), 
602(1858).  The  case  of  Martin  v.  Few-  281  (1885);  Pochelu  v.  Kemper,  14  La. 
ell,  79  Mo.,  401,  412  (1883),  holds  also  Ann.,  308  (1859).  The  partners  herein 
that,  "  for  the  debts  incurred  after  they  cannot  bring  an  action  at  law  against 
become  a  corporation,  their  liability  each  other.  Their  remedy  is  in  equity, 
will  depend  upon  the  fact  of  actual  no-  Crow  v.  Green,  17  W.  N.  C,  409  (Pa., 
tice  of  their  incorporation  to  the  plaint-  1886).  See,  also,  ch.  XXIX,  on  Joint- 
iffs  at   the  time  such  debts  were  in-  stock  Companies. 

curred."  8  Welch  v.  Importers',  etc.,  Bank,  122 

3  Searight  v.  Payne,  2  Tenn.  Ch.,  175.     N.  Y.,  177  (1890). 

*  Central  City  Sav.  Bank  v.  Walker,  66        9  See  ch.  XXXVI. 
N.  Y,  424  (1876),  aff'g  5  Hun,  34.  A  con-       1»  See  ch.  IV. 

325 


§  243.] 


PARTNERSHIP    LIABILITY   OF    STOCKHOLDERS. 


[CH. 


XIIT. 


where.1   Where  stockholders  are  sued  on  a  corporate  liability  they 
need  not  plead  the  incorporation.    They  may  merely  deny  liability.2 


i  See  §  6. 

2  Where  suit  is  brought  against  stock- 
holders to  hold  them  liable  as  partners 
they  may  deny  liability  and  need  not  set 
up  the  affirmative  defense  that  the  cor- 
poration alone  is  liable.  Demarest  v. 
Flack,  128  N.  Y.,  205  (,1891).  In  an  action 


for  damages  the  defense  that  the  de- 
fendant is  merely  a  stockholder  in  the 
party  who  really  is  liable  should  be  set 
up  by  the  general  issue  and  not  by  a 
plea.  Dade  Coal  Co.  v.  Haslett,  10  S.  E. 
Rep.,  435  (Ga.,  1889) 


326 


CHAPTER  XIV. 


LIABILITY  OF  PLEDGEES,  TRUSTEES,  EXECUTORS,  AGENTS,  ETC. 


§  244.  The  subject. 
245-246.  The  liability  of  trustees  and 
cestui  que  trust. 

247.  The    liability    of    a    pledgee    of 

shares. 

248.  The   liability  of  an  executor  or 

administrator. 

249.  The    liability    of    principal    and 

agent    on    stock    standing   in 
the  agent's  name 


250.  Liability    where    stock    is    sub- 

scribed for  or  held  by  or  in  the 
names  of  infants  and  married 
women. 

251.  The  liability  of  the  corporation 

itself  as  a  stockholder. 

252.  The  liability  of  legatees,  assignees 

in  insolvency,  and  joint  own- 
ers of  shares. 

253.  The    use    of    "  dummies,"    and 

transfers  to  nominal  and  ficti- 
tious persons. 


§  24i.  The  subject. —  AVhere  the  apparent  owner  of  shares  is  not 
the  real  owner,  the  registered  title  to  the  stock  being  in  one  per- 
son and  the  equitable  or  real  ownership  being  in  another,  various 
intricate  questions  have  arisen  involving  the  matter  of  liability  for 
unpaid  subscriptions  and  liability  under  the  statute.  The  cases 
present  every  variety  of  ownership  and  every  phase  of  liability, 
including  many  instances  of  transfer  for  the  purpose  of  avoiding 
liability.  The  principles  and  rules  of  law  governing  this  branch  of 
the  subject  are  somewhat  numerous  and  complicated,  nevertheless 
they  are  comparatively  well  settled. 

§§  245-24:6.  The  liability  of  trustees  and  cestui  que  trust. —  A 
trustee  of  stock  who  is  recorded  on  the  corporate  books  as  a  stock- 
holder is,  at  common  law,  liable  on  such  stock  as  though  he  were 
the  absolute  owner  of  the  same.  This  is  the  rule  even  though  he 
is  recorded  on  the  corporate  books  not  as  an  absolute  owner,  but 
as  a  trustee  of  the  stock.1  And  the  liability  of  the  trustee  is  not 
limited  by  the  amount  of  the  trust  property.2  Each  trustee  is 
liable  not  merely  for  his  proportion,  but  for  the  whole  amount  due 
upon  the  stock.3 


1  Chapman  &  Barker's  Case,  L  R,  3 
Eq.,  361  (1866);  Davis  v.  Essex,  etc., 
Soc,  44  Conn.,  582 ;  Bugg's  Case,  2  Dr. 
&  Sm.,  952;  Muir  v.  City  of  Glasgow 
Bank,  L.  R,  4  App.  Cas.,  337  (1879).  See, 
also,  Sales  v.  Bates,  6  E.  Rep.,  703  (R.  I., 
1886) ;  Holt's  Case,  1  Sim.  (N.  S),  389 
(1851);  Mitchell's  Case,  L.  R,  9  Eq., 
363  (1870);  King's  Case,  L  R,  6  Ch.,  196 
(1871);    Grew   v.   Breed,    10    Mete,  569 


(1846):  Leifchild's  Case,  L  R,  1  Eq.. 
231  (1865);  Hemming  v.  Maddick,  L.  R, 
9  Eq.,  175  (1870);  Ex  parte  Oriental, 
etc.,  L.  R,  3  Ch.,  791  (1868);  Ind's  Case, 
L  R.,  7  Ch.,  485  (1872).  Cf.  Saunders' 
Case,  2  De  G,  J.  &  S,  101. 

2Hoare's  Case,  2  John.  &  H,  229 
(1862). 

3  Cunningham  v.  City  of  Glasgow, 
L  R,  4  App.  Cas.,  607  (1879). 


327 


§  246.]  LIABILITY    OF    PLEDGEES,  AGENTS,  EXECUTORS,   ETC.       [CH.   XIV. 


The  cestui  que  trust  is  not  liable  on  the  stock  held  by  the 
trustees.  The  corporation  cannot  hold  him  liable;  neither  can  the 
corporate  creditors.  The  cestui  que  trust  cannot  be  held  either  on 
the  unpaid  subscription  or  on  the  statutory  liability  of  the  stock. 
He  is  a  stranger  to  the  corporation  and  its  creditors.1 

But  here  the  exemption  of  the  cestui  que  trust  ceases.  He  does 
not  entirely  escape  liability.  His  exemption  from  liability  to  the 
creditors  of  the  trust  does  not  protect  him  from  liability  to  the 
trustee.  He  is  bound  to  indemnify  the  trustee  and  to  repay  to  him 
any  debts  which  the  latter  may  have  paid  in  the  administration  of 
the  trust.2     The  indemnity  which  the  trustee  may  claim  from  him 

i  Mitchell's  Case,  L.  R,  9  Eq.,  363; 
Ex  parte  Bugg,  2  Drew.  &  Srn.,  452 
(1865);  Williams'  Case,  L.  R,  1  Ch.  Div., 
576 ;  King's  Case,  L.  R,  6  Ch.  App.,  196 
(1871);  Fenwick's  Case,  1  De  G.  &  Sm., 


557  (1849);  Newry,  etc.,  Co.  v.  Moss,  14 
Beav., 64.  Frequently, however,  the  stat* 
utes  of  the  state  cieating  the  corpora- 
tion change  these  rules.  In  New  York, 
by  statute,  trustees  holding  stock  in 
railroad  or  manufacturing  corporations 
are  released  from  liability.  Laws  of 
1892,  ch.  688,  sec.  54.  By  the  statutes 
of  the  United  States  a  similar  provision 
applies  to  national  banks.  R  S.,  §  5152. 
But  this  exemption  does  not  protect 
the  trustee  unless  the  stock  registered 
in  his  name  is  registered  to  him  as 
"  trustee."  Davis  v.  Essex,  etc.,  Soc,  44 
Conn.,  582  (1877).  A  trustee  is  not  lia- 
ble on  national  bank  stock,  his  trustee- 
ship appearing  on  the  books.  Welles 
r.  Larrabee,  36  Fed.  Rep.,  866  (1888). 
These  statutes,  however,  apply,  of  course, 
only  to  stock  issued  by  corporations 
which  have  been  incorporated  by  the 
government  which  enacted  the  stat- 
ute. 

2  Butler  v.  Cumpston,  L.  R,  7  Eq.,  16 
(1868);  James  v.  May,  L.  R,  6  H.  of  L., 
328  (1873);  Re  National  Financial  Co., 
L,  R,  3  Ch.,  791  (1868):  Perry  on  Trusts, 
§§  485,  486.  In  the  case  of  Jervis  v. 
Wolferston,  L.  R,  18  Eq.,  16  (1874),  the 
court  said,  in  enforcing  indemnity  to 
the  trustees  of  stock :  "  I  take  it  to  be  a 
general  rule  that  where  persons  accept 
a  trust  at  the  request  of  another,  and 


that  other  is  a  cestui  que   trust,  he   is 
personally     liable     to     indemnify     the 
trustees  for   any  loss  accruing  in  the 
due  execution  of  the  trust ;  and  under 
that  doctrine  I  shall  hold  that  the  estate 
of    the  testator  becomes  liable  to  in- 
demnify the   trustees  against  the  pay- 
ment of    this   large  sum    of    money." 
Hemming  v.  Maddick,  L.  R,  7  Ch.  App., 
395  (1872).  where  the  court  held  also  that 
the  trustee  might  authorize  the  corpora- 
tion to  use  the  trustee's  name  and  collect 
from  the  cestui  que  trust.     In  Hughes 
v.  India,  etc.,  Co.,  L.  R,  22  Ch.  D.,  561 
(1882),  it  is  held  that  the  trustees  cannot 
sue  for  indemnity  before  the  corpora- 
tion has  demanded  payment     See,  also, 
Phene  v.  Gildan,  5  Hare,  11  (1845),  where 
a  mortgagor  of  stock  was  held  liable  to 
indemnify  the  mortgagee,  who  had  been 
held  liable  on  the  stock.    The  court  said 
the  mortgagor  was  liable  the  same  as  a 
'•trustee   of   leasehold    property   under 
covenants  for  the  benefit  of  a  cestui  que 
trust"     In  Balsh  v.  Hyham,  2  P.  Will- 
iams, 453  (1728),  the  lord  chancellor  said 
that  "  it  is  a  rule  that  the  cestui  que  trust 
ought  to  save  the  trustee  harmless  as  to 
all  damages  relating  to  the  trust,"  and 
consequently  that  the  cestui  que  t7-ust 
must  repay  to  the  trustee  money  bor- 
rowed by  the  latter  and  given  to  the 
cestui  que  trust,  the  trust  consisting  of 
stock  which  was  pledged  to  secure  the 
loan.     Approved  in  Ex  parte  Chippen- 
dale, 4  De  G.,  M.  &  G.,  19,  54  (1854). 
Liudley  on  Partnership,  pp.  758, 759,  says  : 
•'The  right  of  a  trustee  to  indemnity 


328 


CH.  XIV.]         LIABILITY    OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.        [§  247. 

cannot  be  denied  on  the  ground  that  the  trustee  is  irresponsible, 
and  consequently  that  the  corporation  cannot  get  anything  from 
him.1  But  until  the  trustee  is  actually  called  on  by  the  corporation 
to  pay,  he  cannot  compel  the  cestui  que  trust  to  give  indemnity.2 

This  liability,  however,  of  the  cestui  que  trust  may  be  avoided. 
If  the  trustees  are  willing  to  provide  in  the  trust  instrument  that 
the  cestui  que  trust  shall  not  be  liable,  such  a  provision  is  legal  and 
effectual.  The  cestui  que  trust  then  escapes  liability  absolutely  and 
completely.3 

§  247.  The  liability  of  a  pledgee  of  shares. —  A  pledgee  of  stock, 
that  is,  one  to  whom  the  stock  has  been  transferred  in  pledge  or 
as  collateral  security,  and  who  has  had  the  stock  transferred  into 
his  own  name  on  the  corporate  books,  is  liable  to  the  creditors  of 
the  corporation  as  though  he  were  the  absolute  owner  of  the  stock.4 


from  his  cestui  que  trust  very  closely  re- 
sembles the  right  of  an  agent  to  indem- 
nity from  his  principal.  ...  A 
trustee  is  clearly  entitled  to  be  indemni- 
fied out  of  the  trust  property  against  all 
costs,  charges  and  expenses  properly  in- 
curred, and  against  all  losses  sustained 
by  him  in  the  execution  of  his  trust; 
and  if  the  trust  property  is  not  sufficient 
for  the  purpose  of  indemnifying  him  in 
respect  of  such  matters,  his  cestui  que 
trust,  if  under  no  disability,  is  personally 
liable  to  indemnify  him.  unless  such 
liability  is  excluded  by  some  special  cir- 
cumstance. ...  If  there  is  an  ex- 
press covenant  to  indemnify,  the  obliga- 
tion will  be  limited  by  the  covenant." 

1  In  re  National  Financial  Co.,  L.  R., 
3  Ch.,  791  (1868) ;  Cruse  v.  Paine,  L.  R, 
6  Eq.,  641  (1868). 

2  Hughes-Hallett  v.  Indian,  etc.,  Co., 
L.  R.  22  Ch.  D.,  561  (1882). 

3  Thus,  Ex  parte  Chippendale,  4  De  G., 
M.  &  G.,  19,  52  (1854).  The  court  says, 
in  a  dictum:  "  No  doubt  a  company's 
deed,  or  any  other  deed,  may  be  so 
formed  as  to  deprive  directors  or  trustees 
of  the  right  to  indemnity  ;  and,  if  parties 
think  proper  to  accept  directorships  or 
trusts  under  deeds  so  framed,  they  must 
abide  by  the  consequences.  See,  also, 
Gillan  v.  Morrison,  1  De  G.  &  Sm.,  421 
(1847),  holding  that  an  express  agree- 
ment that  the  cestui  que  trust  shall  be 


liable  to  the  trustee  to  a  certain  extent 
and  no  more  is  binding  on  the  trustee. 
4  Nat'l  Com.  Bank  v.  McDonnell,  9  S. 
Rep.,  149  (Ala.,  1891):  Moore  v.  Jones.  3 
Woods,  53  (1877) ;  Pullman  v.  Upton,  96 
U.  S.,  328  (1877);  Aultman's  Appeal,  98 
Pa.  St.,  505  (1881);  Crease  v.  Babcock,51 
Mass.,  525  (1846) ;  Holyoke  Bank  v.  Bum- 
ham,  65  Mass.,  183  (1853);  Sleeper  v. 
Goodwin,  31  N.  W.  Rep.,  335  (Wis.. 
1887);  Rosevelt  v.  Brown,  11  N.  Y.,  148 
(1854) ;  Matter  of  The  Empire  Bank.  18 
id.,  199  (1858) ;  Grew  v.  Breed,  10  Mete, 
569  (1846) ;  Royal  Bank  of  India's  Case, 
L.  R.,  7  Eq.,  91  (1868)  ;*S.  C,  L.  R,  4 
Chan.,  252  (1869);  Weikersheim's  Case, 
L.  R,  8  Chan.,  831  (1873);  Price  & 
Brown's  Case,  3  De  G.  &  Sm.,  146  (1850), 
in  which  the  holders  of  shares  taken  as 
security,  who  had  new  shares  issued  in 
their  own  names  in  exchange  for  the 
old  shares  which  had  been  called  in. 
were  declared  to  be  contributories, 
though  the  directors  knew  the  nature 
of  their  holding ;  Richardson  V.  Abend- 
roth.  43  Barb.,  162  (1864).  And  the 
pledgee  is  liable  upon  the  stock  even 
after  his  debt  has  been  paid  and  the 
certificate  handed  back  to  the  pledgor, 
if  the  retransfer  is  not  properly  entered 
on  the  corporate  books.  Bowdell  v.  The 
Farmers'  &  Merchants'  National  Bank 
of  Baltimore,  25  Nat.  Bank.  Reg.,  405 
(1877) ;  Johnson  v.  Somerville  Dyeing, 


329 


§  247.]  LIABILITY   OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.       [CH".  XXV. 


This  rule  has  frequently  been  enforced  in  the  case  of  a  pledge  of 
shares  of  stock  in  a  national  bank.1  If,  however,  the  stock  has  been 
recorded  on  the  corporate  books,  not  in  the  name  of  the  pledgee, 
but  in  the  name  of  a  "  dummy,"  the  pledgee  is  not  liable  thereon.2 
A  statute  frequently  relieves  the  pledgee.3 


etc.,  Co.,  15  Gray,  216  (1860) ;  Adderly  v. 
Storm,  6  Hill,  624  (1844). 

•Magruder  v.  Colston,  44  Md.,  349 
(1875);  Wheelock  v.  Kost,  77  111.,  296 
(1875);  Hale  v.  Walker,  31  Iowa.  344 
(1871);  Barre  National  Barik  v.  Hing- 
ham  Manuf'g  Co.,  127  Mass.,  563  (1S79); 
National  Bank  v.  Case,  99  U.  S.,  628 
(1878). 

2  Henkle  v.  Salem  Mfg.  Co.,  39  Ohio 
St.,  547  (1883) ;  Welles  v.  Larrabee,  36 
Fed.  Rep.,  866  (1888).  In  the  case  of 
Anderson,  Receiver,  v.  Philadelphia 
Warehouse  Co.,  Ill  U.  S,  479  (1883),  it 
is  held  that  a  pledgee  of  shares  of  stock 
in  a  national  bank,  who  takes  the  se- 
curity for  his  benefit  in  the  name  of  an 
irresponsible  person,  as  trustee,  for  the 
avowed  purpose  of  avoiding  individual 
liability  as  a  share-owner,  incurs  no  lia- 
bility which  can  be  enforced  by  cred- 
itors of  the  bank  in  case  of  its  failure. 
To  same  effect,  Newry,  etc.,  R'y  Co.  v. 
Moss,  14  Beav..  64  (1851) ;  §  470,  infra. 
A  transfer  of  shares  by  one  who  holds 
them  as  collateral  security,  for  the  pur- 
pose of  avoiding  liability  thereon,  is  not 
a  conversion.  Hiatt  v.  Griswold,  5  Fed. 
Rep.,  573  (1881).     Cf.  %  253. 

3  New  York  Laws  of  1892,  ch.  688, 
§  54;  also  Part  VII,  infra,  See  McMa- 
hon  v.  Macy,  51  N.  Y.,  155  (1872).  A  sim- 
ilar provision  is  found  in  the  old  New 
York  Manufacturing  Companies  Act  of 
1848  (New  York  Laws  of  1848,  ch.  40, 
§  16).  See  Stover  v.  Flack.  30  N.  Y.  64 
(1864);  S.  C,  41  Barb.,  162.  Cf.  Case 
of  the  Reciprocity  Bank,  22  N.  Y,  9,  17 
(1860).  And  a  similar  provision  has 
been  enacted  in  Maryland.  Matthews 
v.  Albert,  24  Md.,  527  (1866);  Addison's 
Case,  L.  R,  5  Chan..  294  (1870).  In  Bur- 
gess v.  Seligman,  107  U.  S.,  20  (1882),  the 
supreme  court  of  the  United  States  con- 
strued the   Missouri  statute,  and  held. 


that  the  pledgees  were  not  liable  to  cor- 
porate creditors  upon  the  shares  so  held 
by  them ;  and  such  also  is  the  rule  now 
in  Missouri.  Union  Sav.  Ass'n  v.  Selig- 
man, 92  Mo.,  635  (18S4),  overruling  Gris- 
wold v.  Seligman,  smb.  So,  also,  a 
pledgee  of  the  corporation  itself  has  been 
held  not  liable,  especially  where  the 
statutes  declared  pledgees  not  liable  and 
the  creditor  suing  became  such  before 
the  pledgee  voted  the  stock  held  by  him. 
Union  Sav.  Assoc,  v.  Seligman,  15  S.  W. 
Rep.,  630  (Mo.,  1884),  reversing  11  Mo. 
App.,  142,  overruling  Griswold  v.  Selig- 
man, 72  Mo.,  116,  and  following  Burgess 
v.  Seligman,  107  U.  S.,  20.  See,  also. 
Melvin  v.  Lamar  Ins.  Co.,  80  HI..  446 
(1875),  §§  138,  465.  In  England,  Chap- 
man's, etc.,  Case,  L'  R,  3  Eq.,  365 ;  Re 
Anglesea  Colliery  Co.,  L  R,  2  Eq.,  379: 
Inds'  Case,  L  R,  7  Ch.,  485,  were  under 
the  Companies  Act.  In  the  case  .Re  City 
Terminus  Hotel  Co.,  L  R,  14  Eq.,  10 
(1872),  a  hotel  company  borrowed  £40,000 
of  a  railroad  company  and  gave  its  un- 
issued shares  as  security,  they  being 
placed  in  the  hands  of  a  trustee,  with 
power  to  sell,  and  thus  reduce  the  debt. 
Afterwards  the  railway  company  bought 
the  hotel,  and  the  latter  was  wound  up. 
Held,  that  the  railway  company  were 
not  stockholders,  but  creditors,  and  were 
entitled  to  deduct  the  amount  of  the 
loan  from  the  purchase-money.  See, 
also,  Manchester,  etc.,  Case,  22  Week. 
Rep.,  41  (1875);  Nellis  v.  Coleman,  98 
Pa.  St,  465  (1881),  where  the  corporation 
received  subscriptions  as  a  loan,  to  be 
repaid.  It  was  held  to  be  valid.  In  a 
late  Massachusetts  case  it  is  said  that  the 
pledgee  is  liable  on  the  stock  as  owner 
only  when  the  certificate  fails  to  show 
that  the  shares  are  held  merely  as  col- 
lateral. Bane  National  Bank  v.  Hing- 
hara  Manuf'g  Co.,  127  Mass..  563  (1879) ; 


330 


OH.  XIV.]       LIABILITY   OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.  [§  248. 


A  pledgee  of  stock  who  holds  the  certificates,  but  who  docs  not 
appear  on  the  corporate  books  as  a  stockholder,  is  not  liable  as  a 
stockholder.1 

§  248.  The  liability  of  an  executor  or  administrator. —  The  estate 
of  a  deceased  person  is  liable  upon  the  stock  held  and  owned  by 
the  decedent  in  the  same  way  and  to  the  same  extent  that  the  share- 
holder was  liable  in  his  life-time.  Accordingly,  an  executor  or  ad- 
ministrator of  the  estate  of  a  deceased  shareholder  is  chargeable 
upon  the  shares  of  the  decedent  to  the  extent  of  the  property  that 
comes  into  his  hands  as  the  personal  representative  of  the  deceased.2 
The  executor  or  administrator  becomes  personally  liable,  however, 
upon  the  stock,  if  he  pay  away  the  assets  of  the  estate  in  legacies 
without  making  provision  to  meet  the  liability  on  the  stock.3  When 


S.  P.,  Davis  v.  Essex  Baptist  Society,  44 
Conn.,  582  (1877). 

1  Prouty  v.  Prouty,  etc.,  Co.,  25  Atl. 
Rep.,  1001  (Pa.,  1893).  An  unrecorded 
pledgee  is,  of  course,  not  liable  on  stat- 
utory liability.  Henkle  v.  Salem,  etc., 
Co.,  39  Ohio  St.,  547  (1883).  See,  also, 
§  258,  infra. 

2  Thomas'  Case,  1  De  G.  &  Sm.,  579 
(1849);  Baird's  Case.  L.  R,  5  Chan.,  725 
(1870),  holding  that  the  presumption  is 
that  executors  of  a  deceased  shareholder 
succeed  to  his  full  liability ;  Stewart's 
Trustee  v.  Evans,  9  Scotch  Ct.  of  Ses. 
Cas.  (3d  series),  810  (1871) ;  Evans  v.  Cov- 
entry, 25  L.  J.,  Chan.,  489  (1856),  holding 
the  executor  liable  only  to  the  extent  of 
the  estate  funds.  To  same  effect,  Blake- 
ley's  Case,  13  Beav.,  133  (1850) ;  Ex  parte 
Gouthvvaite,  3  Mac.  &  G.,  187  (1851);  Ex 
parte  Doyle,  2  Hall  &  Twell's  (Eng. 
Chan.),  221  (1850);  Ex  parte  Hall,  1  Mac. 
&  G.,  307  (1849) ;  Hamer's  Devisee's  Case, 
2  De  G.,  M.  &  G.,  366  (1852) ;  Robinson's 
Executor's  Case,  6  id.,  572  (1856) ;  Ness 
v.  Armstrong,  3  De  G.  &  Sm.,  38,  note 
(1849) ;  Straffars'  Case,  1  De  G.,  M.  &  G, 
576;  Bulmer's  Case,  33  Beav.,  435; 
Gouthwaite's  Case,  3  De  G.  &  Sm.,  258 
(1850) ;  Taylor  v.  Taylor,  L.  R,  10  Eq., 
477  (1870);  Alexander's  Case,  15  Sol. 
Jour.,  788  (1871);  Hamer's  Case,  3  De  G. 
&  Sm.,  279  (1850);  Grew  v.  Breed,  10 
Mete,  569  (1846);  New  England  Com- 
mercial Bank  v.  Stockholders  of  the 
Newport  Steam   Factory,   6   R.  I.,  154 


(1859) ;  Crandall  v.  Lincoln,  52  Conn.,  73 
(1884);  Bailey  v.  Hollister,  26  N.  Y.,  112 
(1862);  Chase  v.  Lord,  77  id.,  1  (1879); 
Witters  v.  Sowles,  25  Fed.  Rep.,  168 
(1885);  S.  C,  32  id.,  130  (1887),  relative 
to  the  liability  of  an  executor  under 
the  federal  statute  governing  national 
banks ;  also  Davis  v.  Weed  (U.  S.  D.  G), 
44  Conn.,  569 ;  Schouler  on  Executors, 
§  380 ;  New  York  Laws  of  1850,  ch.  140, 
§  11 ;  1848,  ch.  40,  §  13.  An  administra- 
tor is  not  liable  on  national  bank  stock 
even  though  he  is  the  residuary  distribu- 
tee of  the  estate.  Matter  of  Bingham, 
127  N.  Y,  296  (1891).  Some  of  the  ear- 
lier Massachusetts  cases  are  in  apparent 
conflict  with  the  rule  declared  in  the 
text.  Child  v.  Coffin,  17  Mass.,  64  (1820); 
Gray  v.  Coffin,  9  Cush.,  200 ;  Ripley  v. 
Sampson,  10  Pick.  371  (1830) ;  Andrews 
v.  Callender,  13  id.,  484  (1833) ;  Dane  v. 
Dane  Manuf'g  Co.,  14  Gray,  489  (1860) ; 
Grew  v.  Breed,  10  Mete,  569  (1846).  See, 
also,  Re  Cheshire  Banking  Co.,  54  L  T. 
Rep.,  558  (1886). 

3  Taylor  v.  Taylor,  L.  R,  10  Eq.,  477 
(1870);  Jefferys  v.  Jefferys,  24  L.  T.  Rep. 
(N.  S.).  177  (1871);  Thomas' Case,  siqjra. 
In  Stewart's  Trustees  v.  Evans,  9  Scotch 
Ct.  Ses.  Cas.  (3d  series),  810  (1871),  it  is 
held  that,  where  executors  pay  away 
the  estate  bona  fide,  they  are  not,  after 
a  lapse  of  sixteen  years,  liable  person- 
ally for  a  deficit  on  shares.  Cf.  Witters 
v.  Sowles,  25  Fed.  Rep.,  168  (1885). 


331 


§  2i9.]  LIABILITY    OF    PLEDGEES,  AGENTS,  EXECUTORS,  ETC.       [CH.  XIV. 


the  executors  accept  a  transfer  in  their  own  names  they  make 
themselves  personally  liable  on  the  stock.1  An  executor  who  takes 
new  shares  for  the  estate  is  personally  liable  thereon.2 

§  249.  The  liability  of  principal  and  agent  on  stock  standing  in 
the  agent's  name. —  Sometimes  a  subscription  for  stock  is  made  by 
one  person  as  the  agent  of  another,  and  the  stock  is  entered  on  the 
corporate  books  in  the  name  of  the  agent.  In  such  a  case  it  is  the 
rule  that  corporate  creditors  may  hold  either  the  principal  or 
the  agent  responsible  on  the  stock.*  But  an  agent  who  is  com- 
pelled to  assume  and  pay  charges  on  the  stock  may  recover  from 


1  Alexander's  Case,  15  Sol.  Jour.,  788 
(1871).  In  New  York  it  is  held  that  an 
action  to  charge  an  executor  on  the 
stock  of  the  estate  need  not  be  joined 
with  an  action  to  enforce  an  individual 
subscription  by  the  executor.  Erie,  etc., 
Ry  Co.  v.  Patrick,  2  Keyes,  256  (1865). 
A  special  statute  of  limitations  appli- 
cable to  executors  will  apply  to  an  exec- 
utor's liability  on  stock.  Sales  v.  Bates, 
6  East  Rep.,  703  (R  I.,  1886).  In  Eng- 
land an  executor  is  liable  personally  on 
stock,  if  he  transfers  it  to  himself ;  other- 
wise not,  the  title  to  the  stock  being  left 
in  the  name  of  the  testator.  Healey's 
Company  Law  and  Practice,  p.  90; 
Buchan's  Case,  L.  R,  4  App.  Cas.,  549 
(1879). 

2Fearnside  &  Dean's  Case,  L.  R,  1 
Chan.,  231  (1866);  Spence's  Case,  17 
Beav.,  203(1853);  Jackson  v.  Turquand, 
L  R,  4  H.  L,,  305  (1866);  Mallorie's 
Case,  L  R,  2  Chan.,  181  (1867).  Cf. 
Russell's  Executor's  Case,  15  Sol.  Jour., 
790  (1871). 

3  Burr  «.  Wilcox,  22  N.  Y.,  551  (I860). 
See,  also,  §§  68,  69 ;  and  §  253,  infra.  Cf. 
Grangers'  Market  Co.  v.  Vinson,  6  Ore- 
gon, 172(1876);  Barrett's  Case,  4  DeG., 
J.  &  S.,  416  (1864),  where  one  who  al- 
lowed another  to  use  his  name  in  reg- 
istering stock  as  a  favor,  and  under 
agreement  that  he  should  incur  no  lia- 
bility, was  held  to  be  a  contributory.  A 
broker  who  has  the  stock  transferred 
into  his  own  name  is  liable  as  though 
he  were  the  full  owner.  M'Kim  v. 
Glenn,  8  Atl.  Rep.,  130  (Md.,  1887).  An 
unregistered  transfer  to  one  as  agent  to 


sell  does  not  render  him  liable  for  the 
unpaid  subscription.  Powell  v.  Willa- 
mette, etc.,  R  R  Co.,  15  Pac.  Rep,  663 
(Oreg.,  1887):  Mann  v.  Currie,  2  Barb., 
294  (1848),  where  one  who  held  stock  in 
his  own  name,  but  really  as  an  agent  or 
broker  for  its  sale,  was  held  to  be  a 
stockholder  at  the  suit  of  creditors. 
One  to  whom  stock  is  issued,  and  in 
whose  name  it  appears  on  the  books  of 
the  corporation,  is  liable  to  the  creditors 
of  the  corporation  for  the  unpaid  sub- 
scription, although  he  is  not  the  owner 
of  such  stock.  Baines  v.  Babcock  et  al., 
27  Pac.  Rep.,  674  (Cal.,  1891).  One  who 
subscribes  to  corporate  stock  for  his 
wife,  in  the  wife's  name,  is  not  liable  on 
the  subscription,  because  a  married 
woman  cannot  make  such  a  subscrip- 
tion ;  but  if  the  subscription  is  for  him- 
self, although  in  the  wife's  name,  it  is 
otherwise.  The  fact  that  the  husband 
took  part  of  the  stock  in  his  own  name 
and  participated  in  the  business  of  the 
company  tends  to  show  that  the  sub- 
scription was  for  his  benefit  Shields  v. 
Casey,  25  Atl.  Rep.,  619  (Pa,  1893). 
Where  a  party  subscribes  for  stock  in 
the  name  of  his  son,  even  without  the 
consent  or  knowledge  of  the  son,  the 
party  so  subscribing  is  not  liable  him- 
self thereon.  Re  Britannia,  etc.,  Ass'n, 
Limited,  64  L.  T.  Rep.,  184  (1890),  revers- 
ing 63  L.  T.  Rep,  480.  Where  the  hus- 
band subscribes  for  stock  in  his  wife's 
name  and  she  is  incompetent  to  respond, 
he  is  liable  on  the  stock.  Nat'l  Com'l 
Bank  v.  McDonnell,  9  S.  Rep.,  149  (Ala., 
1891). 


332 


CH.  XIV.]       LIABILITY    OF    PLEDGEES,  AGENTS,  EXECUTORS,  ETC.  [§  250. 

his  principal  the  amount  so  paid.1  Where  a  transfer  is  made,  not 
to  the  principal  himself,  but  to  an  agent,  the  latter  is  but  a  nom- 
inal holder,  and  is  subject  to  the  rules  applicable  to  such. 

The  transferee  of  an  agent,  when  suit  is  brought  by  corporate 
creditors  to  enforce  a  demand  against  the  stock,  cannot  set  up  that 
the  agent  had  no  power  to  transfer  the  stock  to  him.  If  he  has 
received  the  certificates  and  appears  as  a  stockholder  on  the  books 
of  the  corporation,  he  is,  as  between  himself  and  creditors  of  the 
corporation,  a  shareholder.2 

It  is  a  serious  question  whether  so-called  "  dummies  " —  that  is,  per- 
sons holding  in  their  own  names  stock  which  belongs  to  others,  in 
order  to  enable  the  latter  to  avoid  liability  thereon  —  are  not  to  be 
regarded  as  agents  rather  than  trustees.  This  question,  however, 
is  considered  elsewhere.3 

§  250.  Liability  where  stock  is  subscribed  for  or  held  by  or  in  the 
names  of  infants  and  married  women. —  It  has  already  been  shown 
that  an  infant  cannot  be  held  liable  upon  a  subscription  to  stock,4 
and  any  person  subscribing  for  shares  in  the  name  of  an  infant 
renders  himself  personally  liable  thereon.  So,  likewise,  when  shares 
are  assigned  or  transferred  to  infants  as  a  contrivance  to  escape 
liability,  the  transferrer  remains  liable.5  And  this  is  the  rule  as  to 
an  infant  transferee,  although  the  transfer  was  bona  fide,  and  even 
in  ignorance  *of  the  infancy  of  the  transferee."  The  infant  may, 
however,  upon  attaining  his  majority,  ratify  or  acquiesce  in  a  trans- 

i  Orr  v.  Bigelow,  14  N.  Y.,  556  (1856) ;  (186S) :  Reid's  Case,  24  Beav.,  318  (1857) : 

affirming    S.    C,   20    Barb.,  21    (1854);  and  see  cases  in  the  succeeding  notes 

Stover  v.  Flack,  30  id.,  64  (1864).  herein. 

2  Wakefield  v.  Fargo,   90  N.  Y.,  213        *  Weston's  Case,  L.  R,  5  Chan.,  614 

(1882).     Upon  the  liability  of  agents  or  (1870).    Thus,  a  broker  purchasing  shares 

trustees  in  these  cases,  see  Crandall  v.  for  the  account  of  an  infant  was  held 

Lincoln,  52  Conn.,  73  (1884).  liable  as  holder  of  the  stock,  not  even 

8  See  §  253,  infra.  his  broker's  agency  availing  to  protect 

4  See  §§  67,  318.  him.     Ruchisky  v.  De  Haven,  97  Pa.  St.. 

s  Capper's  Case,  L.  R.,  3  Chan.,  458  202  (1881);  Mann's  Case,  supra.  In 
(1868);  Mann's  Case,  id.,  459,  note  (1867);  Nickalls  v.  Merry,  L.  R,  7  H.  L.,  530 
Weston's  Case,  L.  R,  5  Chan.,  614(1870);  (1875),  a  stock  jobber  was  held  liable 
Richardson's  Case,  L.  R,  19  Eq.,  588  where,  in  a  suit  to  recover  calls  on  stock 
(1875);  Roman  v.  Fry,  5  J.  J.  Marsh.,  634  sold  by  him  for  the  Stock  Exchange,  it 
(1831);  Castleman  v.  Holmes,  4  id.,  1  turned  out  that  the  ultimate  transferee 
(1830).  But  see  Parson's  Case,  L.  R,  8  of  the  shares  was  a  minor,  and  his  trans- 
Eq.,  656,  where  the  action  of  the  com-  ferrer  had,  in  consequence,  been  com- 
pany in  continuing  an  infant's  name,  pelled  to  pay  the  calls.  If  three  persons 
and  not  notifying  his  vendor  of  his  in-  buy  fifteen  shares  and  take  title  in  an 
fancy,  was  held  to  be  such  laches  as  to  infant's  name,  each  is  liable  on  five 
estop  the  official  liquidator  from  sub-  shares  and  no  more.  Brown  v.  Black, 
stituting  the  vendor's  name  for  that  of  29  L.  T.  Rep.,  363  (1873). 
the  infant.    Curtis'  Case,  L.  R,  6  Eq.,  455 

333 


§  250.]  LIABILITY    OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.       [CH.  XIV. 


fer  of  shares  to  him  during  his  infancy,  and  thereby  render  him- 
self liable  on  the  stock.1  The  plea  of  infancy  in  these  cases  must, 
however,  allege  repudiation  within  a  reasonable  time  after  attain- 
ing majority.2 

What  is  a  reasonable  time  within  which  the  infant  must  repudi- 
ate the  contract  in  order  to  escape  chargeability  is,  in  general,  a 
question  of  law,  and  it  will  vary  with  the  particular  circumstances 
of  each  individual  case.  In  general  it  is  the  rule  that  the  trans- 
feree, on  coming  of  age,  must  disaffirm  promptly.  Laches  will  bar 
his  right  to  repudiate.3 


1  Lumsden's  Case,  L.  R.,  4  Chan.,  31 
(1868),  where  an  infant  held  stock  for 
six  months.  Accordingly,  where  an  in- 
fant, after  becoming  of  age,  permits  his 
name  to  remain  on  the  registry  as  a 
shareholder,  he  is  held  to  have  ratified 
the  antecedent  transfer  to  him  during  his 
minority.  Cork,  etc.,  R'y  Co.  v.  Cazenove, 
10  Q.  B.,  935  (1847).  An  infant  may  be 
an  incorporator  at  least  until  he  repudi- 
ates the  transaction.  All  rights  ac- 
quired prior  to  such  repudiation  are 
protected.  Re  W.  Laxon  &  Co.,  67  L.  T. 
Rep.,  85  (1892). 

•^Dublin,  etc.,  R'y  Co.  v.  Black,  8 
Exch.,  181  (1852).  Cf.  Birkenhead,  etc., 
R'y  Co.  v.  Pilcher,  5  Exch.,  24  (1850). 
Where  an  infant  transferee  became  of 
age  ten  months  before  the  winding  up, 
he  was  held  liable  as  a  contributory  by 
acquiescence.  Ebbett's  Case,  L.  R,  5 
Chan.,  302  (1870);  S.  C,  18  W.  R,  202 
(1869).  But  in  a  case  where  the  winding 
up  came  just  before  an  infant  transferee 
became  of  age,  it  was  held  that  no  af- 
firmative repudiation  was  necessary, 
but  that  some  distinct  act  of  affirmation 
alone  would  avail  to  render  him  liable 
after  majority.  Wilson's  Case,  L.  R,  8 
Eq.,  240  (1869).  Where  the  winding  up 
occurs  just  before  or  just  after  the  in- 
fant transferee  becomes  of  age,  it  is  said 
that  he  need  not  expressly  repudiate  in 
order  to  escape  liability,  "because  he 
cannot  tell  whether  the  compauy  in- 
tends to  enforce  their  claim  against  him, 
and,  therefore,  he  is  not  bound  till  some 
steps  are  taken  to  resist  his  bfing  a 
shareholder  in  the  company."   Mitchell's 


Case,  L.  R,  9  Eq.,  363  (1870).     It  seems, 

■ 

also,  that  a  repudiation  during  infancy 
may,  under  certain  circumstances,  avail 
to  discharge  an  infant  shareholder  from 
liability  to  pay  calls  which  are  made 
after  he  attained  the  age  of  twenty-one 
years.  Newrj  &  Enniskillen  R'y  Co.  v. 
Coombe,  3  Exch.,  565,  578  (1849).  The 
court,  in  speaking  to  this  point,  said,: 
"  He  became  a  shareholder  by  contract 
during  infancy,  and  during  infancy  he 
disaffirmed  the  contract;  therefore,  in 
my  opinion,  he  ceased  to  be  a  share- 
holder liable  to  be  sued  for  calls.  Where 
the  infant  transferee,  coming  of  age 
after  the  winding  up  had  been  com- 
menced, offered  to  affirm  the  contract, 
it  was  held  that  the  liquidators  might, 
in  the  interest  of  the  creditors,  refuse 
to  accept  the  offer,  and  might  instead 
hold  the  transferrer  liable.  Symon's 
Case,  L.  R,  5  Chan.,  298  (1870);  Cos- 
tello's  Case,  L,  R,  8  Eq.,  504. 

3  In  one  English  case  we  find  it  held 
that  two  years'  dela}'  after  coming  of 
age  is  a  ratification  of  the  contract 
Mitchell's  Case,  L.  R.,  9  Eq.,  363  (1870). 
And  in  another  case  ten  months  is  held 
sufficient.  Ebbett's  Case.  L.  R,  5  Chan., 
302  (1870).  While  in  a  third  case  a  lapse 
of  three  years  was  held  not  to  amount 
to  an  affirmance  of  the  contract.  Hart's 
Case,  L.  R.  6  Eq..  512  (1868).  In  this 
case  the  infant  shareholder  came  of  age 
six  months  after  the  proceedings  to 
wind  up  the  company  had  been  com- 
menced. He  was  served  with  notice  of 
these  proceedings  shortly  before  his  ma- 
jority.   Two  years  after,  a  list  of  share- 


334 


CH.  XIV.]       LIABILITY    OF    PLEDGEES,  AGENTS,  EXECUTORS,  ETC.  [§  250. 


~No  general  rule  can  be  laid  "down  as  regards  the  effect  of  a  trans- 
fer of  stock  to  a  married  woman.  Bv  the  law  of  most  of  the  states 
she  may  contract  as  a  feme  sole  in  respect  to  her  separate  estate, 
and  doubtless  may  become  a  transferee  of  stock.1     In  such  cases 


holders  liable  as  contributors,  which 
included  his  name,  was  filed,  and  a  year 
later  a  notice  of  a  call  was  served  on 
him.  He  resisted  the  collection  of  the 
amount  of  that  call ;  and,  although  his 
resistance  was  made  three  years  after 
he  came  of  age,  the  court  held  that  he 
was  liable.  But  after  a  repudiation  of 
the  contract  on  attaining  majority,  it  is 
held  that  rendering  aid  in  holding  the 
transferrer  liable  is  not  a  waiver  by 
the  infant  of  his  formal  repudiation  of 
the  transfer  to  him  of  which  the  cor- 
porate creditors  can  take  advantage, 
when  for  any  reason  they  fail  to  make 
their  claim  against  the  vendor  of  the 
infant  Baker's  Case,  L.  R,  7  Chan., 
115  (1871).  If  a  father  transfers  shares 
of  stock  to  his  minor  son,  though  in 
good  faith,  he  is,  upon  the  winding 
up,  liable  upon  the  stock  as  though 
no  transfer  had  been  attempted,  if  the 
son  repudiates  the  transaction.  Litch- 
field's Case,  3  De  G.  &  8m.,  141  (1850); 
Weston's  Case,  L.  R,  5  Chan..  614  (1870). 
Of.  Roman  v.  Fry.  5  J.  J.  Marsh.,  634 
(1831).  And  a  director  in  an  incorpo- 
rated company,  who  induces  his  minor 
children  to  take  stock  in  the  company 
in  their  own  names,  is  liable  upon  the 
winding  up  for  a  breach  of  trust,  in 
case  the  children  are  still  minors.  Ex 
parte  Wilson,  L.  R,  8  Chan.,  45  (1872). 
But  if  a  father  buy  shares  in  the  name 
and  for  the  benefit  of  his  son,  who  is  a 
minor,  and  when  the  transfer  is  made 
informs  the  broker  of  the  vendor  of  the 
minority  of  the  transferee,  the  father, 
upon  the  winding  up,  is  not  liable  on  the 
stock,  but,  the  transferee  continuing  a 
minor  when  the  right  of  action  accrues, 
the  corporate  creditors  may  look  to  the 
transferrer.  Maitland's  Case,  38  L.  J., 
Chan.,  554  (1869).  So,  also,  where  the 
vendor  of  shares  allows  the  certifi- 
cate to  be  made  to  the  minor  son  of 


his  vendee,  and  the  son  upon  attaining 
his  majority  repudiates  the  transaction, 
the  vendor  and  not  the  vendee  is  liable 
upon  the  winding  up.  Hennessey's  Case, 
3  De  G.  &  Sm„  191  (1850).  But  where 
a  shareholder  transferred  to  an  infant, 
and  this  infant  to  another  infant,  who 
in  his  turn  transferred  to  an  adult  capa- 
ble of  responding  upon  the  stock,  all 
the  transfers  having  been  duly  reg- 
istered, it  was  held  that  the  last  vendee 
was  a  contributory,  and  that  the  im- 
mediate transfers  could  not  be  avoided. 
Gooch's  Case,  L.  R,  8  Chan.,  266  (1872). 
After  a  winding  up  is  commenced,  a 
person  in  whose  name,  while  an  infant, 
stock  had  been  placed,  but  who  had, 
with  knowledge,  allowed  the  subscrip- 
tion to  continue  after  he  came  of  age, 
cannot  repudiate.  Re  Yoeland,  etc.,  58 
L.  T.  Rep.,  922  (1888).  It  seems,  there- 
fore, that  the  act  of  the  infant  in  trans- 
ferring shares  is  valid  and  effectual  to 
pass  the  title  and  to  discharge  himself 
from  liability  on  the  stock. 

1  See  £§  66,  319.  A  woman  to  whom 
stock  is  transferred  in  the  corporate 
books  is  liable  on  the  statutory  liability 
if  she  approves  or  acquiesces  in  it  in 
any  way,  as  by  signing  an  application 
to  change  the  charter  of  the  bank  or 
by  indorsing  checks  which  are  made 
out  to  her  for  dividends.  She  is  es- 
topped from  denying  that  she  knew 
what  she  was  signing.  It  is  immaterial 
whether  new  certificates  were  issued  to 
her,  and  also  whether  the  transfer  to 
her  was  by  the  husband  in  order  to  con- 
ceal his  property.  A  married  woman 
may  be  a  stockholder  in  a  bank  in  the 
District  of  Columbia,  and  be  liable  on 
the  statutory  liability.  The  court  re- 
fused to  pass  on  the  question  as  to 
what  property  might  be  reached  as 
against  her.  Keyser  v.  Hitz,  133  TJ.  S., 
138  (1890).     See,  also,  Johnson  v.  Gal- 


335 


§  251.]  LIABILITY    OF    PLEDGEES,  AGENTS,  EXECUTORS,  ETC.       [CH.  XIV. 

she  would  also  have  power  to  transfer  her  stock  without  the  con- 
sent of  her  husband. 

§  251.  The  liability  of  the  corporation  itself  as  a  stockholder. — 
When  the  corporation  becomes  the  purchaser  of  its  own  stock,  and 
the  shares,  as  is  generally  the  case,  are  transferred  into  the  name 
of  a  trustee  for  the  corporation,  it  is  the  rule,  both  here  and  in  Eng- 
land, that  the  trustee  is  personally  liable  in  respect  of  all  the  shares 
so  standing  in  his  name.2 


lagher,   3  De  G.,   F.  &  J.,   491   (1861); 
Mrs,  Matthewmann's  Case,  L  R,  3  Eq., 
781 ;  Luard's  Case,  1  De  G.,  F.  &  J.,  533; 
Queen  v.  Carnatic  R.  Co.,  L.  R,  8  Q.  B., 
290  (1873).     In  Angus'  Case,  1  De  G.  & 
Sm.,  560,  the  constitution  of  the  corpo- 
ration prevented  such  a  transfer.     See, 
also,   Matter  of    Reciprocity   Bank,   22 
N.  Y.,  9.  In  England  the  husband  is  liable 
on  stock  owned  by  his  wife  when  he 
married  her.     Burlinson's  Case,  3  De  G. 
&  Sm.,  18  (1849) ;  Sadler's  Case,  id.,  36 ; 
White's  Case,  id.,  157.    But  he  is  liable 
only   for  subsequent  liabilities   of    the 
company.     Kluht's  Case,  id.,  210.     See, 
also,  Butler  v.  Cumpston,  L.  R,  7  Eq., 
16,  where  the  wife  was  a  cestui  que 
trust.     A  husband  has  been  held  liable 
on  stock  which  was  given  to  his  wife 
after  their  marriage  by  way  of  legacy, 
and   was  accepted   by  her.     Thomas  v. 
City  of  Glasgow  Bank,  6  Scotch  Ct  of 
Sess.  (4th  series),  607  (1879).     A  married 
woman  is  herself  liable  for  the  statutory 
liability  on  stock,  where  she  lias  power 
to  be   a  stockholder.      Sales  v.    Bates, 
6  East.  Rep.,  703  (R  I,  1886);  Bundy  v. 
Cocke,    128  U.  S.,   185  (1888).     So,  also, 
as  to  national  banks.  Witters  v.  Sowles, 
32  Fed.   Rep.,  767  (1887);   Ibid.,  35  id., 
640  (1888);  38  id,  700;  Keyser  v.  Hitz,  2 
Mackey,  473  (U.  S.  D.  C,  1883) ;  Hobart 
v.  Johnson,  19  Blatch.,  359  (1881) ;  Ander- 
son v.  Line,  14  Fed.  Rep.,  405  (1880).   The 
case  of  Simmons  v.  Dent,  16  Mo.  App., 
288  (1884),  holds  that,  under  a  statute 
whereby  a  married  woman  may  become 
a  stockholder,  a  transfer  of  stock  from 
the  husband  to  the  wife  is  valid,  and  re- 
lieves him  from   liability  on  the  stock 
the  same  as  though  he  had  transferred 


to  any  other  person.  A  married  woman 
may  give  away  or  pledge  her  stock. 
Walker  v.  Joseph,  etc.,  Co.,  20  Atl.  Rep., 
885  (N.  J.,  1890).  Married  women  are 
liable  on  the  statutory  liability.  Par- 
rish's  Appeal.  19  Atl.  Rep.,  5(59  (Pa.. 
1890).  A  married  woman  is  not  at 
common  law  qualified  to  act  as  an  in- 
corporator nor  as  treasurer.  9  R'y  & 
Corp.  L  J.,  197. 

2  Matter  of  the  Empire  City  Bank,  18 
N.  Y.,  199.  226  (1858) ;  Allibone  v.  Hager. 
46  Pa.  St,  48  (1862);  Crandall  v.  Lincoln. 
52  Conn.,  73  (1884).     Cf.  Sanger  v.  Up- 
ton. 91  U.  S,  56,  60  (1875).     To  the  same 
effect  are  the  English  cases.    In  re  St. 
Marylebone    Banking  Co.,  3  De   G.   & 
Sm.,  21  (1849);  In  re  National  Financial 
Co.,  L  R,  3  Chan.,  791  (1868),  in  which 
one  who  held  shares  in  one  company  as 
trustee  for  another  company  was  de- 
clared to  be  a  creditor  of  the  company 
for   which   he  held  the  shares  to  the 
amount   of  the  calls  made  upon  and 
paid  by  him  on  account  of  the   other 
company.     Chapman  &  Barker's  Case, 
L  R,    8  Eq.,  361  (1866),   holding,  also, 
that  the  trustee  might  have  a  right  to 
be    indemnified    by    the    company    of 
which  he  was   merely  a  trustee.     The 
trustee  for  the  corporation  has  recourse 
against  it  for  calls  paid  by  him.    Good- 
son's  Claim,  28  W.  R,  766  (1880);  Ind's 
Case,  L.  R,  7  Chan.,  485  (1872) ;  Eyre's 
Case.  31  Beav.,  177;  Munt'sCase,  22  id., 
55:  Richmond's  Case,  3  De  G.   &  Sm.. 
96:   Walter's   Case,    id.,   244.     The  last 
four  cases  are  instances  of  attempted 
transfers  to  trustees  for  the  benefit  of 
the  corporation  being  declared  void  as 
illegal   and  the  original  holders  being 


336 


OH.  XIV.]       LIABILITY   OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.  [§  252. 

The  transferrer,  also,  if  he  knew  that  the  transferee  took  as  trustee 
for  the  corporation,  is  liable  upon  the  stock.1  But  when  this 
knowledge  is  not  imputable  to  the  transferrer,  he  is  not  liable.2  Xor, 
of  course,  is  he  liable  when  the  corporation  has  power,  by  charter 
or  otherwise,  to  deal  in  its  own  shares.3  Where  the  owner  of  stock 
transfers  it  directly  to  the  corporation  itself,  without  the  interven- 
tion of  a  trustee,  the  transferrer  is  not  released  from  his  liability 
on  the  stock,  but  remains  as  fully  chargeable  as  though  no  transfer 
had  been  attempted.4 

§  252.  The  liability  of  legatees,  assignees  in  insolvency  and  joint 
owners. —  A  legatee  of  shares  of  stock  may,  of  course,  if  he  thinks 
proper,  decline  to  receive  his  testator's,  gift.  But  if  he  accepts  the 
legacy,  it  is  well  settled  that,  as  specific  legatee,  he  is  bound  to  pay 
all  calls  made  upon  the  stock  after  the  death  of  the  testator.5    He 


declared  liable.  See,  also,  §§  282,  314. 
Where  the  company  issues  its  stock  as 
collateral  security  to  notes  given  to  it 
by  its  subscribers  in  payment  for  such 
stock,  and  then  sells  the  notes,  the  stock 
follows  the  notes  and  may  be  subjected 
to  the  payment  of  judgment  on  the 
notes.  If  the  corporation  has  issued  the 
stock  to  others  it  must  pay  the  judg- 
ments. Houston,  etc.,  R'y  v.  Bremond, 
18  S.  W.  Rep.,  448  (Tex.,  1886).  Concern- 
ing a  pledge  of  its  own  stock  bjr  a 
corporation,  see  §  465. 

1  Lawe's  Case,  1  De  G.,  M.  &  G.,  421 
(1852) ;  Walter's  Second  Case,  3  De  G.  & 
Sm.,  244  (1850) ;  Daniell's  Case,  22  Beav., 
43  (1856).  Cf.  Johnson  v  Laflin,  5  Dill., 
65  (1878) ;  S.  C,  Thompson  Nat.  Bank 
Cases,  331 ;  S.  C,  103  U.  S.,  800  (1880) ; 
and  particularly  Crandall  v.  Lincoln,  52 
Conn..  73  (1884).     See,  also,  §  309. 

2Hollwey's  Case,  1  De  G.  &  Sm.,  777 
(1849) ;  Nicol's  Case,  3  De  G.  &  J.,  387 
(1859) ;  Johnson  v.  Laflin,  103  U.  S.,  800 
(1880\ 

s  Grady's  Case,  1  De  G,  J.  &  S.,  488 
(1863);  Lane's  Case,  id.,  504  '(1863). 
Sometimes,  by  agreement  between  dis- 
contented stockholders  and  the  direct- 
ors of  the  corporation,  transfers  are 
made  by  such  shareholders  as  desire  to 
be  released  from  their  obligation  as 
shareholders  to  nominees  of  the  direct- 


ors, with  the  intent  thereby  to  relieve 
themselves  from  liability  upon  the 
stock.  In  such  cases  it  is  held  that  the 
action  of  the  directors  in  permitting  or 
sanctioning  such  a  transfer  was  ultra 
vires,  and  that  in  consequence  the  trans- 
ferrer is  still  liable.  Morgan's  Case,  1 
De  G.  &  Sm.,  750  (1849) ;  Bennett's  Case, 
5  De  G,  M.  &  G,  284  (1854);  In  re 
Patent  Paper  Manuf'g  Co.,  L.  R.,  5 
Chan.,  294  (1870) ;  Nathan  v.  Whitlock, 
9  Paige,  152  (1841).  See,  also,  §§253, 309, 
310,  infra. 

4  Case  of  the  Recipi-ocity  Bank,  22  N. 
Y.,  9  (1860) ;  Currier  v.  Lebanon  Slate 
Co.,  56  N.  H.,  262  (1875);  Johnson  v. 
Laflin,  5  Dill.,  65  (1878);  S.  C,  6  Cen- 
tral Law  Jour.,  124;  103  U.  S.,  800 
(1880) ;  Walter's  Second  Case,  3  De  G.  & 
Sm.,  244  (1850) ;  Glenn  v.  Scott,  28  Fed. 
Rep.,  804  (1886).  Compare  Zulueta's 
Claim,  L.  R,  5  Chan.,  441  (1870);  In  re 
Patent  Paper  Manuf'g  Co.,  L.  R.,  5 
Chan.,  294  (1870).  Subscribers  whose 
stock  is  taken  back  by  the  corporation 
are  not  liable  thereon  either  at  common 
law  or  by  statute  relative  to  transfers. 
Ailing  v.  Ward,  24  N.  E.  Rep.,  551  (111., 
1890).    See  §§  167-171. 

&  Day  v.  Day,  6  Jur.  (N.  S.),  365  (1860). 
Cf.  Witters  v.  Sowles,  25  Fed.  Rep.,  168 
(1885). 


(22) 


337 


§  253.]  LIABILITY   OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.       [CH.  XIV. 

must  also  p?v  all  calls  voted  before,  but  not  due  and  payable  in  tue 
regular  course  of  business  until  after,  the  testator's  death.1 

It  has  been  held  that  an  assignee  of  the  estate  of  a  bankrupt  is 
not  liable,  personally  or  as  assignee,  upon  the  bankrupt's  share  of 
stock.  He  is  not  bound,  as  assignee,  to  accept  as  part  of  the  es- 
tate property  of  this  nature,  when  it  is  of  an  onerous  or  unprofit- 
able character.2 

Upon  the  death  of  one  who  is  joint  owner  with  another  or 
others  of  shares  of  stock,  the  liability  thereon  attaches  only  to  the 
surviving  owners,  and  the  estate  of  the  deceased  owner  cannot  be 
charged.3 

§  253.  The  use  of  "  dummies  "  and  transfers  to  nominal  and  fic- 
titious persons. —  Frequently  it  happens  that  persons  purchasing 
or  subscribing  for  stock  do  not  wish  to  take  the  stock  in  their  own 
names,  inasmuch  as  they  thereby  incur  liability,  or  make  known  to 
the  public  the  fact  that  they  are  stockholders.  Accordingly,  it  is 
the  custom  in  such  cases  to  have  the  stock  taken  or  purchased  in 
the  names  of  other  persons.  These  latter  are  called  "dummies."4 
The  law  is  well  settled  that  such  a  "  dummy  "  is  liable  on  the  stock 
to  the  corporation  and  corporate  creditors  to  the  same  extent  that 
he  would  be  if  he  were  the  real  owner  of  the  stock.5    And  it  is 


1  Addams  v.  Ferick,  26  Beav.,  384 
(1859).  For  a  more  complete  statement 
of  the  law  relative  to  legacies  of  stock, 
see  ch.  XVIII. 

2  American  File  Co.  v.  Garrett,  110 
U.  S.,  288  (1883) ;  Amory  v.  Lawrence,  3 
Cliff.,  523  (1872);  and  see  Rugely  & 
Harrison  v.  Robinson,  19  Ala.,  404  (1851) ; 
Streeter  v.  Sumner,  31  N.  H.,  542  (1855) ; 
Ex  parte  Davis,  L.  R,  3  Chan.  Div.,  463 ; 
Furdonjee's  Case,  id.,  268,  holding  that 
the  liability  upon  shares  not  being  a 
debt  provable  in  insolvency  proceedings 
is  not  barred  by  the  order  of  discharge. 
And  where  a  corporation  itself  assigned 
shares  of  its  own  stock  to  an  assignee 
for  the  benefit  of  corporate  creditors,  it 
was  held  that  the  assignee  was  not  lia- 
ble, personally  or  as  assignee,  thereon. 
In  re  City  Terminus  Hotel  Co.,  L.  R,  4 
Eq,  10  (1872).  It  has  been  held  other- 
wise, however,  in  a  case  where  the  as- 
signment was  absolute  and  the  assignee 
was  also  a  creditor.  Protection  Life 
Insurance  Co.  v.  Osgood,  93  111.,  69.     It 


has  been  held  that  one  who  makes  an 
assignment  for  the  benefit  of  creditors 
is  thereby  released  from  liability  on 
stock,  even  though  the  transfer  has  not 
been  recorded  in  the  corporate  books. 
Sales  v.  Bates,  6  East  Rep.,  703  (R  I., 
1886). 

3  Re  Maria  Anna,  etc.,  Coal  &  Coke 
Co.,  44  L.  J.,  Chan.,  423  (1875);  Hill's 
Case,  L.  R,  20  Eq.,  585  (1874).. 

4  The  cases  in  this  section  refer  to  tue 
use  of  "  dummies "  without  the  real 
owner  appearing  at  all  on  the  corporate 
books  as  a  stockholder.  These  cases 
differ  from  those  where  stock  is  trans- 
ferred by  a  stockholder  from  himself 
to  a  "dummy"  or  irresponsible  person. 
See  §§  263-266. 

s  Wakefield  v.  Fargo,  90  N.  Y.,  213 
(1882) ;  Case  of  Reciprocity  Bank,  22  id., 
9  (1860) ;  Barrett's  Case,  4  De  G.,  J.  &  S., 
416  (1864) ;  Bugg's  Case,  2  Dr.  &  Sm.,  952. 
Cf.  Fox  v.  Clifton,  6  Bing.  (Eng.),  776 
(1830).  A  transfer  of  stock  on  the  books 
to  a  director  renders  him  liable  on  the 


338 


CH.  XIV.]       LIABILITY   OF   PLEDGEES,  AGENTS,  EXECUTORS,  ETC.  [§  253. 

established  that  the  real  owner  of  the  stock  is  liable  to  repay  to  his 
"dummy  "  any  sum  of  money  which  the  latter  has  paid  to  the  cor- 
poration or  the  corporate  creditors.1  An  attachment  against  the 
"  dummy  "  may  take  the  stock.2 

But  a  more  difficult  question  arises  when  an  attempt  is  made  to 
hold  the  real  owner  of  the  stock  liable  to  the  corporation  or  corpo- 
rate creditors.  Where  the  real  owner  was  formerly  the  registered 
stockholder,  but  has  transferred  his  stock  to  an  irresponsible  per- 
son, a  class  of  cases  is  found  which  is  considered  elsewhere.3 

A  different  class  of  cases,  however,  is  now  under  consideration, 
and  in  America  it  has  been  held,  where  a  person  purchased  stock 
in  a  national  bank,  but  had  it  transferred,  not  to  himself,  but  to 
another  person,  a  "dummy,"  that  the  real  owner  of  the  stock  is 
liable  thereon,  although  he  never  appeared  on  the  corporate  books 
as  a  stockholder.4 


statutory  liability,  even  though  the 
transfer  was  to  render  him  eligible  for 
office,  and  lie  was  unaware  of  the  trans- 
fer, and  had  paid  the  dividends  to  the 
transferrer.  As  director  he  was  bound 
to  know.  Brown  v.  Finn,  34  Fed.  Rep., 
124  (1888 1.  When  a  director  enters  stock 
in  his  wife's  name,  but  she  knows  noth- 
ing of  it  and  he  receives  all  dividends 
and  votes  it,  she  cannot  be  charged  as  a 
stockholder.  Longdale  Iron  Co.  v.  Pom- 
eroy  Iron  Co.,  34  Fed.  Rep.,  448  (1888). 

1  This  is  the  rule  whether  the  relation 
of  the  real  owner  be  considered  that  of 
a  principal  towards  an  agent  (see  §  249, 
supra),  or  that  of  cestui  que  trust 
towards  a  trustee  (see  §  245). 

2  White  v.  Rankin,  8  S.  Rep.,  118  (Ala., 
1890). 

3  See  §§  263-266,  infra. 

*  Davis  v.  Stevens,  17  Blatch.,  259 
(1879),  where  the  question  was, 
"  Whether,  in  an  action  at  law  by  a  re- 
ceiver of  the  bank,  the  real  owner  of 
stock  in  a  national  bank,  standing  by  his 
procurement  in  the  name  of  another, 
and  never  having  been  in  his  own  name 
on  the  books,  can  be  charged  as  a  share- 
holder with  the  statutory  liability  for 
debts?"  Held,  that  the  real  owner  is 
liable.  "Every  principal  is  responsible 
for  the  obligations  of  his  agency.  The 
debt   of  the  agent  is  the  debt  of  the 


principal,  and  always  recoverable  from 
the  principal."  See,  also,  to  same  effect, 
Case  v.  Small,  10  Fed.  Rep.,  722  (1881) ; 
Castleman  v.  Holmes,  4  J.  J.  Marsh.,  1 
(1830).  In  England,  under  its  statutes,  a 
different  rule  prevails.  See  King's  Case, 
L.  R,  6  Ch.  App.,  196  (1871) ;  William's 
Case,  L.  R,  1  Ch.  D.,  576;  Fenwick's 
Case,  1  De  G.  &  Sm.,  557  (1849) ;  Cox's 
Case,  4  De  G.,  J.  &  S.,  53  (1863).  The  real 
owner  of  stock  is  likewise  liable  where 
he  transfers  it  from  his  own  name  to 
that  of  an  irresponsible  person.  §§  263- 
266,  infra.  Cf.  cases  in  note  3,  p.  332, 
supra.  An  undisclosed  owner  of  stock, 
standing  in  the  name  of  another  as 
trustee,  is  liable  on  the  statutory  liability. 
Borland  v.  Haven,  37  Fed.  Rep.,  394 
(1888);  Castleman  v.  Holmes,  4  J.  J. 
Marsh.,  1  (1830),  holding  that  one  who 
subscribed  for  stock  in  the  name  of  an 
infant  for  the  purpose  of  avoiding  re- 
sponsibility, and  who  enjoyed  the  ben- 
efits of  the  stock,  was  individually  re- 
sponsible as  a  stockholder  for  debts  of 
the  corporation.  Where  the  "  dummy  " 
dies,  and  his  representatives  claim  the 
stock,  and  they  pay  the  real  owner  a 
small  sum  in  settlement,  the  compro- 
mise will  be  upheld.  Antoine  r.  Smith. 
4  S.  Rep.,  321  (La.,  1888).  Where 
the  "  dummy "  dies  and  is  insolvent. 
the  stock  cannot   be   reclaimed  by  the 


:;:!9 


§  253.]  LIABILITY    OF    PLEDGEES,  AGENTS,  EXECCTOKS,  ETC.       [CH.  XIV. 


In  England  a  directly  contrary  rule  prevails.1 

In  America  the  relation  of  the  real  owner  to  the  "  dummy  "  is  held 
to  be  that  of  principal  and  agent,  and  the  principal  is  held  liable, 
on  the  ground  that  an  undisclosed  principal  is  liable  on  the  con- 
tracts of  his  agent.  In  England  the  real  owner  of  the  stock  is 
looked  upon  as  a  cestui  que  trust,  and  hence  is  not  liable.2  Under 
the  Ohio  statute  the  word  "stockholders"  applies  to  persons 
owning  stock  in  the  name  of  another,  as  well  as  to  persons  appear- 
ing on  the  corporate  books  as  stockholders.3 

A  transfer  to  a  fictitious  person  is  void,  and  leaves  all  parties  as 
they  were.4 


real  owner.  Hirsch  v.  Norton,  17  N.  E. 
Rep.,  612  (Ind.,  1888).  Stock  held  in  the 
name  of  a  "dummy"  is  subject  to  his 
debts,  even  though  he  notified  the  sec- 
retary of  the  company  that  be  held  it  in 
trust.  Ex  parte  Old,  2  Mont.  &  A.,  734 
(1835) ;  Ex  parte  Watkins,  id.,  348  (1835) ; 
reversing  1  id.,  693. 

king's  Case,  L.  R,  6  Ch.  App,  196 
(1871),  where  the  court  says  it  does  not 
know  upon  what  ground  a  court,  set- 
ting aside  a  transaction  as  fraudulent, 
is  able  to  make  a  new  contract  for  per- 
sons which  they  had  never  made  them- 
selves. Cox's  Case,  4  De  G.,  J.  &  S.,  53 
(1863),  is  distinguished  on  the  ground 
that  Cox  had  agreed  to  take  certain 
shares,  and  the  decision  was  in  the 
nature  of  specific  performance.  In  Cox's 
Case,  also,  he  had,  by  the  use  of  "dum- 
mies," entrapped  the  public  into  believ- 
ing that  many  persons  were  investing. 
In  Williams'  Case,  L.  R,  1  Ch.  D.,  571 
1 1875),  where  a  purchaser  of  shares  had 
them  transferred  to  one  of  his  em- 
ployees, the  real  owner  was  held  not 
liable  thereon.  In  the  case  Ex  parte 
Bugg,  2  Drew.  &  Sm.,  452,  a  similar 
conclusion  was  arrived  at,  the  court 
saying  that  the  relation  between  the 
real  owner  and  the  "  dummy  "  was  that 
of  cestui  que  trust  and  trustee.  Such, 
also,  is  the  rule  laid  down  in  Fenwick's 
Case,  1  De   G.  &  Sm.,  557  (1849),  where 


the  purchaser  had  the  stock  transferred 
into  the  name  of  the  "  dummy "  as 
"  trustee."  A  person  who  subscribes 
for  stock  in  a  Canadian  corporation  in 
the  name  of  another,  a  "  dummy,"  is 
not  liable  for  the  unpaid  subscription. 
Molson's  Bank  v.  Boardman,  47  Hun. 
(N.  Y.),  135  (1888).  That  a  cestui  que 
trust  is  not  liable  on  stock  held  by  his 
trustee,  see  §§  215,  246.  See,  also, 
cases  in  note  2,  p.  330,  sxipra. 

2  See  supra. 

3  Lloyd  v.  Preston,  146  U.  S.,  630(1892). 

4  Arthur  v.  Midland  R'y  Co.,  3  Kay  & 
J.,  204  (1857).  See  Pugh  &  Sharmans 
Case,  L.  R,  13  Eq.,  566  (1872),  where  the 
transfer  was  to  a  married  woman,  but 
the  court  treated  it  as  a  transfer  to  a 
fictitious  person.  In  Muskingum,  etc., 
Co.  v.  Ward,  13  Ohio,  120  (1844),  where 
the  transfer  was  made  to  a  fictitious 
person,  the  court  held  that  the  transac- 
tion was  a  mere  nullity,  and  that  it 
could  not'  be  regarded  as  an  abandon- 
ment of  the  stock.  So  where  one  pur- 
chased, or  assumed  to  purchase,  shares 
for  an  infant,  and  took  the  certificate 
in  the  name  of  an  imaginary  person,  it 
was  held  that  by  such  a  transaction  the 
purchaser  did  not  become  liable  upon 
the  shares,  nor  was  the  vendor  released. 
Maitland's  Case,  38  L.  J.,  Chan.,  554 
(1869).  See,  also,  Richardson's  Case, 
L.  R,  19  Eq.,  588. 


340 


CHAPTER  XV. 


LIABILITY  AS  AFFECTED  BY  TRANSFERS. 


§  254.  The  subject  herein. 

255.  Liability   of  the   transferrer  on 

unpaid  subscriptions  after  reg- 
istry. 

256.  Liability    of    the    transferee    on 

unpaid  subscriptions  after  reg- 
istry. 

257.  Knowledge  that  the  shares  are 

not  fully  paid  up,  how  far  im- 
putable to  a  transferee. 

258.  Liability    on    subscription    after 

transfer  but  before  registry  — 
Irregular  and  attempted  trans- 
fers. 


§  259.  Does  the  statutory  liability  at- 
tach when  the  corporate  debt 
is  contracted  or  is  due  or  is 
sued  upon? 

260.  Transferrer's    statutory    liability 

after  transfer  but  before  reg- 
istry. 

261.  The    transferee's    statutory    lia- 

bility. 

262.  Liability  of  transferee  to  trans- 

ferrer. 
263-266.  A  transfer  to  a  "dummy" 
or   to   an   insolvent   person  in 
order  to  escape  liability. 


§  254.  The  subject  herein. —  "When  shares  of  stock  are  transferred 
from  one  owner  to  another  it  at  once  becomes  an  important  matter 
to  determine  who  is  liable  upon  unpaid  subscriptions,  and  who 
must  assume  the  liability  imposed  by  statute.  The  difficulty  is  in- 
creased by  the  rule  of  law  that  no  transfer  is  complete  until  it  is 
duly  entered  or  recorded  in  the  transfer  book  of  the  corporation. 
The  complication  is  usually  greatest  in  cases  involving  the  question 
of  statutory  liability,  since  generally  each  case  turns  more  or  less 
upon  the  particular  words  of  the  statute  by  which  the  liability  is 
imposed.  There  are,  however,  many  rules  which  are  general  in 
their  character  and  application,  governing  the  liability  of  share- 
holders as  affected  by  transfer,  and  these  are  the  subject  of  this 
chapter. 

§  255.  Liability  of  the  transferrer  on  unpaid  subscriptions  after 
registry. —  Transfers  of  shares  may  be  made  at  any  time  after  the 
contract  of  subscription  is  made,  and  before  any  part  or  after  a 
part  of  the  subscription  price  has  been  paid.  The  well-established 
and  general  rule  of  law  is,  that  where  a  stockholder  makes  an  ab- 
solute transfer  of  his  stock  in  good  faith,  and  the  transfer  is  duly 
recorded  in  the  corporate  stock  book,  the  transferrer  is  thereby 
wholly  discharged  from  all  further  liability  upon  the  uncalled  sub- 
scription price  of  the  stock.1 

1  Huddersfield  Canal  Co.  v.  Buckley,  transferrer  is  not  liable  on  an  unpaid 
7  Term  Rep.,  36  (1796,  by  Lord  Ken-  subscription.  "  A  transfer  of  stock  made 
yon);  Executors  of  Gilmore  v.  Bank  of  in  good  faith  and  at  a  time  when  the 
Cincinnati,   8    Ohio,    62,    71   (1837).     A     corporation  is  a  going  and  solvent  con- 

341 


§  255.]  transferrer's  and  transferee's  liability-.         [ch.  XV. 

This  important  rule  is  peculiar  to  corporation  law.  It  is  based 
on  public  policy  and  an  appreciation  of  the  demands  of  trade.  The 
transferrer  is  released,  although  the  corporate  officers  enter  the 


cera,   and   which  is  entered   upon  the 
books,  would  certainly  relieve  the  trans- 
ferrer from  all  of  the  responsibilities 
which  attached  to  him  as  a  stockholder." 
Tucker  v.  Gilman,  121  N.  Y.,  189  (1890) ; 
Billings  v.  Robinson,  94  N.  Y.,  415  (1884) ; 
affirming  S.    C,   28    Hun,    122    (1882); 
"Wakefield  v.  Fargo,  90  N.  Y,  213  (1882) ; 
Cowles    v.     Cromwell.    25    Barb.,    413 
(1857);  Cole  v.  Ryan,  52  id.,  168  (1868); 
Isham  v.   Buckingham,   49  N.  Y,  216 
(1872);  Stewart  v.   Walla,   etc..  Co.,  20 
Pac.  Rep.,  605  (Wash.  Ter.,  1889) ;  Miller 
v.  Great  Republic  Ins.  Co.,  50  Mo.,  55 
(1872):  Allen  v.  Montgomery  R.  R.  Co., 
11    Ala.,    437,    451    (1847);    Haynes    v. 
Palmer,  13  La.  Ann.,  240  (1858);  Wes- 
ton's Case,  L,  R„  4  Chan.,  20  (1868) ;  Mc- 
Kenzie  v.  Kittridge,  24  Upp.  Can.,  C.  P., 
1  (1874).     The  mere  fact  that  the  trans- 
ferrer,  after  the   registry,  paid   a   call 
does  not  estop  him  from  denying  his 
liability  for  subsequent  calls.     Provin- 
cial Ins.  Co.  v.  Shaw,  19  U.  C.  (Q.  B.), 
533   (1860).     It  is  not  necessary  to  the 
validity  of  the  transfer  that  there  should 
be  a  consideration  moving  from  trans- 
feree to  transferrer ;  and  so,  where  one 
gives  his  share  away  absolutely  and  in 
good  faith,  the  same  rule  as  to  liability 
prevails.     In  re  European  Bank,  Mas- 
ter's Case,  41   L.  J.,  Chan.,   501  (1872). 
Neither  does  it  alter  the  rule  that  no 
certificates  of  stock  have  been  issued. 
In  such  a  case  the  transferee  becomes 
liable  on  the  stock,  and  the  transferrer's 
liability  is  at  an  end.     Burke  v.  Smith, 
16  Wall.,  390  (1872);  Brigham  v.  Mead, 
10  Allen,   245    (1865).     See,   also,    First 
Nat'l  Bank  v.  Gifford,  47  Iowa,  575,  583 ; 
Isham  v.  Buckingham,    49    N.   Y,   216 
(1872).     As  regards  the  rule  where  the 
transfer  is  made  before  the  corporation 
is  organized,  see  §  61.     The  statutes  of 
the  state  may,  of  course,  change  this 
rule.   Thus,  in  Pennsylvania,  see  Bright- 
ley's   Purdon's  Digest,    pp.    1420-1427; 


and  in  Virginia,  see  Glenn  v.  Scott,  28 
Fed.  Rep.,  804  (1886) ;  McKim  v.  Glenn, 
8  Atl.  Rep.,  130  (Md.,  1887).    In  Pennsyl- 
vania and  Virginia  both  the  transferrer 
and  transferee  are  liable.  Glenn  v.  Foote, 
36  Fed.  Rep.,  824  (1888) ;  Priest  v.  Glenn, 
51  Fed.  Rep.,  400  (1892) ;  Hambleton  v. 
Glenn,  9  S.  E.  Rep.,  124  (Va.,  1889).    Sub- 
scribers to  stock  are  liable  according  to 
the  law  of  the  state  incorporating  the 
company,  and  not  according  to  the  law 
of  the  state  where  the  subscribers  re- 
side.    A  subscriber  to  stock  in  a  Vir- 
ginia corporation  is  liable  by  statute  al- 
though he  has   transferred  his  stock. 
Morris  v.    Glenn,    7   S.   Rep,  90   (Ala., 
1888).     In   Pennsylvania,  after    consid- 
erable  doubt  and  conflict,  it  has  been 
clearly  stated  by  the  supreme  court  that 
the  transferee  of  stock  is  liable  on  the 
unpaid  subscription.     Bell's  Appeal,  8 
Atl.  Rep,  177  (Pa.,  1887);  Citizens',  etc., 
Co.  v.  Gillespie,  9  Atl.  Rep.,  73  (1887), 
where,  however,  the  transferee  directly 
contracted  to  pay.     But  compare  West 
Philadelphia  Canal  Co.  v.  Innes,  3  Whar- 
ton, 198  (1838);    Aultman's   Appeal,  98 
Pa.  St,  505  (1881);  Bunn's  Appeal,  105 
id.,  49  (1884);  Palmer  v.  Ridge  Mining 
Co.,  34  id.,  288 ;  Pittsburgh  Iron  Co.  v. 
Otterson,  4  Week.  Notes  Cas.,  545  (1878) ; 
Delaware  Canal  Co.  v.  Sanson),  1  Biun., 
70  (1803) :  Merrimac  Mining  Co.  v.  Levy, 
54  Pa.  St,  227  (1867).     And,  in  general, 
as   regards    the  Pennsylvania  General 
Railroad  Act  of  February  19,  1849,  see 
Pittsburgh,  etc.,  R  R  Co.  v.  Clarke,  29 
Pa.  St,  146  (1857);  Graff  v.  Pittsburgh, 
etc.,  R  R.  Co.,  31   id.,  489  (1858).     Cf. 
Frank's  Oil  Co.  v.  McCleary,  63  id.,  317 
(1869),  holding  that  the  transferee  in  a 
mining  company  is  not  liable.     Messer- 
sniith   v.  Sharon  Savings  Bank,  96  id., 
440  (1880),  to  same  effect ;  and  see  Ault- 
man's Appeal,  98  id.,  505  (1881),  involv- 
ing an   Ohio  corporation ;    Pittsburgh, 
etc.,  Iron  Co.  v.  Otterson,  4  Week.  Notes 


342 


CH. 


XV.] 


transferrer's  and  transferee's  liability. 


[§  256. 


transfer  against  the  protest  of  the  transferrer.1  The  transferrer, 
however,  is  liable  for  calls  payable  before  the  transfer  is  made,2  and 
in  some  cases  for  calls  made  before  but  payable  after  the  transfer.3 
§  256.  Liability  of  the  transferee  or  unpaid  subscriptions  after 
registry. —  When  a  transfer  of  stock  is  made,  and  the  transfer  is 
duly  recorded  in  the  corporate  stock  book,  the  transferee  thereupon 
becomes  liable  for  any  balance  of  the  subscription  price  remaining 
unpaid  at  the  time  of  the  transfer.  The  transfer  releases  the  trans- 
ferrer, and  charges  the  transferee.4 


Cas.,  545  (1878) ;  Miller  v.  Peabody  Bank, 
15  Week.  Notes  Cas.,  76 ;  Reimer  Co.  v. 
Rosenberger,  40  Leg.  Jnt,  383;  Pitts- 
burgh R.  R  Co.  v.  Clarke.  29  Pa.,  153. 
In  Maryland,  also,  the  ordinary  stat- 
utor}'  provision  holding  stockholders 
liable  until  the  capital  stock  is  fully 
paid  in  is  held  to  render  the  shareholder 
liable,  even  though  he  has  transferred 
his  shares.  Hager  v.  Cleveland,  36  Md., 
476  (1872).  After  a  transfer  and  regis- 
try the  stockholder  is  not  liable  on  the 
subscription  even  under  a  statute.  Libby 
v.  Tobey,  19  Atl.  Rep.,  904  (Me.,  1890). 
In  New  York  no  stock  in  either  railroad 
or  manufacturing  corporations,  created 
by  the  laws  of  that  state,  can  be  law- 
fully transferx-ed  while  there  are  calls 
unpaid  upon  the  shares.  N.  Y.  Session 
Laws,  1850,  ch.  140,  §  8 ;  N.  Y.  Session 
Laws,  1848,  ch.  40,  §  8.  In  California 
railroad  stock  cannot  be  issued  until  it 
is  fully  paid  up.  Brewster  v.  Hartley, 
37  Cal.,  15  (1869).  In  Tennessee  it  is 
held  that,  upon  a  valid  transfer,  the 
transferrer  is  released,  not  only  upon 
his  liability  for  unpaid  subscriptions, 
but  also  as  to  all  the  existing  debts  of 
the  corporation ;  and  this  is  the  general 
rule.  Jackson  v.  Sligo  Mfg.  Co.,  1  Lea, 
210  (1878).  So  in  Alabama.  Allen  v. 
Montgomery  R.  R..  11  Ala.,  437  (1847> 

1  London,  etc.,  R'y  Co.  v.  Fairclough, 
H  Man.  &  G.,  674,  706  (1841) ;  Upton  v. 
Burnham,  3  Biss.,  520  (1873);  Webster 
v.  Upton,  91  U.  S.,  65  (1875).  'In  a  pro- 
ceeding in  equity  a  transferee  will  be 
compelled  to  pay  calls  made  after  trans- 
fer of  the  certificate  and  before  registry 
of  the  same.     Webster  v.  Upton,  supra. 


2  Yicksburg,  etc.,  R  R  Co.  v.  McKean, 
14  La.  Ann.,  724  (1859) ;  and  cases  in  this 
section  generally,  and  g  258,  infra. 

3  North  American  Colonial  Association 
v.  Bentley,  19  L.  J.  (Q.  B.),  427  (1850); 
Schenectady,  etc.,  Plank-road  Co.  v. 
Thatcher,  11  N.  Y,  102,  113  (1854). 
Contra,  West  Philadelphia  Canal  Co.  v. 
Innes,  3  Wharton,  198  (1838).  But  this 
case  was  decided  on  the  ground  that  the 
transferee  had  not  accepted  the  stock, 
and  could  not  be  held  liable  by  the  cor- 
poration. Cf.  Aylesbury  Railway  Co. 
v.  Mount,  4  Man.  &  G.,  651,  reversing  5 
Scott's  New  Rep,  127  (1842);  In  re  Hoy- 
lake  R'y  Co.,  L.  R.,  9  Chan.,  257  (18741 

4  Webster  v.  Upton,  91  U.  S.,  65  (1875) ; 
Pullman  v.  Upton,  96  id.,  328  (1877); 
Upton  v.  Hansbrough,  3  Biss.,  417  (1873) ; 
Hall  v.  United  States  Ins.  Co..  5  Gill 
(Md.),  484  (1847) ;  Bend  v.  Susquehanna 
Bridge  Co.,  6  Har.  &  J.,  128  ^1825) ;  Mer- 
rimac  Mining  Co.  v.  Bagley,  14  Mich., 
501  (1866) ;  Brigham  v.  Mead,  10  Allen, 
245  (1865);  Hartford,  etc.,  R  R  Co.  v. 
Boorman,  12  Conn.,  530  (1838) ;  Moore  v. 
Jones,  3  Woods,  53  (1877);  Merrimac 
Mining  Co.  v.  Levy,  54  Pa.  St.,  227  (1867) ; 
Huddersfield  Canal  Co.  v.  Buckley,  7 
Term  Rep.,  36  (1796).  In  Gray's  Case, 
L.  R,  1  Ch.  Div.,  664,  where  an  owner  of 
iron-works  sold  them  to  an  incorpora- 
tion for  its  stock,  and  having  guarantied 
that  the  net  dividends  should  be  not  less 
than  ten  per  cent,  on  the  paid-up  capital, 
for  which  purpose  the  shares  given  as 
consideration  were  vested  in  trustees, 
but  were  not  to  be  registered  in  their 
names  except  by  their  own  direction,  it 
was  held   that  they  were  not  liable  as 


343 


§  257.] 


transferrer's  and  transferee's  liability. 


[cil 


XV. 


In  Pennsylvania 1  and  some  other  states,  the  liability  of  the  trans- 
feree is  regulated  by  statute.  Where,  by  statute  or  a  by-law  of 
the  corporation,  no  valid  transfer  can  be  made  while  there  are  calls 
due  and  unpaid,  it  is  held  that  a  transfer  without  such  payment 
will  not  render  the  transferee  liable  thereon.2 

§  257.  Knowledge  that  the  shares  are  not  fully  paid  up,  how  far 
imputable  to  a  transferee. —  The  question  whether  the  purchaser  of 
shares  is  bound  to  take  notice  that  the  stock  he  purchases  is  not 
fully  paid  for  is  a  serious  and  complicated  one.  The  better  opin- 
ion, and  the  one  most  in  accord  with  the  usages,  analogies  and 
demands  of  trade,  is  that,  where  one  buys  stock  in  open  market, 
in  good  faith,  and  without  notice  that  the  subscription  price  thereof 
has  not  been  paid  up,  such  a  purchaser  cannot  be  held  liable  to  pay 
the  unpaid  balance  of  subscript  ion.a 


stockholders  because  they  had  not 
elected  to  be  registered  as  stockholders. 
When  a  person  takes  shares  of  a  com- 
pany, he,  as  between  himself  and  other 
shareholders,  takes  those  shares  with  all 
the  rights  and  liabilities  attaching  to 
them,  so  that  his  co-shareholders  have  a 
perfect  right  to  insist  upon  his  contribut- 
ing with  them  towards  the  liquidation  of 
debts  contracted  before  he  joined  the 
company.  Taylor  v.  Ifill,  1  N.  R„  566,  V. 
C.  W. ;  Cape's  Executor's  Case,  2  De  G., 
M.  &  G.,  562 ;  Mayhew's  Case.  5  id.,  837. 
See,  too.  Horsley  v.  Bell,  1  Bro.  C.  G, 
101,  note.  Sanderson's  Case,  3  De  G.  & 
S.,  60,  cannot  be  regarded  as  correct  on 
this  point  See  Henderson  v.  Sanderson, 
3  H.  L.  G,  698. 

!See  notes  to  the  preceding  section. 

z  Watson  v.  Eales,  23  Beav.,  294  (1856); 
McCready  v.  Rumsey,  6  Duer,  574  (New 
York  Super.  Ct.,  1857),  was  a  case  under 
a  prohibition  to  transfer  in  articles  of 
association  of  a  bank,  organized  under 
the  General  Banking  Act  of  1838  of  the 
state  of  New  York ;  In  re  Bachman,  12 
Nat.  Bank.  Reg.,  223  (1875),  where  the 
corporation  had  a  lien  on  the  stock. 

3  Certificates  of  stock  have  become 
such  important  factors  in  trade  and 
credit,  and  general  investment  by  all 
classes,  that  the  law  is  steadily  tending 
towards  the  complete  protection  of  a 
bona  fide  purchaser  of  them   in  open 


market,  and  without  notice  of  facts 
which  will  decrease  the  apparent  value 
of  the  stock.  The  constant  tendency  of 
the  courts  to  increase  the  negotiability 
of  certificates  of  stock  will  probably,  at 
some  time  hereafter,  not  allow  any  lia- 
bility on  unpaid  subscriptions  to  be  en- 
forced against  a  transferrer  unless  such 
liability  is  stated  on  the  face  of  the  cer- 
tificate itself.  At  present  it  is  still  a 
question  whether  a  purchaser  of  the  cer- 
tificate is  bound  to  inquire  and  know 
whether  the  stock  is  issued  as  paid-up 
stock  or  not  See  ch.  III.  Where  a 
member  has  not  paid  for  his  stock  in 
full  and  sells  it  as  though  it  was  full 
paid  he  must  refund  to  the  transferee 
the  balance  which  the  transferee  is 
obliged  to  pay.  Jamison  r.  Harbert,  54 
N.  W.  Rep.,  75  (Iowa,  1893).  But  where 
a  subscription  is  not  paid,  and  the  stock 
is  transferred  to  the  corporation  as 
"  treasury  stock  "  and  then  sold  below 
par,  the  purchaser  is  liable  for  the  un- 
paid par  value.  Ailing  v.  Ward,  24  N. 
E.  Rep.,  551  (111.,  1890).  A  contract  by  a 
corporation  that  it  will  issue  its  stock 
for  one-fifth  of  its  par  value  is  void 
under  the  Alabama  constitutional  pro- 
hibition. The  subscriber  having  sold 
his  contract  to  another  person  cannot 
collect  on  such  sale.  Williams  v.  Evans, 
6  S.  Rep.,  702  (Ala.,  1889> 


344 


CH.  XV.  1 


TRANSFERRER  S    AND    TRANSFEREE  S    LIABILITV. 


[§  258. 


§  25S.  Liability  on  subscription  after  transfer  hut  before  regis- 
try—  Irregular  and  attempted  transfers. —  Until  a  transfer  is  re- 
corded in  the  transfer  book  of  the  corporation,  the  transferee,  not 
being  duly  organized  as  a  stockholder,  is  not  chargeable  either 
with  corporate  debts  or  unpaid  balances  of  the  subscription.  He 
is  bound  to  protect  and  indemnify  his  transferrer,  but  he  is  not 
liable  to  the  corporation  or  corporate  creditors  or  other  stockhold- 
ers.1 The  transferrer,  however,  is  not  released  from  liability  until 
the  transfer  is  dulv  registered  in  the  corporate  books.2  This  rule, 
however,  has  not  been  rigidly  adhered  to;  and  it  is  the  law  that, 
where  the  corporation  accepts  the  transferee  as  a  stockholder  and 
pays  dividends  to  him,  or  where,  through  the  negligence  or  fault 
of  the  corporation,  no  transfer  on  the  books  is  made,  in  such  cases 
the  transferrer  is  released,  and  the  transferee  only  is  liable  on  the 
stock.3 


1  Marlborough  Manuf'g  Co.  v.  Smith,  2 
Conn..  579  (1818);  Topeka.  etc.,  Co.  r. 
Hale,  17  Pac.  Rep.,  601  (Kan.,  1888) ;  Mid- 
land, etc.,  R'y  Co.  v.  Gordon,  16  Mees.  & 
W.,  804  (1847).  In  Indiana  it  has  been 
held  that  a  statute  will  not  be  construed 
so  as  to  make  both  transferrer  and 
transferee  liable  directly  for  the  same 
indebtedness.  Williams  v.  Hanna,  40 
Ind.,  535  (1872). 

2Shelliugton  v.  Howland,  53  N.  Y., 
371  (1873);  Worrall  v.  Judson,  5  Barb., 
210  (1849) ;  Louisiana  Insurance  Co.  v. 
Gordon,  8  La.  Rep,  174  (1835);  Dane 
v.  Young,  61  Me.,  160  (1872) ;  Fowler  v. 
Ludwig,  34  Me.,  455  (1852);  Davis  v. 
Essex,  etc.,  Society,  44  Conn.,  582  (1877); 
Kellogg  v.  Stockwell,  75  111.,  68 ;  Bow- 
dell  v.  Farmers',  etc.,  Nat.  Bank,  U.  S. 
C.  C.  (D.  Md.,  1877);  Brown's  N.  B. 
Cas.,  147 ;  London,  etc..  R'y  Co.  v.  Fair- 
clough,  2  Man.  &  G,  674  (1841) ;  to  the 
same  effect,  McEuen  r.  West  London 
Wharves,  etc.,  Co.,  L.  R,  6  Chan.,  655, 
in  which  it  was  held  that  the  sale  and 
transfer  by  delivery  of  scrip  certificates, 
allotted  and  issued  to  a  subscriber  enti- 
tling the  bearer  to  exchange  them  for 
share  certificates,  would  not  exonerate 
the  vendor  from  liability  for  calls,  even 
though  the  vendee  had  paid  some  calls ; 
Midland,  etc..  v.  Gordon,  6  Mees.  &  W.. 
604(1847);  Sayles  v.  Blane,  19  L.  J.  (Q. 


B.),  19 ;  S.  C,  6  Eng.  R'y  Cases,  79.  See, 
also,  Hawkins  v.  Glenn,  131  U.  S.,  319 
(1889).  The  registered  stockholder  is 
liable  on  the  subscription.  Baines  v.  Bab- 
cock,  30  Pac.  Rep,  776  (Cal.,  1892).  An 
original  subscriber  for  stock  is  not  re- 
leased from  his  obligation  although  he 
sells  and  transfers  the  certificate  of 
stock,  such  transfer  not  having  been  re- 
corded on  the  corporate  books.  Hood 
v.  McNaughton,  24  Atl.  Rep.,  497  (N.  J., 
1892).  A  person  sued  as  a  subscriber 
cannot  set  up  that  he  subscribed  at  the 
solicitation  of  another  person  who  agreed 
to  take  the  subscription  off  his  hands  at 
once.  Stutz  v.  Handley,  41  Fed.  Rep., 
531  (1890). 

3  Isham  v.  Buckingham,  49  N.  Y.,  216 
(1872);  Cutting  v.  Damerel,  88  id.,  410 
(1882);  Chambersburg  Ins.  Co.  r.  Smith, 
11  Pa.  St.,  120  (1849);  Murry  v.  Bush. 
L.  R,  6  House  of  Lords,  37  (1873); 
Upham  v.  Burnham.  3  Biss.,  431  (1873); 
S.  C,  id.,  520.  Where  the  transferrer 
signs  the  transfer  on  the  back  and  de- 
livers the  same  to  his  broker,  who  sells 
the  stock  and  then  presents  the  certifi- 
cate to  the  corporation  for  transfer,  and 
the  corporation  agrees  so  to  do,  but  neg- 
lects to  for  a  year,  the  transferrer  is  not 
liable  on  the  stock.  Young  v.  M'Kay, 
50  Fed.  Rep.,  394  (1892).  The  transferrer 
of  stock  in  a  national  bank  is  released 


345 


S  258.] 


transferrer's  and  transferee's  liability.         [ch.  XV. 


It  is  immaterial  that  no  certificate  of  stock  is  issued  to  the  trans- 
feree.    The  registry  is  complete  without  it.1     When  the  transferrer 


from  liability  when  he  goes  with  the 
transferrer  to  the  bank,  delivers  the  old 
certificate  duly  transferred  and  leaves 
the  same  for  registry,  even  though  no 
registry  is  made.  Hayes  v.  Shoemaker, 
39  Fed.  Rep.,  319  (1889).  A  substitution 
of  stockholders  after  organization  by 
canceling  some  subscriptions  and  filling 
in  others  is  illegal.  There  should  be  a 
transfer.  Cartwright  v.  Dickinson,  12 
S.  W.  Rep.,  1030  (Tenn.,  1890).  Where 
a  party  buys  stock  through  a  broker 
and  the  broker  without  authority  causes 
the  stock  to  be  transferred  on  the  books 
to  the  purchaser,  but  the  latter  upon 
receiving  the  certificates  returns  them 
and  repudiates  the  transfer  and  orders 
a  sale  and  transfer,  and  the  company 
fails  before  such  resale  is  made,  the 
purchaser  is  not  liable  to  corporate 
creditors  on  the  subscription  price  of 
the  stock.  Glenn  v.  Garth,  133  N.  Y., 
18  (1892).  Where  a  person  subscribes  to 
the  proposed  increased  capital  stock, 
but  the  increase  is  not  made,  and  the 
officers  surreptitiously  transfer  some  of 
their  old  stock  to  him,  he  is  not  liable 
on  the  statutory  liability  thereon,  even 
though  he  accepted  the  stock,  if  he  ac- 
cepted in  ignorance  of  the  fraud  prac- 
ticed upon  his.  Stephens  v.  Follett,  43 
Fed.  Rep.,  842  (1890).  A  stockholder  is 
liable  by  statute  on  stock  where  he  has 
merely  transferred  the  certificate,  and 
no  effort  has  been  made  to  complete  the 


transfer  on  the  corporate  books.  Where 
there  is  no  transfer  book,  but  cer- 
tificates are  merely  canceled  and  new 
ones  issued,  this  is  sufficient  to  effect  a 
transfer  on  the  corporate  books.  Plumb 
v.  Bank  of  Enterprise,  29  Pac.  Rep.,  699 
(Kan.,  1892).  Where  a  person  agrees  to 
accept  a  transfer  of  stock,  and  acts  as 
director,  he  is  liable  on  the  unpaid 
subscription  though  no  formal  transfer 
is  made.  Weinman  v.  Wilkinsburg,  etc., 
R'y  Co.,  12  Atl.  Rep.,  288  (Pa.,  1888) ; 
Bernard's  Case,  5  De  G.  &  Sm.,  283  (1852). 
See,  also.  §  260,  infra.  Cf.  Ex  parte  Hall, 
1  McC.  &  G.,  307  (1849),  holding  that 
an  unregistered  transferee  is  not  liable 
merely  because  he  accepts  dividends; 
Shipman's  Case,  L.  R,  5  Eq.,  219,  in 
which  a  purchaser  offered  a  name  to 
which  he  wished  the  shares  transferred 
on  the  register,  but  which  was  rejected 
by  the  directors.  The  vendor,  in  whose 
name  they  stood,  was  held  liable  for 
calls,  and  the  court  refused  to  remove 
his  name;  Sheffield,  etc.,  v.  Woodcock, 
7  Mees.  &  W.,  574,  holding  that  where,  by 
law,  transfers  of  stock  were  to  be  made 
by  deed,  a  transfer  in  blank,  and  stating 
the  consideration  untruly,  made  to  a 
purchaser  who  afterwards  signed  and 
sent  to  the  company  a  proxy,  in  which 
he  described  himself  as  the  proprietor 
of  the  shares,  constituted  him  a  stock- 
holder for  the  purpose  of  requiring  him 
to    respond  to    calls    for    assessments ; 


1  First  Nat'l  Bank,  etc.,  v.  Gifford,  47 
Iowa,  575,  583;  Brigham  v.  Mead,  10 
Allen,  245  (1865) ;  Straffon's  Executor's 
Case,  1  De  G.,  M.  &  G,  576  (1852). 
Chouteau  Spring  Co.  v.  Harris,  20  Mo., 
382  (1855),  holding  that  an  assignment 
upon  the  books  of  the  company,  with- 
out having  a  new  certificate  issued,  is  a 
sufficient  transfer  to  exonerate  the  as- 
signor from  liability  for  assessments ; 
and  that  any  transfer  in  writing  is  valid 
against  a  company  which,  having  notice, 
refuses   to  allow  it  to  be  made.     The 


shareholder  cannot  set  up  for  defense, 
to  an  action  by  a  corporate  creditor, 
that  some  third  person  had  contracted 
to  purchase  his  shares,  or  a  portion  of 
them,  but  that  with  the  consent  of  the 
corporate  authorities  it  had  been  agreed 
that,  until  that  third  person  had  paid 
the  notes  given  for  the  purchase  price 
of  the  stock,  the  transfer  should  not 
be  made  on  the  corporate  stock-book. 
Phoenix  Warehousing  Co.  v.  Badger,  67 
N.  Y.,  294  (1876);  affirming  S.  C,  6  Hun, 
293  (1875). 


346 


ch.  xv.]        transferer's  and  transferee's  liability. 


[§  258. 


has  clone  all  in  his  power  to  complete  the  transfer  and  is  guilty  of 
no  laches,  his  liability  to  corporate  creditors  is  thereby  deter- 
mined; and  accordingly,  he  is  discharged,  as  though  the  registry 


Taylor    v.    Hughes,    2    Jones    &    Lat. 
(Ir.  Ch.),  24.  in  which  the  court  refused 
to  hold  liable  as  a  stockholder  of  a  bank 
one  who  has  transferred  his  stock  seven 
years  before,   though    not  by  a  proper 
method,  and  whose  name  had  not  ap- 
peared on  the  books  during  that  time, 
but  had  been  re-entered  by  a  committee 
after  the  failure  of  the  bank.    Burnes  v. 
Pennell,  2   H.  of  L.  Cas.,  497,  held  that 
where  certain  forms  were  to  be  observed 
by  a   transferee  of  shares  in  a  Scotch 
joiut-stock  compan}r,  the  required  acts 
were  for  the   benefit  of  the  company, 
and  therefore    the   leaving   of   one    of 
such  acts    unexecuted  by  a   purchaser 
was  not  allowed  to  enable  him  to  retire 
from   his  contract.      Maguire's  Case,  3 
De  G.  &  Sm.,  31.     In  this  case  a  share- 
holder   in    a    steam    packet    company 
transferred  two  shares  to  his  son  without 
his  knowledge.     The  son  did  not  receive 
dividends  nor  do  any  act  as  proprietor ; 
but,  for   the  purpose   of  obaining  free 
passages  upon    the  boats   of  the  com- 
pany, he   obtained  from   the  company 
certificates  that  he  was  a  proprietor.    It 
was  held  that  the  son  was  a  contribu- 
tory in  respect  of  the  two  shares.     A 
receiver  cannot  apply  to  have  a  trans- 
feree's name  put  on  the  list  of  contribu- 
tories  on  ground  of  undue  delay  of  the 
company  in   registering    the    transfer. 
Only    the    transferrer    can    complain. 
Sichell's   Case,  L.  R,  3  Ch.,  119  (1867). 
See  Marlborough   Mfg.  Co.  v.  Smith,  2 
Conn.,  579  (1818),  holding  that  a  mere 
entry   on   the  corporate   books    that  a 
transfer  has  been  made  is  insufficient ; 
and  see,  also,  Lane   v.  Young,  61  Me., 
160,  holding  that  the  failure  to  have  the 
registry  properly  witnessed  invalidates 
it.     A  person  who  buys  stock  at  an  exe- 
cution sale,   after  it  has  already  been 
pledged  for  its  full  value  to  others  and 
a  transfer  to  them  made,  is  not  liable 
for  calls  on  the  stock,  even  though  such 


pledgees  transferred  it  to  him  without 
his  knowledge.  Simmons  v.  Hill,  10  S. 
W.  Rep.,  61  (Mo.,  1888).  A  vendee  of 
stock  who  is  to  be  entitled  to  it  only 
upon  payment  is  not  liable  for  the  sub- 
scription price  if  he  never  pays  for  the 
stock  and  his  name  never  appears  on 
the  books.  Cormac  v.  Western,  etc.,  Co., 
41  N.  W.  Rep.,  480  (Iowa,  1889).  For 
other  cases  holding  the  transferee  lia- 
ble, although  all  the  formalities  of  reg- 
istry were  not  complied  with,  see  Ex 
parte  Dixon,  1  Dr.  &  Sm.,  225  (1860); 
Gordon's  Case,  3  De  G.  &  Sm.,  249  (1850) ; 
Staffron's  Case,  1  De  G.,  M  &  G.,  576 
(1852);  Walter's  Case,  3  De  G.  &  Sm., 
149  (1850);  London,  etc.,  Ry  v.  Fair- 
clough,  2  Man.  &  G,  674  (1841);  Lon- 
don, etc.,  R'y  v.  Freeman,  2  Man.  &  G., 
606  (1841);  Birmingham,  etc.,  R'y  v. 
Locke,  1  Q.  B.,  256  (1841).  For  a  case 
holding  that  the  transferrer  is  liable,  see 
Keene's  Case,  3  De  G,  M.  &  G,  272 
(1853).  For  cases  to  the  effect  that  the 
transferrer  is,  in  general,  discharged 
only  when  the  transfer  is  actually  re- 
corded, and  duly  recorded  in  the  stock- 
book,  and  when  all  the  prescribed  con- 
ditions of  a  valid  transfer  have  been 
duly  complied  with,  Cartmell's  Case, 
L.  R,  9  Chan..  691  (1874);  Heritage's 
Case,  L.  R,  9  Eq.,  5  (1869) ;  Hennessy's 
Executor's  Case,  3  De  G.  &  Sm.,  191 
(1850) ;  Ex  parte  Henderson,  19  Beav., 
107  (1854).  Where  the  consent  of  the 
board  of  directors  is  necessary  to  a  trans- 
fer, no  transfer  is  complete  without  it, 
and  the  transferrer  remains  liable. 
Bosanquet  V.  Shortridge,  4  Ex.,  699 
(1850).  But  this  case  at  law  was  en- 
joined by  Bargate  v.  Shortridge,  5  H.  L 
C,  297  (1855),  in  equity,  and  it  was  held 
that  the  transferrer  was  not  liable.  To 
same  effect,  see  Taylor  v.  Hughes,  2  Jo. 
&  La.  (Irish),  24  (1844),  where  the  regis- 
try was  not  regularly  made,  but  the 
transferee  was  treated  as  a  stockholder, 
347 


§  253.] 


transferrer's  and  transferee's  liability.         [ch.  XT. 


had   been  made.1     The   corporation   cannot   hold   an    unrecorded 
transferrer  liable  on  the  unpaid  subscription  for  stock.2 


Cf.  Murray  v.  Bush,  L.  R.,  6  H.  of  L„ 
37  (1872);  affirming  L.  R,  6  Ch.,  246. 
In  this  case  the  deed  of  settlement, 
among  other  things,  required  a  trans- 
feree to  covenant  by  deed  to  abide  by 
the  rules  of  the  company.  A  director 
who  failed  to  comply  with  that  require- 
ment was  held  to  be  a  shareholder  as  to 
the  shares,  because  he  had  been  recog- 
nized as  a  shareholder  by  the  directors 
at  a  meeting  of  shareholders  and  had 
been  at  that  meeting  elected  a  director. 
The  transferrer  was  held  not  liable. 
Contra,  Keene's  Ex'rs  Case,  3  De  G., 
M.  &  G.,  272  (1853) ;  Mayhew's  Case,  5 
De  G..  M.  &  G,  837  (1854),  where  the 
parties  went  together  to  the  proper  of- 
ficer of  the  company  and  deposited  a 
transfer,  but  no  notice  in  writing  was 
given  to  the  officer  as  required  by  the 
company's  rules.  The  transferee  was 
held  to  be  properly  placed  on  the  list  of 
con  tributaries.     See,  also,  next  note. 

•  Whitney  V.  Butler,  118  U.  S.,  655 
(1886).  See,  also,  £  383.  Ex  parte  Hen- 
derson, 19  Beav.,  107  (1854);  Shortridge 
v.  Bosanquet,  16  Beav.,  84  (1852),  over- 
.  ruling  S.  C,  sub  nom.  Bosanquet  v. 
Shortridge,  4  Exch.,  699  (1850).  In 
White's  Case,  L.  R,  3  Eq.,  86  (1866),  a 
transferrer  was  held  not  discharged  be- 
cause of  laches;  Fyfe's  Case,  L.  R,  4 
Ch.,  768  (1869),  where  there  was  an  im- 
proper delay  on  the  part  of  the  com- 
pany in  registering  a  transfer ;  Lowe's 
Case,  L.  R.,  9  Eq.,  589  (1870),  on  similar 
facts  and  to  same  effect;  Nation's  Case, 
L.  R,  3  Eq.,  77  (1866),  in  which  the  di- 
rectors did  not  confirm  a  transfer  at 
their  next  meeting  after  it  was  left  for 
that  purpose,  thereby  causing  an  unnec- 
essary delay ;  Hill's  Case,  L.  R,  4  Ch., 
769  (1869),  note,  to  same  effect  as  Fyfe's 
Case,  supra;  Ward  v.  Garlit's  Case,  L.  R, 
4  Eq.,  ltsn,  in  which  the  court  rectified 
the  register  by  completing  a  transfer 
which  was  duly  executed  and  left  for 


registry  the  day  before  the  corporation 
stopped  business,  but  was  not  registered 
on  that  account ;  Ward's  Case,  L.  R,  2 
Eq.,  226  (1867),  in  which  the  names  of 
purchasers  of  shares  had  not  been 
placed  on  the  register  in  place  of  that  of 
the  vendor  in  consequence  of  disputes 
among  themselves;  Ex  parte  Hall,  5 
R'y  &  Canal  Cas.,  624  (1849),  holding 
that  where  a  transferee  whose  name 
has  not  been  actually  entered  on  the 
registry  has  so  acted  —  as  being  a 
trustee  for  his  wife  —  and  his  acts  have 
been  so  far  adopted  that  a  waiver  of 
the  necessary  forms  may  be  inferred, 
he  will  be  held  a  contributory  in  wind- 
ing-up proceedings.  De  Pass'  Case,  4 
De  G  &  J.,  544(1859).  In  this  case  the 
certificates  were  transferable  by  de- 
livery ;  and  in  winding-up  proceedings 
the  holders  were  adjudged  to  be  con- 
tributories,  though  it  appeared  that  as 
to  some  shares  they  were  not  delivered 
until  after  the  winding-up  order  was 
made,  and,  as  to  others,  that  they  were 
delivered  to  a  clerk  for  a  nominal  con- 
sideration in  order  to  escape  liability. 
Marino's  Case,  L.  R,  2  Ch.,  596  (1867), 
in  which  the  transferee,  who  lived  in 
Smyrna,  and  had  not  sufficient  time  to 
execute  and  forward  the  deed  required 
of  him  by  the  rules  and  usage  of  the 
company  to  effect  a  valid  transfer,  was 
held  not  to  be  a  contributory ;  Skowhe- 
gan  Bank  v.  Cutler,  49  Me..  315  (1872), 
holding  that,  in  order  to  hold  a  trans- 
feree liable,  it  must  be  shown  that  stat- 
utory provisions  relating  to  transfer 
have  been  observed ;  Laing  v.  Burley, 
101  111.,  591  (1882).  holding  that,  where 
there  was  no  transfer  on  the  books  of  a 
national  bank  as  required  by  law,  but 
new  certficates  had  been  issued  to  the 
transferee,  who  was  also  recognized  as 
a  shareholder  on  the  bank's  ledger,  the 
transferee  was  liable;  Midland,  etc., 
v.   Gordon,  16  Mees.   &  W.,  804  (1847), 


-'Vale  Mills  v.  Spalding,  62  N.  H.,  605  (1883). 
348 


ch.  xv.]         transferrer's  and  transferee's  liability. 


[§  259. 


§259.  Does  the  statutory  liability  attach  to  him  who  is  the  reg- 
istered stockholder  when  the  corporate  debt  is  contracted-,  or  is  due, 
or  is  stud  upon?-  -When  the  question  of  statutory  liability  is  con- 
sidered there  is  more  difficulty,  as  between  transferrer  and  trans- 
feree,' in  determining  who  is  to  be  charged.  Frequently  the  statute 
itself  prescribes  when  the  liability  is  to  attach.  The  important 
question  which  arises  herein  is  whether  the  corporate  debt  raises  a 
liability  against  him  who  was  the  registered  stockholder  when  the 
corporation  entered  into  the  contract  leading  to  the  debt,  or 
against  him  who  was  the  registered  stockholder  when  the  debt  it- 
self became  due  and  payable  to  the  corporate  creditor,  or  against 
him  who  was  the  registered  stockholder  when  suit  is  brought  bv 
the  corporate  creditor  against  the  corporation  to  collect  the  debt, 
or  against  him  who  was  the  registered  stockholder  when  suit  is 
brought  against  the  stockholder. 

Under  certain  statutes  to  that  effect,  those  stockholders  are  liable 
who  are  such  at  the  time  when  the  execution  against  the  corpora- 
tion is  returned  nulla  hona} 


holding  that  a  holder  of  scrip  certifi- 
cates for  shares  to  be  allotted  at  a  future 
time,  having  sold  them  in  the  market, 
was  liable  for  calls  until  the  name  of 
the  vendee  was  registered  as  the  holder 
of  them.  See,  also,  Harpold  v.  Stobart, 
21  N.  E.  Rep.,  637  (Ohio,  1889).  That  the 
failure  to  record  the  transfer  is  the  fault 
of  the  corporation  itself,  or  of  the  officer 
thereof  whose  duty  it  is  to  make  the 
entries  in  the  stock-book,  is  not  sufficient 
to  relieve  the  shareholder  who,  having 
transferred  his  shares,  fails  to  see  to  it 
that  the  proper  entry  is  actually  and 
duly  made.  In  re  Bachman,  12  Nat 
Bank.  Reg.,  223  (1875). 

1  Nixon  v.  Green,  11  Exch.,  550;  af- 
firmed, 25  L.  J.,  Exch.,  209  (1856) ;  Dodg- 
son  v.  Scott,  2  Exch.,  457  (1848) ;  Long- 
ley  v.  Little,  26  Me.,  162  (1846) ;  Bond  v. 
Appleton.  8  Mass.,  472  (1812).  In  this 
case,  under  a  statute  making  the  orig- 
inal stockholders,  their  successors,  as- 
signs and  the  members  of  the  corpora- 
tion liable  for  the  debts  of  the  corpora- 
tion, it  was  held  that  only  such  persons 
as  were  members  at  the  time  paj^ment 
was  refused  were  intended ;  McClaren 
v.  Franciscus,  43  Mo.  452  (1869) ;  Douchy 
v.    Brown,  24  Vt,  197.     Cf.  Deming  v. 


Bull,  10  Conn.,  409  (1835).  Under  the 
provision  of  a  charter  that  stockholders 
should  "at  all  times  be  liable  for  all 
debts  due  by  said  corporation,"  it  was 
held  that  those  who  were  members 
when  the  debt  was  contracted,  but  had 
transferred  their  stock  absolutely  and 
in  good  faith  before  the  commencement 
of  the  suit  against  the  corporation,  are 
not  to  be  held  liable  under  the  statute. 
Middletown  Bank  v.  Magill,  5  Conn..  28 
(1823),  following  Bond  v.  Appleton, 
supra;  Child  v.  Coffin.  17  Mass.,  64 
(1820),  holding  that,  where  there  is  a 
statutory  provision  "'that  a  creditor,  in 
a  certain  case,  may  levy  his  execution 
upon  the  body  or  estate  of  any  member 
of  the  corporation,  this  must  be  under- 
stood of  such  as  were  members  at  the 
time  of  the  commencement  of  the  ac- 
tion, and  of  those  only.''  It  does  not 
authorize  an  execution  upon  the  estate 
of  a  corporator  who  died  before  the 
commencement  of  the  action. 

Under  the  statute  making  all  the 
members  of  a  company  liable  in  certain 
cases  for  its  debts,  the  liability  extends 
to  all  who  wej-e  members  when  it  was 
sought  to  be  enforced,  and  is  not  con- 
fined to  such  persons  as  were  members 


349 


§  250.] 


transferrer's  and  transferee's  liability. 


[en.  xv. 


As  to  whether  under  the  usual  statute  making  the  stockholders 
liable,  to  a  greater  or  less  extent,  for  the  debts  of  the  corporation, 
a  registered  stockholder  is  liable  for  debts  contracted  before  he 
became  such  as  well  as  for  those  contracted  while  he  was  such,  al- 
though he  subsequently  transfers  his  stock,  the  words  of  the  stat- 
ute control,  and  decisions  on  various  statutes  are  given  in  the  notes 
below.1 


when  the  debt  was  contracted.     Curtis 
v.  Harlow,  12  Mete,  3  (1846). 

i  Chesley  v.  Pierce,  32  N.  H.,  388  (1855), 
holding  that,  under  a  statute  making 
stockholders  liable  for  the  debts  of  a 
corporation,  the  individual  stockholders 
are  not  liable  for  debts  contracted  be- 
fore they  became  such ;  Castleman  w 
Holmes,  4  J.  J.  Marsh.,  1  (1839),  but  here 
a  statute  made  them  liable  for  debts, 
etc..  contracted  "during  the  time  he  or 
the}'  held  stock;"  Mill-dam,  etc..  v. 
Hovey,  21  Pick.,  417,  453  (1834),  where 
the  question  arose  on  an  objection  to  a 
witness  in  a  suit  against  a  corporation 
on  the  ground  that  it  was  liable  for  its 
debts;  Bank  v.  Burnham,  11  Cush.,  183 
(1853),  a  case  where,  under  a  statute 
making  liable  "all  members"  of  a  cor- 
poration, a  shareholder  was  held  for  all 
debts  contracted  while  he  was  a  mem- 
ber, although  he  ceased  to  be  a  member 
before  they  were  payable,  and  not  liable 
for  debts  contracted  before  he  became  a 
member  if  his  membership  expired  be- 
fore they  became  payable  and  action 
brought;  Southmayd  v.  Russ.  3  Conn., 
52  (1819),  holding  that  the  judgment 
creditor  cannot  proceed  against  stock- 
holders by  scire  facias,  but  must  sue 
them  upon  their  liability ;  Williams  v. 
Hanna,  40  Ind.,  535  (1872),  holding  that 
owners  of  stock  at  the  time  corporate 
debts  are  contracted  are  intended  in  a 
statute  making  stockholders  liable  for 
all  debts  of  the  company,  etc. ;  Larrabee 
v.  Baldwin,  35  Cal.,  155  (1868);  Moss  v. 
Oakley,  2  Hill,  265  (1842);  holding  that 
a  charter  declaring  stockholders  jointly 
and  severally  liable  for  the  debts  of  the 
company  makes  liable  only  such  as 
were  members  when  the  debt  was  con- 


tracted, and  not  those  persons  who  be- 
came members  afterwards :  Judson  v. 
Rossie,  etc.,  9  Paige,  598  (1842),  to  the 
same  effect;  McCullough  v.  Moss,  5 
Denio,  567,  572,  585  (1846)  to  same  effect ; 
Adderly  v.  Storm,  6  Hill,  624,  holding 
that  they  are  considered  liable  whose 
names  appear  on*  the  books  of  the  com- 
pany as  stockholders  when  the  debt  was 
contracted.  But  see  McMaster  v.  David- 
son, 29  Hun,  542  (18S3),  varying  this 
rule  as  applicable  to  New  York  manu- 
facturing corporations;  and  cf.  Tracy 
v.Yates,  18  Barb.,  152  (1854);  Phillips 
v.  Therasson.  11  Hun,  141  (1877);  King 
v.  Duncan,  38  Hun,  461  (1886);  David- 
son v.  Rankin,  34  Cal.,  503  H868),  hold- 
ing that  the  cause  of  action  against  a 
stockholder  of  a  mining  corporation, 
under  the  laws  of  California,  accrues  at 
the  same  time  as  against  the  corpora- 
tion. In  Ohio  those  who  own  the  stock 
at  the  time  the  corporate  creditor  com- 
mences his  suit  against  stockholders 
to  enforce  their  statutory  liability  are 
liable  under  the  Ohio  statute.  It  is  im- 
material that  some  of  the  stock  was  is- 
sued after  the  debt  itself  was  incurred 
by  the  corporation.  See,  also,  Barrick 
v.  Gifford,  24  N.  E.  Rep.,  259  (Ohio, 
1890).  Stockholders  are  liable  under 
the  Ohio  statute  for  debts  incurred  be- 
fore they  became  stockholders,  but  the 
equities  between  them  and  the  trans- 
ferrers of  the  stock  may  be  adjusted  in 
the  same  suit.  Railroad  Co.  v.  Smith, 
31  N.  E.  Rep.,  743  (Ohio,  1891).  Under 
the  Ohio  statute  the  transferees  are  lia- 
ble for  precedent  debts.  See  Brown  v. 
Hitchcock,  36  Ohio  St..  667  (1881).  See, 
also,  Mason  v.  Alexander,  44  Ohio  St.. 
318  (1886);  Wheeler  v.  Faurot,  37  id,  86 


350 


en.  xv.]         transferrer's  and  transferee's  liability. 


[§  260. 


§  260.  Transferrer 's  statutory  liability  after  transfer  but  before 
registry. —  The  previous  section  treated  of  the  statutory  liability  of 
a  transferrer  in  cases  where  the  transfer  is  recorded  on  the  corporate 
books  at  the  same  time  that  the  sale  and  transfer  of  the  certificates 


(1881) ;  Brown  v.  Hitchcock,  supra,  hold- 
ing, also,  that  the  liability  is  not  dis- 
charged by  a  subsequent  transfer  of  the 
stock ;  that  in  such  cases  there  is  an 
implied  undertaking  by  the  assignee  to 
indemnify  the  assignor  from  the  liabil- 
ity for  debts  contracted  while  he  was  a 
stockholder:  Hager  v.  Cleveland,  etc., 
36  Md.,  476,  holding  that,  by  virtue  of 
the  statute  of  Maryland,  the  transfer 
of  stock  does  not  exonerate  the  trans- 
ferrer from  liability  for  a  corporate 
debt  contracted  while  he  was  a  stock- 
holder and  before  the  capital  stock  was 
paid  in.  His  liability  is  in  the  nature 
of  a  contract  with  the  compam\  and  is 
not  affected  by  a  transfer  of  his  stock. 
In  Illinois  suit  may  be  brought  against 
him  who  is  a  stockholder  at  the  time 
suit  is  brought  "The  liability  being 
because  of  the  ownership  of  stock,  it 
follows  the  stock,  into  whosesoever 
hands  it  may  go,  and  whoever  pur- 
chases it  does  so  at  the  risk  of  this  lia- 
bility." Root  v.  Sinnock,  11  N.  E.  Rep., 
339  (111.,  1887).  Individual  liability  con- 
tinues, even  after  the  death  of  the 
stockholder,  until  a  transfer  is  made. 
Davis  v.  Weed  (U.  S.  D.  C),  44  Conn., 
569.  See,  also,  Witters  v.  Sowles,  32 
Fed.  Rep.,  130  (1887);  Phillips  v.  Theras- 
son,  11  Hun,  141  (1877);  Tracy  v.  Yates, 
18  Barb.,  152  (1854),  holding  that,  un- 
der the  New  York  statute  of  1848,  a 
stockholder  is  not  liable  for  debts  con- 
tracted before  he  was  such.  But  see 
McMaster  v.  Davidson,  20  Hun,  542 
(1883).  Cf.  Rosevelt  v.  Bro%vn,  11  N.  Y, 
148  (1854) ;  Cutting  v.  Damerel,  88  id., 
410  (1882).  See,  also,  §  261,  infra.  A 
stockholder  does  not,  by  transfer,  avoid  a 
statutory  liability  to  creditors  who  were 
such  at  the  time  of  the  transfer.  Jack- 
son v.  Meek,  9  S.  W.  Rep.,  225  (Tenn., 
1888).  It  is  not  always  clear  precisely 
when  a  given  indebtedness  may  be  held 


to  have  been  "contracted."  When  a 
corporate  note  has  been  renewed,  it  is 
doubtful  whether  the  renewal  operates 
to  create  a  new  indebtedness  or  to  con- 
tinue and  perpetuate  that  indebtedness 
for  which  the  original  note  was  given. 
In  Ohio  it  is  held  that  a  renewal  which 
is  a  payment  or  extinguishment  of  the 
debt  discharges  the  shareholders  who 
were  bound  under  the  old  note.  Wheeler 
v.  Faurot,  37  Ohio  St.,  26  (1881).  And 
in  Maine  the  date  of  the  second  or  re- 
newal note  is  taken  as  the  time  when 
the  indebtedness  accrued.  Milliken  v. 
Whitehouse.  49  Me.,  527  (1860).  While 
in  Massachusetts  the  debt  is  said  to  be 
contracted  when  the  corporation  accepts 
a  bill  of  exchange.  Byers  v.  Franklin 
Coal  Co.,  106  Mass.,  131  (1870).  Cf.  Free- 
land  v.  McCullough,  1  Denio,  414,  426 
(1845),  holding  that,  in  a  suit  upon  a 
note  given  by  the  corporation  for  a  debt 
on  a  simple  contract,  the  stockholders 
at  the  time  the  debt  was  contracted  are 
the  ones  to  be  held  liable.  See,  also,  in 
New  York,  Parrott  v.  Colby.  6  Hun,  55 ; 
affirmed,  71  N.  Y,  507  (1877);  Jagger 
Iron  Co.  v.  Walker,  76  N.  Y,  521  (1879\ 
overruling  Fisher  v.  Marvin,  47  Barb., 
159 ;  Moss  v.  Oakley,  2  Hill,  265  (1842), 
holding  that,  where  stockholders  at  the 
time  the  debt  was  contracted  are  liable, 
a  note  given  for  a  debt  will  be  presumed 
to  have  been  made  when  the  debt  was 
contracted.  It  has  been  held  that  the 
debt  does  not  accrue,  as  against  the 
shareholder,  at  the  time  judgment 
thereon  is  recovered  against  the  corpo- 
ration. Larrabee  v.  Baldwin,  35  Cat, 
155,  168  (1868).  In  this  case  Sawyer, 
C.  J.,  said  :  "  The  claim  of  the  respond- 
ent, that  the  judgment  is  itself  a  con- 
tract creating  a  new  debt,  within  the 
meaning  of  the  statute,  for  which  all 
who  were  stockholders  at  the  date  of 
the  rendition  of  the  judgment  are  per- 


351 


§  260.] 


transferrer's  and  transferee's  liability. 


[CH.  XV. 


are  made.  But  frequently  there  is  some  delay  in  registering  the 
transfer  in  the  corporate  books,  and  in  such  cases  the  further  com- 
plication arises  as  to  who  is  liable  for  corporate  debts  and  liabili- 
ties incurred  during  that  interim.  The  rule  in  such  cases,  however, 
is  clear.  The  law  is  well  settled  that  the  transferrer  of  stock  is 
liable  to  corporate  creditors  on  his  statutory  liability,  up  to  the  time 
of  a  registrv  of  the  transfer,  to  the  same  extent  that  he  would  be 
if  no  sale  and  transfer  of  the  certificate  had  been  made  until  the 
date  of  the  registry.  Until  registry  is  made,  corporate  creditors 
may  hold  the  unregistered  transferrer  liable,  as  though  he  had  not 
sold  his  stock.  As  to  them  the  transfer  will  be  deemed  to  have 
been  made  only  at  the  date  of  the  record  thereof  in  the  corporate 
stock-book.1    Such,  also,  is  the  rule  of  the  English  courts.2  The  cor- 


sonally  liable,  is  too  absurd  to  require 
argument  to  refute  it."  Registered 
transferees  are  liable  the  same  as  their 
transferrers,  even  though  before  the 
transfer  the  statutory  liability  was  de- 
creased by  statute.  The  liability  to  old 
creditors  follows  the  stock.  Nat'l  Com. 
Bank  v.  McDonnell,  9  S.  Rep.,  149  (Ala., 
1891);  Tracy  r.  Yates,  18  Barb.,  152(1854), 
holding  that  the  transferee  is  not  liable 
on  prior  debts ;  Cape's  Executor's 
Case,  2  De  G.,  M.  &  G,  562,  holding 
that  the  transferee  is  liable  for  debts  in- 
curred before  as  well  as  after  the  trans- 
fer; McMaster  v.  Davidson,  29  Hun,  542 
<1883),  holding  that  the  transferee  is 
liable  on  debts  contracted  before  he 
"became  such,  but  falling  due  after  he 
"became  a  stockholder.  Under  the  Mas- 
sachusetts Manufacturing  Act,  as  re- 
enacted  in  Rhode  Island,  "the  liability 
extends  to  all  persons  who  were  stock- 
holders when  the  debt  sought  to  be  en- 
forced was  contracted,  and  also  to  all 
persons  who  are  stockholders  when  the 
liability  is  sought  to  be  enforced,  al- 
though  they   may  have  become   such 


since  the  debt  was  contracted ;  but  it 
does  not  extend  to  persons  who  had  be- 
come stockholders  after  the  debt  was 
contracted,  and  had  ceased  to  be  such 
before  the  debt  became  payable  and  ac- 
tion was  brought."  Sales  v.  Bates,  2  N. 
E.  Rep.,  633  (R  I,  1886).  By  the  law  of 
copartnership  a  new  partner  is  not  lia- 
ble for  old  debts.  See  Lindley  on  Part- 
nership, 205,  435,  208  (Callaghan  &  Co., 
1888). 

1  Brown  v.  Hitchcock,  36  Ohio  St,  667 
(1881).  holding,  also,  that  after  the  lia- 
bility attaches  to  a  stockholder  it  is  not 
discharged  by  an  assignment  or  transfer 
of  the  stock,  but  the  subsequent  hold- 
ers of  it  impliedly  undertake  to  indem- 
nify the  assignor  from  his  liability; 
Wehrman  u  Reakirt,  1  Cinn.  Super. 
Ct,  230  (1871).  Cf.  Jackson  v.  Sligo 
Manuf'g,  etc.,  Co.,  1  Lea  (Tenn.),  210 
(1878).  In  an  action  to  charge  a  trans- 
ferrer for  corporate  debts  incurred  be- 
tween transfer  and  registry,  the  trans- 
feree is,  in  Ohio,  a  necessary  party. 
Wheeler  v.  Faurot,  37  Ohio  St,  26  (1881) ; 
Richmond  r.  Irons,  121  U.  S.,  27  (1887); 


-  Musgrave  &  Hart's  Case,  L.  R.,  5  Eq., 
193  (1867);  Walker's  Case,  L.  R,  6  Eq., 
30  (1868);  McEuen  v.  West  London 
Wharves,  etc.,  Co.,  L.  R.,  6  Chan.,  655 
<1871);  Gower's  Case,  L.  R,  6  Eq.,  77 
<1868),  holding  that  where  shares  had 
been  forfeited  by  a  resolution  of  the 
directors,  but  the  names  of  their  owners 


had  not  been  removed  from  the  reg- 
ister, they  were  contributories  in  wind- 
ing-up proceedings  instituted  a  year 
later.  Humby's  Case,  5  Jur.  (N.  S.),  215 
(1859);  Head's  Case,  L.  R.,  3  Eq.,  84 
(1866);  White's  Case,  L.  R,  3  Eq.,  86 
(1866):  Shepherd's  Case,  L  R,  2  Chan., 
16  (18GG). 


352 


ch.  xv.]         transferrer's  and  transferee's  liability. 


[§  261. 


porate  creditor,  in  determining  who  are  stockholders,  need  only 
show  that  the  persons  whom  he  sues  appear  as  stockholders  on  the 
corporate  stock-books.1 

A  different  question  arises  when  an  irregular  registry  of  the 
transfer  has  been  made,  or  the  transferrer  has  done  all  in  his  power 
to  effect  a  registry,  or  the  corporation  has  accepted  the  unregis- 
tered transferee  as  a  stockholder.  These  questions,  however,  are 
considered  elsewhere.2 

§  261.  The  transferee's  statutory  Uauilitij.—  The  transferee  of 
stock  whose  name  has  been  duly  entered  on  the  stock-book  as  a 
shareholder  becomes  thereupon  liable  on  the  stock  to  corporate 
creditors.  The  registry  which  operates  to  change  the  stockholder 
at  the  same  time  operates  to  charge  the  transferee.3  It  is  imma- 
terial that  no  certificate  has  been  issued  to  the  transferee,  or  that 
the  corporation  has  not  issued  certificates  to  any  of  the  sharehold- 
ers.4 Nor  will  the  transferee  be  heard  to  allege,  as  defense  against 
an  action  to  enforce  the  statutory  liability,  that  he  was  induced  by- 
fraudulent  representations  to  purchase  the  shares.5     Whether  the 


Shellington  v.  Howland,  53  N.  Y.,  371 
(1873) ;  Johnson  v.  Underhill,  52  id..  203 
(1873);  Veiller  v.  Brown,  18  Hun,  571 
(1879);  Richardson  v.  Abenroth.  43 
Barb.,  162  (1864);  Worrall  v.  Judson,  5 
id.,  210  (1849);  Borland  v.  Haven,  37 
Fed.  Rep.,  394  (18S8);  Dane  v.  Young. 
61  Maine,  100  (1872);  Skowhegan  Bank 
v.  Cutler,  49  id,  315  (1860);  Fowler  v. 
Ludwig,  34  id.,  455  (1853);  Stanley  v. 
Stanley,  26  id.,  191  (1846),  holding  that 
parol  evidence  is  not  admissible  as 
against  the  books  of  a  corporation  to 
prove  who  were  its  stockholders  in 
suits  by  creditors.  In  support  of  the 
general  rule  see,  also,  Irons  v.  Manu- 
facturers' Nat.  Bank.  27  Fed.  Rep,  591 
(1886) ;  Price  v.  Whitney,  28  Fed.  Rep., 
297  (1886),  holding  that  the  executors  of 
one  whose  name  appears  on  the  books 
as  a  stockholder  are  liable  for  assess- 
ment, though  deceased,  in  his  life-time, 
had  sold  the  stock.  Transferrer  is  liable 
on  debts  existing  at  time  of  registry  of 
transfer.  Harford  v.  Stobart,  21  N.  E. 
Rep.,  637  (Ohio,  1889). 

iMagruder  v.   Colston,   44    Md.,  349, 

356  (1875).     Cf.  Fisher  v.  Seiigman.  75 

Mo.,    13   (1881);    Adderly    v.    Storm,   6 

Hill.  624  (1844);  Crease  v.  Babcock,  10 

(23)  3 


Mete,  525  (1846);  Matter  of  the  Em- 
pire City  Bank,  18  N.  Y,  200,  224  (1858);. 
Holyoke  Bank  v.  Burnham.  11  Cush., 
183,  187  (1853).  A  stockholder  is  pre- 
sumed to  be  a  stockholder  until  the  con- 
trary is  shown.  Barron  v.  Paine,  22 
Atl.  Rep..  218  (Me.,  1891). 

2  See  £  258,  supra. 

a  Webster  v.  Upton,  91  U.  S.,  65  (1875) ; 
De  Pass'  Case,  4  De  G.  &  J.,  544  (1859) : 
Cape's  Executor's  Case,  2  De  G.,  M.  & 
G,  562  (1852);  Briggs  v.  Waldron,  83' 
N.  Y,  582  (1881).  Cf.  Chesley  v.  Pierce, 
32  X.  H.,  388  (1855) ;  Thebus  v.  Smiley. 
110  111.,  316  (1884),  to  the  effect  that  there 
can  be  but  one  amount  for  which  there 
is  liability  on  account  of  the  same  stock, 
and  the  statutory  double  liability  hav- 
ing been  once  met  by  an  owner  of  the 
stock,  his  transferee  takes  it  free  from 
liability. 

4  See  §  258,  supra. 

5  Oakes  v.  Turquand,  LR,2  House  of 
Lords,  325  (1867) ;  Houldsworth  v.  City 
of  Glasgow  Bank,  L.  R,  5  App.  Cas., 
317  (1880) :  Tennent  v.  City  of  Glasgow 
Bank,  L.  R,  4  App.  Cas.,  615  (1872);  and 
see  ch.  IX.  Cf.  Slater's  Case,  35  Bcav., 
391  (1866). 


53 


§  262.]  transferrer's  and  transferee's  liability.  [en.  xr. 

statutory  liability  attaches  to  a  shareholder,  in  respect  of  debts 
contracted  before  he  became  a  member  of  the  corporation,  is  a 
question  turning  upon  the  words  of  the  statute.1  Nevertheless, 
although  the  transferee  may  not  be  liable  to  others,  he  clearly  is 
liable  herein  to  his  transferee  for  liabilities  herein  which  fall  upon 
the  latter.2  A  purchaser  of  stock  may  be  held  liable  to  creditors 
upon  the  liability  imposed  by  statute,  although  the  transfer  is  not 
recorded. 

§  262.  Liability  of  transferee  to  transferrer  herein. —  A  transfer 
of  stock  may  be  said  to  involve  three  distinct  acts,  all  of  which 
may  take  place  at  one  and  the  same  time,  or  each  at  a  different 
time.  There  is,  first,  the  agreement  of  sale,  b}*-  which  the  right  to 
the  stock  passes  from  the  transferrer  to  the  transferee ;  second,  the 
formal  transfer  of  the  certificate  of  stock;  third,  a  registry  of  the 
transfer,  by  an  entry  on  the  corporate  transfer-book.  It  frequently 
happens  that  the  registry  is  not  made  until  some  time  after  the 
agreement  of  sale,  and  that  during  the  interim  calls  on  the  sub- 
scription are  made  or  corporate  creditors'  rights  attach.  The  law 
then  holds  liable  the  transferrer  whose  transfer  has  not  been  res:- 
istered.  But  in  reality  his  transferee  ought  to  meet  that  liability. 
Hence  the  rule  that  for  liabilities  arising  after  a  sale  of  stock,  but 
before  a  registry  of  the  same  on  the  corporate  books,  the  vendee 
is  liable  to  the  vendor  when  such  liabilities  are  paid  by  the  latter.3 

1  See  §  259.  (1886);  Johnson  v.  Underhill,  52  N.  Y., 

*  See    §  262.     An   unrecorded    trans-  203  (1873) ;  Kellogg  v.  Stockwell,  75  HI., 

feree  is  liable  on  the  statutory  liability  of  68(1874);  Hutzler  v.  Lord,  64  Md.,  534 

stockholders.      McDowall    v.    Sheehan,  (1885) :  Brigham  v.  Mead,  10  Allen,  245 

129  N.  Y.,  200  (1891).     A  stockholder  of  (1865);  Walker  v.  Bartlett,  18  C.  B.,  845, 

record  in  a  national  bank  cannot  set  up  overruling  Humble  v.  Langston,  7  Mees. 

that  the  transfer  was  made  without  his  &  W„  517;  Grissell  v.  Bristowe,  L.  R, 

knowledge   or  consent,  where  he  was  3  C.  P.,  112  (1868);  Davis  v.  Haycock, 

cashier  of  the  bank  and  was  bound  by  L.  R,  4  Exch.,  373  (1871);  Bowring  r. 

law   to  know   about    the    stock    book.  Shepherd,  L  R,  6  Q.  B.,  309  (1869);  Kel- 

Finn  v.  Brown,  142  IT.  S.,  56  (1891).     A  lock  v.    Enthoven,   L.  R,  9  Q.  B.,  241 

person  to  whom  stock  is  transferred  on  (1874);  S.  C,  L.   R,  8  Q.  B.,  458.     The 

the  corporate  books  is  liable  on  the  stat-  statute  of  limitations  does  not  begin  to 

utory  liability,  if  he  approves  or  acqui-  run  against  the   transferrer  until   the 

esces  in  it  in  any  way.  as  by  signing  an  assessment  is  paid  by  him.     Hutzler  v. 

application  to  change  the  charter  of  the  Lord,  supra.     So,  also,  when  shares  are 

bank,    or  by  indorsing  checks  which  sold  for  future  delivery,  but  before  the 

are  made  out  to  him  for  dividends.    He  time  for  delivery  the  seller,  in  order  to 

is  estopped  from  denying  that  he  knew  save  the  stock  from  forfeiture,  is  cora- 

what  he  was  signing.     It  is  immaterial  pelled  to  pay  assessments  duly  levied 

whether  a  new  certificate  was  issued  to  upon  it,  the  seller  may  refuse  to  deliver 

him  or  not.     Keyser  v.  Heitz,  133  TJ.  S.,  until  he  is  repaid  the  amount  of  such 

138  (1890).  assessments.     Whitney   v.   Page  (N.  Y. 

3  Lord  v.    Hutzler,   3   Atl.   Rep.,   891  Super.   Ct.),   Daily  Register,  March  31, 

354 


CH.   XV 


transferrer's  and  transferee's  liability. 


[§  262. 


The  transferrer  in  these  cases  may  have  recourse  to  the  real  and  not 
the  nominal  transferee.1  In  case  of  several  successive  transfers, 
the  transferrer  who  has  paid  an  assessment  or  corporate  debt  may 
look  to  his  immediate  transferee,  although  there  be  another  one 
in  the  series  who  will  ultimately  be  charged.2  Generally  the  trans- 
ferrer who  has  paid  seeks  his  remedy  by  a  suit  in  equity  for  in- 
demnity, and  also  to  compel  a  registry  of  the  transfer.3 


1885.  A  transferrer  who  seeks  recourse 
to  his  transferee  for  calls  paid  by  the 
former  after  the  transfer  does  not  prove 
the  transfer  by  showing  a  registry  of 
the  same.  He  must  prove  some  act  of 
purchase  or  acceptance  by  the  trans- 
feree. Tripp  v.  Appleman,  35  Fed.  Rep., 
19  (1888). 

1  Castellan  v.  Hobson,  L.  R,  10  Eq. 
Cas.,  47  (1870).  But  not  to  an  interven- 
ing unregistered  transferee.  Shaw  v. 
Fisher.  2  De  G.  &  Sm.,  11  (1848);  S.  C, 
5  De  G ,  M.  &  G.,  596  (1855).  See,  also, 
§253,  supra.  An  unrecorded  transferee 
who  has  transferred  the  certificate  to 
still  another  party  is  not  liable  to  his 
transferrer  for  calls  made  after  the 
transferee  had  transferred  to  the  sec- 
ond transferee.  Brinkly  v.  Hambleton, 
8  Atl.  Rep.,  904  (Md.,  1887).  In  Lessas- 
sier  v.  Kennedy,  36  La.  Ann.,  539  (1884), 
an  unregistered  vendee  escaped  liability 
of  indemnity  to  his  vendor,  because  the 
vendee  sold  to  a  person  to  whom  the 
transfer  direct  from  the  first  vendor  was 
made  on  the  corporate  books,  but  with- 
out the  knowledge  of  the  vendor.  The 
dissenting  opinions  in  this  case  are  to  be 
commended. 

2  Nickalls  v.  Eaton,  23  L.  T.  (N.  S.), 
689  (1871);  Kellock  v.  Enthoven,  supra. 
Or  he  may  look  to  the  final  transferee, 
even  though  the  call  was  made  be- 
fore the  latter  purchased.  Hawkins  v. 
Maltby,  L.  R.,  3  Ch.,  188  (1867).  See 
S.  C,  L.  R.,  6  Eq.,  505  (1868). 

a  Wynne  v.  Price,  3  De  G.  &  Sm.,  310 
(1849);  Cheale  v.  Kenward,  3  De  G.  & 
J.,  27  (1858);  Morris  v.  Cannan,  4  De  G., 
F.  &  J.,  581  (1862) ;  Hawkins  v.  Maltby, 
L.  R,  4  Chan.,  200  (1868),  holding, 
however,  that  the  vendor    cannot   re- 


cover from  the  vendee  interest  which 
he  has  had  to  pay  to  a  liquidator  by 
way  of  penalty  for  not  having  paid 
calls  promptly ;  Butler  v.  Cumpston, 
L  R,  7  Eq..  16;  Evans  v.  Wood,  L.  R., 

5  Eq.,  9  (1867);  Paine  v.  Hutchinson, 
L.  R,  23  Eq.,  257 ;  Cruse  v.  Paine,  L.  R, 

6  id..  641 ;  S.  C,  4  id.,  441  (1868);  Shaw 
r.  Fisher,  2  De  G.  &  Sm.,  11  (1848); 
James  v.  May,  L.  R,  6  House  of  Lords, 
328 ;  Allen  v.  Graves,  L.  R.,  5  Q.  B.,  479 
(1870),  holding  that,  where  the  pur- 
chaser did  not  offer  as  transferee  the 
name  of  a  person  to  whom  no  reason- 
able objection  could  be  made,  he  had 
not  fulfilled  the  contract  of  sale  and 
was  liable  for  the  amount  of  a  call  sub- 
sequently made,  and  interest,  as  dam- 
ages ;  Shaw  v.  Rowley,  16  Mees.  &  W., 
810  (1847),  sustaining  an  action  for  price 
of  shares  sold  on  which  a  previous  call 
had  not  been  paid,  it  being  held  that 
plaintiffs  could  recover  because  they 
could  have  paid  the  call  and  transferred 
the  stock  if  defendants  had  furnished 
the  name  of  the  transferee  when  re- 
quested. In  Ohio,  under  the  act  creat- 
ing statutory  liability  on  the  part  of 
shareholders,  transferees  are  liable,  as 
between  themselves  and  their  vendors, 
for  all  indebtedness  of  the  corporation, 
whether  incurred  before  or  after  the 
transfer,  "as  if  they  had  owned  the 
stock  from  the  organization  of  the  com- 
pany." Wheeler  v.  Faurot,  37  Ohio  St., 
26  (1881);  Brown  v.  Hitchcock,  36  id., 
667  (1881),  a  case  wherein  the  question 
of  statutory  liability  is  very  fully  and 
satisfactorily  discussed.  To  same  effect 
Cape's  Case,  2  De  G.,  M.  &  G,  562 
(1852).  That  a  transferrer  may  compel 
the  transferee  to  register  the  transfer, 


355 


§§  203-265.]     transferrer's  and  transferee's  liability,     [ch.  xv. 


§§  263-2G5.  A  transfer  to  a  "dummy"  or  to  an  insolvent  to  es- 
cape liability.1  —  In  the  United  States  a  transfer  of  shares  in  a  fail- 
ing concern,  made  by  the  transferrer  with  the  intention  and  for  the 
purpose  of  escaping  liability  as  a  shareholder  to  a  person  who  for 
any  cause  is  incapable  of  responding  in  respect  of  such  liability,  is 
void  both  as  to  creditors  of  the  company  and  as  to  other  share- 
holders ;  and  that,  too,  although  as  between  the  transferrer  and 
transferee  the  transaction  may  have  been  absolute  and  no  secret 
trust  involved.2     But,  on  the  other  hand,  it  has  been  held  that  if 


see  §  384.  The  court  will  determine 
the  liability  as  between  the  transferrer 
and  transferee,  in  connection  with  the 
corporate  creditors'  suit,  brought  to  en- 
force the  stockholder's  liability.  Mason 
v.  Alexander,  44  Ohio  St,  318  (1886); 
Sayles  v.  Blane,  19  L  J.  (Q.  B.),  19 
(1849),  holding  that  a  transferrer  who 
continues  to  be  the  owner  on  the  reg- 
istry, and  who  has  been  compelled  to 
pay  calls  made  after  the  transfer,  can- 
not recover  the  money  so  paid  from  the 
transferee  upon  the  common  count  for 
money  paid  for  his  use. 

1  The  cases  in  this  section  refer  to 
instances  where  a  person  transfers 
stock  from  his  own  name  to  that  of  a 
"  dummy."  An  entirely  different  class 
of  cases  exists  where  the  person  really 
interested  buys  stock  or  subscribes  for 
stock  in  the  name  of  a  "dummy,"  and 
the  name  of  the  real  owner  never  ap- 
pears on  the  corporate  books.  The  latter 
class  of  cases  are  treated  of  in  §  253, 
supra. 

*  Nathan  v.  Whitlock,  3  Edw.  Chan. 
(N.  Y.),  215  (1838);  S.  C,  9  Paige,  152 
(1841) ;  Rider  v.  Tritchey,  30  N.  E.  Rep., 
692  (Ohio,  1892).  Transferee  held  liable 
herein  though  transfer  of  certificate  was 
made  long  previous,  but  registered  only 
shortly  before  insolvency,  and  though 
all  parties  acted  in  good  faith.  Rich- 
mond v.  Irons,  121  U.  S.,  27  (1887) ;  Veil- 
ler  v.  Brown,  18  Hun,  571  (1879);  Mc- 
Laren v.  Franciscus,  43  Mo.,  452  (1869); 
Miller  v.  Great  Republic  Ins.  Co.,  50  id., 
55  (1872),  holding,  however,  that  if  a  sale 
and  transfer  be  made  honestly  and  with- 
out intent  to  defraud  the  creditors  of 


the  corporation,  the  fact  that  the  pur- 
chaser is  insolvent  will  not  render  the 
vendor  liable.  Provident  Savings  In- 
stitution v.  Jackson  Place  Skating  and 
Bathing  Rink,  52  id.,  557  (1873);  Chou- 
teau Spring  Co.  v.  Harris,  20  id.,  382 ; 
Mandion  v.  Fireman's  Ins.  Co.,  11  Rob. 
(La.),  177  (1845),  where  the  transfer  was 
a  gift;  In  re  Bachman,  12  Nat  Bank. 
Reg.,  223  (1875);  Marcy  v.  Clark,  17 
Mass.,  330  (1821);  Central  Agricultural, 
etc..  Association  v.  Alabama  Gold  Life, 
etc.,  Co.,  70  Ala.,  120  (1881);  Gaff  v. 
Flesher,  33  Ohio  St.  107  (1877);  Douchy 
v.  Brown,  24  Vt,  197  (1852);  Aultman's 
Appeal,  98  Pa.  St,  505  (1881).  In  the  last 
case  one  who  held  stock  as  collateral 
security  and  surrendered  it  after  the 
company's  insolvency  to  the  company, 
which  issued  a  new  certificate  to  the 
former  owners,  was  held  responsible  to 
the  creditors  of  the  company.  Everhart 
V.  West  Chester,  etc.,  R  R.  Co.,  28  id., 
339  (1857);  Rider  v.  Morrison,  54  Md., 
429  (1880) ;  Paine  v.  Stewart  33  Conn., 
516  (1866) ;  Bowden  v.  Santos,  1  Hughes 
(U.  S.),  158  (1877) ;  Wehrman  v.  Reakirt, 
1  Cin.  Super.  Ct,  230  (1871);  Bowden  r. 
Johnson,  107  U.  S.,  251  (1882);  Davis  v. 
Stevens,  17  Blatch.,  259  (1879).  Cf.  Allen 
v.  Montgomery  R  R.  Co.,  11  Ala.,  457 
(1847) ;  Billings  v.  Robinson,  28  Hun,  122 
(1882);  affd.  94  N.  Y.,  415  (1884).  It  is 
also  held  that  the  owner  of  stock  cannot 
escape  liability  by  transferring  it  to  his 
infant  children,  or  by  taking  it  origi- 
nally in  their  name.  Roman  v.  Fry,  5 
J.  J.  Marsh.,  634  (1831).  It  has  been  held, 
also,  that  no  transfer  made  in  anticipa- 
tion of  a  judgment  against  the  corpora- 


35S 


ch.  xv.]         transferer's  and  transferee's  liability. 


[§  2M. 


the  transfer  is  bona  Jide,  and  the  transferrer  is  ignorant  of  the  in- 
solvency of  the  transferee,  and  the  company  is  not  insolvent,  the 
transfer  is  effectual,  and  the  transferrer  is  released  from  liability.1 
The  creditor's  remedy  to  enforce  the  liability  of  a  shareholder  who 
has  in  this  way  fraudulently  assigned  or  transferred  his  stock  is  in 
a  court  of  chancery.- 

§  266.  The  rule  in  England. —  The  rule  in  England  is  that  a 
shareholder  may  transfer  his  shares,  when  the  company  is  in  a  fail- 
ing condition,  to  a  man  of  straw  for  a  nominal  consideration,  even 
although  the  sole  purpose  of  such  a  transfer  be  to  escape  liability. 
If  the  transfer  be  out  and  out,  and  not  merely  colorable,  and  col- 
lusive with  a  secret  trust  attached,  it  is  valid,  and  the  transferrer 
is  thereby  released  from  liability,  both  as  to  corporate  creditors 
and  the  other  sharehold  rs.3     But  if  the  transfer  is  merely  color- 


tion,  and  for  the  purpose  of  escaping 
liability,  is  valid,  and  shareholders  who 
make  such  a  transfer  will  be  held  liable. 
McLaren  v.  Franciscus,  43  Mo.,  452 
(1869):  Marcy  v.  Clark,  17  Mass.,  330 
(1821). 

1  Miller  v.  Great  Republic  Ins.  Co.,  50 
Mo.,  55  (1872).  See,  also,  Cole  v.  Ryan, 
52  Barb.,  168  (1868).  Cf.  Billings  v.  Rob- 
inson, 94  N.  Y.,  415  (1884) ;  S.  C,  28  Hun, 
122  (1882).  A  stockholder  who  promises 
a  corporate  creditor,  at  a  time  when  the 
company's  affairs  are  involved,  that  he 
will  not  transfer,  thereby  inducing  him 
not  to  sue  to  collect  his  debt,  is  liable  to 
such  creditor  in  case  he  does  transfer. 
Paine  V.  Stewart,  33  Conn.,  516  (1866). 
But  a  ti'ansfer  will  be  held  valid,  it 
seems,  when  it  is  made  pursuant  to  an 
antecedent  option  agreement,  although 
the  final  transfer  is  really  made  in  order 
to  avoid  liability.  Holyoke  Bank  v. 
Burnham,  65  Mass.,  183  (1853);  Magru- 
der  v.  Colston,  44  Md.,  349  (1875).  Cf. 
Chapman  v.  Shepherd,  L.  R,  2  C.  P.,  228 
(1867),  under  the  English  statute. 

-Johnson  v.  Southwestern  Railroad 
Bank,  3  Strobh.  Eq.  (S.  C),  263,  295 
(1848). 

3De  Pass'  Case,  4  De  G.  &  J.,  544 
(1859) ;  Weston's  Case,  L.  R,  4  Chan.,  20 
(1868) ;  Harrison's  Case.  L  R,  6  Chan., 
286  (1871);  Master's  Case,  L.  R,  7  Chan., 
292(1872);  Hakim's  Case,  L.  R.,  7  Chan.. 


296,  n.  (1872);  Bishop's  Case,  id.  (1S72); 
William's  Case,  L.  R,  1  Chan.  Div.,  576 
(1875) ;  King's  Case,  L.  R,  6  Chan.,  196 
(1871);  Chynoweth's  Case,  L.  R,  15 
Chan.  Div..  13(1880);  Jessopp's  Case,  2 
De  G.  &  J.,  638(1858);  In  re  Taurine 
Co.,  L,  R.,  25  Chan.  Div.,  118  (1883); 
Moore  v.  McLaren,  11  Up.  Can.,  C.  P., 
534  (1862);  Batties'  Case,  39  L  J.,  Chan., 
391  (1870).  Cf.  Bunn's  Case,  2  De  G. 
F.  &  J.,  275  (1860).  Thus,  in  De  Pass' 
Case,  4  De  G.  &  J.,  544  (1S59),  the  facts 
were  that  DePass,  owning  two  hundred 
and  fifty  shares  of  stock  in  the  Mexican 
&  South  American  Company,  for  which 
he  had  paid  £1,750,  upon  learning  that 
the  concern  was  involved,  handed  the 
certificate  to  his  clerk,  without  having 
previously  spoken  to  him  of  the  matter, 
saying  that  he  might  have  the  stock  for 
a  sovereign,  which  the  clerk  instantly 
paid,  and  at  the  same  time  accepted  the 
shares.  In  about  three  weeks  this  clerk 
sold  the  shares  to  another  person  in  the 
employ  of  De  Pass.  Upon  the  winding 
up  of  the  company,  which  was  ordered 
within  a  few  days  after  the  sale  by  De 
Pass  to  his  clerk,  although  it  was  shown 
that  the  shares  at  the  time  of  that  sale 
were  worth  considerably  more  than  a 
sovereign,  still,  inasmuch  as  the  trans- 
action appeared  to  have  been  absolute, 
although  confessedly  made  to  escape 
possible  liability,  it  was  held  that  the 


357 


§  266.] 


TRANSFERRERS    AND    TRANSFEREE'S    LIABILITY.  [CH.  XV. 


able,  and  there  exists  a  secret  trust  in  favor  of  the  transferrer,  so 
that  as  between  the  parties  there  has  been  no  hona  fide  transfer, 
but  the  object  is  to  secure  the  shares  to  the  transferrer  in  the  event 
that  the  concern  becomes  prosperous,  and  to  leave  tliem  to  the 
transferee  if  there  is  a  winding  up,  the  transferrer's  name  will  be 
put  in  the  list  of  contributories,  and  the  pretended  transfer  be 
wholly  ignored.1 

The  right  to  transfer  shares  in  England  seems  to  exist  up  to  the 
time  the  company  is  ordered  to  be  wound  up  and  business  is  sus- 
pended.2 But  after  that  time  the  right  is  gone,  and  it  is  the  duty 
of  the  management  to  refuse  to  allow  a  transfer.3  Any  collusion 
between  the  stockholders  and  the  directors  to  evade  the  rules  erov- 
erning  transfers,  for  the  purpose  of  evading  liability,  will  invali- 
date the  transfer.4    Persons  to  whom  shares  have  been  transferred 


transfer  might  stand,  and  that  De  Pass 
was  not  liable  in  respect  to  the  shares 
after  the  date  of  the  sale  to  the  clerk. 
But  in  Master's  Case,  L.  R,  7  Chan., 
202  (1872),  a  transfer  of  two  hundred 
and  eighty  shares  of  stock,  on  which 
£15  per  share  had  been  paid,  for  a  nomi- 
nal consideration  to  an  irresponsible 
son-in-law  of  the  transferrer,  the  trans- 
fer being  made  only  for  the  purpose  of 
escaping  liability  upon  the  shares,  was 
held  to  discharge  the  transferrer.  A 
transfer  by  a  director  in  a  failing  corpo- 
ration to  avoid  liability  is  void.  Re 
South  London,  etc.,  Co.,  59  L.  T.  Rep., 
210  (1888). 

i  Budd's  Case,  3  De  G.,  F.  &  J.,  297 
(1861);  Payne's  Case,  L,  R.  9  Eq.,  223 
(1869);  Kintrea's  Case,  39  L.  J.,  Chan., 
193  (1869);  S.  C,  L,  R,  5  Cban.,  95; 
Chinnock's  Case,  Johns.  (Eng.  Chan.), 
714(1860);  Costello's  Case,  2  De  G.,  F. 
&  J.,  302  (1860);  Hyam's  Case,  1  id.,  75 
(1859) ;  Lund's  Case,  27  Beav.,  465  (1859) ; 
Ex  parte  Bennett,  18  id.,  339  (1853); 
Daniell's  Case,  22  id.,  43(1856);  Eyre's 
Case,  31  id.,  177  (1862);  Hunt's  Case,  22 
id.,  55  (1856) ;  Slater's  Case,  35  id.,  391 
(1866);  Bank  of  Michigan  v.  Gray,  1  Up. 
Can.,  Q.  B.,  422  (1834) ;  Cox's  Case.  33 
L.  J.,  Chan.,  145  (1864);  William's  Case, 
L,  R,  9  Eq.,  225,  n.  (1869);  Capper's 
Case,  L.  R,  3  Chan.,  458  (1868) ;  Mann's 
Case,  id.,  459,  n.  (1868) ;  Mitchell's  Case, 


L.  R,  9  Eq..  363  (1870) ;  Ex  parte  Hat- 
ton,  31  L.  J.,  Chan.,  340  (1862) :  Pugh  & 
SI  n-man's  Case,  L,  R,  13  Eq.,  566  (1872) ; 
Lankester's  Case,  L  R,  6  Chan.,  905,  n. 
(1871);  Gilbert's  Case,  L.  R,  5  Chan., 
559  (1879).  Cf.  Castellan  v.  Hobson,  L, 
R,  10  Eq.,  47  (1870) ;  Maynard  v.  Eaton, 
L,  R,  9  Chan.,  414  (1874) ;  Colquhoun  v. 
Courtenay,  43  L.  J.,  Chan.,  338  (1874) ; 
Richardson's  Case,  L.  R,  19  Eq„  588 
(1875). 

2De  Pass'  Case,  supra,  and  the  cases 
generally  in  the  preceding  notes. 

3  Mitchell's  Case,  L.  R,  4  App.  Cas., 
548  (1879) ;  Weston's  Case,  L.  R,  4  Chan.. 
20,  30  (1868);  Ex  parte  Parker,  L  R,  2 
Chan.,  685  (1867) ;  Chappell's  Case,  L.  R, 
6  Chan.,  902  (1871).  In  this  country  di- 
rectors have  in  general  no  power  to  re- 
fuse or  prevent  transfers,  such  as  inheres 
in  the  boards  of  management  in  English 
companies. 

4  Eyre's  Case,  31  Beav.,  177  (1862): 
Bennett's  Case,  5  De  G.,  M.  &  G,  284 
(1854).  Nor  may  a  director  make  use  of 
his  position  as  director  to  transfer  his 
stock,  and  thus  escape  chargeability 
upon  it.  Munt's  Case,  22  Beav.,  55 
(1856).  Nor  will  a  stockholder  be  al- 
lowed to  relieve  himself  when  he  learns 
of  the  probable  insolvency  of  the  con- 
cern by  inducing  the  directors  to  post- 
pone their  application  for  an  order  to 
wind  up  until  he  have  time  to  transfer 


358 


CH.  XV.] 


transferrer's  and  transferee's  liability. 


[§  ^06. 


without  their  knowledge  or  assent  are  not  estopped,  when  the 
knowledge  is  brought  to  them,  from  repudiating  and  denying  the 
stockholdership.1  The  present  tendency  in  England  is  to  give 
greater  security  to  corporate  creditors;  and  it  is  probable  that  the 
English  rule  in  regard  to  transfers  to  insolvent  persons  will  gradu- 
ally be  changed. 


his  shares  to  a  pauper  or  other  irrespon- 
sible person.  Ex  parte  Parker,  L.  R, 
2  Chan.,  685  (1867);  Gilbert's  Case,  L. 
R,  5  Chan..  559(1870);  Allin's  Case,  16 
Eq.,  449  (1873).  And  a  director  who 
transfers  shares  standing  in  his  name 
to  a  person  already  holding  all  the 
shares  any  one  person  is  allowed  to 
hold  will  not  thereby  escape  liability. 
Ex  parte  Brown,  19  Beav.,  97  (1854). 
In  general,  moreover,  a  transferrer  is 
not  exempt  from  liability  by  reason  of 
a  transfer,  unless  the  transferee  has  the 
present  capacity  to  assume  the  liability. 
Nickalls  v.  Merry,  L.  R,  7  H.  L.,  530 
(1875);  Browne  r.  Black.  L.  R,  8  Chan., 
939  (1873) ;  Mann's  Case.  L.  R,  3  Chan., 
459,  n.  (1868).  Cf.  Johnson  v.  Lafiin,  5 
Dill.,  65,  81  (1878);  Case  of  the  Reci- 
procity Bank,  22  N.  Y.,  9  (1860).  Ac- 
cordingly, a  transfer  to  an  infant  for 
the  purpose  of  escaping  liability  is  fu- 
tile. Symon's  Case,  L.  R,  5  Chan.,  298 
(1870);  Weston's  Case,  id.,  614  (1870) 
Curtis'  Case,  L.  R,  6  Eq.,  455  (1868) 
Castello's  Case,  L.  R,  8  Eq.,  504  (1869) 


"Walsh  v.  The  Union  Bank,  5  Quebec, 
L.  R,  289(1879). 

i  Birch's  Case,  2  De  G.  &  J.,  10  (1857); 
Fox's  Case,  3  De  G,  J.  &  S.,  465  (1863); 
Higg's  Case,  2  Hem.  &  M.,  657  (1865) : 
Somerville's  Case,  L.  R,  0  Chan..  266 
(1870).  Cf.  Bullock  v.  Chapman,  2  De  G. 
&  Sra.,  211  (1848).  And  see,  also,  case 
of  the  Reciprocity  Bank,  22  N.  Y.,  9 
(1860).  A  colorable  transfer,  as  has  ap- 
peared, will  not  operate  to  discharge 
the  transferrer  where  shares  were  col- 
lusively  assigned  to  a  servant  for  the 
purpose  of  evading  liability.  Hence 
when  the  servant,  upon  the  concern 
becoming  solvent,  attempted  to  claim 
the  shares  as  though  the  transfer  had 
been  out  and  out,  the  court,  having  pre- 
viously decided  against  the  bona  fides 
of  the  transaction,  held  the  owner  en- 
titled to  a  declaration  that  the  servant 
held  the  shares  in  trust  for  him.  Col- 
quhoun  v.  Courtney,  43  L.  J.,  Chan.,  338 
(1874).  As  to  a  transfer  made  in  igno- 
rance of  the  fact  that  a  winding  up  has 
been  commenced,  see  Emmerson's  Case, 
L.  R,  1  Ch.,  433  (1866). 


359 


CHAPTER  XVI. 


ISSUE  OF  PREFERRED  STOCK  AND  STOCK  UPON  WHICH  INTEREST 

IS  GUARANTIED. 


267.  What  is  preferred  stock. 

268.  When  may  a  corporation   issue 

preferred  stock? 

269.  270.  Rights    of    preferred    stock- 

holders —  Amount  of  prefer- 
ence —  Voting  —  Subsequent 
leases,  consolidations,  etc. 

271.  Preferred    stockholders   are   not 

creditors  —  Dividends  can  be 
only  from  profits  —  Mortgages 
securing  preferred  stock. 

272.  What  are  net  profits  applicable  to 

preferred  dividends  —  The  pre- 
ferred stockholder's  remedy  to 
enforce  a  dividend. 


§273, 


•4 1 .). 


276. 
277. 
278. 


274.  Arrears  of  preferred  stock,  to 
what  extent  payable  subse- 
quently —  Remedies  to  enforce 
payment  of  arrears. 

Rights  of  the  assignee  or  trans- 
feree of  preferred  stock  in  ar- 
rears of  dividends. 

"  Special  stock  "  in  Massachusetts. 

Interest-bearing  stocks. 

Rights  of  preferred  shareholders 
on  dissolution  and  on  a  reduc- 
tion of  the  capital  stock. 


§  267.  What  is  preferred  stock. —  By  preferred  stock  is  to  be 
understood  stock  which  entitles  the  holder  to  receive  dividends 
from  the  earnings  of  the  company  before  the  common  stock  can 
receive  a  dividend  from  such  earnings.1  In  other  words,  it  is  stock 
entitled  to  dividends  from  the  income  or  earnings  of  the  corpora- 
tion before  any  other  dividend  can  be  paid.2  The  relation  of  debtor 
and  creditor  does  not  exist  between  the  preferred  stockholders  and 
the  corporation,  and  the  right  to  a  preferred  or  guarantied  dividend 
is  not  a  debt  until  the  dividend  is  declared.  A  dividend  is  money 
paid  out  of  profits  by  a  corporation  to  its  shareholders.  A  pre- 
ferred dividend  is  nothing  more  than  that  which  is  paid  to  one 
class  of  shareholders  in  priority  to  that  to  be  paid  to  another  class.11 


1  Totten  v.  Tison,  54  Ga.,  139  (1875). 

2  Chaffee  v.  Rutland  R  R.  Co.,  55  Vt, 
110  (1S82). 

3  Belfast,  etc..  R  R  Co.  v.  Belfast,  77 
Me.,  445  (1885);  Taft  v.  Hartford,  etc., 
R.  R  Co.,  8  R  L,  310,  333  (1866) ;  Chaffee 
v.  Rutland,  etc.,  R.  R.  Co.,  55  Vt.,  110 
(1882).  A  preferred  dividend  has  also 
been  defined  as  "substantially  interest 
chargeable  exclusively  on  profits.*' 
Henry  v.  Great  Northern  R'y  Co.,  1  De 
G.  &  J.,  606,  637;  Crawford  v.  North 
Eastern,  etc.,  R.  R  Co.,  3  Jur.  (N.  S.), 
1093(1856).     The  preferred  stockholder 


is  one  who  may  say,  "  Nobody  shall  have 
any  portion  of  the  profits  of  the  com- 
pany until  I  have  been  paid  my  divi- 
dend." Henry  v.  Great  Northern  R'y 
Co.,  4  Kay  &  J.,  1,  32  (1857);  aff'd,  1 
De  G.  &  J.,  606.  A  preferred  dividend 
is  said  to  be  "  a  pledge  of  the  funds 
legally  applicable  to  the  purposes  of  a 
dividend."  Taft  v.  Hartford,  etc.,  R  R 
Co.,  8  R.  L,  310,  335  (1866).  "Payment 
of  dividends  to  preferred  stockhold- 
ers differs  from  such  payment  to  the 
holders  of  common  stock  oul}r  in  that 
they  are  entitled  to  dividends  in  priority 


360 


CH.  XVI.] 


PREFERRED    STOCK. 


[§  268. 


Guarantied  stock  is  the  same  thing  as  preferred  stock,1  except 
of  course  where  one  corporation  guaranties  dividends  on  the  stock 
of  another  corporation.2 

§  268.  When  may  a  corporation  issue  preferred  stock?  —  Upon 
the  incorporation  of  a  company  the  incorporators  and  stockhold- 
ers may  agree  that  a  part  of  the  stock  shall  be  preferred  stock. 
This  is  generally  done  by  a  by-law.  It  is  undoubtedly  legal,  since 
there  is  no  rule  of  public  policy  that  forbids  it,  and  moreover  it 
amounts  only  to  a  contract  of  the  stockholders  as  to  how  they 
shall  divide  the  profits  among  themselves.3 


to  any  dividends  upon  the  common 
stock."  Miller  v.  Katterman,  24  N.  E. 
Rep.,  496  (Ohio,  1890). 

i  Taf t  v.  Hartford,  etc.,  R  R  Co.,  8 
R.  I.,  310,  333,  334,  335  (1866);  Henry  v. 
Great  Northern  R'y  Co.,  4  Kay  &  J.,  1, 
12,  21  (1857) ;  affirmed,  1  De  G.  &  J.,  606 ; 
Lockhart  v.  Van  Alstine,  31  Mich.,  76 
(1875).  A  guarantied  dividend  differs 
in  nothing  from  a  preferred  dividend. 
Miller  v.  Ratterman,  24  N.  E.  Rep.,  496 
(Ohio,  1890).  Cf.  Boardmau  v.  Lake 
Shore,  etc.,  R'y,  84  N.  Y.,  157, 174  (1881). 
holding  that  the  word  "  guarantied " 
made  the  dividends  cumulative.  See 
§§  273,  274. 

2  See  ch.  XLVI,  infra. 

3  The  case  Re  South,  etc.,  Brewery 
Co.,  L.  R.,  31  Ch.  D.,  261  (1885).  clearly 
holds  that,  although  the  charter  and 
statutes  are  silent  on  the  subject,  yet 
that  the  by-laws  may  provide  for  the 
issue  of  preferred  stock,  and  this  provis- 
ion being  in  the  original  by-laws,  a 
stockholder  cannot  enjoin  a  subsequent 
issue  of  the  stock;  approving  Harrison 
v.  Mexican  R'y,  L.  R.,  19  Eq.  Cas.,  358 
(1875).  Judge  Cooley,  in  the  case  Lock- 
hart  v.  Van  Alstine,  31  Mich.,  76,  81,  85 
(1875),  said,  in  reference  to  the  issues  of 
preferred  stock,  even  though  the  issues 
are  not  provided  for  by  charter  or  stat- 
ute, ''  there  can  be  no  reasonable  objec- 
tion to  them  if  they  are  entered  into 
with  full  knowledge  on  the  part  of  all 
concerned.  .  .  .  The  guaranty  prop- 
erly construed  is  not  void,  but  unobjec- 
tionable." In  the  case  Kent  v.  Quick- 
silver, etc.,  Co.,  78  N.  Y.,  159,  affirming 


17  Hun,  169,  the  court  said  :  "  We  know 
nothing  in  the  constitution  or  the  law 
that  inhibits  a  corporation  from  begin- 
ning its  corporate  action  by  classifying 
the  shares  in  its  capital  stock,  with  pe- 
culiar privileges  to  one  share  over  an- 
other, and  thus  offering  its  stock  to  the 
public  subscriptions  thereto.  No  rights 
are  got  until  a  subscription  is  made. 
Each  subscriber  would  know  for  what 
class  of  stock  he  put  down  his  name, 
and  what  right  he  got  when  he  thus  be- 
came a  stockholder,  There  need  be  no 
deception  or  mistake ;  there  would  be 
no  trenching  upon  rights  previously  ac- 
quired; no  contract,  express  or  implied, 
would  be  broken  or  impaired.*'  The 
same  question  has  recently  arisen  in  the 
iTnited  States  courts,  and  the  court 
there  held  that  a  stockholder,  who  is  an 
officer  of  the  company,  who  is  active  in 
having  preferred  stock  issued,  sub- 
scribes for  it,  takes  his  certificate  there- 
for, votes  upon  it  and  induces  others  to 
take  it,  cannot  after  two  years,  when 
the  corporation  is  insolvent,  say  that  the 
statutes  of  the  state  authorize  the  issue 
of  common  stock  only.  Banigan  v. 
Bard,  134  TJ.  S.,  291  (1890);  S.  G,  39  Fed. 
Rep.,  13.  The  highest  authority  in  Eng- 
land, Lindley  on  Companies,  p.  396, 
says  :  "  Shares  conferring  on  their  hold- 
ers preferential  or  additional  rights  not 
enjoyed  by  the  holders  of  other  shares 
are  called  preference  shares.  They  can 
only  be  created  when  the  authority  to 
create  them  is  given  by  statute  or  char- 
ter, or  by  agreement  between  all  parties 
interested.     If,   however,   authority   to 


361 


§  268.] 


PEEFEEEED    STOCK. 


[CH.  XVI. 


But  after  the  corporation  has  been  organized,  with  common 
stock  onty,  and  the  stock  issued  in  whole  or  in  part,  and  business 
commenced  and  money  invested  in  stock,  it  is  then  too  late  to  make 
the  unissued  stock  preferred  stock,  or  to  increase  the  capital  stock 
and  issue  preferred  stock,  unless  all  the  stockholders  assent  thereto. 
It  would  be  a  breach  of  contract  to  issue  preferred  stock  then,  in- 
asmuch as  the  existing  stockholders  invested  their  money  on  the 
basis  of  common  stock  only.  Hence  a  dissenting  stockholder  may 
enjoin  the  corporation,  the  directors  and  the  majority  of  stock- 
holders from  issuing  preferred  stock  in  such  a  case.1 

issue  them  is    given   by, a  company's     pany  had  secretly  agreed  with  certain 


memorandum  of  association,  or  by  its 
articles  of  association  as  originally 
framed,  preference  shares  may  be  is- 
sued." If  all  assent,  the  issue  is  legal. 
Re  Bridgewater,  etc.,  Co.,  58  L.  T.  Rep., 
476  (1888);  affirmed,  id..  866.  In  the 
case  Bates  v.  Androsco.uuin.  etc.,  R  R., 
49  Me.,  491  (1860),  preferred  stock  was 
issued  by  unanimous  consent,  but  with- 
out express  statutory  authority.  Pre- 
ferred stock  was  issued  without  statu- 
tory authority  in  Gordon's  Ex'rs  v. 
Richmond,  etc.,  R  R.,  78  Va.,  501  (1884). 
In  Sturge  v.  Eastern  Union  R'y,  7  De  G., 
M.  &  G.,  158  (1855),  the  court  declined 
to  pass  upon  the  question  whether,  at 
common  law,  it  was  legal  for  a  corpo- 
ration to  issue  preferred  stock.  In  Eng- 
land a  stock  dividend  of  preferred  stock 
may  be  enjoined  by  any  stockholder, 
inasmuch  as  any  stock  dividend  may  be 
objected.  In  America  the  rule  is  differ- 
ent. See  ch.  XXXII,  infra.  A  person 
who  participates  in  an  issue  of  preferred 
stock,  and  also  subscribes  for  part  of  it. 
cannot  repudiate  it  upon  the  insolvency 
of  the  company.  Bard  r.  Banigan,  39 
Fed.  Rep.,  13  (1889).  "Where  a  person 
bought  new  preference  stock  of  a  rail- 
way company  which  both  he  and  the 
directors  bona  fide  believed  they  had 
power  to  issue,  but  which,  in  truth,  they 
had  not,  it  was  held  that  he  had  no 
remedy  against  them,  for  there  was 
nothing  more  than  a  common  mistake 
of  law.  Eaglesfield  t\  Marquis  of  Lon- 
donderry, 4  Ch.  D.,  693.  It  is  no  defense 
to  a  subscription  for  stock  that  the  corn- 


subscribers  to  give  them  a  preferred 
dividend.  Such  an  agreement  is  void 
as  regards  another  subscriber  who  did 
not  assent  thereto.  Ryder  v.  Alton,  etc., 
R.  R,  13  111..  501  (1851). 

1  After  a  part  of  the  stock  has  been 
issued,  the  majority  stockholders  and 
the  directors  cannot  give  a  preference 
to  the  remaining  stock  where  the  mi- 
nority object.     Hutton  v.  Scarborough, 
etc.,  Co.,  4  De  G.,  J.  &  S.,  672  (1865); 
S.  C,  2  Dr.  &  Sm.,  521 ;  Kent  v.  Quick- 
silver, etc.,  Co.,  78  N.  Y.,  159  (1879).     In 
the  case  of  Moss  v.  Syers,  32  L.  J.,  Ch., 
711  (1863),  the  court  at  the  instance  of 
dissenting  stockholders  enjoined  the  is- 
sue of  preferred  stock  which  was  not 
provided  for  by  the  charter  or  by  the 
original  agreement  of  the  stockholders. 
A  pledgee  of  a  certificate  of  stock  is  not 
bound  by  a  subsequent  agreement  of  all 
the  stockholders  to  surrender  to  the  cor- 
poration a  part  of  their  stock,  which 
part  is  then  to  be  considered  preferred 
stock  and  is  to  be  sold  by  the  corpora- 
tion for  the  purpose  of  paying  corpo- 
rate   debts.      Although    all    the    other 
stock  has  had  this  agreement  stamped 
on  the  certificates,  yet  the  corporation 
cannot  insist  that  the  purchaser  of  the 
stock  so  pledged  shall  allow  the  same 
agreement  to  be  stamped  on  the  new 
certificate  issued  to  such  purchaser.  The 
court  will  order  a  transfer  free  from  the 
agreement.     Campbell  v.  American,  etc., 
Co.,  122  N.  Y.  455  (1890).     A  preliminary 
injunction  against  the  issue  of  preferred 
stock  in  order  to  raise  capital  for  an  old 


362 


CH.  XVI.] 


PREFERRED    STOCK. 


[§  268. 


So  also  a  common  stockholder  may  object  where  preferred  and 
common  stock  are  already  issued  and  an  attempt  is  made  to  issue 
second  preferred.1 

But  the  dissenting  stockholder  must  move  quickly  in  the  mat- 
ter. If  he  delays  in  bringing  his  suit,  so  that  the  interested  par- 
ties are  justified  in  believing  that  he  acquiesces  in  the  issue,  and  the 
issue  itself  is  made,  his  remedy  is  barred.  His  injunction  suit  will 
fail.2  If,  however,  the  statutes  of  the  state  authorize  the  issue,  or 
if  the  by-laws  contemplate  a  future  issue  of  preferred  stock,  its 
issue  will  be  legal,  even  though  some  of  the  stockholders  object.3 

"Where  the  articles  of  incorporation  specify  the  amount  of  pre- 
ferred and  common  stock,  and  also  state  that  further  stock  may  be 
issued,  this  increased  stock  must  be  common  stock,  and  cannot  be 
second  preferred  stock,  even  though  the  by-laws  provide  that  it 
may  be  issued  on  such  conditions  as  the  corporation  may  deter- 
mine.4 

Preferred  stock  may  be  issued  subsequently  to  the  issue  of  the 


corporation  was  refused  in  Fielden  v. 
Lancashire,  etc.,  Ry.,  2  De  G.  &  Sm.,  536 
(1848),  because  only  five  stockholders 
dissented,  but  the  court  expressly  re- 
fused to  declare  the  issue  a  legal  one. 

i  Melhado  v.  Hamilton,  28  L.  T.  (N.  S.), 
578  (1873) ;  S.  C,  29  id..  364. 

2  A  stockholder  who  is  an  officer  of 
the  company,  who  is  active  in  having 
preferred  stock  issued,  subscribes  for  it, 
pays  for  it,  takes  his  certificate  therefor, 
votes  upon  it  and  induces  others  to  take 
it,  cannot  after  two  years,  when  the  cor- 
poration is  insolvent,  say  that  the  stat- 
utes of  the  state  authorize  the  issue  of 
common  stock  only.  Banigan  v.  Bard, 
134  U.  S.,  291  (1890),  affirming  39  Fed. 
Rep.,  13.  The  court  has  refused  relief 
where  there  was  a  delay  of  four  years, 
Kent  v.  Quicksilver  Mining  Co.,  78  N. 
Y.,  159  (1879);  or  ten  years.  Taylor  v. 
South,  etc.,  R.  R  Co.,  4  Woods,  575 
(1882);  S.  C,  13  Fed.  Rep,  152.  Delays 
in  raising  the  question  of  the  validity  of 
an  issue  of  preferred  stock,  advantages 
having  accrued  in  the  meantime  to  the 
corporation  and  the  shareholders,  have 
been  held  such  acquiescence  as  will  bar 
the  right  of  a  stockholder  to  object. 
Acceptance  of  the  preferred  stock  and 


dividends  thereon  also  bars  the  right  to 


challenge  the  legality  of  the  issue. 
Branch  v.  Jesup,  106  U.  S.,  468  (1882). 
Preferred  stock  may  b}r  unanimous  con- 
sent be  issued  although  the  statutes  are 
silent  concerning  it  When  issued  after 
the  first  issue  of  stock  has  been  made  it 
may  be  prevented  by  a  dissenting  stock- 
holder ;  yet  delay  on  the  part  of  the 
latter  will  bar  his  objection.  Hazle- 
hurst  v.  Savannah,  etc.,  R  R,  43  Ga., 
13  (1871).  But  see  Moss  v.  Syres,  32  L. 
J.,  Ch.,  711  (1863). 

3  If  the  by-laws  provide  that  any  in- 
creased capital  may  be  made  in  such 
manner  and  with  rules,  regulations, 
privileges  and  conditions  as  a  meeting 
of  the  stockholders  might  determine, 
preferred  stock  may  be  issued  on  an  in- 
crease of  the  capital  stock.  Harrison  v. 
Mexican,  etc.,  Ry,  L.  R,  19  Eq.  Cas.,  358 
(1875). 

*  Melhado  v.  Hamilton,  28  L.  T.  Rep.. 
578;  affirmed,  29  id,  364  (1873),  the 
court  saying :  "  If  they  could  issue  one 
share  they  could  issue  a  thousand,  and 
if  at  seven  per  cent  they  might  issue 
them  at  seventy  per  cent,  and  thus,  at  a 
general  meeting,  the}-  might  pass  resolu- 
tions which  would  have  the  effect  of 
utterly  annihilating  the  interests  of 
the  ordinary  shareholders." 


363 


§  269.] 


PREFERRED    STOCK. 


[CH.  XVI. 


common  and  against  the  dissent  of  the  minority  stockholders, 
where  the  legislature  amends  the  charter  and  provides  for  the 
issue  of  preferred  stock.  Such  an  amendment  is  considered  inci- 
dental and  is  constitutional.1 

A  subscriber  to  preferred  stock  may  be  liable  on  the  subscrip- 
tion, although  no  preferred  stock  can  be  issued ; 2  and  a  person 
who  loans  money  to  be  repaid  in  such  stock  may  recover  it  back 
if  the  stock  cannot  be  issued.5 

§  269.  Bights  of  preferred  stockholders  —  Amount  of  preference  — 
Toting  —  Subsequent  leases,  consolidations,  etc. —  The  rights,  pow- 
ers and  privileges  of  preferred  stockholders  depend  largely  on 
the  terms  upon  which  it  is  issued.  Preferred  stock  takes  a  multi- 
plicity of  forms  according  to  the  desire  and  ingenuity  of  the  stock- 
holders and  the  necessities  of  the  corporation  itself.  The  percent- 
age of  preferred  dividend  is  always  fixed  at  the  time  of  the  issue. 
It  is  a  matter  of  contract.4     The  preferred  dividends  may  be  made 


1  Everhart  v.  West  Chester,  etc.,  R.  R. 
Co.,  28  Pa.  St,  339  (1857),  holding  that  a 
charter  amendment  authorizing  the  is- 
sue was  legal ;  Rutland,  etc.,  R,  R.  Co. 
v.  Thrall,  35  Vt,  536,  545  (1863),  to  same 
effect,  and  holding  that  a  common 
stockholder  could  not  defeat  his  sub- 
scription on  this  ground;  Williston  v. 
Michigan,  etc.,  R.  R.  Co..  95  id.,  400  (1866) ; 
Curry  v.  Scott,  54  Pa.  St.,  270  (1867) ;  Cov- 
ington v.  Bridge  Co.,  10  Bush  (Ky.),  69 
(1873),  where  the  dissenting  stockholder 
did  not  object  until  after  the  preferred 
stock  had  been  issued  and  dividends 
laid  upon  it.  In  Covington,  eta,  Bridge 
Co.  v.  Sargent,  1  Cin.  Super.  Ct.  354 
(1871),  there  is  an  intimation  that  such  a 
statute  is  unconstitutional,  and  the  court 
held  that  statutory  power  to  issue  a 
certain  amount  of  preferred  stock  did 
not  authorize  an  issue  of  partly  pre- 
ferred and  partly  common.  This  de- 
cision may  well  be  questioned.  In  Eng- 
land an  act  of  parliament  may  authorize 
such  an  issue.  Stevens  v.  South  Devon 
R'y,  9  Hare,  313  (1851).  And  in  one 
case  the  legality  of  the  issue  of  pre- 
ferred stock  under  a  statute  was  put 
upon  the  ground  not  of  the  right  to 
borrow  money,  but  upon  the  ground  of 
a  right  to  raise  funds  by  sale  of  stock. 
Chaffee  v.  Rutland,  etc.,  R.  R.  Co..  55 


Vt,  110  (1882).  In  the  case  of  Eichbaum 
v.  City  of  Chicago  Grain  Elevators.  65 
L.  T.  Rep.,  704  (1891),  the  court  held  that 
the  company  upon  increasing  its  capi- 
tal stock  might,  by  a  majority  vote  of 
its  stockholders,  make  such  increased 
capital  preferred  stock,  calling  for  a  cer- 
tain dividend  with  no  rights  in  surplus 
profits  beyond  that  dividend,  and  might 
give  to  common  stockholders  the  right 
to  exchange  their  common  stock  for 
such  preferred. 

2  Where  a  person  subscribes  for  pre- 
ferred stock,  but  no  preferred  stock  is 
provided  for,  and  he  becomes  a  director 
and  acts  as  such  for  several  years,  he  is 
liable  on  such  stock  to  corporate  credit- 
ors, as  though  it  were  a  subscription  for 
common  stock.  Tama,  etc.,  Co.  v.  Hop- 
kins, 44  N.  W.  Rep.,  797  (Iowa,  1890). 

3  Where  a  corporation  borrows  money 
and  agrees  to  repay  it  in  preferred 
stock,  but  has  no  power  to  issue  the  pre- 
ferred stock,  the  party  paying  the 
money  may  recover  it  back.  Anthony 
v.  Household,  etc.,  Co.,  18  Atl.  Rep.,  176 
(R.  I..  1889). 

4  The  amount  of  preference,  and 
whether  cumulative  or  not,  is  all  a  mat- 
ter of  contract  Smith  v.  Cork,  etc.. 
R'y,  Ir.  Rep.,  3  Eq.,  356  (1869).  The 
amount  of  preference  may   be    detei- 


364 


CH.  XVI.]  PREFERRED    STOCK.  [§  269. 

cumulative  or  not  cumulative.  If  nothing  is  specified  in  respect 
to  this,  then  the  law  makes  the  preferred  dividends  cumulative.1 
It  seems  that  unless  the  contract  expressly  provides  otherwise,  pre- 
ferred stockholders  participate  in  the  surplus  profits  remaining 
after  the  proper  dividend  has  been  declared  on  the  preferred  and 
an  equal  dividend  on  the  common  stock.2 

Where  the  preferred  stockholders  are  entitled  to  participate  in  all 
dividends  paid  after  their  preferred  dividend  is  paid,  they  are  en- 
titled to  participate  in  a  dividend  of  scrip,  similar  to  a  stock  dividend 
and  representing  accumulated  profits  which  have  been  used  for  bet- 
terments.3 The  disposition  of  the  surplus  profits  after  the  regular 
dividends  have  been  paid  is  a  matter  of  contract.4 

After  the  preference  has  been  fixed  the  company  cannot  alter  it 
by  altering  the  amount  of  preference  and  providing  for  the  re- 
demption of  shares  out  of  the  surplus  profits.5 

Preferred  stockholders  are  entitled  to  vote  at  elections  and  to  ex- 
ercise the  various  rights  of  stockholders  the  same  as  common  stock- 
holders, unless  this  right  is  expressly  withheld  from  them  by  the 
terms  under  which  the  stock  is  issued.8 

As  already  stated  there  are  an  infinite  variety  of  provisions  under 
which  preferred  stock  may  legally  be  issued.  These  provisions  are 
to  be  found  in  the  charter,  the  by-laws,  the  certificates  of  stock,  the 

mined  by  the  by-laws,  and  the  provis-  corporation  a  part  of  their  stock,  which 

ions  of  such  a  by-law  constitute  a  con-  part  is  to  be  then  considered  preferred 

tract.     Belfast,  etc.,  R.  R.  v.  Belfast,  77  stock  and  is  to  be  sold  by  the  corpora- 

Me.,  445  (1885).  tion  for  the  purpose  of  paying  corporate 

1  See  §§  273,  274,  infra.  debts.     Although   all  the   other    stock 

2  Id.  has  had  this  agreement  stamped  on  the 

3  Gordon's  Ex'rs  v.  Richmond,  etc.,  R  certificates,  yet  the  corporation  cannot 
R,  78  Va,,  501  (1S84).  insist  that  the  purchaser  of  the  stock  so 

4  Where  the  articles  of  incorporation  pledged  shall  allow  the  same  agreement 
specify  that  after  certain  dividends  to  be  stamped  on  the  new  certificate 
have  been  paid  on  both  the  preferred  issued  to  such  purchaser.  The  court 
and  common  stock,  one-fifth  of  the  sur-  will  order  a  transfer  free  from  the 
plus  shall  go  to  the  preferred  stock,  the  agreement.  Campbell  v.  American,  etc., 
company  cannot  devote  such  surplus  to  Co.,  122  N.  Y.,  455  (1890). 
redeeming  of  shares.  Ashbury  v.  Wat-  6  Miller  v.  Ratterdam,  24  N.  E.  Rep., 
son,  L.  R,  30  Ch.  D.,  376  (1885).  496  (Ohio,  1890),  where  the  right  to  vote 

5  Ashbury  v.  Watson,  L.  R,  30  Ch.  D.,  was  expressly  withheld.  In  the  caseMc- 
376  (1885).  If  a  stockholder,  by  accept-  Intosh  v.  Flint,  etc.,  R  R,  34  Fed.  Rep, 
ing  the  benefits,  assents  to  a  change  in  350  (1S87),  it  appeared  that  the  common 
the  privileges  which  pertain  to  his  stock,  stockholders  were  by  contract  deprived 
he  cannot  afterwards  object  thereto,  of  their  right  to  vote  for  a  specified 
Compton  v.  Chelsea,  13  N.  Y.  Supp.,  722  time.  In  the  case  lie  Barrow,  etc.,  Co., 
(1891).  A  pledgee  of  a  certificate  of  59  L.  T.  Rep.,  50  (1888),  the  right  to  vote 
stock  is  not  bound  by  an  agreement  of  was  withheld  from  preferred  stock- 
all  the  stockholders  to  surrender  to  the  holders. 

365 


§  270.] 


PREFERKKD    STOCK. 


[ch.  XVL 


resolutions  of  the  stockholders  and  directors,  the  minutes  of  corpo- 
rate meetings,  the  reports  of  or  to  the  company,  and  any  contracts 
under  which  the  stock  was  issued.  The  rights  pertaining  to  the 
stock  are  matters  of  contract,  and  this  contract  is  ascertained  from 
the  sources  specified  above.1  Some  of  the  various  devices  for  rais- 
ing money  by  issuing  various  kinds  of  preferred  stock  are  referred 
to  in  the  notes  below.2 

§  270.  Where  the  corporation  has  power  to  lease  its  road,  it  may 
make  a  lease,  although  the  rental  is  sufficient  to  pay  a  dividend  on 
the  preferred  stock  alone,  leaving  nothing  for  the  common  stock- 
holders.3 


1  Boardman  v.  Lake  Shore,  etc.,  R.  R. 
Co.,  84  N.  Y.,  157  (1881);  Gordon  n 
Richmond,  etc..  R.  R,  Co.,  78  Va..  501, 
510  (1884) ;  Baily  v.  Hannibal,  etc.,  R.  R 
Co.,  1  Dill.,  174  (1871);  S.  C.,17  Wall.,  96; 
St.  John  v.  Erie  R'y  Co.,  22  id.,  136  (1874) ; 
Webb  v.  Earle,  L.  R,  20  Eq.,  556  (1875) ; 
Matthews  v.  Great  Northern,  etc.,  R'y 
Co.,  28  L.  J.,  Chan.,  375  (1859),  constru- 
ing a  statute  affecting  the  rights  of 
holders  of  "guarantied"  and  "deferred" 
stock ;  Belfast,  etc.,  R  R.  Co.  V.  Belfast, 
77  Me..  445  (1885);  Stevens  v.  South,  etc., 
R'y  Co.,  9  Hare,  313  (1851);  Sturge  v. 
Eastern,  etc.,  R'y  Co.,  7  De  G.,  M.  &  G., 
158  (1855):  Harrison  v.  Mexican,  etc., 
R'y  Co.,  L.  R,  19  Eq.  Cas.,  358  (1875); 
Crawford  v.  Northeastern,  etc.,  R'y  Co., 
3  Jur.  (N.  S.),  1093(1856);  Henry  v.  Great 
Northern,  etc.,  R'y  Co.,  1  De  G.  &  J., 
606,  642,  646  (1857) ;  Matthews  r.  Same, 
28  L  J.,  Ch.,  375  (1859).  See,  also,  Coates 
v.  Nottingham,  etc.,  30  Beav.,  86.  The 
agreement  is  ascertained  from  the  con- 
tract, reports,  resolutions,  conveyances, 
etc.  Rogers  v.  New  York,  etc,  Land 
Co.,  134  N.  Y.,  197  (1892). 

2  Under  the  powers  conferred  by  the 
statute,  30  and  31  Vict,  ch.  127,  various 
plans  have  been  devised  by  English 
companies  on  the  verge  of  insolvency 
to  raise  funds ;  and  a  favorite  device  is 
the  issue  of  preferred  shares  of  stock. 
Thus,  in  one  case,  there  were  five  kinds 
of  preference  shares.  Corry  v.  London- 
derry, etc,  R'y  Co.,  29  Beav.,  263  (1860). 
See,  also,  by  way  of  illustration  as  to 


these  various  methods  in  England  of 
raising  funds  by  the  issue  of  preferred 
shares,  Matthews  v.  Great  Northern, 
etc.,  R'y  Co.,  28  L  J.,  Chan.,  375  (1859) ; 
Re  Cambrion  R'y  Co.,  L.  R,  3  Chan., 
278  (1868);  Re  Potteries,  etc.,  R'y  Co., 
id.,  67  (1867) ;  Webb  v.  Earl,  L  R,  20 
Eq..  556  (1875) ;  Stevens  v.  Midland,  etc., 
R'y  Co.,  L.  R,  8  Chan..  1064  (1873);  Re 
Bristol,  etc.,  R'y  Co.,  L  R,  6  Eq.,  448 
(1868);  Re  Devon,  etc.,  R'y  Co.,  id.,  610 
(1868) ;  Munas  r.  Isle  of  Wight  R'y  Co., 
L  R.  8  Eq.,  665  (1869;;  Re  East  & 
West,  etc.,  R'y  Co.,  id.,  87  (1869);  Lon- 
don, etc.,  Association  v.  Wrexham,  etc, 
R'y  Co.,  L  R,  18  Eq,  566  (1874);  Re 
Anglo-Danubian,  etc.,  Co.,  L  R,  20 
Eq.,  339  (1875) ;  Midland  R'y  Co.  v.  Gor- 
don, 16  Mees.  &  W.,  804  (1847).  For  a 
scheme  where  the  stock  was  divided 
into  half  shares,  one-half  of  which  were 
deferred  to  the  other  half,  see  Re  Brigh- 
ton, etc.,  R'y,  62  L.  T.  Rep.,  353(1890).  In 
Phillips  v.  Eastern  R  R,  138  Mass.,  122 
(1884),  a  scheme  appears  by  which  under 
a  statute  the  creditors  elected  two-thirds 
and  the  stockholders  one-third  of  the 
directors. 

3  Middletown  v.  Boston,  etc.,  R  R,  53 
Conn.,  351  (1885).  In  the  case  Re  Bue- 
nos Ayres.  etc.,  Co.,  66  L.  T.  Rep.,  408 
(1892),  a  sale  of  the  company's  enter- 
prise to  the  government  upon  terms 
which  paid  something  to  the  preferred 
stockholders  but  left  nothing  for  the 
common  stockholders  was  sustained. 


366 


CH.  XVI.] 


PREFERRED    STOCK, 


[§  270. 


But  in  a  contract  of  lease  the  rent  must  be  applied  to  income 
bonds  before  it  is  applied  to  dividends  and  preferred  stock.1 

Where  a  corporation,  having  issued  preferred  stock,  is  merged 
into  a  new  corporation  by  consolidation,  the  preferred  shareholders 
of  the  old  corporation  may  prosecute  a  suit  for  dividends  against 
the  new  corporation  if  the  consolidated  company  has  assumed  all 
the  obligations  of  the  old  company.2 

A  preferred  stockholder  is  entitled  to  a  certificate  of  stock  which 
sets  forth  the  fact  of  the  preference.3 

Sometimes  the  right  is  given  to  exchange  common  for  preferred 
stock  or  preferred  for  common,  or  bonds  for  stock.  Concerning 
any  such  options,  it  is  the  settled  rule  that  any  time  limited  for 
the  exercise  thereof  is  of  the  essence  of  the  offer.4 

Dividends  on  the  preferred  stock  must  be  on  all  of  that  class, 
even  though  some  of  it  has  been  exchanged  for  preferred  stock 
bearing1  a  lower  dividend.5 


iln  Phillips  v.  Eastern  R.  R,  138 
Mass.,  122,  135  (1884),  preferred  stock 
had  been  offered,  under  a  statute,  in  ex- 
change for  indebtedness  to  be  paid  from 
income  only.  The  company  leased  its 
property,  and  the  lessee  agreed  to  use 
the  net  profits  to  pay  dividends  on  the 
preferred  stock  the  same  as  the  interest 
on  such  debts  as  had  not  been  converted 
into  preferred  stock,  and  if  the  net 
profits  were  not  sufficient,  each  was  to 
get  the  same  proportionately.  The  court 
held  this  to  be  illegal,  inasmuch  as  it 
placed  the  preferred  stockholders  on  the 
same  basis  as  the  income  creditors. 

2  Boardman  v.  Lake  Shore,  etc.,  R.  R. 
Co.,  84  N.  Y.,  157  (1881) ;  Chase  v.  Van- 
derbilt,  62  '"d.,  307  (1875).  Cf.  Prouty  v. 
Lake  Shore,  etc.,  R  R  Co.,  52  N.  Y., 
563  (1873). 

3  Where  by  statute  municipal  aid 
bonds  are  to  be  paid  for  by  preferred 
stock,  the  municipality  may  by  man- 
damus compel  the  company  to  issue  a 
certificate  of  stock  setting  forth  the 
preference.  State  v.  Cheraw,  etc.,  R  R„ 
16  S.  C,  524  (f881). 

4  Where  the  corporation  offers  to  ex- 
change preferred  for  common  stock, 
upon  the  payment  of  an  additional 
sum  of  money,  a  stockholder  who  de- 
lays for  thirty  years  to  avail  himself  of 

36 


the  privilege  cannot  claim  the  right 
thereto.  The  fact  that  the  corporation 
had  taken  in  some  of  the  common  stock 
on  a  new  basis  of  exchange  is  immate- 
rial. Holland  v.  Cheshire  R'y,  24  N.  E. 
Rep.,  206  (Mass.,  1890).  An  extension  of 
the  time  when  a  bond  is  to  be  paid  does 
not  extend  the  time  within  which  it 
may  be  exchanged  for  stock  of  the 
company.  Muhlenberg  v.  Philadelphia, 
etc.,  R.  R,  47  Pa.  St.,  16  (1864).  Where 
an  option  was  given  to  holders  of  the 
common  stock  to  take  a  certain  number 
of  new  preferred  shares  within  a  given 
time,  it  was  held  that  a  shareholder 
who  lived  abroad  and  had  no  notice  of 
the  option  until  the  expiration  of  the 
specified  time  could  not,  upon  learning 
of  it  afterwards,  come  in  and  demand 
the  right  to  purchase  the  preferred 
shares.  Pearson  v.  London,  etc.,  R*y 
Co.,  14  Sim.,  541  (1845).  Such,  also,  is 
the  rule  where  there  is  an  option  within 
a  fixed  time  to  convert  loan  notes  into 
common  shares.  Campbell  v.  London, 
etc.,  R'y  Co.,  5  Hare,  519  (1846).  See, 
also,  §  283. 

5  Although  the  preferred  stock  is 
partly  taken  back  by  the  company  and 
new  preferred  stock  of  the  same  amount, 
bearing  a  less  dividend,  is  issued  in  ex- 
change, yet  this  does  not  enab'e  the 


§  271.] 


PREFERRED    STOCK. 


[ch.  xvr. 


Preferred  stockholders  are  subject  to  a  statutory  liability  the 
same  as  common  stockholders.1 

§  271.  Preferred  stockholders  are  not  creditors  —  Dividends  can- 
oe only  from  profits —  Mortgages  securing  preferred  stoclc. —  For- 
merly it  was  a  matter  of  doubt  and  discussion  whether  or  not  a 
preferred  stockholder  had  any  rights  as  a  creditor  of  the  company 
or  was  confined  to  his  rights  as  a  stockholder.  The  law  is  now 
clearly  settled  that  a  preferred  stockholder  is  not  a  corporate  cred- 
itor.2 " 

The  preferred  shareholder  is  but  a  shareholder  with  a  right  to 
have  his  dividend  paid  before  dividends  on  the  common  stock  are 
paid,  and  he  is  not  entitled  to  any  dividend  until  the  corporation 
has  funds  which  are  properly  applicable  to  the  payment  of  divi- 
dends.    A  contract  that  dividends  shall  be  paid  on  the  preferred 


company  to  declare  a  dividend  on  the 
part  not  exchanged,  and  on  that  alone. 
It  must  declare  on  all.  Coey  v.  Belfast, 
etc.,  R'y,  Ir.  Rep.,  2  C.  L.,  112  (1866).  If 
part  of  the  preferred  stockholders  sur- 
render their  stock  for  new  common 
stock  on  a  reorganization  without  fore- 
closure, such  stock  is  canceled,  and 
holders  not  so  surrendering  their  stock 
are  entitled  to  arrears  of  dividends  out 
of  the  first  net  profits,  without  allowing 
such  surrendered  stock  to  participate 
therein.  West  Chester,  etc.,  R  R  v. 
Jackson.  77  Pa.  St.,  321  (1875).  In  this 
case  there  was  a  special  act  providing 
for  the  issue  of  preferred  stock,  and  after- 
wards another  for  the  issue  of  consoli- 
dated stock.  A  dividend  having  been 
declared,  a  holder  of  the  preferred  stock, 
who  had  declined  to  accept  the  consoli- 
dated, was  held  "entitled  to  receive  just 
what  the  company  agreed  to  pay  when 
the  money  was  received."  In  the  case 
Griffith  v.  Paget,  L.  R„  6  Ch.  D.,  511 
(1877);  S.  C,  25  W.  R,  523,  it  was  held 
that  where  the  company  is  dissolved  by 
a  consolidation  with  another  company, 
under  a  statute,  the  stockholders  of  the 
old  being  entitled  to  exchange  their 
stock  for  stock  in  the  new,  the  preferred 
stock  is  not  entitled  to  preferred  stock 
in  the  new. 

»  Railroad  Co.  v.  Smith.  31  N.  E.  Rep., 
743  (Ohio,  1891}. 


2  The  House  of  Lords  in  England  have 
clearly  laid  down  the  rule  that  preferred 
stockholders  are  not  creditors.  Birch 
v.  Cropper,  61  L.  T.  Rep.,  621  (1889) ;  Bel- 
fast, etc.,  R  R  v.  Belfast,  77  Me.,  445 
(1885).  A  very  full,  clear  and  learned 
discussion  of  the  essential  differences 
between  a  preferred  stockholder  and  a 
creditor  of  a  corporation  is  to  be  found 
in  Miller  v.  Ratterman,  24  N.  R  Rep, 
496  (Ohio,  1890),  a  case  wherein  the  pre- 
ferred stockholder  was  secured  by  a 
mortgage  and  was  deprived  of  the  right 
to  vote  at  corporate  elections.  Taft  v. 
Hartford,  etc.,  R  R  Co.,  8  R  I,  310 
(1866) ;  Chaffee  v.  Rutland,  etc.,  R  R  Co., 
55  Vt.,  110  (1882),  the  court  saying: 
"  The  claim  is  that  he  is  also  a  creditor 
with  all  the  rights  pertaining  to  that  re- 
lation. Against  this  claim  are  the  terras 
of  the  charter,  the  presumption  of  law 
and  the  usual  course  of  business."  In 
this  case  certificates  issued  for  "scrip 
dividends"  or  "guarantied  preferred 
stock"  were  convertible  into  mortgage 
bonds.  The  company  having  refused 
to  convert  them  it  was  held  that  general 
assumj)sit  for  the  amount  of  the  cer- 
tificates would  lie,  and  that  the  suit 
could  be  brought  in  the  name  of  the 
holder  for  value.  St  John  v.  Erie  R'y 
Co.,  10  Blatch.,  271  (1874);  S.  C,  22 
Wall.,  137. 


36S 


CH.  XVI.] 


PREFERRED    STOCK. 


[§  271. 


stock  whether  any  profits  are  made  or  not  would  be  contrary  to 
public  policy  and  void.  An  agreement  to  pay  dividends  abso- 
lutely and  at  all  events  —  from  the  profits  when  there  are  any,  and 
from  the  capital  when  there  are  not  —  is  an  undertaking  which  is 
contrary  to  law,  and  is  void.  Public  policy  condemns  with  em- 
phasis any  such  undertaking  on  the  part  of  a  corporation  as  to  its 
preferred  or  guarantied  shares.  Dividends  on  preferred  stock  are 
payable  only  out  of  the  net  earnings  of  the  company.1     The  ques- 


1  Taft  v.  Hartford,  etc..  E.  R  Co.,  8 
R  L,  310  (1866);  Lockhart  v.  Van  Al- 
styne,  31  Mich.,  76  (1875);  Chaffee  v. 
Rutland,  etc..  R.  R.  Co.,  55  Vt.  110  (1882) ; 
Warren  v.  King,  108  U.  S.,  389  (1882> 
Under  the  statute  in  Connecticut  it 
was  held  that  dividends  may  be  de- 
clared on  preferred  stock  where  the  net 
earnings  since  the  issue  of  the  stock  are 
sufficient,  even  though  prior  to  such 
issue  the  capital  stock  had  been  im- 
paired. Cotting  v.  N.  Y.,  etc.,  R.  R,  54 
Conn.,  156  (1886).  As  supporting  the 
rule  in  the  text,  see,  also,  Lockhart  v. 
Van  Alstyne,  31  Mich.,  76  (1875);  Craw- 
ford v.  Northeastern,  etc.,  R'y  Co.,  3 
Jur.  (N.  S),  1093  (1856).  In  Mills  v. 
Northern  R'y  Co.,  etc..  L.  R.,  5  Ch.  App, 
621  (1870),  where  a  corporation,  being  in 
arrears  in  the  payment  of  preferred 
stock  dividends,  and  being  at  the  same 
time  largely  indebted,  proposed  to  ap- 
propriate a  portion  of  its  capital  and  to 
borrow  further  sums  upon  debentures 
for  the  purpose  of  paying  such  preferred 
dividends,  it  was  held,  in  a  suit  by  the 
creditors  to  prevent  such  action,  that 
inasmuch  as  the  appropriation  of  the 
'capital  was  justified  on  the  ground  that 
an  equivalent  portion  of  the  revenue 
had  been  used  for  capital  purposes,  and 
the  proposed  loan  was  within  the  com- 
pany's borrowing  power,  an  injunction 
could  not  be  granted.  See,  also,  Elkins 
v.  Camden,  etc.,  R.  R  Co.,  36  N.  J.  Eq., 
233  (1882);  Belfast,  etc.,  R  R  Co.  v. 
Belfast,  77  Me.,  445  (1885X  and  the  cases 
supra. 

In  the  case  Guinness  v.  Land  Corpo- 
ration, L.  R,  22  Ch.  D.,  349  (1882),  the 
court  declared  illegal   a    provision  for 


the  payment  of  preferred  dividends  out 
of  the  capital  stock.  Interest  on  debts, 
even  those  incurred  after  the  preferred 
stock  was  issued,  and  rent  on  leases  in- 
cluding those  taken  after  such  issue, 
must  be  paid  before  dividends  are  de- 
clared on  the  preferred  stock.  St.  John 
v.  Erie  R'y,  22  Wall.,  137,  affirming  10 
Blatch.,  271  (1872),  defining  also  the 
meaning  of  net  profits.  In  the  case 
Williston  v.  Michigan  Southern,  etc.. 
R  R,  9?  Mass.,  400  (1866),  the  court  held 
that  preferred  and  guarantied  stock  in 
a  Michigan  and  Indiana  corporation  was 
not  entitled  to  dividends  unless  there 
were  net  profits.  Preferred  dividends 
may  be  paid  out  of  the  gross  earnings 
where  the  statute  evidently  so  intended. 
Gordon's  Ex'rs  v.  Richmond,  etc.,  R  R., 
78  Va.,  501  (1884).  See,  also,  Ragland  v. 
Broadnax.  29  Gratt,  401  (1877),  where 
the  court  upheld  the  charge  of  guaran- 
tied dividends  on  the  gross  receipts. 
That  was  the  case  of  a  debt  converted 
into  guarantied  stock.  The  debt  would 
have  borne,  if  it  had  not  been  converted 
into  stock,  interest  at  the  rate  of  six 
per  cent  per  annum,  whether  there 
were  net  earnings  or  not.  The  court 
held  that  the  guaranty  of  three  per  cent, 
dividend  on  the  whole  stock,  which 
formerly  belonged  to  the  state,  was 
simply  the  six  per  cent,  interest  upon 
the  debt  which  was  converted  into 
stock ;  and  it  also  held  that  it  was 
chargeable,  in  accordance  with  the  plain 
provisions  of  the  statute,  upon  the  gross 
receipts.  Guarantied  dividends  can  be 
paid  only  from  net  profits.  Miller  v. 
Ratterman,  24  N.  E.  Rep.,  496  (Ohio, 
1890). 


(24) 


369 


§  271.] 


PKEFEEEED    STOCK. 


[CH.  XVI. 


tion  of  what  constitutes  net  earnings  has  been  treated  else- 
where.1 

Occasionally,  however,  a  mortgage  is  given  by  the  corporation 
to  secure  the  payment  of  dividends  on  preferred  stock  and  to  give 
it  a  preference  in  payment  over  subsequent  debts  of  the  corpora- 
tion upon  insolvency  or  dissolution.  It  is  difficult  to  see  how  such 
a  mortgage  would  be  legal  except  where  it  is  issued  under  express 
statutorv  authority.  It  is  difficult  to  see  how  stockholders  can 
contrive  legally  to  obtain  a  preference  over  corporate  creditors  se- 
cured or  unsecured,  as  they  would  do  by  such  a  mortgage.  Certain 
it  is  that  the  courts  will  not  readily  give  the  stockholders  a  prefer- 
ence over  creditors,  even  though  the  preferred  stock  is  by  its  terms 
to  be  a  first  claim  on  the  property.'2 

A  mortgage  to  secure  preferred  stock  and  dividends  thereon  has 
been  upheld  in  a  few  cases.3     In  other  cases  that  which  was  called 


■  See  ch.  XXXII. 

2  Preferred  stock  which  is  "  to  be  and 
remain  a  first  claim  upon  the  property 
of  the  corporation  after  its  indebted- 
ness" has  no  lien  ahead  of  present  or 
future  debts  of  the  company.  King  v. 
Ohio  &  M.  R'y,  2  Fed.  Rep.,  36  (1880). 
See,  also,  Warren  v.  King,  108  U.  S.,  389 
(1882),  the  court  holding  that  although 
the  certificates  of  preferred  stock  pro- 
vided that  it  should  "be  and  remain  a 
first  claim  upon  the  property  of  the 
company  after  its  indebtedness,"  etc., 
and  although  in  foreclosure  proceedings 
the  preferred  stockholders  asked  to  have 
their  stock  declared  a  lien  prior  to  a 
subsequent  mortgage,  yet  the  court  re- 
fused the  application,  declaring  that 
they  had  priority  over  the  common 
stock  only.  It  has  been  held,  however, 
that  where  preferred  stock  is  issued,  re- 
citing that  it  is  a  lien  on  all  the  prop- 
erty of  the  corporation  after  the  first 
mortgage,  the  lien  will  be  upheld  by  the 
court  as  against  subsequent  mortgages 
and  general  creditors,  although  such 
lien  was  not  secured  by  any  mortgage. 
The  trustees  in  the  subsequent  deed  of 
trust  knew  of  and  acquiesced  in  the  pri- 
ority of  the  preferred-stock  lien,  and  the 
deed  itself  recognized  it.  This  bound 
the  bondholders.  Skiddy  v.  Atlantic, 
etc.,  R.  R,  3  Hughes,   320,   355  (1878). 


Cf.  Westchester,  etc.,  v.  Jackson,  77  Pa. 
St.,  321  (1875).  In  this  case  the  preferred 
stock  to  be  redeemed  by  payment  of  the 
par  value  and  a  sum  which,  with  divi- 
dends and  interest  already  paid,  should 
amount  to  eight  per  cent,  per  annum 
from  the  time  of  its  purchase  from  the 
company,  was  declared  to  be  a  contract 
which  entitled  its  holder  to  his  divi- 
dends before  dividends  were  paid  ou  the 
common  stock. 

3  Although  the  power  of  a  railroad  to 
borrow  be  limited,  yet  preferred  stock 
may  be  issued  secured  by  a  mortgage, 
where  the  power  to  mortgage  has  been 
given,  and  such  preferred  stock  may  be 
deprived  of  the  power  to  vote.  Miller  v. 
Katterdam.  24  N.  E.  Rep..  496  (Ohio, 
1 S90).  A  deed  of  trust  given  by  a  cor- 
poration upon  its  lands  to  secure  the 
performance  of  an  undertaking  of  the  • 
company  to  pay  dividends  on  preferred 
stock  which  was  about  to  be  issued,  and 
also  ultimately  to  pay  for  the  stock  itself, 
is  a  mortgage.  Where  the  corporation's 
equity  of  redemption  has  been  sold  the 
receiver  of  the  corporation  takes  noth- 
ing. Fitch  v.  Wetherbee,  110  111..  475 
(1884).  In  the  case  Davis  v.  Proprietors, 
etc.,  49  Mass..  321  (1844),  the  stock  was 
by  law  entitled  to  redemption  when  the 
holder  moved  from  the  town.  The 
court  upheld  and  enforced  the  contract 
70 


CH.  XVI.]  PREFERRED    STOCK.  [§  272. 

preferred  stock  was  nothing  more  than  income  bonds  with  a  voting 
power.1 

A  preferred  stockholder  is  in  no  better  position  to  enjoin  the 
corporation  from  giving  a  mortgage  than  a  common  stockholder.2 
Where  bonds  are  deposited  as  collateral  security  for  preferred 
stock,  it  has  been  held  that  the  corporation  may  call  in,  redeem 
and  cancel  the  stock  in  exchange  for  the  bonds;3  but  this  would 
seem  to  be  an  illegal  reduction  of  the  capital  stock. 

§  272.  What  are  net  profits  applicable  to  preferred  dividends  - 
The  preferred  stockholder 's  remedy  to  enforce  a  dividend. —  It  is 
largely  a  matter  of  discretion  with  a  board  of  directors  as  to 
whether  they  will  use  the  net  profits  for  a  dividend  or  will  use 
them  in  the  business  of  the  company.  There  is  a  limit  to  this  dis- 
cretion, and  the  courts  will  not  allow  the  directors  to  use  their 
power  oppressively  by  refusing  to  declare  a  dividend  where  the  net 
profits  and  the  character  and  condition  of  the  business  clearly  war- 
rant it.  This  is  the  rule  where  all  of  the  stock  is  common  stock.4 
Such  also  is  the  rule  is  regard  to  dividends  on  preferred  stock. 
The  preferred  stockholder  is  not  entitled  as  a  matter  of  right  to 

In  the  case  Gordon's  Ex'rs  v.  Richmond,  denominated  a  'preferred  stockholder,' 

etc.,  R.  R.,  78  Va.,  501  (1884),  a  mortgage  is  a  mortgage  creditor  nevertheless ;  and 

had  been  given  to  secure  the  payment  interest  is  not  changed  into  a  '  dividend ' 

of  the  par  value  and  dividends  of  pre-  by  calling  it  a  dividend."    It  was  a  self- 

ferred  stock.     The  case  involved  a  dis-  evident  misnomer  in  the  act.     So  also 

tribution  of  profits  and  not  a  foreclos-  under  a  statute.     See  Pittsburgh,  etc.,  v. 

ure  of  the  mortgage,  but  the  court  said  County  of    Allegheny,   63  Pa.  St.,   126 

that  the  mortgage  was  legal.  (18751.     Compare  S.  C,  79  id.,  210.     In 

>  Burt  v.  Rattle,  31  Ohio  St.,  116  (1876),  the  case  Miller  v.   Ratterdam,  24  N.  E. 

turned  upon  a  general  "  Act  to  author-  Rep.,   496   (Ohio,    1890),   the  court  held 

ize  manufacturing  corporations  to  issue  that  the  fact  that  a  mortgage  had  been 

preferred  stock."     Where    such    stock  given   to  secure  the  payment  of   pre- 

was  issued  certifying  that  the  corpora-  ferred  dividends  does  not  prevent  such 

tion  guarantied  the  holders  certain  div-  stock  from   being  considered  stock  in- 

idends   not  exceeding   legal  rates,  and  stead  of  a  debt. 

the  final  payment  of  the  certificates  at  a  2  Preferred  stockholders  cannot  pre- 

specified   lime,  it  being   provided   that  vent  the  corporation  giving  a  consoli- 

such  preferred  stock  might  be  converted  dated    mortgage    to    secure    past    and 

into   common   stock,  and  the   corpora-  future   debts.      "  Holders   of    preferred 

tion  issued  its  bond  and  mortgage  to  a  stock  have  no  special   control  over  the 

trustee  to  secure  such  certificates,  it  was  corporation  or  its  management.     .     .     . 

held  that  holders  of   the  so-called  pre-  The    corporation    is    in    no    sense    the 

ferred  slock  did  not  become  stockhold-  trustee  for  the  holders  of  preferred  stock. 

ers  and  members,  but  creditors  of  the  Its  duty  is  to  each  other  alike  according 

corporation,  so  that,  on  the  winding  up  to  the  conditions  attached  to  the  stock 

of  the  company's    affairs,   they  had  a  of    each."    Thompson    v.   Erie    R'y,  1 1 

lien  upon  the  mortgage  property  supe-  Abb.  Pr.,  TJ.  S.,  188  (Supr.  Ct.,  1871). 

rior  to  that  of  general  creditors  and  as-  3Totten  v.  Tison,  54  Ga.,  139  (1875). 

signees.  "A  mortgage  creditor,  although  i  See  ch.  XXXII,  infra. 

371 


§  272.] 


PREFERRED    STOCK. 


[CH\  XVI. 


his  dividend,  even  though  there  are  net  profits  which  might  be 
used  for  that  purpose.  If  the  directors  are  reasonable  in  the  exer- 
cise of  their  discretion,  and  use  the  profits  to  improve  the  road,  it 
is  held  by  the  supreme  court  of  the  United  States  that  the  discre- 
tion of  the  directors  will  not  be  interfered  with.1  This  rule  will 
work  no  injustice  where  the  corporation  is  liable  for  arrears  of 
preferred  dividends.  But  if  such  arrears  are  not  collectible  under 
the  terms  upon  which  the  stock  is  issued,  then  the  rule  laid  down 
by  the  supreme  court  will  result  in  numerous  frauds  by  the  corpo- 
ration on  the  preferred  stockholder,  since  no  dividend  would  be  given 
to  the  preferred  stockholder  unless  the  net  profits  were  sufficient 
for  a  dividend  on  the  common  stock  also.  For  instance,  where 
there  are  enough  profits  for  two  annual  dividends  on  the  preferred 
stock  and  no  more,  it  will  be  a  temptation  to  the  common  stock- 
holders to  declare  no  dividend  at  all  the  first  year,  and  to  declare 
a  dividend  on  both  the  common  and  preferred  stock  the  second 
year.2 

The  question  of  what  constitutes  "net  profits"  is  discussed  else- 
where.3 This  question  has  arisen  a  few  times  in  connection  with 
preferred  stock,  and  the  courts  are  inclined  to  scan  closely  a  refusal 
to  declare  dividends  where  there  are  net  profits  and  where  the  pre- 
ferred stock  is  non-cumulative.4     In  an  action  to  compel  the  decla- 


i  New  York,  etc..  R.  R.  Co.  v.  Nickalls, 
119  U.  S.,  296  (1886),  reversing  15  Fed. 
Rep.,  575. 

2  For  an  instance,  see  Mcintosh  v. 
Flint,  etc.,  R.  R,  34  Fed.  Rep.,  350  (1887) ; 
S.  C,  32  id.,  350.  For  a  valuable  note  by 
Judge  Seymour  on  Dividends,  see  22 
Cent.  L.  J.,  452. 

3 Seech.  XXXII. 

4  Non-cumulative  preferred  stock  is 
entitled  to  a  dividend  where  all  the  prop- 
erty is  leased  for  $36,000  a  year ;  tbere  is 
no  floating  debt :  the  property  cost  over 
$1,000,000;  the  bonded  debt  of  $150,000. 
coming  due  in  three  jrears,  may  be  ex- 
tended and  all  annual  outlays  are  but 
$9,000.  Tbe  court  will  order  the  pay- 
ment of  a  dividend.  Hazeltine  v.  Bel- 
fast, etc.,  R.  R.,  79  Me.,  411  (1887).  Di- 
rectors are  not  allowed  to  use  their 
power  illegally,  wantonly  or  oppressively 
in  refusing  to  declare  dividends;  but 
wbere  the  company  owes  $88,000  float- 
ing debt ;  $150,000  debt  due  in  five  years, 
and  $1,000,000  due  in  thirty-five  years, 

37 


at  which  time  its  profits  would  probably 
be  nothing,  the  court  will  not  order  a 
dividend  even  on  the  preferred  stock, 
although  the  company  has  $37,000  on 
band  and  an  annual  income  of  $36,000 
from  the  lessee  of  its  road.  Belfast,  etc., 
R.  R.  v.  Belfast,  77  Me.,  445  (1885).  Profits 
available  for  a  dividend  are  such  as  are 
left  after  all  debts  for  rolling  stock,  rails, 
station-houses,  etc.,  are  paid,  but  not  tbe 
money  raised  under  the  borrowing  pow- 
ers. Corry  v.  Londonderry,  etc.,  R'y,  29 
Beav.,  263  (1860).  In  the  case  Stevens 
v.  South  Devon  R'y,  9  Hare,  313  (1851), 
the  court  refused  to  enjoin  the  payment 
of  dividends  on  preferred  stock,  even 
though  the  floating  and  unsecured  debt 
had  not  been  paid  or  provided  for. 
Where,  by  a  re-organization  plan,  com- 
mon stockholders  are  allowed  to  vote, 
etc.,  only  after  certain  dividends  are  de- 
clared on  preferred  stock,  the  court 
will  determine  whether  such  dividends 
should  have  been  declared.  Mcintosh 
v.  Flint,  etc.,  R.  R.,  34  Fed.   Rep.,   350 


en.  xvi.] 


PREFERRED    STOCK. 


[§  273. 


ration  of  a  preferred  dividend  the  common  stockholders  are  proper 
but  not  necessary  parties.1 

A  stock  dividend  is  legal  in  America  but  cannot  be  forced  upon 
stockholders  in  England.2 

A  bond  dividend  is  legal,  and  even  if  it  results  in  impairing  the 
capital  stock  the  court  will  not  interfere  if  no  harm  can  come 
from  it.3 

§  273.  Arrears  of  preferred  stock,  to  what  extent  payable  subse- 
quently—  Remedies  to  enforce  payment  of  arrears. —  When  pre- 
ferred stock  is  issued  it  is  generally  specified  whether  it  is  "cumu- 
lative" or  "non-cumulative."  In  the  former  case  all  arrears  of 
dividends  must  be  paid  on  the  preferred  stock  before  any  dividend 
is  paid  on  the  common.  In  the  latter  case  the  contrary  is  the 
rule.  Suoh  are  the  rules  where  the  question  is  expressly  settled  by 
the  terms  under  which  the  stock  was  issued. 


(1887).  See,  also,  Smith  v.  Cork,  etc.,  R'y 
Co.,  Ir.  Rep.,  3  Eq.,  356  (1869). 

Hence,  in  Dent  V.  London  Tramways 
Company,  L.  R,  16  Chan.  Div.,  344  (1880), 
it  was  held  that  the  owners  of  preference 
shares,  the  dividend  on  which  was  "de- 
pendent upon  the  profits  of  the  particu- 
lar year  only,"  were,entitled  to  a  divi- 
dend out  of  the  profits  of  any  year  after 
setting  aside  a  proportionate  amount 
sufficient  for  the  maintenance  and  repair 
of  the  tramway  for  that  year  only  ;  and 
that  they  were  not  to  be  deprived  of  that 
dividend  in  order  to  make  good  the  sums 
which  in  previous  years  should  have 
been  set  aside  by  the  company  for  main- 
tenance, but  which  had  been  improperly 
applied  by  them  in  paying  dividends. 
But  preferred  shareholders  are  not  en- 
titled to  a  redemption  of  their  stock  in 
accordance  with  a  statute  if  it  would 
work  an  injustice  to  creditors  and  the 
other  stockholders  by  taking  all  the 
money  from  the  treasury  and  thereby 
crippling  or  wrecking  the  enterprise. 
Culver  v.  Reno,  etc.,  Co.,  91  Pa.  St.,  367 
(1879). 

i  Thompson  v.  Erie  R.  Co.,  45  N.  Y., 
468  (1871).  See,  also,  Chase  v.  Vander- 
bilt,  62  id.,  307  (1875),  holding  that  the 
corporate  officers  are  not  necessary  par- 
ties. 

2  See  ch.  XXXII,  infra.    In  Hamell  v. 


Chicago,  etc.,  R.  R.,  51  Barb.,  378  (1868), 
where  the  rights  of  the  preferred  and 
common  stockholders  were  clearly  de- 
fined by  the  contract,  a  stock  dividend 
of  preferred  stock  was  made  to  the  pre- 
ferred stockholders  and  of  common 
stock  to  the  common  stockholders.  In 
figuring  the  amount  of  dividend  thus 
declared  the  court  estimated  the  stock 
dividends  at  their  market  values.  In 
the  case  Wood  v.  Lary,  124  N.  Y„  83 
(1890),  the  court  sustained  the  court 
below  in  refusing  to  caucel  a  mortgage 
and  bonds,  the  bonds  having  been  issued 
as  a  bond  dividend  to  preferred  stock- 
holders.    S.  C,  47  Hun,  550. 

3  Where  the  company  pays  dividends 
on  preferred  stock  by  issuing  certificates 
entitling  the  holder  to  bonds  in  ex- 
change therefor,  the  company  cannot 
afterwards  refuse  to  deliver  the  bonds 
on  the  ground  that  the  dividend  was 
illegal  or  that  such  an  issue  of  bonds 
was  ultra  vires,  many  bonds  having  al- 
ready been  so  issued.  Chaffee  v.  Rut- 
land R  R,  55  Vt,  110  (1882).  Although 
a  dividend  may  be  illegal,  yet  "  equity 
even  would  not  interfere  with  a  divi- 
dend unless  it  appeared  that  somebody 
in  particular  was  hurt  or  liable  to  be 
injured.  It  would  not  interfere  after 
all  dauger  had  passed,  and  for  the  sake 
of  vindicating  general  principles."     Id. 


373 


§  273.] 


PREFERRED    STOCK. 


[ch.  XVI. 


If  preferred  stock  is  issued  without  any  mention  of  whether  or 
not  the  dividends  are  cumulative,  then  the  law  makes  them  cumu- 
lative. As  soon  as  there  are  net  profits  available  for  dividends, 
the  corporation  must  pay  the  preferred  dividends  and  all  arrears 
thereon  before  a  dividend  is  declared  on  the  common  stock.  This 
is  the  well-settled  rule  at  common  law  in  this  country1  and  in  Eng- 
land.2 


'Boardman  v.  Lake  Shore,  etc.,  R  R. 
Co.,  84  N.  Y.,  157.(1881);  Prouty  v. 
Michigan,  etc.,  R  R.  Co.,  1  Hun,  655 
(1873);  Elkins  v.  Camden,  etc.,  R  R.  Co., 
36  N.  J.  Eq..  233  (1882):  Taft  v.  Hartford, 
etc..  R.  R.,  8  R  I,  310  (1866);  West 
Chester,  etc.,  R  R  v.  Jackson,  77  Pa.  St, 
321  (1875):  Lockhart  v.  Van  Alstine,  31 
Mich.,  76  (1875),  per  Cooley,  J. ;  Bates  v. 
Androscoggin,  etc..  R  R,  49  Me.,  491 
(1860).  There  are  cases,  however,  to  the 
contrary,  under  peculiar  provisions  gov- 
erning the  dividends.  When  the  pre- 
ferred dividends  are  "dependent  upon 
the  profits  of  the  particular  year  only," 
they  are  not  cumulative.  Dent  v.  Lon- 
don, etc.,  Co.,  L  R.,  16  Ch.  D.,  344  (1880). 
Preferred  stock  under  a  provision  that 
"should  a  surplus  then  remain  of  net 
earnings,  after  both  of  said  dividends, 
in  any  one  year,  the  same  shall  be  di- 
vided pro  rata  on  all  the  stock,"  is  non- 
cumulative.  Hazeltine  v.  Belfast,  etc., 
R  R,  79  Me.,  411  (1887).  See,  also,  dic- 
tum in  Cotting  v.  N.  Y.,  etc.,  R  R,  54 
Conn.,  156  (1886). 

Speaking  of  preferred  stock  the  court 
slid  in  Belfast,  etc.,  R  R  v.  Belfast.  77 
Me..  445  (1885).  in  a  dictum  and  under  a 
by-law  in  that  case :  '•  It  was  not  in- 
tended in  the  present  instance  to  guar- 
antee a  dividend.  If  a  dividend  is  pre- 
vented in  any  one  year  by  a  deficit  of 
earnings,  it  cannot  be  made  up  from 
the  earnings  of  succeeding  years."  The 
preferred  stock  may  be  made  non-cu- 
mulative. Bailey  v.  Hannibal,  etc..  R.  R., 
1  Dill.,  174  (1871);  S.  C,  17  Wall.,  96. 
Where  there  is  a  statutory  provision 
that  dividends  on  the  preferred  stock 
shall  not  exceed  a  certain  rate  per  cent- 
then  there   is  no  carrying  over  of  ar- 


rears.    Elkins  v.  Camden,  etc.,  R  R  Co., 
36  N.  J.  Eq.,  233  (1882). 

-Henry  v.  Great  Northern,  etc.,  R'y 
Co.,  1  De  G.  &  J.,  606  (1857),  afTg  4  K. 
&  J.,  1 ;  Crawford  v.  Northeastern  R'y 
Co.,  3  Jur.  (N.  S.),  1093 ;  Sturge  v.  East- 
ern, etc.,  R'y  Co.,  7  De  G.,  M.  &  G.,  158 
(1855);  Stevens  y.  South,  etc.,  R'y  Co.,  9 
Hare,  313  (1851);  Matthews  v.  Great 
Northern,  etc.,  R'y  Co..  28  L  J.,  Chan., 
375(1859);  Corry  *.  Londonderry,  etc., 
R'y  Co.,  29  Beav.,  263  (1860);  Webb  v. 
Earle,  L  R,  20  Eq.,  556  (1875) ;  Coates  v. 
Nottingham,  etc.,  R'y  Co.,  30  Beav., 
86(1861);  Smith  v.  Cork,  etc.,  R'y  Co., 
Ir.  L.  R,  3  Eq.,  356  (1869) ;  S.  C,  5  id., 
65.  The  Companies  Clauses  Act  of 
1863,  26  and  27  Vict.  ch.  16,  §  14,  pro- 
vides that  preference  shares  or  stock 
shall  be  entitled  to  the  preference  divi- 
dend or  interest  assigned  thereto  out  of 
the  profits  of  each  year  in  priority  to 
the  ordinary  shares  and  stock  of  the 
company,  but  that  if  in  any  year  there 
are  -cot  profits  available  for  the  pay- 
ments of  the  full  amount  or  the  prefer- 
ential dividend  or  interest  for  that  year, 
no  part  of  the  deficiency  shall  be  made 
good  out  of  the  profits  of  any  subse- 
quent year,  or  out  of  any  other  funds 
of  the  company.  In  Henry  v.  Great 
Northern  R'y  Co.,  siqjra,  in  which  the 
matter  of  arrears  in  preferred  divi- 
dends was  elaborately  considered,  it 
was  stated  that  the  reason  why  such 
arrears  ought  to  be  held  payable  out 
of  subsequent  profits  is  that  other- 
wise there  would  be  a  temptation  to 
the  corporation  to  set  aside  profits  for 
improvements  when  the  profits  were 
too  small  for  a  dividend  on  both  the 
common  and  the  preferred  shares,  and 


374 


CH.  XVI.] 


PREFERRED    STOCK. 


[§  274. 


The  right  of  the  preferred  stockholder  to  arrears  of  dividends  is 
not  deemed  waived  by  delay,  nor  in  any  way  except  upon  clear 
proof  of  intent  to  waive.1  The  dividends  on  the  common  stock 
may  be  made  cumulative  also  before  the  preferred  stock  shares  in 
the  surplus  profits  remaining  after  preferred  dividends  are  paid.2 

§  274.  The  remedy  of  a  preferred  stockholder  when  the  com- 
pany proposes  to  pay  dividends  on  the  common  stock  before  pay- 
ing the  arrears  of  dividends  on  preferred  stock  is  in  a  court  of 
equity.3    But  an  action  at  law  will  lie  if  dividends  have  already  been 


not  to  set  aside  enough  for  improve- 
ments when  the  company  made  a  divi- 
dend for  both.  Where  each  share  in  a 
company  was  converted  into  two  half 
shares,  one  preferred,  the  other  com- 
mon or  deferred,  and  the  holders  of  the 
preferred  half  shares  had,  in  a  former 
year,  acquiesced  in  the  declaration  of  a 
dividend  on  the  deferred  half  shares, 
while  there  was  an  arrearage  of  divi- 
dends on  the  preferred  half  shares,  it 
was  held  that,  although  they  had  pre- 
cluded themselves  from  making  any 
claim  to  those  specific  arrears,  they  had 
not  waived  their  light  to  claim  subse- 
quent arrears.  Matthews  v.  Great 
Northern,  etc.,  R'y  Co.,  28  L.  J.,  Chan., 
375  (1859). 

1  Boardman  v.  Lake  Shore,  etc.  R.  R., 
supra.  In  Smith  v.  Cork,  etc.,  R'y.  Ir.  Rep., 
3  Eq.,  35G  (1869),  the  court  held  under 
the  facts  of  that  case  that  the  preferred 
stockholders  had  not  waived  their  right 
to  arrears,  although  they  had  forborne 
and  had  taken  part  in  inducing  new 
capital  to  come  in. 

2  When  the  preferred  stock  is  entitled 
to  participate  in  the  surplus  after  the 
dividends  are  paid  on  the  preferred,  and 
"a  dividend  of  the  same  amount  upon 
the  whole  amount  of  paid-up  capital" 
has  been  paid,  arrears  of  dividends  on 
the  common  stock  as  well  as  on  the  pre- 
ferred must  be  paid  before  there  is  any 
surplus.  Allen  v.  Londonderry,  etc.,  R'y 
Co..  25  Week.  Rep..  524  (1877). 

3  A  suit  in  equity  to  restrain  the  cor- 
poration from  declaring  dividends  on 
the  common  stock  and  to  compel  an  ac- 
counting and  the  payment  of  dividends 


on  the  preferred  stock  is  the  proper 
remedy.  Boardman  v.  Lake  Shore,  etc.. 
R.  R,  84  N.  Y..  157  (1881);  Williston  v. 
Michigan,  etc.,  R.  R.  Co.,  95  Mass.,  400 
(1866).  In  this  case  the  decision  was 
that,  when  a  preferred  stockholder  is 
entitled  to  share  pro  rata  with  holders 
of  common  stock  in  dividends  over  and 
above  the  preference,  his  remedy  is  not 
by  an  action  at  law  against  the  corpora- 
tion, but  by  suit  in  equity ;  and  that 
there  is  no  remedy  against  a  foreign 
corporation  in  such  case.  In  an  action 
by  a  preferred  stockholder  in  behalf  of 
himself  and  others  to  enjoin  the  pay- 
ment of  dividends  to  common  stock- 
holders before  the  arrears  of  preferred 
dividends  are  paid,  he  need  not  join 
all  the  common  stockholders  as  par- 
ties defendant.  Smith  v.  Cork,  etc.,  R'y, 
Ir.  Rep.,  3  Eq.,  356  (1869);  Prouty  u. 
Michigan,  etc.,  R.  R.  Co.,  1  Hun,  655 
(1874),  where  an  injunction  was  granted 
to  restrain  the  declaring  of  dividends  or 
making  other  disposition  of  the  funds  of 
the  corporation  until  arrears  on  pre- 
ferred stock  should  be  paid  ;  Thompson 
v.  Erie,  etc.,  R.  R.  Co.,  45  N.  Y.,  468,  in- 
volving an  action  to  "enforce  the  dec- 
laration and  payment  of  a  dividend;" 
Barnard  V.  Vermont,  etc.,  89  Mass.,  572 
(1863).  holding  that  where  certificates 
for  an  intended  dividend  had  been  is- 
sued payable  at  a  future  time  when  the 
company  should  be  able  to  pay  them, 
the  final  decision  as  to  when  the  corn- 
pan}'  is  able  to  pay  does  not  rest  with 
the  directors  but  with  the  court  Where 
the  common  stockholders  in  a  re-organ- 
ized company  claim  that  the  preferred 
75 


§§  275,  276.1  PREFERRED   STOCK.  [CH.  XVT. 

declared  and  paid  to  the  common  stockholders  in  violation  of  the 
rights  of  the  preferred  stockholders.1 

When  the  arrears  and  dividends  of  preferred  stock  are  recover- 
able, the  interest  on  such  arrears  mav  be  recovered  from  the  time 
when  moneys  sufficient  to  pay  the  arrears  were  unlawfully  used  to 
pay  dividends  on  the  common  stock  instead  of  being  used  to  pay 
the  arrears  on  the  preferred  stock.2 

§  275.  Bights  of  the  assignee  or  transferee  of  preferred  stock  in 
arrears  of  dividends. —  The  transferee  or  assignee  of  preferred 
stock  stands,  in  respect  to  arrears  of  dividends,  in  the  shoes  of  his 
assignor  or  transferrer.  The  undeclared  arrears  of  dividends  pass 
to  him  in  the  transfer  of  the  stock,  unless  by  the  terms  of  the  trans- 
fer the  arrears  are  expressly  separated  from  the  stock  itself  and 
reserved  to  the  transferrer.3  An  assignment  of  preferred  stock 
carries  with  it  all  arrears  of  dividends,  and  a  subsequent  assign- 
ment of  arrears  by  the  transferrer  conveys  nothing.4 

§276.  u Special  stock"  in  Massachusetts. —  In  Massachusetts  in- 
corporated companies  are  permitted  by  statute5  to  issue  a  pecul- 
iar kind  of  stock,  known  as  "special  stock."  It  is  something 
essentially  different  from  preferred  stock."  Its  essential  character- 
istics are  that  it  is  limited  in  amount  to  two-fifths  of  the  actual 
capital ;  it  is  subject  to  redemption  by  the  corporation  at  par  after 
a  fixed  time,  to  be  expressed  in  the  certificate;  the  corporation  is 

stockholders  are  defrauding  them,  a  C.  L.,  112  (1866).  holding  that  an  action 
preliminary  injunction  will  not  be  at  law  will  lie  against  a  railway  corn- 
ordered  unless  imminent  danger  is  pany  for  not  giving  to  the  plaintiff  pre- 
ahown.  Mcintosh  v.  Fliut,  etc.,  R  R  ferred  stockholder  the  same  dividend 
Co.,  32  Fed.  Rep.,  350  (1887).  The  plaint-  that  it  has  given  to  others, 
iff  by  offering  in  evidence  his  certificate  2Boardman  v.  Lake  Shore,  etc.,  R  R. 
of  stock  and  showing  that  no  dividends  Co.,  84  N.  Y,  157  (1881) ;  Prouty  v.  Mich, 
have  been  paid,  makes  out  a  prima  S.,  etc.,  R.  R.,  1  Hun,  655  (1874).  See 
facie  case  entitling  him  to  dividends  Adams  v.  Fort,  etc.,  Bank,  36  N.  Y.,  255 
and  arrears.  Boardman  v.  Lake  Shore,  (1867).  Contra,  Corry  v.  Londonderry, 
etc.,  E.  R,  84  N.  Y,  157  (1881).  etc.,  R'y  Co.,  29  Beav.,  263  (1860).     Of. 

1  If  dividends  are  declared  and  paid  ch.  XXXII,  infra. 

on  the  common  stock,  before  paying  the  3Jermain   v.  Lake  Shore,   etc.,  R  R 

arrears  of  dividends  on   the  preferred  Co.,  91  N.  Y.,  483  (1883) ;  Boardman  v. 

stock,  the  holders  of  the  latter  may  col-  Same,  84  id.,  157  (1881);  Hyatt  v.  Allen, 

lect  such  arrears  by  au  action  at  law  in  56  id.,  553  (1874);  Manning  v.  Quicksil- 

assumpsit.    West  Chester,  etc.,  R  R  v.  ver,  etc..  Co.,  24  Hun,  361  (1881). 

Jackson,  77  Pa.  St.,  321  (1875).     In  the  4  Manning  v.  Quicksilver  Mining  Co.. 

case  Bates  v.  Androscoggin,  etc.,  R.  R.,  24  Hun,  361  (1881). 

49  Me..  491  (1860).  an  action  of  debt  for  •"'  Stats.    1855,   ch.   290 ;    1870,  ch.  224. 

past  due  dividends  was  sustained,  al-  §§   25.  39,  cl.    4;    Pub.  Stats.,  ch.    106, 

though  such  dividends   had  not  been  §§  42,  61.  cl.  3. 

declared,    they    having    been     earned.  6  American   Tube  Works   v.   Boston, 

Coey  v.  Belfast,  etc.,  R'y  Co.,  Ir.  Rep.,  2  etc.,  Co.,  139  Mass.,  R  (1885). 

R78 


CH.  XVI. J 


PREFKRRED    STOCK. 


[§  277. 


bound  to  pay  a  fixed  half-yearly  sum,  or  dividend,  upon  it  as  a 
debt;  the  holders  of  it  are  in  no  event  liable  for  the  debts  of  the 
corporation  beyond  their  stock,  and  the  issue  of  this  special  stock 
makes  all  the  general  stockholders  liable  for  all  debts  and  contracts 
of  the  corporation  until  the  special  stock  is  fully  redeemed1  Spe- 
cial stock  can  be  issued  only  by  a  vote  of  three-fourths  of  the  gen- 
eral stockholders  of  the  compan}7  at  a  meeting  duly  called  for  that 
purpose.2  The  guaranty  of  dividends  of  special  stock  in  Massa- 
chusetts is  an  absolute  one,  and  not  in  any  degree  conditional  upon 
the  earning  of  sufficient  profits  by  the  corporation.3 

§277.  Interest-bearing  stoclcs. —  Occasionally,  instead  of  issuing 
preferred  stock,  a  corporation  issues  ordinary  common  stock,  to- 
gether with  a  promise  that  the  corporation  will  pay  interest  thereon. 
Such  a  promise  is  generally  lawful,  and  may  be  enforced  as  a  con- 
tract in  the  nature  of  an  agreement  to  pay  a  dividend.4  It  is  a 
lawful  contract,  however,  only  when  it  is  to  be  interpreted  as  re- 
quiring payment  from  profits  alone.5  An}7  contract  on  the  part  of 
a  corporation  to  pay  interest  or  dividends  to  its  shareholders,  with- 


1  The  statutes  cited  supra;  American 
Tube  Works  v.  Boston,  etc.,  Co.,  139 
Mass..  5  (1885). 

2  Stats.  1870,  ch.  224,  §  25.  And  the 
corporation  must  have  a  clerk,  who  is 
sworn,  and  who  acts  as  recorder  at  such 
meeting.  Stats.  1870,  ch.  224,  §§  15,  18; 
Pub.  Stats.,  ch.  106,  §§  23,  26.  See.  also, 
Reed  v.  Boston  Machine  Co.,  141  Mass., 
454  (1886).  This  special  stock  is  declared 
to  be  "  a  peculiar  kind  of  stock,  distinctly 
provided  for  by  statute ;  "  and  it  is  im- 
portant that  the  marked  distinction  be- 
tween preferred  stock,  as  usually  under- 
stood, and  special  stock,  as  authorized 
by  the  statutes  cited  in  the  notes,  be 
kept  plainly  in  view.  American  Tube 
Works  v.  Boston,  etc.,  Co.,  139  Mass.,  5 
(18S5). 

It  was  held,  in  accordance  with  this 
view,  in  the  case  last  cited,  that  a  vote  of 
a  corporation  to  issue  special  stock,  at  a 
meeting  called  to  consider  whether  the 
corporation  will  issue  preferred  stock, 
is  invalid ;  that  a  vote  to  issue  special 
stock  is  invalid  if  the  record  of  the 
meeting  fails  to  show  that  three-fourths 
of  the  general  shareholders  voted  for 
such  issue ;  that  the  court  will  not  pre- 
sume, because  the  record   showed  that 


more  than  three-fourths  of  the  share- 
holders were  present  at  the  meeting, 
that  therefore  three-fourths  or  more 
voted  for  the  issue  of  special  stock ;  and 
that  a  holder  of  special  stock  which  is 
illegally  issued  cannot,  by  estoppel  or 
otherwise,  become  a  member  of  the 
corporation  in  respect  of  such  shares. 

s  Williams  v.  Parker,  136  Mass.,  204 
(1884).  See,  also,  Allen  v.  Herrick,  81 
id.,  274  (1860). 

4  Barnard  v.  Vermont,  etc.,  R  R  Co., 
89  Mass.,  512  (1863). 

5  Richardson  v.  Vermont,  etc.,  R  R 
Co.,  44  Vt,  613  (1872);  Miller  v.  Pitts- 
burgh, etc.,  R  R  Co.,  40  Pa.  St.,  237 
(1861);  Cunningham  v.  Same,  78  Mass., 
411  (1859);  City  of  Ohio  v.  Cleveland, 
etc.,  R  R  Co..  6  Ohio  St.,  489  (1856) ; 
Wright  v.  Vermont,  etc.,  R  R.  Co.,  66 
Mass.,  68  (1853) ;  Waterman  v.  Troy,  etc., 
R  R  Co.,  74  id.,  433  (1837);  Barnard  v. 
Vermont,  etc.,  R  R  Co.,  89  id.,  512 
(1863).  In  the  case  of  Ohio  College, 
etc.,  v.  Rosenthal,  12  N.  E.  Rep.,  665 
(Ohio,  1887),  where  certificates  of  stock 
bearing  interest  were  issued  by  a  corpo- 
ration which  merely  owned  real  estate, 
which  was  not  organized  for  profit, 
never  made  any  profit,  never  expected 


377 


§  278.] 


PREFERRED    STOCK. 


[~CH.  XVI. 


out  reference  to  the  ability  of  the  company  to  pay  them  out  of  its 
earnings,  is  wholly  illegal  and  void.'  Moreover,  the  directors  or 
corporate  officers  paying  interest  on  stock  out  of  the  capital  stock 
are  jointly  and  severally  liable  to  refund  the  amounts  so  paid  out.2 
A  railway  company  may  lawfully  receive  subscriptions  to  its  cap- 
ital stock  upon  the  condition  to  pay  interest  thereon  as  soon  as  the 
amount  of  the  subscription  shall  have  been  paid  in,  and  until  the 
completion  of  the  road,  or  of  some  part  thereof,  or  until  the  road 
shall  have  been  put  in  operation.3  It  has  been  held  that  stipulated 
interest  on  stock  cannot  become  a  debt  payable  absolutely.4  The 
right  of  a  subscriber  drawing  interest  on  his  stock  to  participate 
in  elections  and  general  corporate  meetings,  and  to  exercise  gener- 
ally the  rights  of  a  shareholder,  is  the  same  as  that  of  other  stock- 
holders.5 

§  278.  Sights  of  preferred 'shareholders  on  dissolution  and  on  a 
reduction  of  the  capital  stoclc. —  Upon  the  dissolution  of  a  corpora- 
tion, and  the  distribution  of  its  assets  among  the  shareholders  after 
the  pa}Tment  of  the  corporate  indebtedness,  it  is  the  settled  rule  of 
law  that,  in  the  absence  of  any  provision  in  the  statutes,  by-laws 


to,  and  had  existed  forty  years,  a  suit 
by    a    stockholder    to    collect    interest 
failed. 
1  Painesville,  etc.,  R.  R  Co.  v.  King, 

17  Ohio  St.,  534  (1867);  Pittsburgh,  etc., 
R  R.  Co.  v.  County  of  Allegheny,  79  Pa. 
St.,  210  (1875);  id.,  63  Pa.  St.,  126  (1869); 
Lockhart  v.  Van  Alstyne,  31  Mich.,  76 
(1875);  Troy,  etc.,  R.  R.   Co.  v.  Tibbits, 

18  Barb.,  297  (1854);  Salisbury  v.  Metro- 
politan, etc.,  R'y  Co.,  38  L.  J.  (N.  S.),  Ch., 
249  (1869);  In  re  National,  etc.,  Co., 
L.  R.,  10  Ch.  Div.,  118  (1878).  Cf.  Bard- 
well  v.  Sheffield,  etc.,  Co.,  L.  R,  14  Eq. 
Cas.,  517  (1872).  In  the  case  City  of 
Ohio  v.  Cleveland,  etc.,  R  R.,  6  Ohio  St., 
489  (1856),  interest  payable  by  stock 
dividends  was  allowed  by  statute.  A 
subscriber  to  stock  which  by  its  terms 
is  to  draw  interest  cannot  defeat  the 
subscription  on  the  ground  that  the  pro- 
vision as  to  interest  is  illegal.  Evans- 
ville,  etc.,  R  R.  v.  Evansville,  15  Ind., 
395  (1860).  In  the  case  McLaughlin  v. 
Detroit,  etc.,  R  R,  8  Mich.,  100  (1860),  a 
railroad  company  issued  stock  bearing 
interest.  Tiie  court  sustained  it.  The 
stock  called  for  interest  instead  of  divi- 
dends.     Bonds   were    tendered   to  the 

3" 


stockholder  in  payment  of  such  "  in- 
terest." He  declined  the  tender  and 
sued  for  the  interest  money.  The  court 
sustained  his  suit.  No  question  was 
raised  as  to  paying  such  "interest" 
irrespective  of  profits. 

2  Re  National,  etc.,  Co.,  10  L.  R.,  Chan. 
Div.,  118(1878). 

8  Milwaukee,  etc.,  R  R  Co.  v.  Field, 
12  Wis ,  340  (1860) ;  Racine  County  Bank 
v.  Ayers,  12  id.,  512  (1860);  Miller  v. 
Pittsburgh,  etc.,  R  R  Co.,  40  Pa.  St., 
237  (1861) ;  Waterman  v.  Troy,  etc.,  R  R 
Co.,  74  Mass.,  433  (1857).  The  only  effect 
of  an  agreement  by  the  corporation  to 
pay  such  interest  is  to  enable  those 
stockholders  with  whom  the  agreement 
is  made  to  claim  a  dividend  and  arrears 
of  dividends  before  other  stockholders 
receive  anything.  This  is  nothing  more 
nor  less  than  a  preferred  dividend. 

4  Barnard  v.  Vermont,  etc.,  R  R  Co., 
89  Mo.,  512  (1863).  Nevertheless,  the 
relation  of  debtor  and  creditor  is  cre- 
ated to  the  extent  of  the  interest  stipu- 
lated for.  McLaughlin  v.  Detroit,  etc., 
R.  R.  Co.,  8  Mich.,  100  (1864). 

5  McLaughlin  v.  Detroit,  etc.,  R  R  Co., 
supra. 


CH.  XVI.] 


PKEFERRED    STOCK. 


[§  278. 


or  certificate  to  the  contrary,  preferred  shareholders  have  no  pri- 
oritv  over  common  stockholders.  Their  stock  was  preferred  in 
respect  of  dividends,  and  not  in  reference  to  the  capital  stock.  The 
assets  of  the  corporation  are  to  be  distributed  as  though  no  pre- 
ferred shares  had  been  issued.  The  preferred  shareholder  in  the 
distribution  becomes  a  common  shareholder.1  Where,  however,  a 
preference  as  to  capital  has  been  expressly  contracted  for,2  or  is 
given  by  a  statute,3  the  rule  is,  of  course,  otherwise. 

If  the  capital  stock  is  reduced  the  preferred  stock  is  reduced 
proportionately  with  the  common  unless  the  preferred  stock  is  pre- 
ferred as  to  assets  as  well  as  dividends.4 


1  The  House  of  Lords  has  held  that 
upon  the  dissolution  of  a  corporation 
having  preferred  stock  and  common 
stock  the  surplus  assets,  after  repayment 
of  the  paid-up  capital,  the  common  stock 
not  having  been  paid  up,  is  divisible 
among  all  the  stockholders,  common 
and  preferred,  in  proportion  to  their 
holdings.  Birch  v.  Cropper,  61  L.  T. 
Rep.,  621  (1889),  reversing  the  court  be- 
low. See,  also,  In  re  London  India 
Rubber  Co.,  L.  R.,  5  Eq.,  519  (1864) ;  Re 
Bridgewater  Nav.  Co.,  58  L.  T.  Rep.,  476 
(1888);  id.,  866,  a  case  where  there  was 
a  large  surplus ;  McGregor  v.  Home  Ins. 
Co.,  33  N.  J.  Eq.,  181  (1880),  a  dictum, 
the  court  holding,  however,  that  under 
the  statutes  of  the  state  the  preferred 
stockholders  had  a  preference  as  to  as- 
sets also,  the  statute  providing  for  a 
division  of  the  surplus  after  payment 
to  preferred  stockholders.  Stock  with 
guarantied  dividends  is  stated,  in  Gor- 
don's Ex'rs  v.  Richmond,  etc.,  R.  R,  78 
Va.,  501  (1884),  to  give  a  preference  as 
to  dividends,  but  not  of  the  stock  on  a 
winding  up.  In  the  case  of  Griffith  v. 
Paget.  L.  R.,  6  Ch.  D.,  511  (1877);  S.  C, 
25  W.  R,  523,  it  was  held  that  where 
the  company  is  dissolved  by  a  consol- 
idation with  another  company  under  a 
statute,  the  stockholders  of  the  old  being 
entitled  to  exchange  their  stock  for 
stock  in  the  new,  the  preferred  stock  is 
not  entitled  to  preferred  stock  in  the 
new.  On  a  winding  up,  if  it  turns  out 
that  the  profits  had  been  systematically 


overestimated  for  a  number  of  years, 
thereby  depriving  common  stockholders 
of  the  dividends,  an  account  would  be 
taken  and  such  dividends  would  be  then 
paid.  Be  Bridgewater,  etc.,  Co.,  64  L.  T. 
Rep.,  576  (1891). 

2  Re  Bangor,  etc.,  Slate  Co.,  L.  R.,  20 
Eq.,  59  (1875). 

3  McGregor  v.  Home  Ins.  Co.,  33  N.  J. 
Eq.,  181  (1880). 

4  When  the  capital  stock  is  reduced  by 
decreasing  tlie  par  value  of  the  stock, 
the  preferred  stock  may  be  reduced 
equally  with  the  rest.  Re  Barrow,  etc., 
Co.,  59  L.  T.  Rep.,  500  (1888).  Where  in 
consequence  of  losses  the  capital  stock 
is  reduced,  as  allowed  by  the  charter,  by 
reducing  the  par  value  of  the  stock  one- 
half,  the  preferred  stock  as  well  as  the 
common  is  reduced  one-half.  Bauna- 
tyne  v.  Direct,  etc.,  Co.,  55  L.  T.  Rep.,  716 
(1886).  But  not  where  the  preferred 
stock  is  preferred  as  to  assets  as  well  as 
dividends,  unless  all  the  preferred  stock- 
holders assent  thereto.  Re  Quebrada 
R'y.  60  id.,  482  (1889).  Where  a  company 
has  not  issued  or  has  acquired  some  of 
its  stock  it  may  reduce  its  capital  stock 
by  canceling  the  part  owned  by  it, 
although  it  is  all  preferred  or  all  com- 
mon or  part  of  both.  Re  Gatliug  Gun, 
Lim.,  62  L.  T.  Rep.,  312  (1890).  Where 
there  is  both  common  and  preferred 
stock  it  is  legal  for  the  company  to  re- 
duce the  common  stock  without  reduc- 
ing the  preferred.  Re  Agricultural,  etc, 
Co.,  63  L  T.  Rep.,  748  (1890). 


379 


CHAPTER  XVII. 


INCREASE   AND   REDUCTION   OF   THE  CAPITAL    STOCK  AND  OVER- 
ISSUED STOCK 


§  279.  Introductory. 

A.   LEGAL  INCREASE    OR    REDUCTION    OF 
CAPITAL  STOCK. 

§  280.  Power  of  the  legislature  to  au- 
thorize an  increase  or  reduc- 
tion. 

281.  Power  of  the  corporation  to  in- 

crease or  reduce  the  capital 
stock. 

282.  Effect  of  purchase  by  a  corpora- 

tion of  shares  of  its  own  stock. 

283.  The  issue  of  bonds  convertible 

into  stock. 

284.  Power  of  a  court  to  direct  an  in- 

crease or  reduction. 

285.  Shareholders,  not  directors,  should 

authorize  the  increase. 

286.  Prior  right  of  the  old  stockhold- 

ers to  buy  the  new  stock. 

287.  Issue  of  an  increase  of  stock  by  a 

stock  dividend. 

288.  Liability  of  the  shareholder  upon 

an  increase  of  the  capital 
stock  —  Irregularities  in  in- 
creasing the  stock. 

289.  Rights  and  liabilities  of  the  share- 

holder upon  a  reduction  of  the 
capital  stock. 


§  290.  Changes  in  the  number  or  par 
value  of  the  shares. 

B.     ILLEGAL  INCREASE  OF  STOCK.   BEING 
OVERISSUED  STOCK. 

§  291.  Unauthorized  increase  of  stock 
may  amount  to  overissued 
stock. 

292.  Overissued    stock    is    absolutely 

void. 

293.  Liability  of  the  corporation  on 

overissued  stock. 

294.  Defenses  of  the  corporation   to 

such  actions. 

295.  Personal  liability  of  the  officers  of 

the  corporation  on  overissued 
stock. 

296.  Liability*  of  the  vendor  of  over- 

issued stock. 

297.  Equity  will  enjoin  voting,  trans- 

ferring and  dividends  on  such 
stock,  and  will  adjust  the  rights 
of  all  parties. 

298.  Subscriber's    right    to    defeat   a 

subscription  to  overissued  stock 
and  to  recover  back  money 
paid  thereon, 


§  279.  Introductory. —  The  capital  stock  of  all  incorporated  com- 
panies is  generally  fixed  by  the  charters  which  give  them  an  exist- 
ence. Frequently,  however,  in  the  progress  of  the  corporate  enter- 
prise, it  happens  that  the  capital  stock  is  found  to  be  too  small  or 
too  large  for  the  demands  of  the  business,  and  there  is  a  desire  to 
change  it.  This  change  can  be  made  lawfully  only  under  certain 
conditions  and  limitations.     These  are  the  subject  of  this  chapter. 


A.    LEGAL    INCREASE    OR    REDUCTION    OF   CAPITAL    STOCK. 

§  280.  Power  of  the  legislature  to  authorize  an  increase  or  reduc- 
tion.—  It  is  clearly  constitutional  for  the  legislature,  upon  granting 
a  charter,  to  fix  the  capital  stock  and  to  authorize  the  corporation 
to  increase  or  decrease  that  capital  stock.  But  where  the  legisla- 
ture did  not  authorize  the  corporation  to  vary  its  capital  stock,  it 

3S0 


CH.  XVII.]       INCREASE,   REDUCTION    AND    OVERISSUE    OF    STOCK.  [§  28L 

is  a  serious  question  whether,  as  against  a  dissenting  stockholder, 
the  capital  stock  may  be  subsequently  changed,  even  under  the  au- 
thority of  a  legislative  enactment.  The  better  and  prevailing  opin- 
ion is  that  it  may  be;  that  the  statute  authorizing  the  change  is 
constitutional,  and  that  the  increase  or  reduction  is  valid.1 

A  different  conclusion  may  be  reached,  however,  as  regards  the 
rights  of  creditors  of  the  corporation.  It  is  clear  that  the  legisla- 
ture cannot  constitutionally  authorize  a  reduction  of  the  capital 
stock  in  prejudice  of  their  rights  as  to  an  existing  corporate  in- 
debtedness.2 

§  281.  Poiver  of  the  corporation  to  increase  or  reduce  the  capital 
stoclc—  In  the  absence  of  express  authority  from  the  state,  a  cor- 
poration has  no  power  whatsoever  to  increase  or  reduce  the  amount 
of  its  stock,  and  any  attempt  upon  the  part  of  the  corporation, 
either  by  the  corporate  officers  or  by  the  stockholders,  to  do  so  is 
wholly  illegal  and  void.3  Accordingly  it  is  not  competent  for  a 
corporation,  having  a  fixed  capital  stock  and  being  without  legisla- 
tive authority  to  change  it,  to  reduce  that  capital  to  the  amount 
actually  paid  in.4 

"Where  the  attempted  increase  or  reduction  of  the  stock  is  not 
authorized  by  the  charter,  not  even  the  unanimous  assent  and 
agreement  of  all  the  parties  concerned  will  legalize  it.     It  is  void.5 

A  different  rule  prevails,  however,  where  the  increase  of  capital 
stock  is  authorized  by  charter  or  statute,  but  is  informally  made. 
In  such  a  case  the  increase  is  valid  as  against  all  parties  excepting 
the  state  which  created  the  corporation.6 

An  authority  to  reduce  the  number  of  shares  cannot  be  inferred 
from  the  authority  to  increase,  and  a  reduction  with  no  other  war- 
rant of  authority  than  a  right  to  increase  will  be  held  void.7 

If  the  charter  of  the  corporation  provides  that  the  capital  stock 
shall  not  be  less  than  a  specified  sum,  nor  greater  than  another 
specified  sum,  the  corporation  may  commence  business  with  less 

1  See  ch.  XXVIII  on  this  subject.  poration    r.   Ropes,   6  Pick.,  23  (1827). 

2 Id.  "If,"  says  Parker,  C.  J.,  in  the  case  last 

3Scovill  v.  Thayer,  105  U.  S.,  143,  148  cited,  "a  corporation  is  created  with  a 

(1881):  Sutherland  v.  Olcott,  95  N.  Y.,  93,  fund  limited  by  the  act,  it  cannot  en- 

100  (1884);  New  York,  etc.,  R.  R.  Co.  v.  large  or  diminish  that  fund  but  by  a 

Schuyler,  34  id.,  30  (18G5) ;  Mechanics'  license  from  the  legislature." 

Bank  v.  New  York,  etc.,  R  R  Co.,  13  4  Droitwich  Patent  Salt  Co.  v.  Curzon, 

id.,  599  (1856);  Grangers'  Life,  etc.,  In-  L.  R,  3  Ex.,  35,  42  (1867). 

surance  Co.   v.   Kamper,   73    Ala,,  325  *  See  §  292,  infra. 

(1882);  Moses    v.    Ocoee    Bank,    1    Lea  « See  §  288,  infra. 

(Tenn.),  398   (1878);  Ferris  v.  Ludlow,  7  *  Sutherland  v.   Olcott,   95  N.  Y,   93 

Ind.  517  (1856);  Lathrop  v.  Kneeland,  46  (1884);  Seignouret  v.  Home  Ins.  Co.,  24 

Barb.,  432  (1866);  Salem  Mill-Dam  Cor-  Feci  Rep.,  332  (1885). 

381 


§  282.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.       [CH.  XVII. 

than  the  latter  sura,  and  afterwards  increase  the  capital  until  the 
limit  is  reached.1 

An  injunction  is  the  proper  remedy  to  prevent  an  illegal  increase 
or  reduction  of  the  capital  stock  of  a  corporation.  But  an  injunc- 
tion against  the  issue  of  new  stock  by  a  foreign  corporation  will  be 
dissolved  where  the  courts  of  the  state  where  the  corporation  was 
created  decide  such  issue  of  stock  to  be  legal.2 

§  2S2.  Effect  of  purchase  oy  a  corporation  of  shares  of  its  own 
stock. —  If  a  corporation  has  power  to -reduce  its  capital  stock  it  has 
been  held  that  it  may  do  so  by  purchasing  and  retiring  a  portion 
of  its  shares.3  Whether  such  a  purchase  by  a  corporation  will  op- 
erate to  diminish  the  capital  stock  is  a  question  of  intention.  If  a 
reduction  is  authorized  by  charter  or  by  statute,  and  the  formali- 
ties of  making  the  reduction  have  been  complied  with,  and  the 
proper  corporate  authorities  purchase  for  the  corporation  shares 
of  its  own  stock  and  consider  the  capital  stock  thereby  reduced, 
the  law  holds  that  a  reduction  of  the  capital  stock  is  thereby  made. 
But  if  any  of  these  elements  are  wanting,  then  no  reduction  is  ef- 
fected, and  the  corporation  may  at  any  time  sell  and  re-issue  the 
stock.  Hence  a  mere  transfer  of  shares  to  the  corporation,  whether 
the  corporation  assumes  to  buy  tin1  stock  or  the  stockholders 
simply  to  surrender  it,  will  in  no  case  constitute  a  reduction  when 
the  corporation  lacks  authority  from  the  legislature  to  reduce  its 
capital.  Even  if  the  shareholder  is  held  to  be  released  by  such  a 
transfer,  still  the  stock  survives  and  subsists.  The  corporation  is 
merely  the  holder  of  it,  and  may  sell  and  re-issue  it  at  any  time.4 

i  Gray  v.  Portland  Bank,  3  Mass.,  364  3  State  v.  Smith.  48  Vt,  266  (1876). 
(1807);  Somerset,  etc.,  R  R.  Co.  v.  dictum.  So,  also,  City  Bank  of  Colum- 
Cushing,  45  Me.,  524  (1858).  In  the  bus  v.  Bruce.  17  N.  Y.,  507  (1858).  Con- 
case  last  cited  it  is  held  that  where  the  tret,  Currier  v.  Lebanon  Slate  Co.,  56  N. 
number  of  shares  is  not  fixed  by  charter  H.,  262  (1875).  Where  a  company  has 
the  directors  or  shareholders  must  fix  it  not  issued  or  has  acquired  some  of  its 
before  an  assessment  can  be  levied,  and  stock  it  may  reduce  its  capital  stock  by 
that  then,  if  the  number  fixed  is  greater  canceling  the  part  owned  by  it,  although 
than  the  number  taken,  it  may  be  re-  it  is  all  preferred  or  all  common  or  part 
duced  subsequently.  of  both.     Re  Catling  Gun,  Lim.,  62  L.  T. 

so^Brien  v.  Chicago,  Rock  Island  &  Rep.,  312  (1890). 
Pacific  K.  R.  Co.,  53  Barb,  568  (1868).  *  The  purchase  by  a  corporation  of 
An  increase  of  the  capital  stock  without  its  own  stock  does  not  necessarily  de- 
warrant  of  authority  is  denominated  an  crease  the  capital  stock.  "  It  might  or 
overissue  of  stock  —  a  subject  fully  con-  might  not  have  that  effect  at  the  option 
sidered  in  the  succeeding  sections  of  this  of  the  company,  and  would  require,  I 
chapter,  q.  v.  The  issue  of  new  stock  by  think,  some  manifestation  of  such  an 
the  corporation  cannot  be  enjoined  intent  to  produce  that  result."  Such 
where  neither  the  corporation  nor  any  stock  may  be  re-issued  at  any  time, 
of  its  directors  are  parties  to  the  action.  City  Bank  of  Columbus  v.  Bruce,  17 
White  v.  Wood,  129  N.  Y.,  527  (1892).  N.  Y.,  507  (1858).    See,  also,  §  814,  infra, 

382 


0B\  XVII.]       INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.  [§  283. 


§  283.  The  issue  of  bonds  convertible  into  stock. —  Where  the  char- 
ter of  a  raihva}'  corporation  authorizes  the  issue  of  bonds,  convert- 
ible at  the  option  of  the  holder  into  stock,  such  an  issue  may  be 
made,  even  though,  if  the  bonds  were  converted  into  stock,  the 
capital  stock  would  thereby  be  increased  beyond  the  amount  fixed 
by  the  charter.  The  statute  or  charter  authorizing  such  an  issue 
of  bonds  is  held  to  thereby  authorize,  by  necessary  implication,  the 
right  to  increase  the  capital  stock  to  the  extent  required  in  the  ful- 
fillment of  the  contract  to  allow  the  bonds  to  be  converted  into 
stock.1 

The  issue  of  a  bond  convertible  into  stock  has  the  same  effect  as 
issuing  stock,  and  the  sale  of  such  a  bond  at  a  discount  would  prob- 
ably be  governed  by  the  same  rules  that  pertain  to  stock.2  The 
holder  of  the  bonds  may  demand  stock  therefor  at  any  time;  and 
even  though  the  demand  is  made  just  before  a  dividend  is  declared 
he  is  entitled  to  the  stock  and  dividend.3 


and  Hartridge  v.  Rockwell,  R.  M.  Charl- 
ton (Ga.),  SCO  (1828).  In  an  early  case 
a  transfer  to  the  corporation  seems  to 
have  been  regarded  as  a  reduction  of 
the  capital  stock  pro  tanto.  Percy  v. 
Millaudon.  3  La..  568,  587  (1832).  It  is 
important  to  note  in  this  connection 
that  the  purchase  of  its  own  stock  by  a 
corporation  is  an  act  not  permitted  at 
all  in  England,  and  not  permitted  in  this 
country  when  corporate  creditors'  rights 
would  be  prejudiced  thereb3r.  See 
§S  309-312.  infra.  It  has  been  held  in  a 
recent  case  (New  Eng.,  etc..  Life  Ins.  Co. 
v.  Phillips,  6  N.  E.  Rep.,  534,  Mass.,  1886) 
that  a  purchase  by  a  corporation  of  cer- 
tificates of  indebtedness  effects  a  cancel- 
lation, even  though  the  certificates  have 
a  voting  power. 

i  Belmont  v.  Erie  R'y  Co.,  52  Barb., 
637,  669  (1869) ;  Ramsey  v.  Erie  R'y  Co., 
38  How.  Pr.,  193,  216  (1869).  When 
bonds  are  convertible  by  their  terms 
into  stock,  but  the  company  has  no 
stock,  specific  performance  will  not  be 
decreed,  but  damages  given.  Chaffee 
v.  Middlesex  R.  R.,  16  N.  E.  Rep.,  34 
(Mass.,  1888).  Where  the  stock  of  a  land 
corporation  is  convertible  into  land,  a 
stockholder  may  enforce  the  change  by 
bill  in  equity.  Franco,  etc.,  Co.  v.  Bous- 
selet,   7  S.   W.   Rep.,  761  (Texas,  1888). 


The  bonds  may  provide  that  the  holder 
may  take  certain  lots  of  land  in  satisfac- 
tion thereof.  Chicago,  etc.,  Land  Co.  r. 
Peck,  112  111..  408  (1885). 

2  See  ch.  Ill  concerning  the  issue  of 
stock.  Where,  however,  a  corporation 
has  power  to  increase  its  capital  stock,  it 
may  issue  bonds  at  fifty  per  cent,  of 
their  par  value,  convertible  into  stock 
upon  payment  of  the  other  fifty  per 
cent.  Van  Allen  v.  111.  Central  R.  R. 
Co.,  7  Bosw.  (N.  Y.),  515  (1861). 

3  Jones  v.  Terre  Haute,  etc.,  R.  R.  Co., 
57  N.  Y.,  196  (1874).  Where  bonds  are 
convertible  into  stock,  a  bondholder  is 
entitled  to  stock  equal  in  par  value  to- 
the  par  value  of  his  bonds,  but  is  not  en- 
titled in  addition  thereto  to  past  stock 
dividends  declaimed  on  such  stock.  Sut- 
liff  v.  Cleveland,  etc.,  R.  R,  24  Ohio  St., 
147  (1873).  In  a  suit  by  holders  of  bonds 
convertible  into  stock  against  the  cor- 
poration for  refusal  to  allow  such  con- 
version, the  plaintiffs  must  allege  that 
they  still  hold  the  bonds.  Denney  v. 
Cleveland,  etc.,  R.  R.,  28  Ohio  St.,  108 
(1875).  A  corporation  with  authority  to 
increase  its  capital  stock  may  lawfully 
issue  new  shares  and  receive  in  payment 
therefor  the  bonds  of  the  corporation. 
Lohman  v.  New  York,  etc.,  R.  R.  Co.,  2 
Sandf.  Super.    Ct,  39  (1848);    Reed    v. 


383 


§  234.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.       [CH.  XTII. 

An  option  to  convert  stock  into  bonds  must  be  exercised  within 
a  reasonable  time  if  the  option  itself  contains  no  limit.1 

Where  bonds  are  convertible  into  stock  the  holder  may  demand 
conversion  into  the  stock  of  a  new  consolidated  corporation  that 
has  assumed  all  the  claims  and  liabilities  of  the  old.2 

§  2S4.  The  power  of  a  court  to  direct  an  increase  or  reduction.— 
The  courts  have  no  power,  by  mandate  or  decree  or  in  any  other 
manner,  to  effect  an  increase  or  reduction  of  the  capital  stock  of 
a  corporation.  Hence,  where  the  whole  capital  stock  has  been 
issued,  and  the  corporation,  by  reason  of  its  misconduct  or  mis- 
takes, is  bound  to  issue  new  certificates  to  the  owner  of  the  stock 
or  pay  him  damages,  the  court  can  give  judgment  for  damages 
only.  It  cannot  order  the  corporation  to  issue  stock,  since  to  do 
so  would  be  to  direct  an  overissue/1 

In  Massachusetts  a  later  and  better  rule  prevails,  to  the  effect 
that  the  corporation  in  such  a  case  may  be  compelled  to  issue  the 
stock,  but  in  order  to  prevent  an  illegal  overissue  it  must  purchase 
an  equal  amount  of  shares  in  the  market.4 

Hayt,  51  N.  Y.  Super.  Ct,  121  (1884).  tificates  of  stock  (which  are  valid  and 
See,  in  general.  g  27:5.  not  void)  to  the  full  extent  of  all  the 
iCatlin  v.  Green,  120  N.  Y,  441  shares  which  by  law  and  the  eonstitu- 
(1890).  Where  the  subscribers  for  stock  tion  of  the  company  it  may  issue,  no 
have  an  option  to  exchange  their  stock  court  can  order  the  issuance  of  other 
for  bonds  of  the  company  and  fail  to  shares,  because  in  that  respect  the 
exercise  that  option  for  nine  years,  powers  of  the  corporation  have  been 
when  the  company  has  passed  into  the  exhausted."  Smith  v.  North  American 
hands  of  a  receiver  and  the  stock  be-  Mining  Co.,  1  Nev.,  423  (1865);  Will- 
come  worthless,  the  right  is  gone.  The  iams  v.  Savage  Manuf.  Co.,  3  Md.  Chan., 
option,  not  being  limited  in  time,  must  418  (1851);  Mechanics'  Bank  v.  New 
be  exercised  within  a  reasonable  time.  York,  etc.,  R.  R.  Co.,  13  N.  Y,  599  (1856). 
Id-  In  an  action  for  the  conversion  of  shares, 

2  Day  v.  Worcester,  etc.,  R.  R.,  23  N.  E.  the  question  of  an  increase  cr  reduction 
Rep.,  824  (Mass.,  1890).  When  by  statute  not  being  involved,  it  was  said  that  "To 
the  consolidated  company  is  liable  for  require  a  new  issue  of  stock  might  in 
the  contracts  of  the  old  companies,  it  cases  like  this,  where  shares  have  gone 
must  issue  stock  in  exchange  for  bonds  into  the  hands  of  innocent  purchasers, 
of  the  old  company  which  were  con-  involve  an  overissue  of  stock,  which 
vertible  into  stock.  India  Mut.  Ins.  Co.  would  be  illegal."  Baker  v.  Wasson, 
v.  Worcester,  etc.,  R.  R..  25  N.  E.  Rep.,  59  Texas,  140  (1883);  S.  C,  53  id.,  150 
975  (Mass.,  1890).     Where  a  bondholder  (1880). 

has  a  right  to  convert  his  bonds  into  *  This  rule,  with  an  equitable  adjust- 

stock,  a  consolidation    cannot  deprive  ment  of  the  conflicting  interests  of  all 

him  of  that  right  until  after  he  has  the  parties,  where  an  owner  of  stock 

been  notified  of  the  intended  consolida-  was  deprived  of    it    by    forgery,   was 

tion  and  given  an  opportunity  to  exer-  established    by    the    supreme    judicial 

cise  his  rights.     Rosenkrans  v.   Lafay-  court  of  Massachusetts  in  the  case  of 

ette,  etc.,  R.  R.,  18  Fed.  Rep.,  513  (1883).  Machinists'  National  Bank  v.  Field,  126 

3  "  When  a  corporation  has  issued  cer-  Mass.,   345    (1879).    See,    also,   Pratt  n 

384 


CH.  XVII.]       INCREASE,  KEDUCTION    AND    OVERISSUE    OF    STOCK.  [§  285. 


Where  corporate  officers  enter  into  a  contract  to  pay  for  services 
or  property  wholly  or  partially  in  stock  of  the  corporation,  a  court 
will  not,  after  the  whole  amount  of  the  stock  has  been  issued, 
decree  a  specific  performance  of  the  contract,  but  the  aggrieved, 
party  is  remitted  to  his  action  for  damages.1 

§  285.  Shareholders,  not  directors,  should  authorize  the  increase. 
An  increase  or  reduction  of  the  capital  stock  of  a  corporation  is 
such  a  fundamental  change  in  its  affairs  that,  although  it  has  been 
duly  authorized  by  act  of  the  legislature  or  by  the  charter  of  incor- 
poration, it  cannot  lawfully  be  effected  merely  by  the  act  or  assent 
of  the  board  of  directors,2  but  must  be  authorized  by  the  sharehold- 
ers at  a  corporate  meeting.  Where,  however,  the  directors  have 
made  the  change,  and  the  stockholders  have  acquiesced  therein, 
they  are  as  fully  bound  as  though  the  increase  or  reduction  had 
been  expressly  authorized  at  a  corporate  meeting.  The  share- 
holders' assent  to  the  change  may  be  shown  as  conclusively  by 
their  conduct  and  acquiescence  as  by  a  formal  vote.3  The  power  to 
increase  the  capital  stock  may  be  vested  in  the  directors.4  Although 
the  shareholders  have  regularly  voted  to  increase  the  capital  stock, 


Machinists'  National  Bank,  123  id.,  110, 
and  Boston,  etc.,  R.  R.  Co..  v.  Richard- 
son, 135  id.,  473,  each  of  the  three  cases 
growing  out  of  the  same  transaction. 

1  Finley  Shoe,  etc.,  Co.  v.  Kurtz,  34 
Mich.,  89  (1876).  In  this  case  the  court 
say  that  where  the  capital  stock  may  be 
increased  by  vote  of  the  stockholders, 
*'  it  certainly  could  not  be  within  the 
implied  powers  of  any  corporate  officer 
to  obligate  the  corporation  to  any  such 
increase,  and  thus  indirectly  do  what 
the  law  permits  to  be  done  only  by  the 
body  of  corporators,  specially  convened 
for  the  purpose."  In  actions  against 
corporations  for  conversion  of  stock,  the 
relief  demanded  is  usually  in  the  alter- 
native, being  either  for  an  issue  of  a 
certificate  of  stock,  or  damages  in  lieu 
thereof. 

2  Percy  v.  Millaudon,  3  La.,  568,  585 
(1832);  Eidman  v.  Bowman,  58  111.,  444 
(1871);  Finley  Shoe,  etc.,  Co.  v.  Kurtz, 
34  Mich.,  89  (1876);  Crandall  v.  Lincoln, 
52  Conn.,  73,  99  (1884) ;  People  v.  Parker 
Vein  Coal  Co.,  10  How.  Pr.,  543  (1854). 
See,  also,  Railway  Company  v.  Allerton, 
18  Wall,  233  (1873).  Cf.  City  of  Chicago 
v.  Jones,  60  111..  383  (1871) ;  Matter  of 


Wheeler,  2  Abb.  Prac.  (N.  S.),  361  (1866) ; 
People  v.  Twaddell,  18  Hun,  427,  432 
(1879);  State  v.  Merchant,  37  Ohio  St, 
251  (1881).    See,  also,  §  708,  etc. 

sSewell's  Case,  L.  R.,  3  Chan.,  131 
(1868);  Lane's  Case,  1  De  G.,  J.  &  S., 
504  (1863);  Payson  v.  Stoever,  2  Dill., 
428  (1873).  See,  also,  ch.  XLVIL  infra, 
relative  to  mortgages ;  but  see  §  288, 
infra.  An  allegation  of  ratification 
must  not  be  in  general  terms,  but  must 
set  out  specifically  the  facts  constituting 
the  ratification.  Eidman  v.  Bowman,  58 
111.,  444  (1871).  An  amendment  of  the 
charter  which  allows  the  directors  in- 
stead of  the  shareholders  to  authorize 
an  increase  of  the  capital  is  not  such  a 
fundamental  change  in  the  constitution 
of  the  corporation  as  will  operate  to  re- 
lease non-assenting  shareholders  from 
the  obligation  on  their  stock.  Payson 
v.  Withers,  5  Biss.,  269  (1873) ;  Payson 
v.  Stoever,  supra. 

*  Sutherland  v.  Olcott,  95  N.  Y.,  93 
(1884).  Their  resolution  that  "the  capi- 
tal stock  of  this  company  be  and  the 

same   is  hereby  increased  to  "  is 

sufficient  to  effect  the  increase. 


(25) 


385 


§  286.] 


INCREASE,  SEDUCTION   AND    OVERISSUE    OF   STOCK. 


[CH. 


XVII. 


in  pursuance  of  adequate  legislative  authority,  still,  inasmuch  as 
the  increase  is  not  accomplished  until  the  shares  are  actually  is- 
sued, the  vote  may  be  reconsidered  in  a  lawful  manner  at  anytime 
before  the  stock  is  finally  issued.1 

§  286.  Prior  right  of  the  old  stockholder  to  ouy  the  new  stock. — 
"When  the  capital  stock  of  a  corporation  is  increased  by  the  issue 
of  new  shares,  each  holder  of  the  original  stock  has  a  right  to 
offer  to  subscribe  for  and  to  demand  from  the  corporation  such 
a  proportion  of  the  new  stock  as  the  number  of  shares  already 
owned  by  him  bears  to  the  whole  number  of  shares  before  the  in- 
crease. This  pre-emptive  right  of  the  shareholder  in  respect  of 
new  stock  is  well  recognized.2  But  this  applies  only  when  the  cap- 
ital is  actually  increased,  and  not  to  a  re-issue  of  any  portion  of  the 


1  Terry  v.  Eagle  Lock  Co.,  47  Conn., 
141  (1879).  In  this  case  the  court  say : 
"It  cannot  be  said  that  the  capital  is 
actually  increased  until  the  new  stock  is 
subscribed  for  at  least.  Until  then  there 
is  an  element  of  uncertainty  about  it. 
It  may  never  be  taken.  It  is  very  clear 
that  the  vote  to  increase  is  not  per  se  an 
increase." 

2  Gray  v.  Portland  Bank,  3  Mass.,  364 
(1807);  Eidman  v.  Bowman,  58  111.,  444 
(1871);  Reese  v.  Bank  of  Montgomery, 
31  Pa.  St.,  78  (1855);  Jones  v.  Morri- 
son, 31  Minn.,  140  (1883) ;  Bank  of  Mont- 
gomery v.  Reese,  26  Pa.  St.,  143  (1856). 
Cf.  Curry  v.  Scott,  54  Pa.  St,  270 
(1867);  Miller  v.  Illinois,  etc.,  R.  R.  Co., 
24  Barb.,  312  (1857);  Wilson  v.  Bank  of 
Montgomery  County,  29  Pa.  St,  537 
(1857);  Mason  v.  Davol  Mills,  132  Mass., 
76  (1882).  A  sale  of  shares  of  the  orig- 
inal capital  stock  carries  with  it  as  an 
incident  the  right  which  the  vendor  had 
previously  acquired  by  subscription  to 
shares  of  increased  capital  stock.  Balti- 
more, etc.,  Co.  t\  Hambleton,  26  Atl. 
Rep.,  279  (Md.,  1893);  Biddle's  Appeal, 
99  Pa.  St.,  278,  in  which  the  option  to 
subscribe  for  new  stock  was  sold  by  an 
executor;  Pratt  v.  American  Bell  Tel. 
Co.,  141  Mass..  225  (1886),  where  one  who 
held  notes  convertible  into  stock  at  a 
future  time  sought  to  establish  his  right 
as  a  stockholder  to  an  equitable  share 
of  an  increase  of  capital  stock  to  which 
shareholders  had   a  first  right  to  sub- 


scribe upon  favorable  terms.  The  court 
held  that  the  suit  could  not  be  main- 
tained, on  the  ground  that  until  he  had 
converted  the  notes  into  stock  he  had 
no  rights  as  a  stockholder;  Ohio  Ins. 
Co.  v.  Nunnemacher,  15  Ind.,  294  (1860), 
where  the  charter  varied  the  rule;  Re 
Wheeler.  2  Abb.  Pr.  (N.  S.),  361,  363,  in 
which  it  was  said  that  if  new  stock  is 
not  apportioned  among  old  stockholders 
it  should  be  sold  at  public  sale  to  the 
highest  bidder,  so  that  all  may  share  in 
the  gains  arising  from  its  sale;  Miller 
v.  Illinois,  etc.,  24  Barb.,  312  (1857),  that 
a  stockholder  who  holds  a  receipt  from 
a  corporation  for  money  payable  on  de- 
mand in  cash,  or,  at  his  option,  in  new 
stock  when  issued,  has  no  interest  in 
such  stock  as  a  shareholder  until  he  has 
elected  to  take  it  instead  of  the  cash. 
In  Massachusetts  this  right  is  preserved 
in  the  statutes.  Ch.  106,  §  37;  ch.  112, 
§  58.  In  Massachusetts  increased  capi- 
tal, if  worth  more  than  par,  must  in  cer- 
tain cases,  by  statute,  be  sold  at  public 
auction.  See  Att'y-Gen'l  v.  Boston,  etc.. 
R.  R.  Co.,  109  Mass.,  99  (1871).  In  New 
York,  in  banking  corporations,  it  is  se- 
cured to  the  shareholder  by  statute. 
Session  Laws  1878,  ch.  274,  §  5.  But  the 
pledgee  of  stock  who  holds  it  merely  as 
collateral  security  is  not  entitled  to  this 
right  to  take  up  new  shares.  The  right 
belongs  to  the  pledgor.  Miller  v.  Illinois 
Central  R.  R.  Co.,  24  Barb.,  312  (1857). 


386 


CII.  XVII.]       INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.  [§  286. 


original  stock.1  It  applies,  however,  to  such  part  of  the  original 
capital  stock  as  is  issued  long  after  business  has  been  commenced 
by  the  company.  Especially  is  this  the  rule  where  the  directors 
issue  such  new  stock  to  themselves  or  their  friends  in  order  to  con- 
trol an  election  or  make  a  profit.2  The  right  must  be  exercised 
within  a  fixed  or  a  reasonable  time;  and  if  the  shareholder  fails  to 
avail  himself  of  it,  he  is  barred,  by  laches  or  acquiescence,  of  his 
right  to  contest  a  disposition  of  the  stock  to  some  one  else.3  The 
corporation  cannot  compel  the  old  stockholders,  upon  their  sub- 
scription for  new  stock,  to  pay  more  than  par  value  therefor.  They 
are  entitled  to  it  without  extra  burden  or  expense  beyond  the  reg- 
ular subscription  price.4    An  attempt  to  deprive  the  stockholder  of 

1  State   v.  Smith,  48  Vt.,   266  (1876);     which  the  untaken  portion  of  the  stock 


Hartridge  v.  Rockwell,  R  M.  Charlton 
(Ga.),  260  (1828) ;  Curry  v.  Scott,  54  Pa. 
St.,  270  (1869),  in  which  Reese  v.  Bank 
was  said  to  decide  "nothing  more  than 
that  untaken  stock  is  held  by  the  corpo- 
ration in  trust  for  the  corporators,  and 
must  be  disposed  of  for  the  benefit  of 
all ;  "  and  it  was  held  that  a  stockholder 
has  no  greater  right  than  a  stranger  to 
subscribe  to  original  stock  untaken. 
Cf.  Eidmau  v.  Bowman.  58  111.,  444 
(1871);  Gray  v.  Portland  R  R.  Co.,  3 
Mass.,  364  (1807). 

2  Where,  long  after  the  company  has 
commenced  business,  it  has  disposed  of 
its  property  and  is  ready  to  declare  a 
five  per  cent  dividend,  the  directors 
issue  to  themselves  at  par  that  part  of 
the  original  capital  stock  which  never 
had  been  issued,  it  is  a  fraud  on  the  re- 
maining stockholders.  Arkansas,  etc., 
Soc.  v.  Eichholtz,  25  Pac.  Rep.,  613  (Kan., 
1891).  Where  a  director  issues  to  him- 
self, at  par,  stock  belonging  to  the  cor- 
poration and  which  is  worth  more  than 
par,  the  transaction  is  voidable ;  but  if  all 
t'..e  stockholders  acquiesce  therein  for  a 
long  time,  the  acquiescence  of  the  ex- 
ecutors of  a  deceased  stockholder  binds 
the  estate.  St.  Croix  L.  Co.  v.  Mittle- 
stadt,  44  N.  W.  Rep..  1079  (Minn.,  1890). 
In  the  case  of  Reese  v.  Bank,  etc.,  31  Pa. 
St,  78  (1855),  the  court  held  that  where 
a  part  of  the  authorized  capital  stock 
remained  untaken,  and  a  resolution  of 
the  directors  was  carried  into  effect  by 


was  issued  to  those  shareholders  not  in 
arrears  upon  shares  previously  taken,  to 
the  exclusion,  as  to  the  new  shares,  of 
those  in  arrears  upon  the  original  issue, 
it  was  held  an  invalid  discrimination 
and  an  unlawful  imposition  of  a  pen- 
alty upon  those  in  arrears.  In  regard 
to  the  right  to  subscribe  for  the  unissued 
portion  of  the  original  capital  stock,  see, 
also,  §§  70,  653.  Where  a  corporation 
has  an  authorized  capital  of  $5,000,  but 
only  $2,500  are  directed  by  the  stock- 
holders to  be  issued,  it  is  illegal  and 
fraudulent  to  issue  the  remaining  au- 
thorized capital  without  giving  the  ex- 
isting stockholders  a  prior  right  to  sub- 
scribe to  such  increased  capital  pro  rata. 
Directors  elected  by  reason  of  such  ille- 
gal issue  will  be  enjoined  from  acting 
where  they  are  about  to  change  the 
whole  policy  of  the  company.  Hum- 
boldt, etc.,  Ass'n  v.  Stevens  et  aJ.,  52  N. 
W.  Rep.,  568  (Neb.,  1892). 

3  Terry  v.  Eagle  Lock  Co.,  47  Conn.,  141 
(1879) ;  Hart  v.  St.  Charles  St.  R  R  Co.,  30 
La.  Ann.,  758  (1878);  Brown  v.  Florida 
Southern  R'y  Co.,  19  Fla.,  472  (1882). 

4 Cunningham's  Appeal,  108  Pa.  St., 
546  (1885).  Where  the  corporation  in  is- 
suing new  stock  requires  the  old  stock- 
holders to  pay  a  bonus  in  order  to  sub- 
scribe, a  former  stockholder  may  pay 
the  bonus  in  order  to  get  the  stock,  and 
may  then  recover  back  tlie  bonus  by  a 
suit  Dawson  v.  Insurance  Co.,  5  R'y 
&  Corp.  L  J.,  154  (1888,  Com.  PI.  Phil.). 


387 


§  286.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.       [CH.  XVII. 

this  right  will  be  enjoined  in  the  absence  of  laches  or  acquiescence.1 
The  courts  go  very  far  in  protecting  the  right  of  stockholders  to 
subscribe  for  new  stock.     It  is  often  a  very  important  right. 

When  the  newly-issued  shares  have  all  been  distributed  or  sold 
to  others,  in  violation  of  a  shareholder's  pre-emptive  right,  his  only 
remedy  is  an  action  at  law  against  the  corporation  for  damages. 
And  the  measure  of  damages  has  been  declared  to  be  the  excess  of 
the  market  value  above  the  par  value  at  the  time  of  the  issue  of 
the  shares,  with  legal  interest  on  such  excess.2 

A  mere  verbal  notice  by  the  stockholder  to  the  corporation  that 
he  will  take  his  proportion  of  the  new  issue  under  an  increase  is 
held  in  Louisiana  not  to  be  sufficient  to  render  the  company  liable 
in  damages  for  selling  the  shares  to  some  one  else.3  The  corpora- 
tion mav,  however,  and  usually  does,  limit  the  time  within  which 
the  shareholders  may  signify  their  intention  to  take  up  the  new 
shares,  and  may  require  a  part  payment  upon  the  shares  within 
that  time.4  The  stockholder,  therefore,  who  brings  his  action 
against  the  corporation  for  damages   for  refusal  to  allow  him  to 


If  on  offering  increased  capital  stock  to 
the  old  stockholders  the  company  re- 
quires more  than  par,  a  stockholder  who 
pays  it,  even  under  protest,  canuot  re- 
cover it  back.  He  should  have  tendered 
par  and  then  sued  for  refusal  of  the 
corporation  to  accept  it  De  La  Cuesta 
v.  Insurance  Co.,  20  Atl.  Rep,  505  (Pa., 
1890).  Where  by  its  charter  a  terminal 
and  union  depot  company  is  obliged  to 
allow  new  roads  to  demand  and  pay  for 
a  proportional  part  of  the  former  com- 
pany's capital  stock,  the  price  is  par 
even  though  it  is  worth  more.  St  Paul, 
etc..  Co.  v.  Minn.,  etc.,  R  R,  49  N.  W. 
Rep.,  646  (Minn.,  1891). 

1  A  stockholder's  remedy,  it  is  said,  in 
such  a  case  is  clearly  agaiust  the  cor- 
poration, and  he  is  not  obliged  to  sue  at 
law  for  damages.  "  The  effect  of  such 
an  action  [i.  e.,  the  action  for  damages] 
would  be  to  convert  part  of  his  interest 
as  a  shareholder  into  a  judgment  for 
damages ;  in  other  words,  to  sell  a  por- 
tion of  his  stock  to  the  corporation. 
.  .  .  The  judgment  to  be  effectual 
must  be  against  the  corporation  itself, 
not  against  the  directors  personally, 
who  may  be  changed  from  time  to 
time."     Dousman  v.  Wisconsin  &  Lake 


Superior,  etc.,  Co.,  40  Wis.,  418  (1876). 
In  this  case  it  is  also  held  that  the  share- 
holder, where  the  stock  is  not  yet  fully 
issued,  may  have  a  decree  in  a  court  of 
equity  restraining  the  whole  issue,  or 
else  that  there  be  an  equitable  distri- 
bution ;  and,  if  the  shares  are  already 
partially  distributed,  that  the  proper 
amount  be  issued  to  the  party  com- 
plainant. Cf.  Eidman  v.  Bowman,  58 
111.,  444.  In  Massachusetts,  however, 
this  is  not  the  rule,  and  in  that  state  it 
is  held  that  the  courts  have  no  power  to 
compel  the  corporation  or  the  directors 
to  issue  the  shares  to  the  party  ag- 
grieved. Sewall  v.  Eastern  R.  R  Co.,  9 
Cush.,  5  (1851).  But  an  action  will  lie 
against  the  corporation  for  damages. 
Gray  v.  Portland  Bank,  3  Mass.,  364 
(1807). 

2  Eidman  v.  Bowman,  58  111.,  444 
(1871);  Reese  v.  Bank  of  Montgomery, 
31  Pa.  St,  78  (1855);  Gray  v.  Portland 
Bank,  3  Mass.,  364  (1807). 

3  Hart  v.  St  Charles  St.  R'y  Co.,  30  La. 
Ann-,  758  (1878),  holding,  also,  that  a 
tender  must  be  made. 

4  Sewall  v.  Eastern  R  R  Co.,  63  Mass., 
5  (1851) ;  Hart  v.  St.  Charles  St  R'y  Co., 
30  La.  Ann.,  758  (1878). 


388 


CH.  XVII.]      INCREASE,  REDUCTION  AND  OVEEI8SUE  OF  STOCK.      [§§  2S7,  288. 

subscribe  for  the  new  shares,  or  for  selling  the  shares  to  some  one 
else,  or  for  depriving  him  in  any  other  way  of  them,  must  allege 
and  prove  that  he  demanded  the  shares  and  offered  to  subscribe 
and  pay  for  them  in  the  regular  way,  within  the  time  fixed  for 
such  subscriptions.1  Other  shareholders  similarly  aggrieved  are 
not  to  be  joined  as  parties  complainant.  Each  stockholder  sues 
alone,  inasmuch  as  the  liability  of  the  corporation  in  these  cases  is 
several  and  not  joint.2 

§  2S7.  Issue  of  new  stock  by  a  stock  di  vidend.  —  A  frequent  method 
of  issuing  an  increase  of  the  capital  stock  is  by  a  stock  dividend. 
In  England  there  is  some  doubt  as  to  whether  such  dividends  may 
be  imposed  upon  stockholders  who  ojbject  thereto,  and  demand  the 
money  dividend  in  lieu  of  which  the  stock  is  issued.3  In  this  coun- 
try such  dividends  are  legal  unless  prohibited  by  constitutional  or 
statutor}7-  provisions.4  But  in  all  cases  of  a  stook  dividend,  as  a 
method  of  issuing  an  increase  of  the  capital  stock,  there  must  be 
in  the  possession  of  the  corporation  an  amount  of  property  over 
and  above  its  corporate  debts  equal  to  the  whole  capital  stock,  in- 
cluding the  increase;  and  this  amount  cannot  afterwards  be  used 
for  anv  kind  of  a  dividend. 

§  288.  Liability  of  the  shareholder  upon  an  increase  of  the  capital 
stock  —  Irregularities  in  increasing  the  stocli. —  A  person  subscrib- 
ing for  shares  of  stock  upon  an  increase  of  the  capital  stock  is  liable 
thereon  the  same  as  a  subscriber  to  the  original  capital  stock.  In 
some  respects  he  cannot  set  up  defenses  that  an  original  subscriber 

1  Wilson    v.     Bank    of    Montgomery  increase  of  the  capital.     Miller  v.  Illi- 

_ County,  29  Pa.  St..  537  (1857).  nois  Central   R   R  Co.,  24  Barb.,  312 

2Dousman  v.  Wisconsin  &  Lake  Su-  (1857).     An  incorporator  is  not  entitled 

perior     Mining     &     Smelting    Co.,    40  to   the   increased  stock  as  a  gratuity; 

Wis.,  418  (1876).      In  an  early  Indiana  he  must  pay  for  it     Brown  v.  Florida 

decision  it  is  said   to   be  the  law  that  Southern  R'y  Co.,  19  Fla.,  472  (1882). 
where,    in    the    charter,    directors  are        3  See  ch.  XXXII,  infra. 
given  full  power    to  effect  an  increase        4Id. ;    also   p   51,   svpra:    Howell    n 

of  the  capital  stock,  "  on  such   terms  Chicago,  etc.,  R.  R.   Co.,  51   Barb.,  378 

and  conditions  and  in  such  manner  as  (1868).    An  increase  of  the  capital  stock, 

to  them  shall  seem  best,"  they  may  au-  by  the  issue  of  new  shares  and  the  sale 

thorize  the  increase  without  the  consent  of  them  for  less  than  their  par  value,  is 

of  the  shareholders;    that  as   to  each  not  such  an  "issue  of  fictitious  stock" 

increase  there  is  no  pre-emptive  right,  as  the  California  state  constitution  for- 

and  that,  accordingly,  the  newly-issued  bids  (art.  XII,  g   11).     Stein  v.  Howard, 

shares  may  be  disposed  of  as  the  direct-  65  Cat,  616  (1884).     Where  the  company 

ors  determine.     Ohio  Insurance  Co.  v.  is  under  obligations   to  issue  stock   to 

Nunnemacher,  15  Ind.,  294  (1860).     So,  represent  interest  on  subscriptions  until 

also,  in  New  York  it  is  said  that  the  ex-  dividends  are  declared,  a  stock  dividend 

ecutory  purchaser  of  shares  of  the  oris-  does    not  stop    the    interest.      Hardin 

inal  stock  is  not  entitled  to  the  propor-  County  ?•.  Louisville,  etc.,  R  R,  17  S.  W. 

tionate  amount  of  new  stock    on   an  Rep.,  860  (Ky.,  1891). 

389 


§  288.] 


INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK. 


[CH.  XVIT. 


might  have  set  up.  Thus,  a  subscriber  for  increased  stock  cannot 
defeat  an  action  to  enforce  his  subscription  by  setting  up  the  failure 
of  the  corporation  to  obtain  subscriptions  for  the  whole  of  the  au- 
thorized increase.1  In  general,  a  subscriber  to  an  increase  of  stock 
cannot  interpose  defenses  to  his  subscription  which  subscribers  to 
the  original  stock  could  not  have  raised  —  such,  for  example,  as 
technical  objections  to  the  validity  of  his  contract  of  subscription.2 
Nor  can  the  subscriber  set  up  that  the  increase  was  irregularly 
effected.  It  is  for  the  state  alone  to  raise  the  question  whether 
corporate  capital  stock  has  been  lawfully  and  regularly  increased.3 
Especiall}r  it  is  the  rule  that,  as  against  corporate  creditors,  stock- 
holders who  have  subscribed  for  the  increased  stock,  accepted  the 
certificate,  and  received  dividends  thereon,  are  estopped  from  de- 
feating an  action  on  their  subscription  by  setting  up  that  the  stock 
was  increased  in  an  irregular  or  unlawful  manner.4    Subscribers  to 


i  Clarke  v.  Thomas,  34  Ohio  St,  46 
(1877) ;  Nutter  v.  Lexington,  etc.,  R.  R 
Co.,  6  Gray,  85  (1856) ;  Delano  v.  Butler, 
118  U.  S.,  634  (1886);  Aspinwall  v.  But- 
ler, 133  U.  S.,  595  (1890).  A  subscriber 
for  increased  stock  is  liable  although 
the  full  amount  is  not  subscribed. 
Avegne  v.  Citizens'  Bank,  etc.,  5  S.  Rep., 
537  (La.,  1889).  But  see  Eaton  v.  Pa- 
cific, etc.,  Bank,  10  N.  E.  Rep.,  844  (Mass., 
1887). 

2  Kansas  City  Hotel  Co.  v.  Hunt,  57 
Mo.,  126  (1S74). 

» Pullman  v.  Upton,  96  U.  S.,  328 
(1877).  A  party  purchasing  a  certificate 
of  stock  not  under  seal  nor  signed  by 
the  president  must  take  notice,  and  can- 
not afterwards  complain  that  it  was  an 
irregular  increase  of  stock.  Byers  v. 
Rollins,  21  Pac.  Rep.,  894  (Colo.,  1889). 
Stockholder  participating  in  irregular 
increase  of  stock  cannot  afterwards  ob- 
ject to  it.  Poole  v.  West,  etc.,  Ass'n, 
30  Fed.  Rep.,  513  (1887).  Irregularities 
in  the  increase  of  the  capital  stock  will 
be  disregarded  as  between  the  stock- 
holders who  participate.  Bailey  v. 
Champlain,  etc.,  Co.,  46  N.  W.  Rep.,  539 
(Wis.,  1890);  Bard  v.  Banigan,  39  Fed. 
Rep.,  13  (1889). 

4  Chubb  v.  Upton,  95  U.  S,  665  (1877) ; 
In  re  Miller's  Dale,  etc.,  Co.,  L.  R,  31 
Ch.  D„  211  (1886),  in  which  a  subscriber 


to  new  shares  was  not  permitted  to 
plead,  as  against  creditors,  that  the  issue 
was  irregular  because  only  thirteen  days 
had  elapsed  between  the  passing  of  the 
resolution  to  increase  the  capital  and 
the  confirming  of  it,  when  the  law  re- 
quired fourteen  days;  Kansas  City 
Hotel  Co.  v.  Harris,  51  Mo.,  464  (1S73); 
and  see  McCarthy  v.  Lavasche,  89  111., 
270  (1878) ;  Veeder  v.  Mudgett,  95  N.  Y., 
295  (1884)  —  the  last  case  holding  that  a 
statute  allowing  increase  to  be  made  by 
stockholders  in  meeting  assembled  on  a 
specified  notice  is  invalid  if  the  notice 
did  not  conform  to  the  statute,  but  that 
the  stockholders  are  liable  nevertheless 
to  corporate  creditors  on  such  stock. 
Sewell's  Case,  L  R,  3  Chan.,  131  (1868); 
Upton  v.  Jackson,  1  Flippin,  413  (1874); 
Kansas  City  Hotel  Co.  v.  Hunt,  57  Mo., 
126  (1874).  In  such  a  case  the  state  alone 
can  properly  raise  the  question  whether 
the  corporate  stock  had  been  regularly 
and  lawfully  increased.  Pullman  u 
Upton,  96  U.  S.,  329  (1877).  See  Clarke 
r.  Thomas,  34  Ohio  St.,  46  (1874) ;  Matter 
of  the  Reciprocity  Bank,  22  N.  Y.,  9 
(1860);  Byers  v.  Rollins,  21  Pac.  Rep., 
894  (Colo.,  1889).  See,  also,  Peckham  v. 
Smith,  9  How.  Prac,  436  (1854).  See, 
also,  the  principles  and  cases  in  §  298, 
infra.  Irregularity  of  notice  of  a  meet- 
ing  to   increase  the  capital  stock  has 


390 


OH.  XVII.]       INCREASE,   REDUCTION    AND    OVERISSUE    OF    STOCK.  [§  289. 

increased  capital  stock  cannot  escape  liability  therefor  by  setting 
up  that  the  notice  of  increase  was  not  published  as  required  by 
statute.1 

But  a  contrary  rule  prevails  as  regards  essential  steps  in  the  in- 
crease. If  there  is  no  vote  of  the  stockholders  as  required  b}T  stat- 
ute, they  are  not  liable  on  the  stock.2  Stockholders  of  the  original 
capital  stock  are  of  course  not  liable  for  the  defaults  of  subscribers 
to  the  increased  capital  stock.3 

§  289.  Rights  and  liabilities  of  the  shareholders  upon  a  reduction 
of  the  capital  stoch. —  Upon  an  authorized  reduction  of  the  capital 
stock  of  an  incorporated  company,  regularly  effected,  the  amount 
of  corporate  assets  over  and  above  the  amount  of  the  capital  stock 
as  reduced  is  equivalent  to  surplus  profits,  and  may  be  treated  as 


been  held  to  be  fatal.  Matter  of  Wheeler, 
2  Abb.  Pr.  (N.  S.),  361  (1866).  If  the 
statute  requires  a  publication  of  notice 
of  the  intended  increase,  such  publica- 
tion must  be  made.  It  cannot  be  waived, 
even  by  unanimous  consent  of  the  stock- 
holders. The  public  are  entitled  to 
knowledge  of  the  increase.  State  v. 
McGrath,  86  Mo.,  239  (1886),  the  court 
refusing  to  grant  a  mandamus  to  com- 
pel the  secretary  of  state  to  file  the  cer- 
tificate. The  invalidity  or  irregularity 
of  an  increase  of  stock  may  be  set  up  by 
the  subscribers  therefor  as  against  cred- 
itors who  were  stockholders  and  man- 
agers of  the  company.  Sayles  v.  Brown, 
40  Fed.  Rep.,  8  (1889). 

lHandley  v.  Stutz,  139  U.  S.,  417 
(1891).  Holders  of  increased  capital 
stock  cannot  defeat  their  liability  for 
the  subscription  price  by  alleging  that 
the  increase  was  made  by  a  stock- 
holders' meeting  held  out  of  the  state, 
or  that  proper  notice  of  the  meeting 
was  not  given,  or  that  the  required 
statutory  publication  of  the  increase 
was  not  made.  Stutz  v.  Handley,  41  Fed. 
Rep.,  531  (1890).  If  the  stockholders 
have  knowledge  of  the  intention  to  in- 
crease the  stock,  the  failure  to  give  stat- 
utory notice  cannot  be  taken  advantage 
of  by  one  not  injured  by  such  want 
of  notice.  Columbia  Bank's  Appeal, 
16  Weekly  Notes  Cas.,  357 ;  42  Leg.  Int., 
226.     Concerning  the  failure  to  give  the 


requisite  notice,  see,  also,  chs.  XXXVI 
and  XLVI.  Where  a  person  subscribes 
to  the  proposed  increased  capital  stock, 
and  the  officers  surreptitiously  transfer 
some  of  their  own  old  stock  to  him,  he 
is  not  liable  on  the  statutory  liability 
thereon,  even  though  he  accepted  the 
stock,  being  ignorant  of  the  fraud  prac- 
ticed upon  him.  Stephens  v.  Follett,  43 
Fed.  Rep.,  842  (1890). 

2  The  receiver  of  a  national  bank  can- 
not hold  stockholders  liable  on  increased 
stock  where  such  increase  was  not  au- 
thorized by  a  two-thirds  vote  of  the 
stockholders.  Winters  v.  Armstrong, 
37  Fed.  Rep.,  508  (1889).  In  American 
Tube  Works  v.  Boston,  etc.,  Co.,  139 
Mass.,  5  (1885),  it  was  held  that  a  cred- 
itor who  had  taken  irregularly  issued 
stock  in  payment  of  his  debt  might 
over  two  years  thereafter,  and  after  the 
corporation  became  insolvent,  repudiate 
the  stock  and  again  become  a  creditor. 

3Veeder  v.  Mudgett,  95  N.  Y„  295 
(1884).  See,  also,  §  215,  sujjra.  Stock- 
holder not  participating  is  not  liable  for 
fraud  in  increase  of  stock  where  the 
directors  received  pay  therefor  in  notes 
which  are  worthless.  So  held  under 
Iowa  statute.  Miller  v.  Bradish,  28 
N.  W.  Rep..  594  (Iowa,  18S6).  See,  also, 
Delano  v.  Butler,  118  U.  S.,  634  (1886). 
A  statutory  requirement  that  a  certifi- 
cate shall  be  filed  when  stock  is  fully 
paid  does  not  render  old  stockholders 


391 


§  280.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF   STOCK.       [CH.  XVII. 


such  by  the  corporation.  It  may  be  set  aside  as  surplus,  or  it  may 
be  divided  among  the  shareholders  proportionally  by  a  dividend, 
unless  the  rights  of  previous  corporate  creditors  would  thereby  be 
injured.1     But  it  is  not  the  rule  that  the  reduction  of  the  capital 


liable  for  failure  to  file  as  to  increased 
stock.  Sayles  v.  Brown,  40  Fed.  Rep., 
8  (1889).  A  liability  imposed  until  a 
specified  certificate  is  filed  is  not  revived 
by  an  increase  of  the  capital  stock. 
Veeder  v.  Mudgett,  95  N.  Y.,  295  (1884). 
See,  also.  Ochiltree  v.  Railroad  Co.,  21 
Wall.,  249  (1874),  as  to  liability  on  in- 
crease of  capital  stock.  As  to  the  lia- 
bility on  a  reduction  of  the  capital  stock 
and  the  constitutionality  thereof,  see 
Dane  v.  Young,  61  Me.,  160  (1872):  also 
§  497,  infra.  Where  a  person  subscribes 
to  the  proposed  increased  capital  stock, 
but  the  increase  is  not  made,  and  the 
officers  surreptitiously  transfer  some  of 
their  own  old  stock  to  him,  he  is  not 
liable  on  the  statutory  liability  thereon, 
even  though  he  accepted  the  stock  being 
ignorant  of  the  fraud  practiced  on  him. 
Stephens  v.  Follett,  43  Fed.  Rep.,  842 
(1890).  In  suing  a  stockholder  on  a 
statutory  liability  for  failure  to  file  a 
certificate  upon  an  increase  in  the  cap- 
ital stock,  only  those  who  hold  the  in- 
creased capital  stock  are  liable.  Griffith 
v.  Green,  129  N.  Y,  517(1892). 

1  Strong  v.  Brooklyn  Crosstown  R  R. 
Co.,  93  N.  Y,  426(1883),  where  a  corpo- 
ration whose  capital  had  been  reduced 
one-half  issued  certificates  of  indebt- 
edness bearing  interest  to  shareholders 
for  the  excess.  The  application  of  a 
dissenting  holder  to  have  them  declared 
illegal,  and  to  restrain  the  corporation 
from  paying  them,  was  refused  ;  Seeley 
v.  New  York  National  Exchange  Bank 
of  New  York,  8  Daly,  400  (1878);  S.  C, 
aff'd,  78  N.  Y,  608  (1879) ;  McCann  v. 
First  Nat.  Bank,  14  N.  E.  Rep.,  251  (Ind., 
1887),  approving  of  the  text  herein,  and 
holding  that  where  by  reason  of  bad 
debts  the  capital  stock  is  reduced,  a 
subsequent  collection  of  such  debts  does 
not  sustain  an  action  by  a  stockholder 
for  his  proportion  thereof.     If  increase 


is  afterwards  cancelled,  a  corporate  cred- 
itor who  was  such  previous  to  the  in- 
crease cannot  complain.  Colt  v.  Gold 
Amal.  Co.,  119  U.  S.,  343  (1886).  A  sub- 
scriber to  the  increased  stock  may  re- 
cover back  the  money  paid  thereon  if 
the  corporation  afterwards  reduces  the 
proposed  increase,  so  that  it  shall  cor- 
respond to  the  amount  actually  sub- 
scribed for.  The  principle  laid  down  in 
§§  176-181,  supra,  applies.  Eaton  v.  Pa- 
cific Nat  Bank,  10  N.  E.  Rep.,  844 {Mass., 
1887).  Cf.  §  288.  For  the  rules  herein 
relative  to  life  estates  and  remainder 
in  stock,  see  §  559.  A  stockholder  may 
enjoin  the  corporation  from  reducing 
its  capital  stock,  as  allowed  by  statute ; 
calling  in  all  certificates  of  stock;  issu- 
ing new  certificates  proportionately;  de- 
claring a  dividend  of  the  surplus  over 
the  reduced  capital  stock,  and,  on  ac- 
count of  the  corporate  property  being 
invested,  borrow  money  to  pay  that 
dividend.  Coquard  v.  St.  Louis,  etc.,  Co., 
7  S.  W.  Rep.,  176  (Mo.,  1888).  Under  the 
English  statute  a  reduction  of  the  capi- 
tal stock  reduces  the  preferred  as  well 
as  the  common  stock.  Bannatyne  v. 
Direct,  etc.,  Co.,  55  L.  T.  Rep.,  716  (1886). 
And  in  general  see,  also,  In  re  State 
Ins.  Co.,  14  Fed.  Rep.,  28  (1882) ;  Excel- 
sior Co.  v.  Lacey,  63  N.  Y,  422  (1875). 
By-law  cannot  compel  a  stockholder  to 
sell  his  stock  to  the  corporation  for  the 
purpose  of  i-etiring  it.  Bergman  v.  St. 
Paul,  etc.,  Assoc,  29  Minn.,  275  (1882). 
In  England  it  is  the  rule  that  when  the 
assets  are  already  reduced  by  losses  the 
corporation  cannot  effect  a  reduction  of 
the  capital  stock  so  as  to  cover  up  the 
losses.  In  re  Ebbw  Vale  Steel,  I,ron  & 
Coal  Co.,  L.  R.,  4  Chan.  Div.,  827  (1876). 
And  yet  it  should  seem  that  a  greater 
injury  would  be  worked  upon  the  pub- 
lic by  continuing  business  with  an  im- 
paired capital  than  to  reduce  it  openly 


392 


CH.  XVII.]       INCREASE,  REDUCTION   AND    OVERISSUE    OF    STOCK.  [§  290. 

stock  of  a  corporation  always  authorizes  the  distribution  among  the 
stockholders  of  a  sura  equal  to  the  difference  between  the  original 
and  the  reduced  amount  of  capital.  Such  a  distribution  is  lawful 
only  when  it  appears  that  the  original  capital  stock  is  unimpaired. 
The  corporation  can  divide  among  its  stockholders  only  such  a  sum 
as  will  leave  with  the  corporation  an  amount  equal  to  the  reduced 
capital  stock.1  Not  only  this,  but  corporate  creditors  who  were 
such  before  the  reduction  may  disregard  the  reduction  and  enforce 
payment  of  their  debts  from  the  original  unpaid  subscriptions  as 
though  no  reduction  had  taken  place.2  But  creditors  whose  debts 
were  contracted  subsequently  to  the  reduction  can  look  only  to  the 
capital  stock,  as  reduced,  for  security.  They  will  be  held  to  have 
given  credit  upon  the  faith  of  that  amount  of  stock  alone.3 

A  reduction  of  the  capital  stock  is  effected  only  when  all  statu- 
tory formalities  have  been  complied  with.4 

§  290.  Change  in  tlie . number  or  par  value  of  the  shares. — •  It  is  a 
principle  of  law  closely  related  to  those  already  set  forth  in  this 
chapter,  and  well  settled,  that  the  number  of  shares  into  which  the 
capital  stock  has  been  divided,  and  the  par  value  of  those  shares, 
can  neither  be  increased  nor  diminished,  in  number  or  in  value, 
without  express  warrant  of  authority  either  from  the  legislature  or 


to  what  it  actually  is.  Cf.  In  re  Kirk- 
stall  Brewery  Co.,  L.  R,  5  Chan.  Div., 
535  (1877).  In  England,  by  statute,  a 
plan  for  reducing  the  capital  stock  must 
be  presented  to  and  approved  by  the 
courts.  Be  Direct,  etc.,  Co.,  55  L.  T.  Rep., 
804  (1866).  And  a  distribution  of  part 
of  the  capital  stock  among  the  share- 
holders proportionally  is  an  unauthor- 
ized reduction,  and  the  stock  will  be 
ordered  to  be  returned.  Holmes  v.  New- 
castle-upon-Tyne Abattoir  Co.,  45  L.  J. 
(Chan.),  383  (1875).  Where  the  capital 
stock  is  reduced  by  reason  of  certain 
doubtful  securities,  the  securities  should 
not  be  withdrawn  from  the  assets  of  the 
bank  and  put  into  a  trust.  McCann  v. 
First  Nat'l  Bank,  30  N.  E.  Rep.,  893 
(Ind.,  1892). 

1  Strong  v.  Brooklyn  Crosstown  R.  R. 
Co.,  93  N.  Y.,  426  (1883). 

2  In  re  State  Insurance  Co.,  11  Biss., 
301  (1882);  S.  C,  14  Fed.  Rep.,  28:  Bed- 
ford R  R  Co.  v.  Bowser.  48  Pa.  St.,  29 
(1864).  Shareholders  have  no  power  to 
avoid  liability  on  their  stock  by  reduc- 

39 


ing  either  the  amount  of  it  or  the  par 
value  of  the  shares.  Dane  v.  Young,  61 
Me.,  160  (1872).  Cf.  Bedford  R.  R  Co.  v. 
Bowser,  48  Pa.  St.,  29  (1864). 

3  Hepburn  v.  Exchange,  etc.,  Co.,  4 
La.  Ann.,  87  (1849) ;  Palfrey  v.  Paulding, 
7  id.,  363  (1852) ;  Cooper  v.  Frederick,  9 
Ala.,  742  (1846).  Cf.  In  re  State  Ins. 
Co.,  14  Fed.  Rep.,  28  (1882);  S.  C,  11 
Biss.,  301. 

4  See  Moses  v.  Ocoee  Bank,  1  Lea 
(Tenn.),  398,  holding  that,  where  a  cor- 
poration has  power  under  its  charter  to 
reduce  its  capital  stock,  it  must  clearly 
appear  that  it  has  ordered  the  reduction 
to  be  made ;  neither  equivocal  acts  nor 
inferences  nor  unauthorized  acts  of  a 
president  or  director  will  be  sufficient: 
Ferris  v.  Ludlow,  7  Ind.,  517  (1856), 
holding  that  where  the  records  of  a 
company  showed  that  propositions  to 
reduce  its  stock  had  been  made,  but 
failed  to  show  any  acceptance,  there 
was  no  reduction.  See,  also,  Grangers' 
Life,  etc.,  v.  Kamper,  73  Ala.,  325 
(1882). 

3 


§  291.] 


INCREASE,  SEDUCTION    AND    OVERISSUE    OF    STOCK. 


[CH.  XVII. 


the  charter  of  the  company.1  "When,  however,  the  charter  does  not 
fix  the  number  or  amount  of  the  shares,  it  devolves  upon  the  share- 
holder or  directors  to  fix  them;  and  in  such  a  case  it  seems  that 
the  limit  established  might  lawfully  be  changed  without  special 
authority.2 

B.    ILLEGAL   INCREASE    OF    STOCK,  BEING   OVERISSUED    STOCK. 

§  291.  Unauthorized  increase  of  stock  may  amount  to  overissued 
stock. —  Where  the  full  capital  stock  of  a  corporation  has  been  is- 
sued, and  there  is  no  statute  or  charter  provision  authorizing  an 
increase  of  the  stock,  it  is  clear  that  any  issue  of  stock  in  excess  of 
the  capital  stock  is  not  a  legitimate  increase  of  the  capital  stock. 
It  is  unauthorized  and  illegal,  and  is  termed  in  law  an  overissue  of 
stock.  There  is  a  clear  distinction  between  overissued  stock  and  an 
irregular  increase  of  stock.  The  former  is  where  an  increase  of  the 
stock  is  made,  although  no  increase  is  authorized  by  the  charter  or 
by  statute.  The  latter  occurs  when  there  is  a  statutory  or  charter 
provision  authorizing  an  increase  of  the  stock,  but  the  formalities 
prescribed  for  making  that  increase  have  not  been  strictly  com- 
plied with.  Overissued  stock  is  void,  while  an  irregular  increase 
of  stock  is  merely  voidable. 

An  overissue  of  stock  often  arises  by  forgery  on  the  part  of  an 


1  Salem  Mill-dam  Corporation  v. 
Ropes,  23  Mass.,  23  (1827);  Re  Financial 
Corporation  (Holmes  Case),  L.  R.,  2  Ch., 
714,  733  (1867);  Droitwich  Salt  Co.  v. 
Curzon,  L.  R.,  3  Ex.,  35,  42  (1867); 
Smith  v.  Goldsworthy,  4  Q.  B.,  430 
(1843).  Cf.  Sewell's  Case,  L,  R,  3  Ch.,  131 
(1868).  "A  corporation  with  a  fixed 
capital,  divided  into  a  fixed  number  of 
shares,  can  have  no  power  of  its  own 
volition,  or  by  any  act  of  its  officers  and 
agents,  to  enlarge  its  capital  or  increase 
the  number  of  shares  into  which  it  is 
divided.  The  supreme  legislative  power 
of  the  state  can  alone  confer  that  au- 
thority." It  cannot  be  increased  "  by 
the  covert  or  fraudulent  efforts  of  one 
or  more  of  the  agents  of  the  corpora- 
tion." New  York  &  New  Haven  R.  R 
Co.  v.  Schuyler,  34  N.  Y.,  30,  48  (1865). 
Cf.  Scovill  v.  Thayer,  105  U.  S.,  143  (1881). 
In  New  York  a  statute  allowing  such  a 
change  exists.  New  York  Session  Laws, 
1866,  ch.  73.     "Where  all  the  shares  are 


reduced  in  par  value  from  $50  to  $38  and 
the  $12  difference  is  paid  to  the  stock- 
holders in  cash,  this  is  a  reduction  of 
capital  stock  and  not  a  dividend  and 
cannot  be  taxed  as  a  dividend.  Com- 
monwealth v.  Central  T.  Co.,  22  Atl 
Rep.,  209  (Pa.,  1891).  A  reduction  of 
the  par  value  of  the  common  stock  and 
not  of  the  preferred  is  not  allowed  in 
England.  Re  Union,  etc.,  Co.,  Lim.,  61 
L.  T.  Rep.,  327  (1889). 

2  Somerset,  etc.,  R  R  Co.  v.  Cushing, 
45  Me.,  524  (1858) ;  Ambergate,  Notting- 
ham &  Boston  &  Eastern  R'y  Co.  v. 
Mitchell,  4  Exch.,  540  (1849);  S.  G,  6 
Eng.  R'y  Cases,  234;  In  re  European 
Central  R'y  Co.,  L,  R,  8  Eq.,  438  (1859). 
It  has  been  held  allowable,  however,  for 
the  company  to  allow  the  holders  of 
paid-up  shares  to  return  them  and  take 
in  exchange  shares  of  double  the  par 
value  as  half  paid  up,  and  vice  versa; 
both  kinds  of  stock  being  authorized. 
Teasdale's  Case,  L.  R,  9  Chan.,  54  (1873). 


394 


OH.  XVII.]      INCREASE,  REDUCTION  AND  OVERISSUE  OF  STOCK.      [§§  292,  293. 

officer  of  the  corporation  who  forges  the  necessary  names  of  the 
corporate  officers  to  the  certificate  and  puts  it  in  circulation.1 

§  292.  Overissued  stock  is  absolutely  void. —  By  overissued  stock 
is  to  be  understood  stock  issued  in  excess  of  the  amount  limited 
and  prescribed  by  the  act  of  incorporation.  Certificates  of  stock 
issued  in  excess  of  the  certificates  that  represent  the  full  authorized 
capital  stock  of  the  corporation  represent  overissued  stock.  Such 
stock  is  spurious  and  wholly  void.  This  is  the  settled  law,  and  it 
prevails  equally  whether  the  overissue  is  the  result  of  accident  or 
mistake,  or  want  of  knowledge  of  the  law,  or  is  due  to  fraud  and  in- 
tentional wrong-doing.  The  animus  or  intent  of  the  parties  to  the 
overissue  is  not  material.  Overissued  stock,  no  matter  how  over- 
issued, represents  nothing,  and  is  wholly  and  entirely  valueless  and 
void.2  So  rigid  and  well  established  is  this  rule  that  not  even  a 
bona  fide  holder  of  such  stock  can  give  to  it  any  validity  or  vital- 
ity. Overissued  or  spurious  stock  may,  however,  it  seems,  be  legal- 
ized by  a  subsequent  legal  increase  of  the  capital  stock.3 

§293.  Liability  of  the  coiyoration  as  to  overissued  stock. —  Al- 
though it  is  settled  law  that  overissued  stock  is  void  and  valueless, 
and  that  no  action  lies  either  to  compel  the  corporation  to  recog- 
nize the  holder  as  a  stockholder,  or  to  issue  in  place  thereof  a  valid 
certificate,  yet  where  overissued  certificates  of  stock,  signed  or  pur- 
porting to  be  signed  by  the  corporate  officers  having  the  authority 
to  issue  stock,  and  actually  issued  by  such  officers,  are  purchased 
by  any  person,  or  are  taken  in  any  manner  in  good  faith  and  for 
value,  such  oonafide  holder  may  sue  the  corporation  in  tort  and 
recover  damages.4 


"O' 


iSee  §  293.  ler,  34  N.  Y.,  30,  49,  GO  (1865);  Bruff  v. 

2  The  great  and  leading  case  on  this  Mali,  36  id.,  200  (1867);  Titus  v.  Great, 

subject  is  New  York,  etc.,  R.  R.  Co.  v.  etc.,  Road  Co.,  5  Lans.,  250  (1872) ;  S.  C, 

Schuyler,  34  N.  Y,  30  (1865).     Cf.  Me-  61  N.  Y,  237  (1874);  Bank  of  Kentucky 

chanics'   Bank  v.  New  York,  etc.,  R.  R.  v.     Schuylkill    Bank,    Parsons'    Select 

Co.,  13  id.,  599  (1856).     See,  also,  as  to  Cas.,  180,  216   (1846).     This  was   a  suit 

the  point  that  overissued  stock  is  void  in   equity  by  a   bank   against  another 

even  in  the  hands  of  bona  fide  holders,  bank  which,  acting  as  its  transfer  agent, 

People's  Bank  v.  Kurtz,  99  Pa.  St.,  344  had  made  a  large  overissue  of  its  stock. 

(1882) ;  Bruff  v.  Mali,  36  N.  Y,  200  (1867) ;  Tome  v.  Parkersburg,  etc.,  R.  R.  Co.,  39 

People  v.  Parker,  etc.,  Co.,  10  How.  Prac,  Md.,  36  (1873) ;  Willis  v.  Phila.,  etc.,  R 

543  (1854) ;  Sewell's  Case,  L.  R,  3  Chan.  R  Co.,  6  Week.  Notes  Cas..  461  (1879) ; 

App.,  131, 138(1868);  Wright's  Appeal,  99  Willis  v.  Fry.  13  Phila.,  33  (1879);  Peo- 

Pa.  St.,  425(1882);  Scovill  v.  Thayer,  105  pie's  Bank   v.   Kurtz.   99    Pa.    St.,    344 

U.  S.,  143  (1881).  (1882).     See,  also,  Daly  v.  Thompson,  10 

s  Sewell's   Case,  L.  R,  3  Chan.  App.,  Mees.  &  W.,  309  (1842);  In  re  Bahia,  etc., 

131   (1868);  New  York,  etc.,  R.  R  Co.  v.  R.  R.  Co.,  L.  R,  3  Q.  B.,  584,  595  (1868); 

Schuyler,  34  N.  Y,  30,  56,  57  (1865).  Simm  v.  Anglo,  etc.,  Co.,  L.  R.,  5  Q.  B. 

*  New  York,  etc.,  R.  R  Co.  v.  Schuy-  Div.,  188  (1879):  Waterhouse  v.  London, 

395 


§  293.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.       [en.  XVII. 


This  rule  applies  also  to  overissues  of  stock  which  are  caused  by 
the  forgery  on  the  part  of  one  corporate  officer  of  the  names  of 
other  corporate  officers.1 


etc.,  R.  R  Co.,  41  L.  T.  (N.  S.),  558  (1879); 
Mandelbaum  v.  North,  etc.,  R  R  Co.,  4 
Mich.,  465  (1857):  Wright's  Appeal,  99 
Pa.  St.,  425  (1882).  In  many  of  these 
cases  the  overissue  was  due  to  a  mis- 
take of  the  corporation  in  allowing  a 
transfer  of  stock.  The  failure  to  sur- 
render an  old  certificate  does  not  give  a 
purchaser  of  stock,  notice  that  an  over- 
issue is  being  made.  Allen  v.  South 
Boston  R  R,  22  N.  E.  Rep..  917  (Mass., 
1889).  A  party  who  purchases  over- 
issued stock,  but  is  not  a  purchaser  in 
good  faith  for  full  value,  cannot  hold 
the  company  liable  where  the  stock  was 
issued  by  tlie  executive  committee  with- 
out authority.  Ryder  v.  Bushwick  R 
R.  134  N.  Y..  83  (1892). 

1  Where  the  secretary  and  treasurer 
of  a  corporation,  who  is  also  its  agent 
for  the  transfer  of  stock,  and  authorized 
to  countersign  and  issue  stock  when 
signed  by  the  president,  forges  the  name 
of  the  latter  and  fraudulently  issues  a 
certificate  of  stock,  the  corporation  is 
liable  to  a  bank  which  has  accepted 
such  certificate  in  good  faith  as  security 
for  a  loan.  In  this  case  the  bank 
caused  inquiry  to  be  made  at  the  office 
of  the  railroad  company  and  was  in- 
formed by  the  secretary  and  treasurer 
that  the  certificate  was  genuine.  The 
bank  was  allowed  to  recover  although 
it  had  sold  the  forged  stock,  but  had 
taken  it  back  upon  the  forgery  becom- 
ing known.  Fifth  Avenue  Bank  v. 
Forty-second  Street,  etc.,  Co.,  33  N.  E. 
Rep,  378  (N.  Y.,  1893).  Where  the  treas- 
urer is  the  proper  agent  to  issue  stock 
and  the  president  intrusts  him  with  cer- 
tificates signed  in  blank,  the  corporation 
is  liable  for  overissued  stock  issued  and 
sold  by  the  treasurer  for  his  own  bene- 
fit, even  though  no  old  certificate  was 
surrendered.  Allen  v.  South  Boston 
R  R..  22  N.  E.  Rep,  917  (Mass.,  1889). 
Where   the   secretary  of   the  company 


has  made  fraudulent  transfers  of  stock 
and  falsified  the  share  register,  and 
fraudulently  induced  two  of  the  di- 
rectors to  affix  the  seal  of  the  company 
to  the  certificates,  the  company  is  liable 
to  a  purchaser  of  the  certificates.  The 
measure  of  damages  is  the  price  paid 
by  the  purchaser  for  the  certificate  with 
interest  thereon,  the  application  for 
transfer  having  been  made  to  the  com- 
pany on  that  same  day.  lie  The  Ottos, 
etc.,  Mines,  68  L.  T.  Rep,  138  (1892); 
Shaw  r.  Port  Philip  &  C.  Gold  Min.  Co., 
L.  R,  13  Q.  B.  D.,  103  (1885),  where  the 
corporation  was  held  liable  on  a  cer- 
tificate signed  and  issued  by  the  secre- 
tary of  the  corporation,  but  who  had 
forged  thereto  the  names  of  the  other 
corporate  officers  whose  signatures  were 
necessary  to  the  issue  of  a  certificate  of 
stock.  Cf.  Duncan  v.  Luntley,  2  McN. 
&  G.,  30  (1849).  See,  also,  Manhattan 
Beach  Co.  v.  Harned,  27  Fed.  Rep.,  484 
(1886),  where,  however,  the  issue  was  by 
fraud  rather  than  forgery ;  Moores  r. 
Citizens'  National  Bank,  111  U.  S.,  157 
(1883);  Brooklyn,  etc.,  R  R  v.  Strong, 
75  N.  Y,  591  (1878).  See,  also,  §§  294, 
363,  N.  Y  L.  J.,  Aug.  5,  1889;  21  Pac. 
Rep.,  894  (Colo.,  1889).  A  person  who 
takes  a  certificate  of  stock  issued  di- 
rectly from  the  corporation  to  himself, 
and  takes  it  from  the  officer  is- 
suing it,  as  collateral  security  for  a 
personal  obligation  of  such  officer,  is 
bound  to  inquire  into  the  issue.  If  the 
stock  is  spurious  such  a  holder  is  not  a 
bona  fide  holder.  Farrington  v.  South 
Boston  R.  R,  23  N.  E.  Rep.,  109  (Mass., 
1890).  Where  the  transfer  agent  of  a 
corporation  makes  out  a  certificate  of 
stock  and  forges  the  name  of  a  fictitious 
person  to  an  assignment  thereof,  and 
issues  a  new  certificate  to  such  fictitious 
person  and  causes  the  proper  officers  to 
sign  such  certificate,  and  then  signs  the 
fictitious    person's    name    thereto    and 


396 


CH.  XVII.]       INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.  ..'    294. 

A  corporation,  like  a  natural  person,  is  liable  in  damages  for  the 
torts  and  frauds  of  its  agents  when  acting  within  the  scope  of  their 
proper  employment,  and.  when  fraudulent  certificates  are  issued  by 
its  officers,  and  pass  innocently  into  the  hands  of  bona  fide  holders 
for  value,  the  corporation  is  estopped  to  deny  the  authority  of  such 
agents,  and  cannot  escape  liability  for  damages  so  resulting. 

If  an  innocent  holder  of  overissued  stock  brings  an  action  in 
equity  to  compel  the  corporation  to  record  the  transfer,  he  will  be 
denied  that  relief,  but  may  have,  in  lieu  thereof,  damages  at  law.1 
The.  better  remedy  in  such  a  case,  therefore,  is  an  action  at  law; 
.  nd  the  pleasure  of  damages  is  the  market  value  of  the  stock  at  the 
time  the  transfer  was  demanded.2 

§294.  Defenses  of  (lie  corporation  to  such  actions.—  It  frequently 
happens  that  an  overissue  of  stock  is  made  without  a  strict  com- 
pliance with  the  formalities  of  an  issue  of  genuine  stock.  Gener- 
ally, certificates  of  stock  must,  according  to  the  by-laws  of  the 
corporation,  be  signed  by  certain  specified  corporate  officers.  Often, 
however,  nothing  in  the  charter  or  by-laws  of  the  corporation  reg- 
ulates the  form  or  contents  of  a  certificate  of  stock.  Accordingly, 
when  action  is  brought  against  a  corporation  on  overissued  stock, 
the  defense  is  sometimes  set  up  that  the  certificates  were  not 
signed  by  the  proper  officers,  or  were  not  issued  with  the  usual 
formalities,  and  consequently  that,  the  purchaser  having  had  no- 
sells  it,  the  company  is  liable  in  dam-  special  amount  of  stock  by  the  person 
ages  to  a  purchaser  of  the  certificate,  designated  therein,  or  his  assignee,  and 
Jarvis  v.  Manhattan  Beach  Co.,  6  N.  Y.  the  purchaser  has  a  right  to  rely 
Supp.,  703  (1889);  S.  C,  53  Hun,  362.  thereon  and  claim  the  benefit  of  an 
Where  the  signature  of  the  president  estoppel  in  his  favor  as  against  the  cor- 
and  treasurer  to  certificates  is  required  poration."  See.  also.  Appeal  of  Jeans, 
and  the  president  issues  fraudulent  cer-  11  Atl.  Rep.,  862;  Paper  Co.'s  Appeal, 
tificates  to  himself  and  forges  the  treas-    99  Pa.  St.,  513. 

urer's  name  thereto,  the  corporation  is  l  Willis  v.  Phila.,  etc.,  R.  R.  Co.,  6 
not  liable  therefor,  even  to  bona  fide  Week.  Notes  Cas.,  461  (1879);  People's 
purchasers.  Hill  v.  Jewett,  etc.,  Co.,'  28  Bank  v.  Kurtz,  99  Pa.  St.,  344  (1882). 
X.  E.  Rep.,  142  (Mass.,  1891).  In  the  2  People's  Bank  v.  Kurtz.  99  Pa.  St., 
case  of  Swain  v.  West  Philadelphia,  etc..  344  (1882) ;  Willis  v.  Phila.,  etc.,  R.  R. 
R'y(see  18  Atl.  Rep.,  383),  the  supreme  Co.,  6  Week.  Notes  Cas.,  461  (1879); 
court  of  Pennsylvania  held  a  corpo-  Tome  v.  Parkersburg,  etc..  R.  R.  Co., 
ration  liable  for  a  fraudulent,  false,  39  Md.,  36  (1873).  It  is,  however,  a  con- 
spurious  and  void  issue  of  stock  by  its  dition  precedent  to  maintaining  such  an 
president  "  The  liability  of  the  railway  action  that  the  holder  of  the  overissued 
company  arises  on  the  principle  of  es-  stock  discharge  any  lien  upon  it  which 
toppel,  which  the  necessities  of  trade  would  have  properly  attached  to  gen- 
and  commerce  require.  Stock  certifi-  uine  stock  under  the  same  conditions, 
cates  issued  by  a  corporation  having  Mt.  Holly  Paper  Co.'s  Appeal,  99  Pa. 
power  to  issue  is  a  continuing  con-  St.,  513  (1882). 
firmation    of     the    ownership    of    the 

397 


295.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.       [dl.  XVII. 


tice  of  the  infirmity,  the  corporation  is  not  liable.  But  such  a 
defense  is  not  favored  by  the  courts.1  "Where,  however,  the  charter 
provided  that  certificates  of  stock  should  be  signed  by  the  presi- 
dent, directors  and  treasurer,  fraudulent  overissues  signed  by  the 
president  and  treasurer  alone  were  held  not  sufficient  to  charge  the 
corporation.2 

§  295.  Personal  liability  of  the  officers  of  tlie  corporation  on  over- 
issued stock. —  The  officers  of  a  corporation  who  are  authorized  to 
issue  certificates  of  stock  to  the  stockholders  are  liable,  in  tort,  both 
to  the  immediate  purchasers  from  them  of  spurious  stock,  falsely 
and  fraudulently  certified  by  them,  and  also  to  any  subsequent  pur- 
chaser buying  upon  the  faith  of  the  false  certificate,  and  sustaining 
damage  thereby.3  There  may  be  a  joint  action  against  the  corpora- 
tion and  the  corporate  agents  issuing  the  stock,  or  a  separate  action 
against  either.4     A  corporation  may  sue  in  assumpsit  its  treasurer 


i  New  York,  etc.,  R  R  Co.  v.  Schuy- 
ler, 34  N.  Y.,  30  (1865).  Thus,  where  an 
officer  of  a  corporation  fraudulently  is- 
sued stock  for  his  own  use,  controlled 
all  the  books  relating  to  the  stock,  and 
countersigned  all  the  certificates,  the 
corporation  was  held  liable  for  the  spuri- 
ous stock.  Tome  v.  Parkersburg,  etc., 
R  R  Co.,  39  Md.,  36  (1873).  So,  also, 
where  overissued  stock  is  issued  under 
the  genuine  seal  of  the  corporation,  the 
corporation  is  liable.  People's  Bank  v. 
Kurtz,  99  Pa.  St.,  344  (1882).  See,  also, 
Manhattan  Beach  Co.  v.  Harned,  27  Fed. 
Rep.,  484  (1886).  The  last  case,  however, 
was  where  the  corporate  officers  issued 
stock,  not  in  excess  of  the  capital  stock, 
but  a  part  of  the  unissued  original 
capital  stock.  They  issued  it  not  for 
the  corporation,  but  in  fraud  of  it  and 
for  their  own  benefit  See,  also,  §  293, 
supra. 

2  Hoi  brook  v.  Fauquier,  etc.,  Turnpike 
Co.,  3  Cranch,  C.  C,  425  (1829).  And 
overissued  stock  issued  by  the  president 
to  his  private  debtor,  in  payment  of  his 
private  debt,  has  been  held  not  to  con- 
fer on  such  debtor  a  right  to  hold  the 
corporation  responsible.  Wright's  Ap- 
peal, 99  Pa.  St,  425  (1882).  In  this  case 
the  court  assumes  that  the  debtor  could 
not  be  heard  to  claim  bona  fides. 

SBruff  v.  Mali,  36   N.  Y,  200  (1867); 


Seizer  v.  Mali,  41  id.,  619  (1869),  revers- 
ing S.  C,  32  Barb.,  76  (I860);  11  Abb. 
Prac,  129;  Cazeaux  i\  Mali,  25  Barb.. 
578  (1857).  And  the  holder  of  genuine 
stock  has  an  action  against  them  for  tlie 
depreciation  of  its  value  by  reason  of 
the  overissue.  Shotwell  v.  Mali,  38  id., 
445  (1862).  A  person  receiving  stock 
from  the  directors  of  a  corporation,  in 
pledge  for  a  loan  to  it,  they  knowing 
that  the  stock  was  overissued,  may  sue 
the  directors  for  damages  in  an  action 
for  deceit.  Whitehaven,  etc.,  Co.  v. 
Reed,  54  L.  T.  Rep..  360  (1886);  National 
Exchange  Bank  v.  Sibley,  71  Ga.,  726 
(1883).  See,  also,  Daly  v.  Thompson,  10 
M.  &  W.,  309  (1843;.  By  statute  in  many 
of  the  states  such  forgeries  are  made  a 
special  criminal  offense.  Regina  r.  Nash, 
2  Denison's  Crim.  C,  493  (1852);  New 
York  Penal  Code,  §  591.  Concerning 
the  requirements  of  an  indictment  for 
issuing  fraudulent  stock,  see  West  v. 
People,  27  N.  E.  Rep.,  34  (111.,  1891). 

'Bruff  v.  Mali,  36  N.  Y,  200  (1867). 
And  when  the  action  is  against  the  offi- 
cers responsible  for  the  fraudulent  over- 
issue, if  the  evidence  shows  that  the 
entire  capital  stock  of  the  company  had 
been  issued  prior  to  the  dates  of  tlie 
certificates  purchased  or  held  by  the 
plaintiff,  and  if  it  appears  that  the  de- 
fendants prior  thereto  had,  as  officers  of 


398 


CH.  XVII.  J      INCREASE,  REDUCTION  AND  OVERISSUE  OF  STOCK.      [§§  296,  297. 

who  has  illegally  issued  excessive  stock  and  converted  the  proce3ds 
to  his  own  use.1 

§  296.  Liability  oftlie  vendor  of  overissued  stock. —  In  the  absence 
of  fraud  the  purchaser  of  overissued  and  spurious  stock  cannot 
hold  his  vendor  liable  thereon.  The  hona  fide  vendor  can  be  held 
to  warrant  onlv  his  own  title  to  the  shares,  not  the  right  of  the 
corporation  to  issue  them.  If  he  came  by  them  honestly  and  sells 
them  in  good  faith  there  is  no  recourse  to  him,  even  though  they 
turn  out  to  be  spurious.2 

§  297.  Equity  will  enjoin  voting,  transferring  or  dividends  on 
such  stock,  and  will  adjust  the  rights  of  all  parties. —  A  court  of 
equity  will,  upon  a  proper  application,  grant  an  injunction  to  pre- 
vent the  transfer  of  illegally-issued  stock,  or  the  payment  of  divi- 
dends thereon,  or  the  voting  of  the  pretended  owners  of  such  stocks.3 
The  most  effectual  remedy  in  these  cases  is  a  suit  in  equity,  insti- 
tuted by  the  corporation,  whereby,  in  one  proceeding,  the  rights 
and  liabilities  of  all  persons  concerned  with  the  overissue  of  the 
stock  are  fully  and  finally  determined  and  adjudicated,  and  the 
overissued  stock  itself  is  retired  and  destroyed.  Such  a  proceeding 
is  in  the  nature  of  a  bill  to  quiet  title,  or  to  remove  a  cloud  from 
the  title  of  the  genuine  stock.  Spurious  or  overissued  stock,  issued 
by  corporate  officers  having  the  apparent  authority,  and  outstand- 
ing in  the  hands  of  numerous  holders,  is  a  cloud  upon  the  title  to 
the  genuine  stock.  It  is  a  cloud  which  a  court  of  equity  will  re- 
move; and  a  suit  to  that  end  may  be  commenced,  either  by  the 
corporation 4  or  by  the  stockholders  themselves  in  their  own  behalf, 

the  corporation,  issued  spurious  certifi-  to  the  liability  of  brokers  for  the  forgery 

cates  of  stock,  then  there  is  a  presump-  of  their  employees  in  delivering  spurious 

tion  of  law  that  the  certificates  in  con-  stock  to  a  customer,   see  Andrews  v. 

troversy  are  false  and  fraudulent,  and  Clark,  20  Atl.  Rep.,  429  (Md.,  189(k     In 

the  burden  is  upon  the  defendants  to  the  case  Isham  v.  Post.  N.  Y.  L.  J.,  April 

show  that  these  particular  certificates  18,  1893,  a  broker  was  held  liable  to  his 

were  issued,  either  upon  the  surrender  customer  for  whom  he  had  purchased 

of  certificates  of  genuine  stock,  or  upon  certificates  of  stock  which  turned  out 

the  transfer  on  the  books  of  the  com-  to  be  forgeries.     See,  also,  ch.  XXV. 
pany  of  such  stock  —  facts  peculiarly        3  Kent  v.  Quicksilver  Mining  Co.,  78 

within  the  knowledge  of  the  corporate  N.  Y.,  159.    And  where  a  corporate  offi- 

officers.     Shotwell  v.  Mali,  38  Barb.,  445,  cer  issues  illegal  and  unauthorized  stock 

469  (1862),  a  well-considered  case ;  Bruff  he  may  be  enjoined  from   allowing  a 

v.  Mali,  supra.  transfer  of  it  if  proof  is  given  of  its  ille- 

1  Rutland  R.  R  v.  Haven,  19  Atl.  Rep.,  gal  character  and  of  a  proposed  trans- 
769  (Vt,  1890).  fer.     Sherman    v.    Clark.    4    Nev.,   138 

2  State  v.  North  Louisiana,  etc.,  R  R  (1869). 

Co.,  34  La.  Ann.,  947  (1882);  People's  4  New  York,  etc.,  R  R  Co.  v.  Schuy- 
Bank  v.  Kurtz,  99  Pa.  St,  344  (1882);  ler,  17  N.  Y,  592(1858).  Stock  purchased 
Seizer  v.  Mali,  41  N.  Y,  619  (1869).     As    from  the  secretary,  as  secretary,  is  not 

399 


§  298.]  INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.       [CH.  XVII. 

• 

where  the  corporation  fails  or  refuses  to  institute  it.1  "Were  it  not 
for  this  remedy  in  equity  a  corporation  whose  officers  have  fraud- 
ulently issued  spurious  stock  would  soon  be  thrown  into  insolvency 
and  a  receivership  by  reason  of  the  multitudinous  suits  at  law 
which  would  be  brought,  attended  as  such  suits  are  by  attachments 
and  heavy  bills  of  costs.  In  order  to  protect,  preserve  and  ad- 
minister the  corporate  assets  in  such  cases,  and  in  order  to  prevent 
a  multiplicity  of  suits  and  remove  a  cloud  from  the  title  to  the 
other  stock,  a  court  of  equity  will  assume  jurisdiction. 

§  298.  Subscriber  s  right  to  defeat  a  subscription  to  overissued 
stock,  and  to  recover  uacli  money  paid  thereon. —  In  addition  to  the 
remedy  in  equity,  the  holder  of  overissued  stock  has  the  further 
right  at  law  to  defeat  an  action  on  his  subscription  therefor;  and 
that,  too,  even  though  he  knew  it  to  be  overissued  at  the  time  the 
subscription  was  made.  There  can  be  no  estoppel  in  such  a  case ; 
and  not  even  creditors  can  enforce  any  liability  on  spurious  or  over- 
issued stocks.2  "Where  also  a  subscriber  has  paid  an  instalment  on 
his  subscription,  although  he  knew  when  he  made  the  subscription 
and  paid  the  money  that  it  was  an  illegal  and  unauthorized  issue, 
he  may  rescind,  and  recover  back  what  he  has  paid.3  In  Iowa  it 
has  been  held  that  payment  of  a  note  given  for  overissued  stock 
cannot  be  enforced' where  the  consideration  was  expressed  in  the 
note  to  be  the  stock  of  the  corporation  to  which  the  note  was  given, 
and  the  directors  subsequently  made  an  illegal  and  unauthorized 
increase  in  the  stock,  the  maker  of  the  note  having  had  notice  that 
a  large  amount  of  illegal  stock  had  been  issued,  and  that  the  illegal 

good  if  overissued,  and  if  the  secretary  Cftrk  v.  Turner,  73  Ga.,  1  (1884).     Al- 

sold  it  for  his  own  benefit,  even  though  though  a  corporation  has  taken  more 

it  was  duly  signed.     A  bill  in  equity  lies  subscriptions  than  its  capital  stock  and 

to  cancel  it.   Cincinnati,  etc.,  R'y  v.  Citi-  has  issued  certificates  therefor,  yet  this 

zeus'  Nat'l  Bank,  3  R'y  &  Corp.  L.  J.,  does  not  release  subscribers  up  to  the 

459  (Cin.  Court,  1888).  correct  amount.   Cartright  u  Dickinson, 

i  Dewing  v.  Perdicaries,  96  U.  S.,  193  13  S.  E.  Rep.,  1030  (Tenn.,  1890). 
(1877) ;  Wood  v.  Union,  etc.,  Ass'n,  63        3  Knowlton  v.  Congress,  etc.,  Co.,  14 

Wis.,  9  (1885) ;  Perdicaris  v.  Charleston  Blatch,  364  (1877) ;  aff'd,   103  U.  S.,  49 

Gaslight  Co.,  Chase's  Dec,  435  (1869).  (1880);  Reed  v.  Boston  Machine  Co.,  141 

Cf.  Taylor  v.  South  &  North  Ala,  R.  R.  Mass.,  454  (1886).     And  the  dissenting 

Co.,  4  Woods,  575  (1882),  where  the  sub-  opinion  of  Dwight,  Com'r,  in  Knowlton 

scriber  acquiesced  ten  years.    The  court  v.  Congress,  etc.,  Co.,  57  N.  Y.,  518,  540 

denied  any  relief.     In  an  action  to  can-  (1874).      This  case,   however,   was  not 

eel  illegally  increased  stock  the  plaintiff  strictly  a  case  of  overissued  stock.     A 

must  offer  to  surrender  the  part  held  by  different  class  of  cases  exists  where  an 

himself.     Byers  v.  Rollins,  21  Pac.  Rep.,  increase  of  capital  stock  is  authorized, 

894  (Colo,  1889).  but  is  irregularly  made.     A  subscriber 

2  Scovill  v.  Thayer,  105  U.  S.,  143  (1881) ;  is  then  liable.     See  §  289,  siqwa. 
Page  v.  Austin,  10  Can.  Sup.  Ct.,  132; 

400 


CH.  XVII.]       INCREASE,  REDUCTION    AND    OVERISSUE    OF    STOCK.  [§  298. 

and  valid  stock  could  not  be  distinguished.1  Bat  it  is  held  that  one 
who  subscribes  for  overissued  stock,  bona  Jide,  upon  discovering 
that  the  stock  is  spurious  cannot  have  a  receiver  appointed,  pend- 
ing an  inquiry  into  the  legality  of  the  stock,  to  the  end  that,  in  case 
the  stock  is  judicially  declared  invalid,  such  subscriber  may  re- 
cover back  from  the  corporation  the  money  so  paid  for  the  spurious 
shares,  where  the  money  received  by  the  company  had  not  been 
kept  separate  from  its  general  funds,  and  could  not  be  traced  and 
identified.2 

1  Merrill    v.    Gamble,    46    Iowa,  615        2Whelpley    v.   Erie    Railway    Go.,   6 

(1877) ;   Merrill    v.   Beaver,  46   id.,  646    Blatch.,  271  (1868> 

(1877);  Merrill    v.  Beaver,  50   id.,  404 
(1879). 

(66)  401 


PART  II. 

TKANSFEKS  OF  STOCK. 


CHAPTER  XVIII. 


LEGACIES  AND  GIFTS  OF  STOCK 


§  299.  Definitions  of  general,  specific 
and  demonstrative  legacies  of 
stock. 

300-301.  Importance  of  the  difference 
between  general  and  specific 
legacies. 

302-303.  Legacies  of  stock  are  con- 
strued to  be  general  if  the  lan- 
guage will  permit. 


§  304-305.  Amount  of  stock  conveyed 
by  certain  legacies. 
306.  Ademption   of   revocation  of    a 
legacy    of    stock,    and    abate- 
ment 
Duty  of  executor  as  regards  spe- 
cific or  general  legacies. 
Gifts  of  stock. 


307. 


308. 


§  299.  Definitions  of  general,  specific  and  demonstrative  legacies 
of  stock. —  A  general  legacy  of  stock  is  a  legacy  whereby  it  be- 
comes the  duty  of  the  executor  or  administrator  to  give  to  or  pro- 
cure for  the  legatee  a  certain  amount  of  stock,  as  indicated  by  the 
will,  there  being  nothing  in  the  will  itself  to  indicate  that  the  legacy 
is  to  be  satisfied  from  stock  actually  owned  by  the  testator.  A  spe- 
cific legacy  of  stock  arises  when  the  testator,  in  his  will,  directs  or 
clearly  indicates  that  the  legacy  is  to  be  satisfied  from  stock  which 
he  owns.  A  demonstrative  legacy  of  stock  is  the  same  as  a  gen- 
eral legacy,  except  that  it  is  to  be  purchased  from  a  particular  fund 
of  the  estate.  Demonstrative  legacies  of  stock  are  of  little  impor- 
tance as  compared  with  the  other  two  kinds.1 

§  300.  Importance  of  the  difference  between  general  and  specific 
legacies. —  It  is  frequently  of  the  greatest  importance  whether  a 
legacy  be  a  general  or  a  specific  one.  A  large  number  of  decisions, 
running:  back  for  nearly  two  hundred  years,  have  been  made  in  en- 
deavoring  to  lay  down  rules  on  this  subject.     The  complications, 

1  That  a  legacy  of  stock  may  be  de-  "  may  be  either  specific  or  general,  ac- 

monstrative,  see  Ives  v.  Canby,  48  Fed.  cording   to  the    circumstances.      It    is 

Rep.,  718  (1891).     That  legacies  of  stock  never  demonstrative.     A  demonstrative 

may  be  demonstrative  has  been  assumed  legacy  is  always  pecuniary  —  differing, 

by  the  cases.     In  the  case,  however,  of  however,  from  an  ordinary  legacy  in 

Eckf eld's  Estate,  W.  N.  C.  (Penn.),  19  being  referred  to  a  particular  fund  or 

(1879),  the  court  says  a  legacy  of  stock  source  of  payment" 

402 


CH.  XVIII.]  LEGACIES   AND    GIFTS    OF    STOCK.  [§  301. 

contradictions,  inconsistent  decisions  and.  doubt  that  have  arisen 
from  the  inherent  difficulties  of  the  subject  are  frequently  adverted 
to  and  deplored  by  succe  sive  generations  of  judges. 

The  importance  of  determining  whether  a  legacy  of  stock  is  gen- 
eral or  specific  rests  in  the  fact  that  if  it  is  specific  it  is  entitled  to 
certain  advantages,  and,  on  the  other  hand,  is  exposed  to  certain 
perils;  while,  if  it  is  general,  it  is  without  those  advantages,  but  is 
also  free  from  the  perils.  The  advantages  of  a  specific  legacy  of 
stock  are  that  debts  of  the  estate  are  to  be  paid  from  other  funds; 
the  specific  legacy  passes,  though  other  legacies  fail  partially  or 
wholly  by  reason  of  deficiencies  in  the  estate;  and  the  specific  leg- 
atee is  entitled  to  all  dividends  declared  after  the  testator's  death, 
instead  of  losing  the  first  year's  dividends,  as  in  case  of  a  general 
legacy  of  stock.  General  legacies  of  stock  have  none  of  these  ad- 
vantages. On  the  other  hand,  a  specific  legacy  of  stock  is  open  to 
the  great  danger  of  being  revoked  by  the  acts  of  the  testator,  and 
frequently  so  when  the  testator  has  no  intention  of  revoking  the 
legacy.1  This  revocation,  arising  by  implication  from  the  acts  of 
the  testator  —  such  as  selling  the  stock  bequeathed,  or  using  it  in 
any  wayjnconsistent  with  the  idea  of  its  passing  under  the  will —  is 
a  danger  that  does  not  exist  if  the  legacy  is  a  general  one,  since 
general  legacies  of  stock  may  be  carried  out  by  the  executor  s  pur- 
chasing the  stock  for  the  purpose  of  the  legacy. 

§  301.  If  a  specific  legacy  will  apply  equally  to  paid-up  stock 
and  to  stock  not  paid  up,  the  legatee  may  take  the  former.2     If 

1  Kenkel  v.  Macgill,  56  Md.,  120  (1880),  cific  and   demonstrative  legacy  is  thus 

the  court  saying :     "  If  the  legacy  is  to  described  : 

be  considered  specific,  then,  in  the  event  "  The   points   of    difference    between 

of  the  testator's  parting  with  the  thing  specific  and  demonstrative  legacies  are 

or  property  bequeathed,  or  if  from  any  these : 

cause  it  should  be  lost  or  destroyed,  the  "  A  specific    legacy  is  not  liable  to 

legacy   fails.     Then,   again,  such    lega-  abatement  for  the    payment  of  debts, 

cies  are  not  liable  to  abatement   with  but  a  demonstrative  legacy  is  liable  to 

general  legacies ;  nor  are  they  liable  to  abate  when  it  becomes  a  general  legacy 

contribution    towards  the  payment  of  by  reason  of  the  failure  of  the  fund  out 

debts."     Where    evidently   the    intent  of  which  it  is  payable.    A  specific  legacy 

was  to  give  specific  bonds  it  was  so  is  liable  to  ademption,  but  a  demonstra- 

decreed.     Davies  v.    Fowler,  L.   R,   16  tive  legacy  is  not.     A  specific  legacy,  if 

Eq.,   308   (1873);  Walton    v.  Walton,   7  of  stock,  carries  with  it  the  dividends 

Johns.  Ch.,  257  (1823) ;  Jacques  v.  Cham-  which  accrue  from  the  death  of  the  tes- 

bers,    2   Coll.,   435  (1846),  holding   also  tator,  while  a  demonstrative  legacy  does 

that  the   legatee   may  select   his  stock  not  carry   interest  from    the  testator's 

from  different  classes,  but  that  he  must  death." 

pay  calls  on  the  stock  due  at  the  time  2  Millard  v.   Bailey,  L.  R,  1  Eq.,  378 

of  the  testator's  death  but  not  paid.     In  (1866) ;     Jacques    v.    Chambers    (1846), 

the  case  of  Mullins  v.  Smith,  1  Dr.  &  Sm.,  supra, 
204  (1860),  the  difference  between  a  spe- 

403 


§  302.]  LEGACIES    AND    GIFTS    OF    STOCK.  [CH.  XVIII. 

the  testator  has  made  payments  on  the  stock  before  calls  have 
been  made,  the  legatee  is  entitled  to  the  benefit.1  If  there  is  both 
a  specific  and  a  general  legacy  of  the  same  stock,  the  specific  is  to 
be  first  satisfied.2  The  specific  legatee  takes  all  the  income  and 
profits  of  the  stock,3  whereas  the  general  legatee  has  no  interest  in 
the  stock  until  twelve  months  after  the  testator's  death.4  The  spe- 
cific legatee  takes  the  stock,  although  there  will  then  be  no  prop- 
erty left  to  pay  pecuniary  legacies.5  However,  he  can  have  only 
so  much  stock  of  that  kind  as  the  testator  dies  possessed  of;6  and  if 
the  latter  dies  possessed  of  none,  the  specific  legatee  takes  none.7 
The  specific  legatee  does  not  take  dividends  declared  and  due  be- 
fore the  testator's  death,  although  such  dividends  have  not  been 
collected.8 

§  302.  Legacies  of  stock  are  construed  to  be  general  if  the  lan- 
guage will  permit. —  It  is  the  policy  of  courts  of  justice  to  uphold 
and  carry  out  a  legacy,  and  implied  revocations  are  not  looked 
upon  with  favor.  According^,  in  order  to  avoid  the  danger  of 
ademption,  to  which  specific  legacies  are  subject,  the  rule  has  be- 
come established  that  general  legacies  are  to  be  favored  by  the 
courts;  and,  if  there  is  doubt  as  to  whether  a  legacy  be  specific  or 
general,  it  will  be  construed  to  be  of  the  latter  kind.9 

Where,  however,  the  intent  of  the  testator  clearly  was  to  give 
particular  stock  owned  by  him,  the  court  will  declare  the  legacy  to 
be  a  specific  one.  Thus,  where  the  testator  gives  the  legacy  of 
stock  by  describing  it  as  "  my  "  stock,  the  legacy  is  a  specific  one.10 

i  Tanner  v.  Tanner,  11  Beav.,  69  (1848).  2  Beav.,  259  (1840) ;  Hayes  v.  Hayes,  1 

2  Barton  v.  Cooke.  5  Ves.,  461  (1805).  Keen,  97  (1836);   Brainerd  v.  Cowdrey, 

3 Loring  v.  Woodward,  41  N.  H,  391  16  Conn.,  1  (1843).     The  omission  of  the 

(1860),  holding  also  that  parol  evidence  word  li  my  "  does  not  necessarily  make 

cannot  show  a  contrary  intent  of  the  the  legacy  a  general  one.      Avelyn  v. 

testator.  Ward,  1  Ves.  Sr.,  420  (1749).    The  word 

4  Webster  v.  Hale,  8  Ves.,  410  (1 803).  "  my  "  does  not.  however,  have  the  same 

5Drinkwater  v.  Falconer,  2  Ves.  Sr.,  significance  in  its  application  to  a  legacy 

622  (1755).  of  an  annuity  as  it  has  to  a  legacy  of 

« Gordon  v.  Duff,  28  Beav.,  519(1860);  stock.      Kirby  v.    Potter,   4    Ves.,   748 

Ashton  v.  Ashton,  3  P.  Wms.,  384  (1735).  (1799).     In  the  case  of  Parrott  v.  Wors- 

"  Evans  v.  Trip,  6  Mad.,  91  (1821).  fold,  1  Jac.  &  Walker,  574  (1820),  a  leg- 

8 Perry  v.  Maxwell,  2  Dev.  Eq.  (N.  C),  acy  of  "all   my  stock  that  I  may  be 

487  (1S34).  possessed   of  at  my  decease  "  was  held 

9Davies  v.  Fowler,  L.  R,  16  Eq.,  308  to  be  general,  since  there  was  no  "indi- 

(1873);  Tifftu  Porter,  8  N.  Y.,  516,  520;  vidual   thing  given."     Bequests  in  dif- 

Eckfeld's   Estate,   7  W.  N.  C.  (Pa.),  19  ferent    sums    to    different    legatees  of 

(1879).  "  my  "   stocks  and  bonds  at  their  par 

10  Walton  v.  Walton,  7  Johns.  Ch.  257  value,  not  describing  them  particularly. 

(1823) ;  Loring  v.  Woodward,  41  N.  H,  are  general  legacies.     They  are  not  void 

391    (1860) ;  Shuttleworth  v.  Greaves,  4  for  uncertainty.     In  re  Hadden's  Will, 

Mylne  &  Cr.,  35  (1838) ;  Miller  v.  Little,  9  N.  Y.  Supp.,  453  (1890> 

404 


CH.  XVIII.] 


LEGACIES    AND    GIFTS    OF    STOCK. 


[§  302. 


So  also  where  the  phrase  "standing  in  my  name"1  is  used,  or 
"  which  I  hold;"2  or  a  direction  is  given  to  make  up  the  specified 
amount  from  the  general  fund  if  the  testator  does  not  hold  enough ; 3 
or  the  testator  describes  the  stock  as  "now  lying  in  the  three  per 
cents.;"4  or  uses  the  word  "such;"5  or  makes  a  legacy  of  stock 
out  of  a  quantity  of  stock;6  or  in  another  part  of  the  will  speaks 
of  the  stock  as  that  of  which  the  testatrix  may  die  possessed;7  or 
where,  after  several  legacies,  all  apparently  general,  the  testator 
bequeaths  the  remaining  stock  "standing  in  my  name," —  the  effect 
of  all  these  is  that  the  legacies  are  specific.8  A  legacy  of  all  the 
dividends,  interest  and  proceeds  from  stock  is  a  specific  legacy, 
even  though  the  testator  did  not  own  such  stock  at  the  time  he 
made  the  will.9  There  has  been  some  dilference  of  opinion  as  to 
whether  the  fact  that  the  testator,  at  the  time  of  making  the  will, 
possessed  an  equal  or  greater  amount  of  stock  than  that  bequeathed, 
and  of  the  same  kind,  is  to  be  taken  as  evidencing  an  intent  to 


.  i  Lmllam's  Estate,  13  Pa.  St.,  188 
(1850);  Gordon  v.  Duff,  28  Beav.,  5l9 
(1860);  Kampf  v.  Jones,  2  Keen,  756 
(1837).  Where,  however,  other  parts  of 
the  will  indicate  that  the  legacy  was 
general,  it  was  held  to  be  general.  See 
Auther  v.  Auther,  13  Sim.,  422  (1843), 
holding  also  that  though,  by  the  delay 
of  the  executor  beyond  a  year  in  pur- 
chasing the  stock,  it  rises,  the  legatee  is 
entitled  to  the  same  amount  as  if  it  had 
been  bought  at  the  right  time.  Fidelity 
Trust  Company's  Appeal,  108  Pa.  St., 
339  and  492  (1885). 

^Blackstone  v.  Blackstone,  3  Watts, 
335  (1839). 

STownsend  v.  Martin.  7  Hare,  471 
(1849),  holding  that  such  a  legacy  is 
specific  and  not  demonstrative.  The 
case,  however,  of  McGuire  v.  Evans,  5 
Ired.  Eq.  (N.  C),  269  (1848).  holds  that 
a  legacy  of  stock,  to  take  effect  in  case 
other  legacies  do  not  absorb  that  stock, 
is  demonstrative ;  also  that  in  case  of 
legacies  of  the  same  stock  to  two  differ- 
ent persons,  each  takes  a  moiety.  The 
cases  of  Mulling  v.  Smith,  1  Dr.  &  Sm., 
204  (1860) ;  Fountaine  v.  Tyler,  9  Price, 
Ex.,  94  (1821);  and  Queen's  College  v. 
Sutton,  12  Sim.,  521  (1842),  hold  that 
such  a  legacy  is  specific  if  the  testator 


leaves  stock  enough,  but  is  general  if  he 
does  not  leave  enough. 

"Morely  v.  Bird,  3  Ves.,  628  (1800), 
holding  that  if  the  executor  has  sold 
the  stock  the  legatees  may  hold  him 
liable  for  its  value  one  year  after  the 
testator's  death. 

5  Davies  v.  Fowler,  L.  R.,  16  Eq.,  308 
(1873),  the  court  saying  that  a  legacy  is 
specific  when  a  meting  out  or  dividing 
is  evidently  intended. 

6  Hasking  v.  Nicholls,  1  Y.  &  C.  Ch., 
478  (1842).  And  if  the  administrator  has 
paid  the  dividends  to  another,  he  is  per- 
sonally liable.  A  legacy  of  "  ten  shares 
of  the  stock  of  the  W.  &  N.  R.  Co."  is  a 
specific  legacy,  where  a  subsequent 
clause  bequeathes  "the  balance  of  my 
stock  as  per  my  stock  book."  Trustees, 
etc.,  v.  Tufts,  23  N.  E.  Rep.,  10j06  (Mass., 
1890). 

7  Measure  v.  Carleton,  30  Beav.,  538 
(1862).  This  case  also  holds  that,  if  an 
exact  partition  of  the  stock  is  impossible, 
enough  will  be  sold  to  render  it  possiUe. 

sSleech  v.  Thorington,  2  Ves.  Sr.,  560 
(1754).  A  legacy  of  all  of  several  arti- 
cles is  specific.  Tomlinson  v.  Bury,  14 
N.  E.  Rep.,  137  (Mass..  1887). 

"Stephenson  v.  Dawson,  3  Beav.,  342 
(1840).  See,  also,  Fidelity  Trust  Com- 
pany's Appeal,  siqn-a. 


405 


§  303.] 


LEGACIES    AND    GIFTS    OF    STOCK:. 


[CH.  XVIII. 


make  the  legacy  specific.  The  weight  of  authority  holds  that  such 
a  fact  is  not  to  be  taken  into  consideration,  and  that  if  the  words 
of  the  legacy  make  it  general,  it  cannot  be  construed  to  be  specific 
simply  because  by  an  examination  of  the  testator's  effects  he  is 
found  to  have  possessed  stock  similar  to  that  described  in  the  will.1 
§  303.  The  most  common  form  of  a  general  bequest  of  stock  is 
where  the  testator  merely  bequeaths  a  specified  number  of  shares 
of  a  specified  kind  to  the  legatees,  without  any  further  words  indi- 
cating that  he  then  held  or  expected  to  hold  the  stock  bequeathed.2 
A  direction  to  the  executors  to  invest  a  certain  sum  in  specified, 
stock  for  the  benefit  of  the  legatee  is  a  general  legacy.3  So,  also, 
where  the  executors  are  directed  to  transfer  to  the  legatee  certain 
stock.4  A  legacy  of  the  residue  of  the  testator's  stock  has  been 
held  to  be  a  general  legacy.5  A  legacy  to  be  paid  "  out  of  the  four 
per  cents."  is  general.6     A  codicil  which  is  general  in  form  is  held 


'Robinson  v.  Addison,  2  Beav.,  515 
(1840),  the  court  holding  that  the  legacy 
was  general,  and  saying  the  testator 
"  in  effect  gave  such  an  indefinite  sum 
of  money  as  would  suffice  to  purchase 
so  many  shares  as  he  had  given  ;  "  Davis 
v.  Cain's  Ex'r,  1  lied.  Eq.  (N.  C),  304 
(1840);  Bransdan  v.  Winter,  Ambl.,  56 
(1738):  Simmons  v.  Vallance.  4  Brown's 
Ch.,  346  (1793) ;  Bishop  of  Petersborough 
v.  Mortlock,  1  Brown's  Ch.,  565  (1784) ; 
Boys  v.  Williams,  2  Russ.  &  MyL,  689 
(1831);  Partridge  v.  Partridge,  Cases 
temp.  Talbot,  226  (1730);  Tifft  v.  Poller, 
8  N.  Y.,  516  (1853),  where  the  court  say : 
"  The  mere  possession  by  the  testator, 
at  the  date  of  his  will,  of  stock  of  equal 
or  larger  amount  than  the  legacy,  will 
not  of  itself  make  the  bequest  specific ;  " 
Osborne  v.  McAlpine,  4  Redf.  (N.  Y. 
Surr.),  1  (1878);  Eckfeld's  Estate,  7  W. 
N.  C.  (Pa.),  19  (1879);  Sponsier's  Ap- 
peal, 107  Pa.  St.,  95  (1884),  where  the 
court  also  held  that  a  codicil  repeating 
a  general  legacy  of  stock  wdl  entitle  the 
legatee  to  both  legacies.  In  Massachu- 
setts a  doctrine  contrary  to  that  stated 
in  the  text  prevails.  See  White  v.  Win- 
chester, 23  Mass.,  48  (1827);  Metcalf  v. 
First  Parish,  128  Mass.,  370  (1880).  To 
same  effect,  Cuthbert  v.  Cuthbert,  3 
Yeates  (Pa.),  486  (1803);  Jeffreys  v. 
Jeffreys,  3  Atk.,  120  (1744;. 


2  Wilson  v.  Brownsmith.  9  Ves.,  180 
(1803),  holding  also  that,  if  there  is  not , 
enough  of  such  stock  among  the  tes- 
tator's assets,  the  deficiency  must  be 
purchased  for  the  legatee.  Pearce  v. 
Billings,  10  R.  I.,  102  (1871),  the  court 
saying  that  the  evident  intent  of  the 
testator  was  "  to  have  the  stock  men- 
tioned purchased  for  the  legatees  by  his 
executor,  or  to  have  the  legatees  fur- 
nished with  the  means  to  purchase  the 
stock  for  themselves."  The  value  of  the 
stocks  one  year  after  the  testator's  death 
is  the  amount  to  be  paid  to  the  legatees. 
In  the  case  of  Purse  v.  Snaplin,  1  Atk.. 
413  (1737),  where  two  legacies  of  stock  of 
5,000?.  each  were  given,  and  the  testator 
had  but  5,000?.  of  stock,  the  court  held 
that  the  general  estate  must  purchase 
5,000/.  of  the  same  stock. 

a  Raymond  v.  Brodbelt,  5  Ves.,  199 
(1800). 

4  Lambert  v.  Lambert.  11  Ves.,  607 
(1805) ;  Sibley  v.  Perry,  7  Ves.,  522  (1802), 
the  court  saying  a  legacy  is  not  specific 
"  without  somethiug  marking  the  sp3cific 
thing  —  the  very  corpus;  without  de- 
scribing it  as  standing  in  his  name,  or 
by  the  expression  '  my  stock,'  etc." 

5  Parrot  v.  Worsfold,  1  Jac.  &  W.,  574 
(1820).  Contra,  Bethune  v.  Kennedy, 
1  Myl.  &  C,  114  (1835). 

*  Deane  v.  Test,  9  Ves.,  146  (1803). 


406 


CH.  XVIII.] 


LEGACIES    AND    GIFfS    OF    STOCK. 


[§§  304,  305. 


to  be  such,  although  it  is  but  an  increase  of  a  previous  legacy 
which  is  specific,  and  which  is  revoked  by  the  codicil.1 

§304.  Amount  of  stock  conveyed  oy  certain  legacies. —  A  legacy 
of  "one  hundred  pounds,  long  annuities,"  has  been  held  to  mean 
not  that  the  legatee  is  entitled  to  an  annual  income  from  the  estate 
of  one  hundred  pounds,  but  that  he  was  entitled  to  have  that 
amount  invested  for  him.2  A  will  reciting  the  amount  of  stock 
held  by  the  testatrix,  and  bequeathing  it,  or  so  much  as  should  be 
standing  in  her  name  at  her  death,  does  not  give  to  the  legatee 
stock  acquired  after  the  making  of  the  will  and  before  the  death 
of  the  testatrix.3  A  bequest  of  stock  "  that  I  possess  "  is  held  to 
mean  stock  possessed  by  the  testator  at  the  time  of  making  the 
will.4 

§  305.  There  has  been  some  controversy  and  doubt  as  to  whether 
a  legacy  of  the  testator's  "money"  would  give  to  the  legatee  the 
testator's  stock  in  a  corporation.  The  decided  weight  as  authority 
holds  that  it  does  not.5   Nor  will  shares  of  stock  belong  to  a  legatee 


Johnson  v.  Johnson,  14  Sim.,  313 
(1844). 

2Att'y-Gen.  v.  Grote,  2  Russ.  &  Myk, 
699  (1831);  Fonnereau  v.  Payntz.  1 
Bro.  Ch„  412  (1785).  See  Pearee  v.  Bil- 
lings, supra.  Contra,  Stafford  v.  Hor- 
ton,  1  Bro.  Ch.,  421  (1785).  See,  also, 
§560. 

SHotkam  v.  Sutton,  15  Ves.,  319  (1808). 
So,  also,  of  a  legacy  of  "  the  whole  of 
my  stock  in  the  Housatonic  Bank, 
amounting  to  $6,000."  The  legatee  does 
uot  take  stock  subsequently  acquired. 
Foote,  Appellant,  39  Mass.,  299  (1839); 
Douglass  v.  Douglass,  Kay,  404  (1854). 
The  case  of  Fidelity  Trust  Company's 
Appeal,  supra,  states  that  at  common 
law  a  specific  legacy  of  stock  spoke  from 
the  death  of  the  testator,  and  that  the 
English  Wills  Act  of  1838.  and  the 
Pennsylvania  act  of  1879,  were  but  de- 
claratory in  that  respect  If  the  tes- 
tator, in  making  a  specified  bequest  of 
stock,  speaks  of  the  stock  as  "  now  stand- 
ing in  my  name,"  the  statute  does  not 
apply,  and  the  bequest  speaks  from  the 
date  of  the  will.  In  Miller  v.  Miller,  2 
Beav.,  259  (1840),  the  testator  gave  "  one 
share  to  each  child  him  surviving."  He 
then  had  eight  shares  and  seven  chil- 
dren. At  his  death  he  had  ten  shares  and 

40' 


eleven  children.  Only  the  eight  shares 
were  held  to  pass. 

*  Cochran  v.  Cochran,  14  Sim.,  248 
(1844).  This  rule  is  sometimes  changed 
by  statute.  See,  in  England,  §  24,  Wills 
Act,  applied  in  Trinder  v.  Trinder,  L.  R., 
1  Eq.,  695  (1866),  and  Goodlad  v.  Bur- 
nett, 1  K.  &  J„  341  (1855) ;  Hepburn  v. 
Skerving,  4  Jur.  (N.  S.),  651  (1858) ;  Wag- 
staff  v.  Wagstaff,  L.  R.,  8  Eq.,  229  (1869) : 
Bothamley  v.  Shersan,  L.  R.  20  Eq.,  304 
(1875),  and  preceding  note.  Legacy  of 
bank  stock  conveys  all  stock  deposited 
in  bank,  there  being  no  shares  of  bank 
stock  owned  by  the  testator.  Tomlin- 
son  v.  Bury,  14  N.  E.  Rep.,  137  (Mass., 
1887).  A  will  may  bequeath  not  only 
the  stock  standing  in  the  name  of  the 
testatrix,  but  also  certificates  of  stock 
owned  by  her  but  standing  in  the  name 
of  others.  Angell  et  al.  v.  Springfield 
Home  for  Aged  Women,  31  N.  E.  Rep., 
1064  (Mass.,  1892). 

1  Mullins  v.  Smith.  1  Dr.  &  Sm.,  204 
(1860);  Hotham  v.  Sutton,  15  Ves.,  319 
(1808) ;  Lowe  v.  Thomas.  Kay,  369  (1854), 
affirming  5  De  G.,  M.  &  G,  315  (1854); 
Goshen  v.  Dotterill.  1  Myl.  &  K,  56 
(1832);  Hundleston  v.  Gouldsbury.  10 
Beav.,  547  (1847) ;  Douglas  v.  Congreve, 
1  Keen,  410,  424  (1836);  Willis  v.  Plus- 


§  305.] 


LEGACIES    AND    GIFTS    OF    STOCK. 


[CH.  XVIII. 


to  whom  the  testator  has  given,  by  a  last  will  and  testament,  his 
"  securities  for  money," J  or  "  furniture,"  and  all  claims  and  de- 
mands of  whatever  nature,2  or  "  every  other  article," 3  or  "  ready 
money," 4  or  goods,5  or  "  money  and  effects ; " 6  but  they  will  pass 
under  a  bequest  of  the  "  personal  estate,"  7  or  "  residue  of  money," 8 
or  "  chattels." 9  If  the  testator,  in  describing  the  stock  bequeathed, 
has  very  clearly  made  a  mistake  in  the  description,  the  legacy  will 
be  held  to  apply  to  the  stock  intended  to  be  bequeathed.  Thus, 
where  the  testator  has  "City  Bank"  stock,  but  bequeaths  "  Me- 
chanics' Bank  "  stock,  and  the  intent  was  to  bequeath  the  former, 
the  court  will  render  a  decree  to  that  effect.10  Where,  subsequently 
to  the  making  of  the  will,  and  before  the  death  of  the  testator,  the 
stock  bequeathed  is  changed  in  its  character  by  operation  of  law, 
the  legatee  will  nevertheless  be  entitled  to  the  stock  in  its  new 
form.11 

In   England,    where    "shares"    corresponds    to    the   American 
"  stock,"  but  "  stock  "  is  a  term  applicable  to  a  paid-up  interest, 


kett,  4  Beav.,  208  (1841);  Ogle  v.  Knipe, 
L.  R.,  8  Eq.,  436  (1869);  Ommaney  V. 
Butcher,  1  Tur.  &  R,  260,  272  (1823), 
holding  also  that  a  bequest  of  stock  for 
an  indefinite  charity  fails;  Beck,  Ex'r, 
v.  McGillis,  9  Barb.,  35,  39  (1850). 
Contra,  Waite  v.  Coombes,  5  De  G.  & 
S.,  676(1852);  Chapman  v.  Reynolds,  28 
Beav.,  221  (1860),  where  the  testator  had 
no  property  but  stock  ;  Bescoby  v.  Pack, 
1  Sim.  &  Stu.,  500  (1823),  holding- that 
'"money"  will  pass  the  '-funds."  but 
not  stock  in  private  corporations ;  New- 
man v.  Newman,  26  Beav.,  218  (1858), 
where  the  legacy  was  of  "  surplus 
money ; "  Jenkins  v.  Fowler,  63  N.  H., 
244  (1884). 

i  Turner  v.  Turner,  21  L.  J.  (Ch.),  843 
(1852). 

*  Delamater's  Estate,  1  Whart  (Pa.), 
362  (1836). 

;i  Collier  v.  Squire,  3  Russ.,  467  (1827). 

4  May  v.  Grave,  3  De  G.  &  Sin.,  462 
(1849). 

5  Cowling  v.  Cowling,  26  Beav.,  449 
(1859).  Contra,  Kendall  v.  Kendall.  4 
Russ.  Ch.,  360  (1828).  Stock  passes  un- 
der a  legacy  of  "my  property  at  K.'s 
bank,"  the  certificates  being  there.  Re 
Prater's  Estate,  58  L,  T.  Rep.,  784  (1888). 


6  Borton  v.  Dunbar,  30  L.  J.  (Ch.),  8 
(1861). 

7  Kermode  v.  Macdonald,  L.  R,  3  Ch., 
584  (1868). 

s  Dawson  v.  Gaskoin,  2  Keen,  14  (1837) ; 
Fulkerou  v.  Chitty,  4  Jones'  Eq.  (N.  C), 
244  (1858). 

9  Kendall  v.  Kendall,  supra. 

10  Roman  Catholic  Orphan  Asylum  v. 
Emmons,  4  Redf.  (N.  Y.),  144  (1855); 
Door  v.  Geary,  1  Ves.  Sr„  255  (1749), 
holding  that  a  bequest  of  "  East  India 
stock  "  will  apply  to  bank  stock,  when 
the  testator  had  the  latter  but  none  of 
the  former.  See,  also,  Trinder  v.  Trin- 
der,  L.  R,  1  Eq.,  695  (1866),  where  a 
legacy  of  "  Great  Western  Railway " 
stock  was  held  to  apply  to  the  stock  of 
a  road  absorbed  by  the  Great  Western 
Railway:  Oakes  v.  Oakes,  9  Hare,  666 
(1852),  where  a  bequestof  "shares  "  was 
held  to  apply  to  "  stock ; "  Gallini  v. 
Noble,  3  Mer.  Ch.,  690  (1810);  Penticost 
v.  Ley,  J.  &  W.,  207  (1820) ;  Clark  v.  At- 
kins, 90  N.  C,  629  (1884),  where  "bank 
stock  "  was  held  to  pass  bonds.  A  pal- 
pable mistake  of  the  testator  in  describ- 
ing a  legac)-  of  bonds  will  be  corrected 
by  the  court.  Holt  v.  Jex,  48  Hun,  528 
(1888). 

'» See  §306,  note  9. 


:os 


ch.  xvni.] 


LEGACIES    AND    GIFTS    OF   STOCK. 


[§  305. 


which,  like  a  bank  deposit,  may  be  used  in  large  or  small  quanti- 
ties, a  bequest  of  "  shares"  does  not  pass  "  stock"  if  there  be  any 
"  shares  "  to  which  the  legacy  may  apply.1  The  words  "  funds  "  or 
"public  funds"  will  include  long  annuities;2  and  "foreign  funds" 
means  securities  guarantied  by  foreign  governments  ;3  but  "  funds  " 
will  not  include  bank  stock,4  nor  East  India  stock.*  An  uncondi- 
tional bequest  of  the  dividends  of  stock  is  a  bequest  of  the  stock 
itself.6  But  a  bequest  of  a  specific  sum  to  be  paid  from  stock  does 
not  bequeath  the  stock  itself,  although  amounting  to  a  charge 
upon  it.7  A  bequest  of  stock  to  a  legatee  "  to  draw  the  income 
arising  therefrom  during  her  life-time,  and  at  her  death  to  dispose 
of  the  same  as  she  shall  see  fit,"  vests  the  title  to  the  stock,  when 
it  is  set  apart,  in  the  legatee,  even  though  the  executors  are  directed 
to  collect  and  pay  to  her  the  dividends.8  A  bequest  of  the  "  rest 
and  residue  after  deducting  "  certain  specific  legacies  of  stock  in- 
cludes those  legacies,  if  they  have  lapsed  by  reason  of  the  death  of 
the  legatees.9  A  general  bequest  of  stock  applies  to  full-paid  as 
well  as  partly-paid  stock.10  Legacies  may  be  made  of  stock  over 
which   the   testator   has  the  power  of  appointment,11  and  a  will 


lOakes  v.  Oakes,  9  Hare,  666  (1852). 

2  Howard  v.  Kay,  27  L.  J.  (Ch.),  448 
(1858). 

s  Ellis  v.  Eden,  23  Beav..  543  (1857); 
Cadetfc  v.  Earle,  L.  R.,  5  Ch.  D..  710 
(1877),  properly  holding  that  New  York 
and  Ohio  are  foreign  governments.  Cf. 
Longdale's  Settlement  Trusts,  L.  R,  5 
Ch.  D.,  710  (1877),  relative  to  French 
railway  securities. 

4  Slingsby  v.  Granger,  7  H.  L.  Cases, 
273  (1859). 

5  Brown  v.  Brown,  4  K.  &  J.,  704 
(1858). 

6  A  bequest  of  dividends  and  income 
to  an  institution  as  a  permanent  fund 
is  an  absolute  gift  of  the  stock.  Angell 
v.  Springfield  Home  for  Aged  Women, 
31  N.  E.  Rep.,  1064  (Mass..  1892);  Collier 
v.  Collier,  3  Ohio  St.,  369  (1854) ;  Haig  v. 
Swiney,  1  Sim.  &  Stu.,  487  (1823) ;  Page 
v.  Leapingwell,  18  Ves.,  463  (1812) ;  Fox 
v.  Carr,  16  Hun,  566  (1879),  involving  a 
similar  question.  Cf.  Blann  v.  Bell,  2 
De  G.,  M.  &  G.,  775  (1852),  holding  that 
this  rule  applies  only  to  the  "funds," 
but  not  to  stock  in  private  corporations. 
A  legacy  of  stock  to  A.,  "  the  dividends 
derived  from  the  same  to  be  paid  to  her 


by  B.,  whom  I  name  as  trustee  for  said 
stock  and  bonds,  as  said  dividends  may 
accrue  from  time  to  time,"  passes  com- 
plete title  to  the  legatee.  No  trust  exists. 
Appeal  of  Arnold,  6  Atl.  Rep.,  751  (Pa., 
1886). 

"  Wilson  v.  Maddison,  2  Y.  &  C.  Ch., 
372  (1843). 

8  Onondaga  Trust  &  Deposit  Co.  r. 
Price,  87  N.  Y.,  542  (1882). 

9  Carter  v.  Taggart,  16  Sim.,  423  (1848) ; 
Shuttleworth  v.  Greaves,  4  Myl.  &  Cr., 
35  (1838),  holding  that  a  legacy  of  stock 
lapses  as  to  those  dying  before  the  tes- 
tator, though  it  is  given  to  them,  "  their 
executors,  administrators  or  assigns." 

io  Emery  v.  Wason,  107  Mass.,  507 
(1871).  This  case  holds  also  that,  where 
a  call  on  the  stock  becomes  due  the  day 
after  the  testator  died,  it  was  the  duty 
of  the  executor  to  pay  it  from  the  gen- 
eral fund. 

»  See  Re  David's  Trusts,  1  Johns.,  495 
(1859);  Innis  v.  Sayer,  3  Mac.  &  G,  606 
(1851);  Lawnds  v.  Lawnds,  1  You.  & 
Jer.,  445  (1827;;  Nanuock  v.  Horton,  7 
Ves.,  391  (1802);  Re  Gratwick's  Trusts, 
L.  R,  1  Eq.,  177  (1865);  Warren  v.  Pas- 
tlewaite,  2  Coll.  Ch.,  116  (1845);  Walker 


409 


§ 


■  306.1 


LEGACIES    AND   GIFTS    OF   STOCK. 


[CH. 


xviir. 


may  provide  for  an  annuity  to  be  derived  from  stock.1  In  all 
these  cases  the  intention  of  the  testator  is  the  "  pole  star  "  of  the 
courts. 

§  306.  Ademption  or  revocation  of  a  legacy  of  stock,  and  abate- 
ment.—  The  ademption  of  a  legacy  is  a  revocation  of  that  legacy 
in  part  or  wholly,  not  by  an  express  revocation  in  the  will,  but  by 
the  acts  of  the  testator.  Consequently,  an  ademption  applies  only 
to  specific  legacies.2  An  ademption  of  a  specific  legacy  of  stock 
generally  arises  by  a  sale  of  the  stock  by  the  testator.  If  the  spe- 
cific stock  bequeathed  is  not  owned  by  the  testator  at  the  time  of 
his  death  the  legal  conclusion  is  that  the  specific  legacy  is  adeemed, 
and  the  legatee  takes  nothing.3  A  sale  of  the  stock  by  the  testator 
after  the  will  is  made  revokes  or  adeems  the  legacy,  and  it  is  as  if 
never  made.4  A  codicil  giving  all  the  "  personal  estate  "  to  another 
is  a  revocation  of  a  bequest  of  stock  in  the  original  will.5  Where 
the  testator  specifies  the  amount  of  his  stock,  the  specific  legatees 
of  it  abate  proportionately  with  the  residuary  legatee,  if  upon  his 
death  it  is  insufficient.6  The  rule  is  otherwise  if  no  mention  is 
made  of  what  amount  of  stock  he  owns.7  If  the  general  property 
of  the  testator  is  exhausted  in  the  payment  of  the  debts  of  the  es- 
tate, specific  legacies  of  stock  abate  proportionately  with  other 


v.  Maekie,  4  Russ.,  16  (1827),  disapproved 
in  Hughes  v.  Turner,  3  My].  &  K,  697 
(1834). 

1  As  to  the  construction  of  different 
provisions  in  wills,  where  an  annuity 
on  stock  is  created,  see  Innes  v.  Mitch- 
ell, 9  Ves.,  212  (1803);  Kerr  v.  Middlesex 
Hospital.  2  DeG.,  M.  &  G.,  576  (1852); 
Ross  v.  Borer,  2  Jo.  &  H.,  469  (1862); 
Yates  v.  Maddan,  3  Mac.  &  G.,  532 
(1857);  Blewitt  v.  Roberts,  Cr.  &  Ph., 
274  (1841):  Potter  v.  Baker,  13  B.,  273 
(1851);  Robinson  v.  Hunt,  4  B.,  450 
(1S41);  Hedges  v.  Harpur,  3  De  G.  &  J.. 
129  (1858);  Evans  v.  Jones,  2  Collyer, 
516  (1846);  Manserge  v.  Campbell,  3 
De  G.  &  J.,  232. 

2  A  bequest  of  $2,000  of  certain  bonds 
is  demonstrative  and  not  specific  and 
not  adeemed  where  the  testator  had 
$10,000  of  such  bonds  and  sold  them. 
Ives  v.  Canby,  48  Fed.  Rep.,  718  (1891). 

3  Ford  v.  Ford,  23  N.  H,  212  (1851), 
although  not  a  stock  case,  says  in  re- 
gard to  this  branch  of  the  law:  "It  is 
now   established   in   England   that  the 


only  question  is  whether  the  specific 
thing  remains  at  the  death  of  the  testa- 
tor, and  that  the  intention  to  adeem 
will  not  be  considered  beyond  the  ex- 
pressions in  the  will.  .  .  The  weight 
of  American  authority  is  in  favor  of  the 
English  rule." 

4Ashburner  v.  Macguire,  2  Brown's 
Ch.,  108  (1786);  White  v.  Winchester, 
23  Mass..  48  (1827);  Humphreys  v. 
Humphreys,  2  Cox,  184  (1789);  Hayes 
v.  Hayes,  1  Keen,  97  (1836) ;  Blackstone 
v.  Blackstone,  3  Watts,  335  (1839). 

5Kermode  v.  Macdonald,  L.  R,  1 
Eq.,  457  (1866);  affirmed,  L.  R,  3  Ch., 
584  (1868). 

6Elwes  v.  Causton,  30  Beav.,  554 
(1862),  following  Page  v.  Leapingwell, 
18  Ves..  463  (1812). 

'Petre  v.  Petre,  14  Beav.,  197  (1851); 
De  Lisle  v.  Hodges,  L.  R,  17  Eq.,  440 
(1874);  Vivian  v.  Mortlock,  21  Beav., 
252  (1855).  The  debts  of  the  estate  may 
be  directed  to  be  paid  from  the  residue 
of  the  stock.  Choat  v.  Yeates,  1  Jac.  & 
Walk,  102  (1819). 


410 


CH.  XVIII.]  LEGACIES    AND    GIFTS    OF    STOCK.  [§  307. 

specific  legacies.1  A  specific  legac}7  of  stock  is  not  adeemed  by  a 
change  in  the  stock  produced  by  an  act  of  the  government.  Thus, 
where  the  government  buys  the  stock,  a  specific  legatee  takes  the 
compensation  if  it  has  not  yet  been  collected  by  the  testator,2  but 
not  if  it  has  been  collected  and  used  by  the  latter.3  A  change  by 
law  of  the  funds  iuto  funds  bearing  a  lower  rate  of  interest  does 
not  adeem  a  specific  legacy  of  it,4  even  though  the  testator  sells  the 
former  and  buys  the  latter  kind  of  funds.5  A  specific  legacy  of 
stock  by  a,  feme  covert,  who  had  the  power  to  bequeath  it,  is  not 
adeemed  h}'  the  fact  that  she  had  the  stock  transferred  into  her 
own  name  after  the  death  of  her  husband.6  A  specific  legacy  which 
has  been  adeemed  is  not  revived  by  a  republication  of  the  will  after 
the  ademption.7 

§  307.  Duty  of  executor  or  administrator  as  regards  a  specific  or 
general  legacy  of  stoclc. —  TThere  a  legacy  of  stock  is  made.it  is  the 
duty  of  the  executor  or  administrator  to  carry  into  effect  the  wishes 
of  the  testator  by  turning  over  to  the  legatee  the  stock  bequeathed 
if  the  legacy  be  specific;  or,  if  the  legacy  be  general,  by  either  set- 
ting aside  for  the  legatee  the  required  amount  of  stock  from  the 
testator's  effects,  or  purchasing  the  same  for  the  legatee.  The 
specific  legacy  of  stock  vests  in  the  legatee  as  soon  as  the  executor 
is  satisfied  that  the  general  fund  will  pay  the  debts  of  the  estate 
and  consents  to  such  vesting.  When  once  given  the  consent  of  the 
executor  is  irrevocable,  and  only  a  court  of  chancery  can  reach  the 
stock  and  subject  it  to  the  testator's  debts.8  The  liability  of  the 
legatee  to  pay  calls  on  the  stock  is  discussed  elsewhere.9 

i  Sparks  v.  Weedon,  21  Md.,  156(1863).  of   fulfillment.     In   re  Grey,   67  L,   T. 

When  general  legacies  of  stock  abate  Rep.,  132  (1887). 

proportionately  with  other  general  leg-  5  Partridge  v.  Partridge,  Cases  temp, 

acies,  the  stock  is  estimated  at  its  value  Talbot,  226  (1736).     Roper  on  Legacies, 

twelve     months     after     the    testator's  p.  331,  2d  ed.  (1848),  is  inclined   to  the 

death.     Blackshaw  v.  Rogers,  cited  in  opinion  that  a  specific  legacy  of  stock  is 

4  Brown's  Ch.,  349.  not  revived  by  a  purchase  of  similar 

2  Walton    v.    Walton,   7    Johns.   Ch.,  stock    after    a    sale    of   the  stock    be- 

257  (1823).  queathed. 

SLudlam's    Estate,    13    Pa.    St.,    188  « Dingwell    v.    Askew,    1    Cox's  Ch., 

(1850).  427  (1788). 

*  Brown  v.  McGuire,  1  Beat.  Ir.  Ch.,  '  Trustees,  etc.,  v.  Tufts,  23  N.  E.  Rep, 

358  (1829).     But  a  legacy  of  stock  in  an  1006  (Mass.,  1890). 

unincorporated  company,  which,  after  8  Onondaga   Trust   &  Deposit  Co.   v. 

the  making  of  the  will,  is  incorporated  Price,  87  N.  Y.,  542  (1882);  Hill  v.  Rock- 

and  the  value  of  the  stock   changed,  ingham  Bank.  44  N.  H..  567  (1863),  hold- 

which  change  the  testator  accepts,  fails  ing  that  the  legatee  should  sue  the  cor- 

whether  considered  as  a  specific  legacy  poration   at  law  for  refusing  transfer 

adeemed,  or  a  general  legacy  impossible  where  the  parties  interested  in  the  will 

9  See  §  560,  infra. 
411 


§  308.] 


LEGACIES    AND    GIFTS    OF    STOCK. 


[cH.  XVIII. 


§  308.  Gifts  of  stock. —  Shares  of  stock  in  a  corporation  may  be  the 
subject  of  a  gift.  No  formal  method  of  carrying  out  the  gift  is 
necessary.  A  formal  instrument  of  transfer,  duly  delivered  to  an 
agent  with  directions  to  deliver  to  the  donee,  vests  title  in  the 
donee,  though  no  certificates  are  transferred.1  A  gift  of  stock, 
vested  by  a  due  transfer  into  the  name  of  the  donee,  cannot  be  re- 
voked by  the  donor.2  In  order  to  constitute  a  gift  a  perfectly  clear 
intent  so  to  do  must  be  proved.3  Where  the  gift  is  made  in  grati- 
tude for  care  to  be  bestowed  on  another,  the  gift  will  fail  upon  the 
death  of  the  donee  if  it  is  proved  that  the  stock  had  not  been  fullv 
and  finally  delivered.4     A  gift  of  the  dividend  of  stock  is  a  gift  of 

assent ;  and  in  equity  if  both  the  corpo-  Atl.  Rep.,  885  (N.  J.,  1890).  A  father 
ration  and  such  parties  do  not  assent 
A  decree  of  a  probate  court  that  the 
legacy  of  stock  shall  be  turned  over  to 
the  legatee  cannot  be  required  by  the 
corporation.  Under  the  Vermont  stat- 
ute it  is  the  duty  of  the  executor  to 
transfer  stock  to  the  residuary  legatee. 
Witters  v.  Sowles,  25  Fed.  Rep,  168 
(1885).  As  regards  sales  of  stock  by  an 
executor,  see  §  329,  infra.  If  stock 
specifically  bequeathed  is  not  given  to 
legatee,  but  is  used  for  other  purposes, 
the  other  legatees  must  make  good  its 
value.  Tomlinson  v.  Bury,  14  N.  E. 
Rep.,  137  (Mass.,  1887).  Executors  in 
New  York  are  not  entitled  to  commis- 
sion on  transfers  of  stock  specifically 
bequeathed.  Schenck  v.  Dart,  22  N.  Y., 
420  (1800).  A  legacy  may  be  paid  by 
the  stock  of  the  decedent  at  a  valuation 
thereby  agreed  upon.  Chase  v.  Burritt, 
14  Atl.  Rep.,  212  (Conn.,  1888). 

1  De  Caumont  v.  Bogert,  36  Hun,  382 
(1S85),  treating  also  a  gift  as  an  advance- 
ment. See  S.  C,  Re  Morgan,  104  N.  Y. 
74.  In  England,  under  the  statutes,  it 
is  held  that  a  gift  of  stock  does  not  vest 
in  the  donee  until  registry  on  the  corpo- 
rate books.  Nauney  v.  Morgan,  57  L.  T. 
Rep.,  48  (1887). 

2  Standing  v.  Bowring,  L.  R,  27  Ch. 
D.,  341  (1884),  where  the  donor  trans- 
ferred into  the  joint  names  of  donor  and 
donee,  and  afterwards  attempted  to  dis- 
pose of  the  whole  stock.  A  gift  of  stock 
fully  made  and  accepted  cannot  be  re- 
tracted.    Walker  v.  Joseph,  etc.,  Co.,  20 


who  takes  stock  in  the  name  of  a  son 
in  order  to  qualify  him  as  a  director, 
and  takes  back  the  certificates,  does  not 
thereby  make  a  gift  of  the  stock.  Re 
Gooch,  62  L.  T.  Rep,  384  (1890). 

3  Where,  however,   the  stock  is  pur- 
chased by  one  in  the  name  of  another, 
parol  evidence  may  show  as  against  the 
creditors  of  the  former  that  he  intended 
the  stock  as  a  gift  to  the  latter.     Rider 
v.  Kidder,  10  Ves.,  361  (1805).     A  gift  of 
stock  to  take  effect  only  upon  the  death 
of  the  donor  is  not  absolute,  and  is  sub- 
ject to  the  payment  of  his  debts  exist- 
ing at  the  time  of  his  death.     Sterling 
v.   Wilkinson,   3  S.   E.   Rep.,   533  (Va., 
1887).     A    gift    of    stock    whereby  the 
owner  makes  himself  a  trustee  of  it  for 
his  donee  is  complete,  and  a  recogni- 
tion  of  the    trust  in   his  will  does  not 
render   the  stock   a  part  of  his  estate, 
subject  to  the  dower  right  of  his  wife. 
Dickerson's    Appeal,    8    Atl.    Rep,    64 
(Pa.,  1887);  Stone  v.  Hackett,  12  Gray. 
227.     Although  a  person  buys  stock  as. 
trustee,  and   charges  the   price  on  his 
books  against  his  daughters  and  cred- 
its them  with  dividends,  yet  if  he  sold 
the  stock  and  used  the  money  the  stock 
was     not    an    advancement    to    them. 
Herkimer  v.   McGregor.  25  N.   E.  Rep., 
145  (Ind.,  1890). 

*  Jackson  v.  Twenty-third  St  R'y  Co., 
88  N.  Y,  520  (1882).  When  a  gift  of 
stock  is  made  in  accordance  with  an 
agreement  to  compensate  the  donee  for 
taking  care  of  the  donor,  a  delivery  of 


412 


CH.  XVIII.] 


LEGACIES    AND    GIFTS    OF    STOCK. 


[§  308. 


the  stock  itself.1  A  gift  of  stock  by  one  legatee  to  another,  in  the 
belief  that  the  testator  so  intended  the  stock  to  be  disposed  of,  can- 
not be  revoked  after  an  unsealed  instrument  of  transfer  is  signed 
and  actual  transfer  made,  even  though  it  is  afterwards  found  that 
the  tectator  had  no  such  intent.2  A  stockholder  who  has  trans- 
ferred his  stock  into  the  joint  names  of  himself  and  his  wife  cannot 
dispose  of  his  interest  by  a  last  will  and  testament.  It  passes  to 
the  wife  as  the  survivor.3  A  gift  of  stock,  donatio  causa  mortis, 
may  be  made  by  a  mere  delivery  of  the  certificate  to  the  donee.4 
So,  also,  the  delivery  and  acceptance  of  a  gift  of  stock  is  held  to  be 
effectual  where  the  donor  had  the  stock  transferred  into  the  name 
of  the  fdonee  and  took  out  certificates  in  the  donee's  name,  even 
though  the  donor  died  before  the  donee  knew  of  the  gift.5 


the  certificate  without  any  transfer  suf- 
fices. Reed  v.  Copeland,  50  Conn.,  472 
(1883).  But  the  contract  to  make  the 
gift  must  not  be  in  opposition  to  public 
policy,  nor  in  fraud  of  the  rights  of 
other  stockholders.  Nickerson  v.  En- 
glish, 142  Mass.,  267  (1886). 

i  See  §  305. 

2Delamater's  Estate,  1  Whart.  (Pa.), 
362  (1836). 

3  Dummer  v.  Pitcher,  5  Sim.,  35  (1831) ; 
affirmed,  2  M.  &  K,  262  (1833).  A  gift 
of  stock  direct  from  the  husband  to  the 
wife  is  legal.  She  thereupon  takes  a 
sole  and  separate  estate  therein.  Dem- 
ing  v.  Williams.  26  Conn.,  226  (1857). 
The  case  of  Francis  v.  New  York  &  B. 
El.  R.  R.  Co.,  17  Abb.  N.  C,  1  (N.  Y., 
1885),  holds  that,  when  a  gift  of  stock  is 
made  to  a  minor,  it  is  complete  and 
irrevocable,  so  far  as  the  donor  is  con- 
cerned; but  the  minor  may,  upon  at- 
taining majority,  either  accept  or  re- 
fuse it. 

*  Grymes  v.  Hone,  Ex'r,  49  N.  Y,  17 
(1872);  Walsh  v.  Sexton,  55  Barb.,  251 
(1869);  Allerton  v.  Lang,  10  Bosw.,  362 
(1863).  The  last  two  cases  hold  that  the 
certificates  need  not  even  be  indorsed 
or  transferred,  but  that  a  mere  delivery 
without  any  writing  is  sufficient  Cf. 
§  375.  A  delivery  of  a  certificate  of 
stock  without  written  assignment  is  not 
a  good  gift  inter  vivos.  Matthews  v. 
Hoagland.  21  Atl.  Rep.,  1054  (N.  J.,  1891). 
No  delivery  of  stock  to  a  wife  as  a  gift  ex- 


ists where  after  the  husband's  death  the 
stock  is  found  among  his  papers  in  her 
possession  and  not  indorsed.  Morse  v, 
Weston,  24  N.  E.  Rep.,  916  (Mass.,  1890). 
Although  no  transfer  is  made  of  the 
certificate,  yet  if  it  is  found  among  the 
papers  of  a  deceased  person  it  will  be 
presumed  to  be  his,  though  standing  in 
the  name  of  his  sister  who  also  is  dead, 
the  stock  having  been  considered  of 
little  value  by  them.  In  re  Mape's  Es- 
tate, 12  N.  Y.  Supp,  9  (1890).  A  donatio 
causa  mortis  of  stock  is  revoked  by  the 
recovery  of  the  donor,  even  though  it  is 
registered.  Stainland  v.  Willott,  3  Mac. 
&  G.,  664  (1850).  In  England  railway 
stock  is  not  the  subject  of  a  donatio 
causa  mortis  by  a  delivery  of  the  cer- 
tificate, since  the  transfer  can  be  by  deed 
only.  Moore  v.  Moore.  43  L.  J.  (Ch.), 
617  (1874). 

5  Robert's  Appeal,  85  Pa,  St,  84  (1877). 
In  Maryland  it  is  held  that  a  mere 
transfer  of  the  certificates  of  stock, 
without  a  registiy  on  the  corporate 
book,  is  incomplete  as  a  gift,  and  cannot 
be  enforced  against  the  personal  repre- 
sentatives of  the  deceased  donor.  Balti- 
more Retort,  etc.,  Co.  v.  Mali,  66  Md., 
53  (1886).  Btft  a  written  memorandum 
left  by  a  decedent  to  the  effect  that  he 
thereby  gives  certain  stock  to  a  person, 
but  retains  the  same  during  life  in  or- 
der that  he,  the  donoi*,  may  have  the 
dividends,  is  not  a  valid  gift  Re  Shield, 
53  L.  T.  (N.  S.),  5  (1885). 


413 


CHAPTER  XIX. 


WHO  MAY  BUY  AND  SELL  STOCK 


309-310.  Competency  of  a  corporation 
to  purchase  shares  of  its  own 
capital  stock. 

311-313.  Rule  in  the  United  States. 

314.  The  stock  is  not  merged. 

315.  Purchase    by    a  corporation    of 

stock  in  another  corporation  — 
Purchase  by  railroad. 

Purchases  of  stock  by  banks  and 
pledges  to  banks. 

Purchases  of  stock  by  insurance, 
manufacturing  and  other  cor- 
porations. 

Infants  as  purchasers  of  stock. 

Married  women  as  purchasers, 
owners  or  vendors  of  stock. 

Competency  of  miscellaneous 
parties. 


316. 
317. 


318. 
319. 

320. 


321.  Sales,  purchases  and  transfers  by 

agents. 

322.  Purchase  of  stock  by  guardians, 

executors  and  trustees. 
323-324.  Sale  or  pledge  of   stock  by 

trustee  in  breach  of  his  trust. 
325-326.  Transferee    of    stock    from 

trustee  is  protected,  when. 

327.  Rights  and  liability  of  the  corpo- 

ration allowing  a  transfer  by  a 
trustee  in  breach  of  his  trust. 

328.  Sales  of  stock  by  a  guardian. 

329.  Sales  by  executor  or  administra- 

tor. 

330.  Duty  and  liability  of  the  corpora- 

tion in  sales  by  an  executor  or 
administrator. 


§  309.  Competency  of  a  corporation  to  purchase  shares  of  its  own 
capital  stock. —  In  England  a  long  line  of  decisions  has  established 
the  rule  that,  at  common  law,  a  corporation  cannot  purchase  shares 
of  its  own  capital  stock.1  This  rule  is  enounced  clearly  and  de- 
cisively, and  is  closely  adhered  to.3  The  corporation  may  be  given 
an  express  power  for  this  purpose;  but,  unless  so  given,  the  pur- 
chase is  held  to  be  beyond  the  legal  powers  of  the  directors  and  of 
the  whole  body  of  stockholders.3    The  object  of  the  rule  is  to  pre- 


1  Trevor  v.  Whitworth.  57  L.  T.  Rep., 
457  (H.  of  L,  1887),  reviewing  many 
cases ;  Re  Marseilles  Extension  R'y  Co., 
L.  R,  7  Ch.,  161  (1871);  Evans  u  Cov- 
entry, 25  L  J.  (Ch.),  489,  501  (1856); 
Cross'  Case,  38  L  J.  (Ch.),  583  (1869); 
Morgan's  Case,  1  De  G.  &  Sm.,  750  (1849) ; 
Ex  parte  Morgan,  1  Mac,  &  G,  225 
(1849);  Eyre's  Case,  31  Beav.,  177  (1862); 
3  R'y  &  Corp.  L.  J.,  169.  Cf.  Taylor  v. 
Hughes,  2  J.  &  Lat.  (Irish  Ch.),  24(1844), 
holding  that  a  banking  company  at  com- 
mon law  may  buy  its  own  stock  the 
same  as  a  copartnership  may  buy  out  a 
partner.  Where  a  director  buys  mer- 
chandise of  his  corporation,  and  pays 
for  it  in  stock  of  the  corporation,  and 


the  transaction  is  ratified  in  general 
meeting,  the  director,  on  a  winding  up, 
is  not  liable  for  the  value  of  the  mer- 
chandise. Weeks'  Case,  17  L  R.,  Ir., 
239.  A  purchase  by  a  corporation  of  its 
own  stock  and  payment  by  debentures 
is  void,  and  a  resale  of  the  stock  at  a 
discount  is  void.  Re  London,  etc.,  Co., 
59  L  T.  Rep.,  109  (1888). 

2ZuIueta's  Claim,  L.  R,  5  Ch.,  444 
(1879);  Hope  v.  International  Financial 
Soc,  L.  R,  4  Ch.  Div.,  327  (1876),  hold- 
ing also  that  a  stockholder  may  enjoin 
the  purchase ;  distinguishing  Teasdale's 
Case,  L.  R.,  9  Ch.,  54. 

3  Zulueta's  Claim,  supra;  Hope  v.  In- 
ternational Financial  Soc,  supi'a.    See, 


414 


CH.  XIX.] 


WHO   MAY    BUY    AND    SELL    STOCK. 


[§  309. 


serve  the  rights  of  the  corporate  creditors,  and  also  to  confine  the 
corporation  within  the  express  powers  given  it,  and  the  implied 
powers  necessary  to  its  transaction  of  business.1  If  the  sale  is 
completed,  and  the  corporation  afterwards  become  insolvent,  the 
stockholder  who  sold  the  stock  to  the  corporation  is  liable,  on  the 
winding  up,  as  though  he  never  had  made  such  a  sale.2  If,  how- 
ever, the  stockholder  sells  to  a  person,  not  knowing  that  the  latter 
is  purchasing  as  a  trustee  for  the  corporation,  the  vendor  is  not 
liable  on  such  stock.3  The  directors  authorizing  or  directing  a  pur- 
chase for  the  corporation  of  shares  of  its  own  capital  stock  are 
liable  personally  to  the  same  extent  that  the  selling  stockholder 
would  have  been  had  the  sale  not  taken   place.4     Generally  the 


also,  Lindley  on  Partnership,  p.  739  (Cal- 
laghan  &  Co.,  1881).  Under  an  express 
power  to  the  directors  to  enter  into  any 
contract  and  engagement  that  seemed 
best  for  the  company,  such  a  purchase 
was  upheld.  Singer's  Case,  W.  N.  (1869), 
206;  Cockburn's  Case,  4  De  G.  &  Sm., 
177  (1850).  where  power  was  given  by 
the  deed  of  settlement.  See,  however, 
Ward's  Case,  29  W.  R,  768  (1881),  where 
an  express  power  to  purchase  its  own 
stock  was  held  not  to  authorize  a  traf- 
ficking in  that  stock  —  the  buying  and 
selling  for  purposes  of  gain.  Where  a 
company  has  power  to  purchase  its 
own  stock  and  does  purchase  stock 
which  has  not  been  paid  up,  the  liability 
on  that  stock  cannot  be  included  as 
among  the  debts  of  the  company.  Re 
The  Sovereign,  etc.,  Co.,  67  L.  T.  Rep, 
336  (1892).  Having  purchased  its  own 
stock  from  profits,  a  company  may  re- 
duce its  capital  stock  to  that  extent 
Re  York,  etc.,  Co.,  60  L,  T.  Rep,  744 
(1889). 

1  Id.  Compare,  however,  Ward's  Case, 
29  W.  R,  768  (1881),  where  the  court 
says :  "  If  the  company  could  not  ques- 
tion it,  neither  can  a  creditor;  for  he 
can  obtain  nothing  but  what  the  com- 
pany can  get  from   the  shareholders." 

2  Walter's  2d  Case,  3  De  G.  &  Sm., 
244  (1850);  Richmond's  Ex'rs  Case,  3 
De  G.  &  Sm.  96  (1859) ;  Munts'  Case,  22 
Beav.,  55  (1856),  where  the  stockholders 
disagreed  and  the  corporation  bought 
out   one   faction ;    Daniell's    Case,    22 


Beav.,  43  (1856);  Bennett's  Case,  5  De 
G,  M.  &  G,  284  (1854),  where  the  stock- 
holders disagreed  concerning  the  va- 
lidity of  a  lease,  and  the  corporation 
bought  out  part.  If,  however,  the  cor- 
poration, six  years  after  the  transfer, 
discovers  that  the  transfer  was  invalid, 
and  summarily  retransfers  to  the 
vendor,  the  latter  may  apply  to  a  court 
of  equity  to  compel  the  corporation  to 
keep  the  stock.  Gardiner  v.  Victoria 
Estates  Co.,  12  Ct.  of  Ses.  (Sc.  4th  series), 
1356  (1885).     See,  also,  §  251,  supra, 

3  Nicol's  Case,  3  De  G.  &  J.,  387  (1858) ; 
Grady's  Case,  1  De  G,  J.  &  S.,  488  (1863), 
where  the  vendee  was  managing  agent 
of  the  corporation,  and  the  sale  of  the 
stock  was  to  stop  litigation.  Rich- 
mond's Case,  3  De  G.  &  Sm.,  96  (1849), 
holds,  however,  that  if  the  vendor's 
selling  agent,  his  solicitor,  knew  that 
the  sale  was  for  the  benefit  of  the  cor- 
poration, the  stockholder  himself  is 
chargeable  with  knowledge.  See  Re 
Orpen,  32  L.  J.  (Ch.).  633  (1863),  holding 
that  it  is  a  question  for  the  jury  whether 
the  vendee  purchased  for  the  corpora- 
tion or  for  himself.  Johnson  v.  Laflin, 
5  Dill.,  65;  103  U.  S.,  800  (1878).  See, 
also,  §  251. 

*  Evans  v.  Coventry,  25  L.  J.  (Ch.), 
489,  501  (1856).  To  same  effect,  Land 
Credit  Co.  of  Ireland  v.  Fermoy,  L.  R, 
8  Eq.  Cas.,  7  (1869);  Marzette's  Case,  42 
L.  T.  (N.  S.),  206  (1S80).  The  directors 
may  have  contributions  from  each  other 
for  sums  paid  out  by  their  authoritv  for 


415 


§§  310,  311.]  WHO   MAT   BUT   AND    SELL   STOCK.  [CH.  XIX. 

transfer  is  made,  not  to  the  corporation  directly,  but  to  a  trustee 
on  behalf  of  or  for  the  benefit  of  the  corporation.  This  practice  is 
not  at  all  necessary,1  and  has  no  effect  other  than  a  transfer  direct 
to  the  corporation  itself,  unless  it  be  that  the  vendor  of  the  stock 
may  not  know  that  his  vendee  purchases  for  the  corporation,  and 
thereby  escapes  liability  on  the  winding  up.  If  the  contract  is  ex- 
ecutory, the  corporation  may  repudiate  it  and  refuse  to  pay  the 
purchase-money  for  the  stock.2  If,  however,  the  sale  is  completed, 
the  stock  belongs  to  the  corporation,  and  does  not  pass  to  the 
vendor's  assignee  in  bankruptcy.3 

§  310.  "Where  the  transfer  of  stock  to  the  corporation  is  made  by 
one  of  the  original  subscribers  for  stock,  it  frequently  becomes  a 
difficult  question  to  decide  whether  the  transaction  was  a  cancella- 
tion of  the  subscription  contract  or  was  a  sale  of  the  stock  to  the 
corporation.  Each  case  turns  largely  on  its  own  peculiar  facts  and 
circumstances.  If  the  transaction  is  a  cancellation,  it  is  legal.  In 
England,  if  it  is  a  sale,  it  is  illegal.  The  courts  seem  to  favor  a 
construction  whereby  the  transaction  is  held  to  be  a  sale,  and  the 
stockholder  made  liable  on  the  winding  up.4 

§  311.  Rule  in  the  United  States. —  In  this  country  there  has  been 
a  difference  of  opinion  as  to  whether  a  corporation  may  purchase 
shares  of  its  own  stock.  In  Illinois,  Massachusetts  and  other  states 
such  a  purchase  is  legal  and  allowable.5  And,  indeed,  if  there 
is  no  statutory  liability  on  stock,  and  if  stockholders  do  not  object, 

such  purchases,  and  for  which  one  or  Div.,  622  (1876).    See,  also,  §§  167-170, 

more  has  been  held  liable  to  the  corpo-  supra. 

ration.    Ashhurst  v.  Mason,   L.  R.,  20  '  First  Nat  Bank  v.  Salem,  etc.,  Co.,  39 

Eq.,  225  (1875).    The  directors  are  not  Fed.  Rep..  89  (1889).  In  Illinois,  in  Chicago, 

liable  to  the  vendor  of  the  stock  for  the  P.  &  S.  R  R  v.  President,  etc.,  of  Town 

failure  of  the  corporation  to  complete  of  Marseilles,  84  111.,  145  (1876),  the  court 

their  purchase  for  it  of  its  own  stock,  said:  "We  entertain  no  doubt  that  a  rail- 

Abeles  v.  Cochran,  22  Kan.,  405  (1879).  road  company  may,  for  legitimate  pur- 

1  See  ch.  III.  poses,  purchase  shares  of  stock  which 

2  The  corporation  may  even  refuse  to  have  been  issued  to  individuals.  Such  is 
pay  the  price  to  the  brokers  employed  believed  to  have  been  the  general  cus- 
by  its  directors  to  buy  its  stock.  Zulu-  torn  of  such  bodies;  nor  have  we  known 
eta's  Claim,  L.  R,  5  Ch.,  444  (1879).  the  power  to  have  been  questioned."  A 
This,  of  course,  does  not  authorize  the  contract  whereby  the  corporation  agreed 
corporation  to  retain  the  stock  so  pur-  to  take  back  the  stock  unless  certain 
chased.  things  were  done  within  a  certain  time 

3  Great  Eastern  R'y  Co.  v.  Turner,  42  was  sustained.  S.  C,  id.,  643,  where 
L.  J.  (Ch.),  83  (1873).  the  court  says,  "  the  power  of  the  direct- 

*  Hall's  Case,  L.  R,  5  Ch.,  707  (1870),  ors  of  a  company,  when  not  prohibited 
distinguishing  Snell's  Case,  L.  R,  5  Ch.,  by  their  charter,  to  purchase  shares  of 
22.  See,  also,  Thomas'  Case,  L.  R,  13  stock  of  their  company,"  is  well  recog- 
Eq.,  437  (1872) ;  Teasdale's  Case,  L.  R,  9  nized;  Clapp  v.  Peterson,  104  111.,  25 
Ch.  54  (1873);  Duke's  Case,  L.  R,  1  Ch.    (1882);  Chetlain  v.  Republic  Life  Ins. 

416 


CH.  XIX.] 


WHO   MAY    BOY    AND    SELL    STOCK. 


[§  311. 


there  is  no  reason  why  the  net  profits  of  a  corporation  should 
not  be  applied  to  purchasing  its  stock,  instead  of  being  used  for  a 


Co.,  86  111.,  220  (1877);  Fraser  v.  Ritchie, 
8  Bradw.,  554  (1881).  where  a  perfectly 
solvent  concern  sold  certain  property 
and  took  its  own  stock  in  payment; 
Dupee  v.  Boston  Water-power  Co.,  114 
Mass.,  37  (1873),  holding  that  a  stock- 
holder could  not  enjoin  the  purchase,  the 
court  saying:  " In  the  absence  of  legis- 
lative provision  to  the  contrary,  a  corpo- 
ration may  hold  and  sell  its  own  stock, 
and  may  receive  it  in  pledge  or  in  pay- 
ment in  the  lawful  exercise  of  its  corpo- 
rate powers ; "  Leland  v.  Ha\den,  102 
Mass.,  542  (1869) ;  Crease  v.  Babcock.  51 
Mass.,  525,  557  (1846),  holding  that  the 
stockholders  are  not  liable  for  the  defi- 
ciency caused  by  part  of  the  stock  being 
owned  by  the  corporation.  In  Pennsyl- 
vania, in  Eby  v.  Guest.  94  Pa.  St.,  160 
(1880).  and  Early  &  Lane's  Appeal,  89 
id.,  411  (1879),  it  was  held  that  "the  as- 
signment of  the  stock  of  a  coi-poration 
to  itself,  as  collateral  security  for  a  loan, 
divests  the  title  of  the  assignor  so  far  as 
to  prevent  a  sale  of  it  under  a  fi.  fa. 
against  the  assignor."  But  in  Coleman 
v.  Columbia  Oil  Co.,  51  Pa.  St.,  74 
(1865),  where  a  stockholder  had  accepted 
the  benefit  of  the  purchase  and  then 
objected  to  its  legality,  the  court  said : 
"The  employment  of  corporate  funds  to 
speculate  in  the  stock  of  the  company 
to  which  the  funds  belong  is  not  a  prac- 
tice to  be  encouraged ;  but  the  present 
plaintiff  is  not  in  position  to  censure  the 
practice."  He  "should  have  sought  an 
injunction  against  the  company  to  re- 
strain the  purchase,  or  to  cancel  it  if 
done  before  he  had  knowledge  of  it ;  or 
if  he  would  bring  an  action  at  law  he 
should  have  declared  for  his  share  of 
the  funds  which  he  complains  were  mis- 
applied in  buying  the  shares."  In  Geor- 
gia, in  the  case  of  Hartridge  v.  Rockwell, 
R.  M.  Charlton,  260  (1826),  the  court  held  : 
"If  from  the  course  of  business  or  the 
state  of  things  the  capital  of  the  bank 
cannot  be  usefully  employed  in  loans. 


there  can,  I  think,  be  no  objection  against 
the  purchase  of  its  own  stock."  The 
legislature,  however,  thought  differently, 
and  by  the  Penal  Code  of  1833  made 
sucli  purchases  a  penal  offense.  See 
Robinson  r.  Beale,  26  Ga.,  17  (1858).  where 
the  purchase  was  held  to  be  authorized 
under  a  power  to  purchase  goods,  etc. 
See,  also,  as  supporting  the  doctrine. 
Farmers'  &  Mechanics'  Bank  i?.  Cham- 
plain  Transportation  Co.,  18  Vt.,  131, 139 
(1846);  Iowa  Lumber  Co.  v.  Foster,  49 
Iowa,  25  (1878),  under  a  power  to  pur- 
chase "property  that  may  be  deemed 
desirable  in  the  transaction  of  its  busi- 
ness." A  corporation  which  has  agreed 
to  pay  a  person  a  certain  sum  for  his 
stock  in  the  corporation,  if  he  will  trans- 
fer it  to  a  corporate  creditor  in  payment 
of  the  corporate  debt,  is  liable  for  that 
sum  to  the  stockholder.  Snyder  v.  Tu- 
nitas,  etc.,  Co.,  13  Pac.  Rep.,  479  (Cal., 
1887).  "A  corporation  may,  if  it  acts  in 
good  faith,  buy  and  sell  shares  of  its 
own  stock."  Republic  Life  Ins.  Co.  v. 
Swigert,  25  N.  E.  Rep.,  680  (111..  1890) ; 
First,  etc.,  Bank  v.  Salem,  etc.,  Co.,  39 
Fed.  Rep.,  89  (1889).  An  agreement  of  a 
corporation  to  accept  its  own  stock  in 
payment  for  land  sold  by  it  is  not  per  se 
an  ultra  vires  act.  Thompson  v.  Moxey, 
20  Aft  Rep.,  854  (N.  J.,  1890).  A  corpo- 
ration may  purchase  shares  of  its  own 
stock,  subject  to  the  right  of  creditors  to 
object  thereto  if  the  capital  stock  is  im- 
paired thereby.  Blalock  v.  Kernersville, 
etc.,  Co.,  14  S.  E.  Rep.,  501  (N.  C,  1892). 
A  corporation  may  issue  stock  to  an  em- 
ployee on  an  agreement  to  buy  it  back 
in  case  he  is  discharged.  Yeaton  v.  Eagle, 
etc.,  Co.,  29  Pac.  Rep.,  1051  (Wash.,  1892). 
Where  the  majority  stockholders  cause 
the  directors  to  purchase  stock  of  them 
for  the  corporation  at  a  price  higher  than 
the  market  price  the  minority  may  cause 
the  transaction  to  be  set  aside.  Wood- 
roof  v.  Howes,  26  Pac.  Rep.,  Ill  (Cal., 
1891). 


(27) 


417 


§  312.] 


WHO   MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


dividend.1  The  few  cases  which  appear  to  uphold  a  contrary  rule 
are  found,  upon  close  examination,  to  come  within  the  exceptions 
given  above.1  All  of  the  American  courts  coincide  in  the  view 
that  a  corporation  may  take  shares  of  its  own  stock  in  payment  of 
or  security  for  antecedent  debts  due  to  the  corporation.2  A  cor- 
poration may  take  its  own  stock  by  way  of  gift 3  or  bequest.4 

§  312.  The  objection  usually  made  to  allowing  a  corporation  to 
purchase  its  own  stock  is  that  thereby  the  corporate  funds  are 
expended  and  no  property  is  received  by  the  corporation,  except 


the  right  to  resell. 


In 


some  cases,  also,  a  statutory  liabilit}7  at- 


1  In  Ohio  the  early  case  of  Taylor  v. 
Miami  Ex.  Co.,  6  Ohio  Rep.,  166  (1833), 
held  that  a  bank  may  receive  from  the 
stockholders  transfers  of  stock  in  pay- 
ment of  (debts  previously  contracted  by 
them.  See,  also,  State  of  Ohio  v.  Frank- 
lin Bank  of  Columbus,  10  Ohio  Rep.,  91, 
97  (1840).  But  in  Cappin  v.  Greenlees,  38 
Ohio  St.,  275  (1882),  the  court  refused 
to  enforce  an  executory  contract  for  the 
sale  to  the  corporation  of  its  own  stock, 
and  said :  "  The  doctrine  that  corpora- 
tions, when  not  prohibited  by  their 
charters,  may  buy  and  sell  their  own 
stock,  is  supported  by  a  line  of  author- 
ities. .  .  .  But,  nevertheless,  we 
think  the  decided  weight  of  authority, 
both  in  England  and  in  the  United 
States,  is  against  the  existence  of  the 
power,  unless  conferred  by  express 
grant  or  clear  implication.  The  foun- 
dation principle  upon  which  these  lat- 
ter cases  rest  is  that  a  corporation  pos- 
sesses no  powers  except  such  as  are 
conferred  upon  it  by  its  charter,  either 
by  express  grant  or  necessary  implica- 
tion." The  proposed  purchase  was  held 
to  be  invalid  under  the  constitutional 
provision  imposing  a  personal  liability 
on  all  stockholders.  But  see  Morgan  v. 
Lewis,  17  N.  E.  Rep.,  558  (Ohio,  1888). 
Quo  ivarranto  does  not  lie  against  a  cor- 
poration for  purchasing  its  own  stock. 
State  v.  Minn.,  etc.,  Co.,  41  N.  W.  Rep., 
1020  (Minn.,  1889). 

1  Thus,  in  German  Sav.  Bank  v.  Wulfe- 
kuhler,  19  Kan.,  60  (1877),  the  bank  was 
insolvent  when  the  stock  was  purchased 
by  it.   The  purchase  was  declared  illegal. 


In  Bent  v.  Hart,  10  Mo.  App.,  143  (1881), 
the  corporation  did  not  purchase  its  own 
stock.  The  stock  was  purchased  by  an- 
other corporation,  and  was  sustained. 
In  St.  Louis,  etc.,  Co.  v.  Hilbert,  1  R'y  & 
Corp.  L.  J.,  160  (Mo.  Ct  of  App.,  1887), 
the  stock  purchased  by  the  corporation 
was  not  paid-up  stock.  In  State  v. 
Building  Assoc,  35  Ohio  St,  258  (1880). 
the  peculiar  purposes  and  articles  of 
association  of  a  building  association 
governed  the  decision.  In  Barton  v. 
Port  Jackson,  etc.,  Co.,  17  Barb.,  397 
(1854),  the  company  mortgaged  its  road 
in  order  to  raise  money  to  buy  the  stock. 

-The  leading  case  is  City  Bank  of 
Columbus  v.  Bruce,  17  N.  Y.,  507  (1858), 
where  a  corporation  received  $133,000 
of  its  own  stock  in  payment  of  debts 
due  the  corporation,  the  court  saying  it 
is  "  not  aware  of  any  common-law  prin- 
ciple which  forbids  it."  See,  also,  Ver- 
planck  v.  Mercantile  Ins.  Co.,  1  Edw. 
Ch.,  84  (1331).  State  Bank  of  Ohio  v. 
Fox,  3  Blatch.,  431  (1856),  where  the 
stock  was  taken  in  payment  of  a  debt 
due  the  corporation.  In  Williams  v. 
Savage  Mfg.  Co.,  3  Md.  Ch.,  418,  451 
(1851),  the  creditor  who  had  given  stock 
to  a  corporation  in  payment  of  a  debt 
was  allowed  to  deny  the  amount  of  the 
debt  and  to  take  back  the  stock  upon 
payment  of  the  amount  actually  due. 

s  Lake  Superior  Iron  Co.  v.  Drexel,  90 
N.  YM  87  (1882),  where  its  legality  was 
assumed.     See,  also,  ch.  Ill,  siqira. 

*  Rivanna  Nav.  Co.  v.  Dawsons,  3 
Gratt,  19  (1846). 


418 


CU.  XIX.] 


WITl)    MAY    BUY    AND    SELL    STOCK. 


[§  312. 


tached  to  the  stock  is  thereby  jeopardized.  The  latter  objection  is 
answered  by  the  principle  of  law  that  the  transferrer  of  stock  to 
the  corporation  is  liable  on  the  subscription  and  statutory  liability 
to  the  same  extent  as  though  no  transfer  to  the  corporation  had 
been  made.1  The  former  objection  is  merely  a  limit  to  the  power  of 
the  corporation  to  purchase.  In  Illinois,  the  state  where  the  rights 
of  the  corporation  to  make  such  purchases  is  most  clearly  and  deci- 
sively established,  the  collateral  principle  that  such  purchases  are  to 
be  declared  illegal  and  voidable  at  the  instance  of  corporate  creditors 
who  are  injured  thereby  is  distinctly  stated  and  rigidly  applied.2 
If  the  corporation  is  insolvent  at  the  time  of  the  purchase,  it  is 
clearly  an  invalid  transaction,  and  will  be  set  aside.3  The  rule 
goes  still  further,  and  declares  that  if  a  corporation,  b}7"  a  purchase 
of  shares  of  its  own  capital  stock,  thereby  reduces  its  actual  assets 
below  its  capital  stock,  or  if  the  actual  assets  at  that  time  are  less 
than  the  capital  stock,  such  purchase  may  be  impeached  and  set 
aside,  and  the  vendor  of  the  stock  rendered  liable  thereon  at  the 
instance  of  a  corporate  creditor.4  In  Massachusetts  not  even  a 
dissenting  stockholder  can  complain.5 


1  See  §  251,  supra. 

2  Clapp  v.  Peterson,  104  111.,  26  (1882) ; 
Peterson  v.  111.  Land  &  Loan  Co.,  6 
Bradw.,  257  (1880).  In  Crandall  v.  Lin- 
coln, 52  Conn.,  73  (1884),  where  stock 
was  bought  for  the  corporation  by  a  cor- 
porate agent,  the  latter  was  held  liable 
to  the  receiver  of  the  corporation  for 
the  money  so  expended.  The  court 
said :  "  The  statute  forbidding  the  com- 
pany to  make  dividends  payable  from 
the  stock,  and  to  loan  money  upon  a 
pledge  of  its  stock,  by  necessary  impli- 
cation forbids  the  company  from  pur- 
chasing its  stock.  .  .  .  As  a  rule, 
to  which  there  are  few,  if  any,  excep- 
tions, when  a  stockholder  convej-s  his 
stock  to  the  company  and  receives  in 
return  a  portion  of  the  capital,  he  holds 
the  money  so  received  subject  to  the 
superior  equities  of  creditors."  But  the 
selling  stockholder,  not  knowing  that 
his  vendee  buys  for  the  corporation,  is 
not  liable.  Johnson  v.  Laflin,  5  Dill., 
65 ;  103  U.  S,  800. 

3  Currier  v.  Lebanon  Slate  Co.,  56  N. 


H.,  262  (1875);  Alexander  v.  Relfe,  74 
Mo.,  495  (1881).  A  purchase  by  an  in- 
solvent bank  of  shares  of  its  own  stock 
from  one  who  had  just  resigned  as  vice- 
president  is  illegal,  and  he  cannot  col- 
lect a  certificate  of  indebtedness  given 
him  therefor.  In  re  Columbian  Bank, 
23  Atl.  Rep.,  626  (Pa.,  1892).  So  also  of 
a  sale  by  the  president ;  even  though  he 
held  the  stock  as  executor  of  an  estate. 
Id.,  625.  Where  a  corporation  is  insolv- 
ent and  a  stockholder  knows  that  fact, 
he  cannot  sell  his  stock  to  the  corpora- 
tion in  exchange  for  corporate  property, 
and  he  will  be  compelled  by  the  court, 
in  behalf  of  then  existing  creditors,  to 
return  the  property.  Commercial  Na- 
tional Bank  v.  Burch,  31  N.  E  Rep.  120 
(111.,  1892). 

4  Fraser  v.  Ritchie,  8  Bradw.  (111.),  554 
(1881),  holding  that  the  right  of  the  cor- 
poration to  purchase  its  own  stock  is 
subject  to  certain  restrictions,  "  one  of 
which  is  that  it  shall  not  be  done  at  such 
time  and  in  such  manner  as  to  take 
away  the  security  upon  which  the  credit- 


5  Dupee  v.  Boston,  etc.,  Co.,  114  Mass.,     corporation  to  purchase  stock  in  order 
37  (1873).     See  §282  as  to  the  power  of  a    to  reduce  its  capita)  stock. 


419 


§  313.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


§  313.  Frequently  statutes  are  passed  expressly  prohibiting  a 
corporation  from  purchasing  shares  of  its  own  stock.1  The  national 
banks  in  this  country  are  prohibited  from  so  doing  by  the  statutes 
of  the  federal  government.2     In  New  York,  by  statute,  both  raon- 


ors  of  the  corporation  have  the  right  to 
rely  for  the  payment  of  their  claims;  or 
in  other  words,  so  as  not  to  diminish  the 
fund  created  for  their  benefit  Each 
case  must,  therefore,  depend  upon  and 
be  determined  by  its  own  facts  and  cir- 
cumstances." Gillett  v.  Moody,  3  N.  Y., 
479  (1850).  Where  directors  and  stock- 
holders desire  to  sell  the  enterprise,  and 
do  so  by  paying  for  their  stock  out  of 
the  corporate  funds,  and  then  re-insur- 
ing all  risks  in  another  company,  and 
turning  over  everything  to  the  latter,  a 
receiver  of  the  company  so  sold  out  may 
hold  a  director  liable  for  moneys  so  paid 
out.  Guild  v.  Parker,  43  N.  J.  L.,  430 
(1881).  A  receiver  of  a  corporation  seek- 
ing to  set  aside  a  purchase  of  stock  by 
itself  must  tender  back  the  stock  before 
suing  to  recover  the  money.  Pierson  v. 
McCurdy,  33  Hun,  520  (1884).  In  the 
case  In  re  Republic  Ins.  Co.,  3  Biss.,  452 
(1873),  where  the  insolvent  corporation 
had,  some  three  years  previously,  when 
the  corporation  was  solvent,  purchased 
stock  of  various  stockholders  and  still 
held  it,  the  court  held  that  these  old 
stockholders  were  not  liable  for  the  un- 
paid subscription  price  thereof.  In  Farns- 
worth  v.  Robbins,  36  Minn.,  369  (1887), 
the  receiver  of  an  insolvent  company 
recovered  from  a  stockholder  whose 
stock  the  company  had  purchased.  A 
scheme  whereby  the  corporation  takes 
back  the  stock  and  issues  certificates  of 
indebtedness  for  it  is  invalid  as  against 
creditors.  The  latter  are  entitled  to  the 
assets  in  preference  to  the  former.  Heg- 
gie  v.  Building,  etc.,  Assoc,  12  S.  E. 
Rep.,  275  (N.  C,  1890).  Although  a 
company  buys  its  own  stock  from  a 
stockholder,  subsequent  creditors  cannot 
complain.  Rollins  v.  Shaver,  etc.,  Co., 
45  N.  W.  Rep.,  1037  (Iowa,  1890). 

1  See  Part  VII,  infra. 

2  R  S.  of  U.  S.,  §  5201.     See  Johnson 


v.  Laflin,  5  Dill.,  65;  103  U.  S.,  800, 
holding  that,  if  a  stockholder  in  good 
faith  and  without  notice  sells  his  stock 
to  one  who  purchases  for  the  bank,  the 
sale  is  valid  so  far  as  he  is  concerned, 
and  he  is  not  liable  thereon.  See,  also, 
Bank  v.  Lanier,  11  Wall.,  369  (1870), 
holding  that  the  bank  cannot  take  its 
own  stock  in  pledge. 

When  the  president  of  a  bank  buys 
its  stock  for  the  bank  itself,  taking  title 
in  his  own  name,  lie  is  liable  as  a  stock- 
holder. The  purchase  for  the  bank, 
however,  is  void.  Bundy  r.  Jackson,  24 
Fed.  Rep.,  628  (1885).  Although  a  na- 
tional bank  must  sell  its  stock  taken  in 
payment  of  a  debt  within  six  months, 
it  may  sell  on  credit,  taking  a  note  in 
payment  and  the  stock  as  collateral. 
Union  Nat.  Bank  v.  Hunt,  76  Mo.,  439 
(1882).  Where  a  national  bank  receives 
its  own  stock  in  pledge  at  the  time  of 
making  the  loan,  and  sells  the  stock  as 
collateral,  on  failure  of  the  debtor  to 
pay,  the  latter  cannot  complain  that  the 
§tatute  has  been  violated.  National 
Bank  of  Xenia  v.  Stewart.  107  U.  S.,  076 
(1882).  See,  also,  Gold  Mining  Co.  v. 
National  Bank,  96  U.  S.,  640  (1877); 
Shoemaker  v.  National  Mechanics'  Bank, 
31  Md.,  396;  O'Hare  v.  Second  National 
Bank,  77  Pa.  St,  96 ;  Stewart  v.  National 
Union  Bank,  2  Abb.  (N.  S.),  424  (1869). 
Although  a  national  bank  is  prohibited 
from  taking  its  own  stock  as  security, 
yet  if  it  does  so,  the  stock  being  taken 
in  the  name  of  the  cashier,  it  may  en- 
force the  security.  Only  the  govern- 
ment can  object  after  the  transaction 
has  been  completed.  It  is  immaterial 
that  the  stock  was  transferred  to  the 
cashier  individually  and  not  "as  cashier.'1 
Walden  Nat.  Bank  v.  Birch,  130  N.  Y., 
221  0891).  A  transfer  of  the  stock  of  a 
national  bank  to  the  bauk  in  payment 
of  a  debt  will  not  be  set  aside  at  the 


420 


en.  xix. j 


WHO    MAY    BUY    AND    SKLL    STOCK. 


[§  314. 


eyed1  and  railroad2  corporations  are  prohibited  from  purchasing 
shares  of  its  own  capital  stock. 

§  314.  The  stock  is  not  merged. — When  a  corporation  buys  snares 
of  its  own  capital  stock,  the  capital  stock  is  not  reduced  by  that 
amount,  nor  is  the  stock  merged.3  So  long,  however,  as  the  corpo- 
ration retains  the  ownership,  the  stock  is  lifeless,  without  rights  or 
powers.  It  cannot  be  voted  nor  can  it  draw  dividends,  even  though 
it  is  held  in  the  name  of  a  trustee  for  the  benefit  of  the  corpora- 
tion.4 But  at  any  time  the  corporation  may  resuscitate  it  by  sell- 
ing it  and  transferring  it  to  the  purchaser.  Such  sale  may  be 
made  upon  the  authority  of  the  corporate  directors.5  It  may  be 
sold  at  its  market  value,  and  need  not  be  held  for  its  par  value,  as 
is  necessary  in  an  original  issue  of  stock.6 


instance  of  the  vendor  as  being  in  vio- 
lation of  the  statute.  Chapin  v.  Mer- 
chants' Nat  Bank,  14  N.  Y.  St.  Rep., 
272  (1888).  A  national  bank  president 
and  directors  are  not  liable  criminally 
for  purchasing  the  stock  of  the  bank  for 
the  bank  itself.  United  States  v.  Brit- 
ton,  107  U.  S.,  192  (1882);  id.,  108  U.  S., 
655  (1882). 

1  See  Part  VII,  infra.  "  The  evident 
intention  was  to  prohibit  a  division  of 
the  capital,  or  any  portion  of  it,  among 
the  stockholders,  by  whatever  instru- 
mentality the  powers  of  the  corporation 
in  doing  the  act  might  be  exerted." 
Giilett  v.  Moody,  3  N.  Y.,  479,  487.  See, 
also,  United  States  Trust  Co.  v.  United 
States  Fire  Ins.  Co.,  18  N.  Y,  199,  226 
(1808) ;  Tracy  v.  Talmage,  14  N.  Y,  162 
(1856).  But  purchasers  of  the  stock  from 
a  banking  corporation  that  had  pur- 
chased it  in  violation  of  the  statute  can- 
not complain.  Thej-  cannot  impeach 
their  own  tit!  .  Case  of  the  Reciprocity 
Bank,  22  N.  Y.,  9,  17  (1860).  Nor  can 
the  vendor  of  the  stock  to  the  bank 
claim  that  the  sale  was  invalid.  He  is 
estopped.  United  States  Trust  Co.  v. 
Harris,  2  Bosw.,  75,  91  (1857). 

2  See  Part  VII,  infra.  See,  also,  Bar- 
ton v.  Port,  etc.,  P.  R  Co.,  17  Barb.,  397 
(1854). 

3  State  v.  Smith.  48  Vt,  266  (1876); 
Williams  v.  Savage  Mfg.  Co.,  3  Md.  Ch., 


418,  451  (1851) ;  City  Bank  of  Columbus 
v.  Bruce,  17  N.  Y,  507  (1858);  State 
Bank  of  Ohio  v.  Fox,  3  Blatch.,  431 
(1856),  the  court  saying:  "The  stock 
was  not  extinguished  or  destroyed  by 
the  purchase  thereof  by  the  corpora- 
tion ;  "  Vail  v.  Hamilton,  85  N.  Y,  453 
(1881) ;  American  R'y  Frog  Co.  v.  Haven, 
101  Mass.,  398  (1869);  Commonwealth 
v.  Boston,  etc.,  R  R  Co.,  2  New  Eng.  Rep., 
647  (Mass.,  1886);  Ex  parte  Holmes, 
5  Cow.,  426  (1826).  See,  also,  §§  282, 251. 
*  See  ch.  XXXVII,  infra. 

5  State  Bank  of  Ohio  v.  Fox,  3  Blatch., 
431  (1856);  State  v.  Smith,  48  Vt,  266 
(1876).  See,  also,  §  282.  Stockholders 
cannot  enjoin  the  corporate  officers  from 
selling  shares  of  its  own  stock  which  it 
has  purchased.  Jefferson  v.  Burford,  17 
S.  W.  Rep.,  855  (Ky.,  1891). 

6  See  ch.  Ill,  supra.  It  may  be  issued 
by  way  of  a  stock  dividend.  See 
ch.  XXXII,  infra.  Land  scrip  of  a  land 
company,  that  is,  certificates  issued  al- 
lowing the  holder  to  exchange  the  cer- 
tificate for  land  at  a  specified  price,  after 
being  bought  up  by  the  company  may 
be  issued  as  a  scrip  dividend  to  the 
stockholders.  A  scripholder  whose 
scrip  was  not  bought  up  by  the  company 
cannot  object  unless  there  was  actual 
fraud.  Rogers  v.  Phelps,  9  N.  Y.  Supp., 
886  (1890). 


421 


§  315.] 


WHO    MAY   BUY   AND    SELL    STOCK. 


[CH.  XIX. 


§  315.  Purchase  hy  a  corporation  of  stoclc  in  another  corpora- 
tion—  Purchase  hy  railroad. —  It  may  be  stated  as  a  general  rule, 
with  but  few  exceptions,  that  a  corporation  has  no  implied  power 
to  purchase  shares  of  the  capital  stock  of  another  corporation. 
Especially  is  this  the  rule  as  regards  railroad  corporations.  It  has 
been  firmly  settled  by  well-considered  cases  that  one  railroad  com- 
pany cannot  purchase  shares  of  stock  in  another  railroad  company, 
especially  where  the  purchase  is  for  the  purpose  of  controlling  the 
latter  by  means  of  corporate  elections.1  In  a  few  instances,  partic- 
ular corporations,  by  their  charters,  are  given  the  power  to  invest 


1  See  §  64.  The  most  important  case 
is  Central  R.  R  Co.  v.  Collins,  40 
Ga.,  582  (1869),  where  a  stockholder  in 
one  railroad  obtained  an  injunction 
against  its  purchase,  for  purposes  of  con- 
solidation, of  stock  in  a  rival  and  com- 
peting railroad.  The  court  declared  the 
purchase  to  be  beyond  the  corporate 
powers  and  contrary  to  public  policy, 
and  says,  "  it  is  a  general  principle  that 
a  railroad  company,  without  express 
authority  given  by  the  legislature  to 
make  the  purchase,  cannot  purchase 
stock  in  another  railroad  company." 
Angell  &  Ames,  §  392.  To  same  effect, 
Hazelhurst  v.  Savannah,  G.  &  Ni  A.  R 
R  Co.,  43  Ga.,  13,  57  (1871),  the  court 
saying  :  "If  one  railroad  may,  at  its  op- 
tion, buy  the  stock  of  another,  it  prac- 
tically undertakes  a  new  enterprise  not 
contemplated  by  its  charter.  This  it 
cannot  dob}' any  implication.  The  power 
so  to  do  must  be  clear."  In  the  case  of 
Elkins  v.  Camden  &  Atlantic  R  R  Co., 
36  N.  J.  Eq.  Rep.,  5  (1882),  a  similar 
injunction  was  granted.  Such  purchase 
is  not  authorized  by  a  power  to  lease 
other  lines,  nor  to  build  them.  "  The 
purchase  of  a  rival  railroad  is  (not  to 
speak  of  public  policy)  foreign  to  the 
objects  for  which  the  defendant  was  in- 
corporated. .  .  .  As  a  purchase  with 
a  view  to  extinguishing  competition,  the 
transaction  is  clearly  ultra  vires."  It  is 
immaterial  that  the  complainant  pur- 
chased stock  for  the  purpose  of  obtain- 
ing the  injunction.  Salomons  v.  Laing, 
12  Beav.,  389,  353  (1850);  Great  Northern 


Ry  Co.  ix  Eastern  Counties  Ry  Co.,  21 
L.  J.  (Ch.}  837.(1851),  where  the  object 
was  to  control  the  corporation.  The 
court  said  it  was  an  "  attempt  to  carry 
into  effect,  without  the  intervention  of 
parliament,  what  cannot  lawfully  be 
done  except  by  parliament,  in  the  exer- 
cise of  its  discretion  with  reference  to 
the  interest  of  the  public."  Maunsell  v. 
Midland  Great  Western  Ry  Co.,  1  Hem. 
&  M-,  130  (1863),  relative  to  the  power  of 
a  railroad  company  to  subscribe  for  the 
stock  of  another  railroad ;  Central  R  R 
Co.  of  N.  J.  v.  Pennsylvania  R  R  Co., 
31  N.  J.  Eq.  Rep.,  475,  494  (1879),  where 
the  defendant  was  enjoined  from  build- 
ing another  railroad  by  means  of  an  inde- 
pendent corporation  operated  by  "  dum- 
mies." The  court  said :  "A  corporation 
cannot  in  its  own  name  subscribe  for 
stock  or  be  a  corporation  under  the  gen- 
eral railroad  law,  nor  can  it  do  so  by  a 
simulated  compliance  with  the  provis- 
ions of  the  law  through*  its  agents  as 
pretended  corporators  or  subscribers  for 
stock."  Pearson  v.  Concord  R  R  Co.,  13 
Am.  &  Eng.  R  R.  Cases,  102  (N.  H., 
1883),  where  a  railroad  had  purchased 
the  controlling  interest  in  the  stock  of  a 
connecting  railroad  and  was  managing 
it  in  the  interest  of  the  former  road.  A 
suit  by  a  stockholder  of  the  defrauded 
road  to  enjoin  such  act  was  sustained. 
A  foreign  corporation  cannot  buy  rail- 
road stocke  for  the  purpose  of  uniting 
competing  lines,  where  domestic  corpo- 
rations are  prohibited  from  so  doing. 
Clarke  v.   Central  R   R,  etc.,  50  Fed. 


422 


CH.  XIX.] 


WHO    MAY    BUY    AXD    SELL    STOCK. 


[§  315. 


in  other  railroad  stocks,  and  in  other  instances  general  statutes  to 
that  effect  prevail.1  Occasionally  prohibitions  against  such  pur- 
chases are  placed  in  the  constitution  of  a  state.2 


Rep.,  338  (1892).  A  railroad  has  no 
power  to  buy  the  stock  of  another  rail- 
road. Hamilton  v.  Savannah,  etc.,  R'y, 
49  Fed.  Rep.,  412  (1892);  Columbus,  etc., 
R.  R  v.  Burke,  19  Week.  Law  Bull.,  27 
(Ohio,  1887);  Mackintosh  v.  Flint,  etc., 
R  R,  34  Fed.  Rep.,  582  (1888).  See,  also, 
Green's  Brice's  Ultra  Vires,  91  (2d  ed.). 
Where  a  railroad  company,  in  the  name 
of  one  of  its  leased  lines,  contracted  to 
purchase  a  majority  of  the  stock  of  still 
another  line,  the  vendor  representing 
that  the  last  line  was  unincumbered,  the 
first-mentioned  company  may  avoid  the 
contract  by  proving  that  an  incum- 
brance rested  on  the  road  to  be  sold. 
Southwestern  R'y  Co.  v.  Papot,  67  Ga.,  675 
(18S1).  A  controlling  stockholder  in  one 
railroad  corporation  may  become  the 
controlling  stockholder  in  another  rail- 
road corporation.  Havemeyer  v.  Have- 
meyer,  43  Super.  Ct  (N.  Y.),  506  (1878) ; 
45  id.,  464 ;  aff'd,  86  N.  Y.,  618 ;  O'Brien  v. 
Breitonbach,  1  Hilt.,  304.  A  bondholder 
cannot  object  Matthews  v.  Murchison, 
15  Fed.  Rep.,  691  (1883).  Where  a  rail- 
road president  uses  its  funds  to  pur- 
chase the  stock  of  a  construction  com- 
pany that  has  the  stocks  and  bonds  of  a 
contemplated  competing  line  which  the 
construction  company  has  agreed  to 
build,  the  sale  of  the  stock  to  such  pres- 
ident may  be  attacked  by  parties  who 
were  defrauded  by  the  party  who  sold 
the  stock  of  the  construction  company. 
Langdon  v.  Branch,  37  Fed.  Rep.,  449 
(1888).  A  railroad  corporation  which  is 
advancing  money  to  another  corpora- 
tion may  take  the  bonds  and  stock  of 
the  latter  as  security.  The  West  Vir- 
ginia statutes  do  not  prevent  such  act. 
County  Court  v.  Baltimore,  etc.,  R.  R, 
35  Fed.  Rep.,  161  (1888). 

1  Mayor  v.  Baltimore  &  O.  R  R  Co., 
21  Md.,  50  (1863);  Zabriskie  v.  Cleveland, 
etc.,  R.  R  Co.,  23  How.,  381  (1859),  as  to 
the  Ohio  statute.     The  case  of  White  v. 


Syracuse  &  Utica  R  R  Co.,  14  Barb, 
559  (1853),  held  to  be  constitutional  and 
valid  a  general  law  allowing  any  New 
York  railroad  to  subscribe  to  the  stock 
of  the  Great  Western  Railroad,  Canada 
West.  Matthews  v.  Murchison,  17  Fed. 
Rep.,  760  (1883),  on  the  North  Carolina 
act  As  to  the  Kansas  act  allowing  such 
purchases,  see  Atchison,  etc.,  R  R  Co. 
v.  Fletcher,  10  Pac,  Rep,  596  (1886); 
Ryan  v.  Leavenworth,  etc.,  R'y  Co..  21 
Kan.,  365  (1879) ;  Atchison,  etc.,  R.  R  v. 
Cochran,  23  Pac.  Rep.,  151  (Kan.,  1890). 
In  the  case  of  Kimball  v.  Atchison,  etc., 
R  R,  46  Fed.  Rep.,  888  (1891),  the  court 
held  that  the  Atchison,  Topeka  &  Santa 
Fe  Railroad  Company  had  power  under 
its  charter  to  buy  a  majority  of  the 
stock  of  the  St  Louis  &  San  Francisco 
Railway,  a  partially  competing  line. 
Under  the  statutes  of  Pennsylvania  it  is 
legal  for  a  railroad  company  to  own  all 
the  stock  of  a  mining  company  which 
owns  land  and  such  land  does  not  es- 
cheat Coram,  v.  New  York,  etc.,  R  R, 
21  Atl.  Rep.,  528  (Pa.,  1891);  id.,  19  id., 
290. 

2  By  the  constitution  of  Pennsylvania 
any  railroad  corporation  is  forbidden  to 
control  any  other  railroad  corporation 
owning  or  having  under  its  control  a 
parallel  or  competing  line.  Under  this 
provision  the  Pennsylvania  Railroad 
Company  was  enjoined  from  purchasing 
a  majority  of  the  stock  of  the  South 
Pennsylvania  Railroad  Company.  In 
this  noted  case  (Pa.  R  R.  Co.  v.  Com- 
monwealth, 7  Atl.  Rep.,  368—1886),  the 
court  said  that  the  ownership  of  a  ma- 
jority of  the  stock  gave  "  control "  in  the 
sense  of  that  word  as  used  in  the  con- 
stitution. Cf.  Pullman  Pal.  Car  Co.  v. 
Missouri  Pac.  R.  R.  Co.,  11  Fed.  Rep., 
632  (1882) :  affirmed,  115  U.  S.,  587  (1885), 
construing  the  word  "control"  differ- 
ently in  a  contract  whereby  the  defend- 
ant was  to  use  the  plaintiff's  cars  over 


423 


§  315.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


Where  a  railroad  company  has  power  to  purchase,  lease  or  con- 
solidate with  another  railroad  company,  it  may  buy  the  stock  of 
the  latter  company  with  a  view  to  such  consolidation,  lease  or  sale.1 

It  is  illegal  for  a  railroad  company  to  buy  a  controlling  interest 
in  another  railroad  for  the  purpose  of  electing  the  board  of  direct- 
ors of  the  latter.  A  minority  stockholder  in  the  latter  company 
may  enjoin  the  former  from  voting  the  stock  so  purchased.2 

A  railroad  company  owning  all  the  stock  and  bonds  of  another 
company  does  not  own  the  property  of  the  latter.  It  cannot  sue 
on  a  cause  of  action  belomrin^  to  the  latter.3 


roads  under  the  defendant's  control. 
The  supreme  court  of  Pennsylvania,  in 
Pa.  R  R  Co.  v.  Commonwealth,  7  Atl. 
Rep.,  374  (Pa.,  1886),  also  sustained  an 
injunction  enjoining  a  corporation,  a 
majority  of  whose  stock  was  owned  by 
the  Pennsylvania  Railroad  Company, 
from  purchasing  a  majority  of  the  stock 
of  a  road  competing  with  the  Pennsyl- 
vania Railroad  Company.  The  con- 
stitution of  Georgia  forbids  and  prevents 
one  railroad  from  buying  the  stock  and 
control  of  a  competing  railroad  scheme, 
even  though  the  railroad  of  the  latter  is 
not  even  commenced  and  there  is  no 
intention  of  building  it.  Hamilton  v. 
Savannah,  etc.,  Ry.,  49  Fed.  Rep.,  412 
(1892). 

1  Where  a  railroad  corporation  has 
power  to  consolidate  with  another,  it 
may  purchase  the  stock  of  that  other  in 
contemplation  of  the  consolidation. 
Hill  v.  Nisbit,  100  Ind.,  341  (1884).  A 
railroad  corporation  may  purchase  the 
stock  of  another  railroad  with  a  view  to 
buying  the  railroad  itself  where  the  sale 
of  the  railroad  is  authorized.  Dewey  v. 
Toledo,  etc.,  Ry.,  51  N.  W.  Rep.,  1063 
(Mich.,  1892).  Where  a  railroad  company 
has  power  to  lease  another  company's 
road,  it  may  buy  all  the  stock  of  the 
latter  instead  of  taking  a  lease.  Atch- 
ison, etc.,  R.  R  v.  Fletcher,  35  Kan.,  236, 
247  (1886).  A  railroad  corporation 
having  the  power  to  buy  or  consolidate 
with  other  railroads  may  buy  a  control- 
ling interest  in  the  stock  of  another 
railroad.  Wehrhauer  v.  Nashville,  etc., 
R  R,  4  N.  Y.  St  Rep.,  541  (1886). 


2  See  ch.  XXXVII,  infra;  Millbank  v. 
N.  Y.,  etc.,  64  How.  Pr.,  20  (1882).  Cf. 
Great  Western  R'y  Co.  v.  Metropolitan 
R'y  Co.,  32  L.  J.  (Ch.),  382  (1863).  Where 
a  railroad  buys  a  controlling  interest  in 
the  stock  of  a  competing  railroad,  it  and 
its  officers  and  dummies  will  be  enjoined 
from  voting  such  stock  at  the  instance 
of  a  minority  stockholder,  it  being  clear 
that  if  allowed  to  control  the  latter  cor- 
poration the  former  corporation  can 
enhance  its  profits  at  the  expense  of  the 
latter  corporation,  by  diversion  of 
traffic.  Memphis,  etc.,  R.  R.  v.  Wood, 
7  S.  Rep.  108  (Ala.,  1889).  One  rail- 
road corporation  has  no  power  to  ac- 
quire the  bonds  of  another  railroad  cor- 
poration in  order  to  control  the  elections 
of  the  latter,  such  bonds  having  a 
voting  power.  State  v.  McDaniel,  22  Ohio 
St.,  354,  368  (1872).  Eleven  years'  delay 
is  fatal  to  a  complaint  that  another 
corporation  has  purchased  a  majority 
of  the  stock  of  the  corporation  in  which 
the  complaiuantstockholder  holds  stock, 
and  that  such  purchaser  is  diverting  the 
traffic  to  its  own  line  and  is  wrecking 
the  corporation  which  it  controls.  Alex- 
ander v.  Searcy,  8  S.  E.  Rep.,  630  (Ga., 
1889\ 

3  Fitzgerald  v.  Missouri  P.  R'y,  45  Fed. 
Rep.,  812  (1891).  Although  one  railroad 
company  owns  a  majority  of  the  stock 
of  another  railroad  company,  yet  the 
identity  of  the  two  are  separate  as  re- 
gards being  parties  to  suits.  Jessup  v. 
111.,  etc.,  R.  R,  36  Fed.  Rep.,  735  (1888). 
A  corporation  which  owns  a  majority 
of  the  stock  of  another  corporation,  and 


424 


CH.  XIX.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[§§  316,  317. 


§316.  Purchases  of  stock  by  banks  and  pledges  to  banks.—  A 
banking  corporation  has  at  common  law  no  power  to  purchase  or 
invest  in  the  stock  of  another  corporation,  whether  that  other  cor- 
poration be  itself  a  bank  or  of  a  different  business.1  The  bank  is 
organized  for  the  purpose  of  receiving  deposits  and  loaning  money, 
not  for  the  purpose  of  dealing  in  stocks.  Any  attempt  to  engage 
in  such  transaction  is  a  violation  of  its  charter  rights  and  of  its 
duty  towards  the  stockholders  and  the  public.  There  can  be  no 
difference  of  opinion  as  to  whether  a  pledge  of  stock,  as  collateral 
security  for  a  loan  made  by  the  bank  at  the  time  of  pledging  the 
stock,  is  legal.  Such  a  pledge  of  stock  is  valid  and  may  be  en- 
forced.2 

As  regards  a  pledge  of  stock  to  a  bank  to  secure  a  debt  previ- 
ously contracted,  its  legality  is  unquestioned,  and  is  as  free  from 
objections  as  a  pledge  made  contemporaneous  with  the  loan.3 

§  317.  Purchases  of  stock  by  insurance,  manufacturing  anil  other 
companies. —  An  insurance  company  has  no  power  or  legal  right  to 
subscribe  for  stock  in  a  savings  bank  and  building  association,4  nor 


buys  goods  of  it,  is  not  bound  to  see  that 
the  latter  turns  the  funds  over  to  a 
party  who  owned  the  goods  and  con- 
signed them  for  sale.  Wheeler  v.  New 
Haven,  etc.,  Co.,  16  Atl.  Rep.,  393  (Conn., 
1889).  See  on  this  subject  §  6,  supra, 
and  chs.  38,  39  and  43,  infra. 

iTalmage  v.  Pell,  7  N.  Y..  328,  347 
(1852);  Nassau  Bank  v.  Jones,  95  N  Y., 
115,  120  (1884);  First  Nat.  Bank  v.  Nat. 
Exchange  Bank,  92  U.  S.,  122, 128  (1875), 
where,  in  reference  to  national  banks, 
the  court  said :  "  Dealing  in  stocks  is 
not  expressly  prohibited,  but  such  a  pro- 
hibition is  implied  from  the  failure  to 
grant  the  power."  Tracy  v.  Talmage, 
14  N.  Y,  162  (1856);  Royal  Bank  of 
India's  Case,  L.  R.,  4  Ch.,  252  (1869); 
Franklin  Co.  x\  Lewiston  Institution  for 
Savings.  68  Me.,  43  (1877).  The  bank  is 
not  liable  to  the  corporate  creditors  on 
the  stock. 

2  Royal  Bank  of  India's  Case,  supra. 
"  Making  advances  upon  shares  in  pub- 
lic companies  is  within  the  ordinary 
course  of  the  dealing  of  bankers."  The 
stock  pledged  was  stock  in  another 
bank.  To  same  effect.  Re  Barned's 
Banking  Co.,  L.  R.,  3  Ch.,  105  (1867): 


Shoemaker  v.  Nat  Mechanics'  Bank,  1 
Hughes  (Ct.  Ct.  Md.),  101  (1869),  as  ap- 
plicable to  national  banks ;  also  Na- 
tional Bank  v.  Case,  99  U.  S..  628  (1878). 
Such  a  pledge  to  a  national  bank  is  not 
prohibited  by  the  statute  that  the  bank 
shall  not  take  a  real-estate  mortgage  as 
security.  So  held  where  the  property 
of  the  corporation  whose  stock  was 
pledged  consisted  of  real  estate.  Bald- 
win v.  Canfield,  1  N.  W.  Rep.,  261  (foot- 
paging),  (1879).  See,  also.  Sistare  v.  Best, 
88  N.  Y.,  527  (1882).  Contra,  Franklin 
Bank  v.  Commercial  Bank,  36  Ohio  St., 
350  (1881),  where  the  legality  of  the 
pledge  was  denied,  and  the  right  of  the 
pledgee  to  have  the  stock  registered  in 
its  name  not  granted.  On  a  reorganiza- 
tion it  is  legal  for  a  bank  owning  some  of 
the  bonds  to  take  part  in  such  reorgani- 
zation and  accept  stock  in  the  new 
company.  Deposit  Bank  v.  Barrett,  13 
S.  W.  Rep..  337  (Ky.,  1890). 

3  First  National  Bank  v.  National  Ex- 
change Bank,  92  IT.  S.,  122,  128. 

4  Mutual  Sav.  Bank  &  Bldg.  Ass'n  v. 
Meriden  Agency  Co.,  24  Conn.,  159 
(1855),  holding  the  insurance  company 
uot  liable  on  the  stock.     An  insurance 


425 


317.] 


WHO   MAY   BUY    AND    SELL    STOCK. 


[CH.  XIX. 


to  purchase  stock  in  another  insurance  company.1  It  is  difficult  to 
state  any  rule  as  regards  the  right  of  a  manufacturing  or  trading 
corporation  to  purchase  shares  of  the  capital  stock  of  another  cor- 
poration. It  has  been  held  that  neither  a  note-selling  company3 
nor  a  lumber  company  3  has  power  to  invest  in  the  shares  of  a  bank, 
nor  a  steamship  company  to  subscribe  for  stock  in  a  dry-dock  com- 
pany.4 On  the  other  hand,  it  has  been  held  that  a  steamboat  com- 
pany may  purchase  stock  in  another  rival  line,  even  though  the 
evident  purpose  be  to  injure  it.5  It  is  clearly  legal  for  a  manufactur- 
ing corporation  to  take  the  stock  of  another  in  payment  of  a  debt.8 

A  corporation  formed  to  manufacture  and  sell  gas  has  no  power 
to  buy  shares  of  stock  in  other  gas  companies.7 

A  steel-spring  company  may  use  its  surplus  earnings  to  purchase 
shares  of  stock  in  an  iron  and  steel  company  for  the  purpose  of 
purchasing  steel  cheaply  from  the  latter  company,  especially  where 
there  is  a  combination  which  has  put  up  the  price  of  steel.3 

Where  a  corporation  owns  stock  in  another  corporation  and  sells 
it  and  takes  a  note  in  payment,  it  is  no  defense  to  a  suit  on  the 
note  to  set  up  the  ultra  vires  of  the  above  act.9 


company  cannot  invest  in  the  stock  of 
a  bank.  State  v.  Butler,  8  S.  W.  Rep., 
586  (Tenn.,  1888). 

1  Re  Liquidators  of  the  British  Nation 
Life  Assurance  Association,  L.  R,  8  Ch. 
Div.,  679  (1878),  the  court  refusing  to 
hold  the  former  liable  on  a  winding  up; 
Berry  v.  Yates,  24  Barb.,  199  (1857)* 
Pier  son  v.  McCurdy,  33  Hun,  530  (1884). 

2  Joint-stock  Discount  Co.  v.  Brown, 
L.  R,  8  Eq.,  381  (1869). 

3  Sumner  v.  Marcy,  3  W.  &  M.,  105 
(1847). 

4  New  Orleans,  F.  &  H.  S.  Co.  v.  Ocean 
Dry-dock  Co.,  28  La.  Ann.,  173  (1876). 
Although  a  corporation  purchases  stock 
in  another  corporation  contrary  to  stat- 
ute, yet  a  bona  fide  holder  of  a  note 
given  in  payment  therefor  may  collect 
the  note.  Wright  v.  Pipe  Line  Co.,  101 
Pa.  St.,  204  (1882). 

5  Booth  v.  Robinson,  55  Md.,  419  (1880). 
This  decision  goes  to  the  extreme  length 
in  allowing  one  corporation  to  invest  in 
the  stock  of  another.  A  manufacturing 
corporation  is  not  presumed  to  bo  inca- 
pable of  purchasing  stock  in  another 
corporation.  Parker  v.  Bernal,  66  Cal, 
112  (1884). 


6  Howe  v.  Boston  Carpet  Co.,  82  Mass., 
493  (1860).  Where  an  iron  company 
Bells  iron  to  a  railway  company  to  be 
paid  for  iu  stock  of  the  latter,  the  con- 
tract is  void,  and  the  iron  companycan- 
nofc,  it  seems,  even  recover  the  value  of 
the  goods  delivei-ed.  Valley  R'y  Co.  v. 
Lake  Erie  Iron  Co.,  18  N.  E.  Rep.,  486 
(Ohio,  1888).  Where  one  telegraph  cor- 
poration holds  the  bonds  of  another  and 
exchanges  the  bonds  for  the  stock  of 
the  latter  corporation,  a  subsequent 
mortgagee  of  the  first  corporation  can- 
not attack  the  validity  of  the  bonds  and 
mortgage  on  the  property  of  the  second 
corporation.  Boston,  etc.,  Co.  v.  Bank- 
ers', etc.,  Co.,  36  Fed.  Rep.,  288  (1888). 
This  case  was  affirmed  sub  nom.  United 
Lines  Tel.  Co.  v.  Boston,  etc.,  Co.,  147 
U.  S.,  431.  The  court  said  in  regard  to 
the  method  of  issuing  the  stocks  and 
bonds,  "  It  violated  no  principle  of  law, 
and  no  rule  of  good  morals." 

1  People  v.  Chicago  Gas  T.  Co.,  22  N. 
E.  Rep.,  798  (111.,  1889). 

8  Layng  v.  A.  French,  etc.,  Co.,  Lim- 
ited, 24  Atl.  Rep.,  215  (Pa.,  1892). 

9  Holmes,  etc.,  Co.  v.  Holmes,  etc.,  Co., 
53  Hun,  52  (1889) ;  affirmed,  127  N. Y.,  252. 


426 


OH.  XIX.] 


WHO   MAY    BUY   AND    SELL    STOCK. 


[§  317. 


A  trust  company  has  no  power  to  hold  as  trustee  and  vote  the 
majority  of  the  stock  of  a  great  railroad  system,  especially  where 
it  is  also  the  trustee  in  a  trust  deed  of  the  company.1 

One  company  may  be  enjoined  from  voting  stock  in  a  rival  cor- 
poration where  such  vote  controls  and  will  render  the  second 
company  subject  to  the  first.2 

Although  the  statutes  of  a  state  authorize  incorporation  for  any 
legal  purpose,  yet  it  may  be  a  question  whether  incorporation  can 
be  had  for  buying  and  selling  shares  of  stock  in  other  corporations. 
The  state  only,  however,  can  raise  this  objection.3 

Religious  and  charitable  and  other  corporations,  not  for  profit, 
have,  it  seems,  implied  power  to  invest  their  funds  in  stock  of 
other  corporations.4  There  has  been  some  controversy  whether 
one  corporation  could  sell  all  its  property  to  another  corporation, 
taking  pay  in  stock  of  the  latter,  and  dividing  such  stock  among 
the  shareholders  of  the  selling  corporation.  The  weight  of  author- 
ity holds  that  such  a  transaction  is  legal  if  all  the  stockholders 


i  Clarke  v.  Central  R.  R.,  etc.,  Co.,  50 
Fed.  Rep.,  338  (1893). 

^  See  §  315 ;  also  ch.  XXXVII.  Where 
a  consolidation  is  effected  by  one  com- 
pany buying  all  the  stock  of  another 
company,  and  just  before  the  transac- 
tion is  completed  the  company  whose 
stock  is  thus  sold  issues  a  dividend  of 
interest-bearing  securities  in  order  to 
defraud  the  purchasing  company,  the 
latter  may,  by  a  bill  in  equity,  have 
such  securities  canceled.  Bailey  v. 
Citizens',  Gas.,  etc.,  Co.,  27  N.  J.  Eq.,  196 
(1876). 

3  A  stockholder  in  the  corporation 
cannot  enjoin  it  from  purchasing  stock 
in  accordance  with  its  articles  of  in- 
corporation. Willoughby  v.  Chicago, 
etc.,  Co.,  25  Atl.  Rep.,  277  (N.  J.,  1892). 
It  is  not  for  a  creditor  of  the  vendor  of 
stock  to  raise  the  question  whether  the 
vendee  —  a  corporation  —  had  power  to 
purchase  the  stock.  Kern  v.  Day,  12  So. 
Rep.,  6  (La.,  1893).  Although  the  charter 
authorizes  other  corporations  to  hold 
the  stock  of  a  corporation,  yet  a  subse- 
quent general  constitutional  provision 
against  one  corporation  owning  the 
stock  of  another  applies  to  it.  Clarke 
v.  Central  R.  R,  etc.,  50  Fed.  Rep.,  338 
(1892).     A  corporation  organized  to  deal 

42' 


in  the  stock  of  a  stock-yard  corporation 
and  hold  personal  and  real  estate  may 
buy  competing  stock  yards ;  also  buy 
the  stock  of  a  contemplated  con^eting 
company :  also  buy,  guaranty  and  sell 
the  bonds  of  such  competing  com- 
pany ;  also  pay  money  to  settle  suits 
against  the  first-named  stock-yard  com- 
pany, and  to  bind  stock-yard  men  not  to 
erect  competing  yards  for  a  specified 
term  of  years,  within  a  certain  terri- 
tory; and  may  sell  any  or  all  of  the 
above  property  and  right  to  the  first- 
named  company.  Ellerman  v.  Chicago, 
etc.,  S.  Y.  Co.,  23  Atl.  Rep.,  287  (N.  J„ 
1891). 

4  Pearson  v.  Concord  R.  R.  Co.,  13  Am. 
&  Eng.  R.  R.  Cases,  102  (N.  H.,  1883). 
"  Certain  classes  of  corporations  may 
rightfully  invest  their  moneys  in  the 
stock  of  other  corporations,  such  as  re- 
ligious and  charitable  corporations,  and 
corporations  for  literary  purposes.  The 
power  is  not  expressly  mentioned  in 
their  charters,  but  is  necessarily  implied, 
for  the  preservation  of  the  funds  with 
which  such  institutions  are  endowed, 
and  to  render  their  funds  productive." 
To  same  effect,  Hodges  v.  New  Eng. 
Screw  Co.,  1  R.  I.,  312  (1850). 


§  318.]  WHO    MAT    BUY    AND    SELL    STOCK.  [cH.  XIX. 

assent,  but  may  be  prevented  by  any  stockholder  of  the  former 
corporation.1  Where  a  corporation  owns  stock  in  the  name  of  a 
trustee  for  the  corporation,  it  is  obliged  to  indemnify  such  trustee 
for  calls  paid  by  him.2  The  stock  owned  by  a  corporation  may  be 
sold  by  its  general  business  agent  and  financial  manager  and  rep- 
resentative, he  having  apparent  power  to  sell,  and  the  governing 
body  not  objecting.3 

§318.  Infants  as  purchasers  of  stock. —  An  infant  is  incompe- 
tent to  purchase  shares  of  stock.  Most  cases  of  this  class  arise 
upon  a  winding  up  of  the  corporation,  when  the  infant  is  placed 
upon  the  list  of  contributories,  and,  in  defense,  infancy  is  set  up.4 
An  infant's  purchase  of  stock  is  voidable  and  not  void.5  This 
seems  to  be  the  rule  finally  arrived  at  by  the  English  courts,  after 
some  hesitation  and  difference  of  opinion.  The  transfer  is  similar 
to  a  deed,  and  passes  an  interest  to  the  infant  even  when  coupled 
with  a  liability,  if  it  be  for  his  benefit  to  accept  it."  Consequently 
an  infant,  upon  coming  of  age,  is  bound  to  elect  whether  he  will 
affirm  or  disaffirm  a  purchase  of  stock  made  by  him  while  yet  an 
infant.7  He  may  disaffirm  while  still  an  infant,  and  is  then  not 
liable  on  calls.8  The  plea  of  infancy  is  a  good  defense,9  but  the 
plea  must  allege  a  disaffiliation  within  a  reasonable  time  after  be- 
coming of  age.10  Where  a  stockholder  sells  his  stock  through  a 
stock-exchange  jobber,  and  the  sale  is  made  to  an  infant,  the  jobber 
is  liable  to  the  vendor  for  calls  paid  by  him  in  consequence  of  such 

1  See  ch.  XL,  infra.  6  id. 

*  Goodson's  Claim,  28  W.R.,  760(1880).  7  Where,    however,    the    corporation 

Where  one   company   takes   shares  of  becomes   insolvent  just  before    or  just 

stock  in  another  company  and  puts  such  after  the  infant  comes  of  age,  he  need 

stock  in  the  name  of  its  treasurer  and  not  affirm  or  disaffirm,  but  may  await 

president  as  "  trustees  of  the  stockhold-  the  action  of  the  corporation.  Mitchell's 

ers  of  the  A.  Co.,"   and  the  treasurer  Case,  L.  R.,  3  Eq.,  363  (1870).     Where 

afterwards  sells  the  stock  and  converts  he  is  silent  for  two  years  after  coming 

the  money  to  his  own  use,  he  may  be  of  age,  and  corporate  insolvency  then 

compelled   to    account    for    the    same,  occurs,  he    is    bound.     Id.     For    other 

Murray  v.  Aiken,  etc.,  Co.,  16  S.  E.  Rep.,  cases  of  ratification,  see  references  in 

143  (S.  C,  1892).  §§  67,  250. 

'Walker  v.  Detroit  Transit  R'y  Co.,  *Newry  &  Enniskillen  R'y  Co.  v. 
47  Mich.,  338  (1882).  See,  also,  Sistare  v.  Coombe,  3  Ex.,  565,  578  (1849).  "  He  be- 
Best,  88  N.  Y.,  527.  That  the  corporate  came  a  shareholder  by  contract  during 
treasurer  may  sell  the  stock,  see  Holden  infancy,  and  during  infapcy  he  dis- 
v.  Metropolitan  Nat'l  Bank,  138  Mass.,  48.  affirmed  the  contract ;  therefore,  in  my 

4  See  §§  67,  250.  opinion,  he  ceased  to  be  a  shareholder 

5  Lumsden's    Case,    L.   R,   4  Ch.,    31  liable  to  be  sued  for  calls." 

(1868).     A  minor's  sale  of  stock  is  void-        <J  Birkenhead,  L.   &   C.   J.  R'y  Co.  v. 
able  by  him.     It  is  not  void.     Smith  v.     Pilcher,  5  Ex.,  24  (1850). 
Nashville,  etc.,  R  R„  18  S.  W.  Rep.,  546       i"  Dublin  &  Wicklow  R'y  Co.  V.  Black, 
(Tenn.,  1892).  8  Ex.,  181  (1852). 

428 


on 


XIX.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[§  319. 


infancy.1     An  infant's  sale  of  stock,  even  by  a  transfer  of  the  cer- 
tificate, is  not  binding  on  him.2 

§  310.  Married  women  as  purchasers,  owners  or  vendors  of  stock. 
At  common  law  a  married  woman's  rights  as  regards  shares  of  stock 
were  the  same  as  prevailed  with  reference  to  other  personal  prop- 
erty purchased  or  owned  by  her.  She  had  no  material  rights. 
Modern  statutes  have,  however,  completely  changed  her  rights  of 
property  and  of  contract.  These  statutes  are  so  different  in  form 
and  effect  that,  for  the  purpose  of  ascertaining  the  status  of  a  mar- 
ried woman  as  a  stockholder,  it  is  necessary  to  consult  the  statute 
law  of  the  state  of  her  domicile,  and  also  of  the  state  of  the  corpo- 
ration itself.3  In  England  the  severity  of  the  common  law  has 
been  but  partially  modified  by  statute.4 


iNickalls  v.  Merry,  L.  R,  7  H.  L., 
530  (1875). 

2  Smith  v.  Baker,  42  Hun,  505  (1886). 

3  The  wife's  capacity  to  transfer  is  de- 
termined by  the  law  of  her  domicile. 
Hill  v.  Pine  River  Bank,  45  N.  H,  300 
(1864).  Dow  v.  Gould  &  C.  S.  M.  Co.,  31 
Cal.,  629  (1867),  holds  that  in  California 
a  gift  of  stock  from  husband  to  wife  is 
valid,  and  that,  after  such  gift,  he  could 
not  sell  and  transfer  it  as  his  own. 
Leitch  v.  Wells,  48  N.  Y.,  585  (1872). 
The  case  of  Stanwood  v.  Stanwood,  17 
Mass.,  57  (1820),  holds  that  where  the 
husband  does  not  have  the  stock  trans- 
ferred to  himself  on  the  corporate  books, 
but  declares  it  to  be  his  wife's  stock, 
there  is  no  reduction  of  it  to  his  posses- 
sion. See,  also,  Wall  v.  Tomlinson,  16 
Ves.,  413  (1809),  to  the  effect  that  a 
transfer  of  the  wife's  stock  to  the  hus- 
band as  trustee  is  not  a  reduction  to 
possession ;  also,  Arnold  v.  Ruggles,  1 
R.  L,  165  (1837);  Wildman  v.  Wildman, 


9  Ves.,  174  (1803),  and  Slaymaker  v. 
Bank  of  Gettysburg,  10  Pa.  St.,  373 
(1849>,  to  the  effect  that  only  a  registry 
will  reduce  the  wife's  stock  to  the  pos- 
session of  the  husband.  See,  also,  ch. 
XXXII,  infra.  The  wife's  stock,  stand- 
ing in  her  name  at  the  time  of  and  after 
marriage,  is  not  subject  to  her  husband's 
debts.  Cochrane  v.  Chambers,  Arnbl., 
79,  n.  (1825).  Contra,  Stamford  Bank  v. 
Ferris,  17  Conn.,  259  (1845).  In  Con- 
necticut it  is  held  that  the  wife  is  not 
liable  in  assumpsit  to  her  husband's 
creditors,  to  whom  she  has  pledged 
her  stock,  although  she  subsequently 
pledges  it  to  another.  An  express  prom- 
ise to  pay  on  her  part  is  necessary. 
Piatt  v.  Hawkins,  43  Conn.,  139  (1879). 
Curtis  v.  Steever,  36  N.  J.  Law,  304 
(1873),  clearly  and  properly  holds  that 
the  wife's  stock,  held  by  her  as  her  sep- 
arate estate,  is  not  subject  to  her  hus- 
band's debts.  See,  also,  Cornell's  Case, 
18   W.  N.   Cases,   289  (Pa.,  Nov.,  1886), 


*  By  33  and  34  Vict,  ch.  93,  §  4,  mar-    natic  R'y  Co.,  42  L.  J.  (Q.  B.),  169  (187:!). 


ried  women  may  purchase  or  take  paid- 
up  stock,  or  stock  upon  which  there  can 
be  no  liability,  but  if  taken  without  the 
consent  of  her  husband,  he  may  apply 
to  the  court  and  have  it  turned  over  to 
himself.  Previous  to  this  act  the  cor- 
poration might  refuse  to  register  her  as 
a  stockholder,  but  now  the  corporation 
must  accept  her  the  same  as  any  other 
applicant  for  registry.     Regina  v.  Car- 


Under  this  act  she  may  transfer  her 
stock  only  after  it  has  been  formally 
set  aside  by  statutory  authority  as"  her 
separate  property.  Howard  r.  Bank  of 
Eng.,  L.  R,  19  Eq.,  295  (1875).  Where 
the  corporation  has  allowed  a  transfer 
by  a  married  woman,  it  cannot  cancel 
the  registry.  Ward  v.  Southeastern 
R'y  Co.,  2  El.  &  EL,  812  (1860). 


429 


320.] 


WHO   MAT   BUY   AND    SELL    STOCK. 


[CH.  XIX. 


§  320.  Competency  of  miscellaneous  parties. —  A  sale  of  stock  by 
a  person  non  compos  mentis  is  void.  The  corporation  is  bound  ab- 
solutely to  know  of  the  lunacy  of  a  transferrer,  even  though  it 
allows  a  registry  on  his  ordinary  signature  and  transfer.1  An  as- 
signee in  bankruptcy  or  for  the  benefit  of  creditors  takes  only  the 
interest  and  equitable  rights  of  his  assignor.  A  previous  unre- 
corded transfer  of  the  insolvent's  stock  is  protected.2  A  partner 
may  accept  stock  as  collateral  security  for  a  loan  from  the  firm,3 
and  may  sell  and  transfer  partnership  stock.4 


and  §§  66,  250,  308;  Vandenheyden  v. 
Mallory,  1  N.  Y.,  452  (1848);  Voorhees 
v.  Bonesteel,  16  Wall.,  16  (1872).  A  cer- 
tificate issued  to  husband  as  trustee  of 
wife  constitutes  her  separate  estate, 
where  he  pays  dividends  to  her.  In 
Kentucky  a  resident  married  woman's 
power  of  attorney  to  convey  stock  is 
void.  Bank  of  Louisville  v.  Gray,  2 
S.  W.  Rep.,  168  (Ky.,  1886).  Taking  out 
a  certificate  in  his  own  name  by  the 
husband  reduces  his  wife's  stock  to  his 
possession,  and  it  passes  by  his  will, 
even  though  he  made  a  memorandum 
to  the  effect  that  he  held  it  in  trust  for 
her.  Cummings  v.  Cummings,  9  N.  E. 
Rep.,  730  (Mass.,  1887).  Where  a  hus- 
band uses  his  wife's  money  to  purchase 
stock  and  takes  title  in  his  own  name, 
but  considers  himself  trustee  for  her,  a 
creditor  of  the  husband,  who  at  the 
time  of  incurring  the  debt  knew  that 
the  latter  held  the  stock  for  his  wife, 
cannot  subject  it  to  the  payment  of  the 
debt.  Porter  v.  Bank  of  Rutland,  19 
Vt,  410  (1847).  Although  a  corporation 
errs  in  allowing  a  wife  to  transfer  her 
stock  to  her  husband,  yet  the  statute  of 
limitations  runs  against  her  right  of  ac- 
tion from  the  time  of  the  transfer. 
Chase  v.  Hibernia  Nat  Bank,  10  S.  Rep., 
379  (La.,  1891).  In  Kentucky,  by  statute, 
a  wife's  bank  stock  goes  to  her  heirs, 
and  not  to  her  husband,  upon  her  de- 
cease. Kent's  Adm'r  v.  Deposit  Bank, 
14  S.  W.  Rep.,  962  (Ky.,  1890).  Posses- 
sion by  the  husband,  as*  executor,  of 
stock  of  his  wife  is  not  a  reduction  to 
possession.  Sowles  v.  Witters,  39  Fed. 
Rep.,  403  (1889).     A  person  taking  stock 


from  a  person  in  whose  name  it  stands 
cannot  hold  the  same  as  against  the  lat- 
ter's  wife,  where  the  stock  belonged  to 
her  separate  estate  and  was  not  known 
to  be  by  the  person  taking  it.  Stickney 
v.  Stickney,  8  S.  Rep.,  568  (Ala.,  1890). 
A  married  woman  may  give  away  or 
pledge  her  stock.  Walker  v.  Joseph, 
etc.,  Co.,  20  Atl.  Rep.,  885  (N.  J.,  1890). 
Where  the  wife  authorizes  her  husband 
to  sell  her  stock  and  use  the  proceeds  in 
his  business,  he  cannot  sell  the  stock  and 
assign  the  proceeds  to  another  person. 
The  latter  cannot  collect  such  proceeds. 
Deming  v.  Bailey,  2  Rob.,  1  (1864). 

1  Chew  v.  Bank  of  Baltimore,  14  Md., 
299  (1859).  A  sale  of  stock  is  not  easily 
set  aside  on  the  ground  of  mental  in- 
capacity on  the  part  of  the  vendor. 
Perry  v.  Pearson,  25  N.  E.  Rep.,  636  (111., 
1890> 

2  Dickinson  v.  Central  Nat  Bank,  129 
Mass.,  279  (1880) ;  Purchase  v.  New  York 
Exchange  Bank,  3  Rob.  (N.  Y),  164 
(1865).  Contra,  Shipmau  v.  ^Etna  Ins. 
Co.,  29  Conn.,  245  (I860),  where  the  pre- 
vious transferee  delayed  unreasonably 
in  claiming  ownership  of  the  stock. 

3  Weikersheim's  Case,  L  R,  8  Ch., 
831  (1873).  In  Comstock  v.  Buchanan, 
57  Barb.,  127  (1864),  however,  where  the 
stock  was  registered  in  both  partners' 
names,  a  contrary  rule  was  upheld. 

4  Quiver  v.  Marblehead  Social  Ins.  Co., 
10  Mass.,  470  (1813).  Cf.  Sargent  v. 
Franklin  Ins.  Co.,  8  Pick,  90  (1829). 
Stock  may  belong  to  a  partnership 
although  standing  in  the  individual 
names  of  the  partners  in  order  to  make 
them  stockholders.     Fairfield  v.  Phillips, 


430 


CH.  XIX.] 


Wno    MAY    BUY    AND    SELL    STOCK. 


[§  320. 


A  director  of  the  corporation  itself  may  buy  and  sell  its  stock 
like  any  other  individual.  The  information  which  he  has  of  the 
affairs  of  the  corporation,  whereby  he  is  enabled  to  bu^y  or  sell  at 
an  advantage  over,  the  person  with  whom  he  deals,  does  not  affect 
the  validity  of  the  transaction.  He  is  entitled  to  the  benefit  of  his 
facilities  for  information.  There  is  no  confidential  relation  between 
him  and  a  stockholder,  so  far  as  a  sale  of  the  stock  between  them 
is  concerned ;  and,  so  long  as  he  remains  silent  and  does  not  actively 
mislead  the  person  with  whom  he  deals,  the  transaction  cannot  be 
set  aside  for  fraud.1 

It  is  illegal  for  the  directors  to  issue  to  themselves,  in  exclusion 
of  others,  such  part  of  the  original  or  increased  capital  stock  as  has 
not  been  already  issued,  the  issue  being  for  the  purpose  of  control- 
ling an  election  and  making  a  profit.2 


49  N.  W.  Rep.,  1025  (Iowa,  1891).  Where 
one  of  the  partners  in  the  building  of 
railroads,  and  in  many  owning  stocks, 
bonds,  etc.,  dies,  and  his  executor  by 
means  of  experts,  etc.,  makes  a  settle- 
ment with  the  other  partner,  such  settle- 
ment is  binding  although  the  other 
partner  did  not  impart  all  the  knowl- 
edge or  information  he  might  have 
given.  The  subsequent  rise  in  value  of 
some  of  the  securities  is  immaterial. 
Colton  v.  Stanford,  23  Pac.  Rep.,  16(Cal., 
1890). 

1  Board  of  Com'rs  of  T.  County  v. 
Reynolds,  44  Ind.,  509  (1873);  Carpenter 
v.  Danforth,  52  Barb.,  581  (1868).  This 
case  was  disapproved  by  the  commenta- 
tor to  Story's  Eq.  Juris.,  12th  ed.,  229  n., 
but  the  disapproval  is  omitted  in  the 
13th  ed.  So,  also,  Grant  v.  Attrill,  11 
Fed.  Rep.,  469  (1882),  where  the  sale  was 
induced  by  threat  of  assessments.  See, 
also,  Johnson  v.  Laflin,  5  Dill.,  65,  83 
(1878);  Deaderick  v.  Wilson,  8  Baxter 
(Tenn.),  108  (1874);  Gilbert's  Case,  L.  R, 
5  Ch.,  559  (1870) ;  §  351,  infra.  See,  also, 
Heman  v.  Britton,  14  Mo.  App.,  109 ; 
affd,  84  Mo.,  657  (1883).  In  New  York, 
by  statute,  a  director  is  prohibited  from 
selling  stock  "short."  Laws  1884,  ch. 
223.  Where  the  president  of  a  company 
advises  a  stockholder  to  sell  his  stock  at 
a  certain  price  to  a  certain  person,  and 
the  sale  is  made,  the  president  is  liable 


for  the  difference  between  that  price 
and  the  market  price,  where  the  person 
purchased  as  the  secret  agent  of  the  presi- 
dent. Fish  v.  Budlong,  10  R.  I.,  525  (1873). 
A  director  may  buy  stock  from  a  stock- 
holder at  less  than  its  real  value,  and 
there  is  no  fraud  in  the  fact  that  the 
director  knew  the  real  value  while  the 
stockholder  did  not.  Crowell  v.  Jackson, 
23  Atl.  Rep.,  426  (N.  J,  1891).  Where 
the  president  sells  stock  for  $120  per 
share  after  he  has  indorsed  a  false  state- 
ment of  the  company's  affairs,  the  stock 
being  really  worth  but  $70  per  share,  the 
vendee  may  have  the  sale  rescinded. 
Prewett  v.  Trimble,  17  S.  W.  Rep.,  356 
(Ky.,  1891).  It  would  be  "  inequitable  to 
permit  the  directors  of  a  corporation  to 
so  manage  its  business,  or  to  so  deal 
with  its  property,  as  to  lessen  the  value 
of  its  stock  for  the  purpose  of  purchas- 
ing such  stock  for  themselves  at  a  low 
figure."  But  this  relation  does  not  exist 
between  one  director  and  another  di- 
rector. Perry  v.  Pearson,  25  N.  E.  Rep., 
636  (111.,  1890).  The  purchaser  of  stock 
from  the  secretary  of  the  company  can- 
not rescind  on  the  ground  of  fraud,  the 
secretary  having  given  at  the  time  of  the 
sale  all  the  information  which  he  had 
concerning  the  company.  No  confiden- 
tial or  fiduciary  relation  exists.  Krumb- 
haar  v.  Griffiths,  25  Atl.  Rep.,  64  (Pa.,  1892). 
2  See  §  70,  supra. 


431 


§  321.] 


WHO   MAY   BUT    AND    SELL   STOCK. 


[CH.  XIX. 


A  joint  owner  of  stock  cannot  transfer  the  interest  of  the  other 
joint  owner  where  the  stock  is  registered  in  the  name  of  both.1 
On  the  death  of  one,  the  survivor  takes  title  to  the  whole  stock.2 

A  drunken  person's  sale  of  stock  may  be  set  aside  if  an  undue 
advantage  was  taken.3  Where  stock  is  purchased  by  one  person 
in  his  own  name  by  due  authority  for  himself  and  another,  the 
latter  is  a  part  owner,  and  has  rights  and  liabilities  as  such.4  The 
statute  of  frauds  does  not  apply  to  such  an  arrangement.5 

§  321.  Sales,  purchases  and  transfers  by  agents. —  Stock  may  be 
purchased  by  an  agent;  and  in  making  such  a  purchase  the  agent 
is  not  permitted  to  make  a  secret  profit,  even  though  he  acts  with- 
out compensation.6  The  real  owner  of  stock  may  compel  the  nomi- 
nal owner  to  transfer  the  stock  to  him.7     The  corporation  may 


1  Standing  v.  Bowring,  L.  R.,  27  Ch. 
D.,  341  (1884);  Comstock  v.  Buchanan, 
57  Barb.,  127  (1864).  But  if  the  other 
joint  owner  dies  first,  the  previous 
transfer  of  the  survivor  is  effective  and 
conveys  the  whole.  Slaymakerv.  Bank 
of  Gettysburg,  10  Pa.  St.,  373  (1849). 
Where  two  persons  own  stock  in  com- 
mon, replevin  will  not  lie  by  one  as 
against  the  other  for  his  part  of  the 
stock.  Barrowcliffe  v.  Cummins,  66 
Hun,  1  (1892). 

2  Garrick  v.  Taylor,  3  L.  T.  (N.  S.),  460 
(1860);  Hill's  Case,  L.  R.,  20  Eq.,  585 
(1874). 

3  A  sale  of  stock  by  a  drunken  person 
for  an  insufficient  consideration  will  be 
set  aside ;  and  if,  without  his  fault,  he 
is  unable  to  restore  the  amount  re- 
ceived, it  will  be  provided  for  in  the 
final  decree.  Thackrah  v.  Haas.  119  U. 
S.,  499  (1886). 

<Staver  v.  Flack,  41  Barb.,  162  (1862). 
Where  several  parties  buy  and  sell  a 
certain  stock  in  the  name  of  one  of 
themselves  and  close  the  deal,  a  subse- 
quent purchase  of  the  same  stock  by 
that  one  does  not  inure  to  their  com- 
mon benefit  Kenned}'  v.  Porter,  109 
N.  Y.,  526  (1888).  Where  several  par- 
ties agree  to  purchase  land  in  the  name 
of  a  corporation  in  exchange  for  stock 
to  be  taken  in  the  name  of  one  of  them, 
tbe  others  may  compel  the  latter  to  ac- 
count for  the  stock.     King  v.  Bar  nee, 


109  N.  Y.,  267  (1S88).  See,  also,  §  252, 
siqira.  A  partnership  or  joint  owner- 
ship of  stocks  between  two  persons  may 
be  shown  by  the  acts  and  contracts  of 
the  parties  and  by  the  fact  that  the 
property  clearly  owned  by  them  in 
common  was  used  in  the  acquisition  of 
the  other  property.  Beardsley  r.  Beards- 
ley,  138  U.  S.,  262  (1891).  Where  sev- 
eral parties  buy  a  certificate  of  stock  in 
fixed  proportions  and  the  certificate  is 
taken  by  one  for  the  benefit  of  all,  he  is 
a  bailee  for  the  others  and  not  a  vendor. 
Coquard  v.  Wernse,  13  S.  W.  Rep.,  341 
(Mo.,  1890).  Where  one  party  loans 
money  to  another  party  to  buy  stock  in 
a  certain  company,  such  stock  to  be  de- 
livered to  the  former  party  in  pledge, 
and  the  latter  party  uses  the  stock  for 
another  purpose,  the  loan  of  the  money 
is  not  a  mere  loan,  but  the  money  is 
impressed  with  a  trust,  and  this  trust 
follows  the  stock  as  against  bona  fide 
holders.  Barnard  v.  Hawks,  16  S.  E. 
Rep.,  329  (N.  C,  1892). 

5  See  §  339,  infra. 

BKimber  v.  Barber,  L.  R.,  8  Ch.,  56 
(1872),  holding  that,  where  a  person  of- 
fers to  buy  for  another  stock  at  a  cer- 
tain price,  but  buys  it  at  a  less  price  and 
keeps  the  difference,  he  is  liable  to  the 
vendee  for  his  gains.  Keyes  v.  Bradley, 
35  N.  W.  Rep.,  656  (Iowa,  1887). 

'  Colquhoun  v.  Courtenay,  43  L.  J. 
(Ch.),  338  (1874). 


432 


CH.  XIX.] 


WHO    MAY    nrY    AND    SELL    STOCK. 


[§  322. 


disregard  the  nominal  holder  and  allow  the  real  owner  to  sell  and 
transfer  the  stock.1  The  relation  of  an  agent  towards  his  princi- 
pal in  the  purchase,  sale  or  holding  of  stock  exists  where  a 
"dummy"  is  used  to  shield  the  real  owner  from  liability  on  the 
stock.2  A  stockholder  may  of  course  sell  stock  through  an  agent. :) 
But  power  to  sell  does  not  give  power  to  pledge.4 

The  principal  and  most  difficult  questions  connected  with  an 
agency  herein  arise  where  the  owner  of  stock  indorses  it  in  blank, 
and  places  it  in  the  hands  of  an  agent,  and  the  agent  in  violation 
of  his  orders  then  sells  the  stock  to  a  hona  fide  purchaser.  The 
law  is  clear  that  the  hona  fide  purchaser  is  protected  in  his  owner- 
ship of  the  stock.' 

§  322.  Purchases  of  stock  by  guardians,  executors  and  trustees. — 
In  England,  at  an  early  day,  the  common-law  rule  was  declared  to 
be  that  guardians,  executors  and  trustees  had  no  right  to  invest 
the  trustee  fund  in  the  stocks  of  private  corporations,  and  that  if 
thev  did  so  thev  themselves  were  personallv  liable  for  the  monevs 
so  invested.6  The  rigor  of  this  rule  has  been  relaxed  somewhat  in 
England,  b}r  statute  and  by  orders  in  chancery,  so  that  such  in- 


1  Sabin  v.  Bank  of  'Woodstock.  21  Vt, 
353  (1849),  holding  also  that  the  nominal 
holder  is  not  protected,  although  he  sub- 
sequently becomes  the  real  owner  of  the 
stock. 

2  See  §  253,  supra. 

3  See  ch.  XXV,  on  stock-brokers.  A 
person  may  assign  stock  to  another 
with  discretionary  power  to  sell  at  any 
time  the  latter  thinks  best,  and  pay  the 
former's  creditors  therefrom.  Appeal 
of  Neilson,  13  Atl.  Rep.,  943  (Pa.,  1888). 
Where  an  agent  to  sell  stock  is  to  have 
any  excess  of  price  over  a  sum  named 
to  him  by  the  vendor,  and  the  agent 
finds  a  customer  at  an  advanced,  price 
and  the  vendor  refuses  to  sell,  the  agent 
may  recover  such  profit  as  he  lost 
thereby.  Mattingly  v.  Roach,  23  Pac, 
Rep..  1117  (Gal,  1891).  An  agent  author- 
ized to  sell  stock  may  sell  part  of  it. 
Ulster,  etc.,  Inst  v.  Fourth,  etc.,  Bank, 
8  N.  Y.  Supp.,  162  (1889). 

4  See  §  326.  A  stockholder's  power  of 
attorney  to  his  agent  "  to  exchange  old 
issues  or  certificates  of  stock  and  to  re- 
ceive new  issues  or  certificates  in  lieu 
thereof "  does  not  authorize  the  agent 
to  sell  or  pledge  the  stock     The  corpo- 


ration is  liable  for  allowing  a  transfer 
to  a  third  person  on  such  authority. 
Quay  r.  Pre  idio,  etc.,  R.  R,  22  Pac. 
Rep.,  925  (Cal.,  1889).  Where  a  person 
gives  to  another  a  general  power  of  at- 
torney, covering  the  sale  and  transfer  of 
all  stocks,  etc.,  the  attorney  may,  upon 
delivering  up  the  certificate  therefor  to 
the  corporation,  transfer  the  stock  of 
his  principal  into  his  own  name.  The 
corporation  is  not  bound  to  inquire 
further  than  the  power  of  attorney,  nor 
is  it  given  notice  by  the  fact  that  the 
attorney  is  one  of  its  directors.  Tafft  v. 
Presidio,  etc.,  Co.,  22  Pac.  Rep.,  485 
(Cal.,  1889). 

5  See  g  351,  infra, 

eTrafford  v.  Boehm,  3  Atk.,  440  (1746), 
where  the  investment  was  in  bank  and 
South  Sea  stock.  Lewin  on  Trusts,  281 
(7th  ed.,  1879),  says  that,  "unless  spe- 
cially given  power,  it  is  settled  in  Eng- 
land that  a  trustee  may  not  invest  the 
trust  fund  in  the  stock  of  any  private 
company,  as  South  Sea  stock,  bank 
stock,  etc. ;  for  the  capital  depends  upon 
the  management  of  governors  and  di- 
rectors, and  is  subject  to  loss." 


(28) 


433 


322.] 


WHO   MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


vestments  may  be  made  in  the  stock  of  the  banks  of  England  and 
of  Ireland  and  the  East  India  Company.1  In  this  country,  aside 
from  a  few  dicta  and  a  few  decisions  to  the  contrary,  the  English 
rule,  in  its  original  integrity,  is  upheld  and  followed.  The  weight 
of  authority  clearly  holds  that  the  investment  of  trust  funds  in  the 
stock  of  railroad,  insurance,  bank,  manufacturing  or  other  corpora- 
tions is  made  at  the  peril  of  the  trustees.2     The  cestui  que  trust 


i  Lord  St  Vincent's  Act,  22  and  23 
Vict,  ch.  35,  §  32;  23  and  24  Vict, 
ch.  38. 

2  In  New  York  the  case  of  King  v. 
Talbot,  40  N.  Y.,  76  (1869) ;  aff'g  50  Barb., 
453,  clearly  enounces  and  sustains  this 
rule.  See,  also,  Adair  v.  Brimmer,  74  N. 
Y,  539,  551  (1878),  where  the  trustees 
were  held  liable  for  selling  coal  lands, 
taking  in  pay  coal  stocks,  they  being 
authorized  by  the  will  to  invest  in  such 
securities  as  they  deemed  safe.  Mills  V. 
Hoffman,  36  Hun,  594  (1882);  reversed 
in  92  N.  Y.,  181,  but  not  on  this  point 
Ackerman  v.  Emott,  4  Barb.,  620  1 1 
See,  also,  Berry  v.  Yates,  21  Barb.,  310 
(1857);  Brown  v.  Campbell,  Hopkins1 
Ch.  (2d  ed.),  265  (1824).  In  Pennsylvania 
the  rule  is  the  same.  Nyce's  Appeal,  5 
Watts  &  Serg.,  354  (1843),  holding  the 
trustee  liable  for  investment  in  United 
States  bank  stock,  although  the  guard- 
ian approved  of  the  trustee's  invest- 
ment Norris  r.  Wallace,  3  Pa.  St,  319 
(1S46),  where  the  investment  was  in  the 
stock  of  a  suspended  bank.  Worrell's 
Appeal,  9  Pa.  St.  508  (1848),  navigation 
stock  not  good,  although  dividends  had 
been  accepted  by  the  cestui  que  ti'ust; 
sustained  on  second  appeal.  23  Pa.  St 
(1854).  Rush's  Estate,  12  Pa.  St.,  375 
(1849).  stock  in  Lehigh  Coal  and  Navi- 
gation Company  not  good.  Hemphill's 
Appeal,  18  Pa.  St,  303  (1852),  United 
States  bank  stock  not  good.  Pray's  Ap- 
peal, 34  Pa.  St,  100  (1859),  manufactur- 
ing corporation  stock  not  good,  the 
works  being  unfinished.  Barton's  Es- 
tate, 1  Pars.,  24,  doubted.  Ihmsen's  Ap- 
peal, 43  Pa.  St..  431  (1862),  railroad  stock 
not  good.  In  New  Jersey  the  rule  is  the 
6ame.    Gray  v.  Fox,  1  N.  J.  Eq.  Rep.,  259 


(1831);  Halsted  v.  Meeker's  Ex'rs,  18  N. 
J.  Eq.  Rep.,  136  (1866);  Ward  v.  Kitchen, 
30  N.  J.  Eq.  Rep,  31  (1878).  Also  in  New 
Hampshire.  Kimball  v.  Reding,  31  N. 
H.,  352  (1855),  stock  in  contemplated 
railroad  not  good  ;  French  u  Currier.  47 
N.  H,  88,  99  (1866),  unproductive  stock 
not  good.  In  Massachusetts  the  tend- 
ency is  to  favor  a  contrary  rule.  "Trust- 
ees in  this  commonwealth  are  permitted 
to  invest  portions  of  trust  funds  in  divi- 
dend-paving stocks  and  interest-bearing 
bonds  of  private  business  corporations, 
when  the  corporations  have  acquired, 
by  reason  of  the  amount  of  their  prop- 
erty and  the  prudent  management  of 
their  alTairs,  such  a  reputation  that  cau- 
tious and  intelligent  persons  commonly 
invest  their  own  money  in  the  storks 
and  bonds  as  permanent  investments.'' 
But  where  the  trustee  invested  over  a 
fifth  of  the  estate  in  Union  Pacific  Kail- 
road  stock  and  afterwards  invested  a 
further  amount  in  the  same  stock,  he 
was  charged  with  the  loss  due  to  the 
second  investment  Dickinson's  Appeal, 
25  N.  E.  Rep.,  99  (Mass..  1890).  In  the 
case  of  Harvard  College  v.  Amory,  26 
Mass.,  446  (1830),  express  power  was 
given.  In  Lovell  v.  Minot,  37  Mass.,  116 
(1838),  the  stock  was  taken  as  security. 
Kinmouth  v.  Brigham,  87  Mass.,  270 
(1862),  and  Brown  v.  French,  125  Mass., 
410  (1878),  were  not  cases  of  investments 
in  stocks.  Hunt,  Appellant,  6  N.  E. 
Rep.,  554  (Mass.,  1886),  is  a  dictum.  Sev- 
eral of  the  southern  states  clearly  up- 
hold the  rule  that  trustees,  etc.,  may 
invest  the  trust  funds  in  stocks.  Boggs 
v.  Adger,  4  Rich.  Eq.  (S.  C),  408  (1853), 
United  States  bank  stock  good;  Wash- 
ington  v.  Emory,  4  Jones'   Eq.  (N.  C), 


434 


CH.  XIX.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[§  323. 


mav  hold  the  trustee  liable  for  the  amounts  so  invested,  together 
with  interest  upon  the  same.  Where  the  trustee  is  authorized  to 
purchase  stock  he  is  not  liable  for  the  embezzlements  of  an  agent 
whom  with  due  care  he  employs  to  make  the  purchase.1 

§  323.  Sale  or  pledge  of  stock  by  trustee  in  breach  of  his  trust. — 
It  is  the  function  and  duty  of  a  trustee  to  keep  and  preserve  the 
trust  property,  and  to  apply  the  income  according  to  the  terms  of 
the  instrument  creating  the  trust.  As  a  general  rule  it  is  not  bis 
dutv  or  his  right  to  sell  or  change  the  investment.  Unless  the  in- 
strument  creating  the  trust  authorizes  the  sale  of  the  trust  prop- 
erty, it  is  a  breach  of  trust  for  the  trustee  to  make  a  sale.2  In 
this  respect  the  powers  of  a  trustee  differ  widely  from  those  of  an 
executor  or  administrator,  and  the  rule  applies  to  a  trustee  hold- 
ing in  trust  shares  of  stock.  Moreover,  under  ordinary  circum- 
stances, a  trustee  cannot  sell  stock  held  in  trust,  although  such  sale 
be  for  the  purpose  of  investing  the  proceeds  in  other  stock  or  other 
property.3 


32  (1858),  railroad  stock  good ;  Gray  v. 
Lynch,  8  Gill  (ltd.),  403  (1849),  bank 
stock  good ;  Smyth  v.  Burns,  25  Miss.. 
422  (1853),  bank  stock  good ;  Lamar  v. 
Micou,  112  U.  S.,  452  (1884),  and  114  TJ. 
S.,  218  (speaking  for  Georgia  and  Ala- 
bama), bank  and  railroad  stock  good, 
but  not  Confederate  bonds.  See,  also, 
on  this  subject,  generally,  40  Am.  Dec, 
515,  notes.  An  executor  who  is  inter- 
ested in  a  corporation,  and  gets  a  com- 
mission for  selling  its  stock,  is  liable  to 
replace  funds  which  he  induces  the 
cestui  que  trust,  a  woman,  to  invest  in 
such  stock.  Appeal  of  Potter,  12  Atl. 
Rep.,  513  (Conn.,  1888).  Where  all  the 
stockholders  assign  stock  to  the  presi- 
dent to  sell  to  pay  corporate  debts,  he 
may  assign  part  of  it  to  himself  to  pay 
a  debt  due  to  himself  from  the  corpora- 
tion. Appeal  of  Patterson,  12  Atl.  Rep., 
679  (Pa.,  1888).  Where  the  trustee  is 
expressly  authorized  to  invest  in  bank 
stock  he  is  not  liable  to  the  estate  for 
losses,  though  the  investment  is  made  in 
his  individual  name.  Appeal  of  Pensyl, 
15  Atl.  Rep.,  719  (Pa.,  1888).  As  to  stat- 
utory and  constitutional  provisions,  see 
Part  VII,  infra.  In  Kentucky  the  stat- 
utes authorize  the  retention  by  a  guard- 
ian   of    an    investment  in  good   bank 


stock.  Fidelity,  etc.,  Co.  v.  Glover,  14 
S.  W.  Rep,  343  (Ky.,  1890). 

1  Speight  v.  Gaunt,  L.  R.,  9  App. 
Cases,  1  (1883). 

2Bohlen's  Estate,  75  Pa. St.  312  (1874); 
Bayard  v.  Farmers'  &  M.  Bank.  52  Pa. 
St.,  232  (1866):  Jaudon  v.  National  City 
Bank,  8  Blatch.,  430  (1871);  affirmed.  15 
Wall.,  165  (1874).  On  the  relations  and 
duties  of  trustees  generally  in  regard  to 
stock,  see,  also,  Perry  on  Trusts  (3d  ed.), 
539,  556. 

3  Trustee  selling  stock  for  purpose  of 
investing  in  real  estate  may  be  com- 
pelled to  replace  it.  Earl  Powlet  v. 
Herbert,  1  Yes..  297  (1791).  Cf.  Bohlen's 
Estate,  75  Pa.  St.,  312  (1874);  Peckham 
v.  Newton,  4  Atl.  Rep.,  758  (R.  I.,  1886). 
Cestui  que  trust  may  waive  the  objection. 
Duncan  v.  Jaudan,  15  Wall.,  171.  The 
case  of  Washington  v.  Emory,  4  Jones' 
Eq.,  32  (1858),  holds  that  a  change  in  the 
investment  is  allowable  if  there  is  good 
reason  to  believe  that  the  estate  will  be 
benefited.  Trustees  should  sell  the  stock 
if  depreciation  is  probable.  Ward  v. 
Kitchen,  30  N.  J.  Eq.,  31  (1878).  But  not 
liable  for  failure  to  sell  if  in  good  faith 
and  sound  discretion.  Bowker  v.  Pierce, 
13d  Mass.,  262  (1881);  Parker  v.  Glover, 
9  Atl.  Rep.,  217  (N.  J.,  1887);  Appeal  of 


435 


§  324.] 


WHO   MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


§  324.  Where  a  trustee  improperly  sells  shares  of  stock  belonging 
to  the  trust  estate,  the  cestui  que  trust  has  a  right  to  elect  to  have 
the  stock  restored  or  the  amount  received  for  it  paid  over,  together 
with  interest  from  the  time  of  the  sale.1  Were  the  rule  otherwise 
the  trustee  would  profit  by  >is  own  breach  of  trust  in  case  there 
was  a  decline  in  the  value  of  the  stock.  The  trust  attaches  to  any 
stock  standing  in  the  name  of  the  trustee,  and  although  the  same 
certificates  are  not  retained,  an  equal  amount  of  other  similar  stock 
owned  by  the  trustee  may  be  applied  to  the  trust.2  And  in  all  cases 
where  the  trustee  has  sold  stock  belonging  to  the  trust  estate  in 
breach  of  his  duties  as  trustee,  he  may  be  held  liable  in  damages  by 
the  cestui  que  trust  or  his  representative  for  the  value  of  the  stock.3 


Stewart,  6  Atl.  Rep.,  321  (Pa.,  1885)  —the 
last  case  holding,  also,  that  the  trustee 
cannot  sell  the  stock  to  himself,  even  at 
the  market  price.  Cannot  change  stock 
bequeathed.  Murray  v.  Feinour.  2  Md. 
Ch.,  418  (1851).  Nor  a  good  investment 
to  a  stock  investment  In  re  Warde,  2 
Johns.  &H.,  191  (1861);  Waite  v.  Whor- 
wood.  2  Atkyns,  159  (1741).  A  trustee  of 
an  estate  has  implied  power  to  sell  rail- 
road stock  belonging  to  the  estate  in 
order  to  reinvest  the  proceeds  in  secu- 
rities which  the  law  allows  him  to  invest 
in.  Toronto,  etc.,  Co.  v.  Chicago,  etc., 
R.  R.  64  Hun,  1  (1892).  See,  also,  Re 
Bennison,  60  L.  T.  Rep,  859  (1889).  In 
the  case  Jones  v.  Atchison,  etc..  R.  R.,  23 
N.  E.  Rep,  43  (Mass.,  1889),  the  court  up- 
held a  sale  of  stock  made  by  the  trustee 
for  the  purpose  of  changing  the  invest- 
ment. A  trustee  selling  stock  at  a  high 
price  and  then  replacing  it  at  a  lower 
figure  is  liable  to  the  cestui  que  trust 
for  the  high  price.  Snyder's  Adm'r  v. 
McComb's  Ex'r,  39  Fed.  Rep.,  292  (1889). 

1  Harrison  v.  Harrison,  2  Atkyns,  121 
(1740) ;  Bostock  v.  Blakeney,  2  Brown's 
Ch.  R.,  653  (1789) ;  Pocock  v.  Redding- 
ton,  5  Vesey,  800  (1801) ;  Long  v.  Stew- 
art, 5  Vesey,  809,  note  (1801):  Hart  v. 
TenEyck,  2  Johns.  Ch.,  62,  117  (1816); 
Re  Masoiuberd's  Settlement,  60  L.  T.  Rep, 
620  (1889). 

2Pinkett  v.  Wright,  2  Hare,  120 
(1842).     A  trustee  is  liable  for  breach  of 


trust  of  co-trustee  in  regard  to  stock 
where  the  former  is  negligent  in  keep- 
ing himself  informed  as  to  the  transac- 
tions of  the  latter  in  the  trust  properly. 
Bullock  v.  Bullock,  55  L.  T.  Rep,  703 
(1886).  Trust  stock  was  pledged  by  a 
trustee  to  secure  his  own  debts  in  1864, 
the  pledgee  knowing  that  the  stock  was 
trust  stock ;  the  stock  was  sold  by  pledgee 
in  1867;  the  cestui  que  trust  learned 
thereof  in  1877  and  commenced  suit 
against  the  executors  of  the  surety  for 
the  trustee;  judgment  was  rendered  in 
1882,  and  executors  commenced  tins 
suit  against  the  pledgee  within  three 
years  after  1882.  Held,  that  no  laches 
or  statute  of  limitations  barred  the  suit. 
Blake  v.  Traders'  Nat'l  Bank,  12  N.  E. 
Rep,  414  (Mass.,  1887). 

3  A  trustee  authorized  to  sell  stock, 
but  selling  in  breach  of  trust,  is  liable  for 
the  value  of  the  stock  at  the  time  of  com- 
mencing suit  against  him,  and  interest; 
also  for  dividends  declared  after  the 
breach  of  trust;  or  the  cestui  que  trust 
may  demand  the  value  of  the  stock  at 
the  time  of  the  breach  of  trust,  and  in- 
terest, or  a  replacing  of  similar  stock 
and  dividends.  McKim  v.  Hibbard,  8 
N.  E.  Rep,  152  (Mass.,  1886).  A  trustee 
to  use  stock  to  pay  debts  may  assign  a 
part  of  the  stock  to  pay  a  debt  due  to 
himself,  if  in  good  faith  and  at  a  full 
valuation.  Appeal  of  Patterson,  12  AtL 
Rep.,  679  (Pa,  1888). 


436 


CH. 


XIX.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[§  3i'5. 


A  specific  performance  in  regard  to  a  trust  estate  of  stock  may  be 
decreed.1 

§  325.  Transferee  of  stock  from  trustee  —  is  protected  when. —  A 
vendee  or  pledgee  of  stock,  directly  from  a  trustee,  is  or  is  not  pro- 
tected in  his  interest  in  the  stock,  according  as  he  is  or  is  not  charge- 
able with  notice  of  the  fact  that  the  stock  belongs  to  a  trust  estate, 
and  that  the  trustee  is  using  it  in  breach  of  the  trust.  Anything 
that  is  sufficient  to  put  a  party  on  inquiry  is  considered  equivalent 
to  actual  notice,  if  inquiry  be  not  made  and  reasonably  satisfied. 
The  law  imputes  to  a  purchaser  the  knowledge  of  a  fact  of  which 
the  exercise  of  common  prudence  and  ordinary  diligence  would 
have  apprised  him.  This  is  called  constructive  notice,  and  has  the 
same  effect  as  an  actual  notice  of  the  trusteeship.  The  most  com- 
mon instance  of  a  constructive  notice  that  stock  being  sold  belongs 
to  a  trust  estate  is  where  the  words  "trustee"  or  "in  trust,"  either 
with  or  without  the  name  of  the  cestui  que  trust,  are  written  on  the 
face  of  the  certificate  of  stock  after  the  name  of  the  person  in  whose 
name  it  stands  on  the  corporate  books.  It  is  well  established  that 
such  words,  indicating  a  trustee  ownership,  are  notice  to  the  pur- 
chaser that  his  vendor  is  selling  trust  property,  and  that  he  must 
ascertain  whether  the  trustee  has  any  power  to  sell  the  stock.2 


i  See  §  338,  n.,  infra. 

2  "A  certificate  for  shares  of  stock  run- 
ning to  'A.  B.,  trustee,'  or  to  'A.  B.,  in 
trust,'  without  disclosing  the  names  of 
beneficiaries  or  the  particulars  of  the 
trust,  is  notice  to  a  purchaser  of  the 
shares  that  'A.  B.'  does  not  hold  them 
in  his  own  right  but  as  a  trustee."  Ger- 
ard v.  McCormick,  130  N.  Y.,  261,  267 
(1891);  Shaw  v.  Spencer,  100  Mass.,  382 
(1868),  the  court  saying  that  the  word 
"  trustee"  means  trustee  for  some  one 
whose  name  is  not  disclosed,  and  that  a 
custom  of  trade  disregarding  such  words 
on  certificates  of  stock  is  illegal  and 
ineffectual  to  protect  the  purchaser.  To 
same  effect,  Jaudon  v.  National  City 
Bank,  8  Blatch.,  430  (1871);  aff'd,  15 
Wall.,  165,  176,  where  the  court  says  the 
purchasers  "  are  chargeable  with  con- 
structive notice  of  everything  which, 
upon  inquiry,  they  could  have  ascer- 
tained from  the  cestui  que  trust."  Gaston 
v.  American  Ex.  Nat  Bank,  29  N.  J.  Eq. 
Rep.,  98  (1878) ;  Walsh  v.  Stille,  2  Par- 
sons' Sel.   Cases  in  Eq.   (Pa.),  17  (1842) ; 


Simons  v.  Southwestern  R.  R  Bank,  5 
Rich.  Eq.,  270  (1853),  where  a  master 
in  chancery  held  the  stock  in  his  own 
name  officially ;  Loring  v.  Brodie,  134 
Mass..  453  (1883) ;  Loring  v.  Salisbury 
Mills,  125  id.,  138  (1878);  Sweeney  v. 
Bank  of  Montreal,  5  Canadian  Law 
Times,  503  (1885);  Budd  v.  Monroe,  18 
Hun,  316  (1879);  Bank  of  Montreal  v. 
Sweney,  36  L.  T.  Rep.,  897  (1887).  In 
California,  however,  it  is  held  that,  al- 
though the  word  "  trustee  "  on  the  face 
of  the  certificate,  followed  by  the  name 
of  the  cestui  que  trust,  may  give  notice 
that  it  is  trust  property,  yet  that  where 
the  word  "trustee"  is  but  a  cloak  for 
an  agency,  for  the  purpose  of  shielding 
the  real  owner  from  liability  on  his 
stock,  and  to  conceal  the  fact  that  he  is 
dealing  in  stocks,  the  court  will  dis- 
regard it,  and  will  not  protect  the  real 
owner  against  his  agent's  unauthorized 
sale  of  the  stock.  Brewster  v.  Sime,  42 
Cat,  139  (1871);  Thompson  v.  Toland.  48 
Cal.,  99  (1874).  Where  a  certificate  of 
stock  runs  to  a  person  absolutely  and 


437 


§  325.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


There  are  many  other  facts  which  will  prevent  the  vendee  from 
claiming  that  he  is  a  bona  fide  holder  of  the  stock.  Thus,  if  the 
stock  is  pledged  to  a  bank  by  the  trustee,  who  is  a  director  of  a 
bank,  and  the  bank  is  prohibited  from  loaning  to  its  directors,  the 
bank  is  not  a  bona  fide  holder,  though  without  notice  or  knowledge 
of  the  trusteeship.1 

In  England,  the  house  of  lords  have  decided  that  certificates  of 
stock  in  railway  companies  are  not  negotiable  in  any  respect,  and 
that  a  bona  fide  transferee  of  the  certificate  is  not  protected  until 
he  has  obtained  registry  in  the  corporate  books.2  In  this  country 
a  different  rule  prevails,  and  it  is  acce1  ted  and  assumed  as  element- 
ary that  a  In  in 'I  fide  purchaser  for  value  of  stock  belonging  to  a  trust 
estate  and  sold  in  breach  of  trust  is  nevertheless  protected  in  his 
purchase,  although  he  has  not  registered  the  transfer  on  the  cor- 
porate books.  A  bona  fide  purchaser  through  several  mesne  con- 
veyances, starting  from  a  trustee  who  sells  the  stock  in  breach  of 
trust,  is  protected.3 


passes  into  bona  fide  hands,  the  corpora- 
tion is  not  liable  for  allowing  a  transfer. 
even  though  such  stock  was  held  in 
trust  and  the  corporation  knew  the  fact 
so  to  be.  No  harm  was  done  by  the 
transfer,  inasmuch  as  the  certificate  had 
already  passed  into  bona  fide  hands. 
Smith  ft  Nashville,  etc.,  R  R,  18  S.  W. 
Rep..  546  (Tenn..  1892).  A  purchaser  of 
certificates  of  stock  need  not  look  back 
of  the  last  registry  of  tr  nsfer  on  the 
corporate  books.  A  breach  of  trust 
back  of  that  does  not  invalidate  his 
title.  Winter  r.  Montgomery,  etc..  Co., 
7  S.  Rep.  773  (Ala..  1890).  Where 
st- M-k  standing  in  the  name  of  a  person 
as  trustee  is  sold  and  the  certificates  are 
turned  in  for  transfer  without  the  pur- 
chaser seeing  them,  he  takes  good  title 
even  though  there  was  a  breach  of 
trust,  he  not  knowing  of  such  breach, 
nor  of  the  trusteeship.  Stinson  ft  Thorn- 
ton, 56  Ga.,  379  (1876).  Notice  to  a  per- 
son attending  to  the  transfer  is  not  notice 
to  the  transferee. 

1  Albert  i\  Savings  Bank  of  Balti- 
more. 2  Mil..  159,  171  (1852  .  A  bank 
which  receives  trust  stock  as  security 
for  a  loan,  and  afterward,  on  payment 
of  the  loan,  transfers  the  stock  to  par- 
ties designated  by  the  pledgor,  is  liable 


to  the  cestui  que  trust  for  aiding  in  the 
latter  transfer.  Hatten  t\  Russell,  58  L. 
T.  Rep.  252  (IS*-  . 

2  Shropshire  Union  Rys.  &  Canal  Co. 
v.  Queen,  L.  R.,  7  H.  L.,  496  (1875).  Cf. 
Dodds  ft   Hills.  2  H.  &  M..  424  (1865). 

>.  880,  416.  A  cestui  que  trust 
of  stock  in  England  may  defeat  a  bona 
fide  purchaser's  title  to  the  stock  by 
suing  for  the  stock  before  a  transfer  is 
made  on  the  corporate  books.  Roots  ft 
Williamson,  58  L.  T.  Rep.,  802  (1888). 

3  Salisbury  Mills  ft  Townsend,  109 
Ma-.,  115  (1871);  Stinson  ft   Thornton, 

56  Ga..  377  1 1876) ;  Cohen  ft  Grayun,  4 
Md.  Ch..  357  (1848'.  Where,  however, 
the  trustee  has  been  removed  by  a 
court  and  another  trustee  appointed  in 
the  state  of  the  corporation,  a  pur- 
chaser of  the  certificates  held  by  the  old 
trustee  is  not  protected,  his  purchase 
being  after  the  removal,  Sprague  ft 
Cachigo  Mfg.  Co.,  10  Blatch.,  173  (1872). 
But  in  Holbrook  ft  New  Jersey  Zinc  Co., 

57  N.  Y„  616  (1874),  it  was  held  that  a 
successful  suit  in  a  state  not  the  state  of 
the  corporation,  to  remove  a  trustee, 
does  not  affect  a  bona  fide  purchaser  of 
the  certificate  from  the  trustee,  the  pur- 
chase being  made  pending  the  suit :  and 
that  the  corporation  allowing  registry 


438 


CH.  XIX.]  "WHO    MAY    BUY    AND    SELL    STOCK.  [§§  320,  327. 

§  32G.  The  mere  fact  that  a  purchaser  of  stock  knows  he  is  buy- 
ing from  a  trustee,  and  that  the  stock  belongs  to  the  trust  estate, 
puts  the  purchaser  to.no  inquiry  except  that  of  ascertaining 
whether  the  trustee  has  power  to  sell  the  stock  or  vary  the  invest- 
ment. If  he  has  such  power  the  purchaser  will  be  protected,  al- 
though the  trustee  uses  the  money  for  his  own  private  purposes, 
provided  the  purchaser  has  no  notice  of  such  an  intent  on  the  part 
of  the  trustee.1  The  purchaser  has  a  right  to  assume  that  the  ob- 
ject of  the  sale  is  to  invest  the  funds  in  a  permanent  investment  or 
to  discharge  liabilities.2  "Where,  however,  the  purchaser  knows 
that  his  vendor  sells  or  pledges  the  stock  as  trustee,  and  also  knows 
that  the  sale  or  pledge  is  for  the  private  debts  or  purposes  of  the 
trustee,  the  purchaser  is  chargeable  with  knowledge  of  the  breach 
of  trust,  and  is  not  protected.3  Nor  is  a  pledgee  of  stock  from  a 
trustee,  acting  as  trustee,  protected  where  the  trustee  is  authorized 
merely  to  sell  the  stock.4  Power  to  sell  does  not  confer  power  to 
pledge.5 

§  327.  Rights  and  liability  of  the  corporation  allowing  a  trans- 
fer by  a  trustee  in  breach  of  his  trust. —  Where  a  corporation  has 
notice  that  a  stockholder  holds  his  stock  as  trustee  for  another,  and 
the  means  of  ascertaining  the  character  of  that  trust  are  within  the 
power  of  the  corporation,  it  is  bound  to  refuse  to  allow  a  registry 
of  the  trustee's  transfer  until  it  is  satisfied  that  the  trustee  has 
power  to  make  the  transfer.6  If  the  corporation  allows  the  trans- 
fer and  the  trustee  had  no  power  to  make  it,  the  corporation  is 

of  the  new  trustee  as  holder  of  the  stock,  4  Loring    v.    Erodie,    134    Mass.,    453 

and  issuing  new  certificates  to  him,  is  (1883). 

liable  in  damages  to  the  purchaser  from  5  Merchants'  Bank  of  Canada  v.  Liv- 

the  old  trustee.  ingston.  74  N.  Y.,  223  (1878) ;  Manhattan 

i Perry  on  Trusts,  §  225,  3d  ed.  (1882) ;  Bank  v.  Walker,  13U  U.  S..  267  (1889).  The 

Lewin  on  Trusts,  417,  7th  ed.   (1879);  power  of  an  agent  to  sell  does  not  au- 

Godefroi  on  Trusts,  125,  127  (1879).  thorize  him  to  pledge.    First  Nat'l  Bank 

2Ashton  v.  Atlantic  Bank,  85  Mass.,  v.   Taliaferro,    19    AtL    Rep.,    364  (MA, 

217  (1861),  where  the  trustee  sold  land,  1890). 

took  notes  in  payment  and  stock  as  col-  6  Chapman  v.  City  Council,  6  S.  E. 
lateral,  and  sold  the  notes  with  the  col-  Rep.,  158  (S.  C,  1888) ;  Bayard  v.  Farm- 
lateral,  ers'    &    Mechanics'    Bank,    52    Pa.    St.. 

3  Jaudon  v.  National  City  Bank,  8  232  (1866),  where  a  refusal  of  the  cor- 
Blatch.,  450  (1871):  affirmed,  15  "Wall.,  poration  to  transfer  until  the  terms  of 
165,  sub  nom.  Duncan  v.  Jaudon  ;  Walsh  the  trust  were  examined  by  ;ts  attorney 
v.  Stille,  2  Parsons'  Sel.  Cases  in  Eq.  and  found  to  allow  the  trustee,  was  sus- 
(Pa.).  17  (1^42);  White  v.  Price,  29  tained.  The  corporation  cannot,  how- 
Hun,  394(1886);  Simmons  f.  Southwest-  ever,  retain  the  copies  of  the  probate 
ern  R  R.  Bank,  5  Rich.  Eq.,  279  (1853);  records  used  in  investigating.  Bird  v. 
Shaw  v.  Spencer,  100  Mass.,  382  (1868),  Chicago,  L  &  X.  R  R  Co.,  137  Mass., 
holding  also  that  silence  while  the  428  (1884).  In  transfer  of  trust  stock 
vendee  pays  an  assessment  is  no  waiver,  the  corporation  may  very  properly  re- 

439 


§  327.] 


WHO   MAY    BUY    AND    SELL    STOCK. 


[CH.  XIX. 


liable  to  the  cestui  que  trust.  The  fact  that  the  certificate  runs  to 
the  holder  as  "  trustee "  is  sufficient  notice  to  the  corporation.1 
Notice  to  a  board  of  directors  is  notice  to  all  subsequent  boards.2 
The  corporation  is  bound  to  see  that  the  sale  by  the  trustee  is  made 
in  accordance  with  the  terms  of  the  trust.  Thus,  it  is  liable  if  it 
permits  a  sale  and  transfer  by  one  trustee  when  there  are  two 
trustees;  and  a  general  power  of  attorney  bv  the  other  trustee  au- 
thorizing sales  will  not  protect  the  corporation  in  its  registry  of  a 
transfer  signed  by  one  only.3  It  is  liable  for  allowing  a  registry  of 
a  trustee's  transfer  when  the  trust  is  for  an  unmarried  woman,  to 
take  effect  when  she  shall  marry.4  If  there  are  several  cestuis  que 
trust,  the  corporation  is  liable  for  allowing  one  of  them  to  transfer 
the  whole  interest  in  the  stock,  where  by  mistake  of  the  corpora- 
tion the  stock  had  been  registered  in  the  name  of  that  one.  and  not 
in  the  name  of  the  trustee.5  If,  however,  the  cestui  que  trust  is 
guilty  of  laches  in  taking  steps  to  obtain  his  rights,  the  corporation 
is  discharged.6  The  remedy  of  the  cestui  que  trust  is  in  equity,  not 
at  law.7     A  waiver  of  former  breaches  of  trust  is  no  waiver  of  the 


fuse  to  allow  a  registry  where  the  sale 
is  made  by  the  trustee  at  a  price  far 
below  its  market  value.  Succession  of 
Boullemet,  3  S.  Rep..  401  (La.,  1887). 
Where  stock  is  transferred  to  a  trustee 
by  the  executors,  the  corporation  know- 
ing of  the  trust,  and  the  corporation 
subsequently  allows  the  trustee  to  trans- 
fer the  stock  to  third  persons,  the  corpo- 
ration is  liable  to  the  cestui  que  trust  if 
such  last  mentioned  transfer  is  fraud- 
ulent and  in  breach  of  trust  Marbury 
v.  Ehlen.  19  Atl.  Rep.,  648  (MdL,  1890). 
If  the  will  gives  the  executrix  power  to 
sell  the  stock,  the  corporation  is  pro- 
tected in  allowing  transfers  by  the  ex- 
ecutrix and  trustee  even  though  it  did 
not  know  the  contents  of  the  will.  Al- 
though the  transfer  is  to  a  bank,  the 
corporation  is  not  bound  to  know  that 
the  transfer  is  a  pledge  and  not  a  sale. 
Peck  v.  Providence  Gas  Co.,  21  Atl.  Rep., 
543  (R  I.,  1891).  Where,  upon  reorgan- 
ization, the  committee  issue  transferable 
certificates  exchangeable  into  stock  of 
the  new  corporation  when  it  is  formed, 
the  new  corporation  is  liable  for  allow- 
ing an  exchange  by  a  person  to  whom 
a  trustee  has  illegally  transferred  tne 
certificates  issued  to  him.     Mobile,  etc., 


R'y  v.  Humphries,  7  S.  Rep.,  522  (Miss., 
1890). 

•See  ^  325,  infra.  In  the  case  of 
Stockdale  v.  South  Sea  Co.,  Barnardis- 
tou's  Ch.  (folio)  363  (1740),  the  court  said, 
however :  "  These  great  companies  are 
only  to  consider  the  person  in  whose 
name  the  stock  is  standing,  unless  the 
trust  of  that  stock  is  declared  in  their 
books." 

-  Mechanics'  Bank  of  Alex.  v.  Seton,  1 
Pet,  299(1828). 

3  Bohlen's  Estate,  75  Pa.  St,  312  (1874). 
Nor  where  the  signatures  of  the  other 
trustees  are  forged  by  one.  Cottam  v. 
Eastern  Counties  R'y  Co.,  1  J.  &  H..  243 
(1860).  In  England  one  executor  or 
trustee  cannot  assign  railway  stock.  All 
must  join.  Barton  v.  North.,  etc.,  R'y 
Co.,  58  L.  T.  Rep.,  549  (1884). 

*  Magwood  v.  R  R.  Bank,  5  S.  C,  379 
(1874). 

5  Farmers'  &  M.  Bank  v.  Wayman,  5 
Gill  (Md.),  336(1847> 

6  Albert  v.  Sav.  Bank  of  Baltimore,  1 
Md.  Ch.,  407  (1849);  affirmed,  2  Md.,  159 
(1S52). 

7Loring  r.  Salisbury  Mills,  125  Mass., 
138  (1878).  In  a  suit  by  a  stockholder 
to  hold  a  corporation  liable  for  his  stock 


440 


CH.  XIX. J  WHO    MAY    BUY    AXD    SELL    STOCK.  [§§  328,  329. 

one  complained  of;  and  a  judgment  against  the  trustee  himself  is 
no  bar  to  the  suit  against  the  corporation,  except  to  the  extent  that 
satisfaction  has  been  obtained.1  The  corporation  may  be  compelled 
by  the  court  to  purchase  an  equal  amount  of  stock  and  register  it 
for  the  benefit  of  the  cestui  que  trust.2 

§  328.  Sales  of  stock  oy  a  guardian. —  At  common  law  a  guard- 
ian may  sell  the  personal  property  belonging  to  him  as  guardian 
without  obtaining  any  special  license  or  authority;  and  a  bona  fide 
purchaser  from  him  of  such  property  is  protected  and  is  entitled 
to  the  property,  even  though  the  guardian  misappropriates  the 
proceeds  of  the  sale.3  This  rule  applies  to  shares  of  stock.4  In 
most  of  the  states,  however,  statutes  have  been  passed  requiring 
guardians  to  obtain  the  consent  of  a  court  before  selling  the  per- 
sonal property  of  his  ward.5  If  such  a  statutory  permission  to  sell 
is  required,  and  the  vendee  of  stock  has  notice  that  his  vendor  sells 
as  guardian,  the  vendee  is  bound  to  see  that  the  requisite  permis- 
sion to  sell  has  been  given.6  An  order  of  the  court  allowing  the 
guardian  to  sell  is  not  authority  to  him  to  pledge  the  stock,  and 
the  pledgee  is  bound  to  take  notice  of  that  fact.7  Where  stock  is 
sold  by  a  foreign  guardian  according  to  the  laws  of  the  state  of 
the  guardianship,  title  passes  and  the  purchaser  is  protected.8 

§  329.  Sales  of  stock  oy  an  executor  or  administrator. —  It  is  the 
duty  of  an  executor  or  administrator  of  an  estate  to  collect  the 
assets,  pay  the  debts,  and  distribute  the  remainder  according  to 
the  provision  of  the  will  or  of  the  statute  of  distribution.9    In  order 

and  dividends,  by  reason  of  its  allowing  ing  that  the  corporation  is  not  liable  for 

a  transfer  by  an  unauthorized  agent  of  a  broach  of  trust  by  the  guardian  in 

the  stockholder,  the  subsequent  owners  selling  the  stock.     The  court  said:  "If 

of  the  stock  are  not  necessary  parties,  the    guardian    defrauds    his    ward,  his 

The  defense  of  prescription  may  prevail,  sureties    are    responsible ;    if   the   pur- 

St.  Romes  v.  Cotton  Press  Co.,  127  U.  S.,  chaser  combines  in  the  fraud,  he  too  is 

614(1888).  chargeable;  but  the  bank  cannot  inter- 

1  Id.  fere  and  arrest  the  transfer  of  its  stock 

2  Bohlen's  Estate,  mipra.  by  the  legal  holder  of  the  scrip  upon 

3  Field  v.  Schieffelin,  7  Johns.  Ch.,  150  such  pretenses.  It  would  trammel  and 
(1823);  Ellis  v.  Prop,  of  E.  M.  Bridge,  2  embarrass  such  transactions  so  as  to  im- 
Pick.,  243  (1824),  holding  that  a  bona  pede  materially  that  transferable  char- 
ade purchaser  from  the  guardian  of  a  acter,  which  is  one  of  the  most  valuable 
person  non  compos  metitis  is  protected,  attributes  of  stock." 

*  Lamar  v.  Micou,  112  U.  S.,  452.  475  5Mass.  R.  S.,  ch.  79,  §  21. 

(1884),  the  court  saying:  "He  had  the  6 Atkinson  v.  Atkinson,  90  Mass.,  15 

authority,    as    guardian,    without    any  (1864). 

order  of  court,  to  sell  personal  property  7  Webb  v.    Graniteville    Mfg.  Co.,  11 

of  his  ward  in  his  own  possession,  and  S.  C,  396  (1878) ;  130  U.  S.,  267. 

to  reinvest  the   proceeds."     See,    also,  8  Ross  v.  Southwestern  R.  R,  Co.,  5? 

Bank  of    Va.    v.  Craig,   6  Leigh,    399,  Ga.,  514  (1874). 

432  (1835),  to  the  same  effect,  and  hold-  ^Keylinge's   Case,  1  Eq.  Cases  Abr., 

441 


§  329.] 


WHO   MAY    BUY   AND    SELL    STOCK. 


[CH.  XIX. 


to  pay  the  debts  the  executor  may  sell  the  personal  property  of 
the  estate.  Accordingly,  the  rule  has  become  established  that  the 
purchaser  of  personal  property  from  an  executor  or  administrator 
is  not  bound  to  ascertain  whether  the  sale  is  necessary  in  order  to 
pay  the  debts  of  the  estate,  nor  to  see  that  the  proceeds  of  the 
sale  are  applied  to  the  debts.  If  he  buys  in  good  faith  and  for 
value,  he  is  protected.  Such  also  are  the  rules  applicable  to  an  ex- 
ecutor's or  administrator's  sales  of  stock.1  The  executors  in  the 
state  of  the  decedent  may  transfer  the  stock  of  the  estate,  and  con- 
vey a  title  which  the  corporation  is  bound  to  recognize,  although 
the  corporation  itself  is  domiciled  in  another  state.2  The  rule  is 
otherwise,  however,  as  regards  executors  appointed  in  jurisdictions 
out  of  the  United  States.3 

An  executor  may  pledge  estate  stock  at  his  bank  on  a  represen- 
tation that  the  money  is  to  be  used  for  the  estate ;  and  the  bank 


239  (1702).  holding  that,  where  the  exec- 
utor holds  the  stock  for  several  years 
and  it  declines  in  value,  he  is  charge- 
able with  its  value  one  year  after  the 
death  of  the  testator. 

I  Leitch  v.  Wells,  48  N.  Y.,  585  (1872), 
holding  that  the  bona  fide  transferee  is 
protected,  although  the  executors  had 
previously  set  aside  the  same  stock  to 
apply  to  the  payment  of  a  certain 
amount  chargeable  by  the  will  to  the 
estate  annually.  Woods'  Appeal,  92 
Pa.  St.,  379  (1880),  holding  that  a  bona 
fide  transferee  of  the  executor's  trans- 
feree is  protected,  although  the  latter 
would  not  have  been,  even  though  the 
former  was  aware  that  his  title  came 
from  an  executor.  The  court  held  that 
letters  of  administration  are  always  evi- 
dence of  power  to  sell,  and  that  an 
executorship  differed  widely  from  a 
trusteeship  as  regards  the  right  to  sell 
Prall  v.  Tilt,  27  N.  J.  Eq.,  393  (1876); 
affirmed,  28  N.  J.  Eq.,  479  (1877),  where 
the  will  authorized  advances  to  the 
sons,  and  they  represented  to  the  trans- 
feree that  the  stock  was  so  advanced 
to  them  by  the  executor.  Lowry  v. 
Commercial  &  F.  Bank  of  Baltimore, 
Taney  (U.  S.  C.  Ct),  310  (1848).  In  this 
case  the  purchaser  had  no  knowledge 
or  notice  that  the  transferrer  sold  the 
stock  as  an  executor.    Clark  v.  South 


Metropolitan  Gas  Co.,  54  L  J.  (Ch.),  259 
(1885),  sustaining  a  sale  of  stock  by  an 
administratrix  of  an  administrator.  Re 
, London,  etc.,  Tel.  Co..  L  R,  9  Eq.,  633 
(1870),  sustaining  the  title  of  a  bona  fide 
purchaser  from  the  executrix  as  against 
an  assignee  in  bankruptcy  of  the  de- 
ceased, the  assignee  having  delayed  his 
application  for  five  years. 

2  Middlebrook  v.  Merchants'  Bank,  3 
Keyes  (N.  Y.).  135  (1866);  Luce  v.  Man- 
chester, etc.,  R  R  Co.,  2  New  Eng.  Rep., 
263  (N.  H.,  1886);  Hobbs  v.  Western 
Nat  Bank,  8  Weekly  Notes,  131  (U.  S. 
C.  Ct,  1880).  An  executor  or  adminis- 
trator may  transfer  stock  in  a  foreign 
corporation  without  taking  out  letters 
in  the  state  incorporating  the  company. 
In  re  Cape,  etc.,  Co.,  16  Atl.  Rep.,  191 
(N.  J.,  1889). 

3  Alfonso's  Appeal,  70  Pa.  St,  347 
(1872),  holding  that  in  Pennsylvania, 
executors  of  a  decedent,  whose  domi- 
cile was  in  Cuba,  have  no  authority, 
under  letters  testamentary  in  Cuba,  to 
transfer  stock  in  a  Pennsylvania  corpo- 
ration. '•  Domestic  creditors,  legatees 
or  next  of  kin  should  not  be  sent  abroad 
in  quest  of  property  to  answer  their 
claims  when  the  decedent  left  property 
within  the  jurisdiction  of  the  state  that 
can  be  applied  to  meet  their  demands." 


442 


CH.  XIX.] 


WHO    MAY    BUY    AND    SELL    STOCK. 


[§  329. 


will  be  protected  although  the  note  given  by  the  executor  is  re- 
newed several  times,  and  the  proceeds  of  the  transaction  were 
passed  to  the  executor's  private  account.1  So,  also,  a  bona  fide 
purchaser  of  stock  from  a  life  tenant,  to  whom  the  administrator 
improperly  transferred  it,  is  protected  The  remainder-man's  rem- 
edy is  on  the  administrator's  bond.2  But  a  pledge  of  stock  by  an 
executor  does  not  protect  the  pledgee,  where  the  pledgee  does  not 
relv  on  the  executor's  power,  but  requires  other  ineffectual  precau- 
tions to  be  taken.3  Where  the  transferee  of  the  executor  knows 
that  the  transaction  is  not  for  the  benefit  of  the  estate,  but  is  a 
breach  of  trust,  he  is  not  protected.4  Frequently  statutes  are 
found  requiring  executors,  when  selling  personal  property  of  the 
estate,  to  sell  the  same  at  public  auction.  When  such  a  statute 
exists  a  purchaser  at  private  sale  is  not  a  lonafide  purchaser,  and 
is  not  protected,  and  is  liable  for  the  stocks  and  dividends  paid 
thereon  after  his  purchase.5     The  hona  fide  transferee  of  such  a 


1  Goodwin  v.  American  National  Bank, 
48  Conn.,  550  (1881) ;  Gottberg  v.  United 
States  Nat.  Bank,  N.  Y.  L.  J.,  November 
21,  1890,  wbere  the  bonds  were  even 
registered  in  the  names  of  both  execu- 
tors and  were  pledged  by  one.  Under 
the  English  act.  where  shares  are  regis- 
tered in  the  names  of  two  executors 
jointly,  the  signature  of  both  to  a 
transfer  is  necessary,  and  the  company 
is  liable  if  it  permits  a  transfer  by  one. 
Barton  v.  London,  etc.,  R'y,  62  L.  T.  Rep., 
164  0889). 

2  Keeney  v.  Globe  Mill  Co.,  39  Conn., 
145  (1872). 

3  Moore  v.  American,  etc.,  Co.,  115 
N.  Y.,  65  (1889). 

4  Prall  v.  Hamil,  28  N.  J.  Eq.,  66  (1877). 
The  facts  in  this  case  differed  from 
those  in  Prall  v.  Tilt,  supra,  in  that  the 
transferee  knew  that  the  stock  was  still 
owned  by  the  executrix.  White  v. 
Price,  39  Hun,  394  (1886),  the  court 
saying :  "  A  person  who  takes  title 
from  an  executor  in  payment  of  the 
executor's  personal  debts  is  not  a  pur- 
chaser in  good  faith,  and  acquires  no 
rights  over  the  prior  title  or  rights  of 
other  persons."  Also,  that  a  purchaser, 
buying  with  knowledge  that  the  right 
of  the  executor  to  sell  is  denied  and  is 


being  contested,  is  not  a  bona  fide 
holder.  Cf.  Keane  v.  Robarts,  4  Madd. 
Ch.,  332  (1819),  where  it  was  held  that 
where  the  executor  did  business 
through  an  agent,  the  application  of 
the  proceeds  from  sale  of  the  stock 
to  the  running  account  between  the 
executor  and  his  agent  was  legal.  A 
suit  in  equity  lies  to  set  aside  an  illegal 
sale  of  stock  by  an  executor.  White  v. 
Price,  108  N.  Y,  661  (1888).  A  pledgee 
with  notice  of  stock  held  by  an  exec- 
utor in  breach  of  his  duty  may  be 
compelled  to  give  up  the  stock.  Odd, 
etc.,  Bank's  Appeal,  16  Atl.  Rep.  606 
(Pa.,  1889).  A  pledgee  who  takes  with 
knowledge  that  the  executor  is  giving 
the  pledge  in  breach  of  trust  cannot 
foreclose  the  pledge.  Bell  v.  Farmers', 
etc.,  Bank,  18  Atl.  Rep.,  1079  (Pa.,  1890). 
If  the  administrator  sells  to  himself 
through  "dummies"  he  may  be  com- 
pelled to  disgorge.  Carter  v.  Good,  10 
N.  Y  Supp.,  647  (1890). 

5  Nutting  v.  Thompson,  57  Ga,,  418 
(1876),  the  court  saying  also  that  factors 
or  brokers  acting  for  third  persons  are 
also  liable;  Nutting  v.  Boardman,  43 
Ga,,  598  (1871),  holding  that  the  admin- 
istrator's bondsmen  are  not  proper  par- 
ties to  the  suit ;  Weyer  v.  Second  Nat. 


443 


§  330.]  WHO   MAY    BUY   AND    SELL    STOCK.  [CH.  XIX. 

purchaser,  however,  is  protected.1  An  executor  may  have  the 
duties  of  a  trustee  to  perform,  and  then  become  subject  to  the  rules 
governing  trustees  in  their  transfers  of  stock.2  While  a  corporation 
may,  under  ordinary  circumstances,  allow  an  executor  or  admin- 
istrator to  register  a  transfer  of  stock  from  himself  to  a  purchaser 
from  him,  yet,  when  so  long  a  time  has  elapsed  between  the  taking 
out  of  letters  and  the  transfer  that  the  executor  has  become  prac- 
tically a  trustee,  then  the  corporation  must  use  the  same  precau- 
tions as  in  sales  by  a  trustee.3 

§  330.  Duty  and  Viability  of  the  corporation  in  sales  oy  executors 
or  administrators. —  There  has  been  great  difficulty  in  ascertaining 
the  rights  and  duties  of  the  corporation  in  allowing  and  refusing 
to  allow  a  registry  on  the  corporate  transfer-book  of  a  sale  of  stock 
by  an  executor  or  administrator.  The  Bank  of  England,  at  an 
early  day,  assumed  the  power  to  refuse  to  allow  a  registry  of  an 
executor's  transfer  of  stock  that  had  been  specifically  bequeathed, 
unless  the  executor  satisfied  the  bank  that  the  sale  was  necessary 
to  pay  the  debts  of  the  estate.  The  courts,  however,  compelled  it 
to  allow  registry  without  investigating  specific  legacies  or  the  ap- 
plication of  the  proceeds  of  the  sale.4  In  this  country  the  question 
of  the  liability  of  the  corporation  has  arisen  on  a  different  state  of 
facts.     Tho  cases  of  Lowry  v.  Commercial  &  Farmers'  Bank  of 

Bank  of  Franklin,  57  Ind.,  198  (1877),  ration  is  not  liable  for  a  transfer  by  ber 

holding    the    purchaser    liable.     If  the  in  breach  of  trust,  the  corporation  hav- 

executor    uses    the    proceeds    of    sales  ing  no  knowledge    thereof.     The  fact 

of  stock    for   his    own    personal    pur-  that  the  stock  is  transferred  to  banks 

poses  he  is  liable  for  the  dividends  de-  which  have  no  power  to  purchase  is  not 

clared  after  such  sales  up  to  time  of  notice  to  the  corporation.    The  execu- 

accounting,   and   for  market  value  of  torship  in  this  case  was  merged  into  a 

stock  at  time  of  accounting.    Person  trusteeship.    Peck  v.  Prov.  Gas  Co.,  23 

taking  stock  from  him  with  knowledge  Atl.  Rep.,  967  (R  I.,  1892). 

of  the  breach  of  trust  is  also  liable.  4  Pearson    v.    Bank    of    England,    2 

McGeary's  Appeal,  6  Atl.  Rep.,  763  (Pa,,  Brown's  Ch.  Rep.,  529  (1789);  Bank  of 

1886).  England    v.   Moffat,   3    id.,   260  (1791): 

1  Nutting    v.    Thomason,  46    Ga.,   34  Hartga  v.  Bank  of  England,  3  Ves.,  55 

(1872).  (1796);  Bank  of  England  v.  Parsons,  5 

2 White  v.  Price,  39  Hun,  394(1886);  Ves.,  665  (1800);  Bank   of  England  v. 

Prall  v.  Tilt,  supra.  Lunn,  15  Ves.,  568  (1809) ;  Austin  v.  Bank 

3  Where  an  executor  holds  stock  for  of  England,  8  Ves.,  522  (1803);  Mar- 
nine  years  and  then  sells  it  in  breach  of  ryatt  v.  Same,  id.,  524,  n.  (1793) ;  Ayns- 
trust,  the  purchaser  is  bound  to  take  worth  v.  Same,  id. ;  Franklin  v.  Same,  1 
notice.  The  executorship  becomes  a  Russ.  Ch.,  575  (1826);  Churchill  v.  Same, 
trusteeship.  Peik  v.  Bank  of  America,  11  M.  &  W.,  323(1843);  Humberstone  v. 
19  Atl.  Rep.,  369  (R  I.,  1890).  Where  an  Chase,  2  Y.  &  C.  Ex.  Rep.,  209  (1836), 
executrix  has  power  by  the  will  to  sell  where  the  executor  represented  that  the 
stock  held  in  trust  for  heirs,  the  corpo-  specific  legatee  had  died. 

444 


CH.  XIX.J 


WHO    MAY    BUY    AND    SELL    STOCK. 


[§  330. 


Baltimore,1  and  Stewart  v.  Firemen's  Ins.  Co.,2  clearly  establish  the 
rule  that,  where  the  corporation  has  reasonable  notice  of  the  fact 
that  the  executor  is  committing  a  breach  of  trust,  the  notice  aris- 
ing1 from  the  fact  that  the  transfer  is  made  several  years  after  the 
estate  should  have  been  wound  up,  the  corporation  is  under  obli- 
gation to  refuse  to  allow  a  registry  of  the  transfer ;  and,  having 
allowed  it,  the  corporation  is  liable  to  the  parties  injured  thereby. 
"Where,  by  statute,  executors'  sales  are  to  be  at  public  auction, 
the  corporation  is  bound  to  ascertain  whether  the  statute  was 
complied  with,  and  is  liable  for  allowing  a  registry  when  the  sale 
was  a  private  one.3  In  general,  a  corporation  has  a  rig-lit  to  assume 
that  the  executor  is  transferring  the  stock  for  the  purposes  of  the 
estate.  It  is  not  obliged  to  inquire  into  the  purposes  of  the  par- 
ties, nor  to  investigate  whether  the  transaction  is  in  good  faith  or 
is  fraudulent,4  nor  to  examine  the  will.5 


i  Taney,  U.  S.  C.  Ct,  310  (1848\  The 
court  said  the  Corporation  "not  only 
enabled  the  executor  to  perpetrate  the 
wrong  by  permitting  the  transfer,  but 
co-operated  in  it  by  certifying  that  the 
title  of  transferee  was  good.  Justice, 
therefore,  requires  that  it  should  bear 
the  loss." 

2  53  Md.,  564  (1880),  holding  also  that 
the  corporation  was  bound  to  take  no- 
tice of  the  contents  of  the  will  —  a  posi- 
tion that  is  denied  by  the  case  of  Hutch- 
ins'  Adni'r  v.  State  Bank,  53  Mass.,  421 
(1847).  Where,  however,  the  executrix 
has  power  given  by  the  will  to  apply 
the  stock  to  her  own  use  in  case  of  need, 
the  corporation  is  not  bound  to  ascer- 
tain whether  such  a  state  of  need  ex- 
ists. Hutchins'  Adm'r  v.  State  Bank, 
supra. 

3  Weyer  v.  Second  National  Bank  of 
Franklin,  57  Ind.,  198  (1877).  A  con- 
trary view  seems  to  be  held  in  South- 
western R.  R.  Co.  v.  Thomason,  40  Ga. 
Rep.,  408  (1869).  In  Indiana,  where  an 
administrator  cannot  sell  personal  prop- 
erty except  in  a  certain  way,  the  corpo- 
ration is  liable  to  the  estate  if  it  allows 
a  transfer  of  stock  on  its  books  under  a 


sale  by  the  administrator  who  has  not 
complied  with  the  law.  The  purchaser, 
however,  who  does  not  see  the  old  cer- 
tificates but  takes  new  certificates  is- 
sued by  the  corporation  is  protected*. 
Citizens  St.  R'y  v.  Robbins,  26  N.  E. 
Rep,  116  (Ind.,  1891).  A  sale  of  stock 
by  an  executor  at  private  sale  was  sus- 
tained in  Wilson  v.  Proprietors  of  Cen- 
tral Bridge,  9  R  I.,  590  (1870),  although 
the  statute  declares  that  executors 
should  be  liable  for  double  the  appraised 
value  of  the  property  if  they  sold  at  pri- 
vate sale. 

4  Crocker  v.  Old  Colony  R.  R.  Co.,  137 
Mass.,  417  (1884).  See,  also,  Carter  v. 
Manufacturers'  Nat'l  Bank,  71  Me.,  448 ; 
Goodwin  v.  American  Nat'l  Bank,  48 
Conn.,  550. 

s  Although  the  administrator  trans- 
fers the  stock  to  the  "heirs  and  distrib- 
utees," the  corporation  is  protected  in 
issuing  absolute  certificates  to  such  dis- 
tributees, and  is  not  bound  to  learn  or 
know  of  a  will  to  the  effect  that  the  dis- 
tributee had  only  a  life  interest.  Smith 
v.  Nashville,  etc.,  R.  R,  18  S.  W.  Rep., 
546  (Tenn.,  1892). 


445 


CHAPTER  XX. 


SALES   OF   STOCK— THE  FORMATION   AND  PERFORMANCE  OF 
CONTRACT  — GAMBLING  SALES  — FRAUDULENT  SALES. 


THE 


.     FORMATION    AND    PERFORMANCE    OF 
CONTRACTS  TO  PURCHASE  STOCK. 

331.  Shares  of  stock  are  transferable. 

332.  Restrictions  on  right  to  sell  stock 

and  contract  against  selling. 

333.  "  Pools,"  "  corners  "  and  combina- 

tions in  stock. 

334  Contract  for  sale  of  stock  may  be 
valid  without  delivery  or  spe- 
cific time  for  delivery. 

335-36.  Remedies  for  breach  of  a  con- 
tract to  sell  stock. 

337-38.  Specific  performance  as  a 
remedy  for  breach  of  a  con- 
tract to  sell  stock. 

339-40.  Statute  of  frauds  as  affecting 
sales  of  stock. 

B.    GAMBLING  SALES  OF  STOCK. 

341.  What  are  gambling  sales  of  stock. 

342.  Statutes  prohibiting  wager  con- 

tracts,  and  also  certain  stock 
contracts. 


§  343.  Test  of  legality  of  stock  transac- 
tion. 

344.  When  intent  to  deliver  is  question 
for  the  jury  and  wnen  not 

345-46.  Gambling  stock  contracts  as 
affecting  the  relations  between 
the  principal  and  his  broker. 

347-48.  Gambling  stock  transactions 
as  affecting  notes,  bonds,  mort- 
gages, etc.,  grow  ing  out  thereof . 

C.     FRAUD     AS     AFFECTING    A    SALE     OF 
STOCK. 

349.  Extent  of  subject  treated  herein. 

350.  What  has  been  held  to  constitute 

a  fraud  herein. 

351.  Fraudulent  sale  by  agent,  etc.,  in 

breach  of  trust 
352-53.  Fraud   may  be  by  corporate 

reports  or  prospectus. 
354.  Remedies  for  the  fraud. 

855.  Action  for  deceit. 

856.  lo-medy  in  equity. 

357.  Fraud  in  selling  stock  may 
amount  to  a  conspiracy. 


A.    FORMATION   AND    PERFORMANCE    OF    CONTRACTS   TO    SELL    STOCK. 

§  331.  Shares  of  stock  arc  transferable. —  That  shares  of  stock  in 
a  corporation  are  transferable  the  same  as  other  personal  property 
is  a  principle  of  law  coeval  with  the  existence  of  stock  itself.  The 
few  decisions  holding  that  shares  of  stock  were  real  estate  were 
exceptional  rulings,  and  are  no  longer  considered  to  be  good  law.1 
Courts  of  law  and  of  equity  have  guarded  jealously  the  facilities 
for  the  transfer  of  title  to  stock,  and  all  unreasonable  attempts  to 
restrain  the  right  or  readiness  of  passing  title  have  been  declared 
void  as  against  public  policy.  The  right  to  transfer  stock  is  of 
vital  importance,  since  the  two  chief  causes  of  the  phenomenal 
growth  of  corporations  in  recent  times  are  the  limited  liability  of 
the  members  and  the  readiness  of  withdrawing  from  the  corpora- 
tion by  a  transfer  of  the  interest  a  member  has  therein.  The 
common  law  regards  shares  of  stock  as  personal  property,  capable 

i  See  eh.  I. 

446 


CH.   XX.]        CONTRACTS    TO    SELL GAMBLING    SALES  —  FRAUD.  [§  332. 


of  alienation  or  succession  in  any  of  the  modes  by  which  personal 
property  may  be  transferred.1 

§  332.  Restrictions  on  right  to  sell  stock,  and  contracts  against 
selling. —  The  right  of  a  stockholder  to  sell  and  transfer  his  stock 
cannot  be  restrained  by  a  by-law  of  the  corporation.2  An  agree- 
ment or  contract,  however,  between  the  members,  or  a  part  of 
them,  not  to  sell  except  on  certain  conditions,  is  valid,  unless  it 
amounts  to  an  unreasonable  restraint  of  trade.3  In  New  York  a 
contract  whereby  stockholders  of  a  corporation  agree  to  deposit 
their  certificates  of  stock  with  a  trustee  for  six  months,  for  the  pur- 
pose of  preventing  any  disposition  of  the  stock  during  that  time, 
is  unenforceable  and  void,  as  contrary  to  the  statute  law  of  the 
state  and  against  public  policy.4  The  right  of  transfer  is  some- 
times limited  by  statute,  as  in  New  York,  where  stock  in  railroad 
or  manufacturing  corporations  cannot  be  transferred  until  all  calls 


1  Mobile  Mutual  Ins.  Co.  v.  Cullum,  49 
Ala.,  558  (1873);  Cole  v.  Ryan,  52  Barb., 
168  (1868) ;  Heart  v.  State  Bank,  2  Dev. 
Eq.,  Ill  (1831);  Allen  r.  Montgomery  R. 
R,  Co.,  11  Ala.,  437,  451  (1847);  Boston 
Music  Hall  v.  Cory,  129  Mass..  435  (1880) ; 
Sargent  v.  Franklin  Ins.  Co.,  8  Pick.,  90 
(1829):  Chouteau  Spring  Co.  v.  Harris, 
20  Mo.,  382  (1855) ;  Poole  v.  Middleton, 
29  Bear.,  640  (1861)  Bright  well  v.  Mal- 
lory.  10  Yerg.  (Tenn.).  196  (1836). 

-  Morgan  v.  Struthers,  131  U.  S.,  246, 
252(1889) ;  Fechheimer  v.  Nat'l  Ex.  Bank, 
79  Va.,  80  (1884),  where  a  by-law  pro- 
hibiting transfers  except  with  the  con- 
sent of  the  directors  was  declared  void  ; 
Bank  of  Attica  v.  Manufacturers'  &  T. 
Bank,  20  X.  Y.,  501  (1859):  Orr  v.  Bige- 
low,  14  N.  Y.,  556  (1856);  Sargent  v. 
Franklin  Ins.  Co.,  8  Pick.,  90  (1829); 
Moore  v.  Bank  of  Com.,  52  Mo.,  377 
(1873).  A  by-law  to  the  effect  that  a 
transfer  of  stock  shall  be  allowed  only 
upon  consent  of  all  the  other  stockhold- 
ers is  void  as  in  restraint  of  trade.  In 
re  Klaus,  29  N.  W.  Rep.,  582  (Wis.,  1886>. 
As  regards  corporate  liens  herein,  see 
ch.  XXXI,  infra.  See,  also,  as  to  the  gen- 
era' policy  of  the  law  to  discountenance 
restrictions  on  right  to  sell,  Moffatt  v. 
Farquhar,  L.  R.,  7  Ch.  D..  591  (1878\  In 
this  case  the  directors  were  compelled 
to  allow  a  transfer  although   the  pur- 


pose of  the  transfer  was  to  multiply 
votes.  As  already  stated,  a  by-law  that 
no  stockholder  shall  transfer  his  stock 
except  by  the  consent  of  all  stockhold- 
ers is  void.  A  secretary  cannot  refuse 
to  register  a  transfer  on  account  of  the 
motive  of  the  transferrer.  In  re  Klaus, 
supra. 

3  Griffith  v.  Jewett,  15  Week.  L,  Bui., 
419,  and  ch.  XXXII.  The  foreclosure  and 
sale  of  a  pledge  of  stock  in  the  Western 
Associated  Press  has  been  refused  where 
it  was  shown  that  the  stock  merely  enti- 
tled the  holder  to  receive  news :  that  no 
transfer  was  allowed  except  by  consent 
of  the  association,  and  such  consent  had 
never  been  given,  and  the  association 
was  not  made  a  party  to  the  suit.  Met- 
ropolitan, etc.,  Bank  v.  St.  Louis,  etc., 
Co.,  36  Fed.  Rep.,  722  (1888).  In  this 
case  it  is  to  be  noticed  that  no  profits  or 
dividends  could  arise  from  the  stock. 
An  agreement  of  the  holder  of  a  ma- 
jority of  the  stock  that  he  will  retain 
control  is  no  defense  by  the  corporation 
to  an  action  by  the  receiver  of  such 
stockholder  to  transfer  the  stock  on  the 
corporate  books.  Weller  i\  Pace  To- 
bacco Co.,  25  N.  Y.  Week.  Dig.,  531 
(1886). 

■»  Williams  v.  Montgomery,  68  Hun, 
416  (1893). 


447 


§332.]  COKTEACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.        [CH.  XX. 


thereon  shall  have  been  full}-  paid.'  Where  the  charter  or  a  stat- 
ute forbids  transfers  before  the  full  capital  stock  is  paid  in,  any 
transfer  before  such  payment  has  been  held  to  be  void.2 

In  England  sometimes  express  authority  is  given  to  the  direct- 
ors, by  the  articles  of  association,  to  refuse  to  permit  a  transfer 
unless  the  same  is  satisfactory  to  them.3  They  have  this  power, 
however,  only  by  express  authority,  and  it  is  not  extended  by 
implication.4  The  power  must  be  reasonably  exercised,  and  its 
exercise  must  be  free  from  fraud,  caprice  and  arbitrary  power.5 
The  corporation  cannot  refuse  to  allow  a  registry  on  the  ground 
that  there  was  no  consideration  for  the  transfer;'1  nor  because  a 


1  See  Part  VII,  infra. 

2  Merrill  v.  Call,  15  Me.,  428  (1839). 
The  case  of  Quiner  v.  Marblehead  Ins. 
Co.,  10  Mass.,  476  (1813),  holds  that,  nev- 
ertheless, such  a  transfer  vests  in  the 
transferee  all  the  transferrer's  interest 
in  the  stock.  Cf.  Cohn  v.  Bank  of  St 
Joseph,  70  Mo.,  262  (1879).  The  statutes 
of  a  state  cannot  restrict  or  interfere 
with  the  transferability  of  certificates 
of  stock  in  national  banks.  Doty  r. 
First  Nat'l  Bank  of  Larimore,  53  N.  W. 
Rep.,  77  (N.  Dak.,  1892). 

3Shortridge  v.  Bosanquet,  16  Beav.. 
81  (1852);  Bargate  v.  Shortridge,  5  H.  L. 
Cases,  297  (1855) ;  In  re  Joint-stock  Dis- 
count Company,  Shepherd's  Case,  L.  R, 
2  Eq.  Cas.,  564  (1866). 

*  Weston's  Case,  L,  R,  4  Ch.  App.,  20 
(1868);  Gilbert's  Case,  L.  R,  5  Ch.  App, 
559  (1870);  Chappell's  Case,  L.  R,  6  Ch. 
App.,  902  (1871);  Re  Stranton  Iron  & 
Steel  Co.,  L.  R,  16  Eq.,  559  (1873);  Mof- 
fatt  v.  Farqtihar.  infra;  Slee  v.  Inter- 
national Bank,  17  L.  T.  Rep,  425.  Judge 
Dillon,  in  Johnson  v.  Laflin,  5  Dill.,  65, 
78 ;  affirmed,  103  U.  S,  800  (1878),  says : 
"  Such  a  power  is  so  capable  of  abuse 
and  so  foreign  to  all  received  notions 
and  the  universal  practice  and  mode  of 
dealing  in  these  stocks,  that  it  cannot 
in  the  absence  of  legislative  expression, 
be  held  to  exist"  See,  also,  Farmers'  & 
M.  Bank  v.  Wasson,  48  Iowa,  336  (1878), 
the  court  holding  that  a  by-law  that 
transfers  of  stock  shall  not  be  valid  un- 
less approved  by  the  board  of  directors 
cannot  restrain  transfers.    "  Its  enforce- 


ment would  operate  as  an  infringement 
upon  the  property  rights  of  others, 
which  the  law  will  not  permit  It 
would,  besides,  operate  as  a  restraint 
upon  the  disposition  of  property  in  the 
stock  of  the  corporation,  in  the  nature 
of  restraint  of  trade,  which  the  courts 
will  not  tolerate." 

5  They  cannot  refuse  to  allow  any 
transfers.  Robinson  v.  Chartered  Bank, 
L.  R.  1  Eq.,  32  (1865).  And  an  objection, 
not  to  the  transferee,  but  to  the  purpose 
of  the  transferrer  in  respect  to  voting 
is  net  sufficient  Moffatt  v.  Farquhar,  L. 
R,  7  Ch.  D,  591  (1878).  But  the  board 
may  refuse  to  give  its  reasons  for  re- 
fusing to  allow  the  transfer,  and  in  that 
case  it  will  be  presumed  to  have  had 
sufficient  reason  for  the  refusal.  Ex 
parte  Penny,  L.  R,  8  Ch.,  446  (1872). 
If  misrepresentations  are  made  in  in- 
ducing the  directors  to  allow  transfer, 
they,  having  discretion,  may  avoid  the 
same.  Payne's  Case,  L.  R.,  9  Eq.,  22:'. : 
Master's  Case.  L.  R.  7  Ch.,  292;  Bishops 
Case,  L.  R.  7  Ch.,  296.  Although  a 
transfer  is  rejected  by  the  directors  the 
transferee  is  nevertheless  entitled  to 
dividends  and  the  title  to  the  stork. 
Poole  v.  Middleton,  29  Beav..  646  (1861  . 
Where  the  company  may  accept  or 
reject  a  transferee,  and  rejects  him,  the 
transferee  cannot  recover  back  from  the 
transferrer  the  consideration  of  the 
transfer.  London,  etc.,  Ass'n  v.  Clarke, 
59  L.  T.  Rep.,  93  (1888). 

6  Helm  v.  Swiggert  12  Ind.,  194  (1859). 


448 


CH.  XX.]        CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.    .       [§333. 


claimant  of  the  stock  notifies  it  not  to  make  the  registry.1  In  this 
country  no  such  power  is  given  to  the  directors.  A  person  who 
purchases  stock  is  entitled  to  a  transfer  on  the  books. 

§333.  "Pools"  "corners"  and  combinations  in  stool: — The 
courts  will  not  aid  either  party  in  carrying  out  an  agreement  for 
advancing  the  price  of  stock  by  means  of  fictitious  dealings  designed 
to  deceive  others  concerning  the  real  value  of  such  stock.2  Where 
both  the  vendor  and  vendee  of  stock  know  that  the  purpose  of  the 
vendee  is  to  control  the  corporation  and  illegally  issue  corporate 
paper,  the  sale  is  illegal  and  void.3  An  agreement  to  make  a  "cor- 
ner" in  stock,  by  buying  it  up  so  as  to  control  the  market  and  then 
purchasing  the  future  deliveries,  is  illegal.4  It  is  not  necessarily 
unlawful  to  form  a  "  pool  "  for  the  purpose  of  dealing  in  a  particu- 
lar stock.5     An  agreement  to  hold  stock  and  sell  together  is  valid.6- 


1  Ex  parte  Sargent,  L.  R,  17  Eq.,  273 
(1873).     Cf.  §  337,  infra. 

2Livermore  v.  Bushnell,  5  Hun,  285 
(1875).  See,  also,  in  general,  §  445,  note, 
and  ch.  XXXVII,  infra. 

3  Town  Council,  etc.,  v.  Elliott,  5  Ohio 
St,  113  (1855). 

*  Sampson  v.  Shaw,  101  Mass.,  145 
(1869) ;  Raymond  v.  Leavitt,  13  Cent.  L. 
J.,  110  (1881);  Morris  Run  Coal  Co.  v. 
Barclay  Coal  Co.,  68  Pa.  St.,  173  (1871); 
Arnot  v.  Pittston.  etc.,  Coal  Co.,  68  N. 
Y.,  558  (1877) ;  Keine  v.  Kent  (N.  Y.  Sup. 
Ct.,  Gen.  T.),  Daily  Reg.,  March  15, 
1887.  Cf.  Petrie  v.  Hannay,  3  Term  R., 
418  (1789).  No  suit  lies  against  a  broker 
for  fraud  in  carrying  out  a  pool  or  com- 
bination to  "corner  "and  advance  the 
price  of  lard.  Leonard  v.  Poole,  114 
N.  Y,  371  (1889).-  See,  also,  g§  445.  476. 
A  person  making  a  "  corner  "  in  stocks 
is  not  subject  to  a  criminal  prosecution 
therefor.  Raymond  v.  Leavitt,  46  Mich.. 
447  (1881).  It  is  not  fraud  for  the  owner 
of  the  larger  part  of  the  capital  stock  of 


a  corporation  to  "  corner  "  the  market, 
that  is,  to  enter  into  contracts  with  vari- 
ous parties  to  purchase  stock  of  the  cor- 
poration, although  he  knew  that  such 
contracts  could  not  be  fulfilled  by  such 
parties  by  reason  of  the  fact  that  he 
himself  held  such  stock,  and  it  could  not 
be  obtained  elsewhere.  The  same  rule 
prevails  although  such  person  offered 
the  stock  for  public  subscription  and' 
purchased  the  greater  part  of  it  himself. 
Salaman  v.  Warner,  64  L.  T.  Rep..  598 
(1891).  Cf.  Barry  v.  Croskey.  2  J.  &  H., 
1  (1861),  holding  that  the  victim  of  the 
•'corner  "  may  file  a  bill  in  equity  to  re- 
cover back  the  money  lost. 

SQuincey  v.  White,  63  N.  Y.  370,  333 
(1875),  modifying  Quincey  v.  Young.  5 
Daly.  32  (1873).  Where  several  parties 
buy  a  certificate  of  stock  in  fixed  pro- 
portions and  the  certificate  is  taken  by 
one  for  the  benefit  of  all,  he  is  a  bailee 
for  the  others  and  not  a  vendor.  Co- 
quard  v.  Wernse,  13  S.  W.  Rep.,  341  (Mo., 
1890).     The  general  rule  that  an  action 


6  Havemeyer  v.  Havemeyer,  11  J.  &  S. 
(N.  Y),  507  (1878) ;  S.  C.  13  id.,  464 ; 
affd,  86  N.  Y,  618 ;  Griffith  v.  Jewett,  15 
Week.  Law  Bull.,  419  — an  important 
case.  But  an  agreement  not  to  sell  ex- 
cept by  concurrent  consent  of  all  signers 
to  the  agreement  is  void  as  in  restraint 
of  trade  and  against  public  policy. 
Fisher  v.  Bush,  35  Hun,  651  (1885).    See, 


also,  §  320,  supra.  For  a  full  discussion 
of  this  subject,  see  ch.  XXXVII,  infra. 
For  an  interesting  statement  of  the 
modus  operandi  of  a  "corner,"  see  "An 
Investors  Notes  on  American  Rail- 
roads," by  Swann,  ch.  XII  (1886).  See 
ch.  XXXVII,  relative  to  purchases  for 
the  purpose  of  affecting  corporate  elec- 
tions. 


(29) 


449 


§  333.] 


CONTRACTS    TO    SELL  —  GAMBLING    SALES FRAUD. 


[CH. 


XX. 


A  contract  by  which  a  shareholder  in  a  corporation  agrees  to  secure 
to  the  purchaser  of  his  stock  a  corporate  office  at  a  stated  salary, 
and  in  case  of  his  removal  to  repurchase  the  stock,  is  void  as  against 
public  policy  and  as  a  fraud  on  other  stockholders,  unless  it  is  proved 
that  the  transaction  is  not  for  the  private  benefit  of  the  vendor,  or 
that  it  was  consented  to  by  the  other  stockholders.1  But  a  contract 
to  convey  a  majority  of  the  stock  of  a  corporation,  and  to  procure 
the  resignation  of  the  corporate  directors,  thereby  enabling  the 
vendee  to  elect  directors  satisfactory  to  himself,  is  a  valid  and  legal 
agreement.*  One  railroad  company  cannot  purchase  a  controlling 
interest  in  another  railroad  company  for  the  purpose  of  managing 
or  absorbing  the  latter ;  but  this  rule  grows  out  of  the  fact  that  such 
purchases  are  beyond  the  powers  of  the  corporation.3  It  is  imma- 
terial that  a  vendee  already  controls  one  railroad  company,  and 
that  the  stock  contracted  to  be  sold  will  give  him  the  control  of 
another.  He  is  entitled  to  the  stock.4  An  agreement  to  contribute 
stock  towards  a  common  undertaking  is  enforceable,  the  considera- 
tion being  the  mutual  obligation.5  But  the  common  undertaking 
must  be  a  legal  one.e 


affecting  a  joint  enterprise  for  the  pur- 
chase, upon  speculation,  of  certain  min- 
ing stocks  must  join  all  the  parties  who 
enter  the  "  pool "  does  not  necessitate 
the  joinder  of  one  who  is  out  of  the 
jurisdiction.  Angell  v.  Lawton,  76  N.  Y., 
540  (1879).  The  representative  of  a 
syndicate  after  selling  the  stock  cannot 
modify  the  contract  He  is  liable  to 
the  others  if  he  does  so.  Kountz  v. 
Gates,  47  N.  W.  Rep.  729  (Wis.,  1891). 
Where  there  is  a  joint  operation  in 
stocks,  a  "  pool,"  the  transactions  being 
carried  on  in  the  name  of  one  only,  the 
others  may  have  specific  performance 
leading  to  a  division  of  the  stocks. 
Johnson  v.  Brooks,  46  N.  Y.  Super.  Ct, 
13  (1880);  Thornton  v.  St  Paul,  etc.,  R'y, 
45  How.  Pr..  410(1873);  S.  C.  dismissed, 
6  Week.  Dig.,  309. 

Guernsey  v.  Cook,  120  Mass.,  501 
(1876);  Noyes  v.  Marsh,  123  Mass.,  286 
(1877). 

2  See  ch.  XXXVII ;  Barnes  v.  Brown, 
80  N.  Y.,  527  (1880).  Contra,  Jacobs  v. 
Miller,    15   Alb.   L.   J.,  188  (1877);  Fre- 


mont v.  Stone,  42  Barb.,  169  (1864). 
Where  the  agreement  was  to  keep  the 
vendor  in  a  professorship  the  court  will 
not  aid  the  parties.  The  agreement  is 
against  public  policy.  Jones  v.  Scu^der, 
2  Cin.  Sup.  Ct,  178  (1872). 

3  See  §315. 

4  Havemeyer  v.  Havemeyer,  supra; 
O'Brien  v.  Breitenbach,  1  Hilt,  304 
(1857).     Cf.  %  315.  n. 

5  Conrad  v.  La  Rue,  52  Mich.,  83 
(1883).  Where  the  stockholders  enter 
into  a  contract  by  which  they  give  a 
certain  amount  of  their  stock  tn  a  person 
who  agrees  to  do  certain  work  for  the 
corporation  in  consideration  of  tire 
stock,  the  remedy  for  a  breach  of  con- 
tract on  his  part  is  an  action  for  dam- 
ages, unless  by  the  contract  the  stock 
was  to  be  returned  in  case  of  non-pei- 
formance.  Gillett  v.  Bowen,  23  Fed. 
Rep.,  625  (1885).  If  the  action  is  to  re- 
cover back  the  stock  the  corporation  is 
a  proper  party  in  order  to  obtain  a 
transfer.  Johnson  v.  Kirby,  65  Cal.,  482 
(1884).     See,  also,   in    general,    Cates  «, 


6  If  the  purpose   is  to  rob  a  railroad    one.      Tobey    v.   Robinson,  99  111.,   202 
and  bribe  a  judge,  the  court  will  aid  no    (1881). 

450 


CH.  XX.]        CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§  334. 


§  334.  Contract  for  sale  of  stock  may  be  valid  without  delivery  or 
specific  time  for  delivery. —  Generally  a  sale  of  stock  is  attended 
with  an  immediate  delivery  of  the  certificates  therefor,  or  it  is 
agreed  that  the  certificates  shall  be  delivered  at  some  specified 
time  in  the  future.  If,  however,  the  vendor  offers  to  sell  his  stock 
and  the  vendee  accepts  the  offer,  the  contract  is  complete  and  binds 
both  parties,  although  nothing  has  been  said  as  to  the  time  when 
the  certificates  of  stock  shall  be  delivered.  The  law  implies  that 
the  contract  will  be  performed  by  a  delivery  of  the  certificates  im- 
mediately or  within  a  reasonable  time,  and  either  party  may  insist 
upon  carrying  out  the  contract.1     Where  the  vendor  sa}^s,  in  his 


Sparkman,  11  S.  W.  Rep.,  846  (Texas, 
1839).     For  the  construction  of  a  con- 
tract by  which  the  owners  of  all   the 
stock  of  a  mining  company  turned  it 
over  in  pledge  to  parties  who  would 
furnish  the  money  to  carry  on  the  mine, 
see  Newton  v.  Van  Dusen,  50  N.  W.  Rep., 
820  (Minn.,  1891).     For  the  construction 
of  an  agreement  whereby  a  stock  and 
bondholder  deposits  all   his  stock  and 
bonds  as  security  to  another  person  who 
advances  money  to  carry  on  the  busi- 
ness,   see    Appeal    of  Huston,  18    Atl. 
Rep.,  419  (Pa.,   1839).     Where  a  stock- 
holder, owning  a  majority  of  the  stock, 
transfers  it  to  a  person  under  a  contract 
by  the  latter  to  do  certain  work  for  the 
corporation,   and   make  a  loan   to  the 
former  and  retain  the  former  as  presi- 
dent, but  the  stockholder  endeavors  to 
sell  out  to  another  party,  his  bill   in 
equity  to  set  aside  the  transfer  as  ob- 
tained by  fraud   will  fail.     Healey  v. 
Loveridge,  19  Atl.  Rep.,  921  (Md.,  1890). 
Where,  for  the  purpose  of  forwarding 
a  corporate  enterprise,  one  of  its  chief 
promoters  contracts  to  give  and  sell  to  a 
third  person  certain  bonds,  etc.,  if  the 
latter  will  do  certain  acts,  the  former 
cannot,  after  part  performance  by  the 
latter,   rescind  and  recover    back    the 
bonds,  etc.,  unless  he  recompenses  the 
latter  for  his  part  performance;  nor  can 
he  rescind   at  all  unless  he  can  recom- 
pense the  latt3i\  His  remedy  is  for  dam- 
ages.    So  though  defendant  is  charged 
with  fraud  in   refusing  complete  per- 
formance.   Snow  v.  Alley,  11  N.  E.  Rep., 


764  (Mass.,  1887).  In  a  joint  operation 
in  stocks  no  bill  for  an  accounting  will 
lie  where  by  mutual  consent  the  joint 
operation  was  ended  and  one  sold  his 
stock  while  the  other  held  his.  Keller 
v.  Swartz,  20  Atl.  Rep.,  627  (Pa.,  1890). 

1  "The  performance  of  a  contract,  or 
the  tender  of  performance,  is  no  part  of 
the  contract.  The  making  of  a  contract 
is  one  thing,  but  the  performance 
thereof,  or  the  tender  of  performance,  is 
another  and  quite  different  thing.  The 
contract  set  up  in  the  paragraph  in 
question  is  an  executory  one,  by  which 
the  plaintiff  agreed  to  sell  to  the  de- 
fendant the  shares  of  stock,  and  the 
defendant  agreed  to  pay  him  therefor 
the  sum  of  $2,500.  No  time  was  fixed 
for  the  performance ;  the  law  will  im- 
ply, therefore,  that  it  was  to  be  per- 
formed immediately,  or  perhaps  within 
a  reasonable  time.  Had  a  future  day 
been  agreed  upon  for  the  performance 
of  the  contract  on  each  side,  there  could 
have  been  no  doubt  as  to  its  validity,  or 
the  right  of  either  party  to  enforce  it. 
he  having  done  all  he  was  required  to 
do  on  his  part.  The  fact  that  no  time 
was  agreed  upon  for  performance  does 
not  change  the  character  of  the  con- 
tract The  contract  did  not  pass  any 
title  to  the  stock,  but  it  was,  neverthe- 
less, a  valid  contract,  and  one  which 
either  party  can  enforce,  he  having 
been  in  no  default  himself."  Bruce  v. 
Smith.  44  Ind.,  1  (1873);  Kerchuer  v. 
Gettys,  18  S.  C,  521  (1882);  Cheale  v. 
Kenward,  3  De  G.  &  J.,  27  (1858).    Usage 


451 


§  334.]  CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.         [OH.  XX. 


contract,  "I  have  sold"  certain  stock, deliverable  at  seller's  option, 
within  a  specified  time,  a  sale  in  prcesenti  is  made,  and  the  vendor 
assumes  to  have  the  stock  and  to  hold  it  for  the  benefit  of  the  pur- 
chaser until  deliver}7.1  An  agreement  to  purchase  stock  when  the 
corporation  is  created  is  enforceable  only  after  a  complete  and 
legal  incorporation  is  effected.2  A  sale  of  stock  with  an  agreement 
to  take  it  back  whenever  the  vendee  desires  is  an  enforceable  con- 
tract.3 

Great  difficulty  often  arises  in  determining  whether  a  contract 
of  sale  of  stock  is  an  executed  or  is  merely  an  executory  contract 
of  sale.     There  are  a  few  general  rules  on  this  subject,4  but  each 


may  deter  mine  what  is  a  reasonable  time 
for  delivery.  Seven  da)-s  held  reasonable. 
Stewart  v.  Cauty,  8  M.  &  W.,  160  (1841). 
In  a  contract  by  which  one  "  agrees  to 
deliver  "  to  the  other  certain  stock  at  a 
certain  price,  performance  is  to  be 
within  a  reasonable  time,  and  the  vendor 
may  tender  the  stock  and  then  sue  for 
the  price.  Boehm  v.  Lies,  18  N.  Y.  Supp., 
577  (1892).  Specific  performance  of  a 
contract  to  sell  stock  will  not  be  en- 
forced, where  the  time  of  performance 
and  of  payment  is  not  fixed,  and  where 
five  years  have  elapsed,  and  where  the 
vendee,  the  corporate  secretary,  mis- 
represented the  value  of  the  stock  to 
the  vendor.  Diamond,  etc.,  Co.  v. 
Todd,  14  Atl.  Rep.,  27  (Del.,  1888).  An 
agreement  to  transfer  stock  at  any  time 
to  a  trustee,  for  creditors,  is  not  en- 
forceable against  the  insolvent  estate 
of  the  deceased  stockholder.  Chafee 
v.  Sprague,  13  Atl.  Rep.,  121  (R  I., 
1888).  An  offer  to  sell  stock  with  a 
statement  that  the  stock  could  probably 
be  sent  with  a  draft,  even  when  accepted 
with  a  direction  to  send  it  on,  does  not 
make  a  binding  contract  Topliff  v. 
McKendree,  50  N.  W.  Rep.,  109  (Mich., 
1891).  Where  stock  is  sold  on  condition 
that  the  vendee  shall  be  "  in  a  position 
to  take  up  the  stock,"  the  condition  is 
fulfilled  if  the  vendee  accepts  the  stock 
and  acts  as  a  director,  and  holds  the 
stock  for  five  months.  Wills  v.  Fisher, 
17  S.  E.  Rep.,  73  (N.  G,  1893). 

1  Currie  v.  White,  45  N.  Y.,  822  (1871). 
When  the  option  is  exercised  the  time 


of  delivery  as  fixed  is  as  though  that 
time  had  been  specified  in  the  original 
contract.  Kelley  v.  Upton,  5  Duer,  336 
(1866),  holds  otherwise  where  the  con- 
tract has  also  the  words  "at  buyer's  op- 
tion in  ninety  days."  Such  a  contract 
is  executory  as  to  time  of  passing  title, 
and  tender  is  necessary. 

2  Chikls  v.  Smith,  55  Barb,,  45  (1869). 
If  stock  is  sold  conditionally,  and  the 
condition  does  not  happen,  the  sale  is 
void.  Mitchell  v.  Wedderburn,  11  Atl. 
Rep.,  760  Old.,  1887). 

3  See  §339. 

4  A  contract  of  sale  of  stock  was 
worded  as  follows : 

"  I  hold  of  the  stock  of  the  Washing- 
ton and  Hope  Railway  Company  $33,250 
or  1,350  shares,  which  is  sold  to  Paul  F. 
Beardsley  (the  appellee),  and  which, 
though  standing  in  my  name,  belongs 
to  him,  subject  to  a  payment  of  $8,000, 
with  interest  at  same  rate  and  from 
same  date  as  interest  on  my  purchase  of 
Mr.  Alderman's  stock." 

The  court  held  that  this  was  an  exe- 
cuted contract,  by  which  the  ownership 
of  the  stock  passed  to  the  purchaser, 
with  a  reservation  of  title,  simply  as 
security  for  the  purchase-money  —  an 
equitable  mortgage.  The  court  pointed 
out  the  difference  between  an  executed 
and  executory  contract  of  sale  as  fol- 
lows : 

"  If  an  agreement  to  sell,  the  moving 
party  must  be  the  purchaser.  If  a  sale, 
an  executed  contract  with  reservation 
of  security,  the  moving  party  is  the 


452 


CH.  XX.]        CONTRACTS   TO    SELL  —  GAMBLING    SALES FRAUD.  [§334. 


contract  for  the  sale  of  stock  is  construed  and  enforced  by  the 
courts  according  to  the  intent -of  the  parties  as  manifested  by  the 
written  terms  and  conditions  of  the  contract  itself.  Various  con- 
tracts relative  to  the  sale  of  stock  are  explained  and  referred  to  in 
the  notes  below.1     Many  cases  are  also  referred  to  in  the  notes 


vendor,  the  one  retaining  security.  If 
an  agreement  to  sell,  the  moving  party, 
the  purchaser,  must  within  a  reasonable 
time  tender  performance  or  make  ex- 
cuse therefor.  If  an  executed  contract, 
a  completed  sale,  then  the  moving  party- 
is  the  vendor,  the  security  holder,  and 
he  assumes  all  the  burdens  and  risks  of 
delay. 

.  .  .  "It  is  not  always  easy  to  de- 
termine whether  an  instrument  is  a 
contract  of  sale  or  one  to  sell ;  yet  cer- 
tain rules  of  interpretation  have  become 
established. 

.  .  .  •'  Where  the  buyer  is  by  the 
contract  bound  to  do  anything  as  a  con- 
sideration, either  precedent  or  concur- 
rent, on  which  the  passing  of  the  prop- 
erty depends,  the  property  will  not  pass 
until  the  condition  be  fulfilled,  even 
though  the  goods  may  have  been  actu- 
ally delivered  into  the  possession  of  the 
buyer."  Beardsley  v.  Beardsley,  138 
U.  S.,  262  (1891). 

1  An  offer  to  sell  stock,  open  to  accept- 
ance after  January  1st,  must  be  accepted 
before  July  9th.  Park  v.  Whitney,  19 
N.  E.  Rep.,  161  (Mass.,  1889).  An  agree- 
ment of  a  party  to  sell  bonds  for  an- 
other party  at  a  certain  price  may  be 
enforced  by  the  party  who  is  to  give 
the  bonds  to  the  other  party  to  sell. 
Plumb  v.  Campbell,  18  N.  E.  Rep.,  790 
(111.,  1888).  The  vendor  may  guaranty 
that  the  stock  will  be  at  par  within  a 
certain  time.  Suit  lies  if  it  is  not  at  par 
within  that  time.  Hill  v.  Smith,  21  How., 
283  (1858).  The  fact  that  the  corpora- 
tion loses  a  large  amount  of  money 
after  a  partner  agrees  to  take  stock  as 
a  part  of  his  share  of  the  partnership 
assets  does  not  allow  him  to  decrease 
the  price  which  it  was  estimated  to  be 
worth.  Donahue  v.  M'Cosh,  30  N.  W. 
Rep.,  14  (Iowa,  1886).     Only  a  de  facto 


corporation  need  be  proved.  Reynolds 
v.  Myers,  51  Vt,  444  (1879).  A  contract 
guarantying  a  certain  dividend  over 
and  above  certain  corporate  expenses 
does  not  include  payment  of  salaries, 
etc.  Central,  etc.,  Assoc,  v.  James,  7 
S.  E.  Rep.,  862  (Ga.,  1888).  A  guaranty 
upon  the  sale  of  stock  that  certain  divi- 
dends will  be  declared  is  enforceable 
against  the  guarantying  firm,  even 
though  they  acted  as  agents  for  an  un- 
disclosed principal.  Their  obligation  is 
primary,  and  not  that  of  guarantors  for 
the  company.  Kernochan  v.  Murray, 
111  N.  Y.,  306  (1888).  The  memoranda 
of  the  contract,  together  with  the  cer- 
tificates of  stock,  are  sufficient  pre- 
sumptive evidence  of  the  existence  of 
the  corporation  and  the  legal  issue  of 
the  stock.  Mann  v.  Williams,  9  N.  E. 
Rep,  807  (Mass...  1887).  See,  also,  Lindley 
on  Partnership,  pp.  719,  etc..  4th  edition 
(Callaghan  &  Co.,  1881).  Where  stock  is 
issued  to  a  person  for  construction  work 
and  he  sublets  the  contract  and  agrees 
to  divide  the  stock  with  others  who  are 
to  share  the  expense  of  construction, 
they  all  are  liable  to  the  subcontractor. 
M'Fall  v.  M'Keesport,  etc.,  Co.,  16  Atl. 
Rep.,  47S  (Pa.,  1889).  An  option  to  pur- 
chase stock  within  three  years  is  en- 
forceable, though  one  party  has  an  op- 
tion which  the  other  has  not.  Seddon  v. 
Rosenbaum,  9  S.  E.  Rep,  326  (Va..  18S9). 
When  a  subscriber  to  stock  agrees  to 
sell  $5,000  worth  of  the  same  at  its 
"  original  cost,"  such  cost  is  the  cost  to 
the  subscriber  and  not  the  par  value, 
nor  the  cost  including  loans  by  the  sub- 
scriber to  the  corporation.  Eagan  v. 
Clasbey,  13  Pac.  Rep..  430  (Utah,  1887). 
Where  a  person  sells  goods  to  a  corpo- 
ration and  agrees  to  make  payment  in 
stock,  he  must  take  the  stock  at  par, 
even  though  its  actual  and  market  value 


453 


335.]  CONTRACTS    TO    SELL GAMBLING   SALES  —  FEAUD.        [cH.  XX. 


below  relative  to  the  contracts  and  rights  of  agents,  promoters 
and  partners  in  the  purchase  or  sale  of  stock.1 

§  335.  Remedies  for breach  of  a  contract  to  sell  stock. —  A  person 
who  is  under  contract  to  sell  and  deliver  shares  of  stock  may  fulfill 


is  much  less  than  par.     Tilkey  v.  Au- 
gusta, etc.,  R.  R.,  10  8.  E.  Rep.,  448  (Ga., 
1889).     A  contract  calling  for  "original 
ground  floor  or  treasury  stock "  means 
any  of  the  stock  that  is  issued,  where 
the  statutes    prohibit    fictitious    stock. 
All  the  stock  is  then  presumed  to  be 
"  ground  floor  "  stock  and  to  represent 
at  par  the  actual  value  received.     Will- 
iams v.   Searcy,  10  S.   Rep.,  632  (Ala., 
1891).     A  contract  by  a  corporation  that 
it  will  issue  its  slock  for  one-fifth  of  its 
par  value  is  void  under  the  Alabama 
constitutional   prohibition.       The    sub- 
scriber having  sold  his  contract  to  an- 
other  person    cannot   collect    on    such 
sale.     Williams  v.  Evans,  0  S.  Rep.,  702 
(Ala.,  1889).     See  ch.  III.     An  agency  to 
Bell  the  stock  of  a  com  pan}-  refers  to  the 
stock    then    issued    by    the    company. 
(iates  v.  National,  etc.,  Union,  49  N.  W. 
Rep.,  232  (Minn.,  1891).     An  executory 
contract  to  purchase  stock  is  not  such  a 
claim  against  the  estate  of  an  insolvent 
vendee  as   to  be  provable  against  the 
assignee.     In  re   Ives,  11  N.  Y.   Supp., 
G50  (1890).     A  vendor  of  the  stock  of  a 
street    railway    company    may   collect 
damages  for  breach  of  the  contract  of 
the  vendee  to  construct  the  street  rail- 
way   to    certain    laud    owned    by  the 
vendor,  even   though   the  corporation, 
the  stock  of  which  was  sold,  had  agreed 
to  acquire  certain  rights  of  way  and  had 
not  done  so.     Blagen  v.  Thompson,  31 
Pac.   Rep,   G47  (Ore.,    1892).     Where  a 
vendor  of  stock,  in  addition  to  the  price 
received,  is  to  have  an  additional  sum 
equal   to  the  highest  price  paid  to  any 
others  for  their  stock,  he  cannot  recover 
such  additional  price  by  proof  that  the 
vendee,  in  order  to  stop  a  stockholder's 
suit,  paid  a  higher  price  for  other  stock. 
Stewart  v.  Huntington,  124  N.  Y.,  127 
(1890). 
1  For  a  sale  of  stock  where  the  vendee 


was  to    divide   with    the  vendor    the 
amount  for  which  the  stock  should  be 
resold  by  the  vendee,  see  Jones  v.  Kent, 
80  N.  Y,  585  (1880).     An  agreement  to 
divide  the  profits  on  stock  in  considera- 
tion of  information  to  be  furnished  is 
enforceable.     Parsons  v.    Robinson,    15 
N.  Y  Supp,  138  (1891);  aflPd,  133  N.  Y, 
537.     A  contract  whereby  an  agent,  one 
of  the  partners,  is  to  have  half  of  what 
lie  could  sell  partnership  shares  of  stock 
for,  is  legal  and   enforceable  by   him. 
Wright  v.  Wood,  85  N.  Y,  402  (1881).  A 
promoter  who  has  brought  about  the  sale 
of  a  large  plant  to  new  parties  who  have 
agreed  to  organize  a  new  corporation 
and  give  the  promoter  a  certain  amount 
of    stock    therein,     cannot,   upon     the 
ground   that  he  is  being  defrauded  of 
his  commissions,  enjoin  the  parties  from 
closing  the   transaction   irrespective  of 
the  promoter,  nor  can  he  have  specific 
performance  of  the  contract  to  incorpo- 
rate a  company  and  deliver  the  stock. 
There  is  no  fiduciary  relation  between 
the  parties;  the  value  of  the  stock  can 
be  estimated  in  damages;  there  was  no 
allegation  of  defendant's  insolvency,  and 
the  promoter  has  ample  remedy  at  law 
for  damages.     Avery  v.  Ryan.  43  N.  W. 
Rep.,  817  (Wis.,  1889>.     The  question  of 
whether  a  sale  or  pledge  was  involved 
in   the   relations  between   a   contractor 
and  the  party  who  financiered  the  mat- 
ter for  him  was  involved  in  Griggs  v. 
Day.  11  N.  Y  Supp.,  885  (1890).  The  fact 
that  a  vendee  makes  out  a  check  to  a 
person  and  delivers  it  to  him  in  pay- 
ment for  stock  does  not  prove  that  the 
latter  is  the  vendor  and  liable  for  mis- 
representations.    Aron  v.  De  Castro,  131 
N.  Y..  648  (1892)     For  a  breach  of  an 
agreement  to  give  a  certaiu  quantity  of 
stock  in  payment  for  services  to  be  per- 
formed, the  person  entitled  to  the  stock 
may  sue  for  damages.     Alford  v.  Wil- 


454 


CU.  XX.]         CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.  [§335. 


the  obligation  on  his  part  by  tendering  to  the  vendee  certificates 
of  stock  duty  indorsed  by  himself,  and  containing  a  power  of  at- 
torney authorizing  the  vendee  to  obtain  a  registry  of  the  transfer 
on  the  corporate  books.1     It  lias  been  held,  however,  and  evidently 


son,  20  Fed.  Rep.,  96  (1884).  The  cor- 
poration is  not  liable  for  the  breach  of 
an  agreement  among  the  organizers  as 
to  the  distribution  of  stock.  Summerlin 
v.  Fronteriza,  etc.,  Co.,  41  Fed.  Rep..  249 
(1890).  Nothing  is  more  common  than 
for  the  promoters  of  a  company  to 
agree  to  sell  property  to  the  company  in 
consideration  of  a  certain  number  of 
paid-up  shares,  and  it  is  certainly  diffi- 
cult to  see  why  such  a  contract,  if  valid 
and  binding  on  both  parties,  should  not 
be  enforced ;  indeed,  there  is  authority 
for  specific  performance  in  such  a  case. 
See  Fyfe  v.  Swabey,  16  Jur.,  49.  M.  R 
Where  a  party  to  a  contract  relative  to 
an  incorporation  and  division  of  the 
stock  sues  to  recover  his  interest  accord- 
ing to  the  contract,  the  court  will  de- 
cree a  proper  division  of  the  stock,  all 
parties  being  allowed  the  amounts  in- 
vested by  them  in  forwarding  the  enter- 
prise. Bates  v.  Wilson,  24  Pac.  Rep.,  99 
(Colo.,  1890).  Where  the  owner  of  a 
patent  agrees  to  convey  it  to  a  corpora- 
tion for  stock,  and  then  to  divide  the 
stock  with  others,  he  may  be  compelled 
to  perform  his  agreement.  But  where 
the  patentee  does  not  convey  the  patent 
to  the  corporation,  but  conveys  to  an- 
other corporation,  the  latter  is  pi'otected 
in  its  title,  though  some  of  its  incorpo- 
rators and  directors  knew  all  the  facts. 
Davis,  etc.,  Co.  v.  Davis,  etc.,  Co..  20 
Fed.  Rep.,  699  (1884).  Where  a  patentee 
agi'ees  with  a  promoter  to  sell  the  patent 
to  the  corporation  for  stock,  and  divide 
the  stock  with  the  promoter,  but  the 
patentee  after  obtaining  the  stock  sells 
the  certificates  to  a  bona  fide  purchaser, 
the  latter  is  protected  though  the  trans- 
fer is  not  registered  on  the  corporate 
books.  The  purchaser  may  come  into  a 
suit  instituted  by  the  promoter  against 
the  corporation  to  compel  a  transfer. 
Thurber  v.   Crump,   6  S.  W.  Rep.,    145 

41 


(Ky,  1887).  Where  a  person  holds 
property  in  trust  or  as  agent  for  others, 
and  conveys  that  property  to  a  corpo- 
ration for  its  shares  of  stock,  the  per- 
sons who  had  an  equitable  interest  in 
the  property  may  compel  this  agent  or 
trustee  to  transfer  to  themselves  such 
stock.  But  all  of  the  principals  or  ces- 
tuis  que  trust  must  be  made  parties  to 
the  suit.  O'Conner  v.  Irvine,  16  Pac. 
Rep,  236  (Cal.,  1887).  Where  there  is  a 
joint  operation  in  stocks,  a  "  pool,"  the 
transactions  being  carried  on  in  the 
name  of  one  only,  the  others  may  have 
specific  performance  leading  to  a  divis- 
ion of  the  stocks.  Johnson  v.  Brooks, 
46  N.  Y.  Super.  Ct,  13  (1880);  Thorn- 
ton v.  St.  Paul,  etc.,  Ry.,  45  How.  Pr., 
416  (1873);  S.  C,  dismissed,  6  Week. 
Dig.,  309.  Equity  has  jurisdiction  to 
compel  the  transfer  of  stock  as  between 
parties.  Thus,  where  stock  is  issued  in 
payment  for  property  and  the  party  to 
whom  the  certificate  is  issued  refuses  to 
divide  it  among  the  owners  of  the  prop- 
erty, as  provided  by  contract,  a  court  of 
equity  may  compel  the  division  and 
may  enjoin  any  election  of  the  corpora- 
tion until  such  division  is  made.  Archer 
v.  American,  etc.,  Co.,  24  Atl.  Rep.,  508 
(N.  J..  1892).  It  is  a  question  of  fact 
whether  a  person  selling  stock  is  an 
agent  or  vendee  of  the  person  from 
whom  he  obtained  the  stock  and  whether 
the  latter  is  liable  on  misrepresentation 
made  by  such  person.  Henneberger  v. 
Mather,  50  N.  W.  Rep.,  369  (Mich.,  1891) ; 
Florida,  etc.,  Co.  v.  Merrill,  52  Fed.  Rep., 
63  (1892).  A  party  selling  stock  ^is  not 
liable  for  the  false  representations  of  the 
vendee  to  another  person  to  whom  the 
vendee  is  reselling  the  stock.  Master- 
ton  v.  Boyce,  6  N.  Y.  Rupp.,  65  (1889). 

'"When  certificates  of  shares  are 
given  to  a  purchaser  they  are  analogous 
to  the  sale  of  chattels,  and  the  assign- 


§  335.] 


CONTRACTS    TO    SELL 


GAMBLING    SALES  —  FKAUD. 


[CH. 


XX. 


with  good  reason,  that  if  the  vendee  objects  to  the  tender,  on"  the 
ground  that  he  wishes  a  registry  of  the  transfer  to  be  made  on  the 
corporate  books,  the  vendor  must  cause  such  registry  to  be  made 
in  order  to  render  his  tender  complete.1  A  tender  of  a  certificate 
indorsed  in  blank,  not  by  the  vendor  but  b}f  some  previous  owner, 
is  insufficient.  The  vendee  is  not  obliged  to  trace  his  vendor's 
title  from  the  name  appearing  on  the  certificate.2  In  England, 
where  a  transfer  of  shares  is  to  be  made  by  a  deed,  it  is  the  duty 
sometimes  of  the  vendor,3  and  sometimes  of  the  vendee,4  to  furnish 
the  necessary  deed,  according  to  the  custom  of  the  market  in 
which  the  sale  is  made.  If,  after  the  vendee  accepts  a  tender  of 
the  certificates,  the  corporation  refuses  to  allow  a  registry  and 
transfer  on  the  corporate  books,  the  vendor  is  liable  to  him,  since 
the  registry  is  held  to  have  been  guarantied.5  The  vendee  may 
decline  to  "accept  the  certificates  if  the  stock  has  been  attached." 
Hut  the  vendee  cannot  decline  the  tender  on  the  ground  that  the 
corporation  has  issued  stock  at  a  discount,  nor  because  it  has  mort- 
gaged its  property.7  A  contract  whereby  stock  is  sold  to  be  paid 
for  in  the  future  is  not  forfeited  by  mere  failure  to  pay  as  agreed 
upon.8 


merit  and  delivering  of  (lie  certificate 
is  a  symbolical  delivery  of  the  shares 
themselves."  Noyes  v.  Spaulding,  27 
Vt,  420  (1855);  Merchants1  Nat'l  Bank  v. 
Richards,  6  Mo.  App.,  454  (1879);  East- 
man v.  Fiske,  9  N.  II..  182  (1838);  Murin 
v.  Barnum,  21  Barb.,  283  (1857);  Bruce 
v.  Smith,  44  Ind.,  1  (1873).  Of.  Moore 
v.  Hudson  River  R  R.  Co.,  12  Barb..  156; 
21  N.  E.  Rep.,  242  (Mass.,  1889) ;  5  N.  Y. 
Supp.,  937,  940. 

1  White,  Executor,  v.  Salisbury,  33  Mo., 
150  (1862). 

-'Hare  v.  Waring,  3  M.  &  W..  3G2 
(1838),  per  B.  Parke:  "The  party  is  to 
convey  and  deliver  certificates  showing 
either  on  the  face  of  them  or  from  the 
indorsements  that  the  title  is  in  the  per- 
son conveying." 

3  Stephens  v.  De  Medina,  4  Q.  B.,  422 
(1843). 

4  Shaw  v.  Rowley,  16  M.  &  W.,  810 
(1847). 

5  Wilkinson  v.  Lloyd,  7  Q.  B.,  27  (1845). 
e  Eastman  v.  Fiske,  9  N.  H,  182  (1838). 
7 Noyes  r.  Spaulding.  27  Vt,  420  (1855). 

See,  also,  §  349,  etc.,  infra. 


8  Chater  v.  San  Francisco  Sugar  Re- 
fining Co.,  19  Cal.,  219  (1861),  where  pay- 
ment was  made  in  notes  and  labor,  and 
the  notes  were  not  paid.  Subsequent 
dividends  on  the  stock  are  to  be  applied 
to  the  payment  of  such  notes  when  the 
dividends  have  been  received  by  the 
vendor.  A  sale  of  stock  to  take  effect 
when  a  not0  given  in  payment  is  paid 
does  not  enable  the  vendee  to  claim  the 
stuck  long  subsequently,  the  note  not 
having  been  paid.  Davison  v.  Davis.  125 
l".  S..  90  (1888).  Where,  however,  two 
parties,  one  owning  stock,  the  other 
bonds,  contract  to  exchange  the  same. 
delivery  being  in  escrow  at  once,  and 
absolutely  after  the  performance  of  cer- 
tain things,  a  failure  of  one  party  to 
perform  on  his  part  enables  the  other  to 
have  the  contract  canceled  by  a  court 
of  equity.  Wilson  v.  Roots,  10  N.  E. 
Rep,  204  (III,  1887).  Where  fifty  shares 
of  stock  are  sold  but  only  twenty-five 
shares  are  delivered,  and  the  vendor  de- 
clines to  deliver  the  balance,  a  suit  by 
the  vendor  on  the  ground  of  fraud  and 
a  rescission  will  fail.    Matthews  v.  Cadv, 


456 


CH.  XX.]        CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§  33G. 

A  person  who  is  under  contract  to  purchase  stock  cannot  defeat 
that  contract  by  the  fact  that  the  corporation  was  insolvent,  even 
at  the  time  the  contract  was  entered  into.1  An  agreement  to  de- 
liver stock  free  and  clear  of  all  incumbrances  does  not  refer  to  in- 
cumbrances against  the  corporation.2  The  legality  of  the  sale  of 
stock  is  governed  by  the  law  of  the  state  within  which  it  is  made.3 
It  is  no  defense  to  a  contract  to  buy  stock  for  the  vendee  to  allege 
that  the  directors  have  committed  an  ultra  vires  act  in  issuing  more 
stock  at  a  discount.4 

§  33G.  Difficulty  is  often  experienced  in  determining  what  the 
measure  of  damages  is  for  breach  of  a  contract  relative  to  the  sale 
of  stock.  In  certain  cases,  where  the  stock  has  been  delivered  or 
tendered,  the  measure  of  damages  is  the  purchase  price  fixed  by 
the  contract  itself.5   The  vendor  may  tender  the  stock  to  the  vendee 


61  N.  Y.,  651  (1875).  Although  a  party 
to  whom  bonds  and  stock  have  been 
sold  or  issued  to  be  paid  for  in  instal- 
ments has  paid  in  part  and  is  unable  to 
pay  the  remainder,  the  vendor  cannot 
rescind  and  demand  back  the  securities 
unless  he  returns  the  money  already 
paid.  American  Water-works  Co.  v. 
Venner,  18  N.  Y.  Supp..  379  (1892). 
Where  the  owner  of  a  majority  of  the 
stock  sells  it,  the  purchase  price  being 
only  paid  in  part,  and  retains  the  stock 
in  his  own  name  'until  the  full  price  is 
paid,  he  cannot  be  compelled  to  deliver 
the  stock  or  to  refrain  from  ousting  the 
vendee  from  the  presidency  of  the  cor- 
poration where  the  vendee  fails  to  meet 
the  other  payments,  even  though  the 
vendee  has  proceeded  to  improve  the 
property.  Stockton  v.  Russell,  54  Fed. 
Rep.,  224  (1892). 

iRudge  v.  Bowman,  L.  R,  3  Q.  B.,689 
(186S) ;  Gordon  v.  Parker,  10  La.  Rep.,  56 
(1836),  where  the  question  of  whether 
fraud  was  involved  was  submitted  to 
the  jury.  See  §  349  et  seq.  Crubb  v. 
Miller,  19  W.  R,  519  (1871),  where  by 
reason  of  a  winding  up  a  transfer  on 
the  corporate  books  was  no  longer  pos- 
sible; Kerchuer  v.  Gettys,  18  S.  C,  521 
(1882),  holding  that  a  loss  by  the  corpo- 
ration of  its  property  is  no  defense. 
Damages  cannot  be  recovered  for  the 
breach  of  an  executor}-  contract  to  pur- 


chase stock,  if  at  the  time  of  making 
the  contract  the  corporation  had  been 
dissolved  and  the  purchaser  was  not 
aware  of  that  fact.  Kip  v.  Monroe  29 
Barb.,  579  (1859). 

2  Williams  v.  Hanna,  40  Ind.,  535(1872). 

3  Dow  v.  Gould  &  S.  C.  M.  Co.,  31  Cal.. 
629  (1867). 

*  Faulkner  v.  Hebard,  26  Vt,  452  (1854). 
Fraud  is  a  defense,  see  §§  349-357. 

5  Where  the  stock  is  sold  to  be  deliv- 
ered thereafter,  and  the  vendee  refuses 
to  accept  the  stock,  the  vendor  may  ten- 
der the  stock  and  then  sue  for  the  con- 
tract price.  The  court  said  :  "The  court 
refused  to  instruct  the  jury  that  it  was 
necessary  for  Morgan  to  sell  the  stock 
on  the  market  for  the  best  price  he  could 
get,  and  that  the  measures  of  damages 
would  be  the,  difference  between  the 
price  thus  obtained  and  the  contraci 
price;  and  this  refusal  is  assigned  for 
error.  Of  course,  the  seller  would  be  at 
liberty,  after  tender  and  refusal,  to  adopt 
this  course ;  but  it  was  not  essential  to 
his  right  of  action.  The  measure  of 
damages  was  the  difference  between 
the  market  price  of  the  stock  at  the 
time  of  the  breach  and  the  contract 
price.  This  is  the  ordinary  rule;  but 
there  was  evidence  that  the  stock  had 
no  value,  and  there  is  no  certainty  — 
indeed,  no  proof  —  that  upon  a  resale 
a  ly  price  could  have  been  obtained  for 


457 


§  336.]  CONTRACTS   TO    SELL  —  GAMBLING    SALES  —  FBAUD.        [CH.  XX. 


and  sue  for  the  price,  or  may  sell  after  notice  to  the  vendee  and 
then  sue  for  the  difference,  or  may  retain  the  stock  and  sue  for  the 


the  stock,  or  that  it  had  any  market 
value  when  Parker  finally  refused  to 
take.  Under  these  circumstances  we 
see  no  reason  why  the  price  agreed  to  be 
paid  should  not  be  adopted  as  the  meas- 
ure of  damages,  if  that  was  the  only 
mode  by  which  full  compensation  could 
be  made  for  the  breach  of  the  contract 
by  the  purchaser.''  Mobley  v.  Morgan, 
6  Atl.  Rep.,  694  (188G).  "  In  the  absence 
of  special  circumstances  in  an  action 
for  conversion  of  personal  property  as 
well  as  one  for  failure  to  deliver  it  in 
performance  of  a  contract  where  con- 


(1892).  In  the  case  Perin  v.  McGibben, 
53  Fed.  Rep.,  86  (1892),  the  court  granted 
specific  performance  of  a  contract  to 
sell  stock  in  behalf  of  the  vendor  and 
against  the  vendee.  The  court  said: 
"The  agreement  was  in  form  a  contract 
to  buy  all  the  shares  of  stock  in  the  in- 
corporated companies.  The  language  of 
the  contract  shows  that  the  real  agree- 
ment was  to  buy  certain  real  estate,  to- 
gether with  the  personal  property  con- 
nected with  its  use  for  milling  and  dis- 
tilling purposes.  Without  discussing 
the  question  whether  the  sale  of  shares 


sideration  has  been  received,  the  value    of  stock  can  be  specifically  enforced  in 


of  the  property  at  the  time  of  such  con 
version  or  default,  with  interest,  is  the 
measure  of  compensation."  Barnes  i\ 
Brown,  130  N.  Y.,  872  (1892).  As  to  the 
remedies  for  a  breach,  see,  also,  Benja- 
min on  Sales.  g§  428-498.  For  the  meas- 
ure of  damages,  see  chapter  XXXV, 
infra.  As  regards  the  pleadings  in  an 
action  by  a  vendor  of  stock  to  recover 
damages  against  the  vendee  for  refusal 


equity,  it  is  sufficient  to  say  that  the 
sale  here  was  in  fact  a  sale  of  real  estate, 
and  the  circumstance  that  personalty 
was  included  in  the  sale  would  not  af- 
fect the  power  of  a  court  of  equity  to 
afford  relief  by  requiring  specific  per- 
formance." The  measure  of  damages 
for  breach  of  a  contract  to  purchase 
stock  is  the  difference  between  the  con- 
tract price  and  the  market  value  of  the 


to  accept  and  pay  for  stock  which  the    stock  at  the  time  and  place  of  delivery 


latter  had  agreed  to  accept  at  a  stated 
price,  one  year  f rom  date,  if  the  former 
desired  to  sell,  see  Strothers  v.  Drexel, 
122  U.  S.,  487  (1887).  The  vendor  may 
claim  damages  for  a  breach  in  that  the 
vendee  does  not  pay  the  contract  price 
and  take  the  stock,  or  he  may  bring  an 
action  "in  effect  for  the  specific  per- 
formance thereof,"  in  which  case  he 
must  allege  readiness  to  deliver  the 
stock.  Corning  v.  Roosevelt,  11  N.  Y. 
Supp.,  758  (1890).  The  court  will  com- 
pel the  vendee  to  take  and  pay  for  stock 
where  it  would  compel  the  vendor  to 
deliver  the  stock  if  he  defaulted  on  the 
contract  to  sell.  Bumgardner  v.  Leavitt, 
13  S.  E.  Rep.,  67  (West  Va.,  1891).  Where 
the  vendor  gets  judgment  for  the  price 
of  the  stock  sold  but  not  delivered  the 
court  will  order  him  to  deposit  the  stock 
with  the  court  or  lose  his  judgment. 
McKeever  v.  Dady,  18  N.  Y.  Supp.,  439 


with  interest.  Corser  v.  Hale  et  al.,  24 
Atl.  Rep.,  285  (Pa.,  1892).  Where  a 
vendee  refuses  to  carry  out  an  execu- 
tory contract  for  the  sale  of  shares,  the 
measure  of  damages  is  the  difference 
between  the  price  as  fixed  by  the  con- 
tract and  the  value  of  the  stock  at  the 
time  of  tender  ami  refusal  of  the  vendee 
to  fulfill.  See  Barned  v.  Hamilton,  2 
Rail.  &  Canal  Cas.,  624  (1841);  Tempest 
v.  Kilner,  3  C.  B.,  249  (1846),  and  Stewart 
v.  Cauty,  8  Mees.  &  W.,  160  (1841).  In 
Shaw  v.  Holland,  15  Mees.  &  W.,  136 
(1846),  the  proper  measure  of  damages 
is  said  to  be  the  difference  between  the 
coutract  price  and  the  market  price  on 
the  day  when  the  contract  was  broken. 
If  a  person  sells  and  conveys  property 
to  a  company  to  be  paid  for  in  stock, 
and  the  vendee  refuses  to  deliver,  he 
may  recover  the  value  of  the  stock. 
Humeston  v.  Tel.  Co.,  20  Wall.,  20  (1873). 


458 


CH.  XX.]        CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FKAUD.  [§  336. 


difference  between  the  contract  and  market  price.1     The  statute  of 
limitations  may  be  a  bar  to  the  action.2 

The  vendee's  remedy  for  a  failure  on  the  part  of  the  vendor  to 
deliver  is  an  action  for  damages3  or  a  bill  in  equity  to  obtain  spe- 

Where  an  agent  to  sell  stock  is  to  have    specified  amount  will  be  issued  to  the 

any  excess  of  price  over  a  sum  named 

to  him  by  the  vendor,  and  the  agent 

finds  a  customer  at  an  advanced  price 

and  the  vendor  refuses  to  sell,  the  agent 

may  recover    such    profit    as    he    lost 

thereby.     Matting    v.    Roach,    23    Pac. 

Rep.,  1117  (Cal.,  1891).    See,  also,  as  to 

agents,  §  334,  supra. 

1  The  vendor's  remedies  for  a  breach 
of  a  contract  to  buy  stock  are :  (1)  To 
hold  the  stock  for  the  vendee  and  re- 
quire payment  of  the  entire  price ;  (2)  to 
sell  after  notice  to  the  vendee  and  sue 
for  the  difference  between  the  contract 
price  and  selling  price;  (3)  to  retain  the 
stock  and  sue  for  the  difference  between 
the  contract  price  and  the  market  value 
price.  In  re  Ives,  11  N.  Y.  Supp.,  650 
(1890).  No  tender  is  necessary  when 
the  suit  is  for  damages  and  the  vendor 
intends  to  retain  the  stock.  Nysewander 
v.  Lowman,  24  N.  E.  Rep.,  355  (Ind., 
1890).  When  suit  is  brought  to  recover 
the  price  of  stock  sold  a  delivery  or 
tender  must  be  shown.  Holmes,  etc., 
Co.  v.  Morse,  53  Hun,  58  (1S89).  Where 
a  party  is  sued  on  a  note  he  may  recoup 
by  setting  up  that  the  note  was  given  to 
plaintiff  on  plaintiff's  agreement  to  as- 
sign and  deliver  certain  shares  of  stock, 
which  was  not  tendered  until  eight 
months  after  the  time  agreed  upon. 
Hill  v.  Southwick,  9  R.  I,  299. 

2  Williams  v.  Meyer,  41  Hun,  545 
(188G).  The  statute  of  limitations  runs 
against  a  receipt  reciting  a  first  pay- 
ment of  stock  "standing  in  my  name 
but  owned  by  him,  and  he  remaining 
responsible  for  the  balance  of  the  in- 
stalments when  called  in,"  there  being 
no  agreement  as  to  the  future  dispo- 
sition of  the  stock  and  of  dividends. 
Cone  v.  Dunham,  20  Atl.  Rep.,  311 
(Conn.,  1890).  A  sale  of  a  certificate  to 
the  effect  that  when  stock  is  issued  a 


holder  is  a  valid  sale  and  is  not  defeated 
by  the  statute  of  limitations.  Meehan 
v.  Sharp,  24  N.  E.  Rep.,  907  (Mass.,  1890). 
Where  certain  owners  of  stock  place  it 
in  the  hands  of  a  trustee  for  sale  and 
the  trustee  invites  subscriptions  thereto, 
the  subscription  contract  providing  for 
payment  of  one-third  down  and  the 
balance  when  called  for,  the  statute  of 
limitations  is  no  bar  to  an  action  for 
the  two-thirds,  although  six  years  have 
elapsed  since  the  first  payment  was 
made.  Williams  v.  Taylor,  120  N.  Y., 
244  (1890). 

3  A  person  entitled  by  contract  to 
purchase  stock  of  another  may  collect 
damages  against  the  latter  for  failure  to 
comply.  Rand  v.  Wiley,  29  N.  W.  Rep.. 
814  (Iowa,  1886).  Where  a  person  is 
paid  for  stock  and  fails  to  deliver, 
the  measure  of  damages  for  a  breach  of 
the  contract  is  what  it  would  cost  the 
party  to  purchase  the  stock  which  he  is 
entitled  to.  If  he  cannot  purchase  it, 
then  the  par  value  of  the  stock  is  the 
measure  of  value,  inasmuch  as  he  would 
have  had  to  pay  that  to  the  corporation 
in  order  to  have  had  the  stock  issued  to 
him.  Barnes  v.  Seligman,  55  Hun,  339 
(1890).  Where  a  vendor  of  stock  in  a 
corporation  which  has  a  franchise,  but 
nothing  else,  is  entitled  to  two  thousand 
shares  of  full-paid  stock  at  a  later  date, 
according  to  the  contract  of  sale,  his 
measure  of  damages  for  failure  of  the 
vendee  to  deliver  the  two  thousand  shares 
is  nominal  damages  where  there  was  no 
market  or  actual  value  for  the  stock. 
Barnes  v.  Brown,  130  N.  Y,  372  (1892). 
Where  the  vendor  of  stock  is  unable  to 
obtain  the  stock  for  delivery  by  reason 
of  au  injunction  against  the  corpora- 
tion the  vendee  may  sue  for  the  return 
of  the  purchase-money.  Rose  v.  Foord, 
30  Pac.  Rep.,  1114  (Cal.,  1892). 


459 


§§  337,  338.]       CONTRACTS  TO  SELL — GAMBLING  SALES — FEAUD.       [CH.  XX. 

cific  performance.1  In  almost  all  cases,  however,  his  remedy  is  an 
action  for  damages  only,  inasmuch  as  specific  performance  of  a 
sale  of  personalty  is  rarely  granted. 

§  337.  Specific  performance  as  a  remedy  for  oreacli  of  a  contract 
to  sell  stock. —  It  frequently  happens  that  the  person  who  has  con- 
tracted to  purchase  stock  is  particularly  anxious  to  procure  that 
stock,  and  that,  under  the  circumstances  of  the  case,  the  stock  is 
worth  to  him  a  value  not  to  be  compensated  for  by  mere  money 
damages.  This  cannot  happen  in  the  case  of  a  contract  to  sell 
securities  issued  by  the  government,  since  they  may  be  easily  pur- 
chased in  the  market.  Accordingly  it  is  well  established,  both  in 
England  and  America,  that  a  contract  for  the  sale  of  government 
securities  will  not  be  specifically  enforced  by  a  court  of  equity,  but 
the  vendee  may  sue  the  vendor  in  an  action  at  law  for  damages  for 
breach  of  contract.2 

§  338.  An  entirely  different  rule  prevails  as  regards  contracts  for 
the  sale  of  stock  of  private  corporations.  If  the  stock  contracted 
to  be  sold  is  easily  obtained  in  the' market,  and  there  are  no  par- 
ticular reasons  why  the  vendee  should  have  the  particular  stock 
contracted  for,  he  is  left  to  his  action  for  damages.  But  where  the 
value  of  the  stock  is  not  easily  ascertainable,  or  the  stock  is  not  to 
be  obtained  readily  elsewhere,  or  there  is  some  particular  and  rea- 
sonable cause  for  the  vendee's  requiring  the  stock  contracted  to  be 
delivered,  a  court  of  equity  will  decree  a  specific  performance  and 
compel  the  vendor  to  deliver  the  stock. 

This  rule,  as  applicable  to  contracts  for  the  sale  of  railway  stock, 
was  clearly  established  in  England  in  1841,  in  the  case  of  Duncuft 
v.  Albrecht. :i     Contracts  for  the  sale  of  stock  in  mining  and  other 

1  See  next  section.  Ross  r.  (Jnion  Pacific  R'y  Co.,  1  Woolw. 

-'Ross    v.   Union   Pacific    R'y  Co..    1  26.  32  (1863),  per  Miller,  J.     In  Cheale  v. 

Woolw.,  20,  82  (1863):  Cud  or  Cuddee  v.  Ken  ward.  8  De  G.  &  J.,  27  (1858),  the 

Rutter,  1    P.  Wins.   Rep.,  570  (1719);    5  court  said:  "There  is  no  doubt  that  a 

Viner's    Abr.,    538    (1715);    Dorisou   v.  bill  will  lie  for  a  specific  performance 

Westbrook,  5  Viners  Abr.,  540  (1722);  of  an   agreement   to  transfer  railway 

Cappur  v.  Harris,  Bunbury's  Rep.,   135  shares.    This  was  set  at  rest  by  Duncuft 

(1723);  Colt  u.   Netterville,  2  P.  Wins.,  r.  Albrecht"     In  the  case  of  Leach  v. 

304  (1725);  Buxton  v.  Lister,  3  Atk.,  388  Fobes,  77  Mass.,  506  (1858).  specific  per- 

(1746).    Cf.  Daloret  v.  Rothschild,  1  Sim.  form  a  nee  of  a  contract  to  convey  land 

&  S.,  590  (1824).  and  stock  was  granted  chiefly  because 

3  Duncuft  v.  Albrecht,  12  Sim.,  189  of  the  land  part  of  the  contract  Todd 
(1841);  Parish  v.  Parish,  32  Beav..  207  v.  Taft,  SSI  Mass.,  371  (1863X  decreed 
(1863\  granting  also  an  accounting  of  specific  performance  of  contract  to  con- 
dividends  ;  Poole  v.  Middleton,  29  Beav.,  vey  railway  Bhares;  also  Baldwin  v. 
646  (1861);  Turners  May.  32  L.T.(N.  S.),  Commonwealth,  11  Bush,  417  (1875); 
56  (1875) ;  Beckitt  v.  Billsbrough,  8  Hare,  Ashe  v.  Johnson's  Administrator,  2 
188  (1850),  dictum.     Contra,  dictum  in  Jones'   Eq.   (N.    C),    149   (1855).     As   to 

460 


CH.  XX.]        CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.  [§  33S. 


private  corporations  will  also  be  specifically  enforced  under  like 
circumstances.1 

Specific  performance  is  often  granted  as  between  several  parties 
each  of  whom  is  entitled  to  a  certain  part  of  stock  which  is  re- 


when  specific  performance  of  a  con- 
tract to  sell  stock  will  be  specifically 
enforced,  see,  also,  "White  &  Tudor's 
Leading  Cases  in  Equity,  vol.  I,  pp.  914- 
923,  etc.  As  to  possibility  of  mandatory 
injunction  in  any  case,  see  authorities 
in  Hilliard  on  Injunction,  p.  7,  note  a. 

treasurer  v.  Commercial  Coal  Min. 
Co.,  23  Cal.,  390  (1863).  See,  also,  Frue 
v.  Houghton,  6  Col.,  318  (1882).  As  ap- 
plicable to  manufacturing  corporations, 
see  Chater  v.  San  Francisco  S.  R.  Co.,  19 
Cal..  200  (1861).  Granted  in  towboat  as- 
sociation in  White  v.  Schuyler,  1  Abb. 
Pr.  (N.  S.),  300  (1865).  Refused  in  the 
case  of  stock  in  a  land  association. 
Jones  v.  Newhall,  115  Mass.,  2-14  (1S74). 
And  in  a  paper  company.  Noyes  v. 
Marsh,  123  Mass.,  286  (1877).  See  Cush- 
man  v.  Thayer  Mfg.  Co.,  76  N.  Y.,  365 
(1879).  "While  the  general  rule  is  for 
courts  of  equity  not  to  entertain  juris- 
diction for  a  specific  performance  on 
the  sale  of  stock,  this  rule  is  limited  to 
cases  where  a  compensation  in  damages 
would  furnish  a  complete  and  .satisfac- 
tory remedy."  This  case,  however,  is 
not  a  case  of  specific  performance  of  a 
sale  of  stock,  but  of  compelling  the  cor- 
poration to  register  a  transfer.  See, 
also,  in  general,  Austin  v.  Gillaspie,  1 
Jones'  Eq.,  261  (1854);  Nutbrbwn  v. 
Thornton,  10  Vesey,  160  (1804);  Shaw  v. 
Fisher,  5  De  G.,  M  &  G.,  596  (1855) ; 
Wynne  v.  Price,  3  De  G.  &  Sm.,  310 
(1849);  Wilson  v.  Keating,  7  W.  R,  484 
(1859) ;  Oriental  Co.  v.  Briggs,  2  J.  &  H., 
625  (1861) ;  Paine  v.  Hutchinson,  L.  R, 
3  Eq.,  257  (1866) ;  Shepherd  v.  Gillespie, 
L.  R,  5  Eq.,  293  (1867);  Birmingham  v. 
Sheridan,  33  Beav.,  660  (1864);  Stras- 
burg  v.  Echternacht,  21  Pa.  St..  220 
(1853);  Fallon  v.  Railroad  Co.,  1  Dill.,  121 
(1871).  In  regard  to  a  specific  perform- 
ance of  a  trust  of  stock,  see  Ferguson  v. 
Paschall,  11  Mo.,  267  (1848);  Cowles  v. 


Whitman,  10  Conn.,  121  (1834);  Clark  v. 
Flint,  22   Pick,  231   (1839);  Mechanics' 
Bank  v.  Seton,  2  Peters,  299  (1828).    Spe- 
cific performance  of  a  contract  to  sell 
stock  will  be  decreed  where  the  stock 
has  no  recognized   market  value,  and 
cannot  be  bought  in  the  market.     Ap- 
peal of  Goodwin,  etc.,  Co.,  12  Atl.  Rep., 
736   (Pa.,    1888).     Specific    performance 
was  refused  in  Eckstein  v.  Downing,  9 
Atl.  Rep..  626  (N.  H„  1887),  there  being 
no  evidence   that  the  vendee  had  any 
wish  or  reason  for  wishing  to  own  that 
particular  stock  or  stock  in  that  partic- 
ular   corporation.    See.  also,   Cruse    v. 
Paine,  L.  R,  6  Eq..  641.     Where  a  stock- 
holder, who  is  also  a  director,  contracts 
to  give  a   person  a  certain   amount  of 
stock  if  he  will  do  certain  work  for  the 
corporation,  and  the  board  of  directors, 
including  this  director,  discharge  such 
person  without  cause,  and  thus  prevent 
completion,  a  court  of  equity  will  com- 
pel a  delivery  of  the  stock.     Price  v. 
Minot,  107  Mass.,  49  (1871).     In  suits  in 
equity  to  compel   a  transfer  of  stock, 
parties  interested   by  a  purchase  from 
the    defendant    should    be  brought  in. 
O'Connor  v.   Irvine,   16  Pac.  Rep.,  236 
(Cal.,  1887).     Specific  performance  of  a 
contract  to  sell  stock  will  be  decreed 
where  the  property  of  the  corporation 
is  real  estate  —  a  brewery  —  and  the  real 
transaction  is  a  sale  of  the  entire  prop- 
erty.    Megibben's  Adm'rs  v.  Perin,  49 
Fed.  Rep.,  183  (1892).     Specific  perform- 
ance will  not  be  decreed  where  there  is 
doubt  as  to  the  contract  actually  being 
made  and  doubt  as  to  the  consideration, 
one  party  being  dead.     Hibbert  v.  Mac- 
kinnon,  49   N.  W.  Rep.,  21   (Wis..   1891). 
Where  a  debtor  agreed  to  transfer  stock 
as  collateral  security  for  a    debt,  and 
died  insolvent  before  doing  so,  the  court 
refused  to  enforce  specific  performance 
of  the  agreement  to  the  injury  of  other 


461 


338.] 


CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.        [cH.  XX. 


ceived  by  or  held  in  the  name  of  one  of  them.  A  court  will  com- 
pel him  to  distribute  the  stock  in  accordance  with  the  contract. 
Such  cases  arise  often  in  "pools"  of  stock,  and  in  selling  property 


creditors.     City,  etc.,  Ins.  Co.   v.   Olm- 
stead,   33  Conn.,   476.     In   general,  see, 
also,  Stevens  v.  Wilson,  3  C.  E.  Green, 
447.     An  alleged  vendee's  suit  for  a  divi- 
dend is  res  judicata  as  to  a  suit  for  the 
stock.     Shepard  v.   Stockham,  23   Pac. 
Rep.,  559  (Kan.,  1891).     The  corporation 
is  a  proper  but  not  a  necessary  party  to 
an  action  by  one  person  to  compel  an- 
other person  to  transfer  stock  to  hi  in  in 
accordance    with    the    contract.     Say- 
ward  v.   Houghton,  23  Pac.  Rep..   100 
(Cat,  1890).     Where  a  citizen   of    Wis- 
consin claims  stock  in  a  Wisconsin  cor- 
poration as  against  a  citizen  of   Illinois 
in  whose  name  the  stock  stands  on  the 
corporate  books,    the    corporation  is  a 
necessary  party  defendant  and  the  case 
cannot  be  removed  to  the  federal  courts. 
Rogers  v.  Van  Nortwick,  45   Fed.  Rep., 
513(1891).    The  corporation  is  a  proper 
party   defendant     Kendig  v.   Dean.  97 
U.S..   423;  Budd   v.   Monroe,    1«   TTun. 
316;  Crump  v.  Thurber.    115   U.  S..  56. 
The  reason  of  this  rule  is  that  complete 
possession  of  the  stock  can  be  obtained 
only   by  obtaining  a   transfer  of  that 
stock  on   the  corporate  books    to    the 
plaintiff.     Where  a  person  claims  that 


ance  of  shares  in  a  company,  and  Lord 
Romilly  refused  to  decree  specific  per- 
formance of  a  contract  of  this  kind,  on 
the  ground  that  the  decree  would  be  in- 
effectual, as  the  shares  might  be  trans- 
ferred  immediately  after  the  contract 
was  performed.     Sheffield  Gas,  etc.,  Co. 
v.    Harrison,    17   Beav.,   294:    Bluck   v. 
Mailable.   27  Beav.,  398;  Columbine  v. 
Chichester,  2  Ph.,  27.     In  this  last  case 
there  were  circumstances  to  show  that 
specific    performance    was    impossible. 
In  order  that  specific  performance  of  an 
agreement  to  take  or  deliver  shares  in  a 
company  may  be  decreed,  it  is  necessary 
tli.it  the  agreement  should  be  concluded 
and  binding  (which  it  was  not  in  Oriental 
I  Nav.  Co.  v.  Briggs,  4  De  G,  F.  & 
J.,  191),  and  be  untainted  by  fraud  (which 
was  not  the  case  in  New  Brunswick  & 
Canada  Rail.  <  !o.  v.  Muggeridge,  4 Drew., 
989,  and  1  Drew.  &  Sm.,  368;  or  in  Max- 
well r.  Port  Tennant  Co.,  24  Beav.,  495), 
or  unfairness  (as  to  agreements  between 
co-directors,    see    Flanagan    v.    Great 
Western  Rail.  Co.,  7  Eq..  116),  and  be 
capable  of  being  performed  by  the  de- 
fondant  (Ferguson  r.  Wilson.  2  Ch.,  77; 
Columbine  v.  Chichester,  2  Ph.,  27).  and 


he  has  a  contract  for  the  purchase  of    not  involve  any  breach  of  trust  (Fry  on 

Spec.  Perf.,  p.  177,  2d  ed. :  and  see  Flana- 
gan v.  Cheat  Western  Rail.  Co.,  7  Eq., 
116),  or  performance  by  either  party  of 
obligations  the  performance  of  which  a 
court  cannot  practically  enforce  (Flana- 
gan r.  Great  Western  Rail.  Co.,  7  Eq. 
116;  Stockerr.  Wedderburn,  3  K  &  J., 
393).     An  action  will  He  for  specific  per- 


stock  which  the  stockholder  vendor  is 
about  to  sell  or  has  already  sold  to  oth- 
ers, and  the  first-named  person  brings 
a  suit  in  equity  to  obtain  the  stock,  he 
must  show,  first,  that  it  is  a  case  for 
specific  performance ;  and  second,  that 
the  stock  was  impressed  with  a  trust 
and  that  the  last  purchaser  took  with 


notice  of  that  trust     See  White  &  Tu-    formance  of  a  contract  for  the  purchase 


dor's  Leading  Cases  in  Equity,  vol.  I, 
pp.  914,  919,  and  Pooley  v.  Rudd,  14 
Beav.,  34,  43,  44. 

Lindley  on  Company  Law  states  the 
rule  as  follows :  "  A  contract  for  the  sale 
of  shares  by  one  individual  to  another 
is  distinguishable  in  many  respects  from 
a  contract  for  the  allotment  and  accept- 

462 


and  sale  of  shares,  if  it  is  capable  of 
being  performed  (see  as  to  this,  Ber- 
mingham  v.  Sheridan,  33  Beav.,  660,  and 
compare  Poole  v.  Middleton,  29  Beav., 
646):  and  the  purchaser  will  be  com- 
pelled to  pay  the  price,  although  it  may 
have  been  expressed  to  be  paid  in  the 
deed  of  transfer,  if,  in  fact,  it  was  not 


CH.  XX.]        CONTRACTS    TO    SELL — GAMBLING    SALES FRAUD.  [§338. 

to  the  company  in  consideration  of  stock  and  in  buying  stock  in 
the  names  of  other  persons  or  agents.1 

Specific  performance  may  also  be  said  to  be  granted  where  a 
corporation  is  ordered  by  a  court  to  issue  certificates  of  stock  to 
its  stockholders.2 

Specific  performance  will  not  be  granted,  however,  where  the 
purpose  of  the  purchaser  of  stock  is  to  obtain  control  of  a  national 
bank,  when  the  change  in  management  would  probably  be  to  the 
detriment  of  the  bank.3  Where  the  vendor's  contract  is  to  deliver 
stock  and  construct  a  railway,  the  court  will  not  decree  specific 
performance,  since  part  of  the  contract  is  never  the  subject  of  such 
compulsory  performance.4  If  the  vendor  is  not  in  possession  of  the 
desired  stock,  specific  performance  will  not  be  granted,5  except  to 
the  amount   of  stock  which  he  has.6     Although  a  court  of  equity 


thus  paid  (Wilson  v.  Keating,  27  Beav., 
121,  and  4  De  G.  &  J.,  588.  This  case 
seems,  at  first  sight,  to  have  been  a  hard 
one  upon  the  defendant;  but  the  deed 
stated  that  he  had  paid  the  money,  and 
tliis  he  knew  was  not  the  fact.  He 
could  not,  therefore,  be  treated  as  hav- 
ing been  misled  by  the  plaintiff  or  by 
the  contents  of  the  deed) ;  and  will 
be  compelled  to  accept  a  transfer  of 
the  shares  he  has  brought  and  to  in- 
demnify the  seller  from  all  liabilities 
accruing  subsequently  to  the  same 
(Wynne  v.  Price,  3  De  G.  &  S.,  310.  As  to 
the  right  of  a  mortgagee  of  shares  to  an 
indemnity  from  his  mortgagor,  see 
Phene  v.  Gillan,  5  Ha.,  1);  and  the  seller 
will  be  compelled  to  account  for  any 
moneys  he  may  have  received  from  an 
improper  subsequent  sale  to  another 
person  (Beckitt  v,  Bulbrough,  8  Ha.,  188). 
The  court  has  however,  refused  to  com- 
pel a  purchaser  of  scrip  to  accept  shares, 
and  indemnify  the  seller  from  calls  upon 
them  (Jackson  v.  Cocker,  4  Beav.,  59. 
Compare  this  with  the  last  case) ;  and  to 
compel  an  allottee  of  shares  to  accept 
them,  and  to  execute  the  company's 
deed  in  respect  of  them  (Sheffield,  etc., 
Gas  Co.  v.  Harrison,  17  Beav.,  294) ;  and 
to  compel  the  promoters  of  a  company 
to  deliver  shares  to  a  subscriber  to  the 
company  (Columbine  v.  Chichester,  2 
Ph.  27.     In  this  case,  however,  the  pro- 


moters did  not  appear  to  have  any 
shares  which  they  could  allot).  Neither 
will  the  court  interfere  to  compel  the 
completion  of  a  gratuitous  and  intended 
transfer  (see  Milroy  v.  Lord,  4  De  G.,  F. 
&  J,  2G4)." 

i  See  §§  333,  334,  supra,  and  §  705, 
infra. 

2 Seech.  IV. 

3  Foil's  Appeal,  91  Pa.  St.,  434  (1879), 
the  court  saying :  "  I  know  of  no  in- 
stance in  this  state  in  which  a  court  of 
equity  has  decreed  specific  performance 
of  a  sale  of  stock." 

4  Ross  v.  Union  Pacific  R'y  Co.,  1 
Woolw.,  26  (1863),  per  Miller,  J.  Court 
will  not  decree  specific  performance  of 
a  contract  of  a  company  to  deliver  its 
stock  to  a  constructor  of  its  road,  even 
though  the  latter,  the  complainant,  is 
willing  to  perform.  The  court  cannot 
compel  the  latter  to  perform,  and  hence 
will  not  tie  up  the  stock  of  the  former. 
Peto  v.  Brighton,  etc.,  R'y  Co.,  1  H.  & 
M.,  468  (1863). 

ft  Columbine  v.  Chichester,  2  Phil.  Ch., 
27  (1846).  Specific  performance  as  to  is- 
suing stock  is  not  decreed  when  per- 
formance is  impossible.  Summerlin  v. 
Fronteriza,  etc.,  Co.,  41  Fed.  Rep.,  249 
(1890).  An  injunction  against  a  transfer 
in  the  meantime  maybe  granted.  Rutt- 
man  v.  Hoyt,  N.  Y.  L.  J.,  July  19,  1S90. 

6  Turner  u  May,  32  L.  T.  (N.  S.),  56  (1875). 


463 


§339.]  CONTRACTS    TO    SELL GAMBLING    SALES — FRAUD.         [CH.  XX. 


refuses  to  grant  specific  performance,  yet  it  will  not  always  send 
the  party  to  a  court  of  law,  but  in  some  of  the  states  will  grant 
him  damages.1  Laches  may  constitute  a  bar  to  the  bill  in  equity 
to  enforce  specific  performance.2 

§339.  Seventeenth  section  of  statute  of  frauds  as  affecting  sales 
of  stock. —  In  England  the  rule  is  firmly  established  that  the  seven- 
teenth section  of  the  statute  of  frauds,  relating  to  contracts  for  the 
sale  of  "  goods,  wares  and  merchandise,"  does  not  apply  to  sales  of 
stock.  No  delivery,  payment  of  earnest  money  or  memorandum 
in  writing  is  necessary  in  order  to  render  the  contract  of  sale  valid. 
This  principle  of  law  was  doubted  in  the  early  cases,3  but  was  de- 
termined by  the  case  of  Humble  v.  Mitchell,  in  1S39.4  In  1838  this 
question  arose  in  this  country,  apparently  for  the  first  time,  and  it 
was  decided  in  Tisdale  v.  Harris/  chiefly  on  the  authority  of  the 
early  English  cases,  that  a  contract  for  the  sale  of  stock  was  within 
the  seventeenth  section  of  the  statute  of  frauds.  This  decision  has 
been  uniformly  followed  in  America.'1 


i  Wonson  v.  Fenno,  129  Mass..  405 
(1880);  Austin  v.  Gillespie,  1  Jones'  Eq. 
(N.  C),  261  (1854).' 

2  Seven  years'  delay  in  bringing  suit 
for  specific  performance  is  a  bar.  York 
v.  Passaic,  etc.,  Co.,  30  Fed.  Hep.,  471 
(1887).  Five  years'  delay  held  fatal 
where  "  tbe  relations  of  the  parties  have 
changed  aud  the  stock  has  greatly  ap- 
preciated in  value."  Miuuly  v.  Davis, 
20  Fed.  Rep.,  353  (1884).  Where  a  per- 
son sells  aud  delivers  stock  to  be  deliv- 
ered within  a  reasonable  time,  and  re- 
ceives the  money  for  it,  aud  soon  after 
anuouuces  his  inability  to  perform  by 
reason  of  an  injunction,  the  statute  of 
limitations  begins  to  run  from  the  date 
of  this  notice.  The  two  years'  statute 
on  verbal  promises  applies.  Rose  v. 
Foord,  28  Pac.  Rep.,  229  (Cal,  1891). 

3  Mussell  v.  Cooke,  Finch's  Prec.  in 
Ch.,  533  (1720),  holding  that  the  statute 
applied  but  was  not  properly  pleaded ; 
Pickering  v.  Appleby,  1  Comyn's  Rep.. 
353  (1721),  not  decided,  the  judges  being 
divided  six  and  six ;  Colt  v.  Netterville, 
2  P.  Wms.,  306  (1725),  not  decided,  the 
lord  chancellor  saying  it  was  too  diffi- 
cult to  decide  on  a  demurrer ;  Crull  v. 
Dodson,  Sel.  Cas.  in  Ch.  temp.  King 
(fol.  41,  1724),  statute  held  to  apply. 


4 11  A.  &  E.,205,  followed  in  Duncuft 
v.  Albrecht,  12  Sim.,  189  (1841),  the 
court  saying  that  the  statute  applies 
only  to  goods  capable  of  part  delivery  ; 
Hibblewhite  v.  McMorine,  6  M.  &  W., 
201,  214  (1840);  Tempest  v.  Kilner,  3  C. 
R,  249  (1846);  Heseltine  v.  Siggers.  1 
Ex.,  856  (1848). 

*  37  Mass.  (20  Pick.),  9. 

«Baltzen  v.  Nicolay,  52  N.  Y.,  467 
(1873).  rigidly  applying  the  rule;  North 
v.  Forrest,  15  Conn.,  400  (1843),  where 
the  court  say:  "Such  contracts  fall 
clearly  within  the  mischiefs  which  the 
legislature  by  the  statute  intended  to 
remedy.  There  is  as  much  danger  of 
fraud  and  perjury  in  the  parol  proof  of 
such  contracts  as  in  any  other."  Pray 
v.  Mitchell,  60  Me.,  430  (1872);  Fine  v. 
Hornaby.  2  Mo.  App.,  61  (1876);  Colvin 
r.  Williams,  3  Har.  &  Johns.  (Md.),  38 
(1810);  Sherwood  v.  Tradesman's  Nat'l 
Bank.  10  N.  Y.  W.  Dig..  522  (1883,  Su- 
preme Ct);  French  v.  Sanger,  N.  Y.  L. 
J.,  July  22,  1892.  Cf.  Brownson  -v.  Chap- 
man, 63  N.  Y,  625.  Contra,  dictum, 
Vawter  v.  Griffin,  40  Ind.,  593,  602 
(1872).  See  Reed  on  Statute  of  Frauds, 
§  234;  Hagar  r.  King,  38  Barb.,  200 
(1862),  holding  that  the  sale  of  railroad 
bonds   is  within  the  statute.     A    sub- 


464 


CH.  XX.]         CONTRACTS   TO    SELL GAMBLING    SALES  —  FRAUD.  [5 


339. 


A  broker,  however,  as  a  common  agent,  may  make  the  memo- 
randum for  both  parties.1  A  subsequent  part  payment  of  the  con- 
sideration makes  the  contract  valid,2  and  a  payment  in  property 3 
or  services 4  suffices.  The  statute  does  not  apply  as  between  part- 
ners for  the  purpose  of  buying  stock.5  A  contract  for  the  sale  of 
stock  in  a  corporation  not  yet  incorporated  has  been  held  not  to  be 
within  the  statute.6  The  statute  must  be  pleaded  in  order  to  be 
effectual  as  a  defense.7  The  assignee  of  a  contract  for  the  sale  of 
stock,  void  by  the  statute  of  frauds,  takes  nothing  by  the  assign- 
ment.8 An  agreement  by  the  vendor  of  stock  to  take  it  back  at 
any  time  is  not  affected  by  the  statute,  and  such  an  agreement  is 
a  part  of  the  executed  sale.9 


scription  for  stock  is  not  a  contract  for 
the  sale  of  goods,  etc.,  within  the  mean- 
ing of  the  statute  of  frauds.  Webb  v. 
Baltimore,  etc.,  Co.,  26  Atl.  Rep.,  113 
(Md.,  1893).  In  Florida  the  statute  ap- 
plies, the  word  personal  property  being 
used.  Southern  Life  Ins.  Co.  v.  Cole,  4 
Fla.,  359,  378.  See,  also,  Mason  v. 
Decker,  72  N.  Y.,  595 ;  affirming  10  J.  & 
S.,  115;  Johnson  v.  Mulry,  4  Rob.  (N. 
Y.),  401  (1867),  holding  that  the  New 
York  Stock  Jobbing  Act  (Laws  N.  Y. 
1858,  ch.  134)  did  not  affect  the  applica- 
tion of  the  statute  of  frauds.  The  stat- 
ute is  not  sufficiently  pleaded  by  alleg- 
ing that  the  contract  of  sale  of  stock 
"  was  void  in  law  and  not  binding  upon 
him."  Vaupell  v.  Woodward,  2  Sand. 
Ch.,  143.  The  question  of  whether  there 
was  a  delivery  sufficient  to  take  a  case 
of  sale  of  stock  out  of  the  statute  of 
frauds  was  submitted  to  the  jury  in 
Hinchman  v.  Lincoln,  124  U.  S.,  38 
(1887),  discussed  in  N.  Y.  Daily  Reg., 
January  28, 1888.  Contract  to  sell  stock 
at  the  vendee's  option  within  three 
years  is  not  void  by  statute  of  frauds, 
since  the  option  may  be  exercised 
within  a  year.  Seddon  v.  Rosenbaum, 
9  S.  E.  Rep.,  326  (Va.,  1889).  Without  a 
memorandum  in  writing  a  contract  for 
the  sale  of  stock  is  not  enforceable  al- 
though made  in  the  Stock  Exchange, 
whose  rules  provide  that]  the  contract 
6hall  be  enforceable.  Ryers  v.  Tuska,  14 
N.  Y.  Supp.,  926  (1891). 


i  Calvin  v.  Williams,  3  Hare  &  J.,  38 
(1810). 

2  Thompson  v.  Alger,  53  Mass.  (12 
Mete),  428  (1847). 

3  Eastern  R  R.  Co.  v.  Benedict,  76 
Mass.  (10  Gray),  212  (1857). 

*  White  v.  Drew,  56  How.  Pr.,  53 
(1878),  holding  that  the  furnishing  of 
reliable  information  is  sufficient. 

a  Tomlinson  v.  Miller,  7  Abb.  Pr.  (N. 
S.),  364  (1869).  Nor  as  between  persons, 
one  of  whom  buys  stock  in  his  own 
name  for  the  joint  benefit  of  both.  Sto- 
ver v.  Flack,  41  Barb.,  162  (1862). 

6  Gadsden  v.  Lance,  1  McMull.  Eq.  (S. 
C),  87  (1841);  Green  v.  Brookins,  23 
Mich.,  48,  54  (1S71),  where  a  person  was 
induced  to  subscribe  on  parol  contract 
that  a  purchaser  for  the  stock  would 
afterwards  be  found.  In  Massachu- 
setts, on  similar  facts,  except  that  a  cer- 
tain person  agreed  to  purchase,  a  con- 
trary decision  was  rendered.  Board- 
man  v.  Cutter,  128  Mass.,  388  (1880). 

7  Porter  v.  Wormser,  94  N.  Y,  431, 
450  (1884). 

8  Mayer  v.  Child,  47  Cal.,  142  (1873). 
9Fitzpatrick  v.  Woodruff,  96  N.  Y., 

561  (1884) ;  Thorndike  v.  Locke,  98  Mass., 
340  (1867) ;  Fay  v.  Wheeler,  44  Vt.,  292 
(1872);  Bank  of  Lyons  v.  Demmon,  Hill 
&  Denio,  Supp.,  398  (1844).  An  agree- 
ment by  promoters  with  a  subscriber 
for  stock  that  they  would  take  the  stock 
from  him  within  a  certain  time,  if  he 
desired,  is  valid  and  enforceable.    Meyer 


(30) 


465 


§  340.]  CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.        [CH.  XX. 


So,  also,  the  agreement  of  third  parties  to  take  the  stock,  or  to 
protect  from  loss  the  party  buying  it,  is  enforceable  if  founded  on 
a  sufficient  consideration.1 

§  340.  Other  sections  of  statute  of  frauds  as  affecting  sales  of 
stock. —  The  provision  of  the  statute  of  frauds  relative  to  answering 
for  the  debts,  defaults  or  miscarriages  of  another  does  not  apply 

that  the  vendee  of  stock  shall  not  lose 
money  by  the  purchase  may  be  enforced 
by  the  vendee  when  he  proves  that  the 
stock  has  no  market  value  and  that  he 
has  tried  to  sell  it  but  has  failed.  Phipps 
v.  Sharpe.  21  Atl.  Rep,  901  (Pa.,  1891). 
A  statement  of  a  party  who  is  endeavor- 
ing to  sell  stock  for  another,  that  he 
will  see  the  latter  whole  in  the  matter, 
creates  no  liability  on  the  part  of  the 
former.  Willis'  Appeal,  18  Atl.  Rep.. 
987  (Pa.,  1890).  A  person  who  writes  to 
a  party  when  the  latter  subscribes  for 
stock  that  the  former  will  pay  the  sub- 
scription if  the  road  is  not  completed 
within  a  certain  time  is  a  surety  and 
may  be  held  liable.  Allison  r.  Wood,  23 
Atl.  Rep.  559  (Pa.,  1892).  An  agreement 
of  a  stockholder  that  another  stock- 
holder shall  be  made  "whole"  for  any 
loss  due  to  not  selling  stock  is  without 
consideration  and  void.  Martin's  Es- 
tate. 4  R'y  &  Corp.  L,  J.,  449  (Orphans' 
Ct.  Phil.,  1888).  A  person  induced  to 
subscribe  by  an  agreement  of  a  third 
person  to  purchase  the  stock  at  par  at 
anytime  may  collect  from  the  latter  the 
difference  between  the  price  at  which 
the  former  sells  and  the  par  value,  the 
latter  having  declined  to  perform. 
Lewis  v.  Coates.  5  &  W.  Rep,  897  (Mo., 
1888).  See,  also,  §  334.  A  memorandum 
"  We  agree  to  pay  A.  Rampacker  the 
par  value  of  this  stock  .  .  .  upon 
the  surrender  of  this  certificate"  in- 
dorsed on  the  back  of  the  certificate 
enables  him  to  tender  the  stock  and 
collect  the  par  value,  even  though  there 
was  no  consideration  for  the  promise- 
Wheaton  r.  Rampacker,  26  Pac.  Rep., 
912  (Wyo.,  1891).  An  agreement  of  per- 
sons holding  a  majority  of  the  Btock, 
they  being  directors  also,  that  a  person 
purchasing  stock  from   them  shall   be 


v.  Blair,  109  N.  Y.,  600  (1888) ;  Morgan 
?\  Struthers,  131  U.  S.,  246  (1889).  An 
agreement  to  take  back  bonds  if  the 
vendee  desires  to  return  them  is  valid 
and  enforceable.  Johnston  v.  Trask,  1 16 
N.  Y.,  136  (1889).  A  guaranty  that  a 
vendor  will  take  back  the  stock  sold  if 
the  vendee  desires  is  enforceable,  even 
after  the  company  sells  out  to  another 
company  for  its  shares  of  stock,  the 
vendee  not  assenting.  Richter  v.  Frank, 
41  Fed.  Rep.,  859  (1890).  An  agreement 
of  the  vendor  to  buy  back  the  stock  is 
enforceable.  Graham  v.  Houghton.  20 
N.  E.  Rep.,  876  (Mass.,  1891).  The  a 
ment  of  the  vendor  of  stock  to  buy  it 
back  at  the  price  paid,  and  one  per 
cent,  a  month  in  addition,  is  not  usuri- 
ous as  a  matter  of  law.  Phillips  v. 
Mason,  66  Hun,  580  (1893).  Where  the 
vendor  agrees  to  refund  the  money 
upon  the  return  of  the  stock  sold,  the 
vendee  cannot  sue  for  the  money  unless 
he  returns  the  stock.  Henderson  r. 
Wheaton,  28  N.  E.  Rep,  1100  (111..  1891). 
Where  stock  is  sold  with  a  contract  on 
the  part  of  the  vendor  that  he  will  re- 
purchase it  if  desired  "at  the  end  of  one 
year,"  the  time  may  be  extended  by 
oral  agreement.  Weld  v.  Barker,  26 
Atl.  Rep.  239  (Pa..  1893).  The  vendee  in 
enforcing  the  contract  of  the  vendor  to 
take  the  stock  back  must  make  and 
allege  a  tender.  Taylor  v.  Blair,  13  N. 
Y.  Supp,  154  (1891). 

1  Where  a  stockholder  subscribes  for 
an  increased  capital  stock  on  the  agree- 
ment of  parties  "to  take  the  stock  if  the 
subscriber  does  not  want  it,  the  latter 
may  hold  the  former  liable  for  the  dif- 
ference between  what  the  latter  pays 
for  the  stock  and  what  he  is  able  to  sell 
it  for.  Herd  et  al.  v.  Thompson,  24 
Atl.  Rep.,  282  (Pa.,  1892).     A  guaranty 


466 


CII.  XX.]         CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FKAUD.  [§  341. 

to  a  guaranty  that  there  will  be  a  certain  dividend  on  stock  pur- 
chased,1 nor  to  a  broker's  relation  towards  his  client.2  The  pro- 
vision of  the  statute  relative  to  transfers  of  land  does  not  apply  to 
stock,3  since  shares  of  stock  are  personal  property.4  A  transfer  of 
stock  for  the  purpose  of  defrauding  the  transferrer's  creditors  is 
void,  and  a  court  of  equity  will  set  it  aside,5  or  the  stock  may  be 
attached  or  sold  under  execution  the  same  as  though  no  attempt 
at  transfer  had  been  made.8 


B.    GAMBLING    SALES    OF    STOCK. 

§  341.  Wliat  arc  wager  stock  sales. —  Executory  contracts  for  the 
sale  of  stock  may  be  made  with  an  intent  to  actually  deliver  the 
stock,  or  they  may  be  made  with  an  intent  not  to  deliver  it,  but  to 
pa}7  in  cash  the  amount  lost  or  won  by  the  rise  or  fall  of  the  market 
price  of  the  stock.  A  sale  with  the  former  intent  is,  at  common 
law,  l<#gal  and  valid.7     A  sale  with  the  latter  intent  is  a  gambling 


general  manager  and  may  at  the  end  of 
two  years  sell  the  stock  back  to  them  at 
a  stated  price  is  contrary  to  public  pol- 
icy and  void.  The  vendors  need  not 
repurchase.  The  arrangement  is  unfair 
to  the  corporation.  Wilbur  v.  Stoepel, 
46  N.  W.  Rep.,  724  (Mich.,  1890). 

^loorehouse  v.  Crangle,  36  Ohio  St., 
130  (1880). 

2  Genin  v.  Isaacsen,  6  N.  Y.  Leg.  Obs.. 
213  (1845) ;  Rogers  v.  Gould,  6  Hun,  229 
(1875). 

3  Watson  v.  Spratley,  10  Ex.,  222 ;  Pow- 
ell v.  Jessopp,  18  C.  B..  336  (1856); 
Walker  v.  Bartlett,  18  C.  B.,  845  (1856); 
Ashworth  v.  Munu,  L.  R,  14  Ch.  D.,  363, 
368  (1880). 

4  See  ch.  I. 

5Skowhegan  Bank  v.  Cutter,  49  Me., 
315  (1860) ;  State  v.  Warren  F.  &  M.  Co., 
32  N.  J.  Law  Rep.,  439  (1868);  Bayard  v. 
Hoffman,  4  Johns.  Ch.,  450  (1820) ;  Had- 
den  v.  Spader,  20  Johns.  Rep.,  554  (1822) ; 
Scott  v.  Indianapolis  Wagon-works,  48 
Ind.,  75  (1874^;  Moore  v.  Metropolitan 
Nat'l  Bank,  55  N.  Y.,  41  (1873).  The 
fraudulent  transferee  must  be  made  a 
party  defendant.  Hyatt  V.  Swivel,  52 
N.  Y.  Super.  Ct„  1  (1885).  See,  also, 
ch.  XXVII.  But  the  fraudulent  trans- 
feree is  not  liable  unless  he  has  accepted 
the  stock.     Skowhegan  Bank  v.  Cutler, 


49  Me.,  315  (1860) ;  Cartmell's  Case,  L.  R, 
9  Ch.,  691  (1874).  Acceptance  is  a  ques- 
tion of  fact.  Pirn's  Case,  3  De  G.  &  S., 
11  (1849).  But  he  cannot  plead  the  stat- 
ute of  frauds  himself.  Smith  v.  49  and 
56  Quartz  M.  Co.,  14  Cal.,  242  (1859). 

6  Beckwith  v.  Burrough,  R.  I.,  Feb.  9, 
1884.     See  §§  482,  484,  infra. 

"Irwin  v.  Williar,  110  U.  S,  499,  508 
(1883),  the  court  saying :  "  The  generally 
accepted  doctrine  in  this  country  is 
.  .  .  that  a  contract  for  the  sale  of 
goods  to  be  delivered  at  a  future  day  is 
valid,  even  though  the  seller  has  not 
the  goods  nor  any  other  means  of  get- 
ting them  than  to  go  into  the  market 
and  buy  them ;  but  such  a  contract  is 
only  valid  when  the  parties  really  intend 
and  agree  that  the  goods  are  to  be  de- 
livered by  the  seller  and  the  price  to  be 
paid  by  the  buyer ;  and  if  under  guise  of 
such  contract  the  real  intent  be  merely 
to  speculate  in  the  rise  or  fall  of  prices, 
and  the  goods  are  net  to  be  delivered, 
but  one  party  is  to  pay  to  the  other  the 
difference  between  the  contract  price 
and  the  market  price  of  the  goods  at  the 
date  fixed  for  executing  the  contract, 
then  the  whole  transaction  constitutes 
nothing  more  than  a  wager,  and  is  null 
and  void.  And  this  is  now  the  law  in 
England  by  force  of  the  statute  of  8  and 


467 


•§341.]  CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.         [CH.  XX. 


or  wao-er  contract,  and  is  not  enforceable.1  The  essential  difference 
between  a  wager  contract  and  a  contract  not  a  wager  is  whether 
there  is  an  intent  to  deliver  the  property  sold.2 


9  Vict.  ch.  109,  §  18,  altering  the  com- 
mon law  in  that  respect."     In  England 
it  is  held  that  although  the  parties  may 
have   contemplated   tliat,  as    a  whole, 
there  would  be  a  mere  payment  of  dif- 
ferences between  them,  yet,  inasmuch  as 
the  actual    contracts   entered    into  in- 
volved the  liability  for  the  actual  deliv- 
ery of  the  stock  dealt  with,  they  were 
not  gaming  or  wagering  transactions. 
Universal  Stock  Exch.  v.  Stevens,  66  L. 
T.  Rep.,  612  (1892).     It  may  be  specula- 
tion ;  nevertheless  it  is  valid.     Clark  v. 
Foss,7  Biss.,  540(1878);  Smith  v.  Bou- 
vier,  70  Pa.  St.,  325  (1S72) ;  Kirkpatrick 
v.  Bonsall,  72  Pa.  St.,  155  (1872),  where 
the  court  say:  "We  must  not  confound 
gambling,  whether  it  be  in  corporation 
6tocks  or   merchandise,    with    what  is 
commonly    termed    speculation.      Mer- 
chants speculate  upon  the  future  prices 
of  that  in  which  they  deal,  and  buy  and 
sell  accordingly."    Hatch  v.  Douglas,  48 
Conn.,  116  (I860);  Flagg  v.  Baldsvin,  38 
N.  J  Eq.  Rep.,  219  (1884);  Kent  v.  Milt- 
enberger,    13  Mo.    App.,  503  (1883).     A 
corporation  organized  to  act  as  a  broker 
in  buying  and  selling  grain  is  subject  to 
the  same  rule  as  regards  gambling  con- 
tracts   that    individuals  are.     Peck    v. 
Doran,  etc.,  Co.,  57  Hun,  343  (1890).    Con- 
cerning this  subject  of  stock  gambling 


see  Cook  on  The  Corporation  Problem, 
pp.  67-73. 

1  "  Wagers  at  common  law  are  valid 
and  enforceable  in   the  courts ;  "  and, 
with  certain  exceptions  growing  out  of 
the  peculiar  subject  of  the  wager,  they 
have  been  held  to   be   valid  contracts. 
Dewey  on  Contracts  for  Future  Deliv- 
ery and  Commercial  Wagers  (1886),  10. 
To  same  effect  Good  v.  Elliott,  3  Term 
R,  693  (1790);  Gilbert  v.  Sykes,  16  East, 
150  (812);  Atherford  v.   Beard,  2  Term 
R,  610  (1788);  Morgan  v.  Pebrer,  4  Sco., 
230(1837);  Hussey  v.  Crickitt,  3  Camp., 
693 ;  Grant  v.  Hamilton,  3  McLean,  100 
(1842);     Campbell     v.    Richardson,     10 
Johns.,  400    (1813);    Buun    v.    Riker,  4 
Johns.,  436  (1809);   Johnson  XX   Fall,  6 
Cal.,  359  (1856);  Johnson  v.  Russell,  37 
Cat,    670   (1869);    Dewees   v.    Miller,  5 
How.,  347  (1848);   Porter    V.  Sawyer,  1 
How.,  519  (1832);    Griffith  r.  Pearce,  4 
Houston,  209  (1869);  Richardson  v.  Kel- 
ley,  B5  111..  491  (1877);  Petillon  v.  Hippie. 
90  111.,  420   (1878);  Trenton   Ins.   Co.  v. 
Johnson,  2  Zabr.,  526  (1854);  Dunman  v. 
Strother,   1  Tex.,  89  (1846);   McEIroy  v. 
Carmichael,  6  Tex.,  454  (1851);    Wheeler 
r.  Friend,  22  Tex..  683  (1859);  Monroe  v. 
Smeiley,  25  Tex.,  486  (i860).    Contra: 
In  Pennsylvania  —  Edgell  v.  McLough- 
liu,  6  Whart,  176  (1841);  Phillips  v.  Ives, 


2Roundtree  v.  Smith,  108  U.  S.,  269    such  a  transaction  is  a  wager,"  citing 


(1882);  In  re  Hunt,  26  Fed.  Rep.,  739 
(1886).  Dewey,  in  his  recent  work  on 
Contracts  for  Future  Delivery  and 
Commercial  Wagers,  states  the  rule  ac- 
curately as  follows:  -Where  the  par- 
ties to  a  contract  in  the  form  of  a  sale 
agree  expressly  or  by  implication  at  the 
time  it  is  made  that  the  contract  is  not 
to  be  enforced,  that  no  delivery  is  to  be 
made,  but  the  contract  is  to  be  settled 
by  the  payment  of  the  difference  be- 
tween the  contract  price  and  the  mar- 
ket price  at  a  given  time  in  the  future, 


many  cases.  If  there  is  an  intent  to  de- 
liver, then  the  transaction  is  legal, 
though  the  parties  "  exercise  the  option 
of  settling  the  difference  in  price,  rather 
than  make  delivery  of  the  property." 
Ward  r.  Vosburgh,  31  Fed.  Rep.,  12 
(1887).  As  regards  sales  and  margins, 
see  §  157,  infra.  A  note  given  in  New 
York  to  settle  a  gambling  cotton  debt  is 
governed  by  New  York  laws  as  to  its 
legality.  Sondheim  v.  Gilbert,  18  N.  E. 
Rep.,  687  (Ind.,  1888). 


•1G8 


CH.  XX.]         CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.  [§342. 


§  342.  Statutes  prohibiting  wager  contracts,  and  also  certain  stock 
contracts. —  There  are  two  classes  of  statutes  affecting  stock  sales  as 
regards  their  speculative  character.  One  class  tloes  not  specify  sales 
of  stock,  but  declares  in  general  terms  that  all  gaming  and  wager- 
ing contracts  shall  be  void,  thereby  rendering  actions  for  the  recov- 
ery of  money  won  on  such  wagers  unsustainable.  Such  statutes 
exist  in  England l  and  New  York.2  The  second  class  of  statutes 
is  more  explicit,  and  prohibits  specified  transactions  in  stock,  irre- 
spective of  whether  such  transactions  be  wager  contracts  or  not. 
Statutes  affecting  speculative  sales  of  stock  exist  in  many  of  the 
states.  In  Massachusetts  short  sales  are  prohibited;3  in  Pennsyl- 
vania, sales  for  future  delivery; 4  in  Ohio,  sales  of  stock  for  future 
delivery,  where  the  vendor  has  not  on  hand  or  the  vendee  the 


1  Rawle,  36  (1828);  Bruas'  Appeal,  55 
Pa.  St.,  294  (1867);  in  Vermont  — Col- 
lamer  v.  Day,  2  Vt,  144  (1829) ;  Tarlton 
v.  Baker,  18  Vt,  9  (1843) ;  in  New  Hamp- 
shire—Clark v.  Gibson,  12  N.  H.,  386 
(1841);  Winchester  v.  Metter,  52  N.  H., 
507  (1872);  in  Maine  —  McDonough  v. 
Webster,  68  Me.,  530  (1878);  Gilmore  v. 
Woodcock,  69  Me.,  118  (1879) ;  Missouri  — 
Waterman  v.  Buckland,  1  Mo.  App.,  45 
(1876) ;  and  Massachusetts  —  Ball  v.  Gil- 
bert, 12  Met,  399  (1847):  Babcock  v. 
Thompson,  3  Pick.,  446  (1826);  Sampson 
v.  Shaw,  101  Mass.,  150  (1869).  The  su- 
preme court  of  the  United  States  say,  in 
Irwin  v.  Williar,  supra:  "  In  England  it 
is  held  that  the  contracts,  although 
wagers,  are  not  void  at  common  law, 
.  .  .  while  generally,  in  this  country, 
all  wagering  contracts  are  held  to  be  il- 
legal and  void  as  against  public  policy," 
citing  Dickson's  Executor  v.  Thomas,  97 
Pa.  St,  278  (1881);  Gregory  v.  Wendell, 
40  Mich.,  432  (1877) ;  Lyon  v.  Culbertson, 
83  111.,  33  (1876) ;  Melchert  v.  American 
U.  Tel.  Co.,  3  McCrary,  521  (1882) ;  11 
Fed.  Rep.,  193 ;  Barnard  v.  Backhaus,  52 
Wis.,  593  (1881);  Love  v.  Harvey,  114 
Mass.,  80  (1873) ;  Embrey  v.  Jemison,  131 
U.  S.,  336  (1889). 

18  and  9  Vict,  ch.  109,  §  18;  Grize- 
wood  v.  Blane,  11  C.  B.,  526  (1851). 
Agreements  between  buyers  and  sellers 
of  stock  to  pay  or  receive  the  differ- 
ences between  their  prices  on  one  day 
and  their  prices  on  another  day  are  gam- 


ing and  wagering  transactions  within 
the  meaning  of  the  statute.  Thacker  v. 
Hardy,  L.  R,  4  Q.  B.  D,  687  (1878). 
The  statute  does  not  necessarily  affect 
"  corners  "  in  stocks.  Barry  v.  Croskey, 
2  J.  &  H,  1  (1861).  As  to  the  applica- 
tion of  this  statute,  see,  also,  Heinman 
v.  Hardie,  12  Ct  of  Ses.,  406  (Sc,  4th 
series,  1885). 

2  1  R.  S.  of  N.  Y.,  662,  §  8  (vol.  Ill, 
p.  1962,  7th  ed.).  As  applied  to  stock 
cases,  see  Kingsbury  v.  Kirwan,  77  N.  Y., 
612  (1879) :  Story  v.  Saloman,  71  N.  Y, 
420  (1877);  Harris  v.  Tumbridge,  83 
N.  Y,  92  (1880) ;  Yerkes  v.  Saloman,  11 
Hun,  471  (1877). 

3  Gen.  Stat  Mass.,  ch.  105,  §  6.  For 
cases  arising  under  this  statute,  see 
Howe  v.  Starkweather,  17  Mass.,  243 
(1821);  Sargent  v.  Franklin  Ins.  Co.,  25 
id.,  98  (1829);  Barrett  v.  Mead,  92  id., 
337  (1865);  Brigham  v.  Mead,  92  id.,  245 
(1865);  Barrett  v.  Hyde,  73  id.,  160 
(1856) ;  Durant  v.  Burt,  98  id.,  161  (1867) ; 
Brown  v.  Phelps,  103  id.,  313  (1869); 
Price  v.  Minot,  107  id.,  49  (1871):  Colt 
v.  Clapp,  127  id.,  476  (1879);  Rock  v. 
Nicholls,  85  id.,  342  (1862) ;  United  States 
v.  Vaughan,  3  Binn.,  394  (1811) ;  Wyman 
v.  Fiske,  85  Mass.,  238  (1861);  Pratt  v. 
American  Bell  Tel.  Co.,  5  N.  E.  Rep., 
307  (1886),  following  the  decisions  under 
the  New  York  statute  from  which  the 
statute  in  question  was  copied. 

4  Laws  of  Pa.,  1841,  p.  398,  §  6.  This 
statute  has  been  repealed.  For  decisions, 


469 


§  342.]  CONTRACTS   TO    SELL GAMBLING    SALES  —  FEAUD.        [CH.  XX. 


means  to  pay  ; !  in  Illinois,  all  options  are  made  gambling  contracts, 
and  are  void ;  -  in  Georgia,  short  sales  cannot  be  enforced.3  In  New 
York,  the  statute  of  1812,4  re-enacted  in  the  Revised  Statutes  of 
1828,3  prohibiting  short  sales,  was  repealed  by  implication  by  the 
statute  of  1868,  declaring  the  sale  to  be  valid  though  there  be  no 
consideration  or  payment  of  consideration,  or  no  ownership  by  the 
vendor  of  such  stock  at  the  time  of  the  sale.  Various  other  states 
have  statutes  on  this  subject.6  In  England  the  statute  of  1734,7 
prohibiting  gambling  in  the  public  funds,  was  repealed  in  ISfiO.8  It 
is  evident  from  the  history  of  these  statutes  against  stock  gambling 


see  Krause  v.  Setley,  2  Phil.  Rep.,  32 
(1856) ;  Chillas  v.  Snyder.  1  id..  289  (1850)i 

'Ohio  Laws,  May,  1885.  Gambling 
contract  in  grain,  Lester  v.  Buel,  30  X.  E. 
Rep.,  821  (Ohio,  1892). 

2  Revised  Stat  of  111.,  §  178.  For  de- 
cisions, see  "Wolcot  r.  Heath,  7s!  TIL  133 
(1875);  Pickering  v.  Cease,  79  111.,  328 
(1875  ;  Pixley  v.  Boynton,  79  111.,  351 
t  is::.,:  Sanborn  v.  Benedict,  79  111.,  309; 
Cole  v.  Milmine,  88  111.,  349  (1878).  This 
statute  is  restricted  by  the  decisions  to 
cases  where  the  transaction  is  to  be 
"  adjusted  only  by  differences."  But  see 
Ward  v.  Vosburgh,  31  Fed.  Rep..  12 
(1887).  In  Illinois  by  statute  an  option 
to  buy  coal  at  a  future  time  is  void. 
Osgood  v.  Bauder,  39  N.  W.  Rep.,  887 
(Iowa,  ls^s  .  A  Bale  with  an  agreement 
of  the  vendor  to  take  the  stock  back  at 
the  same  price  and  interest  within  a 
certain  time  if  the  vendee  desired  is  not 
a  gambling  contract  under  the  Illinois 
statute.  Richter  r.  Frank,  41  Fed.  Rep., 
859  (1890).  Concerning  an  indictment 
under  the  Illinois  law  for  keeping  a 
"bucket  shop,"  see  Soby  t\  People.  25  X. 
E.  Rep,  109  (111.,  1890).  In  Illinois  by 
statute  a  "  put  "  is  void.  Schneider  v. 
Turner.  22  N.  E.  Rep.,  497  (III,  1889). 

2  Georgia  Code,  §  2638. 

*2R.  L,  187.  §  18. 

6  1  R.  S.,  p.  7  H  I,  §  6.  For  cases  coming 
under  this  statute,  see  Dykers  v.  Town- 
send,  24  X.  Y,  57  (1861).  disapproving 
Stebbins  v.  Leowolf,  3  Cush..  14:3  (1849). 
See,  also.  Thompson  r\  Alger,  5:}  Mass.. 
428  (1847),  on  the  New  York  statute; 
Staples  v.  Gould,  9   X.    Y,   520  (1854). 


(criticising  Gram  v.  Stebbins,  6  Paige, 
124  —  1836) ;  Frost  v.  Clarkson,  7  Cowen, 
24  (1^27 1 ;  Cassard  v.  Heinmann,  14  How. 
Pr.,  84  (1856k  affirmed,  1  Bosw.,  207.  In 
Xew  York  a  director  is  prohibited  from 
selling  "short."  L  1884.  ch.  22:5.  In 
Arkansas  a  broker  and  others  are  liable 
criminally  for  doing  business  in  futures. 
Fortenbury  v.  State,  1  S.  W.  Rep..  5* 
(1886). 

b  A  promissory  note  is  void  under  the 
Tennessee  act  against  gambling  in 
futures  where  such  note  was  given 
therein.  Snoddy  v.  American  Xat'l 
Bank,  13  S.  W.  Rep.,  127  (T^nn.,  1890'. 
The  California  constitution  renders  void 
a  transaction  wherein  a  broker  buys 
stock  for  the  customer  with  the  broker's 
money  and  holds  the  stock  as  security 
and  charges  the  customer  interest  and 
commissions.  Cushman  v.  Root.  26  Pac. 
Rep.  883  (Cat,  1891).  Gambling  stock 
transactions  are  void  under  the  Ken- 
tucky statute.  Lyons  v.  Hodgen,  13  S. 
W.  Rep.,  1076  (Ky.,  189<i  . 

"  7  Geo.  II.,  ch.  8,  and  10  Geo.  II.,  ch.  8. 
For  cases  under  this  statute,  see  Hewett 
n  Price,  4  Man.,  &  Gr.  355  (1842);  Fisher 
v.  Price,  11  Beav.,  194(1848  ;  Mortimer 
v.  McCullon,  6  M.  &  W.,  69  (1840);  Ells- 
worth v.  Cole,  7  M.  &  \V..  30 ;  Byles  on 
Bills,  194 ;  2  Kent's  Com.,  468,  note  (6). 
The  statute  did  not  apply  to  stock  in 
private  corporations.  Hibblewhite  V. 
McMorine,  5  M.  &  W.,  462  (1839),  over- 
ruling Bi-yan  i\  Lewis,  R.  &  ML,  386 
(1826V 

s  23  and  24  Vict,  ch.  28. 


470 


CH.  XX.]       CONTRACTS  TO  SELL GAMBLING  SALES — FRAUD.       [§§   343,344. 


that  it  is  a  difficult  and  delicate  task  to  frame  a  statute  that  will 
cure  the  evil.  The  great  danger  is  that  anv  statute  will  interfere 
with  the  legitimate  transactions  —  transactions  which  for  many 
years  have  been  building  the  railways  and  developing  the  material 
resources  of  the  country.1 

§343.  Test  of  legality  of  stock  transactions. —  Although,  as  al- 
ready stated,  stock  sales,  where  no  delivery  but  merely  a  settle- 
ment of  gain  or  loss  is  intended,  are  wagers,  and  although  such 
wagers  are  void  by  the  statutes  of  some  states  and  by  the  rules  of 
public  policy  in  others,2  yet  difficulty  is  experienced  in  determining 
whether  the  parties  really  intended  to  deliver  the  stock  or  to  pay 
differences.  The  question  of  intent  is  always  difficult  of  ascertain- 
ment and  of  positive  proof.  It  is  pre-eminently  a  question  for  the 
jury.     It  is  accordinglv  found  in  most  of  the  cases  involving  the 

■J         */  D    •/  O 

question  whether  the  transaction  was  stock  gambling,  that  the  court 
submitted  to  the  jury  whether  an  actual  delivery  of  the  stock  was 
intended  or  not.  If  not,  then,  as  a  matter  of  law,  the  transaction 
was  a  wager.  If  a  wager,  it  is,  by  statute  in  some  states,  by  pub- 
lic policy  in  others,  a  void  transaction,  and  the  parties  have  only 
the  rights  given  them  on  void  contracts.3 

§  344.  When  intent  to  deliver  is  question  for  the  jury  and  when 
not. —  The  question  whether  the  parties  to  an  executory  sale  of 
stock  intended  to  actually  deliver  the  stock,  or  merely  to  \>a.y  and 
receive  the  gain  or  loss,  is  for  the  jury.4  In  the  application  of  this 
rule,  however,  great  care  is  to  be  exercised  in  submitting  the  ques- 


1  Dos  Passos  on  Stock  Brokers  and 
Stock  Exchanges  (1882),  p.  405,  says; 
"  The  history  of  these  stock-jobbing 
acts  seems  to  prove  conclusively  that 
they  have  never  been  effective  in  pre- 
venting speculations  in  stocks.  In  al- 
most every  instance  in  which  they  have 
been  adopted,  after  lingering  for  years 
on  the  books,  scorned  and  violated  by 
the  '  unbridled  and  defiant  spirit  of  spec- 
ulation,' despite  the  earnest  efforts  of 
the  courts  to  enforce  them,  they  have 
finally  been  repealed.  It  is,  perhaps, 
better  to  allow  the  evil  to  correct  itself, 
as  it  surely  does,  than  to  bring  the  ad- 
ministration of  justice  into  contempt 
by  filling  the  books  with  useless  laws, 
which  are  at  all  times  openly  violated 
and  laughed  at,  and  which  seem  hardly 
more  effective  to  prevent  the  practice 
at  which  they  are  aimed  than  legislation 


2  Particularly  in  Pennsylvania  are 
such  stock  wagers  void  by  public  policy. 
Worth  v.  Phillips,  89  Pa.  St,  250  (1879); 
Fareira  v.  Gabell,  89  Pa.  St.,  89  (1879) ; 
Ruchizky  v.  De  Haven,  97  Pa.  St.,  202 
(1881) :  Dickson's  Executor  v.  Thomas, 
97  Pa.  St.,  278  (1881);  Bruas'  Appeal,  55 
Pa  St.,  294  (1867). 

3  See  §^  345,  346.  See,  also,  Green- 
hood  on  Public  Policy,  pp.  230-237. 

■»  Whitesides  v.    Hunt,    97    Ind.,    191 
(1884);  Gregory  v.   Wendell,   39  Mich., 
337  (1878).     And  all  the  circumstances 
are  to  be  taken  into  consideration.    Bev- 
eridge  v.  Hewitt,  8  Bradw.,  467  (1881) 
Hawley  v.  Bibb,  14  Reporter,  172  (1881) 
Brand  v.  Henderson,  107  111.,  141  (1S83) 
Barnard    v.    Backhaus,    52    Wis.,     593 
(1881);  Kirkpatrick  v.   Bonsall,  72   Pa, 
St.,  155  (1872). 


against  the  laws  of  nature." 


471 


§344.]  CONTRACTS    TO    SELL  —  GAMBLING    SALES FRAUD.         [CH.   XX. 


tion  and  charging  the  jury.  Thus,  an  " option,"  "put,"  "call," 
"straddle,"  or  other  similar  stock  exchange  contract,  may  be  made 
with  an  intent  to  actually  deliver  the  stock,  and,  if  so,  are  unobjec- 
tionable and  are  enforceable.1  The  parties  may  be  asked  directly 
whether  they  intended  that  a  delivery  should  be  made.2  If  one 
party  intended  to  have  a  delivery  the  transaction  is  valid,  even 
though  the  other  party  intended  otherwise.3  As  between  a  party 
and  his  broker,  however,  greater  difficulty  arises,  and  in  some  juris- 
dictions the  intent  between  them  governs  their  relations,  irrespect- 


1  For  definitions  of  these-  terms,  see 
§  445,  n.  A  "  put "  is  not  per  se  con- 
clusive evidence  of  an  intent  not  to 
deliver.  Bigelow  v.  Benedict,  70  N.  Y., 
202  (1877).  A  "straddle"  follows  the 
same  rule.  The  parties  may  have  in- 
tended to  deliver  the  stock.  Harris  v. 
Tumbridge,  83  N.  Y.,  92  (1880);  Story  v. 
Salomon,  71  N.  Y,  420  (1877).  Cf. 
Ex  parte  Young.  6  Biss.,  53  (1874); 
"Webster  v.  Sturges,  7  Bradw.,  56  (1880); 
Tenney  v.  Foote,  4  Bradw.,  594  (1879) ; 
Lyon  v.  Culbertson,  83  111.,  33  (1876); 
Gilbert  v.  Gouger,  8  Biss.,  214  (1878).  A 
short  salo  is  not  per  se  a  wager,  nor  is 
it  presumed  to  be.  Maxton  r.  Gheen, 
75  Pa.  St.,  166  (1874);  Huss  v.  Rau,  95 
N.  Y,  359  (1884);  Knowlton  v.  Fitch,  52 
N.  Y.  288  (1873);  White  v.  Smith,  54 
N.  Y,  522  (1874);  Cameron  v.  Durkheim, 
55  N.  Y,  425  (1874) ;  Third  Nat'l  Bauk  v. 
Harrison,  10  Feci.  Rep,  243  (1882).  A 
sale,  delivery  to  be  in  twelve  months,  or 
if  vendor  wishes  before  then,  is  not  a 
gambling  contract  Wolffe  v.  Perry- 
man,  9  S.  Rep.,  148  (Ala.,  1891).  These 
decisions  rest  upon  the  principle  of  law 
laid  down  in  Stanton  v.  Small,  3  Sandf. 
(N.  Y),  230,  that  "a  contract  for  the 
sale  of  goods,  to  be  delivered  at  a  future 
time,  is  not  invalidated  by  the  circum- 
stances that,  at  the  time  of  the  contract, 
the  vendor  neither  had  the  goods  in  his 
possession,  nor  has  entered  into  any 
contract  to  buy  them,  nor  has  any  rea- 
sonable expectation  of  becoming  pos- 
sessed of  them  at  the  time  appointed  for 
delivery  otherwise  than  by  purchasing 
them  after  making  the  contract"  There 
are  many  cases  to  the  same  effect.     See 


Noyes  v.  Spaulding.  27  Vt,  420  (1855) ; 
Shales  v.  Seigmoret,  1  Ld.  Raymond, 
440  (1691) ;  Frost  v.  Clarkson,  7  Cow.,  25 
(1827);  Dewey  on  Contracts  for  Future 
Delivery,  97 ;  Thacker  v.  Hardy,  L.  P., 
4  Q.  B.  D.,  685  (1878),  holding  that,  if 
the  intent  at  the  time  of  buying  was  to 
deliver,  it  is  not  a  wager,  even  though 
that  intent  be  afterwards  changed.  As 
to  the  legality  of  a  "corner,"  see  §  333. 
Where  there  is  evidence  of  some  intent 
to  deliver,  the  transaction  is  not  gam- 
bling. Mitchell  v.  Hartley,  16  N.  E.  Rep, 
645  (Ind.,  1888). 

2Yerkes  v.  Saloman,  11  Hun,  471 
(1877);  Cassard  v.  Hinman,  6  Bosw.,  14 
(I860);  First  Nat  Bank  v.  Oskaloosa,  23 
N.  W.  Rep,  255  (1885) ;  Ex  parte  Young, 
6  Biss.,  53  (1874).  In  the  case  of  Porter 
v.  Viets,  1  Biss.,  177  (1857),  the  court  re- 
fused to  admit  parol  evidence  that  the 
contract  was  gambling,  for  the  reason 
that  it  varied  a  written  contract 

3  Wall  v.  Schneider,  17  Reporter,  700 
(1884);  Irwin  v.  Williar,  110  U.  S.,  499 
(1884);  Whitesides  v.  Hunt  97  Ind.,  191 
(1884);  Pixley  v.  Boynton,  79  III.,  351 
(1875);  Ward  v.  Vosburgh,  31  Fed.  Rep., 
12  (1887);  Powell  v.  M'Cord,  12  N.  E. 
Rep.,  262  (111.,  1887);  Lehman  v.  Strass- 
berger,  2  Woods  (C.  C),  554  (1873);  Con- 
ner v.  Robertson,  Louisiana  Sup.  Ct 
(1886).  Contra,  Fareira  v.  Gabell,  89 
Pa.  St.,  89  (1879);  Beveridge  v.  Hewitt. 
8  Bradw.,  467  (1881).  In  Tennessee,  by 
statute,  dealing  in  futures  is  gambling, 
if  either  party  does  not  intend  to  de- 
liver. See  McGrew  v.  City  Produce  Ex- 
change, 4  S.  W.  Rep.,  88  (Tenn.,  1887). 


472 


CH.  XX.]        CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.  [§  344. 


ive  of  the  intent  of  the  party  dealing  with  them.1  The  fact  that  stock 
transactions  were  carried  on  bv  "margins"  is  no  evidence  that 
they  were  gambling  contracts,2  excepting  in  Pennsylvania  and  New 
Jersey.  In  these  states  this  fact  alone  seems  to  be  sufficient  evi- 
dence of  a  wager.3  A  wager  contract  is  not  proved  by  the  fact 
that  the  party  selling  stock  to  be  delivered  at  a  future  time  intends 
to  purchase  that  amount  of  stock  in  time  for  the  delivery,  or  vice 
versa.4  "  An  executory  contract  for  the  sale  of  goods  for  future 
delivery  is  not  infected  with  the  quality  of  a  wager  by  reason  of 
the  fact  that  at  the  date  of  the  contract  the  vendor  had  not  the 
goods ;  had  not  entered  into  any  arrangement  to  provide  them,  and 
had  no  expectation  of  purchasing  them,  unless  by  a  subsequent  pur- 
chase in  the  market."  5     The  financial  responsibility  of  the  parties,6 


1  See  §§  345,  346. 

2  Sawyer  v.  Taggart  14  Bush,'  727 
(1879);  Wall  v.  Schneider,  17  Rep.,  700 
(1884) ;  Bartlett  v.  Smith,  13  Fed.  Rep., 
263  (1882) ;  Whitesides  v.  Hunt,  97  Ind., 
191  (1884);  Union  Nat.  Bank  v.  Carr,  15 
Fed.  Rep.,  238  (1883);  Hatch  v.  Doug- 
las, 48  Conn.,  116  (1880).  Many  other 
cases  do  not  directly  pass  on  this  ques- 
tion, but  assume  that  the  deposit  of  a 
margin,  as  a  security  to  the  broker, 
does  not  prove  an  intent  not  to  have  a 
delivery  of  the  stock. 

SRuchizky  v.  De  Haveu,  97  Pa.  St., 
202  (1881);  Dickson  v.  Thomas,  97  Pa. 
St,  278  (1881) ;  Fareira  v.  Gabell,  89  Pa 
St.,  89  (1879) :  Maxton  v.  Green,  75  Pa. 
St.,  166  (1874):  North  v.  Phillips,  89 
Pa  St.,  250  (1879) ;  Flagg  v.  Baldwin,  38 
N.  J.  Eq.  Rep.,  219  (1884) ;  Justh  v.  Hol- 
liday,  11  Wash.  L.  Rep.,  418  (1883). 

4  In  the  case  of  Ashton  v.  Dakin,  7  W. 
R.,  384  (1859),  the  court  held  it  not  to  be 
a  wager  contract  to  order  a  broker  to 
buy  stock,  "and  let  the  bargain  be  so  as 
to  day  of  payment  that  you  may  have 
an  opportunity  of  reselling  it  for  me  by 
such  a  day,  when  I  expect  the  market 
will  have  risen,  and  then  you  will  pay 
the  seller  for  me  with  the  money  you 
receive  from  the  purchaser,  and  I  shall 
receive  the  gain  from  you,  if  any,  or 
pay  you  the  loss."  So,  also,  Smith  v. 
Bouvier,  70  Pa,  St.,  325  (1872),  holds  that 
stocks  bought  and  sold  upon  specula- 
tion are  not  necessarily  wager  contracts. 


A  person  may  sell  without  owning  the 
stock,  and  at  time  of  delivery  buy  to 
deliver,  and  yet  the  transaction  be  not  a 
wager,  where  the  jury  finds  that  there 
was  an  intent  to  deliver  in  both  the  sell- 
ing and  buying.  See,  also,  Thacker  v. 
Hardy,  L,  R,  4  Q.  B.  Div.,  685  (1879); 
Sawyer  v.  Taggart,  14  Bush,  727  (1879). 
A  purchase  of  corn  may  be  legal  al- 
though made  to  fill  certain  sales  which 
the  party  had  made  previously.  A  mort- 
gage given  to  a  broker  for  advance- 
ments made  in  the  transaction  is  valid. 
Douglas  v.  Smith,  38  N.  W.  Rep.,  163 
(Iowa,  1888). 

5  Conner  v.  Robertson,  37  La.  Ann., 
815  (1885),  the  court  saying  also  that 
Larymer  v.  Smith  (1  B.  &  C,  1)  has  been 
repeatedly  overruled.  See,  also,  supra, 
page  472,  note  1. 

eKirkpatrick  v.  Bonsall,  72  Pa.  St, 
155  (1872);  First  Nat'l  Bank  v.  Oska- 
loosaP.  Co.,  66  Iowa.  41  (1885);  In  re 
Green,  7  Biss.,  338  (1877) ;  Beveridge  v. 
Hewitt,  8  Bradw.,  467  (1881);  Justh  v. 
Holliday,  11  Wash.  Rep.,  418  (1883); 
North  v.  Phillips,  89  Pa.  St.,  250  (1879) : 
Patterson's  Appeal,  16  Rep.,  59  (Pa., 
1883) ;  Flagg  v.  Baldwin,  38  N  J.  Eq., 
219;  Colderwood  v.  McCrea,  11  Bradw., 
543  (1882).  The  fact  that  one  of  the 
parties  is  already  under  obligation  to 
other  parties  to  purchase  cotton  several 
times  greater  in  value  than  his  fortune 
is  evidence  of  an  intent  to  gamble. 
Beadles  v.  McElrath,  3  S.  W.  Rep.,  152 


473 


>}§  345,  346.]       CONTRACTS  TO  SELL — GAMBLING  SALES — FRAUD.       [CH.  XXr. 


and  their  other  transactions  in  the  same  line, l  are  admissible  as 
evidence  as  to  whether  there  was  an  intent  to  deliver  the  stock  or 
merely  to  pay  the  gain  or  loss.  The  burden  of  proving  that  a  stock 
transaction  is  a  gambling  contract  is  upon  him  who  affirms  it.2 

§  345.  Gambling  stock  contracts  as  affecting  the  relations  between 
the  principal  and  Ids  broker. —  A  broker  is  but  an  agent  of  his 
principal.  As  such  he  may  hold  the  principal  liable  for  commis- 
sions and  for  losses  paid  on  stock  transactions  where  those  stock 
transactions  are  legitimate  and  legal.  Where,  however,  the  stock 
contracts  are  of  a  wager  or  gambling  nature,  a  more  difficult  ques- 
tion arises,  and  the  decisions  are  irreconcilable.  In  England,  in 
1878,  Judge  Lindley,  in  Thacker  v.  Hardy,3  a  carefully-considered 
case,  held  that,  where  the  principal  has  been  carrying  on  gambling 
transactions,  he  cannot  escape  or  repudiate  his  liabilities  to  his 
broker  in  those  transactions,  even  though  the  latter  knew  of  the 
gambling  character  of  the  business.  The  principal  is  liable  to  his 
broker  as  though  the  transactions  were  free  from  such  objections. 
This  is  the  well-established  rule  in  England.4 

§  346.  In  this  country  an  opposite  rule  prevails  for  the  most  part. 


(Ky.,  1887).  The  fact  that  a  party  is 
financially  unable  to  pay  for  property 
is  evidence  that  the  contract  is  gam- 
bling.  Myers  v.  Tobias,  16  Atl.  Rep,  641 
(Pa.,  1889). 

i  K irk patrick  v.  Bonsai),  72  Pa  St.. 
155  (1872);  Beveridge  v.  Hewitt.  8 
Bradw.,  467  (1881);  Irwin  v.  Williar,  110 
U.  S.,  499  (1884).  Contra,  Tomblin  v. 
Callen,  28  N.  W.  Rep.,  573  (Iowa,  L886>. 
The  jury  in  passing  upon  the  de- 
fense to  a  note  that  it  was  given  in  a 
stock-gambling  operation  may  consider 
all  the  acts  and  accounts  and  the  actual 
dealings.  Gaw  v.  Bennett,  25  Atl.  Rep., 
1114  (Pa.,  1893).  As  to  the  competency 
of  evidence  herein,  and  that  evidence 
of  custom  of  settling  by  differences  is 
incompetent,  see  Scofield  v.  Blackmarr, 
4  Atl.  Rep.,  208  (Pa.,  1886). 

2  Dewey  on  Contracts,  etc.,  p.  207, 
says :  "  All  the  cases  except  Barnard  v. 
Backhaus,  52  Wis.,  503  (1881);  Cobb  v. 
Prell,  15  Fed.  Rep.,  774  (1883);  Bever- 
idge v.  Hewitt,  8  Bradw..  467  (1881); 
Stebbins  v.  Leowolf,  3  Cush.,  137  (1849), 
and  possibly  Chandler's  Case,  Ex  parte 
Young,  6  Biss.,  53,  hold  that  these  con- 
tracts are  presumed  to  be  bona  fide;  and 


in  order  to  show  them  to  have  been 
used  as  covers  for  wagers,  an  agree- 
ment to  that  effect  must  appear  to  have 
been  made.  According  to  these  ex- 
cepted cases  option  contracts  are  pre- 
sumed to  be  invalid,  and  proof  must  be 
made  that  they  are  bona  fide."1  See, 
also,  Dewey,  p.  46. 

3L  R,  4  Q.  B.  D.,  685.  In  Illinois 
the  burden  of  proof  is  on  the  defend- 
ant to  prove  a  gambling  intent  on  the 
part  of  both  parties.  In  Wisconsin  a 
contrary  rule  seems  to  prevail.  See 
Ward  v.  Vosburgh,  31  Fed.  Rep.,  12 
(1887). 

*i2eHart,  Weekly  Notes,  85  (1870); 
Cooper  v.  Neil,  13  Weekly  Notes,  128 
(1878);  Ex  parte  Rogers,  L.  R,  15  Ch. 
D.,  207  (1879);  Faikuey  v.  Reynons,  4 
Burr.,  2069  (1767);  Jessopp  v.  Lutwyche, 
10  Ex.,  614  (1854);  Knight  v.  Cambers, 
15  C.  B.,  562  (1855);  Knight  v.  Fitch,  15 
C.  B.,  566  (1855);  Lyne  v.  Siesfield,  1 
H.  &  N.,  278  (1856) ;  Rosewarne  v.  Billing, 
15  C.  B.  (N.  S.),  316  (1863) ;  Pidgeon  v. 
Burslem,  3  Ex.,  465  (1849).  Contra, 
Byers  v.  Beattie,  16  Weekly  Rep.,  879 
(1868,  Ex.,  Irish). 


474 


OH.  XX.]        CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§  346. 


The  great  weight  of  authority  holds  that,  where  the  broker  has 
knowledge  of  the  purpose  to  gamble  in  stocks  and  aids  in  carrying 
out  that  purpose,  he  cannot  recover  for  services  rendered  or  losses 
incurred  and  paid  by  himself.1  A  few  cases  hold  to  the  same  effect 
as  the  English  rule.2  Many  cases  which  seem,  to  favor  the  English 
rule  do  so  only  by  dicta,  inasmuch  as  the  transactions  involved  in 
such  cases  are  held  not  to  be  wager  contracts.3  In  Pennsylvania 
and  New  Jersey  the  American  rule  is  rigidly  enforced.  The  broker 
is  held  to  be  dealing  as  a  principal,  not  as  an  agent,  in  all  stock- 
gambling  transactions.4  lie  cannot  recover  commissions  nor  losses.5 
If  his  principal  is  an  infant  the  broker  is  liable  to  such  infant  for 
all  sums  received  by  way  of  margins.6     If,  however,  the  parties  do 


»  Irwin  v.  Williar,  110  F.  S.,  499,  510 
(1883);  Flagg  v.  Gilpin,  19  Atl.  Rep.,  1084 
(R.  I.,  1890) ;  McClean  v.  Stuve,  15  Mo. 
App.,  317  (1884),  per  Thompson,  J. ;  Ream 
v.  Hamilton,  15  Mo.  App.,  377  (1884).  Cf. 
Kentu.  Miltenberger,  13  Mo.  App,  503, 
511  (1883).  See,  also,  as  supporting 
above  rule,  Everingham  v.  Meighan, 
5  Wis.  Leg.  News,  25  (1882);  In  re 
Green,  7  Biss.,  338  (1877);  Bartlett  v. 
Smith,  13  Fed.  Rep.,  263  (1882);  Tenney 
v.  Foote,  4  Bradw.,  594  (1879) ;  affirmed, 
95  111.,  99  (1880),  defeating  a  note  given 
to  the  broker  ;  Calderwood  v.  McRae,  11 
Bradw.,  543  (1882) ;  Webster  v.  Sturges, 
7  Bradw.,  56;  Barnard  v.  Backhaus,  52 
Wis.,  593  (1881),  defeating  notes ;  Bev- 
eridge  v.  Hewitt,  8  Bradw.,  467  (1881); 
Whitesides  v.  Hunt,  97  Ind.,  191,  203 
(1884);  Melchert  v.  American  U.  Tel. 
Co.t  11  Fed.  Rep.,  193  (1882);  First  Nat'l 
Bank  of  Lyons  v.  Oskaloosa  Packing  Co. 
(Iowa),  23  N.  W.  Rep,  255  (1885),  hold- 
ing a  note  void ;  Stewart  v.  Garrett,  4 
Atl.  Rep.,  399  (Pa.,  1886);  Stewart  v. 
Schall,  34  Alb.  L.  J.,  98  (Md.,  1886).  Suit 
by  broker  against  customer  for  moneys 
lost  in  purchase  of  grain  for  the  cus- 
tomer. Mohr  v.  Micsen,  49  N.  W.  Rep., 
862  (Minn.,  1891).  Brokers  are  bound  to 
know  that  banks  have  no  power  to  pur- 
chase cotton  futures  on  margins.  Can- 
not recover  commissions  and  losses. 
The  ultra  vires  contract  was  not  exe- 
cuted, inasmuch  as  the  corporation 
received  no  property.  Jennison  v.  Citi- 
zens' Sav.  Bank,  44  Hun,  412  (1887).     A 


broker  may  recover  commissions,  etc., 
from  his  principal  when  the  former 
knew  nothing  of  the  hitter's  intention  to 
gamble.  Lehman  v.  Feld,  37  Fed.  Rep., 
852  (1889).  Broker  may  recover  from 
principal  though  latter  intended  a  gam- 
bling contract.  Edwards  v.  Hoeffing- 
hoff,  38  id.,  635  (1889) ;  Boyd  v.  Hanson, 
41  id.,  174  (1890). 

2  Brown  v.  Speyers,  20  Gratt.  (Va.), 
296  (1871);  Wyman  v.  Fiske,  85  Mass., 
238  (1861),  on  the  ground  that  the  note 
sued  on  was  a  voluntary  payment  to 
the  broker;  Warren  v.  Hewitt,  45  Ga., 
501  (1872);  Marshall  v.  Thurston.  3  Lea 
(Tenn.),  741  (1879),  where  also  a  note  had 
been  given;  Jackson  v.  Foote,  12  Fed. 
Rep.,  37,  also  a  note  case,  the  court  say- 
ing that,  as  between  the  broker  and  his 
principal,  the  decision  probably  would 
be  different.  Cf.  Tinsley's  Case,  10  Fed. 
Rep.,  249. 

3  Lehmann  v.  Strassberger,  2  Woods, 
554  (C.  C,  1873);  Rumsey  v.  Berry,  65 
Me.,  570  (1876);  Sawyer  a.  Taggart,  14 
Bush,  727  (1879);  Durant  v.  Burt,  98 
Mass.,  161  (1867);  Williams  v.  Carr,  80 
N.  C,  294  (1879). 

•*Ruchizky  v.  De  Haven,  97  Pa.  St., 
202  (1881). 

5  North  v.  Phillips,  89  Pa.  St..  250 
(1879);  Flagg  v.  Baldwin,  38  N.  J.  Eq. 
Rep,  219  (1884);  Fareira  v.  Gabell,  89 
Pa.  St.,  89  (1879),  holding  that  notes 
given  to  the  broker  are  void. 

6  Ruchizky  v.  De  Haven,  supra.  An  in- 


fant gambling  in   stocks  on  a  margin 


475 


§§  347,  348.]       CONTRACTS  TO  SELL GAMBLING  SALES — FKAUD.       [CH.  XS 


not  raise  the  question  of  the  legality  of  the  transaction,  the  court 
cannot.1  In  Ohio  it  is  held  that  the  broker  may  be  made  to  ac- 
count for  profits,  even  though  the  transaction  was  a  gambling 
one.2  A  note  and  mortgage  given  to  the  broker  in  settlement  of 
a  gambling  transaction  will  not  be  interfered  with.3  The  broker 
is  not  liable  for  a  sale  of  the  stock  on  failure  of  margin,  without 
notice  to  the  principal,  where  the  business  is  gambling.4 

§§  ?>47,  343.  Gambling  stock  tra  nsactions  as  affecting  notes,  bonds, 
mortgages,  etc.,  growing  out  thereof.—  The  penalty  of  engaging  in 
a  stock-gaiubling  operation  is  that,  in  case  the  transaction  is  de- 
clared by  a  court  of  justice  to  be  illegal  as  a  wager  contract,  the 
court  declines  to  aid  either  party.5  As  a  general  rule  all  liability 
on  the  part  of  either  party  is  unenforceable.  Money  paid  by  the 
principal  cannot  be  recovered  back.6  Neither  principal  can  collect 
the  gains  of  the  transaction,  and  neither  is  liable  for  a  loss.7  Notes 
given  in  settlement  are  void  and  not  collectible,8  even  in  the  hands 


may  recover  from  the  brokers  all  that 
he  deposited  with  them.  Mordeeai  v. 
Pearl,  6a  Hun.  558  (1892) 

1  Gheen  v.  Johnson.  90  Pa.  St,  38 
(1879);  Williams  v.  Carr,  80  N.  C,  294 
(1879) 

2  Norton  v.  Blinn,  39  Ohio  St.  145 
(1888)  Where  gambling  stock  transac- 
tions are  closed  and  the  account  settled, 
and  the  balance  due  the  customer  is  left 
on  deposit  with  the  broker,  the  latter 
must  pay  it  over.  Peters  et  ah  v.  Grim, 
24  Atl.  Rep.,  192  (Pa.,  1892). 

3  Clark  v.  Foss,  10  Chicago  Legal  News 
(U.  S.  D.  Ct,  1878).  Cf.  Tantum  v.  West 
(N.  J.),  Central  Rep..  March  23,  1886. 

*  North  v.  Phillips,  89  Pa,  St,  250 
(1879) 

» Reese  v.  Fermie,  13  W.  R,  6  (1864), 
holding  that  the  court  will  not  aid  one 
who  has  been  tricked  in  gambling  in 
stocks. 

6  Gregory  v.  Wendall,  39  Mich.,  337 
(1878);  Id.,  40  Mich.,  432  (1879);  Wyman 
v.  Fiske,  85  Mass.,  238  (1861).  Cf.  Nor- 
ton v.  Blinn,  30  Ohio  St.,  145  (1883).  In 
Tennessee,  by  statute,  a  contrary  rule 
prevails.  McGrew  r.  City  Produce  Ex- 
change, 4  S.  W.  Rep.,  38  (Tenn.,  1887); 
Dunn  v.  Bell,  id.,  41  (Id.),  holding,  also, 
that  where  there  are  several  partners  or 
co-conspirators  who  take  the  principal's 


money  they  are  liable  therefor  jointly 
and  severally.  Under  the  New  York 
statute  money  paid  by  a  customer  to  a 
broker  on  gambling  speculations  may 
be  recovered  back.  Peck  v.  Doran,  etc., 
Co.,  10  N.  Y.  Supp..  401  (1890).  Where  a 
gambling  contract  is  illegal  by  statute, 
a  customer  who  gave  money  to  the 
broker  to  gamble  with,  according  to 
orders,  cannot  recover  it  back.  Sale  de- 
liverable in  a  certain  month,  on  a  day 
to  be  fixed  by  seller,  is  not  a  gambling 
contract.  White  v.  Barber,  123  U.  s, 
392  (1887);  17  Atl.  Rep..  791.  Certificate 
of  deposit  given  to  broker  in  gambling 
transactions  may  be  recovered  back. 
Dempsey  v.  Harm,  12  Atl.  Rep.,  27  (Pa., 
1887). 

7Grizewood  v.  Blane,  11  C.  B.,  526 
(1851);  Webster  v.  Sturges,  7  Bradw., 
(111.),  560  (1880);  Ex  parte  Young,  6 
Biss.,  53  (1874):  Thompson  v.  Cum- 
mings,  68  Ga..  124  (1881);  Yerkes  v. 
Solomon,  11  Hun,  471  (1877).  A  partner, 
however,  may  have  contribution  for 
losses  paid  at  the  express  request  of  the 
other  member  of  the  firm.  Petri'  v. 
Hannay,  8  Term  Rep.,  418  (1789) 

"Barnard  v.  Backhaus,  52  Wis..  593 
(1881);  Fareira  v.  Gabell,  89  Pa.  St..  89 
(1879) ;  Lowry  v.  Dillman,  18  N.  W.  Rep., 
4  (Wis.,  1884);  Davis  v.  Davis,  21  N.  E. 


476 


CH.  XX. J        CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§349. 

of  bona  fide  purchasers.1  Bonds  and  mortgages  given  in  payment 
are  void.2  Due-bills,3  acceptances  4  and  guaranties 5  of  notes  are 
not  valid  or  enforceable.  If  a  part  of  the  consideration  is  void 
the  whole  contract  and  all  securities  given  thereunder  are  void.6 


C.    FRAUD    AS    AFFECTING   A    SALE    OF   STOCK. 

§  349.  Extent  of  subject  treated  herein. —  In  a  previous  chapter 
of  this  treatise  the  effect  of  fraud  and  fraudulent  representations 
on  a  subscription  for  stock  was  fully  treated.     There  is  little  dif- 


Rep.,  1112  (Ind.,  1889);  Justh  v.  Holi- 
day, 17  Central  L  J..  56  (1883);  11  Wash. 
L.  Rep.,  418 ;  Cunningham  v.  Third,  etc., 
Bank  of  Augusta,  71  Ga.,  400  (1883); 
Tenney  v.  Foote,  4  Bradw.,  595  (1879); 
affirmed,  95  111.,  99.  Of.  Wynian  v. 
Fiske,  85  Mass.,  238  (1861).  Person  loan- 
ing money  and  taking  notes  therefor 
cannot  be  defeated  in  suit  on  notes  by 
evidence  that  he  knew  the  loan  was  to 
be  used  in  gambling  operations.  De- 
fendant must  prove,  also,  that  plaintiff 
intended  that  the  money  should  be  so 
used.  Waugh  r.  Beck,  6  Atl.  Rep,  923 
(Pa.,  1886).  Checks,  notes,  etc.,  in  gam- 
bling contracts  are  void.  Kahn  v.  Wal- 
ton, 20  N.  E.  Rep.,  203  (Ohio,  1889); 
Embrey  v.  Jemison,  131  U.  S.,  336  (1889). 

1  Barnard  v.  Backhaus,  52  Wis.,  593 
(1881) ;  Steers  v.  Lashley,  6  Term  Rep, 
61  (1794);  Tenney  v.  Foote,  4  Bradw. 
(111.),  594  (1879) ;  Cunningham  v.  National 
Bank  of  Augusta,  71  Ga.,  400  (1883); 
Lowry  v.  Dillman,  18  N.  W.  Rep.,  4 
(1884).  Contra,  Crawford  v.  Spencer,  4 
S.  W.  Rep.,  713  (Mo.,  18S7),  citing  Third 
National  Bank  v.  Harrison,  10  Fed.  Rep., 
243;  also,  contra,  Lilley  v.  Rankin,  55 
L.  T.  Rep.,  814  (1886).  An  accommoda- 
tion indorser  to  the  note  may  set  it  up. 
Justh  v.  Holliday,  17  Cent.  L.  J.,  56 
(1883);  11  Wash.  L.  Rep,  418.  Note  to 
bank  is  valid,  though  the  proceeds 
were  to  pay  a  stock-gambling  debt  and 
the  bank  knew  that  fact  Marshall  v. 
Thurston,  3  Lea  (Tenn.),  741  (1879).  Cf. 
Cannon  v.  Bryce,  3  B.  &  A.,  179  (1819). 

2Amory  v.  Merry  weather,  2  B.  &  C, 
573  (1824);  Flagg  v.   Baldwin,  38  N.J. 


Eq.  Rep,  219  (1884);  Griffiths  v.  Sear.-. 
112  Pa.  St.,  523  (1886);  Barnard  v. 
Backhaus,  52  Wis.,  593  (1881).  A  judg- 
ment entered  by  confession  on  a  bond 
given  for  a  gambling  debt  may  be  set 
aside.  Everitt  v.  Knapp,  9  Johns.,  331 
(1810);  Beveridge  v.  Hewitt,  S  Bradw., 
467  (1881).  A  court  of  equity  will  en- 
join the  transfer  of  a  note  and  will 
decree  the  cancellation  of  a  mortgage 
given  by  a  married  woman  in  payment 
of  her  husband's  stock -gambling  debt?. 
Tantum  v.  West,  6  Atl.  Rep.,  316  (N.  J., 
1886).  But  will  not  where  given  by  the 
part}-  himself  to  his  brokers.  Clark  v. 
Foss,  10  Chicago  Legal  News  (1878). 
A  mortgage  to  a  broker  to  pay  losses  on 
gambling  speculations  is  void  and  not 
enforceable.  Walters  v.  Comer,  5  S.  F. 
Rep,  292  (Ga.,  1888).  But  see  Craw- 
ford v.  Spencer,  4  S.  W.  Rep,  713  (Mo., 
1887). 

3  Rudolf  v.  Winters,  7  Neb,  125  (1878). 

4  Steers  r.  Lashley,  6  Term  Rep,  61 
(1794).  Rawlings  v.  Hall,  1  Carr.  &  P., 
11  (1823),  holds  that  the  broker  on  the 
witness  stand  need  not  admit  that  the 
consideration  was  a  gambling  debt, 
since  it  would  subject  him  to  a  common- 
law  criminal  prosecution. 

5  Tenney  V.  Foote,  95  111.,  99  (1880). 

6  Tenney  v.  Foote,  svpra.  See,  also, 
Fareira  v.  Gabell,  89  Pa  St.,  89  (1879). 
But  where,  upon  the  close  of  a  success- 
ful "  corner,"  which  is  illegal  by  stat- 
ute, one  of  the  parties  leaves  his  share 
of  the  profits  with  the  other  party  to 
invest,  the  latter  must  account  for  it 
when    called   upon  so  to  do.     Where, 


477 


§  350. j  CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.'       [ell.   XX. 

ference  in  the  principles  of  law  governing  fraud  as  affecting  sales 
of  stock  from  fraud  as  affecting  subscriptions  for  stock.  Most  of 
the  cases  assume  that  the  same  principles  apply  to  both  kinds  of 
transactions.  Consequently  the  questions  of  what  constitutes  fraud 
herein;  what  remedies  the  defrauded  person  has;  and  the  general 
principles  governing  this  branch  of  the  law,  will  be  fully  under- 
stood only  by  a  comparison  of  these  two  parts  of  this  work.1 

§350.  What  has  been  held  to  constitute  a  fraud  herein.—  It  is 
difficult  to  lay  down  rules  as  to  what  does  and  what  does  not 
amount  to  fraudulent  misrepresentations.  The  courts,  consequently, 
let  each  case  stand  upon  its  own  facts.  Certain  states  of  fact 
have,  however,  been  passed  upon  as  constituting  fraud,  and  as 
such  they  aid  in  coming  to  a  conclusion  on  facts  in  somewhat 
similar  cases.  Thus,  it  has  been  held  to  be  a  fraudulent  repre- 
sentation to  make  false  statements  as  to  the  location,  explora- 
tions and  developed  state  of  a  mine;2  or  that  a  patent  owned  by 
the  company  was  of  great  value,  and  that  certain  other  persons 
were  owners  of  stock;3  that  the  company  was  prosperous,  when  in 
fact  large  overissues  of  stock  had  been  made:4  or  that  the  corpo- 
rate property  was  free  from  incumbrance ; 5  or  that  the  corporation 
would  guaranty  certain  dividends;6  or  any  false  statement  or  gen- 
eral fraudulent  act,  or  fraudulent  concealment  of  a  material  fact 

upon  the  close  of  an  unsuccessful  "cor-  prosperous,  that  there  was  no  stock  for 

ner,"    the  parties  losing  settle  among  sale,    and    that   defendant   was    selling 

themselves,   hut  one  of  them   fraudu-  stock  of  others  and  not  his  own.     Miller 

lently  overstates  the  losses,  he  is  liable  v.  Curtise,  13  N.  Y.  Supp.,  G04  (1891). 
to  account  for  the  amount  fraudulently        5 Southwestern  R  R  Co.  v.  Papot,  67 

allowed  him.     Wells  v.  McGeoch,  34  N.  Ga..  875,  692  (1881),  the  court  saying: 

W.  Rep.,  769  (Wis.,  1888).  "  It  is,  we  think,  sufficient  to  show  that 

'See  ch.  IX.     In  the  important  case  the  misrepresentation  or  suppression  of 

of  Western    Bank   r.    Addie,   L.   R,    1  fact  was  of  such  a  nature  as  to  prove 

H.  L.  (Sc),  145  (1867),  part  of  the  shares  that  the  property  purchased  was  of  no 

had  been  subscribed  for  and  part  pur-  value  to  the  purchaser  for  the  purpose 

chased.     The    court  applied  the    same  for  which   it   was  bought,   or   that    it 

principle  to  both.  would  be  reasonable  to  suppose  that  the 

2  Morgan    v.    Skiddy,   62    N.   Y.,  319  purchaser  would  not  have  contracted 

(1875).  for  it  had  he  had  knowledge  of  the  ex- 

s  Miller  v.  Barber,  66  N.  Y.,  558  (1876).  istence  of  this  defect"     It  is  fraudulent 

4  Cazeaux  v.  Mali,  25  Barb.,  578  (1857).  to  make  misstatements  to  the  effect  that 

False  representations  as  to  solvency  and  the  corporation   is  out  of  debt  and  is 

financial  condition  of   the  corporation  making  certain  profits.    It  is  no  defense 

are  material,  and   the  purchaser   may  that  the   defendant  might  have  ascer- 

testify    that   he   would    not   have   pur-  tained  the  facts  from  the  corporation, 

chased  the  stock  except  for  the  repre-  Redding  r.  Wright,  51  N,  W.  Rep,  1056 

sentations.     Pridham  v.  Weddington,  12  (Minn..  1892). 

S.  W.  Rep.,  49  (Tex.,  1889).     It  is  fraud        **  Gerhard  i\  Bates,  20  Eng.  L.  &  Eq.t 

to    state    falsely   that  the  company  is  129  (1853). 

478 


CH.  XX.]        CONTRACTS   TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§350. 


whereby  the  purchaser  is  induced  to  complete  the  sale  of  stock.1 
It  may  or  may  not  be  a  fraudulent  representation  to  state  that  the 
stock  is  worth  a  certain  sum.2 

It  is  a  fraud  on  the  vendee  of  stock  to  sell  him  as  paid-up  stock- 
that  which  is  not  paid  up,  although  issued  as  paid  up,  the  vendor 
having  participated  in  the  issue.3     It  is  fraud  in  the  vendor  to  rep- 


1  See  further  illustrations  in  chapter 
IX.  Declaring  a  dividend  in  good  faith 
and  sound  discretion  is  not  fraud  by 
reason  of  its  turning  out  to  have  been 
ill-advised.  Burnes  v.  Pennell,  2  H.  of 
L.  Cases.  497  (1849).  A  representation 
that  the  stock  '-is  good  property  or  in- 
vestment and  is  about  to  make  a  divi- 
dend "  is  a  false  representation  when 
untrue,  and  where  the  person  taking 
the  stock  as  executor  from  a  preceding 
executor  objected  to  receiving  it  on  ac- 
count of  his  doubt  or  ignorance  as  to  its 
character.  Lawton  v.  Kittredge,  30 
N.  H.,  500  (1855).  Representations  that 
a  corporate  property  is  valuable  and  one 
of  the  best  properties  in  Colorado,  when 
in  fact  the  company  was  a  bubble  com- 
pany, raises  a  question  of  fraud  for  the 
jury  to  pass  upon.  Bradley  v.  Poole,  98 
Mass.,  169  (1867).  The  payment  of  an 
excessive  and  speculative  price  for  stock 
is  not  fraud  and  is  no  ground  for  setting 
the  sale  aside.  Moffat  v.  Winslow,  7 
Paige  Cb.,  124  (1838).  The  vendor  war- 
rants the  title  to  the  stock,  but  not  its 
quality  or  value.  Allen  v.  Pegram,  16 
Iowa,  163  (1864).  A  sale  of  stock  in  a 
company  formed  to  purchase  a  railroad 
cannot  be  set  aside  merely  because  its 
title  to  the  railroad  fails.  State  v.  North. 
La.  &  T.  R.  R.  Co.,  34  La.  Ann.,  947 
(1882).  In  the  case  of  Wright's  Appeal, 
99  Pa.  St.,  425  (1882),  it  was  held  that 
the  corporation  was  not  liable  for  the 
conversion  of  stock  by  its  president, 
who  obtained  the  certificates  indorsed  in 
blank  from  the  owner  on  false  repre- 
sentations that  the  corporation  wished 
to  use  them.  Newlands  v.  National,  etc., 
Association,  53  L.  T.  (N.  S.),  242  (1885); 
March  v.  Eastern  R.  R.  Co..  43  N.  H., 
515  (1862),  holding  that  the  fact  that  the 
earnings  were  not  distributed  by  divi- 

41 


dends  until  after  a  sale  of  stock  does  not 
constitute  fraud.  A  confidential  agent 
who  uses  his  position  to  obtain  stock  of 
which  the  principal  has  been  deprived 
wrongfully  must  turn  it  over  to  the 
principal.  Hardenburgh  v.  Bacoil.  33 
Cal.,  356  (1867). 

2  That  it  is  not,  see  Union  Nat'l  Bank 
v.  Hunt,  76  Mo.,  439  (1882).  A  false  rep- 
resentation that  the  stock  sold  is  worth 
eighty  cents  on  the  dollar — it  being 
worth  but  forty  cents  —  will  not  sustain 
an  action  for  deceit.  Ellis  v.  Andrews. 
56  N.  Y..  83  (1874).  It  is  fraudulent  t<. 
represent  that  the  stock  is  worth  par 
when  in  fact  it  is  worthless.  If  the 
vendor  persuades  the  vendee  to  make 
no  inquiries,  the  latter  may  recover, 
although  he  made  none.  The  measure 
of  damages  is  not  the  value  of  the  land 
given  for  the  stock,  but  the  difference 
between  the  actual  and  the  represented 
value  of  the  stock.  Nysewander  v.  Low- 
man,  24  N.  E.  Rep.,  355  (Iud.,  1890). 
False  representations  may  consist  of 
statements  that  the  stock  is  worth  a 
certain  price  and  is  sold  to  plaintiff  at  a 
reduced  price  in  order  to  obtain  his 
services.  Maxted  v.  Fowler,  53  N.  W. 
Rep.,  921  (Mich.,  1892). 

3  Sturges  v.  Stetson,  1  Biss.,  246  (1858) 
holdiug  that  the  vendee  is  not  liable  on 
a  note  given  in  payment  thereof.  Fos- 
dick  v.  Sturges.  1  Biss.,  255  (1858),  hold- 
ing that  the  vendee  may  recover  back 
money  paid.  Reeve  V.  Dennett.  11 
N.  E.  Rep.,  938  (Mas>..  1887),  where  the 
capital  of  $1,000,000  was  issued  for  a 
worthless  patent;  holding  also  that 
the  misrepresentations  may  invalidate 
also  a  second  and  subsequent  purchase 
of  stock,  even  though  in  the  meantime 
the  vendee  has  become  a  director  in  the 
corporation. 


9 


§350.]  CONTEACTS    TO   SELL GAMBLING    SALES  —  FEAUD.         [CH.  XX. 


resent  that  property  is  to  be  turned  in  by  him  to  the  corporation 
at  a  certain  price  and  then  to  refuse  to  carry  out  the  latter  con- 
tract.1 Where  the  vendor  agrees  to  sell  at  a  value  to  be  ascertained 
by  an  examination  of  the  corporate  books  and  affairs,  it  is  fraud  in 
the  vendee  to  cause  false  memoranda  to  be  made  by  the  employees 
of  the  corporation.2  It  is  not  fraud,  however,  for  a  director  or 
other  corporate  officer  to  buy  or  sell  stock  at  a  profit  due  to  his 
official  knowledge  of  the  condition  of  the  corporation;3  nor  to  ob- 
tain the  stock  by  a  threat  of  a  call.4  The  fact  that  a  check  given  in 
payment  for  stock  is  not  honored,  although  the  money  is  in  bank, 
is  not  fraud  where  payment  was  refused  because  of  other  frauds  of 
the  vendor ; 5  nor  is  it  fraud  to  issue  certificates  before  anything  has 
been  paid  thereon,  there  being  no  participation  by  the  vendor.6  It 
is  fraud,  however,  to  represent  the  company  as  having  a  full-paid 
capital  stock  when  in  fact  the  stock  was  wholly  issued  in  pa}Tment 
of  a  worthless  mine.  The  person  making  such  representation  is 
liable  to  the  vendee.7 

There  are  various  facts  which  constitute  fraud  herein,  and  various 
principles  of  law  applicable  to  the  remedy  to  be  pursued.  Many 
cases  are  occurring  constantly,  and  the  decisions  on  this  subject 
are  becoming  of  great  importance.8 


1  Seaman  v.  Low,  4  Bosw.,  337  (1859). 

8Hager  v.  Thompson,  1  Black,  80 
(1801). 

3  Board  of  Com'rs  of  T.  Co.  V.  Rey- 
nolds, 44  Ind.,  509  (1873).  Where  one  of 
the  partners  in  the  building  of  railroads, 
and  in  owning  stocks,  honds,  etc.,  dies, 
and  his  executor,  after  an  examination 
of  all  the  assets  by  means  of  experts, 
•etc.,  makes  a  settlement  with  the  other 
partner,  such  settlement  is  binding 
although  the  other  partner  did  not  im- 
part all  the  knowledge  or  information 
he  might  have  given.  The  subsequent 
rise  in  value  of  some  of  the  securities  is 
immaterial.  Colton  v.  Stanford,  23  Pac. 
Rep.,  10  (Cal.,  1890).  The  purchaser  of 
stock  from  the  secretary  of  the  com- 
pany cannot  rescind  on  the  ground  of 
fraud,  the  secretary  having  given  at 
the  time  of  the  sale  all  the  information 
which  he  had  concerning  the  company. 
No  confidential  or  fiduciary  relation  ex- 
ists. Krumbhaar  v.  Griffiths,  25  Atl. 
Rep.,  04  (Pa.,  1892).  And  see  §  320. 

*  Grant  r.  Attrill,  11  Fed.  Rep.,  409 
(1882).    As  to  other  cases  of  fraud  by  the 


vendee,  see  Johnson  v.  Kirby,  05  Cal., 
482(1884);  Hemppling  v.  Burr,  20  N. 
W.  Rep..  190  (Mich.,  1880). 

5  Lomius  v.  Coe,  117  Mass.,  45  (1874). 

»  Woodruff  v.  McDonald,  33  Ark.,  97 
(1878). 

7  Cross  v.  Sackett,  2  Bosw.  (N.  Y.),  017 
(1858).  See,  also,  §§  40,  48,  supra.  But 
an  assertion  that  the  capital  stock  is  a 
certain  amount  is  not  an  assertion  that 
it  has  been  all  paid  in.  Colt  v.  Wollas- 
ton,  2  P.  Wms.,  154  (1723).  When  a 
promoter  misrepresents  to  a  subscriber 
the  price  paid  by  the  promoter  for  prop- 
erty conveyed  by  him  to  the  company, 
the  subscriber  may  sue  him  for  dam- 
ages. Teachout  v.  Van  Hoesen,  40  N. 
W.  Rep.,  90  (Iowa,  1888).  A  sale  or 
pledge  of  stock  stamped  "  non-assess- 
able." when  in  fact  it  was  not  legally 
paid  up,  renders  liable  for  false  repre- 
sentations the  president  and  secretary 
who  made  such  sale  or  pledge  and  who 
knew  that  it  was  not  paid-up  stock. 
Windram  v.  French,  24  X.  E.  Rep.,  914 
(Mass.,   1800). 

8  Where  a  debtor   turned  over  to  his 


480 


CH.  XX.]        CONTRACTS   TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§  350. 


Fraud  in  the  sale  of  stock  frequently  arises  in  the  organization 
of  the  company.  The  parties  who  cause  the  company  to  be  organ- 
ized are  called  the  "  promoters  "  of  it.  As  such  they  are  disquali- 
fied from  making  a  profit  by  selling  property  to  the  company  at  a 


creditor,  as  trustee,  the  controlling  stock 
of  a  corporation,  for  the  latter  to  man- 
age, and  the  latter  afterwards,  by 
threats  of  abandoning  the  enterprise, 
forced  the  debtor  to  sell  him  the  stock 
outright,  a  court  of  equity  will  set  aside 
such  sale  and  hold  the  creditor  liable 
as  a  trustee.  Ryle  v.  Ryle,  7  Atl.  Rep., 
484  (N.  J.,  1886).  Failure  of  vendor  to 
state  that  the  company  is  a  joint-stock 
association  and  not  a  corporation  is  not 
fraud  avoiding  the  sale  of  the  stock. 
Curtiss  v,  Hurd,  30  Fed.  Rep.,  729  (1887). 
Director  selling  stock  cannot  be  defeated 
in  his  action  for  the  price  by  reason  of 
fraudulent  representations  of  the  cor- 
porate treasurer  inducing  defendant  to 
purchase.  Doane  v.  King,  30  Fed.  Rep., 
106  (1887).  Question  for  the  jury  whether 
it  was  fraud  in  representing  that  stock 
was  paid  up,  when  in  fact  first  payment 
only  had  been  made,  and  balance  had 
been  paid  by  dividends.  Kryger  v.  An- 
drews, 35  N.  W.  Rep.,  257  (Mich.,  1887). 
Fraud  may  be  by  directors  in  fraudu- 
lently making  dividends.  See  ch.  XXXII, 
infra.  Where,  after  an  agreement  to 
sell  land  for  stock,  the  owner  of  the 
stock  attends  a  corporate  meeting  and 
votes  to  sell  all  corporate  property  at 
sixty  cents  on  the  dollar,  which  is  done, 
the  purchaser  of  the  stock  may  have  the 
land  returned.  Harris  v.  Piatt,  31  N.  W. 
Rep.,  135  (Mich.,  1887).  Cases  of  fraud 
on  the  part  of  the  vendee  sometimes 
occur,  where  the  vendee  is  given  a  ma- 
jority of  the  stock,  and  then  uses  his 
control  of  the  corporation  to  defraud 
the  vendor  in  the  execution  of  his  con- 
tract to  pay  for  the  stock.  Hardenburgh 
v.  Bacon,  33  Cal.,  356  (1867).  Jury  de- 
cided it  to  be  fraud  on  part  of  corporate 
officers  representing  that  the  company 
was  without  debt  They  are  liable  in 
damages  for  false  representations.  Fa- 
vill  v.  Shehan,  26  N.  W.  Rep.,  131  (Iowa, 


1885).  Fraud  may  be  by  agent's  repre- 
sentations as  to  cost  of  mining  the  coal, 
of  transportation  and  of  market  price. 
Booth  v.  Smith,  7  N.  E.  Rep.,  610  (111., 
1886).  On  a  question  of  testimony  by 
the  defendant,  see  Reeve  v.  Dennett,  6 
N.  E.  Rep.,  378  (Mass.,  1886).  Defendant 
entitled  to  bill  of  particulars  as  to 
when  and  by  whom  the  misrepresenta- 
tions were  made.  Blanco  v.  Navarro, 
N.  Y.  Daily  Reg.,  April  2,  1887,  p.  640. 
It  has,  been  held  that  one  who  was  in- 
duced by  fraud  to  purchase  stock  in  an 
insolvent  corporation  may  bring  suit  to 
have  his  part  of  the  corporate  assets  as- 
certained, to  the  exclusion  of  a  debt  due 
from  the  corporation  to  the  person  in- 
ducing him  to  purchase.  Poole  v.  West, 
etc.,  Co.,  30  Fed.  Rep.,  513  (1887).  The 
person  making  sales  of  stock  by  false 
representations  may  be  indicted  for  ob- 
taining money  by  false  representations. 
Commonwealth  v.  Wood,  8  N.  E. 
Rep.,  432  (Mass.,  1886).  The  statute  of  * 
frauds  as  to  the  answering  to  the  debt, 
defaults,  etc.,  of  another  person  has  no 
application  to  a  sale  of  stock  herein. 
The  fact  that  the  corporate  property 
sold  several  years  later  for  a  small 
amount  is  immaterial  and  not  admis- 
sible. French  v.  Fitch,  35  N.  W.  Rep, 
258  (Mich.,  1887).  Where  a  stockholder 
sells  a  controlling  interest  to  a  person 
who  is  to  pay  therefor  by  improving  the 
corporate  property,  but  who  elects  a 
board  of  directors  and  defrauds  the 
vendor,  the  latter's  remedy  is  a  difficult 
one.  Cates  v.  Sparkman,  11  St  W.  Rep., 
846  (Texas,  1889).  The  fraud  or  mistake' 
must  have  been  such  that  the  agreement' 
would  not  have  been  made  in  its  ab- 
sence, where  a  rescission  of  the  contract' 
is  sought  by  decree.  Means  v.  Rees,  26 
Fed.  Rep.,  210,  SI©  (1886)1  Where  an 
agent  to  sell  a  mine  induces  his  princi- 
pals to  place  in  his  name- all  their  stock, 


(31) 


481 


§  350.] 


CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.         [en.  XX. 


much  larger  price  than  they  gave  for  the  property.  The  promot- 
ers act  in  a  fiduciary  capacity.  Hence,  when  they  have  made  a 
profit  at  the  expense  of  the  company  they  may  be  compelled  to 
turn  over  that  profit  to  the  company,  or,  if  they  have  sold  stock 


and  he  sells  the  propert-  and  accounts 
to  them  for  part  onty  of  the  price,  and 
refuses  to  return  the  stock,  they  may 
sue  him  for  an  accounting  without  pre- 
viously tendering  back  the  amount  they 
received  or  demanding  the  stock.   Woos- 
ter  v.  Nevills,  14  Pac.  Rep.,  390  (Cal.. 
1887).     False  representations  as  to  cor- 
porate property,  business  and  prospects, 
and  use  of  corporate  prospectus  which 
the  vendee  knows  contains  false  state- 
ments, sustains  rescission  of  transfer  of 
land  for  stock.    Person  purchasing  land 
with  full  knowledge  of  fraud  is  not  pro- 
tected.    Certificates  may  be  filed  with 
clerk   of  court  awaiting  retransfer  of 
land.     Ormsby  v.  Budd,  33  N.  W.  Rep., 
457  (Iowa,  1887).     Vendee  of  stock  can- 
not rescind  or  collect  damages  on  ground 
that  the  corporation  was  not  legally  in- 
corporated.    If  it  is  a  de  facto  corpora- 
tion the  vendor  is  not  liable.     Harter  v. 
Eltzroth,  111  Ind.,  159  (18S7).    It  is  fraud 
ft>r  a  person  to  sell  as  stock  of  another 
that  which  belongs  to  himself.    Matnrin 
V.   Tredinnick,  2    New   Rep..  514  (1863) 
Vendee  of  stock  for  which  he  gave  real 
estate  may  have  a  reconveyance  of  the 
real  estate  decreed,   where  the  sale  of 
stock  was  induced  by  fraudulent  repre- 
sentations.     Gray    v.   Robbius,    11    Atl. 
Rep,  860  (N.  J.,   1887).     For  a  case  of 
misrepresentations,    see.     also,     N.    Y. 
Daily  Reg.,  March  21,  1888.     A  manag- 
ing director  who  buys  stock  on  credit, 
and  then  aids  in  levying  an  attachment 
on  the  stock  against  the  vendor  and  con- 
ceals the  same  from  the  vendor,  and 
buys  in  the  stock  at  a  low  price,  and 
then  repudiates  his  debt  to  the  vendor, 
is  guilty  of   fraud.     Young  v.  Fox,  37 
Fed.  Rep.,  385  (1888).     Where  the  presi- 
dent in  selling  stock  makes  false  repre- 
sentations the  vendee  is  not  bound  to 
investigate  them.    He  may  defeat  a  note 
given  in  payment.    Wannell  v.  Kern,  57 


Mo.,  478  (1874).  A  representation  that  a 
bond  is  an  "  A  No.  1 "  bond  is  not  a  ma- 
terial representation.  Deming  v.  Darling, 
20  N  E.  Rep.,  107  (Mass.,  1889).  See,  also, 
instances  in  §  334,  supra.  The  vendee 
fails  in  his  suit  for  damages  if  he  does 
not  contradict  the  defendant's  testimony 
that  the  plaintiff  vendee  knew  all  the 
facts  at  the  time  of  the  sale.  Nelson  v. 
Louling,  62  N.  Y.,  615  (1875);  aff'g  4 
J.  &  S.,  544. 

A  statement  that  the  last  dividend  was 
seven  per  cent,  and  that  the  fiscal  year 
ended  on    January  1    is    a  fraudulent 
suppression  of  the  truth  where  the  last 
dividend  was  a  year  prior  to  the  past 
June  1.    Tyler  v.  Savage,  143  U.  S.,  79 
1 1892)     "Whore  the  contract  of  sale  con- 
tains  express   warranties,    parol   repre- 
sentations as  warranties  are  not  admit- 
ted   to    prove      false      representations. 
Humphrey  r.   Merriam.  49  N.  W.  Rep., 
199    (Minn.,    1891).     A    statement    filed 
with  the  state  commissioner  as  required 
by  statute,  in  regard   to  the  amount  of 
the  paid-up  stock,  is  not  such  a  repre- 
sentation as  will  sustain  an  action  for 
damages  for  fraudulent  representations 
inducing  a  person  to  take  the  notes  of 
the  company.     Hunnewell  v.  Duzbury, 
28  N.  E.   Rep.,   267   (Mass.,  1891).     The 
fact  that  statements  as  to  the  affairs  of 
the  company  are  not  fded  as  required 
by  statute  does  not  amount  to  fraud  in 
the  sale  of  stock,  nor  do  representations 
that  the  stock  will  pay  twenty  per  cent 
dividends  amount  to  fraud.  The  question 
as  to  the  validity  of  stock  having  once 
been  litigated  cannot  be  again  raised  in 
an  action   for  deceit  in  the  sale  of  the 
stock.     The  mere  act  of  conspiracy   is 
not  sufficient  to  sustain  the  action  un- 
less   damage    is    shown.      Robinson   v. 
Parks  et  ah,  24  Atl.  Rep.,  411  (Md.,  1893). 
A  representation  as  to  the  amount  of 
water  that  can  be  obtained  on  water  com- 


482 


CH.  XX.]        CONTRACTS   TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§  351. 

of  the  company,  the  purchasers  of  the  stock  from  them  may  rescind 
the  purchase  and  hold  them  personally  liable  therefor.1 

It  may  be  fraudulent  for  the  directors  to  issue  to  themselves 
shares  of  the  company's  unissued  stock  in  order  to  control  elec- 
tions or  to  make  a  profit.2 

An  agent  is  not  liable  for  misrepresentations  made  by  his  prin- 
cipal, but  it  may  be  a  question  of  fact  whether  the  vendor  is  a 
principal  or  agent.3 

§  351.  Fraudulent  sale  &?/  agent,  etc.,  in  'breach  of  trust—  A  bona 
fide  purchaser  for  value  and  without  notice  of  stock  from  a  vendor 
who  delivers  the  certificates  therefor  indorsed  in  blank  by  another, 
or  indorsed  by  the  vendor  himself,  is  protected  and  entitled  to  the 
stock,  although  it  afterwards  transpires  that  the  agent  was  selling 
as  agent  of  another  and   had  been  guilty  of  a  breach  of  trust.4 


pany  stock  is  material.  A  tender  of 
the  certificates  is  sufficient  where  there 
has  been  no  transfer  on  the  books.  Hill 
v.  Wilson,  25  Pac.  Rep.,  1105  (Cat,  1891). 
Expressions  of  opinion  as  to  the  future, 
although  exaggerated,  are  not  repre- 
sentations. Columbia  Elec.  Co.  v.  Dixon, 
49  N.  W.  Rep.,  244  (Minn.,  1891).  Notes 
given  in  the  purchase  of  stock  in  a  cor- 
poration whose  sole  business  is  to  carry 
on  an  infringing  telephone  business 
are  without  consideration  and  void. 
Clemshire  v.  Boone,  etc.,  Bank,  14  S. 
W.  Rep.,  901  (Ark.,  1890).  Where  stock 
is  issued  to  several  persons  for  a  patent 
and  they  return  part  of  it  to  a  trustee 
for  the  company  to  sell  for  working 
capital,  and  a  subscriber  to  the  com- 
pany's stock  gives  his  note  to  the  com- 
pany and  the  company  indorses  the 
note  to  one  of  the  first-named  parties, 
who  turns  out  his  own  stock  to  fill  the 
subscription,  the  latter  may  recover  on 
the  note,  and  is  not  liable  for  false  rep- 
resentations of  one  of  his  associates  and 
an  agent  of  the  company.  King  u 
Doane,  139  U.  S.,  166  (1891).  A  sale  of 
stock  will  not  be  set  aside  on  the  ground 
of  inadequacy  of  price  unless  so  gross 
as  to  shock  the  conscience  and  give  de- 
cisive evidence  of  fraud.  Perry  v.  Pear- 
son, 25  N.  E.  Rep.,  636  (111.,  1890).  It  is 
not  sufficient  to  prove  that  defendants 
managed  the  manufacturing  business  of 


the  company,  to  sustain  an  action  for 
fraud  in  stating  that  the  company  was 
doing  a  good  business  and  making  ten 
per  cent.,  it  appearing  that  the  business 
was  new,  and  defendants  did  not  state 
that  they  knew  of  the  financial  condi- 
tion. Hatch  n  Spooner,  13  N.  Y.  Supp., 
642  (1891).  A  vendor  of  stock  may  col- 
lect the  price  although  the  stock  was 
worthless  and  known  so  to  be  by  the 
vendor.  Hunting  v.  Downer,  23  N.  E. 
Rep.,  832  (Mass.,  1890).  Statement  that 
drill  holes  in  coal  fields  showed  certain 
results  are  material,  and  not  matters  of 
opinion.  Martin  v.  Hill,  43  N.  W.  Rep., 
337  (Minn.,  1889). 

i  See  ch.  XLIII.  §§  705-708. 

2  See  §  70,  supra. 

»  See  §p  335,  336,  supra. 

*  The  case  of  McNeil  v.  Tenth  National 
Bank,  46  N.  Y.,  325  (1871),  is  not  only 
the  leading  case  on  the  estoppel  of  the 
principal  from  repudiating  the  sale  or 
pledge  of  his  stock  by  his  agent,  whom 
he  intrusted  with  the  certificates  in- 
dorsed in  blauk,  but  it  is  one  of  the 
leading  cases  on  the  law  of  the  quasi- 
negotiability  of  stock.  Honold  v. 
Meyer,  86  La.  Ann.,  585  (1881) :  Strange 
v.  Houston  &  T.  C.  R.  R.  Co.,  53  Tex., 
162  (1880);  Dovey's  Appeal,  97  Pa.  St., 
153(1881).  Where  certificates  of  stock 
are  deposited  with  the  broker,  duly 
transferred  in  blank,  a  bona  fide  holder 


483 


§  351.] 


COXTRACTS    TO   SELL  —  GAMBLING    SALES  —  FRAUD.         [CD.  XX. 


But  the  transferee  is  not  protected  where  he  is  not  a  bona  fide  pur- 
chaser.1 Where  the  same  person  acts  as  agent  for  both  the  trans- 
ferrer and  the  transferee,  and  absconds  with  the  purchase  price  aftei 
the  certificates  have  been  delivered,  but  before  registry  on  the  cor- 
porate books,  the  transferee  is  protected.2  Where  the  corporation 
knows  that  the  vendor  is  selling  as  the  agent  of  the  stockholder, 
who  has  given  to  the  agent  the  certificates  indorsed  in  blank,  it 
must  see  to  it  that  the  agent  has  full  power  to  sell  the  stock,  and  is 
liable  for  allowing  a  registry  where  the  agent  has  not  such  power.3 
If  the  principal  authorized  the  sale  or  ratified  it,  he  of  course  can- 


of  such  certificates  from  the  broker  is 
protected  as  against    the  real    owner. 
Ryman  v.  Gerlach,   20  Atl.   Rep.,   302 
(Pa.,  1893);  and  see  many  cases  in  chap- 
ter on  Stock  Brokers,  where  this  princi- 
ple of  law  is  often  involved.    The  case 
of  Taylor  v.   Great,  etc.,   R.  R  Co.,  4 
De  G.  &  J..  559  (1859),  to  the  contrary, 
turns    on    the    English    doctrine    that 
transfers  in  blank  are  not  valid.     The 
case  of  Donaldson  v.  Gillet,  L.  R,  3  Eq., 
274  (1800),  where  the  pledgee  of  one  who 
held  the  certificate  indorsed  to  himself 
was  not  protected,  since  the  pledgor  had 
purchased  as  agent  and  had  fraudulently 
taken  title  in  his  own  name,  would  not 
be  good  law  in  this  country,  where  the 
failure  to  have  the  transfer  registered 
has  no  effect  on   the  pledgee's  rights 
under  such  circumstances.     Rumball  v. 
Metropolitan  Bank.  L.  R,2  Q.  B.  D.,  194 
(1877),  where    a    broker    committed    a 
breach   of  trust      The  court  said   the 
stockholder  "  is  in  the  position  of  a  per- 
son who  has  made  a  representation,  on 
the  face  of  his  scrip,  that  it  would  pass 
with  a  good  title  to  any  one  on  his  tak- 
ing it  in  good  faith  and  for  value,  and 
who  has  put  it  in  the  power  of  his  agent 
to  hand  over  the  scrip  with  this  repre- 
sentation to  those  who  are  induced  to 
alter  their  position  on  the  faith  of  the 
representation    so    made."     Moodie    v. 
Seventh  Nat  Bank,  3  Weekly  N.  G,  118 
(1870),   holding  that  if  the    purchaser 
takes  partly  for  an  antecedent  debt  he 
is  not  a  bona  fide  holder  to  that  extent 
Dovey's  Appeal,  97  Pa.  St.,  153  (1881). 
The  books  are  full  of  cases  wherein  an 


agent  has  committed  a  breach  of  trust 
in  the  sale  of  stock.  For  many  instances 
of  this  kind  of  fraud  and  the  various 
principles  of  law  applicable  thereto,  see 
chs.  19,  22,  24.  An  assignee  in  insolv- 
ency of  the  agent  does  not  take  the 
stock.  See  §  320.  An  agent  to  collect 
dividends  who  loans  the  stock  at  a  profit 
is  liable  for  its  loss,  even  "though  he  in- 
formed the  owner  of  the  loan  and  she 
did  not  object  Persch  v.  Quiggle,  57 
Pa.  St,  247  (1808).  A  bona  fide  purchaser 
from  the  agent  is  protected.  State  Bank 
v.  Cox,  11  Rich.  Eq.,  344  (1800);  West 
etc.,  Co.'s  Appeal,  81  Pa.  St,  19  (1870): 
Otis  v.  Gardner,  105  111.,  436  (1883); 
Gulick  v.  Markham,  6  Daly,  129  (1875) ; 
Martin  v.  Sedgwick,  9  Beav.,  333  (1840); 
Appeal  of  Linnard,  0  E  Rep.,  877  (Pa., 
1880). 

1  Talmage  v.  Third  Nat  Bank,  91  N.  Y., 
531  (1883) ;  Crocker  v.  Crocker,  31  N.  Y., 
507  (1805) ;  Weaver  v.  Borden,  49  N.  Y., 
286  (1S72),  where  the  agent  fraudulently 
bought  in  his  own  name  and  then  fraud- 
ulently sold;  Williamson  v.  Mason,  12 
Hun,  97  (1877).  Purchaser  from  agent 
with  notice  of  fact  that  he  held  as  agent, 
and  that  he  had  sold  to  himself,  is  not 
protected.  Bank  of  Louisville  v.  Gray, 
2  S.  W.  Rep.,  168  (Ky.,  1886). 

2  Ex  parte  Shaw,  L.  R,  2  Q.  B.  D.,463 
(1877). 

3  Woodhouse  v.  Crescent  Mutual  Ins. 
Co.,  35  La  Ann.,  238  (1882),  holding  also 
that  the  transferee  who  is  charged  with 
receiving  with  notice  may  be  joined  as 
a  party  defendant ;  St  Romes  v.  Cotton 
Press  Co.,  127  U.  S.,  614  (1888). 


484 


CH.  XX.]        CONTRACTS    TO   SELL  —  GAMBLING    SALES  —  FRAUD.  [§352. 

not  afterwards  complain.1  Where  an  agent  to  sell  is  able  to  sell 
for  more  than  he  accounts  for  to  his  principal,  the  latter  cannot 
recover  the  difference  unless  the  sale  was  actually  made.2  Although 
a  customer  may  rescind  a  purchase  of  stock  made  for  him  by  his 
broker,  when  he  discovers  that  the  broker  sold  him  stock  owned 
by  such  broker,  yet  if  the  customer  has  exchanged  such  stock  for 
reorganization  stock  he  must  tender  back  the  reorganization  stock.15 
In  England  the  courts  do  not  protect  a  purchaser  of  certificates  of 
stock  unless  the  latter  has  not  only  purchased  but  has  obtained  a 
registry  on  the  corporate  books.4 

An  agent's  power  to  sell  stock  does  not  authorize  him  to  pledge 
it.5  A  person  who  knows,  or  has  the  means  of  knowing,  that 
another  person  holds  stock  as  an  agent  only,  cannot  take  such  stock 
in  pledge  from  the  agent,  although  the  latter  represents  that  the 
money  is  to  be  used  for  his  principal.  The  principal  may  re- 
cover the  stock  if  he  has  not  authorized  the  pledge.6  A  bona  fide 
purchaser  of  certificates  of  stock  from  a  pledgee  is  similarly  pro- 
tected.7 

§  352.  Fraud  may  be  by  corporate  reports  or  prospectus. —  A  re- 
port of  corporate  officers  to  the  stockholders,  setting  forth  the  condi- 
tion of  the  affairs  of  the  corporation,  is  deemed  to  be  a  statement  to 
the  public  also,  and  it  may  be  relied  upon  by  any  one  in  purchasing 
shares.     This  principle  of  law  was  first  clearly  established  in  Eng- 

1  As  to  the  admissibility  in  evidence  Easton  v.  London,  etc.,  Bank,  55  L.  T. 
of  receipt  showing  that  agent  was  au-  Rep.,  678  (1886).  Even  in  England,  if  a 
thorized  to  sell  by  order  of  the  princi-  broker  transfers  stock  in  breach  of  trust 
pal's  brother,  see  Dwyer  v.  Fuller,  UN.  to  a  bank,  and  the  bank  afterwards  at 
E.  Rep.,  686  (Mass.,  1887).  Pledge  of  his  request  transfers  the  stock  to  another 
stock  by  agent  is  not  a  conversion,  person,  the  bank,  being  ignorant  of  his 
where  the  principal  receives  without  agency,  is  not  liable  to  the  principal  for 
objection  and  retains  a  receipt  from  the  the  value  of  the  stock.  Marshall  v.  Nat'l, 
agent  setting  forth  such  pledge.  Met-  etc..  Bank  of  Eng.,  66  L.  T.  Rep.,  525 
calf  v.  Williams,   11    N.   E   Rep.,  700  (1892).    See.  also,  §§  378, 379. 

(Mass.,  1887).  5  Merchants'  Bank  of  Canada  v.  Liv- 

2  Edison  v.  Gilliland,  42  Fed.  Rep.,  205  ingston,  74  N.  Y.,  223  (1878).  See  §§  321, 
(1890).  326. 

3  Mayo  v.  Knowlton,  10  N.  Y.  Supp.,  6  Fisher  v.  Brown,  104  Mass.,  259 
230  (1890).  (1870). 

4  In  England  it  is  held,  even  in  regard  7  A  bank  taking  a  pledge  of  nego- 
to  American  certificates  of  stock,  that  a  tiable  bonds  in  good  faith  may  hold 
bona  fide  purchaser  of  certificates  of  them  though  it  turn  out  that  the 
stock,  duly  indorsed,  from  an  agent  pledger  was  not  the  owner  of  them,  but 
selling  in  breach  of  faith,  is  not  pro-  held  them  as  security  that  a  mortgage 
tected  until  registry  is  obtained.  Colo-  would  be  canceled.  Saloy  v.  Hibernia, 
nial  Bank  v.  Hepworth,  57  L.  T.  Rep.,  etc..  Bank,  1  S.  Rep.,  657  (La.,  1887).  As 
148(1887).  But  see  Williams  v.  Colonial  to  sales  by  trustees,  etc.,  nee  ch.  XIX, 
Bank,  57  L.  T.  Rep,  188  (1887);  and  see  supra. 

485 


§  352.] 


CONTRACTS    TO    SELL GAMBLING    SALES  —  FRAUD.         [CH.  XX. 


land  in  18G0,  in  the  case  of  Davidson  v.  Tulloch.1  It  was  there  held 
that  there  need  be  no  privity  between  the  officers  issuing  the  report 
and  the  person  purchasing  shares  of  stock  from  third  persons.  If 
such  purchaser  made  his  purchase  relying  upon  material  statements 
in  corporate  reports  which  were  false,  he  has  his  remedy  against 
all  persons  who  knowingly  made  or  issued  the  report.2  The  lead- 
ing case  in  this  country  on  the  liability  of  corporate  directors  for 
fraudulent  representation  as  to  the  condition  of  the  company,  not 
made  to  a  purchaser  of  stock  personally,  but  to  the  public  gener- 
ally, is  Cross  v.  Sackett,3  decided  in  1858,  where  fraudulent  divi- 
dends and  representations  based  thereon  were  made. 


i  6  Jur.  (N.  S.).  543 ;  S.  C,  3  Macq.  (H. 
of  L.),  783. 

2  Scott  v.  Dixon,  29  L.  J.  (Ex.).  62,  n. 
(1859),  explained  in  Peck  v.  Gurney,  L. 
R,  6  H.  L.,  398  (1873).  as  follows :    "The 
report,   though  originally  made  to  the 
shareholders,  was   intended  for  the  in- 
formation of  all  persons  who  were  dis- 
posed to  deal  in  shares ;  and  the  repre- 
sentation must  be   regarded  as  having 
been  made  not  indirectly,  but  directly 
to  each  person  who  obtained  the  report 
from    the  bank  where  it  was    publicly 
announced  it  was  to  be  brought,  in  the 
same  manner  as  if  it  had  been  person- 
ally delivered  to  him  by  the  director." 
Gerhard  r.  Bates,  20  Eng.  L.  &  Eq..  129 
(1853);  Cullen  v.  Thompson,  6  L.  T.  (N. 
S.).  870  (1862),  holding  that,  where  di- 
rectors of  a  joint-stock  company  issue 
false  and  fraudulent  reports  to  the  pub- 
lic,  and    the    manager,    secretary  and 
other  officers  of  the   bank  supply  the 
detailed    statements    for    such    report, 
knowing  them  to  be  false  and  that  they 
are  to  be  used  for  purposes  of  deceit, 
and  a   third  party,  acting  on  such  re- 
ports, purchases  shares  in  the  company 
and  suffers  loss   thereby,  each  of   the 
officers  of  the  company  who  knowingly 
assisted  in  the  fraud  is  personally  liable 
to  such  third  party  for  the  loss  caused 
by  such  misrepresentation  in  the  report, 
though   the  report  was  signed  only  by 
the  directors  and  not  by  the  subordinate 
officers. 

3  2    Bosw.,  617:  6    Abb.    Pr.,   247;  16 
How.  Pr.,  62,  the  court  saying :  "  When 


an  instrument  is   made  to  deceive  the 
public  generally,  and  is  adapted  as  well 
as  intended  to  deceive  some  portion  of 
the  public,  and  as  well  one   person  as 
another,  and  was  used  as  it  was  designed 
it  should  be,  and  fraudulently  induces 
some  one  to  act  to  his  prejudice  by  act- 
ing in  the  mode  it  was  intended  to  influ- 
ence them  to  act  who  might  be  deceived 
by  it,  the  person  who  made  the  instru- 
ment and  caused  it  to  be  thus  fraudu- 
lently used  is  liable  to  the  person  who 
has  been  defrauded  bj-  it      In   such  a 
case  the  person  injured  has  been  sub- 
jected to  damages  by  his  fraudulent  acts, 
and  the  fraudulent  wrong-doer  is  liable 
for  the  consequences."     Cazeaux  v.  Mali, 
25  Barb..  578  (1857).     "It  is  not  essential 
that  the  reference  should  be  addressed 
directly  to  the  plaintiff ;  if  it  were  made 
with  the  intent  of  its  influencing  every 
one  to  whom  it  might  bf.  communicated, 
or  who  might  read  or  hear  of  it,  the 
latter  class  of  persons  would  be  in  the 
same  position  as  those  to  whom  it  was 
directly  communicated,  but  they  must 
have  come  to  a  knowledge  of  it  before 
their  purchase."      Morse  v.   Swits,    19 
How.    Pr.,   275   (1859),  holding  a  bank 
officer   liable  for  false  statements  in  a 
report  published  in  accordance  with  the 
requirements  of  a  statute.      The  court 
said :  "  Being  published,   the  public  or 
any  individual  of  the  public  has  a  right 
to  believe  it.     And  if,  believing  it,  any 
one  of  the  public  acts  on  that  belief,  the 
makers  and  publishers  of  this  falsehood 
are  to   be  held    liable  for    the  conse- 


4«0 


CH.  XX.]       CONTRACTS  TO  SELL— GAMBLING  SALES FRAUD.       [§§  353,  354. 

§  353.  A  somewhat  different  rule  prevails  in  England  as  to  false 
statements  contained  in  a  prospectus  of  a  corporation.  A  prospectus 
is  issued  for  the  purpose  of  inducing  persons  to  subscribe  for  stock. 
Its  object  is  not  to  promote  the  sale  of  that  stock.  Accordingly  it 
was  decided  in  Peek  v.  Gurney,1  in  1873,  that  "the  purchaser' of 
shares  in  the  market,  upon  the  faith  of  a  prospectus  which  he  has 
not  received  from  those  who  are  answerable  for  it,  cannot,  by  action 
upoii  it,  so  connect  himself  with  them  as  to  render  them  liable  to 
him  for  the  misrepresentation  contained  in  it  as  if  it  had  been  ad- 
dressed personally  to  himself."  In  New  York  a  directly  opposite 
rule  prevails.  In  the  case  of  Morgan  v.  Skiddy,2  in  1875,  the  court 
of  appeals  held  that,  "if  the  plaintiff  purchased  his  stock  relying 
upon  the  truth  of  the  prospectus,  he  has  a  right  of  action  for  deceit 
against  the  persons  who,  with  knowledge  of  the  fraud  and  with  in- 
tent to  deceive,  put  it  in  circulation.  The  representation  was  made 
to  each  person  comprehended  within  the  class  of  persons  who  were 
designed  to  be  influenced  by  the  prospectus ;  and  when  a  prospectus 
of  this  character  has  been  issued,  no  other  relation  or  privity  be- 
tween the  parties  need  be  shown  except  that  created  by  the  wrong- 
ful and  fraudulent  act  of  the  defendants  in  issuing-  or  circulating: 
the  prospectus,  and  the  resulting  injury  to  the  plaintiff." 

§354.  Remedies  for  the  fraud. — -There  are  three  methods  by 
which  a  person  who  has  been  fraudulently  induced  to  buy  or  sell 
stock  may  remedy  the  wrong.3     He  may  bring  an  action  at  law 

quences  they  have  caused  "  (citing  cases),  so  voted  is  legal.     The  by-laws  provid- 

See,     also,    Salmon    v.    Richardson,   30  ing  for  such  a  vote  override  a  general 

Conn.,  360(1862);  Fenn  v.  Curtis,  23  Hun.  statement  in   a  prospectus  to  the  con- 

384  (1881),  holding  corporate  secretary  trary,  the  stockholders  knovviug  of  the 

liable  to  purchaser  of  shares  from  an  in-  by-law.     Compton  v.  Chelsea,  128  N.  Y.. 

dividual,    the  secretary  having  signed  537  (1891). 

the  certificate  of  stock  and  also  a  circu-  l  L.  R.,  6  H.  L.,  377,  overruling  Sey- 
lar  stating  that  the  corporation  was  a  mour  v.  Bagshaw,  18  C.  B.,  903  (1856), 
corporation  when  in  fact  it  was  not.  and  Bedford  v.  Bagshaw,  4  H.  &  N.,  538 
And  see  §§  40, 48,  supra.  A  person  buy-  (1859):  explaining  Scott  v.  Dixon.  29  L. 
ing  stock  in  what  was  supposed  to  be  J.  (Ex.),  62,  n.  (1S59),  and  Gerhard  v. 
a  corporation,  but  is  a  partnership,  can-  Bates,  2  El.  &  Bl..  476  (1853),  and  itself 
not  recover  back  his  money  from  all  of  explained  in  Cargill  v.  Bower,  L.  R.,  10 
the  participants.  Perry  v.  Hale,  10  N.  Ch.  D.,  502(1878).  In  Bell  airs  v.  Tucker, 
E.  Rep.,  174  (Mass.,  1887).  A  corpora-  L.  R,  13  Q.  B.  D.,  563  (1884),  the  court 
tion  is  not  liable  for  misrepresentations  seems  to  have  assumed  a  different  posi- 
of  the  president  in  selling  stock  belong-  tion,  and  to  have  treated  the  prospectus 
ing  to  himself.  Prosser  v.  First  Nat'l  the  same  as  any  other  method  of  mis- 
Bank,  106  N.  Y.,  677  (1887).  Where  representation, 
stockholders  in  an  apartment  house  cor-        262  N.  Y,  319. 

poration  are  entitled  to  rent  apartments        3  "  A  person  who  has  been  induced  by 

at  a  rental  to  be  fixed  by  a  majority  vote  fraudulent  representations  to    become 

of  the  stockholders,  an  increased  rental  the  purchaser  of  property  has  upon  dis- 

487 


§35-1.]  CONTRACTS   TO   SELL  —  GAMBLING    SALES  —  FRAUD.         [CH.  XX. 


for  the  consideration,  or  an  action  at  law  for  damages  for  thp  de- 
ceit, or  he  may  file  a  bill  in  equity  to  have  the  transaction  set 
aside.  The  second  remedy  is  the  most  difficult  and  the  last  the 
most  easy  to  maintain. 

In  special  cases  other  remedies  are  open  to  the  purchaser.  He 
may  compel  the  defrauding  party  to  abide  by  the  statements  that 
were  made.1  If  the  contract  is  executory  it  may  canceled  by  mut- 
ual agreement.2  The  pleadings  in  enforcing  the  remedies  which 
the  vendee  has  vary,  of  course,  according  to  the  remedy  which  is 
pursued.3 


covery  of  the  fraud  three  remedies  open 
to  him.  either  of  which  he  may  elect. 
He  may  rescind  the  contract  absolutely 
and  sue  in  an  action  at  law  to  recover 
the  consideration  parted  with  upon  the 
fraudulent  contract  To  maintain  such 
action  he  must  first  restore,  or  offer  to 
restore,  to  the  other  party  whatever  may 
have  been  received  by  him  by  virtue  of 
the  contract 

**  He  may  bring  an  action  in  equity  to 
rescind  the  contract  and  in  that  action 
have  full  relief.  Such  an  action  is  not 
founded  upon  a  rescission,  but  is  main- 
tained for  a  rescission,  and  it  issufficient, 
therefore,  for  the  plaintiff  to  offer  in  his 
complaint  to  return  what  he  has  re- 
ceived and  make  tender  of  it  on  the 
trial.  Lastly,  he  may  retain  what  he  has 
received  aud.bring  an  action  at  law  to  re- 
cover the  damages  sustained.  This  action 
proceeds  upon  an  affirmance  of  the  con- 
tract, and  the  measure  of  the  plaintiff's 
recovery  is  the  difference  between  the 
article  sold  and  what  it  should  be  ac- 
cording to  the  representations."  Vail  v. 
Reynolds,  118  N.  Y.,  297  (1890).  Where 
the  sale  of  stock  has  been  induced  by 
fraud  the  vendee  may  follow  the  money 
paid  by  him  and  recover  it  back  if  the 
identity  of  the  fund  can  be  shown. 
Moore  v.  Williams,  62  Hun,  55  (1891). 

1  Where  an  apartment  house  corpo- 
ration induces  by  prospectus  subscrip- 
tions on  representations  that  certain 
subscriptions  entitle  the  holder  to  a 
perpetual  leasehold  in  the  apartments 
selected  by  the  subscriber,  he  cannot 
afterwards  be  evicted  on  the  ground  that 


the  building  cost  more  than  was  ex- 
pected and  further  rent  must  be  paid. 
Compton  v.  Chelsea.  8  N.  Y.  Supp.,  622 
(1890) ;  aff'd,  128  N.  Y,  537.  Where  a 
person  organizes  a  railroad  corporation 
and  takes  a  contract  for  its  construc- 
tion, and  causes  all  the  stock  and  a  large 
quantity  of  bonds  to  be  issued  to  him- 
self, and  then  sells  these  stocks  and 
bonds  and  has  knowledge  of  represen- 
tations made  by  corporate  officers  to  his 
vendee  that  the  company  owes  nothing 
except  the  bonds,  he  cannot  afterwards 
enforce  a  claim  for  doing  extra  work 
under  a  contract,  whore  such  contract 
did  not  appear  on  the  books  of  the 
company.  The  transaction  is  a  fraud 
on  his  part  Chicago,  etc.,  R'y  v.  Miller, 
51  N.  W.  Rep.,  981  (Mich.,  1892).  Al- 
though a  purchaser  of  stock  cannot 
rescind,  he  having  been  guilty  of  delay, 
yet  he  may  sue  the  vendor  upon  a  war- 
ranty that  the  stock  will  be  worth  more 
than  what  it  was  sold  for.  Maxted  v. 
Fowler,  53  N.  W.  Rep.,  921  (Mich.,  1892). 

2  A  subscription  may  be  cancelt  d  by 
and  with  the  consent  of  the  directors 
when  fraud  is  involved.  Four  years 
afterwards  corporate  creditors  cannot 
attack  it  McDermott  v.  Harrison,  9 
N.  Y  Supp.,  184  (1890).  See  ch.  X  If 
there  has  been  a  mutual  mistake  in  re- 
gard to  what  the  stock  really  repre- 
sented in  property,  an  action  for  money 
had  and  received  or  a  suit  to  cancel  the 
sale  will  lie.  Norton  v.  Bohart  16  S.  W. 
Rep.,  598  (Mo.,  1891). 

3  In  the  case  of  Smith  v.  Tracy,  36  N. 
Y.,  78  (1867),  the  vendee  sued  the  vendor 


488 


CH.  XX.]        CONTRACTS    TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§355. 


§  355.  Action  for  deceit. —  In  order  to  sustain  an  action  for  dam- 
ages for  deceit,  whereby  plaintiff  was  induced  to  buy  or  sell. shares 
of  stock,  it  is  necessary  for  the  plaintiff  to  prove  that  statements 
were  made  or  acts  done  which  were  fraudulent,  that  the  person 
guilty  of  them  knew  that  they  were  fraudulent,  and  that  the  plaint- 
iff acted  on  such  statements  or  acts  in  buying  or  selling  the  stock.1 
In  England  a  statement  made  recklessly,  or  without  regard  as  to 
whether  it  is  true  or  untrue,  may  constitute  a  fraudulent  intent.2 


for  a  breach  of  warranty,  alleging  that 
the  vendor's  agent  made  certain  repre- 
sentations as  to  the  condition  of  the 
corporation.  The  action  failed  on  the 
ground  that  the  vendor  did  not  author- 
ize the  agent  to  make  a  warranty.  In 
the  case  of  Ayers  v.  French,  41  Conn., 
142  (1874),  the  court  held  that  fraud,  in- 
ducing the  owner  of  stock  to  part  with 
it,  may  be  remedied  by  the  action  of 
trover  with  a  count  in  case  for  a  fraudu- 
lent procurement  and  conversion  of 
the  stock.  In  the  case  of  National  Ex- 
change Co.  v.  Drew,  2  Macq.  (H  of  L.), 
103  (1855),  it  was  held  that  where  a  per- 
son is  induced  by  the  fraudulent  reports 
and  representations  of  corporate  officers 
to  purchase  stock,  and  the  corporation 
loans  him  money  to  do  so,  it  cannot  re- 
cover back  the  money  loaned.  See 
Lightfoot  v.  Creed,  8  Taunt.,  267  (1818), 
holding  that  the  vendee  should  declare 
not  for  money  paid,  but  specially  on  the 
contract. 

i  Arkwright  v.  Newbold,  L.  R.,  17  Ch. 
D.,  301  (1881);  Arthur  v.  Griswold,  55 
N.  Y.,  400,  410  (1874),  the  court  saying : 
"  The  rules  of  law  require  a  reason- 
able degree  of  certainty  as  to  each  req- 
uisite necessary  to  constitute  the  cause 
of  action,  viz.,  representations,  falsity, 
scienter,  deception  and  injury." 

2  In  the  important  case  of  Derry  v. 
Peek,  61  L.  T.  Rep.,  265  (1889).  the  House 
of  Lords  decided  that  in  order  to  sustain 
an  action  of  deceit  there  must  be  proof 
of  fraud,  and  nothing  short  of  that  will 
suffice.  Fraud  is  proved  when  it  is 
shown  that  a  false  statement  has  been 
made  (1)  knowingly ;  (2)  without  belief 
in   its    truth;  (3)  recklessly.    But  if  a 


man  make  a  false  statement  honestly 
believing  it  to  be  true,  it  is  not  sufficient 
to  support  an  action  of  deceit  to  show 
that  he  had  no  reasonable  grounds  for 
his  belief.  The  directors  of  a  tramway 
company  issued  a  prospectus  in  which 
they  stated  that  they  were  authorized 
to  use  steam  power,  and  that  by  this 
means  a  great  saving  in  working  would 
be  effected.  At  the  time  of  making  this 
statement  they  had  not  in  fact  obtained 
authority  to  use  steam  power,  but  they 
honestly  believed  that  they  would  ob- 
tain it  as  a  matter  of  course.  Held 
(reversing  the  judgment  of  the  court 
below),  that  they  were  not  liable  in  an 
action  of  deceit  brought  by  a  share- 
holder who  had  been  induced  to  apply 
for  shares  by  the  statement  in  the  pro- 
spectus. In  an  action  for  deceit  by  a 
misrepresentation  in  a  prospectus  as  to 
the  net  profit  on  the  capital  employed, 
the  action  being  against  one  who  was  a 
promoter,  and  also  one  of  the  vendors, 
and  whose  name  appeared  in  the  pro- 
spectus and  who  became  a  director,  the 
plaintiff  must  prove  (1)  that  the  defend- 
ant's statement  was  untrue ;  (2)  that  it 
was  dishonest ;  (3)  that  he  believed  it  to 
be  untrue.  Glasier  v.  Rolls,  62  L.  T. 
Rep.,  133  (1889),  reversing  60  id.,  591, 
and  following  the  House  of  Lords  in 
Derry  v.  Peek,  61  id.,  265.  Peek  v.  Gur- 
ney,  L.  R,  6  H.  L,  377  (1873),  the  court 
saying :  "  It  is  said  that  the  prospectus 
is  true  as  far  as  it  goes,  but  half  a  truth 
will  sometimes  amount  to  a  real  false- 
hood." See,  also,  ch.  IX,  §  147.  In 
Bellaires  v.  Tucker,  L  R,  13  Q.  B.  D, 
563  (1884),  however,  the  court  say :  "  The 
action  is  one  for  deceit    It  is  necessary 


489 


§355.]  CONTRACTS    TO    SELL GAMBLING    SALES FRA'D.         [CH.  XX. 

In  New  York  the  rule  is  more  stringent.  The  case  of  Wakeman 
v.  Dalley1  applies  to  this  class  of  cases  the  rule  that  "an  action 
founded  upon  the  deceit  and  fraud  of  the  defendant  cannot  be 
maintained  in  the  absence  of  proof  that  he  believed,  or  had  reason 
to  believe  at  the  time  he  made  them,  that  the  representations  made 
by  him  were  false,  and  that  they  were  for  that  reason  fraudulently 
made,  or  that  he  assumed  or  intended  to  convey  the  impression 
that  he  had  actual  knowledge  of  their  truth,  though  conscious  that 
he  had  no  such  knowledge." 

This  case  held  that  a  director  is  not  liable  for  false  representa- 
tions on  the  company's  printed  business  cards,  of  which  he  was 
ignorant,  even  though  his  name  was  attached  thereto.  In  Cali- 
fornia it  is  held  that  the  purchaser  of  stock  who  has  given  a  note 
in  payment  cannot  defeat  an  action  on  the  note  by  setting  up  that 
the  purchase  was  induced  by  fraud.  lie  must  first  disaffirm  the 
contract  and  return  the  certificate,  and  such  return  must  be  made 
before  the  trial.2  But  where  the  purchaser  brings* an  action  for 
deceit  he  need  not  return  the  consideration  nor  rescind  the  con- 
tract.3 His  injury  is  to  be  duly  measured,  and  credit  may  be  given 
for  the  real  value  of  the  stock.4     A  director  is  not  liable  for  the 


not  only  to  prove  that  the  statements  in 
a  prospectus  or  any  other  document  are 
not  true,  but  it  must  be  proved  that  they 
are  fraudulently  put  forward  with  in- 
tent to  deceive."' 

1 51  N.  Y.,  27  (1872) ;  Nelson  v.  Luling, 
4  N.  Y.  Sup.  Ct..  544  (1873);  aff'd,  62  N. 
Y..  645 :  Schweuck  v.  Naylor,  102  N.  Y., 
683  (1886).  The  case  of  Holmes  v. 
Moffat,  120  N.  Y.,  159  (1890),  was  an  ac- 


he represented  as  of  his  own  knowledge 
that  tiny  were  true,  when  in  fact  he 
had  lx »  such  knowledge."  Cole  v.  Cas- 
si-lv.  188  Mass.,  437  (1885).  In  an  action 
for  fraud  inducing  the  purchase  of 
stock  scienter  must  be  proved.  It  is 
sufficient  that  the  defendant  had  no 
good  reason  to  believe  that  material 
representations  made  by  him  were  true. 
A  statement  that  §1,500,000  worth  of  ore 


tion  for  false  representations  and  deceit  was  lying  on  the  ground  aroundythe  mine 

in   the  sale  of  stock,  but  the  decision  is  a    material    representation.      Brandt 

turned  upon  technical  rules  relative  to  v.   Frederick,  47  N.   W.  Rep..   6  (Wis.. 

the  trial.     See,  also,  Clark  v.  Edgar,  80  1890).     In   Wisconsin,   in  a  sujf  by    a) 

Mo.,  106  (1884) ;  Gee  v.  Moss,  68  Iowa,  vendee  of  stock  against  the  vendor  for 

8(1!  The  action  for  deceit  does  damages  for  obtaining  money  and  prop- 


not  lie  against  the  corporation,  at  least 
where  no  fraudulent  intent  is  proved. 
Pinedo  v.  Germania,  etc.,  Co.,  N.  Y. 
Daily  Reg.,  July  29,  1885.  See,  also, 
§  157.  In  an  action  of  tort  for  deceit 
against  a  director  for  inducing  a  person 
to  purchase  stock,  "the  plaintiff  must 
prove  representations  of  material  facts 
which  are  false,  and  which  induce  him 
to  act;  and  either  that  the  defendant 
knew  them  to  be  false,  or  that  the  facts 
being  facts  susceptible   of  knowledge. 


erty  by  false  and  fraudulent  representa- 
tions, the  defendant  may  be  arrested. 
Warner  v.  Bates,  43  N.  W.  Rep.,  957 
(Wis.,  1889),  giving  the  complaint  and 
affidavit. 

2  Gifford  v.  Carhill,  29  Cal.,  589  (18R6). 

3  Miller  v.  Barber,  66  N.  Y.,  558,  564 
(1876) ;  Newberry  v.  Garland,  31  Barb.. 
121  (1860). 

4  See  ch.  XXXV.  In  an  action  for 
false  representations  inducing  the  pur- 
chase of  stock,  the  defendant  may  show 


490 


CH.  XX.]         CONTKACTS    TO    SELL  —  GAMBLING    SALES FRAUD.  [§355. 

misrepresentations  and  frauds  of  his  co-directors,  unless  he  has  ex- 
pressly authorized  or  tacitly  permitted  commission  thereof.1  The 
mere  fact  of  being  a  director  "  is  not  per  se  sufficient  to  hold  a 
party  liable  for  the  frauds  ami  misrepresentations  of  the  active 
managers  of  a  corporation.  Some  knowledge  of  and  participation 
in  the  act  claimed  to  be  fraudulent  must  be  brought  home  to  the 
person  charged."  2  "Where,  however,  proof  is  given  tending  to  show 
that  the  defendants  were  jointly  engaged  in  a  common  scheme  to 
defraud  the  plaintiff,  the  acts  and  declarations  of  one  are  admis- 
sible in  proof  against  all;3  and  frauds  of  a  similar  nature,  at  or  near 
the  same  time  as  the  one  complained  of,  may  be  shown.4  The 
fraud  practiced  •need  not  have  been  the  sole  inducement  to  the  pur- 
chase.5 A  party  may  be  liable  herein  although  he  was  neither  a 
corporate  officer  nor  the  vendor  of  the  stock.  If,  with  intent  to 
cheat  and  defraud  the  vendee,  he  induces  him,  by  fraudulent  means, 
to  purchase  stock  for  value  which  he  knows  to  be  worthless,  he  is 
liable  for  the  damage  sustained,  although  the  purchase  is  actually 
made  from  another.''  A  sale  of  stock  does  not  transfer  a  right  of 
action  for  damages  caused  by  false  representations  made  to  the 
vendor  by  the  party  from  whom  the  vendee  purchased.7  In  an 
action  by  a  purchaser  of  stock  against  the  company  and  two  di- 


that  the  stock  was  worth  as  much  as  it 
would  have  been  had  the  represeuta- 
tions  been  true.     Doran  v.  Eaton,  41  N. 
W.  Rep.,  244  (Minn.,  1889). 
i  Weir  v.  Barnett,  L.  R,  3  Ex.  D.,  32. 

2  Arthur  v.  Griswold,  55  N.  Y.,  400, 
406  (1874);  Morgan  v.  Skiddy,  62  N.  Y., 
319.  Where  a  party  purchases  stock  re- 
lying on  a  prospectus  which  states  that 
reports  had  been  prepared  for  the  di- 
rectors by  the  engineers,  and  giving  ex- 
tracts from  the  reports,  the  directors  are 
not  personally  liable  in  an  action  for  de- 
ceit, even  if  it  is  shown  that  the  reports 
were  not  prepared  on  instructions  from 
the  directors,  but  were  prepared  on  in- 
structions from  the  vendors  to  the  com- 
pany. It  is  necessary  to  prove  that  the 
reports  were  untrue.  Angus  v.  Clifford, 
65  L.  T.  Rep.,  274  (1891),  reversing  63 
L.  T.  Rep.,  684  (1890). 

3  Miller  v.  Barber,  66  N.  Y.,  558,  567 
(1876). 

*  Id. 

5  Morgan  v.  Skiddy,  62  N.  Y,  319,  328 
(1875) ;  Ex  parte  Carling,  56  L.  T.  Rep., 


115  (1887).  Plaintiff  need  not  prove  that 
he  relied  Solely  upon  the  misrepresenta- 
tions. Hatch  v.  Spooner,  13  N.  Y.  Supp., 
642  (1891). 

6  Hubbell  v.  Meigs,  50  N.  Y,  480,  490 
(1872).  Upon  the  effect  of  false  and 
fraudulent  representations  on  an  action 
for  damages,  see  Tockerson  v.  Ohapin, 
52  N.  Y.  Super.  Ct.,  16  (1885).  It  is  no 
defense  to  such  an  action  that  the  orig- 
inal conversion  was  by  some  one  else. 
Kuhn  v.  McAllister,  1  Utah,  275  (1875) ; 
S.  C,  sab  nom.  McAllister  v.  Kuhn,  95 
U.  S.,  87  (1877). 

7  Kennedy  v.  Benson,  54  Fed.  Rep.,  836 
(Iowa,  1893).  Where  fraudulent  repre- 
sentations are  made  inducing  a  party  to 
sell  his  stock,  and  then  the  purchaser 
wrecks  the  corporation,  the  vendor  may 
hold  the  latter  liable  for  damages.  The  as- 
signee of  the  cause  of  action  may  sue  in 
trover  for  conversion,  but  cannot  sue  for 
damages  for  fraudulent  representations, 
inasmuch  as  the  latter  cause  of  action 
is  not  assignable.  Smith  v.  Thompson 
et  al,  54  N.  W.  Rep.,  168  (Mick,  1892). 


491 


§  356.]  CONTRACTS   TO    SELL  —  GAMBLING    SALES  —  FRAUD.        [CH.  XX. 


rectors  for  deceit,  the  verdict  may  be  against  one  or  more  of  the 
defendants  and  may  be  sustained  by  one  or  more  of  the  misrepre- 
sentations alleged.1  Several  persons  defrauded  of  their  contract 
whereby  they  were  to  receive  stock  cannot  sue  jointly.  Each  must 
sue  separately.2  The  measure  of  damages  for  fraud  inducing  the 
purchase  of  stock  "is  the  difference  between  the  value  of  the  stock 
at  the  time  it  was  purchased  and  the  price  paid  for  it." 3 

§  356.  Remedy  in  equity. —  A  court  of  equity  has  concurrent  juris- 
diction with  a  court  of  law  in  enabling  a  purchaser  of  stock  to  re- 
cover back  money  paid,  where  the  purchase  was  induced  by  fraud 
chargeable  to  the  vendor.4  The  remedy  in  equity,  for  a  sale  or 
purchase  of  stock  induced  by  fraud,  is  by  a  bill  \o  set  aside  the 


1  Lare  v.  Westmoreland,  etc.,  Co.,  25 
Atl.  Rep.,  812  (Pa,  1893),  holding,  also, 
that  the  party  purchasing  the  stock  may 
rescind  or  may  retain  the  stock  and  sue 
for  damages. 

2Summerlin  v.  Fronteriza,  etc.,  Co.,  41 
Fed.  Rep.,  249  (1890). 

3  Redding  v.  Godwin,  46  N.  W.  Rep., 
563  (Minn.,  1890).    See,  also,  §  581.    In 
an  action  for  damages  for  fraud  induc- 
ing the  plaintiff  to  purchase  stock,  the 
measure  of  damages  is  "  not  the  differ- 
ence between  the  contract  price  and  the 
reasonable  market  value  if  the  property 
had  been  as  represented  to  be,  even  if 
the  stock  had  been  worth  the  price  paid 
for  it ;  nor,  if  the  stock  were  worthless, 
could  the  plaintiff  have  recovered  the 
value  it  would  have  had  if  the  property 
had  been  equal  to  the  representations. 
What  the  plaintiff  might  have  gained  is 
not  the  question,  but  what  he  had  lost 
by  being  deceived  into  the  purchase." 
The  defendant  "was  bound  to   make 
good  the   loss  sustained,  such   as   the 
moneys  plaintiff  had  paid  out  and  inter- 
est, and  any  other  outlay  legitimately 
attributable  to  defendant's  fraudulent 
conduct;  but  this  liability  did  not  in- 
clude the  expected  fruits  of  an  unreal- 
ized speculation."    Smith  v.  Bolles,  132 
U.  S.,  125  (1889). 

*  Where  a  person  is  induced  to  sub- 
scribe for  stock  on  the  fraudulent  rep- 
resentations of  the  president  that  the 
company  is  in  a  prosperous  condition, 
the  person  may  file  a  bill  in  equity  to 


recover  back  the  money,  and  equity  has 
jurisdiction  on  the  grounds  of  discov- 
ery, account,  fraud,  misrepresentation 
and  concealment  Both  the  compauy 
and  the  president  individually  were 
made  defendants  and  held  liable.  Tyler 
v.  Savage,  143  U.  S.,  79  (1892).  See,  also, 
Hill  v.  Lane,  L.  R,  11  Eq.,  215,  where 
the  court  say :  "  It  is  so  well  settled 
that  this  court  will  entertain  jurisdic- 
tion in  such  cases  that  it  would  be  a  mis- 
fortune, indeed,  to  the  public  if  there 
were  any  sufficient  ground  for  consid- 
ering that  the  jurisdiction  is  doubtful. 
.  .  .  Although  courts  of  common  law 
may  have  jurisdiction  in  some  such 
cases,  there  is  clearly  concurrent  juris- 
diction in  this  court,"  doubting  Ogilvie 
v.  Currie,  37  L.  J.  (Ch.),  541  (1868) ;  Camp- 
bell v.  Fleming,  1  Ad.  &  EL,  40  (1834). 
A  bill  in  equity  is  a  proper  remedy  for 
fraud  inducing  a  sale  of  stock.  An- 
driessen's  Appeal,  16  AtL  Rep.,  840  (Pa., 
1889). 

Where  the  president  sells  stock  for 
$120  per  share  after  he  has  indorsed  a 
false  statement  of  the  company's  af- 
fairs, the  stock  being  really  worth  but 
$70  per  share,  the  vendee  may  have  the 
sale  rescinded.  Prewitt  v.  Trimble,  17 
S.  W.  Rep.,  356  (Ky.,  1891).  In  a  suit  to 
rescind  for  fraud  the  plaintiff  must 
prove  that  the  stock  was  not  worth 
what  he  paid  for  it  or  could  not  be  sold 
for  that  sum.  Aron  v.  De  Castro,  13  N. 
Y.  Supp.,  372  (1891);  affirmed,  131  N.  Y., 
651.    In  an  action  in  equity  to  rescind  a 


492 


CH.  XX.]         CONTRACTS   TO    SELL  —  GAMBLING    SALES  —  FRAUD.  [§356. 


whole  transaction.1  This  remedy  follows  the  rules  usually  pre- 
scribed in  such  suits.  It  is  not  necessary  for  the  complainant  to 
prove  a  fraudulent  intent.     Innocent  acts  or  misrepresentations 


sale  of  stock  for  fraud  the  corporation 
is  not  a  necessary  party.  The  value  of 
the  stock  need  not  be  shown,  and  the 
amount  paid  with  interest  may  be  re- 
covered. But  six  years'  delay  after  dis- 
covering the  fraud  is  a  bar.  Higgins  V. 
Crouse,  63  Hud,  134  (1892).  In  an  ac- 
tion to  rescind  for  fraud  the  defrauded 
subscribers  need  not  join  as  plaintiffs, 
although  they  all  purchased  at  the  same 
time  and  on  the  same  terms.  Moore  v. 
Robertson,  11  N.  Y.  Supp.,  798  (1890). 
Where  the  vendors  represent  that  the 
money  will  be  used  to  buy  a  secret 
process,  and  they  pay  over  the  money 
to  the  company  for  that  purpose,  and  it 
is  mingled  with  other  funds  and  is  not 
used  to  purchase  the  process  because  the 
process  is  a  fraud,  the  vendees  may  re- 
scind as  to  the  vendors  but  cannot  make 
the  receiver  of  the  company  pay  over 
the  money.  Id.  The  vendor  may  ten- 
der back  the  stock  and  file  a  bill  in 
equity  to  cancel  the  sale  on  the  ground 
that  he  was  induced  to  purchase  by 
false  statements  that  the  corporation 
owned  the  secret  process ;  that  a  patent 
had  been  applied  for ;  that  it  was  ready 
to  commence  business,  and  that  com- 
plainant would  be  made  president  and 
manager.  Benton  v.  Ward,  47  Fed. 
Rep.,  253  (1891).  An  equitable  suit  does 
not  lie  to  rescind  a  sale  of  worthless 
bonds.  A  suit  at  law  is  the  proper  rem- 
edy. United  States  Bank  v.  Lyon  County, 
47  Fed.  Rep.,  514  (1891).  A  purchaser 
of  stock  who  was  induced  to  purchase 
by  fraud  cannot  maintain  a  suit  in 
equity  when  he  fails  to  show  more  than 


a  right  to  pecuniary  damages  for  mis- 
representations. Whitney  v.  Fairbanks, 
54  Fed.  Rep.,  985  (Vt,  1893).  A  cred- 
itor holding  an  unpaid  promissory  note 
cannot  by  bill  in  equity  bring  in  the 
directors  to  hold  them  liable  for  false 
representations  and  also  claim  that  the 
company  was  not  duly  incorporated, 
and  also  bring  in  a  subsequent  corpora- 
tion that  took  all  the  assets  of  the  first, 
and  also  bring  in  those  persons  who 
finally  obtained  such  assets  —  all  in  one 
bill  brought  to  collect  the  debt  Na- 
tional Bank  v.  Texas,  etc.,  Co.,  12  S.  W. 
Rep.,  101  (Tex.,  1889).  See,  also,  to  the 
effect  that  a  court  of  equity  has  juris- 
diction, London,  etc.,  Co.  v.  Central  T. 
Co.,  (N.  Y.  K  J.,  June  12, 1891).  Where 
bank  stock  is  sold  by  fraudulent  and 
false  representations,  the  bank  being 
aware  thereof  and  receiving  indi- 
rectly the  money  paid  for  the  stock, 
the  sale  may  be  rescinded  and  the 
money  recovered  back  from  it  even 
though  it  is  insolvent.  Florida,  etc., 
Co.  v.  Murrill,  52  Fed.  Rep.,  63  (1892). 
Several  subscribers  who  have  been  in- 
duced by  the  same  misrepresentations 
contained  in  a  prospectus  to  subscribe 
for  stock  may  join  in  a  suit  in  equity 
for  the  benefit  of  themselves  and  others 
similarly  deceived  to  set  aside  their 
subscriptions.  Bosher  v.  Richmond, 
etc.,  Co.,  16  S.  E.  Rep.,  360  (Ya.,  1892). 
Several  purchasers  of  stock  may  con- 
tribute to  the  bringing  of  a  test  case  to 
decide  whether  representations  induc- 
ing the  purchase  were  fraudulent. 
Da  vies  v.  Stowell,  47  X.  W.  Rep.,  370 


1  Stainbank  v.  Fernley,  9  Sim.,  556 
(1839),  where  a  sale  by  a  director  who 
has  issued  false  reports  and  declared 
illegal  dividends  was  set  aside.  The  cor- 
poration is  a  proper  party  to  such  ac- 
tions, if  a  registry  has  been  obtained  by 
the  person  who  has  obtained  the  stock 
by  fraud,  since  a  retransfer  on  the  cor- 


porate books  is  asked  for.  See,  also, 
Bradley  v.  Luce,  99  111.,  234  (1881).  A 
judgment  creditor  of  a  foreign  corpora- 
tion cannot  enjoin  it  from  transferring 
stock  and  bonds  owned  by  it  The 
remedy  sought  must  be  something  in 
addition  to  the  injunction.  Rogers  v. 
Michigan,  etc.,  R,  R.,  28  Barb,,  539  (1858). 


493 


§  356.]  CONTRACTS    TO    SELL GAMBLING    SALES FRAUD.         [cH".  XX. 

suffice  for  this  purpose,  although  they  would  be  insufficient  to  sus- 
tain an  action  for  deceit.1 

Where,  however,  the  fraud  is  chargeable  to  the  corporate  officers 
or  third  persons,  and  the  vendor  of  the  stock  is  innocent,  the 
vendee  cannot  rescind  the  sale,  unless  such  corporate  officers  or 
third  persons  acted  as  agents  for  the  vendor.2 

Equity  will  sometimes  compel  the  vendor  to  make  good  his  rep- 
resentations. Thus,  where  the  vendor  represented  that  the  corpo- 
rate property  was  unincumbered,  equity  will  at  the  instance  of  the 
purchaser  of  stock  enjoin  the  vendor  from  enforcing  a  lien  which 
he  has  on  such  property.3  The  right  to  rescind  the  contract  for 
fraud  is  waived  by  taking  a  bond  of  indemnity  against  liability  on 
the  stock,  such  bond  being  taken  upon  discovery  of  the  fraud.4 
Laches  also  is  a  bar.*  The  purchaser  repudiating  the  transaction 
must  tender  back  the  stock  received  by  him.6 


(Wis.,  1890).  Where  negotiable  bonds 
are  stolen  from  the  owners  and  they 
pass  into  bona  fide  hands,  and  then  the 
thief  obtains  them  by  force  from  such 
bona  fide  hands  and  returns  them  to  the 
first  owner,  the  latter  is  entitled  to  keep 
them.  London,  etc.  Co.  v.  London,  etc., 
Bank,  61  L.  T.  Rep.,  37  (1889).  In  Eng- 
land this  remedy  I  v  hill  in  equity  is  held 
to  be  "  precisely  analogous  to  the  com- 
mon-law action  for  deceit."  in  that  dam- 
ages may  be  awarded.  Peek  v.  Gurney. 
L,  R.  5  EL  I,.  ::77.  390  (1873),  the  court 
saying  also:  "There  can  be  no  doubt 
that  equity  exercises  a  concurrent  juris- 
diction in  cases  of  this  description,  and 
the  same  principles  applicable  to  them 
must  prevail  both  at  law  and  in  equity." 

i  Arkwright  V.  Newbold,  L.  R,  17  Ch. 
D.,  301  (1881).  A  suit  in  equity  lies  to 
rescind  a  sale  of  stock  induced  by 
fraudulent  representations.  Intent  to 
defraud  need  not  be  proved.  Martin  v. 
Hill,  43  N.  W.  Rep.,  337  (Minn.,    1889). 

z  Moffat  v.  Wiuslow,  7  Paige,  124 
(1838).  Benjamin  on  Sales,  4th  Am.  ed., 
§  467a,  says  "the  only  remedy  of  a 
shareholder  in  a  joint-stock  company, 
who  has  been  induced  to  purchase 
shares  by  the  fraud  of  the  agent  of  the 
company,  is  rescission  of  his  contract 
and  restitutio  in  integrum."1 

3  Jones  v.  Bolles,  9  Wall.,  364  (1869). 


4  Bridge  r.  Penniman.  51  Superior  Ct 
(N.  Y.  i  1 83  ( 1885).  Where  the  vendee  of 
stock  becomes  a  director  and  has  access 
to  the  books,  and  complains  of  fraud  in 
the  sale,  and  then  takes  a  sum  of  money 
from  the  vendor  in  settlement,  he  can- 
not again  complain  upon  the  failure  of 
the  company.  Powell  V.  Adams,  12 
s.  W.  Rep.,  -ji;:,  (Ma,  1889). 

5  A  year's  delay  by  the  vendor  of  stock 
after  being  advised  by  his  attorney  that 
he  bad  a  good  case  of  fraud  is  fatal. 
Perry  r.  Pearson,  25  N.  E.  Rep..  836 
(111.,  1890).  Delay  of  six  years  after 
knowledge  of  fraud  inducing  a  pur- 
chase of  stock  is  fatal.  Andriessens 
Appeal,  16  Atl.  Rep..  840  (Pa.,  1889). 
Three  years'  delay  in  tendering  back 
the  bonds  is  not  fatal,  nor  is  the  fact 
that  the  vendee  resold  the  bonds  on  the 
same  terms,  and  the  sub-vendee  re- 
turned them  to  the  first  vendee. 
Wooster  v.  Sage,  67  N.  Y.,  67  (1876); 
aff  d.  6  Hun,  285 ;  Mayo  r.  Knowlton, 
134  N.  Y.,  250  (1892). 

6  In  order  to  rescind  a  fraudulent  sale 
of  stock,  the  stock  and  also  all  other 
property  received  must  be  tendered 
back.  Wain wright  r.  Weske,  23  Pac. 
Rep.,  12  (Cal.,  1889);  Francis  v.  New 
York  &  B.  EL  R.  R  Co.,  108  N.  Y,  93 
(1888);  17  Abb.  N.  C,  1,  holding,  also, 
that  where  the  vendee  has  transferred 


494 


CH.  XX.]         CONTRACTS    TO    SELL  —  GAMBLING    SALES FRAUD.  [§  35T. 

If  the  person  fraudulently  obtaining  stock  has  transferred  it  to 
another  party,  or  is  about  to  transfer  it,  an  injunction  may  be  ob- 
tained.1    The  corporation  should  then  be  made  a  party.2 

§  357.  Fraud  in  selling  stock  may  amount  to  a  conspiracy. —  A 
combination  of  persons  to  fraudulently  raise  the  price  of  a  stock 
by  misrepresentations  and  fraudulent  practices  may  amount  to  a 


said  stock  to  another  his  action  fails. 
Defrauded  vendee  must  tender  back  the 
stock  unconditional!}'.  If  he  has  used 
the  stock  in  another  transaction,  even 
with  the  vendor,  his  right  to  rescind 
for  fraudulent  representations  is  barred. 
Bridge  v.  Penniman,  105  N.  Y.,  642 
(1887).  But  where  the  vendee  has  sold 
part  of  the  stock  he  cannot  maintain  a 
suit  in  equity  to  collect  money  damages 
for  loss  occasioned  by  misrepresenta- 
tions inducing  him  to  purchase.  His 
remedy  is  at  law.  No  cancellation  of 
the  contract  is  involved.  White  v. 
Boyce,  21  Fed.  Rep.,  228  (1884).  Selling 
some  of  stock  before  repudiating  pur- 
chase for  fraud  is  no  bar  to  repudia- 
tion. 1  R'y  &  Corp.  L.  J.,  434.  Rescis- 
sion is  not  barred  although  the  vendee 
has  lost  the  stock  by  forfeiture,  the 
vendor  having  knowledge  thereof- 
Maturin  v.  Tredinnick,  4  New  Rep.,  15 
(1864).  If  the  party  selling  the  stock 
states  that  he  is  selling  stock  owned  by 
the  corporation,  when  as  a  matter  of 
fact  he  is  selling  his  own  stock,  the 
vendee  upon  discovering  the  fraud  may 
rescind  the  sale,  and  recover  back  the 
purchase  price  paid.  He  rieed  not  tender 
the  same  stock  which  he  received,  inas- 
much as  stock  has  no  "ear  mark."  If 
he  has  exchanged  the  stock  for  the 
stock  of  another  company  into  which 
his  company  has  been  merged,  he  may 
borrow  stock  of  the  first  company  and 
make  a  tender  of  that.  He  must,  how- 
ever, rescind  promptly  upon  the  discov- 
ery of  the  fraud.  Although  he  does  not 
discover  the  fraud  for  four  years  he 
may  then  rescind.  Mayo  v.  Knowlton, 
134  N.  Y.,  250  (1892).  A  suit  to  cancel  a 
a ile  of  stocks  and  bonds,  on  the  ground 
of  fraud  on  the  part  of  the  purchaser, 


will  not  lie  where  the  money  paid  at  the 
sale  has  not  been  returned  or  tendered, 
even  though  the  seller  spent  the  money 
before  he  discovered  the  alleged  fraud, 
and  is  unable  to  obtain  the  amount  of 
money  necessary  for  a  tender.  Such  is 
the  rule  even  though  the  amount  to  be 
distributed  will  be  due  to  the  plaintiff  in 
case  he  succeeds  in  the  suit.  Rigdon  v. 
Walcott,  31  N.  E.  Rep..  158  (111.,  1892). 

1  See  §§361,  362. 

2  Although  the  party  seeking  the  stock 
of  which  he  has  been  deprived  by  fraud 
makes  the  party  complained  of  and  the 
corporation  itself  parties  defendant,  yet 
if  the  certificates  are  not  obtained  from 
the  party  holding  them  the  court  will 
not  order  the  corporation  to  issue  new 
certificates.  The  outstanding  certifi- 
cates may  pass  into  the  hands  of  a  bona 
fide  purchaser.  Joslyn  v.  St.  Paul,  etc., 
Co.,  46  N.  W.  Rep.,  337  (Minn..  1890). 
Where  a  citizen  of  Wisconsin  claims 
stock  in  a  Wisconsin  corporation  as 
against  a  citizen  of  Illinois,  in  whose 
name  the  stock  stands  on  the  corporate 
books,  the  corporation  is  a  necessary 
party  defendant,  and  the  case  cannot 
be  removed  to  the  federal  courts.  Rog- 
ers v.  Van  Nortwick,  45  Fed.  Rep.,  513 
(1891).  Where  stock  is  deposited  with  a 
trustee  for  purposes  of  reorganization, 
and  transferable  certificates  are  issued 
therefor  by  the  trustee,  a  claimant  of 
stock  which  another  person  has  de- 
posited, and  for  which  such  other  per- 
son has  the  trustee's  certificate,  cannot 
compel  the  trustee  to  deliver  up  the 
stock  until  the  trustee's  certificate  is  re- 
turned, even  though  the  party  holding 
it  is  a  party  defendant.  Bean  v.  Amer- 
ican L.  &  T.  Co.,  122  N.  Y,  622  (1890). 


495 


357.]  CONTRACTS    TO    SELL  —  GAMBLING    SALES FRAUD.        [CH.  XX. 


criminal  conspiracy.  In  England,  in  1858,  the  directors  of  a  joint- 
stock  bank  were  found  guilty  of  a  conspiracy  to  defraud,  where, 
knowing  the  bank  to  be  insolvent,  they  issued  a  balance  sheet 
showing  a  profit,  and  declared  a  dividend,  and  issued  advertise- 
ments inviting  the  public  to  invest  on  such  representations.1 


i  Regina  v.  Brown  et  al,  7  Cox's 
Criminal  Cases,  442  (1858);  Regina  v. 
Esdaile,  1F.&  F.,  213  (1858) ;  Queen  v. 
Gurney.  See  Durrell  &  Hyde  on  Di- 
rectors and  Officers,  115;  Queen  v. 
Stewart,  id.,  119 ;  Queen  v.  Murch,  id., 
118;  Burnes  v.  Pennel,  2  E  L  C,  479. 
There  cannot  be  such  an  offense  against 


the  United  States  by  the  directors  of  a 
national  bank,  since  the  offense  is  not 
recognized  by  statute.  United  States  v. 
Britton,  108  U.  S.,  199  (1883).  It  is  diffi- 
cult for  a  corporate  creditor  to  seek 
collection  by  making  out  a  conspiracy. 
Brackett  v.  Griswold,  13  N.  Y.  Supp., 
192  (1891). 


496 


CHAPTER  XXI. 


SALES  OF  STOCK  — SALES  WHILE  SUITS  ARE  PENDING  AFFECTING 
THAT  STOCK;  FORGERY;  LOST  AND  STOLEN  CERTIFICATES  OF- 
STOCK;  CONFISCATION  OF  STOCK 


A-   PURCHASES   WITHOUT  A  CERTIFICATE 
OF  THE   STOCK. 

§  358.  Rights  of  a  purchaser  of  certifi- 
cate of  stock  where  the  cor- 
poration has  registered  trans- 
fer to  another  without  sur- 
render of  certificate. 

359.  Liabilit3r  of  the  corporation 
herein. 

860.  Rights  of  purchaser  of  stock 
without  certificates. 

B.   SALES  OF    STOCK    WHILE    SUITS    ARE 
PENDING  AFFECTING  THAT  STOCK. 

§  361.  Legal  proceedings    as    affecting 
a  sale  of  an  outstanding  cer- 
tificate of  stock. 
362.  Lis  pendens  as  affecting  a  pur- 
chase of  stock. 

C.  FORGERY. 

§  363.  Forgery  as  affecting  a  sale  of 
stock. 


§  364.  Rights  and  liability  of  transfer- 
ees of  forged  certificate  of 
stock,  there  being  no  inter- 
vening registry  on  corporate 
bocks. 

365-66.  Liability  of  corporation  to 
real  owner  of  stock  for  allow- 
ing registry  of  forged  trans- 
fer. 

367.  Rights  of  transferees  who  pur- 
chase after  a  registry  has 
been  obtained. 

D.   STOLEN  OR  LOST  CERTIFICATE 

§  368-69.  Stolen  or  lost  certificates  of 
stock  indorsed  in  blank. 

370.  Owner    of  a    lost  certificate  of 

stock  may  obtain  new  certifi- 
cates. 

371.  E.  CONFISCATION  OF  STOCK. 


A.    PURCHASES    WITHOUT   A   CERTIFICATE    OF   THE    STOCK. 

§  358.  Bights  of  a  pur  chaser  of  certificate'  of  stock  where  the  cor- 
poration has  registered  transfer  to  another  without  surrender  of 
certificate. —  It  has  often  happened  that  an  owner  of  stock,  after 
selling  his  stock  and  delivering  to  the  vendee  the  certificate  there- 
for indorsed  in  blank,  has  gone  to  the  corporation  before  such 
transfer  is  registered,  and  by  misrepresentation  or  other  fraudulent 
means  induced  the  corporation  to  issue  to  another  purchaser  a  new 
certificate  of  stock  without  a  surrender  of  the  old  one.  It  is  the 
duty  of  the  corporation  to  refuse  to  register  a  transfer  unless  the 
old  certificate  is  delivered  up.  The  outstanding  certificate  is  a  con- 
tinuing affirmation  by  the  corporation  that  no  registry  of  a  trans- 
fer of  the  stock  represented  by  that  certificate  will  be  allowed  until 
the  certificate  itself  is  presented  and  surrendered.  This  affirma- 
tion is  sometimes  declared  in  a  by-law,1  and  sometimes  it  is  printed 


'Bridgeport  Bank  v.  New  York,  etc.,     (1880);    New  York,   etc.,   R. 
R  R  Co.,  30  Conn.,  231  (1861);  Strange    Schuyler,  34  N.  Y,  30  (1865). 
v.  Houston,  etc.,    R  R.  Co.,  53  Tex.,  162 

(32)  497 


R.   Co.  v. 


§  359.] 


FORGERY 


STOLEN    STOCK. 


[CH. 


XXI- 


on  the  face  of  the  certificate  itself.1  The  obligations  of  the  corpo- 
ration, however,  to  require  a  surrender  of  the  old  certificate  upon 
obtaining  a  rejnstrv  is  the  same  whether  there  is  a  bv-law,  or  a 
statement  on  the  certificate,  or  neither  of  these.  It  exists  without 
anv  express  declaration.2 

§  359.  LiaMlity  of  the  corporation  herein. —  It  is  the  duty  and 
right  of  a  corporation  to  refuse  to  allow  a  registry  of  a  transfer  of 
stock  unless  the  outstanding  certificate  representing  the  stock  is  de- 
livered up  and  canceled.  And  it  is  a  duty  which  the  corporation 
is  bound  to  fulfill.  If  it  allows  a  transfer  to  be  registered  without 
the  old  certificate  being  produced  and  surrendered,  it  is  liable  to 
anv  person  who,  without  notice,  purchases  or  has  purchased  the 
outstanding  certificate.3     This  rule  is  well  established,  and  is  based 


i  Cushman  v.  Thayer  Mfg.  Co.,  76  N. 
Y.,  365  (1879). 

2  Factors'  &  T.  Ins.  Co.  v.  Marine  D.  D. 
&  S.  Co.,  31  La.  Ann..  149  (1887).  As  re- 
gards the  English  rule  herein,  see  2  R'y 
&  Corp.  L.  J.,  577  and  625. 

3  Id.,  where  a  pledgee  recovered  dam- 
ages against  the  corporation  for  issuing 
now  certificates  without  a  surrender  of 
the  one  which  the  plaintiff  held  ;  Smith 
r.  American  Coal  Co.,  7  Lans.,  317  (1878), 
where  an  unrecorded  transferee  recov- 
ered damages  against  a  corporation  for 
issuing  certificate  to  purchaser  at  exe- 
cution sale  on  attachment  against  the 
transferrer.  See,  also,  §  486  et  seq. 
Cushman  v.  Thayer  Mfg.  Co.,  76  N.  Y., 
365(1879);  Bank  n  Lanier,  11  Wall..  889 
(1870),  the  court  saying:  "It  is  equally 
clear  that  the  hank,  in  allowing  this 
stock  to  be  transferred  to  other  parties 
while  the  certificates  were  outstanding 
in  the  hands  of  bona  fide  holders,  was 
guilty  of  a  broach  of  corporate  duty." 
and  is  liable.  Now  York  &  N.  H.  R.  R. 
Co.  n  Schuyler,  34  N.  Y.,  30,  81  (1865); 
Bolbrook  v.  New  Jersey  Zinc  Co.  57 
N.  Y..  616  (1874),  the  court  saying  :  "  It 
cannot  be  denied  that,  if  a  corporation 
having  power  to  issue  stock  certificates 
does  in  fact  issue  such  a  certificate,  in 
which  it  affirms  that  a  designated  per- 
son is  entitled  to  a  certain  number  of 
shares  of  stock,  it  thereby  holds  out  to 
persons  who  may  deal  in  good  faith  with 


the  person  named  in  the  certificate  that 
he  is  an  owner  and  has  capacity  to  trans- 
fer the  shares.  This  proposition  does 
not  rest  on  any  view  of  the  negotiability 
of  .-took,  but  on  the  gomral  principles 
appertaining  to  the  law  of  estoppel.*' 
Moorea  V.  Citizens'  Nat'l  Bank,  111  U.  S, 
1888)  where  the  court  seem  to  hold 
that  the  person  receiving  new  certifi- 
cates without  requiring  a  surrender  of 
the  old  ones  is  not  BUCh  a  bona 
transferee  of  stock  as  may  hold  the  cor- 
poration liable.  Brisbane  r.  Delaware, 
L  &  W.  R  R.  Co.,  91  N.  Y..  204  (1 
affirming  22  Hun,  588,  and  holding  that 
until  the  purchaser  of  the  outstanding 
certificates  presents  them,  the  corpora- 
tion is  protected  in  paying  dividends  to 
the  transferee  without  the  old  certifi- 
cates. If  no  certificate  has  been  issued 
the  rule  does  not  apply.  First  Natl 
Bank  v.  GifTord.  47  Iowa,  575  (1877 
The  unregistered  holder  of  the  certifi- 
cates is  protected,  since,  if  he  were 
obliged  to  notify  the  corporation  at  the 
time  he  purchases  the  stock.  "  the  value 
of  these  certificates  as  a  basis  of  credit. 
would  be  greatly  impaired,  particu- 
larly where  the  pledge  is  made  at  a 
distance  from  the  domicile  of  the  cor- 
poration."' Smith  r.  Crescent  City,  etc.. 
Co..  30  La.  Ann.,  1378  (18781  See.  also. 
Bridgeport  Bank  i\  New  York  &  N.  H. 
R  R.  Co..  30  Conn..  231  (1861),  the  court 
saying  :  "  The  bona  fide  holders  of  such 


I '.is 


OH.  XXI.] 


FOEGERT 


STOLEN    STOCK. 


[§  359. 


on  the  usages  and  requirements  of  trade,  and  on  a  wise  public  pol- 
icy which  favors  the  protection  of  those  who  invest  their  money  in 
certificates  of  stock,  relying  upon  the  corporation  to  protect  the 
holder  of  such  certificates.1  Thus  the  corporation  has  been  held 
liable  where  seventeen  years  have  elapsed  since  a  new  certificate 
was  obtained,  the  latter  having  been  obtained  on  the  ground  that 
the  outstanding  certificate  has  been  lost.2     The  corporation  need 


certificates  had  a  right  to  rely  on  the 
certificate,  under  the  circumstances,  as 
securing  to  them  the  stock  which  they 
represented  against  all  other  parties." 
Strange  v.  Houston  &  T.  C.  R.  R.  Co.,  53 
Tex.,  162  (1880),  to  the  same  effect,  on 
the  ground  that  the  non-production  of 
the  original  certificate  "is  notice  to  the 
company  that  a  superior  title  may  he  in 
a  third  party."  If  a  corporation  allows 
a  transfer  to  be  made  on  its  books  with- 
out the  transfer  on  the  old  certificate 
being  signed,  it  is  liable  to  the  owner  of 
the  old  certificate,  even  though  the  old 
certificate  is  delivered  up  and  the  attor- 
ney in  fact  of  the  owner  shows  his 
power  of  attorney  at  the  time  of  the 
transfer  on  the  books.  Taft  v.  Presidio, 
etc.,  Co.,  24  Pac.  Rep.,  436  (Cal.,  1890). 
Lee  v.  Citizens'  Nat.  Bank,  2  Cin.  Sup. 
Ct,  298  (1872),  holding  that  the  holder 
of  the  old  certificates  is  entitled  to  have 
the  illegal  registry  canceled.  In  Eng- 
land there  seems  to  be  no  decision  di- 
rectly in  point.  A  dictum,  however,  in 
Shropshire  U.  R'y  &  Canal  Co.  v.  Queen, 
L.  R,  7  H.  L.,  496,  509  (1875),  does  not 
support  the  rule  which  prevails  in  this 
country.  The  court  said :  Whether  a 
transfer  of  shares  in  a  company  can  or 
cannot  be  made  without  the  production 
of  the  certificates  of  the  shares  is  "en- 
tirely within  the  discretion  of  the  di- 
rectors. They  were  not  bound  to  permit 
a  transfer  without  the  production  of  the 
certificate;  but  though  not  bound  to 
permit  a  transfer,  I  apprehend  they 
would  not  be  in  any  way  answerable  if 
the  transfer  should  be  in  any  case  made 
without  the  production  of  the  certifi- 
cates of  the  shares."  The  case  of  Hart 
v.  Frantino,  etc.,  Gold  Min.  Co.,  L.  R.,  5 


Ex.,  Ill  (1870),  holds,  however,  that 
where  the  corporation  cancels  the  stock- 
holdership  of  one  who  purchased  after 
registry  without  a  surrender  of  the  old 
certificates  having  been  obtained,  he 
may  hold  it  liable  in  damages.  As  be- 
tween two  unrecorded  transfers,  one 
having  the  certificates,  and  the  other  — 
a  subsequent  purchaser  —  not  having  it, 
the  former  prevails.  Societe  Gen.  v. 
Tramways  Union  Co.,  L.  R.,  14  Q.  B.  D., 
424  (1884).     See,  also,  cases  in  §  351. 

1  Factors'  &  T.  Ins.  Co.  v.  Marine  D. 
D.  &  S.  Co.,  31  La.  Ann..  149  (1879),  the 
court  saying:  "We  think  that,  by  thus 
making  stocks  transferable  by  mere  de- 
livery of  the  certificate,  the  law  has  in- 
tended to  interdict  corporations  from 
transferring  stocks  on  their  books,  ex- 
cept upon  surrender  of  the  certificate 
or  upon  proof  of  its  loss  or  destruction. 
These  certificates  of  stock  have  become 
such  important  factors  in  trade  and 
credit  that  the  law  has  intended  to  sur- 
round those  who  take  them  with  the 
safeguards  it  accords  to  the  holders  of 
the  other  great  agencies  of  commerce  — 
bills,  notes,  bills  of  lading,  etc." 

2  Cleveland  &  M.  R.  R.  Co.  v.  Robbins, 
35  Ohio  St.,  483  (1880).  But  is  not  liable 
for  dividends  paid  in  the  meantime.  It 
was  held,  further,  that  a  by-law  allow- 
ing such  issue  of  new  certificates  in 
case  of  loss  had  no  effect  as  regards  the 
plaintiff,  and  that  the  statute  of  limita- 
tions ran  against  the  plaintiff  only  from 
the  time  he  had  notice  of  the  new  cer- 
tificate. By  statute,  in  New  York,  the 
person  claiming  to  have  lost  his  certifi- 
cate may  be  compelled  to  give  a  bond 
of  indemnity  to  the  corporation  before 
obtaining  new  certificates,  and  a  holder 


499 


§  360.] 


FORGERY 


STOLEN    STOCK. 


[CH.  XXI. 


not  assume  any  risk,  but  may  refuse  to  permit  a  registry  on  its 
books  of  the  transfer  unless  the  old  certificate  is  produced  and  sur- 
rendered.1 Where,  however,  the  corporation  is  compelled  to  make 
the  registry  by  legal  proceedings,  as  in  case  of  execution  sales,  it 
cannot  be  held  liable  to  the  holder  of  the  outstanding:  certificate.2 
The  corporation,  when  sued  by  the  holder  of  the  old  certificate,  is 
required  either  to  replace  the  stock  which  has  wrongfully  been 
taken  from  the  plaintiff,  or  it  is  obliged  to  compensate  him  in 
damages. 

§  360.  Bights  ofjmrcliaser  of  stock  without  certificates. —  A  pur- 
chaser of  stock  who  does  not  receive  the  certificates  of  the  stock  he 
has  purchased,  but  who  nevertheless  obtains  a  registry  on  the  cor- 
porate books,  and  receives  new  certificates  without  a  surrender  of 
the  old,  and  who  sells  the  new  certificates,  is  not  liable  in  damages 
to  the  holder  of  the  old  certificates.3     The  remedv  of  the  latter  is 


of  the  old  certificates  may  have  the  ben- 
efit of  this  bond.  New  York  Session 
Laws,  1873,  ch.  151.  See  §  370.  Such  a 
subrogation  was  refused  in  Greenleaf  v. 
Ludington,  15  Wis.,  553  (1862). 

1  The  corporation  may  refuse  to  is<ue 
6tock  to  the  heirs  of  a  stockholder  un- 
less they  surrender  the  old  certificates. 
State  v.  New  Orleans  &  C.  R.  R.  Co.,  30 
La.  Ann.,  308(1878);  National  Bank  of 
New  London  v.  Lake  S.  &  M.  S.  R.  R. 
Co.,  21  Ohio  St.,  221  (1871),  where  the  cor- 
poration refused  to  allow  registry  by  a 
purchaser  at  an  execution  sale,  although 
it  was  quite  plain  that  the  judgment 
debtor's  sale  of  the  certificates  had  been 
in  fraud  of  creditors.  As  between  two 
unregistered  transferees,  the  one  with 
the  certificate  is  entitled  to  the  stock, 
especially  where  he  purchased  first 
Maybin  v.  Kirby,  4  Rich.  Eq.  (S.  C), 
105(1851);  Societe  Generale  de  Paris  v. 
Walker,  L  R..  11  App,  20  (1885);  aff'g 
L  R.,  14  Q.  B.  D.,  424.  So,  also,  as  be- 
tween a  bona  fide  purchaser,  to  whom 
the  certificates  are  transferred,  and  a 
third  party,  to  whom  the  vendor  had 
given  the  stock  previous  to  the  sale,  the 
vendee  with  the  certificates  is  protected. 
Crawford  v.  Dox,  5  Hun,  507  (1875).  In 
Wilson  v.  Atlantic,  etc.,  R.  R.  Co.,  2  Fed. 
Rep.,  459  (1880),  where  an  assignee  in 
bankruptcy   applied    for    registry,   the 


bankrupt  having  fled  with  the  certifi- 
cates, it  was  held  that  the  corporation 
was  bound  to  allow  transfer  and  to  issuo 
now  certificates  upon  a  bond  of  in- 
demnity being  given.  It  has  been  held, 
however,  that  a  sale  of  a  certificate  of 
stock  to  a  bona  fide  purchaser  is  to  bo 
upheld,  even  as  against  a  receiver  who 
has  been  appointed  and  been  given  legal 
ownership  of  the  registered  stock.  Dud- 
ley v.  Gould,  G  Hun,  97(1875). 

2Friedlander  v.  Slaughter-house  Co., 
31  La.  Ann.,  523  (1879).  See,  also, 
ch.  XXII.  §  388.  Where  stock  is  de- 
posited with  a  trustee  for  purposes  of 
reorganization  and  transferable  certifi- 
cates are  issued  therefor  by  the  trustee, 
a  claimant  of  stock  which  another  per- 
son has  deposited  and  for  which  sucli 
other  person  has  the  trustee's  certificate 
cannot  compel  the  trustee  to  deliver  up 
the  stock  until  the  trustee's  certificate 
is  returned,  even  though  the  party  hold- 
ing it  is  a  party  defendaut.  Bean  v. 
American  L.  &  T.  Co.,  122  N.  Y.,  022 
(1890). 

»  Baker  v.  Wasson,  53  Texas,  150  (18S0). 
Unless  he  obtained  registry  with  knowl- 
edge that  his  vendor  had  already  sold 
the  old  certificates  to  another.  Scripture 
v.  Francestown  Soapstone  Co.,  50  N.  H., 
571  (1871). 


500 


OH.  XXI.]  FOKGEKY STOLEN    STOCK.  [§361. 

against  the  corporation,  or  he  may  sue  the  corporate  officer  who 
allowed  the  transfer.1  The  purchaser  of  the  stock  may  insist  on 
the  old  certificate  being  produced  and  surrendered  at  the  time  of 
registration,  but  if  he  waives  this  right,  and  a  registry  is  made,  he 
cannot  afterwards  refuse  to  accept  the  stock  on  that  account.2  The 
corporation  is  not  liable  to  the  person  who  is  registered  as  a  stock- 
holder without  a  surrender  of  the  old  certificate,  at  least  not  where 
the  registry  is  by  the  secretary,  without  special  authority  from  the 
board  of  directors.3  "Where,  however,  the  purchaser  of  stock  with- 
out the  certificates  obtained  registry  on  the  corporate  book,  the 
corporation  cannot  afterwards  remove  his  name  in  favor  of  the  pur- 
chaser of  the  old  certificate.  The  former  may  compel  the  corpora- 
tion to  replace  his  name.4  A  pledge  made  by  a  separate  written 
assignment  of  the  stock,  the  certificates  remaining  in  the  pledgor's 
possession  and  continuing  to  stand  in  his  name  on  the  corporate 
books,  is  not  good  as  against  the  pledgor's  receiver  who  takes  pos- 
session of  the  certificates.5 

B.    SALES    OF    STOCK    WHILE    SUITS    AEE    PENDING  AFFECTING    THAT    STOCK. 

§  361.  Legal  proceedings  as  affecting  sales  of  outstanding  cer- 
tificates of  stock. —  It  is  a  well-established  principle  of  law  that 
shares  of  stock  may,  for  certain  purposes,  have  a  situs  at  two  sep- 
arate places  at  the  same  time.     For  the  purposes  of  suits  concern- 

1  Baker  v.  Wasson,  59  Texas,  140  (1883).  obtains  registry  without  a  surrender  of 

2  Boatmen's  Ins.  &  Trust  Co.  v.  Able,  the  old  certificates,  a  regular  registry 
48  Mo.,  136  (1871).  A  bank  cashier  may  with  a  surrender  of  such  certificates 
transfer  bank  stock  standing  in  his  having  previously  been  obtained  by  an- 
name  in  the  stock  register  even  though  other.  Cf.  Hart  v.  Frantino,  etc.,  Co.,  23 
he  does   not  turn  back  the  certificates.  L.  T.  (N.  S.),  30. 

Finn  v.  Brown,  142  U.  S.,  56  (1891).     In        4  Cady  v.  Potter.  55  Barb.,  463  (1869). 

Indiana,  where  an  administrator  cannot  In   Piatt  v.  Birmingham  Axle  Co.,  41 

sell  personal  property  except  in  a  cer-  Conn.,  255  (1874),   the  corporation  was 

tain  way,  the  corporation  is  liable  to  the  protected  by  its  lien,  and  the  fact  that 

estate  if  it  allows  a  transfer  of  stock  on  it  bought  the  stock  without  the  certifi- 

its  books  under  a  sale  by  the  adminis-  cates  was  not  the  essential  point  of  the 

trator  who   has  not  complied  with  the  case.   The  corporation  cannot  interplead 

law.    The  purchaser,  however,  who  does  after  it  has  allowed  the  transfer.     Cady 

not  see  the  old  certificates,  but  takes  v.  Potter,  supra;  Mt.  Holly  L.  &  M.  T. 

new  certificates  issued  by  the  corpora-  Co.  v.   Ferrie,  17  N.  J.  Eq.,  117  (1864). 

tion,  is  protected.     Citizens'  St.  R'y  v.  But  it  may  interplead  if  it  has  refused 

Eobbins,  26  N.  E.  Rep.,  116  (Ind..  1891).  to  transfer  to  anyone.   Merchants'  NatM 

3  Hall  v.  Rose  Hill  &  E.  Road  Co.,  70  Bank  v.  Richards,  6  Mo.  App.,  454  (1879). 
III.,  673  (1873) ;  Houston  &  T.  C.  R'y  Co.  See,  also,  §  387. 

v.  Van  Alstyne,  56  Texas,  439  (1882),  5  Atkinson  v.  Foster,  25  N.  E.  Rep.,  528 
holding  that  the  corporation  is  not  bound     (HI..  1890). 


to  recognize  as  a  stockholder  one  who 


501 


§361.]  FOEGEKY STOLEN    STOCK.  [CH.  XXI. 

ing  rights  to  its  title,  for  taxation,  and  for  a  few  other  purposes, 
shares  of  stock  follow  the  domicile  of  the  stockholder.1  On  the 
other  hand,  it  has  at  the  same  time  a  situs  where  the  corporation 
exists,  and  this  situs  may  be  for  the  purposes  of  suits  concerning  the 
title  to  the  stock,  for  attachment  and  execution,  and  for  various 
other  similar  purposes.  Great  difficulty  arises  in  many  instances  of 
legal  proceedings  affecting  the  title  to  stock  by  reason  of  the  fact 
that,  where  the  defendant  has  in  his  possession  the  certificates  of 
stock  and  is  not  enjoined  from  transferring  them,  he  may  transfer 
them,  either  before  or  after  suit  has  been  commenced  against 
him  to  obtain  possession  of  the  stock  represented  by  such  certifi- 
cates or  to  subject  it  to  his  debts.  The  question  then  arises 
whether  the  bon  a  fide  transferee  of  such  certificate  is  to  be  allowed 
to  retain  the  stock,  or  whether  the  successful  plaintiff  in  the  suit 
against  the  defendant  who  has  transferred  the  stock  may  follow 
such  stock  and  take  it  from  the  transferee.  This  conflict  of  risrht 
between  the  purchaser  of  the  outstanding  certificates  and  the  pur- 
chaser whose  title  is  based  on  judicial  proceedings  arises  most  often 
in  cases  of  attachment  or  execution  issued  against  shares  of  stock 
at  the  domicile  of  the  corporation.  In  such  cases  the  better  rule 
seems  to  be  that  transferees  of  the  certificate  held  by  the  defend- 
ant are  protected  and  entitled  to  protection  at  the  hands  of  the  cor- 
poration, if  their  purchase  is  made  before  the  attachment  or  execu- 
tion is  levied;  but  that  transfers  made  after  the  levy  are  utterly 
void  so  far  as  the  corporation  and  the  plaintiffs  to  the  suit  are  con- 
cerned, provided  the  suit  itself  is  successful.2  The  same  difficulty 
and  conflict  of  rights  arise  in  suits  to  reclaim  stock  which  has  been 
taken  from  the  plaintiff  bv  fraud,  or  by  the  torts  of  an  aarent  or 
pledgee,  or  by  the  breach  of  trust  of  an  executor,  administrator, 
guardian  or  trustee.3  The  plaintiff  seeking  to  recover  his  stock, 
certificates  for  which  are  in  the  hands  of  the  defendant,  seems  to 
have  but  two  modes  of  procedure  whereby  he  may  prevent  the  de- 
fendant from  transferring  the   certificates.     The   suit  should  be 

!It  is  important  here  to  distinguish  change  Bank,  3  Rob.,  164  (1865\     As  re- 

fthares  of  stock  from  the  certificates  for  gards  the  rights  and  duties  of  the  cor- 

those  shares.     Certificates  of  stock  have  poration  herein  when  stock  is  sold  under 

no  situs  or  domicile.     They  cannot   be  an  execution  or  is  attached,  see  §  488. 

attached  or  subjected  toexecution.   The  2Smith  r.  American  Coal  Co., 7  Lans., 

stock   itself  does    not  follow    the  cer-  317  (1873) ;  Smith  v.  Crescent  City,  etc., 

tificate    representing    it      Winslow    v.  Co..    30   La.  Ann.,    1378  (1878),  and  ch. 

Fletcher,  4  Atl.  Rep.,  250  (Conn.,  1886).  XX VII. 

Though  prevented  by  injunction  from  3Holbrook  v.  New  Jersey   Zinc  Co., 

transferring,  the  corporation  must  pre-  57  N.  Y.,  616  (1874);  Leitch  u.  Wells,  48 

Berve  the  rights  of  a  party  who  notifies  N.  Y.,  585  (1872). 
it  of  his  rights.     Purchase  v.  N.  Y.  Ex- 

502 


•CH.  XXI.]  FOKGERY  —  STOLEN    STOCK.  [§  362. 

brought  in  the  state  of  the  domicile  of  the  corporation  and  attach- 
ment against  the  stock  issued,1  or,  when  the  defendant  is  sued  in 
another  state,  an  injunction  restraining  the  defendant  from  trans- 
ferring the  stock  should  be  obtained.  It  is  true  that,  after  judg- 
ment has  been  obtained  and  the  decree  of  the  court  executed,  any 
subsequent  transfer  of  the  certificates  by  the  defendant  is  null  and 
may  be  disregarded  by  the  plaintiff  and  by  the  corporation.2  But 
while  the  suit  is  pending  the  defendant  may  transfer  the  certificates 
and  the  hona  fide  transferee  takes  a  good  title  to  the  stock.  The 
latter  is  not  affected  by  or  bound  to  take  notice  of  a  lis  pendens  in 
that  suit.  If  no  temporary  injunction  is  obtained,  a  transfer  made 
on  the  corporate  books  pending  suit  is  good,  and  the  corporation 
cannot  be  made  liable  although  a  party  defendant.3  Although  the 
party  seeking  the  stock  of  which  he  has  been  deprived  by  fraud 
makes  the  party  complained  of  and  the  corporation  itself  parties 
defendant,  yet,  if  the  certificates  are  not  obtained  from  the  party 
holding  them,  the  court  will  not  order  the  corporation  to  issue  new 
certificates.  The  outstanding  certificates  may  pass  into  the  hands 
of  a  hona  fide  purchaser.4 

§  362.  Lis  pendens  as  affecting  a  purchase  of  stock. — A  purchaser 
of  certificates  of  stock  is  not  chargeable  with  constructive  notice 
that  a  suit  is  pending  in  which  his  vendor  is  defendant,  and  the 
plaintiff  is  endeavoring  to  obtain  possession  and  title  to  the  stock 
which  the  purchaser  is  buying.  The  doctrine  of  lis  pendens  has  no 
application  to  sales  of  shares  of  stock.  The  purchaser  is  bound  to 
know  that  a  judgment  or  decree  has  been  rendered  and  executed 
affecting  the  certificates  he  is  buying,  if  such  a  judgment  or  decree 
exists;  but  he  is  not  bound  to  know  that  a  suit  is  pending  in  which 
judgment  has  not  yet  been  rendered.  That  a  lis  pendens  in  a  suit 
involving  shares  of  stock  does  not  affect  a  purchaser  of  the  certifi- 
cate representing  those  shares,  the  purchase  being  made  while  the 
suit  is  pending,  was  clearly  established  by  the  court  of  appeals  of 
New  York  in  the  case  of  Hoi  brook  v.  New  Jersey  Zinc  Company.5 

1  Quarl  v.  Abbett,  13  Am.  &  Eng.  Corp.  v.  Wells,  48  N.  Y.,  586  (1872).  See 
Cases,  27  (Ind.,  1886).  Dovey's  Appeal,   97  Pa.  St.,  153  (1881), 

2  Sprague  v.  Cacheco  Manuf.  Co.,  10  where  the  court  refused  to  pass  upon 
Blatch.,  173  (1872).  this    question ;    also,    Bank    of    Va.    v. 

3  Hawes  v.  Gas  Consumers,  etc.,  Co.,  12  Craig,  6  Leigh  (Va.),  399,  435  (1885), 
N.  Y.  Supp.,  924  (1891).  See  also  editor-  holding  that  a  lis  pendens  in  a  suit  by 
ial  N.  Y.  L.  J.,  March  29,  1890.  sureties  to  restrain  guardian  from  sell- 

4  Joslyn  v.  St.  Paul,  etc.,  Co.,  46  N.  W.  ing  stock  is  not  notice  to  the  corpora- 
Kep.,  337  (Minn.,  1890) ;  Bean  v.  Ameri-  tion  to  refuse  to  allow  him  to  register  a 
-can  L.  T.  Co.,  122  N.  Y.,  622  (1890).  transfer. 

•5  57  N.  Y.,  616  (1871),  following  Leitch 

503 


§  363.]  •  FORGERY  —  STOLEN    STOCK.  [CH.  XXI. 

C.    FORGERY. 

§  363.  Forgery  as  affecting  a  sale  of  stock  —  An  owner  of  shares 
of  stock  cannot  be  deprived  of  his  property  by  a  forgery  through 
which  his  certificates  of  stock  pass  into  the  hands  of  innocent  pur- 
chasers. He  may  be  deprived  of  his  stock,  but  has  in  lieu  thereof 
the  right  to  collect  the  value  of  that  stock,  either  from  the  corpora- 
tion or  from  parties  who  have  held  the  stock.  The  rights  and  rem- 
edies of  the  stockholder  who  has  lost  possession  of  certificates  of 
stock  by  forgery  vary  according  to  the  extent  to  which  his  certifi- 
cate has  been  transferred.  This  remedv  mav  be  against  the  trans- 
ferees  of  the  certificate  before  a  registry  has  been  obtained,  or  it 
may  be  against  the  corporation  for  allowing  a  registry,  or  it  may 
be  against  the  person  obtaining  the  registry.  The  forgery  itself 
may  consist  of  any  writing  on  the  certificate  of  stock,  whereby, 
with  intent  to  defraud,  it  is  falsely  and  materially  so  made  or 
altered  as  to  have  an  apparent  legality.1  Generally  the  forgery 
is  of  the  name  of  the  stockholder  to  the  transfer  on  the  back  of 
the  certificate.2  The  forgery  may,  however,  b.e  committed  by 
changing  the  number  of  shares  of  stock  which  the  transferrer  has 
written  out  in  the  certificate,3  or  by  inserting  the  numbers  of 
shares  of  stock  of  one  corporation  in  a  blank  transfer  duly  signed 
by  the  stockholder,  but  signed  for  the  purpose  of  transferring 
shares  of  stock  in  another  and  different  corporation.4 

The  subject  of  forgery  by  one  or  more  corporate  officers,  whereby 
spurious  and  overissued  stock  is  issued,  there  being  no  old  certifi- 
cates returned  to  the  company  at  that  time,  is  considered  elsewhere.5 

The  subject  now  under  consideration  is  where  the  name  of  a 
stockholder  is  forged  to  an  assignment  of  the  certificate  or  the 
certificate  itself  is  modified. 

'See    Bouvier's    Dictionary,    vol.    I,  Midland   R'y  Co.,   29    L.    J.   (Ch.),   731 

p.  679 ;  2  Bishop's  Criminal  Law,  §  523.  (I860). 

-  Nearly  all  of  the  cases  in  the  several  3  Matthews  v.  Massachusetts  National 

following  sections  are  cases  of  a  forgery  Bank,  1  Holmes,  396  (1874);  Sewall  v. 

of  the  stockholder's  name  to  a  transfer.  Boston  "Water-power  Co.,  86  Mass.,  277 

It  is  forgery  for  one  trustee  to  write  in  (1862),  where  the  alteration  was  treated 

the  names  of  the  other  trustees  without  as  a  forgery  so  far  as  legal  rights  were 

authority.     Cottam  v.  Eastern  Counties  concerned,  although  the  alteration  was 

R'y  Co.,  1  J.  &  H.,  243  (1860);  Sloman  v.  due  to  an  innocent  misunderstanding 

Bank  of  England,  14  Sim.,  475  (1845).   Or  of  a  clerk. 

for  one  partner  to  write  in  the  name  4Swan  v.  North  Bristol  Co.,  7  H.  &  N., 

of  the  other  partner  without  authority,  603    (1862),    practically    overruling  Est 

where  the  stock  stood   in   their   joint  ])arte  Swan,  7  C.  B.  (N.  S.),  400. 

names.     Midland  R'y  Co.  v.  Taylor,  8  H.  5  s0e  §§  291-29a 
L.  Cases,  751  (1862) ;  affirming  Taylor  r. 

504 


CH.  XXI.]  FORGERY STOLEN    STOCK.  [§304. 

§364.  Mights  and  liabilities  of  transferees  of  forged  certificates 
ofstocli,  there  being  no  intervening  registry  on  corporate  books. — 
The  position  of  a  transferee  of  a  certificate  of  stock  which  is  in- 
valid by  reason  of  forgery  depends  largely  on  whether  there  has 
been  an  intervening  registry  of  transfer  on  the  corporate  books 
after  the  former  owner  was  deprived  of  his  stock  by  the  forgery. 
The  forger  himself  is  of  course  liable,  not  only  to  the  real  stock- 
holder, but  also  to  any  other  person  who  has  been  injured  by  the 
forgery.  If  the  purchaser  of  stock  from  one  who  has  forged  a 
transfer  of  the  same  sells  the  same  after  being  notified  by  the  real 
owner  that  the  latter  claims  the  stock  and  has  been  deprived  of  it 
by  forgery,  the  real  owner  may  recover  damages  in  trover  for  the 
value  of  the  stock  from  the  person  who  so  sells,  although  he  pur- 
chased in  good  faith  and  without  notice  of  the  forgery.1  If  the 
forgery  is  committed  by  a  member  of  a  firm,  the  real  owner  may 
sue  the  firm  for  monev  had  and  received,  and  may  recover  the 
value  of  the  stock  and  dividends.2  "Where  the  forger  has  sold  the 
stock  to  a  purchaser  without  notice,  and  the  latter  has  sold  to  an- 
other purchaser  without  notice,  and  the  latter  is  deprived  of  his 
apparent  ownership  on  account  of  the  forgery,  the  second  trans- 
feree may  hold  the  first  transferee  liable.3  This  principle  grows 
out  of  the  well-established  rule  of  law  that,  in  a  sale  of  chattels, 
there  is  an  implied  warranty  of  title,  unless  the  circumstances  are 
such  as  to  give  rise  to  a  contrary  presumption.  The  broker  or 
auctioneer  of  stock  which  passes  through  their  hands  cannot,  it 
seems,  be  held  liable,  though  it  turns  out  that  on  account  of  a  for- 
gery there  was  no  title  to  the  stock  in  the  party  whom  they  rep- 
resented.4 The  transferee  whose  title  is  based  on  a  forgery  has 
no  rights  as  against  the  corporation,  where  there  has  been  no  reg- 
istry on  the  corporate  books  after  the  forgery.  He  cannot  compel 
the  corporation  to  allow  him  to  register  his  transfer.  If  the  cor- 
poration has  already  registered  him  as  transferee,  it  may  repudiate 
its  registry  so  far  as  he  is  concerned,  and  refuse  to  recognize  him 
as  a  stockholder  or  as  having  the  right  to  transfer  the  stock.*    Such 

1  Monk  r.  Graham,  8  Mod.,  9  (1721).  pledgee,  and  on  payment  of  the  pledge 

2  Marsh  v.  Keating,  1  Bing.  New  Cases,  had  retransferred  the  stock.  As  to  the 
198  (1834);  Marsh  v.  Stone,  6  B.  &  C,  liability  of  brokers  for  the  forgery  of 
551  (1827).  their  employee   in   delivering  spurious 

3  Matthews    v.    Mass.    Nat    Bank,    1  stock  to  a  customer,   see   Andrews  u 
Holmes,  396  (1874).     This  was  an    ex-  Clark,  20  Atl.  Rep,  429  (Md.,  1890). 
tremely  harsh  case,  involving   a  rigid  4  Machinists'  Nat  Bank  v.  Field,  126 
application  of  the  principle,  since  the  Mass.,  345  (1879). 

defendant's  name  appeared  on  the  back  5  Simon  v.  Anglo-American  Tel.  Co.. 
of  the  certificate  of  stock  as  a  trans-  L.  R.,  5  Q.  B.  D.,  188  (1879);  White- 
ferrer,  when  in  fact  it  had  only  been  a     wright  v.  American  Tel.  &  Cable  Co., 

505 


§  365.] 


FORGERY  —  STOLEN    STOCK. 


[CH.  XXI. 


a  registered  transferee  has  no  right  of  action  against  the  corpora- 
tion by  reason  of  its  rescission  of  his  registry,1  although  the  rule 
may  be  different  if  he  purchased  by  reason  of  the  fact  that  he  was 
allowed  such  registry  on  the  corporate  books.2  On  the  other  hand, 
it  is  the  transferee  obtaining  registry  who  warrants  the  validity  of 
his  title  and  right  to  transfer;  and  if  the  corporation  is  compelled 
to  pay  damages  to  the  real  owner  on  account  of  allowing  such  reg- 
istry it  may  have  recourse  to  and  collect  the  same  damages  from 
the  transferee  who  obtained  the  registry,  however  innocent  the 
latter  may  have  been.3  The  person  who  first  obtains  a  registry  after 
a  forgery  has  deprived  the  real  owner  of  his  stock  cannot  retain 
the  new  certificates  as  against  the  real  owner  of  the  old  ones.4 

365.  Liability  of  corporation  to  real  owner  of  stock  for  allow- 
ing registry  offdrged  transfer. — It  is  the  duty  of  a  corporation  to 
prevent  and  refuse  a  registry  of  transfer  of  stock  where  that  trans- 
fer has  been  forged.  If  the  corporation  fails  to  detect  the  forgery 
it  is  liable  to  the  real  owner  of  the  stock  who  has  been  deprived  of 
it  by  the  forgery.5  It  has  been  held  that  the  owner  of  the  stock 
may  compel  the  corporation  to  cancel  the  illegal  registry  and  re- 

N.  Y.  Daily  Reg.,  Aug.  G,  1886  (Superior  fendant  has  a  remedy  over  against  the 

Ct);  Waterhouse  v.   London  &  S.  W.  parties  that  sold  to  him. 

R'y  Co.,  41  L.  T.  (N.  S.),  553  (1880) ;  Ham-  •»  Johnston   v.    Renton,    L.    R,   9  Eq. 

bleton  v.  Central  O.  R.  R  Co.,  44  Md.,  Cas.,  181  (1870). 

551  (1S76):  Brown  v.  Howard  Ins.  Co.,  5  Pratt  v.  Taunton  Copper  Mfg.  Co., 
42  Md.,  384  (1875):  Hildyard  r.  South  128  Mass..  110  (1887);  Sewall  v.  Boston 
Sea  Co..  2  P.  Wins.,  76(1722).  Cf.  Ashby  Water-power  Co.,  86  Mass.,  277  (1862); 
v.  Blackwell,  2  Eden.  299  (1765),  holding  Pratt  v.  Boston  &  Albany  R.  R.  Co.,  126 
the  corporation  liable  not  only  to  the  Mass.,  443  (1879);  Johnston  v.  Renton, 
real  owner,  but  also  to  the  transferee.  L.  R.,  9  Eq.,  181  (1870);  Cottam  v.  East- 
obtaining  registry.  See  §  367  for  rights  era  Counties  R'y  Co.,  1  J.  &  H.,  243 
of  transferee  of  the  first  registered  (1860);  Midland  R'y  Co.  r.  Taylor,  8  H. 
holder. 

•Id. 

2  Metropolitan  Sav.  Bank  v.  Mayor, 
etc.,  of  Baltimore,  63  Md.,  6  (1884).  In 
this  case  the  plaintiff  took  the  forged 
certificates   in   pledge  from  the  forger. 


L.  Cases,  751  (1862);  affg  Taylor  v.  Mid- 
land R'y  Co.,  29  L.  J.  (Ch.),  731  (I860,; 
Davis  v.  Bank  of  Eng.,  Bing.,  393  (1824); 
Swan  v.  North  British  Aus.  Co.,  7  H.  & 
N.,  603  (1862),  substantially  overruling 
same  case  in  court  of  law ;  Ex  parte 
Afterwards,  upon  the  forger's  applying  Swan,  7  C.  B.  (N.  S.),  400  (1859) ;  Pollock 
for  a  further  loan  on  the  same  pledge  of  v.  National  Bauk,  7  N.  Y.,  274  (1852); 
stock,  the  corporation  refused  unless  Day  v.  American  Tel.  &  Cable  Co.,  52 
the  stock  was  registered  in  its  name,  N.  Y.  Sup.  Ct.,  128  (1885);  Dalton  v. 
which  was  accordingly  done.  Held 
that  the  bank  lost  the  first  loan,  but  had 
recourse  to  the  corporation  for  the  sec- 
ond loan. 

3  Boston  &  Albany  R.  R.  Co.  r.  Rich- 
ardson, 135  Mass.,  423  (1883),  the  court    Sloman  r\  Bank  of  Eng.  14  Sim.,  475 
saying  also,  in  a  dictum,  that  the  de-    (1845) ;  Telegraph  Co.  v.  Davenport,  97 

506 


Midland  R'y  Co.,  12  C.  B.,  458  (1852); 
Mayor,  etc.,  of  Baltimore  v.  Ketchum, 
57  Md.,  23  (1881);  Coates  v.  London  & 
S.  W.  R'y  Co.,  41  L.  T.  (N.  S.),  553  (1880) ; 
Blaisdell    v.   Bohr,   68    Gn.,   56  (1881); 


OH.  XXI.] 


FORGERY  —  STOLEN    STOCK. 


[§  305. 


store  the  name  of  the  plaintiff.1  The  better  rule,  however,  is  that, 
inasmuch  as  a  lonafide  transferee  of  the  illegally  registered  trans- 
ferrer is  entitled  to  retain  the  stock,  the  former  owner  of  the  stock 
in  suing  the  corporation  should  demand  relief  in  the  alternative, 
that  the  stock  be  restored  to  him,  or  that  he  be  given  damages 
in  lieu  thereof.2  Or  he  may  demand  that  the  corporation  replace 
the  stock  by  going  into  the  market,  if  necessary,  and  purchasing  sim- 
ilar stock.3'  If  the  stockholder  sues  the  corporation  for  a  dividend 
on  stock  which  by  a  forged  assignment  has  been  registered  in  the 
name  of  another"  person,  the  corporation  cannot  interplead.4  A 
court  of  equity  has  concurrent  jurisdiction  with  law  in  remedying 
a  forged  transfer  of  stock.5  The  corporation,  the  co-conspirators 
and  the  transferees  of  the  forged  certificate  are  all  proper  parties 
to  the  suit;6  but  the  only  necessary  party  is  the  corporation  itself.7 


Lt  S.,  369  (1878),  where  the  court  say: 
"  Upon  the  facts  stated  there  ought  to 
be  no  question    as  to  the  right  of  the 
plaintiffs  to  have  their  shares  replaced 
on  the  books  of  the  company  and  proper 
certificates  issued  to  them,  and  to  cover 
the  dividends  accrued    on   the  shares 
after  the  unauthorized  transfer ;  or   to 
have    alternative    judgments    for    the 
value  of  the  shares  and  the  dividends. 
Forgery  can  confer  no  power  nor  trans- 
fer any  rights.     The  officers  of  the  com- 
pany are  the  custodians   of  its  stock- 
books,  and  it  is  their  duty  to  see  that  all 
transfers  of  shares  are  properly  made, 
either  by  the  stockholders   themselves 
or  persons  having  authority  from  them. 
If  upon  the  presentation  of  a  certificate 
for  transfer  they  are  at  all  doubtful  of 
the  identity  of  the    party   offering  it 
with  its  owner,  or  if  not  satisfied  of  the 
genuineness  of  a  power  of  attorney  pro- 
duced, they  can  require  the  identity  of 
the  party  in  the  one  case,  and  the  gen- 
uineness of  the  document  in  the  other, 
to   be   satisfactorily   established   before 
allowing  the  transfer  to  be   made.     In 
either  case  they  must  act  upon   their 
own  responsibility.     .     .    .     Neither  the 
absence  of  blame  on  the  part  of  the  offi- 
cers or  the  company  in  allowiug  an  un- 
authorized  transfer   of   stock,   nor   the 
good  faith  of  the   purchaser  of  stolen 
property,  will  avail  as  an  answer  to  the 


demand  of  the  true  owner."  A  corpo- 
ration is  liable  to  the  owner  of  stock  al- 
lowing a  transfer  of  the  stock  to  be 
made  to  a  transferee  who  forged  the 
owner's  name  to  the  transfer  on  the 
back  of  the  certificate  of  stock.  Penn- 
sylvania Co.,  etc.,  v.  Philadelphia,  etc., 
R.  Co.,  25  Atl.  Rep.,  1043  (Pa.,  1893). 

i  Johnston  v.  Renton,  supra;  Cottam 
v.  Eastern  Counties  Ry  Co..  supra; 
Sloman  v.  Bank  of  Eng..  supra. 

'-'  This  is  the  usual  prayer  for  relief  in 
this  country. 

s  Pratt  v.  Boston  &  Albany  R  R  Co., 
126  Mass.,  443  (1879). 

4  Dalton  v.  Midland  R  R  Co.,  12  C.  B., 
458  (1852). 

5  Blaisdell  v.  Bohr,  68  Ga.,  56  (1881). 

6  Id.  As  to  a  statutory  criminal  lia- 
bility of  an  officer  forging  and  issuing 
stock,  see  State  v.  Haven,  9  Atl.  Rep., 
841  (Vt.,  1887). 

'  Mayor,  etc.,  of  Baltimore  v.  Ketchum, 
57  Md.,  23  (1881);  Pratt  v.  Boston  & 
Albany  R  R  Co.,  126  Mass.,  443  (1879). 
The  statute  of  limitations  in  behalf  of  the 
corporation  begins  to  run  against  a  cause 
of  action  for  forged  transfer  only  from 
the  time  when  the  corporation  denies 
its  liability  therefor.  Barton  v.  North, 
etc.,  Ry  Co.,  58  L.  T.  Rep.,  549  (1888). 
In  a  stockholder's  action  to  compel  the 
corporation  to  retransfer  stock  to  them 
which  has  been  transferred  on  the  cor- 


507 


§§  366,  367.]  FORGERY STOLEN    STOCK.  [cH.  XXI. 

Where  the  corporation  is  sued  by  the  real  owner  of  the  stock  for 
allowing  the  registry  of  a  transfer  based  on  forgery,  it  cannot  in- 
stitute an  independent  action  bringing  in  all  the  parties  interested 
and  enjoining  the  action  of  the  owner  of  the  stock.1  The  latter  is 
entitled  to  his  action  at  law  without  delay  and  without  involving 
or  settling  the  respective  rights  of  others. 

§  366.  The  right  of  the  rightful  owner  of  the  stock  to  complain 
of  the  forgery  whereby  his  certificate  has  passed  into  the  possession 
of  another  may  be  barred  by  estoppel  or  ratification.  Formerly  it 
was  held  that  the  negligence  of  the  owner  of  the  stock  would  be  a 
bar  to  his  remedy.2  Later  decisions,  however,  have  firmly  estab- 
lished the  rule  that  "there  must  be  either  something  that  amounts 
to  an  estoppel  or  something  that  amounts  to  a  ratification  in  order 
to  make  the  negligence  a  good  answer."3  Accordingly,  the  right- 
ful owner  of  the  stock  is  held  not  to  be  barred  of  his  remedy  bv 
the  fact  that  the  stockholder,  a  corporation,  allowed  its  corporate 
seal  to  be  in  the  possession  of  its  secretary,  whereby  he  sold  the 
stock  owned  by  the  corporation;4  or  by  the  fact  that  the  owner 
delayed  several  months,  during  which  time  the  forger  escaped;5  or 
that  he  transferred  on  the  back  of  the  certificate  only  part  of'  the 
shares  specified  in  the  certificate;6  or  that  he  gave  his  address 
wrong,  and  thereby  a  letter  of  inquiry  did  not  reach  him;7  or  that 
he  allowed  his  clerk,  the  forger,  to  have  access  to  his  papers,  and 
gave  him  blank  transfers  duly  signed  to  use  in  transferring  other 
stock;8  or  that  the  guardian  of  the  plaintiff  was  negligent. » 

§367.  Rights  of  transferees  who  purchase  after  a  registry  hat 
been  obtained—  It  has  already  been  shown  that  the  transferees  of 
a  certificate  of  stock  which  has  been  put  in  circulation  by  forgery 
are  not  allowed  to  retain  such  stock  where  there  has  not  been,  at 
some  time  subsequent  to  the  forgery,  a  transfer  registered  on  the 
corporate  books.     It  has  also  been  shown  that  he  who  applies  to 

porate  books  by  forgery,  the  holders  of  England,  56  L.  T.  Rep.,  665  (1887),  where 

the  new  certificates  are  not  allowed  to  the  preceding  case  was  reluctantly  fol- 

come  in  and  defend.     Barton  r.  London,  lowed, 

etc.,  R'y,  59  L,  T.  Rep,  122  (1888).  5  Davis  v.  Bank  of  England,  2  Bing., 

1  American  Tel.  &  Cable  Co.  v.  Day,  393  (1824). 

52  N.  Y.  Superior  Ct,  128  (1885).  «Sewall  v.  Boston  Water-power  Co., 

2  Coles  v.  Bank  of  Englaud,  10  Ad.  &    86  Mass.,  277  (1862). 

E,  437  (1839i,  where  the  continuous  re-  '  Johnston  v.  Renton,  L.  R,  9  Eq.,  181 

ceipt  of  dividends  on  a  less  quantity  of  (1870). 

stock  than  she  was  entitled  to  was  held  s  swan  v.  North    British    Aus.  Co,  7 

a  bar.  though  the  stockholder  was  old  H.  &  N,  603  (1862),  substantially  over- 

and  infirm.  ruling  Ex  parte  Swan,  7  C.  B.  (N.  S.),  400 

3  Bank  of  Ireland  v.  Trustees  of  Evans  (1859). 

Charities.  5  H.  L.  Cases,  389  (1855).  9  Telegraph  Co.  v.  Davenport,  97  U.  S, 

1  Id,  and  Merchants',  etc,  i\  Bank  of    369  (1878). 


508 


CH.  XXI.]  FORGERY  —  STOLEN    STOCK.  [§  oCS. 

the  corporation  for  a  registry  of  transfer,  such  registry  being  the 
first  one  since  the  forgery  was  committed,  is  not  allowed  to  retain 
the  stock.  An  entirely  different  rule  prevails  as  regards  all  subse- 
quent bona  fide  holders  of  the  new  certificate  obtained  by  the  first 
registry.  The  person  who  obtains  the  first  registry  has  no  rights 
except  as  against  his  transferrer.  But  all  subsequent  purchasers 
without  notice  are  fully  protected.  They  cannot  be  compelled  to 
give  up  the  stock,  either  to  the  corporation  or  to  the  person  who 
lost  it  by  forgery.1  This  rule  arises,  not  from  the  law  of  negli- 
gence, but  from  the  law  of  estoppel  operating  against  the  corpora- 
tion. It  is  in  accord  with  the  demands  of  trade  and  the  constant 
tendency  of  the  law  to  protect  honafide  purchasers  of  certificates 
of  stock. 

D.    STOLEN   OR    LOST   CERTIFICATES. 

§  368.  Stolen  or  lost  certificates  of  stock  indorsed  in  blank. —  One 
of  the  most  important  elements  of  the  negotiability  of  promissory 
notes  is  that,  if  the  holder  of  such  note  loses  it  or  it  is  stolen  from 
him  when  it  is  indorsed  in  blank,  a  subsequent  bona  fide  purchaser 
of  such  note  is  protected  as  against  the  person  who  lost  it.  A  dif- 
ferent rule  seems  to  prevail  as  regards  certificates  of  stock  indorsed 
in  blank  and  then  lost  or  stolen.  In  this  respect  certificates  of  stock 
are  not  negotiable.  It  has  been  clearlv  held  that  a  purchaser  from 
a  thief  of  certificates  of  stock  indorsed  in  blank  is  not  protected, 
nor  is  any  subsequent  purchaser  of  that  identical  certificate  allowed 
to  claim  the  stock.  The  real  owner  of  the  certificate  may  compel 
the  corporation  which  has  refused  to  recognize  the  thief's  trans- 
feree's title  to  register  the  stock  as  his,  or  he  may  have  damages 
against  a  bona  fide  transferee  of  the  thief  where  such  transferee 

1  Machinists'  Nat'l  Bank  v.  Field,  126  in  the  sale  and  transfers  of  shares."     A 

Mass.,  345  (1879);  Re  Bahia  &  San  Fran-  purchaser  of  certificates  of  stock  need 

Cisco  R'y  Co.,  L.  R,  3  Q.  B.,  584  (1868),  not  look  back  of   the  last  registry  of 

where,  however,  the  corporation,  having  transfer    on  the    corporate  books.      A 

canceled  all  the  registries  made  subse-  breach  of  trust  back  of  that  does  not  in- 

quent  to  the  forgery,  was  held  liable  in  validate  his  title.     Winter  v.  Montgom- 

damages  to  a  purchaser  subsequent  to  ery,  etc.,  Co.,  7  S.  Rep.,  773  (Ala.,  1890). 

the  first  registry.     The  court  said   the  A  corporation  cannot  refuse  to  transfer 

giving  of  a  certificate  "  is  a  declaration  stock  on   the  ground  that  the  vendor 

by  the  company  to  all  the  world  that  fraudulently  induced   the  company   to 

the  person  in  whose  name  the  certificate  issue  the  stock  to  him  where  the  company 

is  made  out  and  to  whom  it  is  given  is  has  been  guilty  of  laches  in  not  seeking 

a  shareholder  in  the  company,  and  it  is  a    remedy    before    the    transfer.      The 

given  by  the  company  with  the  inten-  vendee    in    this    case    was  a  director, 

tion  that  it  shall  be  so  used  by  the  per-  American,  etc.,  Co.  v.   Bayless,  15  S.  W. 

son  to  whom  it  is  given,  and  acted  upon  Rep.,  10  (Ky.,  1891). 

509 


§  300.] 


FORGKRY 


STOLEN    STOCK. 


[CH. 


XXT. 


has  sold  the  stock.1  In  Nevada  it  is  held  that  the  purchaser  and 
vendor  of  the  stolen  certificate  is  liable  in  damages  to  its  real  owner, 
although  the  former  acted  as  a  broker  and  without  notice.2  The 
lonafcle  purchaser  of  a  stolen  certificate  of  stock  indorsed  in  blank 
cannot  compel  the  corporation  to  register  him  as  a  stockholder.3 
The  person  stealing  certificates  of  stock  is  guilty  of  larceny,  and 
may  be  convicted  for  the  same.4  The  corporation  cannot  obtain 
an  injunction  against  a  possible  action  by  the  purchaser  of  stolen 
certificates  who  has  applied  for  registry  and  been  refused  it.5 

§  369.  Where,  however,  certificates  of  stock  indorsed  in  blank 
have  been  stolen,  and  the  thief  or  his  transferee^has  obtained  a  reg- 
istry on  the  corporate  books  and  obtained  new  certificates  of  stock, 


1  Barstow  v.  Savage  Mio.  Co.,  64  Cal., 
388  {1883).  substantially  overruling  Win- 
ter v.  Belmont  Min.  Co.,  53  Cal.,  428 
(1879):  Anderson  v.  Nicholas,  28  N.  Y., 
COO  (18G4),  where  the  purchaser  of  the 
stolen  certificate  was  not  a  bona  fide 
purchaser.  The  court  said  that  even  if 
he  had  been  a  bona  fide  purchaser  he 
would  not  be  protected.  Cf.  Aull  v. 
Colket,  33  Leg.  Intel.,  44  (Pa.,  1876), 
where  the  question  of  negligence  was 
submitted  to  the  jury.  The  mere  fact 
of  losing  it  is  no  proof  of  negligence. 
Biddle  v.  Bayard,  13  Pa.  St.,  150  (I860). 
The  purchaser  of  a  certificate  indorsed 
in  blank  and  stolen  is  not  protected. 
Given's  Appeal,  16  Atl.  Rep..  75  (Pa., 
1888).  The  bona  fide  purchaser  of  a  cer- 
tificate of  stock  indorsed  in  blank,  but 
which  was  stolen  from  the  owner,  is  not 
protected.  East,  etc.,  Co.  v.  Dennis.  5 
R'y  &  Corp.  L.  J..  296  (Ala.,  1889).  A 
stockholder  is  liable  to  the  owner  for 
the  value  of  mining  shares  received  for 
sale  from  one  who  had  stolen  them,  al- 
though he  acted  in  good  faith,  without 
notice,  and  paid  the  proceeds  to  the 
thief,  relying  on  his  representations  of 
ownership.  Swim  v.  Wilson.  27  Pac. 
Rep.,  33  (Cal.,  1891). 

2Bercich  v.  Marye,  9  Nev.,  312  (1874); 
Barstow  v.  Savage  Mining  Co.,  64  Cal, 
388.  According  to  the  California  decis- 
ion the  same  rule  would  be  applied  to 
negotiable  instruments.  In  another 
case,  where  a  broker  innocently  sold 
for  a  principal  a  stolen  negotiable  gov- 


ernment bond,  the  broker  was  held 
liable  to  the  true  owner.  Kimball  v. 
Billings,  55  Me.,  147.  The  court  ex- 
pressly refused,  in  this  case,  to  place  the 
broker  in  the  same  position  as  an  inno- 
cent purchaser  for  value.  Tn  the  ease  of 
Zulick  v.  Markham,  6  Daly.  129.  it  was 
sought  to  extend  this  doctrine  to  the 
sale  of  certificates  of  stock  which  had 
only  been  misapplied.  Here  a  broker 
had  innocently  sold  for  a  fraudulent 
principal  indorsed  certificates  of  stock, 
which  bad  not  been  stolen  from  the 
owner,  but  delivered  to  him  by  the 
principal,  who  fraudulently  sold  them 
through  an  innocent  broker.  The  New 
York  court  held  the  broker  in  this  case 
to  stand  on  the  same  footing  as  an  inno- 
cent purchaser  and  not  liahle  to  the 
owner  for  the  proceeds ;  but  no  opinion 
was  expressed  as  to  the  rule  of  liability 
if  the  stock  had  been  stolen  instead  of 
misapplied. 

s Sherwood  v.  Meadow  Valley  M.  Co., 
50  Cal..  412  (1875).  Although  two  per- 
sons have  a  safety-deposit  box  in  com- 
mon, and  one  of  them  steals  therefrom 
a  certificate  of  stock  owned  by  the  other 
and  indorsed  in  blank  by  the  latter,  yet 
a  purchaser  even  in  good  faith  of  such 
stolen  certificate  is  not  protected.  Ban- 
gor, etc.,  Co.  v.  Robinson,  52  Fed.  Rep., 
520  (1892). 

*  People  v.  Griffin,  38  How.  Pr.,  475 
(1869). 

5  Buffalo  Grape  Sugar  Co.  v.  Alberger, 
22  Hun.  349  (1880). 
40 


CH.  XXI.]  FORGERY STOLEN    STOCK.  [§  370. 

and  these  new  certificates  have  been  sold,  the  purchaser  is  protected 
in  his  possession  of  the  stock.1  In  Michigan  this  is  held  to  be  the 
rule  even  though  such  purchaser  took  the  stock  with  full  knowl- 
edge of  all  the  facts.2  It  is  to  be  hoped  that  this  rule  will  be  gen- 
erally sustained,  since  it  is  in  accordance  with  the  general  rule  that 
the  rights  and  equities  of  all  holders  of  stock  back  of  the  registry 
and  issue  of  the  certificates  in  existence  are  not  allowed  to  affect 
the  stockholdership  or  rights  of  purchasers  of  these  new  certifi- 
cates. 

§  370.  Owner  of  a  lost  certificate  of  stock  may  obtain  new  certifi- 
cate.—  An  owner  of  a  certificate  of  stock  who  has  lost  it  or  had  it 
stolen  from  him  may,  by  taking  proper  proceedings  or  by  giving 
proper  security  to  the  corporation,  have  new  certificates  issued  to 
him.  In  Louisiana  it  is  held  that,  upon  satisfactory  proof  of  the 
•loss  of  certificate  of  stock,  a  writ  of  mandamus  will  issue  to  com- 
pel the  corporation  to  issue  new  certificates,  and  that  no  bond  of 
indemnity  need  be  given.3  But  the  better  rule  seems  to  be  that, 
except  in  cases  of  the  clearest  proof  of  loss,  the  corporation,  shall 
not  be  required  to  issue  new  certificates  unless  a  bond  of  indem- 
nity against  its  liability  to  possible  legal  holders  of  the  lost  certifi- 
cate shall  be  given.4  In  ISTew  York,  by  statute,  security  may  be 
required  in  all  such  cases.5  It  would  seem  reasonable  that  a  bond 
of  indemnity  should  be  given  to  the  corporation,  since,  in  case  the 
old  certificate  has  not  been  lost,  but  has  been  sold  by  its  owner, 
the  corporation  is  liable  in  damages  or  to  replace  the  stock  to  the 
purchaser  for  issuing  new  certificates  v:ithout  a  surrender  of  the 
old.6     Where  certificates  of  stock  have  been  lost,  and  a  party  turns 

1  Mandlebaum  v.  North  Am.  Min.  Co.,  47  (1879).  A  corporation  need  not  issue 
4  Mich.,  465  (1857).  A  purchaser  of  cer-  new  certificates  of  stock  in  place  of 
tificates  of  stock  need  not  look  back  of  those  which  are  lost  unless  a  bond  of 
the  last  registry  of  transfer  on  the  cor-  indemnity  be  given.  Guilford  v.  West- 
porate  books.  A  breach  of  trust  back  ern  U.  Tel.  Co.,  46  N.  W.  Eep.,  70  (Minn., 
of  that    does    not  invalidate  his   title.  1890). 

Winter  v.  Montgomery,  etc.,  Co.,  7  S.  5This  statute  does  not  give  a  remedy 

Rep.,  773  (Ala.,  1890).  to  a  purchaser  of  stock  at  a  receiver's 

2  Id.  sale.     If  he  is  unable  to  obtain  the  out- 

3  State  v.  New  Orleans  Gas  Light  Co.,  standing  certificates  his  remedy  is  other- 
25  La.  Ann.,  413  (1873).  wise.     In  re  Biglin  v.  Friendship  Ass'n. 

*  Galveston    City    Co.    v.    Sibley,    56  N.  Y.  Daily  Reg..  Dec.  5,  1887. 
Texas,  269  (1882),  where  one  who  be-        « See  §§  358-360.     Persons  receiving  a 

came  a  stockholder  in  1841  died  in  1865,  duplicate  certificate  on  the  ground  of 

and  his  heirs  applied  for  a  new  certifi-  loss  of  the  original   may   be  compelled 

cate  in  1878;  Societe  Generale  de  Paris  by  the  company  to  return  it  where  the 

v.  Walker,  L.  R.,  11  App.  Cae.  (H.  of  L),  original   turns  up  in  another  person's 

20;  affirming  L   R.,  14  Q.   B.  D.,  424;  hands,  the  certificate  having  been  sold 

Butler  v.  Glen  Cove  Starch  Co..  25  Hun.  to  the  latter  by  the  former  owner.    New 

511 


§371.]  FOEGERY STOLEN    STOCK-  [CH.  XXI. 

up  with  them  and  applies  for  transfer  on  the  corporate  books,  the 
real  owner  may  enjoin  a  transfer  of  the  certificate,  and  also  any 
transfer  by  the  corporation  on  its  books,  pendente  lite.1 

E.    CONFISCATION    OF    STOCK. 

§  371.  During  the  late  Eebellion,  acts  of  confiscation  were  passed, 
both~  by  the  United  States  government  and  by  the  Confederate 
government,  and  shares  of  stock  owned  by  parties  in  one  section 
of  the  country  in  corporations  domiciled  in  the  other  section  were 
confiscated.     The  result  of  the   war  having  established  that  the 
Confederate  government  was  an  illegal  one,  all  its  acts  of  confisca- 
tion became  null  and  void;  and  all  transfers  and  registers  of  stock 
thereunder  were  held  to  be  void  utterly.     The  whole  line  of  trans- 
actions based  on  the  confiscation  fell  with  the  confiscation  itself.2 
The  corporation  was  held  not  liable  to  purchasers  whose  title  was 
based   on  the  confiscation,  since  it  acted  under  compulsion  of  a 
power  temporarily  greater  than  the  law  itself.3     If  the  corporation 
neglects  to  remedy  the  confusion  and  claims  growing  out  of  the 
illegal  confiscation  of  stock,  any  stockholder  may  institute  an  ac- 
tion in  its  behalf  for  that  purpose.4     The  stock  is  to  be  restored  to 
the  owner  against  whom  the  confiscation  proceedings  were  had; 
and  if  the  corporation,  during  the  Rebellion,  voluntarily  paid  divi- 
dends to  the  illegal  holders  of  the  stock,  it  must  pay  the  same  to 
the   plaintiff,  even   though  it  would  have  been  compelled  to  pay 
such  dividends  to  the  southern  holder  if  it  had  not  done  so  volun- 
tarilv.5     On   the  other  hand,  proceedings  for  the  confiscation  of 
stock  under  the  confiscation  acts  of  the  United  States  government, 
passed  by  reason  of  the  late  Rebellion,  are  held  to  have  been  effect- 
ive if  in  accordance  with  established  rules  of  procedure.     "Where, 
however,  no  notice  of  the  proceedings  was  given  to  the  defendant, 
and  her  name  and  the  stock  were  not  accurately  described,  the 
proceedings   were  void;  and  the  corporation,  having  obeyed  the 
illegal  judgment  of  confiscation,  was  held  liable  in  damages  to  the 
southern  owner  of  the  stock.6 

York  Cen.,  etc..  R  R  v.  Stokes,  N.  Y.  »Id. ;  also  Central  R  R   &  Banking 

Law  Journal,   Nov.    16,    1888.     In    the  Co.  n  Ward,  37  Ga.,  515  (1868). 

case  Keller  v.  Eureka,  etc.,  Co.,  9  R'y  'Perdicaris    v.    Charleston    Gas-light 

&  Corp.,  L  J..  123  (St  Louis,  1890),  the  Co.,  Chase's  Dec,  435  (1869);  affirmed, 

court  held  that  the  corporation  need  not  sub  nom.  Dewing  v.  Perdicaris,  supra. 

issue  an  ordinary  certificate  in  place  of  5  Keppel's  Adm.  v.  Petersburg  R  R 

one  that  was  lost,  but  might  write  upon  Co.,  Chase's  Dec,  167  (1868). 

the  new  certificate  the  word  "duplicate.''  6  Chapman  v.  Phoenix  National  Bank, 

•  Sierra  Nevada,  etc.,  Co.  v.  Sears,  10  85  N.  Y,  437  (1881) ;  reversing  S.  G,  12 

Nev.,  346  (1875).  J.  &S.,  340;  Avil  v.   Alexander  Water 

2  Dewing  v.  Perdicaris,  96  U.  S.,  193  Co..  1  Hughes,  408  (1877;. 
(1877). 

512 


CHAPTER  XXII. 


SALES   OF   STOCK  — FORMAL   METHOD   OF   TRANSFERRING  CERTIFI- 
CATES AND  REGISTRY  THEREOF. 


§  372.  Subject  treated  herein. 

373.  The  two  usual  steps  in  perfecting 

a  transfer  of  stock. 

374.  Omission,  of  either  or  both  steps. 

A.    METHOD  OF  TRANSFERRING   THE  CER- 
TIFICATE. 


§  375. 


376. 
377. 

378. 


379. 
380. 


Usual  forms  of  assignment  and 
powers  of  attorney  whereby 
the  transferrer  assigns  the  cer- 
tificate of  stock  to  his  trans- 
feree. 

Questions  which  arise  herein. 

A  seal  is  not  necessary  to  a  trans- 
fer of  stock. 

The  assignment  of  the  cei-tificate 
of  stock  estops  the  transferrer 
from  claiming  any  further 
title  in  the  stock  as  against 
subsequent  bona  fide  transfer- 
ees, although  such  assignment 
be  not  registered. 

Effect  of  charter  provision  re- 
quiring registry. 

Certificate   of  stock  may  be  as- 


signed  with   tlie  name  of  the 
transferee  left  blank. 

B.   METHOD    OF    REGISTERING    A    TRANS- 
FER OF   STOCK. 

§  381.  Registry  an  important  part  of  a 
transfer  of  stock. 


382.  Formalities  of  making  registry. 

383.  Formalities  of  registry   may  be 

waived  by  the  corporation. 

384.  Either    the    transferrer    or    the 

transferee  may  apply  to  the 
corporation  for  a  registry  of 
transfer. 


C.  RIGHTS  AND  DUTIES  OF  THE  CORPO- 
RATION IN  ALLOWING  OR  RE- 
FUSING REGISTRY. 


385. 


386. 


387. 
388. 


389. 


390. 
391. 
392. 


Corporation  may  require  proof 
of  identity;  also  of  genuine- 
ness of  signature,  etc. 

Corporation  cannot  refuse  reg- 
istry on  account  of  the  motive 
of  the  transferrer  or  transferee 
in  the  transaction. 

Corporation  may  interplead  be- 
tween two  claimants  to  stock. 

Corporation  must  obey  mandate 
of  court  ordering  registry  and 
issue  of  new  certificates. 

Remedies  of  a  transferee  of  stock 
against  the  corporation  for  re- 
fusal to  allow  registry. 

Remedy  by  mandamus. 

Remedy  by  suit  in  equity. 

Remedy  by  an  action  for  dam- 
ages. 


§  372.  Subject  treated  herein.—  Having  considered  the  compe- 
tency of  parties  to  enter  into  a  contract  of  sale  of  stock;1  also  of 
the  legality,  enforceability  and  character  of  that  contract ; 2  also 
the  rights  of  third  parties  as  affecting  the  contract  between  the 
transferrer  and  transferee,3 —  it  is  now  necessary  to  discuss  certain 
formalities  whereby  the  title  to  stock  is  transferred.  These  for- 
malities are  peculiar  to  sales  of  stock.  The  only  analogy  to  them 
is  perhaps  that  arising  from  the  making  of  a  deed  of  real  estate, 
and  a  registry  of  the  same  at  a  recorders  office.  In  many  respects, 
however,  this  analogy  does  not  apply.     Thus,  the  corporation  itself 


»  Ch.  XIX. 
2Ch.  XX. 
(33) 


3  Ch.  XXL 


513 


^§  3(3~3T5.]       FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [CH.  XXII. 

has  many  rights  and  duties  herein  which  a  register  of  deeds  has  not. 
The  principles  of  law  governing  the  formalities  of  transfer  of  stock 
have  occasioned  great  difficulties  and  much  litigation.  The  rules 
given  herein  have  arisen  for  the  most  part  out  of  the  necessities 
and  demands  of  business  as  sanctioned  by  the  courts.  They  have 
been  gradually  formed,  and  still  bear  the  imprints  of  the  transition 
stage  of  a  newlv-created  law. 

§  373.  The  two  usual  stejis  in  perfecting  a  transfer  of  stock. — 
To  transfer  a  share  of  stock  there  are  generally  two  distinct  steps 
to  be  taken:  First,  the  certificate  is  assigned  by  the  transferrer  to 
the  transferee;  and  second,  that  assignment  and  transfer  are  per- 
fected and  completed  by  delivering  the  assigned  certificate  to  the 
corporation,  obtaining  an  entry  on  the  corporate  transfer  book  to 
the  effect  that  the  transferee  has  purchased  the  stock  of  the  trans- 
ferrer, and  taking  from  the  corporation  new  certificates  of  stock 
certifying  that  the  newly-recorded  stockholder  owns  a  specified 
amount  of  stock. 

374.  Omission  of  either  or  ooth  steps. —  Either  and  even  both  of 
these  two  steps  in  the  complete  transfer  of  stock  may  be  omitted ; 
and  yet,  where  the  facts  estop  the  various  parties  from  denying 
that  a  transfer  has  been  made,  it  will  be  held  to  be  complete. 
Thus,  it  has  been  held  that  an  owner  of  stock  may  transfer  his 
stock  to  another  bv  a  deliverv  of  the  certificate  without  any  as- 
signment.1  This  happens  when  a  registry  of  transfer  is  made  with- 
out any  surrender  of  the  old  certificate.2  So  far  as  the  transferrer 
is  concerned  such  a  method  of  transfer  is  effectual.  Such  cases 
also  arise  where  the  corporation  has  never  issued  certificates  of 
stock.  The  stockholder  may  then  transfer  his  stock  without  as- 
signing a  certificate.3 

A.  MF/mOD    OF    TRANSFERRING    THE    CERTIFICATE. 

§  375.  Usual  forms  of  assignment  and  powers  of  attorney 
whereby  the  transferrer  assigns  the  certificate  <>f  sloelc  to  his  trans 
feree. —  A  certificate  of  stock  is  a  paper  issued  by  the  corporation 
to  a  stockholder,  stating  that  the  person  specified  therein  is  the 
owner  of  a  certain  number  of  shares  of  its  capital  stock.  The  as- 
signment of  this  certificate  is  made,  it  seems,  in  three  different 
ways :  First,  it  has  been  held  that  it  may  be  made  by  a  simple  de- 
livery of  the  certificate  without  any  writing.4     Again,  it  may  be 

1  See  §§  308,  465,  note.  *  See  §  308,  where  a  delivery  of  a  cer- 

2See§360.  tificate  of  stock  causa  mortis  was  held 

3  First  Nat  Bank  v.  Gifford,  47  Iowa,     good,  without  any  writing  assigning  the 

575  (1877) ;  Brigham  v.  Mead,  92  Mass.,     certificate ;  and  §  465,  note.     See,  also. 

245  (1865).     See,  also,  §  382.  Fraser  v.  Charleston,  11  S.  C,  486  (187- 

514 


CH.  XXII.]  FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [§  375. 

made  bv  a  formal  instrument  of  assignment  duly  signed  bv  the 
transferrer.  This  instrument  may  be  separate  from  the  certificate 
of  stock,  but  generally  is  printed  in  blank  on  the  back  of  it.  In 
either  case,  in  order  to  make  the  transfer  complete  by  a  registry  of 
it  on  the  corporate  books,  it  is  necessary  for  the  transferrer  to  go 
to  the  office  of  the  corporation  and  sign  the  transfer  in  the  corpo 
rate  transfer  book,  whereby  the  transfer  is  recorded.  The  third 
and  most  usual  method  of  assigning  a  certificate  of  stock  is  by  a 
formal  instrument  of  assignment,  similar  to  the  one  explained 
above,  united  with  a  power  of  attorney  authorizing  a  person,  whose 
name  is  generally  left  blank,  to  be  subsequently  filled  in,  to  sign 
the  corporate  transfer  book,  whereby  the  transfer  is  recorded. 
This  instrument  of  transfer  and  the  power  of  attorney  are  gener- 
ally printed  in  blank  on  the  back  of  the  certificate  of  stock.  It 
enables  the  transferee  to  obtain  a  registry  without  the  presence  of 
the  transferrer,  provided  the  corporate  registry  agent  is  satisfied 
with  the  signature  and  intent  of  the  transferrer  to  assign  the  stock. 
The  blank  power  of  attorney  is  generally  filled  in  by  the  transfer 
clerk,  who  inserts  his  own  name  and  thereby  becomes  the  attorney.1 
This  power  of  attorney  is  not  revoked  by  the  death  of  the  trans- 
ferrer before  it  is  used.2  A  general  power  of  attorney  to  sell  land 
and  build  houses  does  not  justify  a  sale  of  stock.3  A  general  power 
of  attorney  authorizing  an  agent  to  sell  and  transfer  stocks,  etc.. 
authorizes  him  to  sign  the  stockholder's  name  to  a  transfer.4     Per- 

o 

Cf.  Sitgreaves  v.  Farmers',  etc.,  Bank,  South  Boston  R  R,  22  N.  E.  Eep.,  917 

49  Pa.  St.,  359  (1870) :  Davis  v.  Bank  of  (Mass.,  1889). 

England,  2  Bing.,   393  (1824);    Burrall  2  Fraser  v.   Charleston,    11   S.  G,  486 

v.  Bushwick  R  R  Co.,  75  N.  Y.,  211  (1878) ;  Leavitt  v.  Fisher,  4  Duer  (N.  Y.), 

(1878):  Dunn  v.  Com.  Bank  of  Buffalo,  1  (1854);  United  States  v.  Cutts,  1  Sum- 

11  Barb.,  580  (1852).     A  deed  of  release  ner,  133  (1832). 

of  shares  of  stock  is  a  sufficient  transfer.  3  Camden,  etc.,  Assoc,  v.  Jones,  21 
Hastings  v.  Blue  Hill,  etc.,  Corp'n,  26  Atl.  Rep.,  458  (N.  J.,  18911  holding  also 
Mass.,  80  (1829).  If  a  corporation  allows  that  the  corporation  is  liable  for  allow- 
a  transfer  to  be  made  on  its  books  with-  ing  a  transfer  of  stock  where  the  stock- 
out  the  transfer  on  the  old  certificate  holder  did  not  sign  the  transfer  nor 
being  signed,  it  is  liable  to  the  owner  of  authorize  another  to  transfer  it 
the  old  certificate,  even  though  the  old  4Tafft  v.  Presidio,  etc..  Co.,  22  Pac. 
certificate  is  delivered  up  and  the  attor-  Rep..  485  (Cat,  1889).  Where  a  person 
ney  in  fact  of  the  owner  shows  his  power  gives  to  another  a  general  power  of  at- 
of  attorney  at  the  time  of  the  transfer  on  torney  covering  the  sale  and  transfer  of 
the  books.  Taft  v.  Presidio,  etc.,  Co.,  24  all  stocks,  etc.,  the  attorney  may,  upon 
Pac.  Rep,  436  (Cal.,  1890).  delivering  up  the  certificate  therefor  to 
1  The  fact  that  the  officer  of  the  cor-  the  corporation,  transfer  the  stock  of 
poration  fills  in  his  own  name  as  agent  his  principal  into  his  own  name.  The 
to  transfer  does  not  make  him  the  corporation  is  not  bound  to  inquire 
agent  of  the  stockholder  as  regards  no-  further  than  the  power  of  attorney,  nor 
tice  of    the    agent's    frauds.     Allen  v.  is  it  given  notice  by  the  fact  that  the 

515 


§§  376,  377.]       FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [CH.  XXII. 

mitting,  without  inquiry,  a  transfer  under  a  power  of  attorney 
thirteen  years  old  is  not  proper  vigilance  on  the  part  of  a  corpora- 
tion.1 

§  376.  Questions  which  arise  herein. —  The  assignment  of  a  cer- 
tificate of  stock  by  the  transferrer  to  the  transferee,  considered 
apart  from  the  actual  registry  of  such  assignment  on  the  corporate 
books,  involves  the  question  whether  such  an  assignment  should  be 
under  seal;  whether,  after  the  assignment,  the  transferrer  can  claim 
any  rights  of  ownership  as  against  the  transferee,  even  though 
there  be  no  registry  of  the  transfer;  and  whether  a  transfer  and 
power  of  attorney  duly  signed  by  the  transferrer,  but  left  in  blank 
as  to  the  name  of  the  transferee  and  attorney,  are  legal  and  may 
pass  from  hand  to  hand  until  some  holder  cares  to  fill  up  the 
blanks.  These  and  incidental  questions  are  discussed  in  the  follow- 
ing sections. 

§  377.  A  seal  is  not  necessary  to  a  transfer  of  stock. —  In  Amer- 
ica an  assignment  or  transfer  of  a  certificate  of  stock  need  not  be 
under  seal.2  Formerly  it  was  the  custom  to  have  all  such  transfers 
made  bv  deed,  dulv  sealed.  As  the  nature  of  stock  and  certificates 
of  stock,  however,  came  to  be  understood  more  clearly,  it  became 
a  rule  of  law  that  a  transfer  of  the  certificate,  like  the  transfer  of 
choses  in  action,  did  not  require  a  seal.  Not  even  the  presence  of 
the  seal  gives  the  transfer  the  character  of  a  sealed  instrument. 
The  seal  is  a  superfluity  and  is  disregarded.3 

In  England,  on  the  other  hand,  transfers  of  railway  stocks  are 
generally  required  by  charter  to  be  under  seal.  This  is  held  to 
give  the  instrument  the  character  of  a  deed;  and  hence,  in  accord- 
ance with  the  ancient  technical  rule  of  law  that  a  deed  must  be 
filled  out  as  to  the  grantee  and  other  essential  particulars  before  it 
is  sealed  in  order  to  be  valid,  it  has  been  held  in  England  that  a 
transfer  of  a  certificate  of  stock,  duly  signed  and  sealed,  but  with 

attorney  is  one  of  its  directors.     Id.     A  10  Mass.,  476  (1813);  Atkinson  v.  Atkin- 

stockholder's  power  of  attorney  to  his  son,   8    Allen,   15  (1864).     If,   however, 

agent  "to  exchange  old  issues  or  cer-  the  by-laws  require  it,  the  transfer  must 

tificates  of  stock,  and   to  receive  new  be  under  seal.     Bishop  v.  Globe  Co.,  135 

issues  or  certificates  in   lieu  thereof,"  Mass.,  132  (1883),  holding,  also,  that  the 

does  not  authorize  the  agent  to  sell  or  word  "seal  "is  insufficient 

pledge   the  stock.     The  corporation  is  3  German    Union    B.   Ass'n   v.   Send- 

liable  for  allowing  a  transfer  to  a  third  meyer,  50  Pa.  St.,  67  (1865) ;  Comruer- 

person    on    such    authority.      Quay    v.  cial  Bank  v.   Kortright,  22  Wend.,  348 

Presidio,  etc.,  R  R,  22  Pac.  Rep.,  925  (1839);   McNiel    v.    Tenth  Nat'l    Bank, 

(Cal.,  1889).  46  N.  Y.,  325  (1871):  Bridgeport  Bank  v. 

i  Pennsylvania  R  R  Co.'s  Appeal,  86  N.  Y.  &  N.  H.  R  R  Co.,  30  Conn.,  231, 

Pa.  St.,  80.  274  (1861) ;  Easton  v.  London,  etc.,  Bank, 

2Quiner  v.  Marblehead  Social  Ins.  Co.,  55  L.  T.  Rep.,  678  (1886). 

516 


CH.  XXII.]  FORMALITIES    OF   TRANSFER   AND    REGISTRY. 


[§  378. 


the  name  of  the  transferee  in  blank,  is  void  absolutely.1  In  those 
English  companies,  however,  whose  charters  do  not  require  trans- 
fers to  be  sealed,  the  transfer  may  be  by  an  ordinary  instrument  in 
writing,  and  the  presence  of  a  seal  will  be  disregarded.2 

§378.  The  assignment  of  the  certificate  of  stock  estops  the  trans- 
ferrer from  claiming  any  further  title  in  the  stoclc  as  against  sub- 
sequent dona  fide  transferees,  although,  such  assignment  he  not 
registered.3 —  There  is  no  case  which  denies  this  principle  of  law. 
On  close  examination  of  the  cases  which  seem  to  militate  against 
it,  it  will  be  found  that  the  issue  involved  was  whether  the  unreg- 
istered transferee  was  protected  against  third  persons  who  claimed 
title  back  of  the  transferrer.  The  transferrer  himself  is  not  al- 
lowed to  impeach  his  unregistered  transferee's  title.  Even  in  Con- 
necticut, where  at  an  early  day  the  court  held  that  the  registry 
was  the  originating  act  of  the  title  of  the  transferee,  the  court  was 
considering  the  rights  of  third  persons,  and  not  the  rights  of  the 


1  Hibblewhite  v.  McMoriue,  6  M.  & 
W.,  200  (1840),  per  Parke,  B. ;  Taylor  v. 
Great  Indian  P.  Ry  Co.,  4  De  G.  &  J., 
559  (1859);  Societe  Gen.  v.  Tramways 
Union  Co.,  L.  R.,  14  Q.  B.  D.,  424  (1884), 
where  transfer  was  to  be  by  deed ; 
affirmed,  L.  R.,  11  App.,  20.  Cf.  §§  325, 
380,  416. 

2  Re  Tees  Bottle  Co.,  33  Law  Times 
(N.  S.),  834  (1876);  Walker  v.  Bartlett,36 
Eng.  L.  &  Eq.,  369  (1856):  Re  Barned's 
Banking  Co.,  L.  R,  3  Ch.,  105  (1867); 
Ex  parte  Sargent,  L.  R.,  17  Eq„  327 
(1873);  Ortigosa  v.  Brown,  47  L.  J. 
(Ch.),  168  (1878).  Transfer  of  certificates 
in  England  must  be  under  seal.  Re 
Balkis,  etc.,  Co.,  58  L.  T.  Rep.,  300 
(1888).  The  American  cases  incline  to 
the  opinion  that,  even  though  a  seal 
were  required,  the  sealed  transfer 
would  not  be  void  because  of  the  blanks 
left  in  it.  Bridgeport  Bank  v.  New 
York,  etc.,  R.  R.  Co.,  supra;  Com.  Bank 
v.  Kortright,  supra;  Matthews  v.  Massa- 
chusetts Nat'l  Bank,  1  Holmes,  396,  407, 
(1874);  McNiel  v.  Tenth  Nat'l  Bank, 
supra. 

3  Scott  v.  Pequonnock  Bank  (U.  S.  C. 
Ct.),  15  Rep.,  137  (1883) ;  Brown  v.  Smith, 
122  Mass.,  589  (1877);  Fitchburg  Sav. 
Bank  v.  Torrey,  134  Mass.,  239  (1883); 
Duke  v.  Cahawba  Nav.  Co.,  10  Ala.,  82 


(1846):  Chouteau  Spring  Co.  v.  Harris, 
20  Mo..  382  (1855):  St.  Louis  P.  Ins.  Co. 
v.  Goodfellovv,  9  Mo.,  149  (1845);  Gil- 
berts. Manchester  Iron  Manuf.  Co.,  11 
Wend.,  627  (1834);  Sargent  v.  Essex 
Manuf.  Co.,  26  Mass.,  202(1829);  Nesmith 
V.  Washington  Bank,  23  Mass.,  324  (1829) ; 
Sargent  v.  Franklin  Ins.  Co.,  8  Pick.,  90 
(1829);  Conant  v.  Reed,  1  Ohio  St.,  298 
(1853);  Baltimore  City  P.  R'y  Co.  v. 
Sewall,  35  Md.,  238  (1871);  Bank  of 
America  v.  McNiel,  10  Bush,  54(1873); 
United  States  v.  Vaughan,  3  Binn.  (Pa.), 
394(1811);  Beckwith  v.  Burroughs,  13 
R.  I,  294  (1882) ;  Farmers'  &  M.  Bank  v. 
Wasson,  48  Iowa,  336(1878);  Carroll  v. 
Mullanphy  Sav.  Bank,  8  Mo.  App.,  249 
(1880) ;  B'way  Bank  v.  McElrath.  13  N. 
J.  Eq.,  24  (1860) ;  Smith  v.  Crescent  City, 
etc.,  Co.,  30  La.  Ann.,  1378(1878);  Peo- 
ple's Bank  v.  Gridley,  91  111.,  457  (1879). 
Nor  can  the  transferrer  avoid  the  as- 
signment before  registry  on  the  ground 
that  no  consideration  passed.  Hall  v. 
United  States  Ins.  Co.,  5  Gill  (Md.),  484 
(1847);  Cushman  v.  Thayer  Mfg.  Co.,  76 
N.  Y.,  365  (1879).  Such  an  assignment 
satisfies  a  contract  to  sell  stock.  White 
V.  Saulsbury,  33  Mo.,  150  (1862);  Mer- 
chants' Nat'l  Bank  v.  Richards,  6  Mo. 
App.,  454  (1879).  The  fact  that  the  cor- 
poration subsequently  refuses  to  regis- 


517 


379.] 


FORMALITIES   OF   TRANSFER    AND    REGISTRY.  [CH.  XXII. 


transferrer  himself.1  That  the  transferrer  cannot  question  the 
completeness  of  his  transfer  of  title  is  a  rule  binding  not  only  on 
himself,  but  also  upon  his  assignees  in  bankruptcy  or  insolvency.2 
The  transferrer  is  estopped  also  from  attacking  the  assignment  of 
the  certificate  on  the  ground  of  informalities  in  the  transfer.3 

§  379.  Effect  of  charter  provision  requiring  registry. —  This  rule 
prevails  even  though  the  certificate  or  by-laws,  or  charter  itself, 
declares  that  a  transfer  shall  not  be  legal  or  complete  or  effectual 
until  it  is  registered  on  the  corporate  books.4  As  between  the 
transferrer  and  transferee,  the  unregistered  assignment  is  complete 
and  effectual  in  contradiction  of  such  declarations.  The  courts 
construe  these  provisions  of  the  certificate  or  by-laws  or  charter  to 
be  intended,  not  to  affect  the  rights  of  the  transferee  as  against 
the  transferrer,  but  to  affect  the  rights  of  the  transferee  as  against 
attaching  creditors  of  his  transferrer  and  other  third  parties  claim- 
ing an  interest  in  the  stock,  and  also  to  affect  his  right  to  claim 
dividends,  the  privilege  of  voting,  and  other  rights  of  a  stockholder.'' 


ter  the  transfer  does  not  prevent  title 
passing,  as  between  transferrer  and 
transferee.  Crawford  v.  Provincial  Ins. 
Co.,  8  Upper  Can.,  C.  P.,  263  (1859). 

1  Northrop  v.  Newtown  &  B.  T.  Co.,  3 
Conn.,  552  (1821):  Fisher  v.  Essex  Bank, 
5  Gray,  373  (1855),  the  rights  of  attach- 
ing creditors  being  involved. 

-Ex  parte  Dobson.  2  Mont,  D.  &  D., 
685  (1842);  Dickinson  v.  Central  Nat'l 
Bank.  120  Mass.,  279  (1880);  Morris  v. 
(  amion,  8  Jur.  (N.  S.),  653  (1862);  Sibley 
v.  Quiusigamond  Nat'l  Bank,  133  Mass., 
515  (1882). 

3  Holyoke  Bank  v.  Goodman  Paper 
Mfg.  Co.,  9  Cush.,  576  (1852);  Maguire's 
Case,  3  De  G.  &  S.,  31  (1849);  Sheffield 
A.  &  M.  R'y  Co.  v.  Woodcock,  7  M.  & 
W.,  574  (1841);  Cheltenham  &  G.  W.  N. 
R'y  Co.  v.  Daniel,  2  Q.  B..  281  (1841); 
Home  Stock  Ins.  Co.  v.  Sherwood,  72 
Mo.,  461  (1880).  The  legal  sufficiency  of 
the  instrument  of  transfer  cannot  be 
questioned  by  the  transferrer.  Chew  v. 
Bank  of  Baltimore,  14  Md..  299  (1859). 

« Johnson  v.  Laflin,  103  U.  S.,  800,  804 
(1880),  affirming  5  Dill.,  65  (1878);  Noyes 
v.  Spaulding,  27  Vt,  420  (1855),  where 
the  court  say  :  "  That  provision  is  similar 
to  the  statute  in  this  state  in  relation  to 
the  transfer  of  real  estate,  under  which 


it  has  uniformly  been  held  that  the  title 
passes  to  the  grantee  as  between  the 
parties  to  the  conveyance,  though  the 
deed  is  unrecorded.  .  .  .  The  object 
of  having  the  transfer  recorded  on  the 
books  of  the  corporation  is  notice,  and 
that  is  the  only  object  For  that  reason 
the  transfer,  though  unrecorded,  is  good 
against  the  party  and  all  those  who  have 
notice  in  fact  of  the  transfer."  United 
States  v.  Cutts,  1  Sumner.  133  (1832); 
First  Nat'l  Bank  v.  Gifford,  47  Iowa,  575 
(1877).  The  same  provision  was  involved 
in  nearly  all  the  cases  cited  in  preceding 
sections.  See,  also,  Johnson  v.  Under- 
bill, 52  N.  Y.,  203  (1873);  Bank  of  Utica 
v.  Smalley,  2  Cowen,  770  (1824) ;  Bald- 
win v.  Caufield,  26  Minn.,  43  (1879). 
where  the  court  say  that  charter  "  pro- 
visions of  this  kind  are  intended  solely 
for  the  protection  and  benefit  of  the  cor- 
poration ;  they  do  not  incapacitate  a 
shareholder  from  transferring  his  stock 
without  any  entry  upon  the  corporation 
books." 

5  Continental  Nat'l  Bank  w,  Eliot 
Nat'l  Bank,  7  Fed.  Rep.,  369  (1881);  Mer- 
chants' etc.,  Bank  v.  Richards,  6  Mo. 
App.,  654  (1879);  and  cases  cited  supra, 
and  §  465,  infra. 


518 


CH.  XXII.]  FORMALITIES    OF    TRANSFER   AND    REGISTRY.       [§§  380,381. 

§380.  Certificate  of  stock  may  l)e  assigned  with  the  name  of  the 
transferee  left  blank. —  By  a  commercial  usage,  which  has  been 
repeatedly  recognized  as  valid  by  the  courts,  certificates  of  stock 
may  be  assigned  by  a  transfer  duly  signed  by  the  transferrer,  but 
with  the  name  of  the  transferee  left  blank.1  Generally  the  com- 
•  bined  instrument  of  transfer  and  power  of  attorney  on  the  back  of 
the  certificate  is  signed  by  the  stockholder  and  delivered  to  the 
purchaser,  with  the  names  of  the  transferee  and  of  the  attorney 
left  blank.  Such  a  certificate  of  stock,  transferred  in  blank,  may 
be  sold  and  passed  from  hand  to  hand;  and  each  purchaser  of  it  is 
entitled  to  the  same  rights  against  his  transferrer  or  previous 
transferrers  as  he  would  have  if  the  names  of  the  successive 
holders  appeared  on  the  certificate  itself.  Any  purchaser  of  the 
certificate,  duly  signed  but  transferred  in  blank,  may  fill  up  the 
blanks  and  insert  his  own  name.2  He  may  fill  in  his  own  name  as 
transferee,  and  the  name  of  an  agent  as  the  attorney  to  make  the 
registry,  or  he  may  leave  the  latter  blank  and  allow  the  registry 
clerk  to  fill  in  his  own  name,  as  is  frequently  done. 

B.    METHOD    OF    REGISTERING    A    TRANSFER    OF    STOCK. 

§  3S1.  Registry  an  important  part  of  a  transfer  of  stock. —  The 

effect  of  obaining  a  registry  or  of  neglecting  to  obtain  a  registry 
of  the  transfer  on  the  corporate  books,  immediately  after  purchas- 

1  Walker  v.  Detroit  Transit  R*y  Co.,  up  the  blanks  and  constitute  himself  the 
47  Mich..  338  (1882) ;  Pennsylvania  R  E.  attorney.  These  points  are  too  well  set- 
Co. 's  Appeal.  86  Pa.  St.,  80  (1878) ;  Cut-  tied  to  need  discussion."  Holbrook  v. 
ting  v.  Damerel,  88  N.  Y.  410  (1882);  New  Jersey  Zinc  Co.,  57  N.  Y.,  616,  623 
German  Union  B.  Ass'n  v.  Sendmeyer,  (1874).  As  to  the  English  rule,  where 
50  Pa.  St.,  67  (1865) ;  Ex  parte  Sargent,  the  charter  requires  transfers  to  be 
L.  R,  17  Eq.,  273  (1873) ;  Ortigosa  v.  under  seal,  see  §  377.  See,  also,  Colo- 
Brown,  47  L.  J.  (Ch.),  168  (1878);  Re  nial  Bank  v.  Hepworth,  57  L.  T.  Rep., 
Barned's  Banking  Co.,  L.  R,  3  Ch.,  105  148  (1887);  Williams  v.  Colonial  Bank. 
(1867).  Cf.  §£  325,  377,  supra;  §  416.  id.,  188  -1887);  Nanney  v.  Morgan,  57 
infra.     "Even  in  the  absence  of  such  id.,  48  (1887). 

usage,  a  blank  transfer  on  the  back  of        -  Broadway  Bank  v.  McElrath.  13  N.  r 

the  certificate,  to  which  the  holder  has  Eq.,  24  (1860);  Matthews  v.  Mass.  Nat'l 

affixed  his  name,  is  a  good  assignment ;  Bank,  1  Holmes,  396  (1874);  Bridgeport 

and  a  party  to  whom  it  is  delivered  is  Bank   v.  N.  Y.    &  N.  H.  R  R  Co.,  30 

authorized   to  fill    it  up  by  writing  a  Conn.,  231  (1861) ;  Kortright  v.  Buffalo 

transfer  and  power  of  attorney  over  the  Com.  Bank, 20  Wend.,  91  (1838) ;  affirmed, 

signature."    McNiel  v.  Tenth  Nat'l  Bank,  22  Wend.,  348  (1839);    Otis,   Adm'r,  v. 

45  N.  Y,  325,  331  (1871).     "There  is  no  Gardner,    105    111.,    436    (1883);    Mount 

force  in  the  suggestion  that  the  power  Holly  L.  &  M.  T.  Co.  v.  Ferrie,  17  N.  J. 

of  attorney  in  the  present  case  was  in-  Eq..   117   (1864);  Prall    v.   Tilt.  28   N.  J. 

complete,  because  there  were  blanks  for  Eq.,  479  (1877) ;  Leavitt  v.  Fisher,  4  Duer, 

the  number  of  shares  and  for  the  name  1,  20  (1854). 
of  the  attorney.     Any  holder  might  fill 

519 


§  382.]  FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [CH.  XXIL 

ing  the  same  from  the  vendor,  has  given  rise  to  much  litigation 
and  much  apparent  confusion.  A  registry  of  the  transfer  is  im- 
portant in  two  respects :  First,  as  regards  the  rights  of  the  purchaser 
in  reference  to  the  corporation;  second,  in  regard  to  the  rights  of 
the  purchaser  as  regards  third  persons  who  are  either  creditors  of 
the  old  registered  stockholders  or  have  claims  upon  the  stock  in 
question.  So  far  as  the  corporation  is  concerned,  it  is  bound  to  recog- 
nize only  the  registered  stockholder.1  To  him  is  accorded  the  right 
to  vote,  draw  dividends,  and  exercise  the  general  rights  of  stock- 
holdership.  The  unregistered  purchaser  of  stock  cannot  claim  such 
rights.  All  the  cases  agree  in  this  result  of  a  neglect  to  register  a 
transfer.  As  regards  the  rights  of  third  -persons,  however,  the  courts 
of  the  different  states  vary  widely  in  their  opinions.  Generally  the 
question  arises  by  reason  of  an  attachment  or  execution  levied  by  a 
creditor  of  the  transferrer  against  the  stock  standing  on  the  corpo- 
rate books  in  the  name  of  the  transferrer,  who  has  already  sold  and 
assigned  the  certificate  of  stock  to  another.  As  a  general  rule,  it 
may  be  said  that  a  purchaser  of  a  certificate  of  stock  is  usually  pro- 
tected as  fully  without  a  registry  on  the  corporate  books  as  he 
would  be  by  a  registry,  so  far  as  subsequent  attachments  and  most 
other  possible  equities  against  the  stock  are  concerned.-'  This  is  the 
rule  in  New  York  and  most  of  the  states.  In  Connecticut,  Illinois 
and  a  few  other  states  a  contrary  rule  prevails.  In  Massachusetts 
and  New  Hampshire  a  late  statute  has  changed  the  old  rule  so  that 
it  now  accords  with  that  of  New  York.' 

§  382.  Formalities  of  making  registry. —  The  customary  method 
of  registering  a  transfer  of  stock  on  the  corporate  books  is  simple. 
The  registered  stockholder,  or  his  attorney  in  fact,  whose  name  is 
written  in  the  blank  power  of  attorney,  applies  to  the  corporate 
officer  having  charge  of  the  transfer  books,  and  requests  a  registry 
of  the  transfer  to  a  person  designated  by  a  name  written  in  the 
form  of  transfer.  Books  of  transfer  are  kept  for  purposes  of  regis- 
tering, and  upon  such  an  application  and  a  surrender  of  the  old  cer- 
tificate the  old  stockholder  or  his  attorney  makes  the  registry  and  a 
new  certificate  is  issued.4 

Any  suitable  registry  or  stock-list,  or  formal  entry  on  the  corpo- 
rate books,  suffices.  No  special  book  need  be  kept  for  that  pur- 
pose.5    Where  the  company  does  not  keep  a  transfer  book  the 

1  Registry  herein  means  not  only  an  4  Burrall  v.  Bushwick  R  R.  Co.,  75 
actual  registry,  but  also  a  request  to  the  N.  Y.,  211  (1878);  Greeu,  etc.,  Co.  v. 
corporation  to  allow  registry  where  im-     Bulla.  45  InoL  1  (1873). 

properly  refused  by  it.     See  §  382.  5"A11   that    is   necessary,    when   the 

2  These  various  questions  are  cousid-  transfer  is  required  by  law  to  be  made 
ered  in  chs.  XXI  and  XXVII.  upon    the  books  of   the  corporation,  is 

3  This  statute  is  given  in  full  in  £  490.  that  the  fact  should   be  appropriately 

520 


CH.  XXII.]  FORMALITIES    OF   TRANSFER   AND    REGISTRY. 


[§  382. 


transfer  of  stock  is  complete  when  the  owner  of  stock  transfers  the 
certificate  on  the  back  and  delivers  it  to  the  secretary  in  order  that 
a  new  certificate  may  be  issued  to  the  transferee.1  The  demand 
for  registry  should  be  made  upon  the  principal  officer  or  clerk  at 
the  office  of  the  corporation.  When  so  made  it  is  sufficient.2  The 
method  of  registry  may  be  regulated  by  the  by-laws  of  the  corpora- 
tion. Thus,  a  by-law  that  the  stock  shall  be  transferable  by  in- 
dorsement in  writing,  made  in  the  presence  of  the  cashier  or  two 
other  witnesses,  has  been  sustained  as  valid,  and  is  complied  with 
only  by  the  presence  and  signature  of  the  cashier  or  of  the  wit- 


recorded  in  some  suitable  registry  or 
stock-list,  or  otherwise  formally  entered 
upon  its  books.  For  this  purpose  the 
account  in  a  stock  ledger,  showing  the 
names  of  the  stockholders,  the  number 
and  amount  of  the  shares  belonging  to 
each,  and  the  sources  of  their  title, 
whether  by  original  subscription  and 
payment  or  by  derivation  from  others, 
is  quite  suitable,  and  fully  meets  the  re- 
quirements of  the  law."  National  Bank 
v.  Watsontown  Bank,  105  U.  S.,  217 
(1881). 

1  Chemical  Nat'l  Bank  v.  Colwell,  132 
N.  Y.,  250  (1892).  A  stockholder  is  liable 
by  statute  on  stock  where  he  has  merely 
transferred  the  certificate  and  no  effort 
has  been  made  to  complete  the  transfer 
on  the  corporate  books.  Where  there  is 
no  transfer  book,  but  certificates  are 
merely  canceled  and  new  ones  issued, 
this  is  sufficient  to  effect  a  transfer  on 
the  corporate  books.  Plumb  v.  Bank  of 
Enterprise,  29  Pac.  Rep.,  699  (Kan.,  1892). 
Where  the  corporation  keeps  a  stock 
certificate  book  but  no  transfer  book,  a 
transfer  on  the  back  of  a  certificate, 
which  is  then  canceled  and  pasted  back 
in  the  certificate  book,  and  a  new  cer- 
tificate issued  to  the  transferee,  is  a  suf- 
ficient transfer  to  constitute  a  transferee 
a  stockholder.  He  may  vote  at  elections, 
and  an  assignment  by  the  corporation 
on  the  direction  of  officers  elected  by 
such  a  transferee  is  valid.  Such  a  trans- 
fer is  valid  also,  although  a  by-law  pro- 
vided that  before  selling  his  stock  a 
stockholder  must  offer  it  to  other  stock- 

52 


holders  for  purchase.  American  Nat'l 
Bank  v.  Oriental  Mills,  23  AtL  Rep.,  795 
(R.  I.,  1891). 

2  "  It  is  sufficient  for  him  to  apply  at 
the  bank  during  the  usual  hours  of 
business,  and  make  his  demand  upon 
the  officers  and  clerks  who  may  be  in 
attendance  there;  and,  in  case  they  are 
not  authorized  to  transact  that  particu- 
lar business,  they  must  either  refer  him 
to  the  proper  officer  in  the  bank  or  pro- 
cure the  attendance  of  such  officer,  or 
of  the  board  of  directors,  if  necessary, 
without  any  unreasonable  delay.  .  .  . 
In  the  absence  of  any  proof  to  the  con- 
trary, it  may  be  fairly  presumed  that 
the  principal  officer  or  clerk  in  attend- 
ance at  the  bank,  during  the  usual 
hours  of  business,  is  authorized  to  per- 
mit such  a  transfer  when  proper." 
Com.  Bank  of  Buffalo  v.  Kortright,  22 
Wend.,  348,  351  (1839);  Case  v.  Bank. 
100  U.  S.,  446  (1879),  where  application 
to  the  cashier  was  held  to  be  proper ; 
McMurrich  v.  Bond  H.  H.  Co.,  9  U.  C. 
(Q.  B.),  333  (1852),  where  the  application 
was  to  the  secretary ;  Re  Goodwin  v. 
Ottawa  &  P.  R'y  Co.,  13  U.  C.  (C.  P.), 
254  (1863),  where  an  application  to  sec- 
retary and  treasurer  was  sustained ; 
Green  Mount.  &  S.  L.  T.  Co.  v.  Bulla 
(1873),  siqjra,  where  the  application  was 
to  the  president.  Presentation  of  the 
certificate  of  stock  duly  indorsed  to  the 
person  in  charge  of  the  office  of  the  cor- 
poration is  a  sufficient  demand  of  trans- 
fer. Dunn  v.  Star,  etc.,  Ins.  Co.,  19 
N.  Y.  Week.  Dig.,  531  (1881). 
1 


^  382.]  FORMALITIES    OF    TEANSFEB    AND    REGISTRY.  [CH.  XXII. 

nesses.1  So,  also,  of  a  by-law  requiring  registry  in  the  presence  of 
the  president  and  secretary  of  the  company.2  But  a  by-law  requir- 
ing the  assent  of  the  president  of  the  corporation  to  the  registry 
of  a  transfer  would  be  in  restraint  of  trade  and  void.3  A  delivery 
of  certificates  to  the  corporation,  and  a  mere  request  to  the  corpo- 
rate officers  to  make  the  transfer,  is  not  a  registry  until  the  entry 
is  actually  made.4 

The  fact  that  the  registry  clerk  marks  on  the  instrument  of  trans- 
fer  the  words  "received  for  record"  does  not  constitute  a  registry.5 
A  memorandum  on  the  stock  book  that  the  stock  has  been  trans- 
ferred as  collateral  security  is  sufficient  to  give  the  transfer  pre- 
cedence over  an  attachment.6  It  has  been  held  that,  where  the 
corporation  has  a  branch  registry  office  in  another  state,  a  registry 
in  the  branch  office  is  not  an  effectual  registry  until  it  has  been 
reported  and  entered  in  the  books  of  the  main  office  of  the  corpo- 
ration.7 If  the  corporation  does  not  keep  books  for  the  registry  of 
transfers  of  stock,  a  mere  notice  to  the  corporation  that  a  transfer 
has  been  made  constitutes  a  registry.8  But  if  the  statute  or  char- 
ter requires  a  transfer  to  be  made  on  the  corporate  books,  no  regis- 
try is  possible  until  such  books  are  obtained  and  opened.9  If 
the  corporation  n<  ver  issues  certificates  of  stock,  the  stockholder 
cannot  demand  them.10  If  the  corporation  cannot  allow  the  regis- 
try on  account  of  an  injunction,  it  is  nevertheless  bound  to  re- 
spect the  rights  of  a  transferee  who  gives  notice  to  it  of  the  trans- 

iDaue  v.  Young,  61  Me.,  160  (1872).  6  Moore  r.  Marshalltown.  etc.,  Co.,  46 

-'Planter-.-  &    M.  M.  Ins.  Co.  r.  Selma  N.  W.  Rep..  750  (Iowa,  18 

Saw  Brmk.  63  Ala..  585  (1879>  "  Pinkerton  v.  Manchester  &  L.  R.  R. 

3 Sargent  v.  Franklin  Ins.  Co.,  8  Pick.,  Co..  42  X.  H.,  424  (1861). 

90(1829).  8  Crawford  v.  Prov.  Ins.  Co.,  8  U.  I  . 

.    *  Brown  v.  Adams,  5  Biss.,  181  (1870).  (C.  P.),  263  (1859);  Agricultural,  etc..  >: 

Nor  will  a  mere  entry  of  credit  to  the  Wilson,  24  Me.,  273  (1844),  holding  that  a 

transferee,    on    the    treasurer's    books,  transfer  on  the  books  of  a  corporation 

suffice.    Marlborough  Mfg.  Co.  v.  Smith,  of  stock  for  which  certificates  had  not 

2  Conn..  579  (1818).     Cf.  §  35a  been  issued  is  sufficient  to  pass  the  prop- 

5  Northrop  r.  <  urtk  5  ( 'nun..  246  (1824).  erty  in  the  stock,  and  a  valid  considera- 
But  a  memorandum  entered  on  the  stub  tion  for  a  note  given  in  payment 
in  the  stock  book  opposite  to  the  cer-  9  McCurry  v.  Suvdam,  10  X.  J.  Law, 
tificate  issued,  that  that  certificate  has  245(1828:.    Where  the  corporation  keeps 
been  transferred,  is  a  sufficient  registry  no  stock  ledger,  a  transfer  is  sufficiently 
as   against  attaching   creditors   of  the  registered  when  the  old  certificate  is  sur- 
transferrer.     Fisher  v.  Jones,  3  S.  Rep.,  rendered,  a  new  one  issued,  and  the  new 
13   Ala..  lv^7.     A  mere  letter  from  the  name  entered  on  the   subscription  list- 
transferee  to   the   corporation   that   he  Stewart   v.   Walla   Walla,    etc.,    Co.,  20 
has  purchased  the  certificate  is  insuffi-  Pac.  Rep.,  605  (Wash.  Ter.,  1889). 
cient,  even  though  suHi  letter  is  pinned  w  Thorp  v.  Woodhull,  1  ^andf.  Ch.,  Ill 
to  the  transfer  1  ook.     Newell  v.  Willis-  (1844).     See  §§  60,  192. 
ton,  138  Mass.,  240  (1885  . 

522 


CH.  XXII.]  FORMALITIES    OF   TRANSFER   AND    REGISTRY. 


[§  382. 


fer.1  The  issue  of  a  new  certificate  of  stock  is  not  essential  to  the 
completeness  of  a  registry  of  the  transfer.2  If  the  corporation  de- 
lays unreasonably  in  allowing  a  registry  it  is  liable  in  damages  to 
the  applicant  for  registry.3 

The  instrument  of  transfer  must  be  in  proper  form.4  Unless  the 
old  stockholder  or  his  duly  authorized  attorney  offers  to  make  the 
registry,  the  corporation  may  refuse  to  allow  it.5  The  power  of 
attorney  must  run  from  the  previous  registered  stockholder,  and 
not  from  an  intermediate  unregistered  transferee  of  the  certificate." 
Transfers  under  bankruptcy  or  insolvent  laws  are  to  be  registered 
like  voluntary  transfers.7  In  England  a  written  acceptance  of  the 
stock  b}T  the  transferee  is  required.8 

A  mere  notice  to  the  corporation  that  an  assignment  has  been 


1  Purchase  v.  New  York  Exchange 
Bank,  3  Rob..  164  (1865). 

2  First  ISat.  Bank  v.  Gifford,  47  Iowa, 
575  (1877) ;  Chouteau  Spring  Co.  v.  Har- 
ris, 20  Mo.,  382  (1855). 

3  Sutton  v.  Bank  of  England,  1  C.  &  P.. 
193  (1824),  where  the  bank  delayed 
longer  than  one  day,  the  customary 
time,  and  refused  to  give  any  reason 
therefor;  Catchpole  v.  Ambergate,  N., 
etc.,  R'y  Co.,  1  El.  &  B.,  Ill  (1852), 
where,  by  reason  of  the  delay,  the  stock 
was  forfeited,  notice  of  forfeiture  going 
to  the  old  stockholder.  See,  also,  Healey 
on  Law  and  Pr.  of  Companies,  p.  81. 
Although  the  directors  are  entitled  to 
reasonable  time  to  decide  whether  to 
make  a  transfer,  yet  if  they  have  al- 
ready made  up  their  minds,  the  measure 
of  damages  for  refusal  is  the  price  of 
the  stock  on  the  day  when  the  applica- 
tion was  made.  Re  The  Ottos,  etc., 
Mines,  68  L.  T.  Rep,  138  (1892). 

4  Queen  v.  General  Cemetery  Co.,  6  E. 
&  B.,  415  (1856),  holding  that  the  deed 
of  transfer,  where  a  deed  is  necessary, 
must  be  properly  drawn.  See,  also, 
Societe  Generale,  etc.,  v.  Walker,  L.  R, 
11  App.,  20  (1885). 

5  Mechanics'  Banking  Ass'n  v.  Mari- 
posa Co.,  3  Rob.  (N.  Y.),  395  (1865). 

6  Dunn  v.  Commercial  Bank,  11  Barb., 
580  (1852). 

7  Dutton    v.    Connecticut     Bank.     13 


Conn.,   493  (1840);    State  v.   Ferris,   42 
Conn.,  560  (1875). 

8  Ortigosa  v.  Brown,  47  L.  J.  (Ch.),  168 
(1878).  The  Joint-stock  Company's  Ac  t 
of  1856  required  such  an  acceptance. 
The  act  of  1862,  repealing  the  act  of 
1S56,  prescribed  that  transfers  should  be 
made  as  was  customary,  unless  the  by- 
laws prescribed  otherwise.  Hence,  in 
the  absence  of  by-laws,  the  written  ac- 
ceptance is  held  to  be  customary  and 
necessary.  In  England,  where  a  trans- 
fer of  stock  is  made  by  first  applying 
to  the  company,  and  having  the  com- 
pany certify  that  the  certificate  of  stock 
had  been  lodged  with  the  company,  and 
then  the  money  is  paid,  it  is  held  that  the 
party  purchasing  the  stock  on  the  faith 
of  this  certificate  of  the  company  can- 
not hold  the  company  liable  although  it 
turns  out  that  the  vendor  was  not  en- 
titled to  the  stock,  and  consequently,  the 
whole  capital  stock  being  already  is- 
sued, that  the  transfer  could  not  be 
made.  The  court  held  that  the  certifi- 
cation was  ultra  vires  and  hence  not 
enforceable.  Bishop  v.  The  Balkis,  etc.. 
Co.,  Limited,  63  L.  T.  Rep,  316  (1890); 
affirmed,  id..  601  (18911  the  court,  how- 
ever, dissenting  from  the  view  that  the 
certification  was  ultra  vires,  but  hold- 
ing that  the  certification  did  not  war- 
rant the  title  nor  the  validity  of  the 
various  documents. 


523 


§  383.] 


FORMALITIES    OF    TRANSFER    AND    REGISTRY. 


[CH. 


XX  IT. 


made  need  not  be  considered  by  the  corporation.1  Where,  how- 
ever, the  transferee  giving  such  notice  does  not  obtain  registry 
because  the  corporation  refuses,  for  any  reason,  to  make  the  regis- 
try, the  mere  notice  must  be  borne  in  mind  by  the  corporation, 
and  the  rights  of  the  applicant  preserved  by  it,  as  regards  future 
registries.2 

§383.  Formalities  of  registry  may  he  waived  ty  the  corporation. — 
The  corporation  may  waive  the  formalities  connected  with  a  regis- 
try of  transfer,  and  when  it  does  so  the  transferee  becomes  a  stock- 
holder as  completely  as  though  registry  had  been  regularly  made.3 
Frequently  the  waiver  arises  by  placing  the  transferee's*  name  on 
the  list  of  stockholders,  although  no  formal  registry  has  been  had.4 
Even  a  charter  requirement  that  the  consent  of  the  directors  to  a 
registry  of  transfer  shall  be  obtained  may  be  waived  by  the  corpo- 
ration.5 The  corporation,  by  paying  dividends  to  an  unregistered 
transferee  of  stock,  thereby  waives  the  formalities  of  registry." 
When  the  corporation  refuses  to  allow  a  registry  for  reasons  other 
than  those  connected  with  the  mere  formalities  of  registry,  or  for 
reasons  not  given  to  the  applicant,  it  waives  its  right  to  insist  on 
them,  and  cannot  afterwards  claim  that  the  appellant  did  not  con- 
form to  such  technicalities.7    A  failure,  however,  on  the  part  of  the 


'Stockwell  v.  St.  Louis  M.  Co.,  9  Ma 
App.,  133(18 
-  See  p.  523,  note  1.  See,  also.  §  532, 
3  Richtnondville  Mfg.  Co.  r.  Prall,  9 
Conn.,  487(1833);  Clowes  v.  Brettell,  11 
M.  &  W..  HU  (1843);  Sadler's  <  nse,  3 
De  G.  A  (1849):    Chambersburg 

Ius.  Co.  o.  Sin  it  1 1.  11  Pa  St..  130(1849); 
Walter's  Case,  :'■  De  < :.  &  s..  |  18 
Baine  v.    Whitehaven,    etc.    R*y    Co., 

3  H.  L,   C,  1  (1830);  Wills    V.   Murray. 

4  Ex.,   843   (1850  :    Yelland's   Cm 

De  G.  &  Si,,..  395  (1852);  Powers  » 
Hunting,  1  C.  B.  (N.  S.),  533  (185*3  ; 
Benderson  v.  Royal  British  Hank.  atJ  L 
.!.  7.  IU  112  (1857);  Daniel!  v.  Same,  1 
II.  &  X..  685  (1857);  Bast  G.  R'y  Co.  v. 
Bartholomew,  L,  R„  3  Ex.,  15  (1867); 
[nd's  Case,  L  B,,  7  Ch..  485  0872); 
Weber  v.  Fickey,  52  M<L,  500,516(1879); 
Home  Stock  Ius.  Co.  a.  Sherman.  72 
Ma,  mi  (1880);  Isham  v.  Buckingham, 
49  N.  Y.,  216  (ls?-_>).  See,  also,  ??  258, 
260,  262 

4Upham  v.  Burnham,  3  Eiss.,  431,  520 
(1873). 


<•  parte  Walton,  26  L.  J.  (Ch.),  545 
(1857)l  Likewise  where  the  by-laws 
contain  Buch  a  provision.  Chambers- 
burg Ins  Co.  r.  Smith,  11  Pa  St..  120 
(1849),  holding  also  that  an  oversight 
whereby  the  attorney  who  makes  the 
registry  omits  to  sign  the  registry  is  im- 
material. 

■Cutting   v.    Damerel,   88  N.  Y.,  410 

38 

?Townsend  v.  Mclver,  2  S.  C,  25 
(1870);  Bond  >:  Mt  Hope  Iron  Co.,  99 
Mass.,  505  (1868),  holding  that  the  cor- 
poration must  put  the  refusal  on  the 
ground  of  non-conformity  with  formali- 
ties at  the  time  of  the  application,  and 
cannot  afterwards  raise  such.  Chou- 
teau, etc.,  Co.  v.  Harris  20  Mo.,  382 
(1855);  Robinson  v.  Nat'l  Bank  of  New 
Berne,  95  N.  Y..  637  (1884).  where  the 
court  say  :  "The  requirement  of  a  reg- 
istry, existing  only  for  its  own  protec- 
tion and  convenience,  must  be  deemed 
waived  and  non-essential  when  it 
wrongfully  refuses  to  obey  its  own 
rule." 


524 


CH.  XXII.]  FORMALITIES    OF    TRANSFER    AND    REGISTRY.       [§§  384,  385. 

corporation  to  notify  the  transferee  of  a  refusal  to  allow  registry  is 
no  waiver  of  such  registry.1 

§  384.  Either  the  transferrer  or  the  transferee  may  apply  to  the 
corporation  for  a  registry  of  transfer. —  A  person  who  appears  on 
the  corporation  books  as  the  holder  of  stock,  but  who  in  fact  has 
sold  the  stock,  has  a  right  to  have  his  transfer  recorded  on  the  cor- 
porate books,  thereby  releasing  him  from  liability  on  the  stock.2 
The  vendor  may  request  the  corporation  to  register  the  transfer, 
and  the  corporation  may  make  it  at  his  request.  If  he  refuses  so 
to  do,  the  vendor  may  bring  suit  in  a  court  of  equity  to  compel  the 
corporation  to  register  the  transfer.3  It  has  been  held,  also,  that 
an  intermediate  vendor  of  the  stock,  Avhose  name  has  never  ap- 
peared on  the  corporate  books,  may  likewise  compel  a  registry  to 
be  made.4  After  an  ultimate  vendee  has  been  registered,  the  oris- 
inal  vendor  cannot  have  an  intermediate  vendee  and  vendor  regis- 
tered  as  the  stockholder.5  The  corporation  may  register  the  transfer, 
even  against  the  wishes  of  the  transferee.6  The  transferee  also  has 
a  right  to  apply  for  and  compel  a  registry  of  the  transfer  of  stock 
to  himself.7 

C.     RIGHTS    AND    DUTIES    OF    THE    CORPORATION    IN    A.LLOWIXG   OR    REFUS- 
ING   REGISTRY.  * 

§  385.  Corporation  may  require  proof  of  identity;  also  of  genu- 
ineness of  signature,  etc. —  When  a  transfer  of  stock  is  presented 
to  the  corporation  for  registry,  if  the  corporation  is  in  doubt  as  to 
the  identity  of  the  person  presenting  it,  whether  he  be  the  stock- 

iGustard's    Case,   L.   R,   8    Eq.,   438  ^Shaw  v.  Fisher,  5  De  G.,  M.  &  G., 

(1869).  596  (1855). 

2  "  The  purchase  was  in  itself  author-  6  Upton  v.  Burnham,  3  Biss.,  520,  525 

ity  to  the  vendor  to  make  the  transfer.  (1873). 

.     .    ,    A  court  of  equity  will  compel  a  ~  Norris  v.  Irish  Land  Co.,  8  E.  &  B., 

transferee  of  stock  to  record  the  trans-  512  (1857);  Daly  v.  Thompson,  10  M.  & 

fer,  and  to  pay  all  calls  after  the  trans-  W.,   309  (1842) ;   Johnston  v.   Laflin,   5 

fer.    ...    If  so,  it  is  clear  that  the  Dill.,  65  (1878):   103  U.  S.,  800;  Hill  v. 

vendor  may  himself  request  the  transfer  Pine  River  Bank,  45  N.  H.,  300  (1864): 

to  be  made."   Webster  v.  Upton,  91  U.  S.,  Presbyterian   Con.   v.  Carlisle   Bank,  5 

65,  71  (1875).     "If  a  subsequent  transfer  Pa.  St.,  345  (1847);  Mechanics'  Bank  v. 

of  the  certificate  be  refused  by  the  bank,  Seton,    1    Peters,  299  (1828) ;  Arnold  v. 

it  can  be  compelled  at  the  instance  of  Suffolk  Bank,  27  Barb.,  424  (1857) ;  Sar- 

either  of  them."   Johnston  v.  Laflin,  103  gent  v.   Franklin   Ins.  Co.,  8  Pick.,  90 

U  S.,  800,  804  (1880).  (1829) ;   Cushman  v.  Thayer  Mfg.   Co., 

»  Wynne  v.  Price,  3  D.  &  S.,  310  (1849) ;  76  N.  Y.,  365  (1879).     But  the  complaint 

Birmingham  v.  Sheridan,  33  Beav.,  660;  must  be  full  and  accurate  in  its  aver- 

Eustace  v.  Dublin  T.  C.  R'y  Co.,  L.  R,  ments.     Edwards  v.  Sonoma  Bank,  59 

6  Eq.,  182  (1868).  Cal.,  136  (1881). 

4  Paine  v.   Hutchinson,  L.  R,  3  Ch., 
388  (1868). 

525 


§  386.J 


FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [CH.   XXII. 


holder  alreadv  registered  on  the  books  or  the  attorney  of  such,  the 
corporation  may  require  proof  of  such  identity.1  If  it  is  in  doubt 
as  to  the  competency  of  the  transferrer  to  sell  the  stock,2  legal 
proof  of  such  competency  must  be  given.3  If  the  applicant  for 
registry  applies  as  the  attorney  of  the  registered  stockholder,  the 
corporation  may  require  satisfactory  evidence  of  the  genuineness 
of  the  latter's  transfer,  or  may  require  the  presence  of  the  stock- 
holder himself.4 

386.  Corporation  cannot  refuse  registry  on  account  of  the  mo- 
tive of  tlie  transferrer  or  transferee  in  the  transaction. —  The  cor- 
poration has  nothing  to  do  with  the  motive  or  purpose  of  the 
vendor  or  vendee  of  the  stock.5  It  can  refuse  a  registry  only  when 
there  is  doubt  as  to  the  legal  right  of  the  applicant  to  have  such 
registry.  It  cannot  refuse  on  the  ground  that  the  transfer  would 
injure  the  corporation,  nor  on  the  theory  that  the  object  of  the 
transfer  is  to  increase  the  votes  of  the  transferee.6  In  England 
often  the  directors  are  by  charter  given  a  discretionary  power  to 
refuse  a  transfer.7 


1  Telegraph  Co.  v.  Davenport.  07  U. 
S.,  369  (1878) :  Davis  v.  Bank  of  England, 
2Bing.k393  vhere  the  com 

the  corporation  '•  may  take  reasonable 
time  to  make  inquiries,  and  require 
proof  that  the  signature  to  a  power  of 
attorney  is  the  writing  of  the  person 
whose  signature  it  purports  to  be." 
Bayard  v.  Farmers'  &  M  Bank,  52  Pa. 
St..  232  (1866). 

2  See  g§  318,  319. 

3  Id. 

*  Supra,  note  1 ;  and  see  §§  363-367. 

5Townsend  v.  Mclver.  2  S.  C.  96 
(1870);  People  v.  Paton.  5  X.  Y.  St  Rep., 
316  (lv~7  .  But  a  transfer,  merely  nomi- 
nal, to  obtain  for  the  transferee  certain 
special  privileges,  such  as  free  admission 
to  a  place  of  amusement  may  be  a  fraud 
on  other  stockholders  and  will  be  set 
aside.  Appeal  of  Academy  of  Music, 
108  Pa.  St,  510  (1885).  Equity  will  not 
compel  a  corporation  to  register  a  trans- 
fer of  stock  when  the  purpose  of  the 
transfer  is  to  obtain  the  control  of  the 
corporation  and  wreck  it  Gould  v. 
Head,  41  Fed.  Rep..  242  (1890).  In  an 
action  to  compel  the  unincorporated 
Standard  Oil  '•  trust "  to  transfer  on  its 
books  trust  certificates  which  the  plaint- 


iff has  purchased,  the  defendants,  who 
that  the  plaintiff  is  a  competitor 
of  the  trust  and  purchased  the  certifi- 
-  in  order  to  break  up  the  trust  and 
compel  it  to  buy  the  plaintiff  out  may 
be  compelled  to  t  II  of  particulars. 

Rice  r.   Rockefeller.   X.  Y.   Daily  Reg.. 
May  29,  1888(     The  plaintiff  in  thi- 
finally  succeeded.      See   134   ST.  Y.,  171 
(18'.' 

« Moffatt  R  Farquhar.  L.  R,  7  Ch.  D. 
591  (1878). 

7  See  Heal ey  on  Law  and  Practice  of 
Companies.  79.  Where  the  directors  are 
authorized  by  the  articles  of  incorpora- 
tion to  reject  a  transfer  of  stock  on  the 
ground  that  they  do  not  approve  of  the 
transferee,  "the  discretionary  power  is 
of  a  fiduciary  nature,  and  must  be  exer- 
cised in  good  faith  ;  that  is,  legitimately 
for  the  purpose  for  which  it  is  conferred. 
It  must  not  be  exercised  corruptly,  or 
fraudulently,  or  arbitrarily,  or  capri- 
ciously, or  wantonly.  It  may  not  be 
exercised  for  a  collateral  purpose.  In 
exercising  it  the  directors  must  act  in 
good  faith  in  the  interest  of  the  com- 
pany and  with  due  regard  to  the  share- 
holder's right  to  transfer  his  shares,  and 
they  must  fairly  consider  the  question 


526 


CH.  XXIT.]  FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [§387. 

§  3S7.  Corporation  may  interplead  between  two  claimants  to  stock. 
The  task  imposed  upon  a  corporation  in  determining  whether  to 
refuse  or  to  allow  a  registry  of  stock  is  a  difficult  and  dangerous 
one.  It  is  easy  to  avoid  the  risk  of  forgery  or  of  failure  of  the 
applicant  to  identify  himself.  But  circumstances  frequently  are 
such  that  the  corporation  dare  not  allow  registry  to  either  of  two 
parties,  each  of  whom  claims  to  be  the  sole  and  absolute  owner  of 
the  stock,  and  each  of  whom  claims  the  right  of  registry  or  notifies 
the  corporation  not  to  register  the  other  claimant  as  a  stockholder. 
These  cases  arise  on  various  occasions,  but  most  often  where  the 
stock  has  been  attached  or  sold  on  execution  by  the  transferrer's 
creditors  before  the  transferee  had  obtained  registry :  or  where,  by 
the  fraud  of  the  old  stockholder's  agent,  the  certificate  has  passed 
into  the  hands  of  a  bona  fide  purchaser:  or  where,  by  a  breach  of 
trust,  an  executor  or  adminstrator,  or  trustee  or  guardian,  has  sold 
the  trust  stock  and  appropriated  the  proceeds ;  or  under  other  states 
of  fact  wherein  there  are  two  claimants  of  the  stock,  each  having 
rights  which  can  be  clearlv  ascertained  onlv  by  litigation.  It  is 
not  incumbent  on  the  corporation  to  decide  between  these  con- 
flicting parties  and  rights.1  Such  a  requirement  would  expose 
it  to  unreasonable  risks  and  compel  it  to  assume  the  functions  of  a 
court.  TThere  there  is  a  reasonable  doubt  as  to  the  facts  involved 
or  as  to  the  respective  rights  of  the  claimants  of  the  stock,  and  the 
corporation  is  sued  by  one  of  the  claimants  for  refusing  to  allow  a 
registry  by  him.  the  corporation  may  interplead,  and  thus  compel 
the  claimants  to  ascertain  their  rights  through  the  medium  of  a 
court  of  justice.2     A  similar  interpleader  may  be  made  where  the 

of  the  transferee's  fitness  at  a  board  cides  between  the  defendants  if  the  case 
meeting."  It  is  not  a  sufficient  reason  is  ready  as  between  them.  If  not  ready. 
that  the  transferee  is  not  a  member  of  a  it  directs  an  action  or  an  issue,  or  a  ref- 
particular  family,  and  the  directors  will  erence  to  a  master,  to  ascertain  con- 
be  ordered  to  make  the  transfer.  Re  tested  facts,  as  may  be  best  suited  to 
Bell  Bros..  Limited,  65  L.  T.  Rep..  245  the  nature  of  the  case:  "or  the  court 
(1891).  may  leave  it  to  the  defendants  to  pre- 

1  The  discussion  of  the   duty  nf    the  pare  the  case  between  them  as  they  may 

corporation  in  various  circumstances  is  be  advised,  which  v%  ould  be  the  effect 

given  under  chapters  devoted  to  them.  of  a  general  order  to  interplead."    State 

-Mechanics"  Bank  v.  Richards.  6  Mo.  Ins.    Co.  r.    Gennett,   2  Tenn.'Ch.,  100 

App..  454  (1SS1  :  afFd.  74  Mo.,  77:  State  (1874 .  citing,  as  cases  on  above  rules  of 

Ins.    Co.    n  Gennett.  2  Tenn.  Ch..   100;  practice.  East.    &  West.   etc..  Co.  v.  Li t- 

Leavitt   v.    Fisher.    4   Duer    (N.    Y.  >.    1  tledale,  7  Hare.  62  (1848);  Martinius  v. 

(1854).     If  the  court  decides  that  the  in-  Helmuth.  2    V.  &  B.,  412  (1814X  note; 

terpleader  is  properly  filed  by  the  corpo-  Horton  v.  Baptist   Church.  34  Vfc,  317 

ration  herein,  it  generally  on  a  motion  (1861);  Rowe  v.  Hoagland.  7  N.   J.  Eq., 

dismisses  the  proceeding  with  costs  to  131  ^1^4V;:   Crawford  v.  Fisher.  1  Hare, 

the  corporation,  and  the  court  also  de-  441  (1842):  Condit  v.  King,  2  Beas.  Ch., 

527 


§  337.] 


FORMALITIES    OF    TRANSFER    AND    REGISTRY.  [CH.  XXII. 


corporation  is  sued  for  dividends  which  are  claimed  by  two  oppos- 
ing parties.1  An  interpleader  is  proper,  however,  only  after  suit 
has  been  actually  commenced  against  the  corporation.2 

There  is  some  doubt  and  considerable  difficulty  in  laying  down 
rules  as  to  when  a  corporation  may  safely  claim  a  right  to  refuse 
to  act,  and  to  compel  the  claimants  to  litigate  between  themselves 
before  it  allows  a  registry  to  either.  The  policy  of  the  law  doubt- 
less is  to  go  very  far  in  allowing  the  corporation  to  refuse  to  incur 
responsibility  by  taking  action.  Where,  however,  the  rights  of  one 
claimant  are  reasonably  clear,  the  corporation  should  suspend  action 
for  a  reasonable  time  within  which  the  contesting  party  may  ap- 
ply to  the  courts;  and  if  no  such  action  is  brought,  it  should  allow 
a  registry  bv  the  first-named  claimant,3  Any  other  rule  would  en- 
able any  person  to  practically  deprive  a  stockholder  of  the  possession 
of  his  stock  temporarily,  by  simply  notifying  the  corporation  that 
he  claims  the  stock.4  Where,  however,  the  corporation  has  allowed 
one  claimant  to  register  his  transfer,  or  has  recognized  him  as  a 
stockholder,  the  right  of  the  corporation  to  interplead  is  gone.5    It 


383  (1861);  Hendrickson  tt  Decow,  Sax.. 
595  (J802);  City  Bark  tt  Bangs,  2  Paige, 
570  (1831);  Angell  tt  Hadden,  16  Ves.. 
202  (1809).  The  case  of  State  Ids.  Co.  r. 
Gennett,  2  Tenn.  Ch..  82  (1871,  Bays: 
"  The  law  is  that  the  mere  pretext  of  a 
conflicting  claim  is  not  sufficient  The 
court  must  be  able  to  see  from  the  facts 
stated  that  there  is  a  question  to  be 
tried."  See,  also.  Norton  r.  Union  Trust 
Co..  N.  Y.  Daily  Reg.,  April  18,  1887, 
p.  744.  In  Englaud,  by  section  35  of 
the  Companies  Act,  1S02.  a  corporation 
may  interplead  between  two  claimants 
of  stock,  and  need  not  pay  costs.  Re 
Edie.  etc..  58  L,  T.  Rep.,  305  (1888).  An 
interpleader  was  sustained  in  Bangor, 
etc.,  Co.  tt  Robinson,  52  Fed.  Rep.,  520 
(1892). 

•Salisbury  Mills  tt  Townsend,  109 
Mass.,  115  (1871);  Diamond,  etc.,  Co.  v. 
Todd,  14  Atl.  Rep.,  27  (Del.,  1888).  Quere, 
as  to  whether  an  action  for  dividends 
can  be  maintained  before  the  right  of 
the  claimant  to  the  stock  is  established. 
Hughes  tt  Vermont  Copper  Min.  Co,  72 
N.  Y.,  207  (1878).     See  ch.  XXXII. 

2  Buffalo  Grape  Sugar  Co.  tt  Alberger, 
22  Hun,  349  (1880).  A  corporation  can- 
not interplead  as  between  stockholders 


for  the  purpose  of  determining  the  own- 
ership of  stock,  there  having  been  no 
claim  made  upon  it  in  regard  to  registry 
or  in  regard  to  dividends.  It  must  be 
shown  also  that  the  company  has  not 
acted  in  a  partisan  manner  as  between 
the  different  claimants.  Hinckley  r. 
Pfister,  53  N.  W.  Rep.,  21  (Wis..  1892). 
If  the  corporation  allows  a  transfer  to 
be  made  during  the  pendency  of  a  suit 
between  two  claimants  therefor,  and 
the  corporation  has  notice,  it  is  liable  to 
the  successful  party,  who  is  thereby  de- 
prived of  the  stock.  Hawes  tt  Gas;  etc., 
Co.,  N.  Y.  L.  J..  March  29.  1890.  See. 
also,  the  editorial  on  that  day. 

3  Townsend  v.  Mclver,  2  S.  C.  (N.  S.). 
25  (1870). 

*  Re  Tahiti  Cotton  Co.,  L.  R,  17  Eq., 
273  (1874);  Ex  parte  Sargent,  L.  R,  17 
Eq.,  273  (1873). 

»  Dalton  tt  Midland  R'y  Co.,  12  C.  B.. 
458  (1852);  Cady  v.  Potter,  55  Barb.,  463 
(1869):  Mt.  Holly.  L.  &  M.  T.  Co.  v.  Fer- 
rie,  17  X.  J.  Eq..  117  (1864).  If  the  party 
has  favored  one  of  the  two  parties,  as  by 
voluntarily  agreeing  with  the  sheriff  to 
recognize  an  execution,  an  interpleader 
will  not  lie.  Cromwell  v.  American, 
eta,  Co.,  11  N.  Y.  Supp.,  144  (1890).     A 


528 


CH.  XXII.]  FORMALITIES    OF    TRANSFER    AND    REGISTRY.       [§§  388,  3S9. 

cannot  afterwards  remove  the  name  of  the  registered  stockholder, 
especially  where  such  stockholder  has  acted  in  reliance  upon  such 
registry.1 

§  388.  Corporation  must  ooey  mandate  of  court  ordering  registry 
and  issue  of  new  certificates. —  The  authorities  on  this  proposition 
of  law  are  few  in  number,  but  they  are  decisive  in  protecting  the 
corporation  from  liability  where  it  proceeds  under  mandate  of  a 
court.  Thus,  where  a  decree  is  obtained  commanding  the  corpora- 
tion to  register  a  transfer,  the  corporation  is  protected  in  obeying 
the  decree,  even  though  it  is  reversed  on  appeal,  there  having  been 
no  stay  of  proceedings.2  Cases  herein  may  arise  also  where  the 
registered  stockholder  alleges  that  he  has  lost  his  certificate,  and 
the  court  compels  the  corporation  to  issue  to  him  a  new  one;3  also 
where  an  attachment  or  execution  has  been  levied,  the  old  certifi- 
cate of  stock  being  outstanding.4  There  is  a  limit,  however,  to  the 
power  of  courts  in  these  matters.  If  the  whole  capital  stock  has 
been  issued  and  the  certificates  therefor  are  outstanding,  a  court 
cannot  order  the  issue  of  other  certificates,  unless  the  decree  at  the 
same  time  practically  nullifies  a  corresponding  outstanding  certifi- 
cate.5 

§  389.  Remedies  of  a  transferee  of  stock  against  the  corporation 
for  refusal  to  alloiv  registry. —  Where,  for  any  reason,  the  corpora- 
tion refuses  to  allow  the  registry  of  a  transfer  of  stock,  when  it  is 

corporation  cannot  refuse  to  transfer  certificate  to  the  life  tenant  of  stock, 
stock  on  the  ground  that  the  vendor  the  corporation  is  still  bound  to  notify 
fraudulently  induced  the  company  to  a  purchaser  of  that  certificate  that  it 
issue  the  stock  to  him  where  the  com-  represents  a  life  interest  only ;  otherwise 
pany  has  been  guilty  of  laches  in  not  the  corporation  is  liable  to  the  remain- 
seeking  a  remedy  before  the  transfer,  der-man.  Caulkins  v.  Memphis,  etc.. 
The  vendee  in  this  case  was  a  director.  Co.,  4  S.  W.  Rep.,  287  (Tenn.,  1887).  A 
American,  etc.,  Co.  v.  Bayless,  15  S.  W.  corporate  officer  is  guilty  of  contempt 
Rep.,  10  (Ky.,  1891).  if  he  refuses  to  obey  an  order  of  court 

1  Ward  v.  Southeastern  R'y  Co.,  6  Jur.  requiring  him  to  make  certain  transfers 
(N.  S.),  890  (1860) ;  Hart  v.  Frontino,  etc.,  of  stock  upon  the  surrender  of  the  old 
Co.,  22  L.  T.  (N.  S.),  30  (1870) ;  Cohen  v.  certificates.  King  v.  Barnes,  113  N.  Y., 
Gwynn,  4  Md.  Ch.,  357  (1848).     Unless  476,  655,  656  (1889). 

there  clearly  is  a  clerical  mistake  and  3  See  §§  368-370. 

the  issue  is  to  the  wrong  party.     Smith  4See  §  488. 

v.  North  Am.  Min.  Co.,  1  Nev.,  423  5  See  §  284.  Where  stock  is  depos- 
(1865).  The  corporation  is  liable  for  ited  with  a  trustee  for  purposes  of  re- 
such  mistakes.  Harrison  v.  Pryse,  Bar-  organization  and  transferable  certifi- 
nardiston  (Fob),  Ch.,  324  (1740).  cates  are  issued  therefor  by  the  trustee, 

2  Chapman  v.  New  Orleans  G.  L.  &  a  claimant  of  stock  which  another  per- 
Banking  Co.,  4  La.  Ann.,  153  (1849).  son  has  deposited,  and  for  which  such 
See,  also,  Purchase  v.  N.  Y.  Exchange  other  person  has  the  trustee's  certificate, 
Bank,  3  Rob.,  164  (1865).  But  when  the  cannot  compel  the  trustee  to  deliver  up 
court  directs  the  corporation  to  issue  a  the  stock  until  the  trustee's  certificate  is 

(34)  529 


S  390.] 


FORMALITIES    OF   TRANSFER   AND   REGISTRY.  [CH.  XXII. 


the  duty  and  obligation  of  the  corporation  to  allow  it,  the  trans- 
ferrer or  the  transferee  who  applies  for  registry  may,  in  general, 
pursue  one  of  three  remedies.  He  may  apply  to  a  court  of  law  for 
a  mandamus  to  the  corporation  to  compel  it  to  open  its  books  and 
allow  the  registry;  or  he  may  bring  a  suit  in  equity,  praying  that 
the  corporation  be  decreed  to  allow  the  registry,  or  to  pav  him 
damages  if  registry  is  impossible ;  or  he  may  sue  the  corporation 
at  law  for  damages,  on  the  ground  that  by  its  refusal  it  has  been 
guilty  of  a  conversion  of  his  stock. 

§  390.  Remedy  by  mandamus. —  The  authorities  are  in  irreconcil- 
able conflict  on  the  question  whether  a  mandamus  lies  to  compel  a 
corporation  to  allow  a  registry  on  its  books  of  a  transfer  of  stock. 
The  weight  of  authority  holds  very  clearly  that  the  mandamus  will 
not  lie  under  such  circumstances.1    This  rule  is  based  largely  on  the 

returned,  even  though  the  party  hold-    issued  to  another;  Wilkinson  v.  Provi- 


ing  it  is  a  party  defendant.  Beau  v. 
American  L.  &  T.  Co.,  122  N.  Y.,  622 
(1890). 

1  The  leading  case  in  this  country  is 
Shipley  v.  Mechanics'  Bank,  10  Johns., 
484(1813),  where  the  court  say:  "The 
applicants  have  an  adequate  remedy,  by 
a  special  action  on  the  case,  to  recover 
the  value  of  stock  if  the  bank  have 
unduly  refused  to  transfer  it.  There  is 
no  need  of  the  extraordinary  remedy  by 
mandamus  in  so  ordinary  a  case.  It 
might  as  well  be  required  in  every  case 
where  trover  would  lie.  It  is  not  a 
matter  of  public  concern,  as  in  the  case 
of  public  records  and  documents;  and 
there  cannot  be  any  necessity  or  even  a 
desire  of  possessing  the  identical  shares 
in  question."  Ex  parte  Firemen's  Ins. 
Co.,  6  Hill,  243  (1843);  People  v.  Parker 
Vein  Coal  Co.,  10  How.  Pr.,  543(1854); 
State  v.  Rombauer,  46  Mo.,  155  (1870); 
State  r.  St.  Louis,  etc.,  Co.,  21  Mo.  App., 
526  (1886);  King  v.  London  Assurance 
Co.,  1  Dowl.  &  R,  510  (1822);  Stackpole 
v.  Seymour,  127  Mass.,  104  (1879);  King 
v.  Bank  of  England,  2  Doug.,  524  (1780) ; 
Curry  v.  Scott,  54  Pa  St.,  270.  276: 
Gray  v.  Portland  Bank,  3  Mass.,  364, 
381;  State  n  Guerrero,  12  Nev.,  105 
(1877);  People  v.  Miller.  39  Hun,  557 
(1886);  Baker  v.  Marshall,  15  Minn.,  177 
(1870),  where  the  stock  had  already  been 


dence  Bank,  3  R  I.,  22  (1853);  Kimball 
v.  Union  Water  Co.,  44  Cat,  173  (1872); 
Birmingham  Fire  Ins.  Co.  v.  Com.,  92 
Pa  St.,  72  (1879),  where  the  court  says 
that,  even  if  the  "courts  were  inclined 
to  enlarge  the  remedy,  it  could  not  be 
done  in  a  case  where  the  right  is  dis- 
puted, where  no  public  interest  is  in- 
volved, where  no  reason  is  shown  for  a 
transfer  of  a  specific  and  favorite  thing. 
and  where  the  remedy  by  action  is  fully 
adequate."  Townes  v.  Nichols,  73  Mb., 
515  (1882),  where  the  court  vigorously 
says:  "All  the  authorities  declare  that 
the  remedy  by  mandamus  cannot  be  re- 
sorted to  in  a  case  like  this,  unless  the 
legal  right  of  the  petitioner  to  the  pos- 
session of  the  thing  sought  for  is  clear 
and  unquestionable.  If  there  be  doubt 
as  to  what  his  legal  right  may  be,  in- 
volving the  necessity  of  litigation  to 
settle  it,  mandamus  must  be  withheld. 
Mandamus  is  the  right  arm  of  the  law. 
Its  principal  office  is  not  to  inquire  and 
investigate,  but  to  command  and  exe- 
cute. It  is  not  designed  to  assume  a 
part  in  ordinary  lawsuits  or  equitable 
proceedings.  It  is  properly  called  into 
requisition  in  cases  where  the  law  has 
been  settled,  or  in  cases  where  questions 
of  law  or  equity  cannot  properly  and 
reasonably  arise.  Its  very  nature  im- 
plies that  the  law,  although  plain  and 


CH.  XXII.]  FORMALITIES    OF    TRANSFER    AND    REGISTRY. 


[§  390. 


historical  origin  of  the  writ  of  mandamus,  and  on  the  theory  that 
the  stock  of  a  private  corporation  has  no  peculiar  value  and  may 
be  readily  obtained  in  open  market  or  fully  compensated  for  in 
damages.  It  is  doubted,  however,  whether  these  reasons  will  be 
sufficient  to  restrain  the  manifest  tendency  to  enlarge  the  scope  of 
this  writ,  particularly  with  reference  to  stock  transactions.  There 
is  a  strong  line  of  decisions  which  holds  that  a  mandamus  lies  to 
compel  a  corporation  to  allow  a  registry  of  a  transfer  of  stock, 
particularly  where  the  corporation  has  no  good  and  sufficient  rea- 
son for  refusing  the  registry.1     Perhaps  the  strongest  argument 


clear,  fails  to  be  enforced  and  needs  as- 
sistance." See,  also,  Rex  v.  "Worcester 
Nav.  Co.,  1  Mon.  &  R.,  529  (1828) ;  Queen 
v.  Liverpool  &  M.,  etc.,  R'y  Co.,  21  L. 
J.  (Q.  B.),  284  (1852) ;  Murray  v.  Stevens, 
110  Mass.,  95  (1872),  where  the  court 
say,  in  refusing  a  mandamus  to  compel 
a  registry  of  stock :  "  Without  under- 
taking to  lay  down  an  invariable  rule 
on  the  subject,  we  think  it  must  be  said 
that  this  process  was  not  intended  and 
is  not  well  adapted  for  the  trial  of  mere 
questions  of  property."  State  V.  Warren 
Foundry  &  M.  Co.,  32  N.  J.  L.,  439 
(1868),  where  a  previous  transfer  had 
been  registered,  although  possibly  in 
fraud  of  creditors ;  Freon  v.  Carriage  Co., 
42  Ohio  St,  304  (1884),  refusing  a  man- 
damus, although  it  is  said  "  that  this 
stock  has  no  market  value,  that  the  cor- 
poration is  doing  a  growing  and  profit- 
able business,  that  its  good-will  en- 
hances the  value  of  the  stock,  and  that 
by  reason  of  these  things  damages  will 
not  be  an  adequate  remedy.  These  facts 
do  not  change  the  rule.  They  are  ele- 
ments in  assessing  damages  which  may 
be  fully  ascertained  in  an  action  at 
law."  See,  also,  Pomeroy  on  Eq.  Juris., 
g  1412;  State  v.  People's  Bld'g,  etc.,  As- 
sociation, 43  K  J.  L.,  389  (1881);  State 
v.  Timken,  2  Atl.  Rep.,  782  (N.  J., 
1886) ;  Tobey  v.  Hakes,  7  Atl.  Rep.,  551 
(Conu.,  1886),  refusing  a  mandamus  on 
the  corporate  secretary ;  Bank  v.  Har- 
rison,- 66  Ga.,  696.  See,  also,  Lindley  on 
Partnership,  pp.  143,  520,  1036.  Man- 
damus does  not  issue  to  compel  a  cor- 
poration to  transfer  stock  when  there 


is  no  written  transfer  of  the  certificate, 
and  another  party  claims  it.  Burnsville, 
etc.,  Co.  v.  State,  20  N.  E.  Rep.,  421  (Ind., 
1889).'  Mandamus  does  not  lie  to  com- 
pel a  corporation  to  transfer  stock. 
People  v.  Brandis,  etc.,  Co.,  N.  Y.  L.  J.. 
Dec.  11,  1889.  Mandamus  does  not  lie 
against  the  Bank  of  England  to  compel 
it  to  register  a  transfer  of  stock  to  an  in- 
dividual and  a  corporation  jointly.  Law 
Guarantee,  etc.Soc.  v.  Bank  of  England, 
62  L  T.  Rep.,  496  (1890). 

i  People  v.  Goss  Mfg.  Co.,  99  111.,  055 
(1881) ;  State  v.  First  Nat'l  Bank,  89  Ind., 
302  (1883);  Green,  Mount,  etc.,  Co.  v. 
Bulla,  45  Ind,  1  (1873);  People  v. 
Crockett,  9  Cat,  112  (1858);  Townsend 
v.  Mclver,  2  S.  C,  25  (1870);  State  v. 
Cheraw,  etc.,  R.  R  Co.,  16  S.  C,  524 
(1881);  Cooper  v.  Swamp,  etc.,  Co.,  2 
Murph.  (S.  C),  195  (1812);  Norris  v. 
Irish  Land  Co.,  8  El.  &  Bl.,  512  (18 
Regina  v.  Carnatic  R'y  Co.,  L.  R.,  8 
Q.  B.,  299(1873);  Crawford  v.  Prov.  Ins. 
Co.,  8  U.  C.  (C.P.),  263  (1859);  Goodwin 
v.  Ottawa  &  P.  R'y  Co.,  13  U.  C.  (C.  P.), 
254  (1863),  holding  also  that  the  man- 
damus may  run  to  the  corporation  itself 
without  specifying  any  officers,  and  that 
an  evasive  answer  by  them  is  equivalent 
to  a  refusal  to  register.  It  has  been  held 
that  mandamus  will  issue  to  aid  the 
sheriff  in  transferring  stock  sold  on  an 
execution  sale.  This  rule,  however, 
would  work  harshly  in  states  where  the 
purchaser  of  the  outstanding  certificate 
may  have  some  rights.  Where  such  a 
possibility  exists  the  mandamus  should 
be  denied.     State  v.  First  Natl  Bank, 


531 


§  391.] 


FORMALITIES    OF    TRANSFER    AND    REGISTRY. 


[CH.  XXII. 


against  granting  a  mandamus  for  this  purpose  lies  in  the  fact  that 
by  a  bill  in  equity  not  only  can  a  registry  be  specifically  decreed  and 
ordered  by  the  court,  but  the  rights  of  the  corporation  and  any 
other  claimant  can  be  fully  and  finally  heard  and  disposed  of. 

§391.  Remedy  ~by  suit  in  equity.—  This  is,  it  seems,  the  surest, 
most  complete  and  most  just  remedy  for  compelling  a  corporation 
to  register  a  transfer  of  stock,  and  for*  adjusting  the  various  con- 
flicting rights  or  claims  of  other  parties.1    It  is  a  remedy  applicable 


supra;  Bailey  v.  Strohecker.  38  Ga.,  259 
(1868) :  Durham  v.  Man.,  etc.,  Co.,  9  Oreg., 
41  (1880).  Mandamus  will  lie  to  com- 
pel the  corporation  to  transfer  the 
stock  on  its  books  where  any  other 
record  would  be  inadequate  because 
there  is  no  market  value  for  the  stock, 
and  because  the  company  has  fraudu- 
lently transferred  its  property  for  the 
purpose  of  injuring  the  value  of  the 
stock.  The  mandamus  will  lie  although 
a  suit  is  pending  in  equity  to  accom- 
plish the  same  purpose.  Slemmons  v. 
Thompson,  31  Pac.  Rep..  514  (Oreg.,  1 

1  Cushman  v.  Thayer  Mfg.  Co.,  70  X. 
Y.,  365  (1879);  Walker  v.  Detroit  Tran- 
sit R'y  Co.,  47  Mich.,  388;  Iasigi  v. 
Chicago,  B.  &  Q.  R  R.  Co..  120  Mass., 
46  (1880);  Mechanics' Bank  v.  Seton,  1 
Peters,  299  (1828);  Wilson  v.  Atlantic, 
etc..  R.  R.  Co.,  2  Fed.  Rep.  459  (1880); 
Middlebrook  v.  Merchants'  Bank,  3  Abb. 
Ct.  of  App.,  295  (18G6);  Buckmaster  v. 
Consumers'  Ice  Co.,  5  Daly,  513  (1874). 
In  the  case  of  Rice  v.  Rockefeller  et  <d., 
134  N.  Y.,  174  (1892,  reversing  9  X.  Y. 
Supp.,  866),  a  court  of  equity  compelled 
the  trustees  of  a  trust  to  transfer  on, 
their  books  trust  certificates  which  had 
been  purchased  in  open  market  by  a 
person  who  then  applied  to  the  trustees 
for  a  transfer.  The- court  based  its  de- 
cision on  the  similarity  of  such  trust 
certificates  to  stock  certificates,  and 
said  :  "The  denial  of  the  right  to  trans- 
fer upon  the  books  is  not  consistent 
with  the  transferable  quality  of  the 
shares,  which  imports  that  the  pur- 
chaser taking  an  assignment  of  them  in 
a  duly  formal  manner  has  the  right  to 
become  a  transferee  within  the  meaning: 


532 


of  the  agreement  upon  which  the  trust 
was  formed.     ...     In  such  case  it  is 
within  the  equitable  power  of  the  court 
to  compel  such  transfer  to  be  made.'' 
The  court  held,  also,  that  it  was  imma- 
terial that  the  purchaser  who  applied 
for  the  transfer  was  hostile  to  and  a 
competitor  of  the  trust     The  court  said 
tli  at  although  it  would  have  been  legal 
in  the  beginning  to  have  vested  a  dis- 
cretion in  the  trustees  as  to  allowing 
transfers,  yet  that,  such  discretion  not 
having  been  reserved,  it  could  not  be 
exercised  by  the  directors.  Suit  in  equity 
lies.  White  v.  Price,  39  Minn.,  395  (1886) ; 
108  X.  Y,  661  (1888);  Iron  R  R  Co.  v. 
Fink,  41   Ohio  St.,  321  (1884),  the  court 
saying  that  the  power  of  equity  to  de- 
cree a  registry  is  well  settled.     As  re- 
gards the  pleadings,  seeBurrall  r.  Bush- 
wick   R.  R   Co.,   75   N.  Y,   211   (1 
See,  also.  §  579.    Suits  herein  frequently 
arise    wherein    a    complainant    claims 
stock  which  is  registered  in  the  name 
of  another.    The  chief  defendant  is  that 
other  party.     But  it  is  necessary  also 
that  the  corporation  be   made  a  party 
defendant,  in  order  that  transfer  may 
be   decreed    on    corporate  books.     For 
equitable  action  to  compel  a  corporation 
to  issue  stock  to  a  purchaser  of  the 
same  from  one  of  the  parties  defendant, 
see  Tanner  v.   Gregory,  37  N.  W.  Rep.. 
830   (Wis.,   1888);    Kendig  v.    Dean,  97 
U.S.,  423  (1878);  Budd  v.  Munroe,  18 
Hun,  316  (1S79),  the  latter  case  holding 
also   that  the  corporation  may  recover 
costs  against  a  co-defendant  who  is  de- 
feated  in  the  suit;  Johnson  v.  Kirby,  65 
Cal.,  482  (1884).     In  such  cases  the  cor- 
poration is  but  nominally  concerned  in 


CII.  XXII. j 


FORMALITIES    OF    TRANSFER    AND    REGISTRY. 


[§ 


391 


to  almost  all  cases  arising  under  a  refusal  of  the  corporation  to 
allow  a  registry  of  transfer.  The  case  will  be  decided  on  equitable 
principles,  however,  and  a  transfer  will  not  be  decreed  if  it  involves 
bad  faith.1  The  relief  usually  demanded  is  in  the  alternative,  being 
either  for  a  registry  of  the  transfer  or  damages  in  lieu  thereof.2  If 
all  the  stock  has  already  been  issued,  equity  has  no  power  to  com- 
pel a  further  issue.3  Laches  or  the  statute  of  limitations  may  also 
be  a  bar.4 


the  result  of  the  suit.  It  cannot  appeal 
from  the  judgment  when  both  of  the 
real  parties  in  interest  are  satisfied  and 
do  not  appeal.  Board  of  L.  v.  New  Or- 
leans Water-works  Co.,  1  S.  Rep.,  445 
(La.,  1887).  If  the  complainant  is  a  citi- 
zen of  the  same  state  as  the  corporation, 
one  of  the  parties  defendant,  another 
defendant  cannot  remove  the  case  into  a 
•United  States  court.  Crump  v.  Thurber, 
115  U.  S.,  56  (1 883).  In  an  action  against 
the  secretary  of  a  corporation  to  com- 
pel him  to  register  a  transfer  of  stock 
the  corporation  is  not  a  necessary  party. 
Gould  v.  Head,  41  Fed.  Rep.,  242  (1890). 
The  federal  courts  have  jurisdiction 
of  a  suit  in  equity  brought  by  a  citizen 
of  one  state  to  compel  a  corporation  of 
another  state  to  transfer  on  its  books 
certain  shares  of  stock  which  the  com- 
plainant purchased  from  a  citizen  of  the 
same  state  as  the  complainant.  Jewett 
v.  Bradford,  etc.,  Co.,  45  Fed.  Rep.,  801 
(1891).  If  the  holder  of  a  certificate  of 
stock  has  applied  for  transfer  and  been 
refused,  he  may  sue  for  the  dividend 
before  bringing  a  suit  in  equity  to  ob- 
tain a  transfer  of  his  stock.  Hill  v. 
Atoka,  etc.,  Co.,  21  S.  W.  Rep.,  508  (Mo., 
1893).  An  agreement  of  the  holder  of 
a  majority  of  the  stock  that  he  will  re- 
tain control  is  no  defense  by  the  corpo- 
ration to  an  action  by  the  receiver  of 
such  stockholder  to  transfer  the  stock 
on  the  corporate  books.  Weller  v.  Pace 
Tobacco  Co.,  25  N.  Y.  Week.  Dig.,  531 
(1886).  A  pledgee  of  a  certificate  of 
stock  is  not  bound  by  an  agreement  of 
all  the  stockholders  to  surrender  to  the 
corporation  a  part  of  their  stock,  which 
part  is  to  be  then  considered  preferr  ^ 


stock  and  is  to  be  sold  by  the  corpora- 
tion for  the  purpose  of  paying  corporate 
debts.  Although  all  the  other  stock  has 
had  this  agreement  stamped  on  the  cer- 
tificates, yet  the  corporation  cannot  insist 
that  the  purchaser  of  the  stock  so  pledged 
shall  allow  the  same  agreement  to  be 
stamped  on  the  new  certificate  issued 
to  such  purchaser.  The  court  will  order 
a  transfer  free  from  the  agreement. 
Campbell  v.  American,  etc.,  Co.,  122 
N.  Y,  455  (1890). 

1  Regina  i:  Liverpool,  etc.,  R'y,  21  L. 
J.  (Q.  B.),  2*4.  Cf.  Rice  v.  Rockefeller, 
134  N.  Y,  174  (1892). 

2  "  A  bill  in  equity  may  be  maintained 
by  a  bona  fide  purchaser  of  stock  against 
the  corporation  to  compel  a  transfer  of 
the  stock  upon  the  corporate  books." 
The  bill  may  be  in  the  alternative  for  a 
transfer  of  the  stock  or  for  damages, 
and  if  the  company  has  already  issued 
its  whole  capital  stock,  damages  will  be 
granted.  Birmingham  Nat'l  Bank  v. 
Roden,  11  S.  Rep.,  883  (Ala.,  1892).  Where 
a  corporation  refuses  to  issue  the  stock 
to  a  subscriber,  he  may  file  a  bill  in  the 
alternative  to  compel  the  issue  of  the 
shares  or  the  payment  of  their  value 
with  damages.  If  during  the  pendency 
of  the  suit  the  company  becomes  insolv- 
ent the  court  can  give  him  damages  pay- 
able pro  rata  out  of  the  assets  of. the  cor- 
poration. In  re  Reading  Ii-ou  Works,  24 
Atl.  Rep.,  202  (Pa,  1892).   See  §  61,  supra. 

3  Smith  v.  North  Am.  Miu.  Co.,  1  Nev., 
423  (1865) ;  and  see  §  284. 

4  In  New  York  the  ten-year  statute  of 
limitations  runs  against  an  equitable 
action  against  the  corporation  for  a 
transfer  of  the  certificates  on  its  books, 


033 


§392.] 


FORMALITIES    OF    TBA2JSFEB    AND    REGISTRY.  [(  H.   XXII. 


§  302.  Remedy  Inj  an  action  for  damages.—  An  action  at  law  for 
damages  is  an  old  and  well-established  remedy  of  a  stockholder 
who  has  applied  to  the  corporation  for  a  registry  of  a  transfer  and 
has  been  refused.1  The  form  of  the  action  is  not  definitely  fixed, 
and  in  different  states  different  forms  seem  to  have  been  passed 
upon  without  any  question  being  raised  as  to  their  technical  nat- 
ure.2 The  measure  of  damages  is  substantially  the  same  as  in 
other  cases  of  conversion  of  stock.3  The  statute  of  limitations  runs 
only  from  the  time  when  a  demand  for  registry  was  made.4 

the  stock  in  the  meantime.  Skinner  u 
City  of  London  It  Ins.  Co.,  L.  R,  14 
Q-  B.  D..  Even  in  England  if 

the  company  lias  completed  a  transfer 
upon  its  books  and  then  repudiates  the 
transfer  on  the  ground  that  it  had  prior 
to  that  time  transferred  the  same  stock 
•ii«rs.  the  company  is  liable  in  dam- 
ages to  the  party  to  whom  the  last 
transfer  was  made.  Tomkinsou  r 
Balkis.  eta, Co.,  64  I.  T.  I;,  p.  816  I 
A  corporation  is  liable  in  damages  fur 
refusing  to  allow  a  transfer  of  the  Btock 
where  such  refusal  is  unjustifiable. 
Doty  R  First  Nat  Bank  of  Larimoi 
N.  W.  Rett,  77  North  Dak..  1888),  If  the 
company  illegally  refuses  to  transfer 
6tock  it  is  a  conversion.  Rio  Grande, 
etc..  Co.  r.  Burns,  17  S.  W.  Rep.,  1043 
(Tex.  The  appropriate  remedy 

of  a  purchaser  to  compel  a  corporation 
to  register  a  transfer  to  himself  is  an 
action  on  the  case  wherein  the  measure 
of  damages  is  the  value  at  the  time  of 
refusal  to  transfer.  German  Building 
Ass'n  r  Sandemeyer,  14  Wright  (Pa.), 
07:  Wain  r.  Bank.  8  S.  &  R,  75;  Pres- 
byterian Church  v.  Bank,  5  Pa.  St.,  345. 
-  See  en,  XXXV. 

3  Id. 

4  Cleveland  R  R.  Co.  v.  Robbins,  35 
Ohio  St,  483 ;  Iron  R.  R,  Co.  v.  Fink,  41 
Ohio  St.,  321  (1884)1 


from  the  time  when  the  outstanding 
certificate  was  issued.  Ryder  v.  Bush- 
wick  R.  R.,  10  N.  Y.  Supp..  -  10). 
In  the  case  Ware  v.  Galveston  City  Com- 
pany, 146  U.  &,  II  .'.  the  bill  of  a 
claimant  of  stock  against  the  company 
to  hold  it  liable  for  allowing  a  transfer 
of  the  stock  in  fraud  of  his  rights  was 
barred  by  laches,  the  suit  having  been 
brought  thirty-five  years  after  the  cause 
of  action  had  accrued.  The  holders  of 
full-paid  stock  cannot  be  assessed  on 
such  stock  even  under  a  reorganization 
agreement  of  the  majority  of  the  stock- 
holders. Where,  however,  for  four  years 
the  stockholder  does  not  object,  and  then 
a  pi  lies  for  a  transfer  of  his  stock,  a 
court  of  equity  may  refuse  to  grant  the 
transfer  and  give  him  damages  for  the 
value  of  his  stock  at  the  time  of  the  de- 
mand of  transfer,  together  with  interest 
Gresham  v.  Island,  etc.,  Bank,  81  S.  W. 
Rep..  556  Tex.,  1883X 

'Ilussey  v.  Manufacturers'  &  M. 
Bank,  27  Mass.,  414  (1830);  Helm  v. 
Bwiggett,  13  Ind.,  184  1 1858>  Cases  sup- 
porting this  rule  abound  in  all  the 
states.  They  will  be  found  together 
with  others  in  chapter  XXXV.  If  the 
corporation  illegally  refuses  to  allow  a 
registry,  but  afterwards  does  allow  it 
the  corporation  is  not  liable  in  damages 
for  the  decline  of  the  market  value  of 


534 


CHAPTER  XXIII. 


RULES  FOR  CORPORATIONS  IN  REGARD  TO  REFUSING  OR  ALLOW- 
ING REGISTRIES  OF  TRANSFERS  OF  STOCK. 


§393. 
394. 


395. 


396. 


397. 

398. 

399. 
400. 
401. 


Purpose  of  the  chapter. 

Right  to  refuse  until  the  trans- 
ferrer pays  the  unpaid  sub- 
scription price. 

Whether  the  corporation  may 
refuse  to  register  a  transfer  to 
an  irresponsible  transferee. 

Corporation  may  refuse  to  reg- 
ister as  transferees  persons 
who  are  incompetent  to  con- 
tract. 

Trustees,  executors,  guardians, 
agents  and  pledgees. 

Sales  of  stock  by  executors  or 
administrators. 

Sales  by  trustees. 

Sales  by  guardians. 

Forgery  of  transfer. 


§402. 


403. 

404. 
405. 

406. 

407. 
408. 


409. 
410. 


Corporation  must  require  a  sur- 
render of  the  outstanding  cer- 
tificate. 

Alleged  loss  of  the  old  certifi- 
cate. 

Attachment  or  execution. 

Decree  of  a  court  that  certifi- 
cates be  issued. 

Theft  of  certificates  indorsed  in 
blank. 

Interpleader  by  the  corporation. 

Restrictions  by  corporation  on 
stockholder's  right  to  sell  or 
transfer. 

Lien  of  the  corporation. 

Formalities  of  registry  which 
the  corporation  may  insist 
upon. 


§  393.  Purpose  of  the  chapter. —  It  is  proposed  in  this  chapter, 
as  a  continuation  of  the  last,  and  as  a  recapitulation  of  the  various 
rights,  liabilities  and  duties  of  the  corporation  in  refusing  or  allow- 
ing a  registry  of  a  transfer  of  stock,  to  state  briefly  the  rules  which 
prevail  herein.  The  stand-point  taken  is  that  of  the  corporation. 
The  minute  and  particular  application  of  the  general  rules  govern- 
ing this  subject  are  not  stated  here  at  length;  but  an  effort  has  been 
made  to  give,  in  systematic  order,  certain  directions  which  will 
enable  a  corporation,  when  in  doubt  as  to  whether  to  allow  or  refuse 
a  registry,  to  decide  the  question  intelligently  and  safely. 

§  394.  Eight  to  refuse  until  the  transferrer  pay s  the  unpaid  sub- 
scription price.1 —  A  corporation  cannot  refuse  to  register  a  trans- 
fer of  stock  merely  because  the  subscription  price  has  not  been 
fully  paid  in,  unless  the  charter  or  the  statutes  of  the  state  ex- 
pressly give  that  right.  Kor  can  it  refuse  registry,  even  though 
a  call  for  part  of  the  subscription  price  has  been  made,  is  due,  and 
remains  unpaid.  It  must  allow  a  registry,  but  may  continue  to 
hold  the  transferrer  liable  for  the  call.  The  corporation  has  no 
lien  on  the  stock  for  the  subscription  price,  nor  has  it  a  right  to  re- 
strict transfers  until  calls  or  parts  of  the  subscription  price  not  yet 
called  are  paid.  The  policy  of  the  law  is  to  favor  the  right  of 
transfer,  and  no  impediments  by  the  corporation  are  allowed  to  re- 

1  See  chapter  XV. 

535 


§§  395-397.]  eules  begclating  eegistet.  [ch.  xxiii. 

strict  that  right.  As  regards  parts  of  the  subscription  not  yet  called 
in,  the  transferrer  is  released  from  liability  and  the  transferee  as- 
sumes the  liability.  As  regards  calls  made  before  the  application 
for  registry  but  not  yet  due,  the  transferrer  is  liable,  but,  it  seems, 
not  the  transferee.  As  regards  calls  made  before  the  application 
and  due  before  such,  the  transferrer  and  not  the  transferee  is  liable. 
As  regards  calls  made  after  the  application  the  transferee  alone  is 
liable.  In  Pennsylvania,  however,  a  different  rule  prevails,  and  by 
statute  the  transferrer,  if  he  is  the  original  subscriber,  is  liable  until 
the  whole  subscription  is  paid.  In  New  York,  by  statute,  both 
railroad  and  manufacturing  corporations  may  refuse  to  allow  reg- 
istry of  transfers  until  unpaid  calls  have  been  paid. 

§  395.  Whether  the  corporation  may  refuse  to  register  a  transfer 
to  an  irresponsible  transferee.1—  Greater  difficulty  is  experienced  in 
finding  a  working  rule  on  this  subject.  On  one  point,  however,  all 
the  authorities  agree.  If  the  corporation  is  insolvent,  or  in  such  a 
state  of  decline  that  insolvency  seems  inevitable,  the  corporation 
may  refuse  to  allow  a  registry  of  transfer  from  a  responsible  to  an 
irresponsible  insolvent  transferee.  The  policy  of  the  law  is  to  protect 
corporate  creditors,  even  at  the  expense  of  restricting  the  right  of 
transfer.  The  above  rule  applies  not  only  where  the  subscription  is 
unpaid,  but  also  where  it  has  been  paid  and  only  a  statutory  liability 
exists.  Where,  however,  the  corporation  is  solvent  and  a  stock- 
holder applies  for  a  registry  of  transfer  from  himself  to  an  irre- 
sponsible transferee,  it  seems  that  the  corporation  cannot  refuse  to 
make  the  registry. 

§  396.  Corporation  may  refuse  to  register  as  transferees  persons 
who  are  incompetent  to  contract.2—  If  the  transferee  of  a  certificate 
of  stock  is  an  infant  or  person  of  unsound  mind,  the  corporation 
may  refuse  to  register  such  transferee  as  a  stockholder.  The  reason 
of  the  rule  is  that  such  persons  would  not  be  obliged  at  law  to  re- 
spond to  the  obligations  of  a  stockholder,  and  consequently  are  not 
entitled  to  its  privileges.  With  married  women  at  the  present  day 
the  law  is  different.  At  common  law  they  were  incompetent  to  be- 
come a  stockholder,  the  same  as  an  infant  is  at  the  present  time. 
But  the  statutes  of  all  the  states  have  substantially  removed  these 
disabilities,  and  enabled  a  married  woman  to  transact  business  as  a 
feme  sole,  so  far  as  her  separate  estate  is  concerned.  She  may  be- 
come a  stockholder  in  a  corporation,  but  cannot  bind  her  husband's 
estate  for  the  liabilities  of  such  stockholdership. 

§  397.  Trustees,  executors,  guardians,  agents, pledgees?— In  regis- 
tering transfer  to  a  trustee,  executor  or  guardian,  the  corporation 

1  See  chapter  XV.  s  See  chapter  XTV. 

2  See  chapter  XIV. 

536 


CH.  XXIII.]  RULES    REGULATING   REGISTRY.  [§  398, 

may  be  required  to  register  the  transferee  as  holder  in  his  official 
capacity.  A  trustee  who  purchases  or  receives  stock  to  hold  in 
trust  for  the  benefit  of  another  may,  it  seems,  require  the  corpora- 
tion to  register  the  transfer  and  issue  new  certificates  to  himself 
in  his  own  name  as  "trustee."  In  England  the  rule  appears  to  be 
different.  The  reason  of  this  rule  is  that  the  liability  of  a  trustee 
on  stock  is  in  many  of  the  states  different  from  that  of  a  complete 
owner  of  the  stock,  and  also  because  where  stock  is  held  by  a  trustee 
as  trustee,  it  is  the  duty  of  the  corporation  to  refuse  to  allow  the 
trustee  to  sell  and  register  a  sale  of  the  stock  unless  the  instrument 
creating  the  trust  authorizes  such  sale.  So  also  an  executor  or  ad- 
ministrator or  guardian  may  compel  the  corporation  to  place  his 
official  title  after  his  name  in  the  stock  registry.  Pledgees,  how- 
ever, and  agents,  have  not  this  right.  The  corporation  need  not 
write  the  word  "pledgee"  after  the  transferee's  name  either  in  the 
stock  registry  or  on  the  certificate.  Such  is  the  rule,  for  the  reason 
that  the  corporation  is  not  obliged  to  protect  the  rights  of  the 
pledgor,  nor  to  recognize  the  pledgeeship  of  the  transferee.  The 
same  rule  applies  to  transferees  who  take  as  agents  of  the  trans- 
ferrer. 

§  398.  Sales  of  stock  by  executors  or  administrators.* — A  corpo- 
ration may  with  safety,  and  in  fact  is  obliged  to,  allow  an  execu- 
tor or  administrator  to  register  a  transfer  of  the  sale  of  stock 
belonging  to  the  estate  upon  presentation  by  the  executor  or  ad- 
ministrator of  the  letters  testamentary  or  letters  of  administration. 
The  executor  or  administrator  may  then  register  a  transfer  of  the 
stock  to  himself,  or  directly  from  the  name  of  the  deceased  to  a 
purchaser  from  the  executor;  or  from  the  deceased  to  the  execu- 
tor, and  then  from  the  executor  to  the  purchaser.  One  executor 
may  sell  and  register  a  transfer  of  the  stock.  The  corporation  is 
not  bound  to  inquire  whether  it  is  necessary  that  the  sale  be  made 
in  order  to  pay  the  debts  of  the  estate,  nor  to  see  to  it  that  the 
executor  actually  applies  the  proceeds  of  the  sale  to  that  purpose. 
Where,  however,  the  corporation  has  actual  knowledge  through 
its  officers  that  a  breach  of  trust  is  contemplated  by  the  executor, 
it  is  bound  to  refuse  registry,  and  will  be  liable  to  the  estate  for 
neglecting  so  to  do.  So  also,  where  such  a  long  time  has  elapsed 
between  the  taking  out  of  the  letters  and  the  sale  by  the  executor 
that  the  latter  has  become  practically  a  trustee,  the  corporation 
must  use  the  same  precaution  as  in  sales  by  a  trustee.  In  the  case 
of  specific  legacies  of  stock,  the  corporation  need  take  no  notice  of 
them,  but  must  allow  the  executor  to  transfer  the  stock  into  his 

1  See  chapter  XIX 

537 


§§  399-401.]  BULKS    EEGULATING   EEGISTKY.  [CH.  XXIIL 

own  name,  since  he  may  need  it  to  pay  debts,  and  the  corporation 
is  not  bound  to  investigate  such  questions. 

§399.  Sales  ~by  trustees.1 — A  trustee  who  holds  stock  belonging 
to  the  trust  estate  has  no  right  to  sell  and  transfer  such  stock  un- 
less he  is  expressly  authorized  so  to  do  by  the  instrument  creating 
the  trust.  Consequently  the  law  imposes  upon  the  corporation  the 
duty  of  refusing  to  allow  a  trustee  to  transfer  the  stock  unless  he 
clearly  has  a  right  so  to  do.  If  the  corporation  neglects  this  duty 
it  is  liable  to  the  trust  estate,  and,  in  case  of  a  breach  of  trust  by 
the  trustee,  may  be  compelled  to  replace  the  stock  or  pay  damages. 
If  the  trustee  has  an  express  power  given  to  him  to  sell,  the  corpo- 
ration may  allow  him  to  make  the  transfer.  If  no  such  power  is 
given,  the  corporation  must  refuse.  The  trustee  is  bound  to  rea- 
sonably satisfy  the  corporation  of  his  right,  but  the  corporation 
cannot  permanently  retain  the  papers  submitted  to  it  for  that 
purpose. 

§400.  Sales  by  guardians? — A  guardian  has  a  right  to  change 
the  investment  of  the  funds  in  his  charge,  and  consequent^  has  a 
right  to  sell  stock  held  by  him  in  his  official  capacity.  Accordingly, 
the  corporation  may  allow  him  to  register  a  transfer  of  stock  held 
b}'  him  as  guardian,  and  cannot  require  the  guardian  to  obtain  an 
order  or  decree  from  a  court  authorizing  such  transfer.  An  order 
or  decree  is  often  obtained  by  the  guardian,  however,  for  his  own 
protection,  and  is  to  be  commended.  In  New  York  the  rights  and 
duties  of  guardians  are  regulated  by  statute,  and  other  states  have 
similar  statutes. 

,  §  401.  Forgery  of  transit  r. —  A  corporation  is  bound  and  required 
to  detect  a  forgery  whereby  the  name  of  the  owner  of  a  certificate 
of  stock  is  signed  to  it  and  a  transfer  made  which  the  corporation 
is  requested  to  register.  The  stockholder  in  whose  name  the  old 
certificate  was  made  out,  and  whose  name  was  forged  to  the  trans- 
fer, may  hold  the  corporation  liable  if  it  fails  to  detect  the  forgery 
and  allows  a  registry  of  the  forged  transfer.  He  may  compel  it  to 
replace  the  stock  or  pay  damages.  This  rule  is  due  to  the  fact  that 
the  corporation  is  a  custodian  of  the  books  whereby  a  stockholder 
obtains  his  rights  of  stockholdership,  and  it  cannot  deprive  him  of 
these  rights  by  allowing  others  to  take  them  from  him  by  the  aid 
of  the  corporation  and  without  his  consent.  It  is  in  the  power  of 
the  corporation  to  require  the  presence  of  the  transferrer  at  the 
time  of  registry,  or  at  least  clear  proof  that  the  signature  is  genu- 
ine. The  corporation,  however,  has  recourse  over  against  the  per- 
son who  applied  for  registry  on  the  forged  transfer,  however  inno- 

1  See  chapter  XLX.  2  See  chapter  XIX. 

538 


CII.  XXIII.]  EULES    EEGCLATING   EEGISTEY.  [§§  402-404. 

cent  the  latter  may  be.  He  is  held  to  have  impliedly  represented 
that  the  transfer  was  genuine. 

§402.  Corporation  must  require  a  surrender  of  the  outstanding 
certificate.1 — If  a  corporation  permits  a  registry  of  a  transfer  of 
stock,  and  issues  new  certificates  to  the  transferrer  without  requir- 
ing a  surrender  of  the  old  certificate,  it  assumes  a  dangerous  posi- 
tion and  one  which  it  is  not  obliged  to  assume.  If  the  certificate 
which  is  not  delivered  up  is  in  the  hands  of  a  bona  fide  purchaser 
for  value  and  without  notice,  he  may  hold  the  corporation  liable 
for  allowing  a  registry  of  transfer  to  another  without  requiring  a 
delivery  of  the  certificates.     It  is  negligence  and  a  breach  of  duty 

•*  iJ         CD  «. 

on  the  part  of  the  corporation  to  allow  a  registry  without  a  surren- 
der of  the  old  certificate.  It  generally  refuses  to  do  so,  as  is  its  duty, 
and  is  sustained  by  the  law  in  its  refusal.  There  are  occasions,  how- 
ever, where  the  law  compels  the  corporation  to  register  the  trans- 
fer without  a  surrender  of  the  old  certificate.  TThen  so  compelled 
to  do,  the  corporation  cannot  be  held  liable  by  the  purchaser  of 
the  outstanding  certificate,  but  he  must  seek  his  remedy  against 
others.  Such  compulsory  registry,  excusing  the  corporation,  may 
exist  in  cases  of  alleged  loss  of  the  old  certificate,  a  decree  of  a 
court  compelling  the  registry,  and,  under  the  latter,  an  attachment 

i  CD  O  •/   '  '  / 

or  execution  against  the  stock.2 

§  403.  Alleged  loss  of  the  old  certificated — According  to  the  rule 
of  nearly  all  the  states  a  corporation  is  not  obliged  to  issue  a  new 
certificate  of  stock  to  the  owner  of  an  old  one,  which  he  alleges 
he  has  lost,  unless  such  person  gives  to  the  corporation  a  suffi- 
cient bond  of  indemnity  to  protect  it  against  liability  in  case  it 
turns  out  that  the  old  certificate  was  not  lost,  but  was  sold  and 
passed  into  bona  fide  hands.  In  New  York  this  rule  is  fixed  by 
statute.  The  corporation  is  liable  to  the  holder  of  the  outstanding 
certificate,  if  it  is  outstanding,  and  consequently  should  be  pro- 
tected against  that  liability  by  a  bond  from  the  applicant  for  regis- 
try. In  Louisiana  a  statutory  advertisement  is  made  and  a  bond 
of  indemnity  dispensed  with.  But  in  the  other  states  the  court 
compels  the  loser  to  give  a  bond,  varying  in  amount  according  to 
the  amount  of  the  stock  and  the  clearness  of  the  proof  of  loss. 

§  404.  Attachment  or  execution.* — Nearly  all  the  states  have  laws 
whereby  shares  of  stock  are  rendered  subject  to  levy  of  attach- 
ment and  to  sale  on  levy  of  execution.  Such  attachment  or  execu- 
tion can  be  levied  only  at  the  domicile  of  the  corporation,  since  the 
certificates  are  mere  evidences  of  title,  and  the  res  itself  of  the 
stock  exists  only  where  the  corporation  is  created.     When,  there- 

i  See  chapter  XXI.  s  See  chapter  XXI. 

2  But  see  §  488.  <  See  chapter  XXVII. 

639 


§  405.]  RULES   REGULATING   REGISTRY.  [CH.  XX1IL 

fore,  an  execution  sale,  or  an  attachment  followed  by  an  execution 
sale,  takes  place  where  the  corporation  exists,  the  purchaser  at 
such  sale  generally  has  not  the  outstanding  certificate,  but  never- 
theless demands  registry  of  himself  as  stockholder  in  accordance 
with  the  law  authorizing  the  attachment  and  execution.  In  the 
meantime  the  judgment  debtor  whose  stock  is  thus  attached  or 
sold  under  an  execution  generally  has  sold  or  will  sell  his  certifi- 
cate of  stock  to  a  loriafide  purchaser  for  value.  If  it  happens  that 
both  parties  claim  the  stock,  the  duty  and  privilege  of  the  corpora- 
tion is  plain.  It  may  refuse  to  decide  between  them,  and  when 
sued  by  either  may  interplead  and  compel  the  claimants  to  settle 
the  right  between  them  in  the  courts.  But  frequently  it  happens 
that  the  corporation  does  not  know  whether  the  judgment  debtor 
lias  sold  the  outstanding  certificate  or  not.  By  the  law  of  most  of 
the  states,  if  such  certificate  was  sold  before  the  attachment  or  exe- 
cution was  levied  the  purchaser  would  be  protected,  and  the  cor- 
poration would  be  liable  to  him  for  registering  as  a  stockholder 
the  purchaser  at  the  execution  sale.  Accordingly,  in  that  case,  it  is 
the  duty  of  the  corporation  to  refuse  to  register  the  purchaser  at 
the  execution  sale.  It  cannot  afford  to  take  the  risk,  and  is  not 
obliged  to  take  it.  If  the  court  then  compels  it  to  make  the  regis- 
try of  transfer  to  the  execution  purchaser,  the  court  will  also,  prob- 
ably, compel  such  purchaser  to  give  a  bund  of  indemnity  to  protect 
the  corporation.  If  such  a  bond  is  not  required  by  the  court  the 
corporation  must  nevertheless  obey  the  decree.  What  rights  the 
purchaser  of  the  outstanding  certificate  would  then  have,  has  not 
as  }ret  been  passed  upon  by  the  courts. 

§  405.  Decree  of  a  court  that  certificates  he  issued.1  —  A  corpora- 
tion must  of  course  obey  the  decree  of  a  court  that  it  issue  a  cer- 
tificate of  stock  to  a  specified  person.  But  a  court  will  rarely  resort 
to  such  an  extreme  remedy  where  it  is  probable  or  possible  that 
there  may  be  an  outstanding  certificate  in  the  hands  of  an  inno- 
cent holder  representing  the  same  shares.  As  a  principle  of  law 
the  court  has  no  power  to  decree  such  an  issue  ordinarily,  since  the 
whole  capital  stock  has  been  issued,  and  its  decree  amounts  prac- 
tically to  an  order  to  make  an  overissue  of  stock.  Generally  the 
court  decrees  damages  to  be  paid,  or  directs  the  corporation  to  pur- 
chase stock  for  the  purpose  of  re-issuing  it  to  the  specified  party. 
This  occurs  frequently  where  the  corporation  has  unjustly  deprived 
a  person  of  his  stock.  A  different  class  of  cases  arises  where  the 
corporation  has  refused  to  allow  a  registry  because  the  outstanding 
certificate  is  not  surrendered.  Such  cases  include  those  of  alleged 
loss  of  certificate,  an  execution  sale  of  the  stock,  and,  possibly,  a 

1  See  chapter  XXIL 

540 


•CH.  XXIII.]  EULES    REGULATING    EEGISTEY.  [§§  40G,  407. 

suit  in  equity  at  the  domicile  of  the  corporation  to  recover  from 
another  stock  which  the  complainant  claims.  A  decree  in  such  a 
suit  in  most  states  would  be  ineffectual  to  deprive  of  his  rights  one 
who  purchased  from  the  defendant  bis  certificate  of  stock  before 
the  decree  was  rendered.  It  would  accordingly  be  a  harsh  decree 
that  compelled  the  corporation  to  register  the  successful  complain- 
ant as  a  stockholder.  The  corporation  should  not  be  compelled  to 
assume  the  risk  of  being  sued  b}T  the  purchaser  of  the  outstanding 
certificate.  The  complainant  should  be  compelled  to  give  a  bond 
of  indemnity,  or  else  be  contented  with  a  personal  judgment  against 
the  defendant.  The  demands  of  trade  and  of  an  investing  public 
require  that  the  safety  of  a  purchaser  of  a  certificate  of  stock  should 
be  assured,  except  against  attachments,  execution  sales  or  decrees 
duly  obtained  and  notified  to  the  corporation  before  the  bona  fide 
purchaser  received  the  certificate  of  stock. 

§  406.  Theft  of  certificates  indorsed  in  blank.1  —  The  corporation 
has  a  duty  to  perform  as  regards  certificates  of  stock  which  have 
been  stolen  from  the  owner  who  held  them  indorsed  in  blank. 

If  the  owner  notified  the  corporation  of  the  theft  it  must  refuse 
to  register  a  transfer  to  a  purchaser  of  such  stolen  certificate. 
Since  the  owner's  negligence  may  have  estopped  him  from  reclaim- 
ing the  stock,  the  corporation  may  refuse  to  recognize  either  party 
as  a  stockholder,  where  there  is  a  reasonable  question  of  negligence, 
and  when  sued  by  either  may  interplead.  If  the  corporation  al- 
lowed a  registry  before  it  was  notified  of  the  theft,  it  is  difficult  to 
see  on  what  principle  it  is  to  be  held  liable  to  the  owner.  Such  a 
case  seems  not  yet  to  have  arisen.  If  notified  of  the  theft  before 
anything  is  learned  concerning  the  whereabouts  of  the  certificate, 
the  case  is  to  be  treated  the  same  as  when  the  certificate  is  alleged 
to  have  been  lost. 

§  407.  Interpleader  by  the  corporation.2  —  Whenever  there  are  two 
or  more  conflicting  claims  made  to  stock  and  demands  are  made 
on  the  corporation  to  allow  registry,  it  is  the  privilege  of  the  cor- 
poration, if  there  is  a  reasonable  legal  doubt  as  to  the  rights  of  the 
parties,  to  refuse  to  register  either  party,  and  when  sued  by  one  to 
interplead  and  compel  the  parties  to  contest  the  matter  between 
themselves  in  the  courts.  The  law  does  not  oblige  the  corporation 
to  turn  itself  into  a  court  of  justice  and  decide  the  rights  of  the 
parties.  The  corporation,  however,  cannot  interplead  if  it  has 
alreadv  committed  itself  bv  registering  one  of  the  claimants  as  the 
stockholder.  Nor  can  the  corporation  resort  to  an  interpleader 
where  one  of  the  claimants  is  clearly  wrong.  The  right  of  inter- 
pleader and  the  power  of  the  corporation  to  refuse  to  register  a 

i  See  chapter  XXL  2  See  chapter  XXII. 

541 


§£  408-410.]  RULES    REGULATING   KEGISTKV.  [ch.  XXIII. 

transfer  until  compelled  to  do  so  by  the  courts,  where  an  outstand- 
ing certificate  is  not  surrendered,  constitutes  the  two  most  effective 
safeguards  of  the  corporation  in  allowing  or  refusing  registrj^. 

§  408.  Restrictions  hy  corporation  on  stockholder's  right  to  sell  or 
transfer.1  —  The  law  has  uniformly  and  decisively  discountenanced 
and  overruled  all  attempts  of  a  corporation  to  prevent  the  sale  and 
transfer  of  its  stock  by  the  stockholder.  Such  attempted  restric- 
tions are  generally  made  by  means  of  by-laws.  Thus,  a  by-law  re- 
quiring the  consent  of  the  directors  or  other  corporate  officers  to  a 
transfer,  or  a  by-law  requiring  the  stockholder  when  he  sells  to  sell 
his  stock  to  specified  persons,  is  null  and  void.  Restrictions  may 
be  created  by  a  contract  mutually  agreed  to  by  the  stockholders, 
but  cannot  be  imposed  upon  them  by  the  majority  of  the  stock- 
holders nor  by  the  board  of  directors.  When,  however,  such  re- 
strictions are  created  by  the  charter,  they  are  valid,  since  they  arise 
with  the  corporation  and  stock  itself.  Thus,  in  England,  the  char- 
ter frequently  authorizes  the  directors  to  refuse  a  registry  unless 
the  transferee  is  satisfactory  to  them.  Even  here,  however,  the 
directors  must  be  reasonable  in  the  use  of  their  discretion.  In  this 
country  the  most  frequent  restriction  created  by  charter  is  that  of 
a  lien  for  debts  due  to  the  corporation  from  the  transferrer. 

§  409.  Lien  of  the  corporation?  —  The  charters  of  many  corpora- 
tions contain  an  express  provision  that  the  corporation  may  refuse 
to  allow  a  stockholder  to  register  a  transfer  of  his  stock  until  he 
has  paid  any  and  all  debts  which  he  may  at  that  time  owe  to  the 
corporation.  Such  a  lien  need  not  be  stated  in  the  certificate  of 
stock.  While  it  may  not  be  created  generally  by  a  by-law,  yet 
certain  phrases  in  charters  have  been  held  to  uphold  a  lien  that  is 
declared  and  made  effectual  by  a  by-law.  Where  the  lien  exists 
the  corporation  may  refuse  to  allow  a  registry  of  transfer  of  any 
stock  owned  by  the  debtor  until  all  debts  due  from  him  to  the  cor- 
poration are  paid,  whether  due  or  not  due,  including,  it  seems,  un- 
paid subscriptions.  It  does  not  apply,  however,  to  debts  due  from 
a  transferee  of  the  certificate  who  never  obtained  registry  or  ap- 
peared as  a  stockholder  on  the  corporate  books.  Nor  does  it  apply 
to  debts  due  from  the  registered  stockholder,  but  incurred  after  the 
corporation  was  given  notice  that  he  had  sold  his  stock  to  another. 
The  corporation  may  waive  its  lien  and  allow  registry  without  the 
debts  of  the  old  stockholder  being  paid.  A  registry  without  re- 
quiring payment  is  a  waiver  in  itself. 

§  410.  Formalities  of  registry  which  the  corporation  may  insist 
upon}—  Where,  as  is  ordinarily  the  case,  the  owner  of  stock  has 

1  See  chapter  XX.  s  See  chapter  XXII. 

•  See  chapter  XXXL 

542 


CH.  XXIII.]  RULES   REGULATING    REGISTRY.  [§  410. 

sold  it  by  signing  the  transfer  and  power  of  attorney  on  the  back 
of  the  certificate,  leaving  the  names  of  the  transferee  and  of  the 
attorney  blank,  the  corporation  may  require  the  names  of  the 
transferee  and  of  the  attorney  to  be  filled  in  before  it  allows  a 
registry.  If  it  is  in  doubt  as  to  the  genuineness  of  the  signature 
of  the  former  owner  of  the  certificate,  it  may  require  his  presence 
or  reasonable  proof  that  he  actually  made  the  signature.  It  cannot 
compel  the  transferrer  to  be  present,  but  may  require  the  presence 
of  the  attorney  authorized  to  make  the  registry.  The  registry 
itself  is  generally  made  by  the  corporate  officer,  but  he  may  re- 
quire the  attorney  to  make  it.  A  surrender  of  the  old  certificate 
is  required,  and  new  certificates  in  the  name  of  the  transferee  are 
issued.  The  by-laws  may  prescribe  that  the  registry  shall  be  in 
the  presence  of  certain  corporate  officers.  A  mere  request  to  reg- 
ister is  not  registry,  although  the  old  certificate  is  left  with  the  clerk, 
together  with  the  transfer,  and  he  marks  "  received  for  record  "  on 
the  same.  If  the  corporation  does  not  keep  a  transfer  book  or 
stock  book,  a  surrender  of  the  old  certificate  and  the  issue  of  a  new 
one  is  sufficient  to  constitute  a  transfer  and  registry.  The  appli- 
cant may  inquire  of  the  corporate  officer  in  charge  for  the  registry 
clerk,  and  is  not  bound  to  ascertain  the  individual  himself.  Reg- 
istry at  a  branch  office  may  not  be  a  legal  registry  until  entered  at 
the  main  office.  The  corporate  registry  may  be  on  its  ledger  with- 
out any  issue  of  certificate.  If  it  keeps  no  registry  at  all,  mere 
notice  to  it  of  a  transfer  constitutes  a  legal  registry.  The  corpora- 
tion has  no  right  to  delay  registry  unreasonably  for  the  purpose  of 
obtaining  advice  or  for  any  other  reasons.  It  may  require  that  the 
power  of  attorney  run  directly  from  the  former  registered  stock- 
holder and  not  from  an  intermediate  one.  A  written  acceptance 
of  the  stock  by  the  transferee  cannot  be  insisted  on  by  the  corpo- 
ration. The  formalities  of  registry  may  be  waived  by  the  corpo- 
ration, and  any  act  which  indicates  that  it  considers  a  transferee 
to  be  a  stockholder  is  effectual  to  make  him  such  so  far  as  the  cor- 
poration is  concerned,  though  no  registry  was  had. 

Either  the  transferrer  or  the  transferee  or  an  intermediate  un- 
registered transferee  may  apph7  to  the  corporation  for  the  purpose 
of  obtaining  a  registry.  The  corporation  cannot  refuse  it  merely 
because  of  the  motive  of  the  transferrer  or  of  the  transferee  in 
making  the  sale  and  transfer.  "Whenever  the  corporation  refuses 
to  allow  a  registry  the  applicant  may  sue  it  for  damages,  or  he  may 
go  into  a  court  of  equit}7  and  ask  that  the  corporation  be  decreed 
to  allow  registry  or  to  pay  damages  in  lieu  thereof.  A  few  cases 
hold  that  he  may  compel  registry  by  a  mandamus  against  the  cor- 
poration, but  the  weight  of  authority  holds  otherwise. 

543 


CHAPTER  XXIV. 


NON-NEGOTIABILTY  OF  STOCK  AND   DANGERS   INCURRED  IN  THE 
PURCHASE  OF  CERTIFICATES  OF  STOCK. 


A.  NON-NEGOTIABILITY. 

§  411.  Nature  and  kinds  of  negotiable 
instruments. 

412.  Certificates  of  stock  are  not  ne- 

gotiable instruments. 

413.  The  term   "  gutm-negotiability," 

as  applied  to  certificates  of 
stock,  throws  little  light  upon 
tht'  subject 

414.  The    distinction     between     the 

"legal"  and  the  "equitable" 
title  in  the  transfer  of  certifi- 
cates of  stock  is  unsatisfac- 
tory. 

415.  The    only  method    of  treatment 

of  the  subject  seems  to  be  by 
inquiring  under  what  facts 
the  holder  or  purchaser  is  pro- 
tected. 
41G.  The  particular  rules  protecting 
a  bona  fide  purchaser  of  cer- 
tificates of  stock  are  based  on 
estoppel. 

B.   DANGERS    INCURBED    IN    PURCHASING 

STO(  K. 

§  417.  Liabilities,  risks  ami  rights  of  one 
.    who  owns  or  purchases  a  <■•  r- 
tilicate  of  stock. 

418.  Liability    on    unpaid   par   value, 

that  is.  the  unpaid  subscrip- 
tion price  of  the  stock. 

419.  Forfeiture    tor   non-payment  of 

calls. 

420.  Statutory  liability. 

421.  Liability   where    the    purchaser 

lias  the  transfer  made  to  a 
nominal  holder. 

422.  No  liability  for  assessments  after 

the  par  value  of  stock  has  been 
paid  in. 


§  423.  Liability  when  stock  was  issued 
for  property. 

424.  Liability   as  partners  by  reason 

of  defective  incorporation  or 
for  other  reasons. 

425.  Danger  of  corporate  lien. 

426.  Overissued  stock. 

427.  Danger  that  transferrer  or  pre- 

\  ious  holder  is  an  infant,  mar- 
ried woman  or  lunatic. 

428.  Purchase  of  stock  by  or  from  a 

corporation. 

429.  Purchase     from    joint    owner.-. 

partner.-  and  agents. 

430.  Purchase    of    stock    at  sheriff  "s 

ution  sale,  or  from  as- 
signee in  bankruptcy,  or  for 
benefit  of  creditors. 

481.  Purchase  from  a  pledj 

482.  Pledgee  is  protected  in  the  same 

w  ay  as  purchaser  of  stock. 

433.  Dan.' r   of   purchasing  from  an 

cutor,      administrator      or 
guardian. 

434.  I'm  (base  from  a  trustee. 

435.  Sale  by  vendor  to  another  pur- 

chaser without  delivery  of  cer- 
tificates of  stock. 

436.  Danger  of  forgery. 

187.  Loss  or  theft  of "  certificates  in- 
dorsed in  blank. 

438.  Danger   that  a   previous  holder 

has  been  deprived  of  that  same 
stock  bv  fraud. 

439.  Statute  of  frauds. 

440.  Gambling  sales  of  stock. 

441.  Method  of  assigning  a  certificate 

of  stock. 

442.  Registry  of  transfer. 

443.  Purchaser  not  affected  by  rights 

of  holders  of  that  stock  back 
of  the  last  registry. 

444.  Summary. 


A.  NON-NEGOTIABILITY. 


§  411.  Nature  and  lands  of  negotiable  instruments. — Negotiable 

instruments  at  the  present  day  are  promissory  notes,  bills  of  ex- 
change, checks,  bank-notes,  bonds  of  the  United  States,  of  states, 
of  foreign  governments,  of  cities  and  counties  and  municipalities 

544 


CH.  XXIV.]  RISK    IN    PURCHASING    STOCK.  [§412. 

generally,  certificates  of  deposit,  interest  coupons  and  bonds  of 
corporations.1  Bills  of  lading  have  only  a  quasi-negot'vdbWityr 
These  different  instruments,  however,  are  not  necessarily  nego- 
tiable, but  are  so  only  when  in  writing;  when  containing  an  un- 
conditional promise  or  order  to  pay;  when  the  payment  is  to  be 
in  money  only;  when  the  amount  is  certain;  when  it  is  payable  to 
a  specific  person,  and  not  in  the  alternative;  when  it  is  payable  at 
a  certain  time;  when  it  contains  words  such  as  "  to  A.  or  order," 
or  " to  bearer,"  or  their  equivalent;  and  when  delivery  has  been 
duly  made.3  If  the  instrument  is  lacking  in  anyone  of  these  quali- 
ties it  falls  back  into  the  category  of  non-negotiable  —  that  is, 
merely  assignable — instruments.  Again,  a  holder  of  one  of  the 
above-named  negotiable  instruments  can  have  the  benefit  of  its 
negotiability  only  when  he  has  purchased  it  in  good  faith,  for  value, 
before  the  instrument  was  due,  and  without  notice  of  the  equitable 
rights  of  previous  holders  or  makers;  that  is,  he  must  be  a  bona 
fide  holder.  "When  all  these  elements  of  negotiability  and  owner- 
ship co-exist,  the  advantage  of  negotiability  over  non-negotiability 
is  this:  that  the  holder  of  the  instrument  is  entitled  to  the  face 
value  thereof,  and  his  right  cannot  be  affected,  decreased  or  de- 
feated by  any  facts  or  equities  between  previous  holders  which 
would  defeat  the  security  as  between  them,  unless  it  be  void  for 
usury  or  other  similar  cause. 

§  412.  Certificates  of  stock  are  not  negotiable  instruments. —  It  is 
very  clear,  and  it  is  well  established,  that  certificates  of  stock  are 
not  negotiable  instruments.4     A  certificate  of  stock  is  not  a  prom- 

1  Daniel  on  Negotiable  Instruments,  mercial  or  negotiable  paper.  Leitch  v. 
3d  ed.,  book  VI;  Dos  Passos  on  Stock  Wells,  48  N.  Y.,  585,  613  (1872),  says: 
Brokers,  ch.  IX.  As  to  bonds  of  eor-  "  Since  the  decision  of  the  case  of  Mc- 
porations  see  ch.  XLVI.  Neil  v.  Tenth  National  Bank.    .    .    .   cer- 

2  Id.  See,  also,  Bank  of  Batavia  v.  tificates  of  stock,  with  blank  assign- 
N.  Y.,  etc.,  R  R.  Co.,  33  Hun,  589  (1S84).  ments,  and  powers  of  attorney  attached, 

3  Id.  must  be  nearly  as  negotiable  as  com- 

4  Certificates  of  stock  are  not  negoti-  mercial  papers."  Weyer  v.  Second  Nat'l 
able.  Hammond  v.  Hastings,  134  U.  S.,  Bank,  57  Ind.,  198,  208  (1877),  says :  "  The 
401(1890).  "  Certificates  of  stock  are  not  difference  between  a  promissory  note 
securities  for  money  in  any  sense ;  much  and  a  certificate  of  bank  stock  is  so  wide 
less  are  they  negotiable  securities."  Me-  and  marked  that  a  rule  of  law  govern- 
chanics'  Bank  v.  New  York  &  N.  H.  R  R  ing  the  transfer  of  the  former  is  by  no 
Co.,  13  N.  Y,  599,  627  (1856) ;  Barstow  v.  means  applicable  to  the  latter."  Sewall 
Savage  M.  Co..  64  Cal..  391  (18S3) ;  Clark  v.  Boston  Water-power  Co.,  86  Mass., 
v.  American  Coal  Co.,  53  N  W.  Rep.,  291  277  (1862),  says:  "The  authorities  cited 
(la.,  1892).  Weaver  r.  Barden,  49  N.  Y.,  show  that  a  certificate  of  stock  is  not  a 
286,  288  (1872),  says  that  a  certificate  of  negotiable  instrument,  and  without  any 
stock  has  none  of  the  qualities  of  com-  authorities  it  is  apparent  that  it  has  not 

(35)  545 


§§  413.  414.]  RISK    IN    PURCHASING    STOCK.  [CH.  XXIV. 

ise  or  order  to  pay  money,  nor  has  it  any  of  the  essentials  of  a 
negotiable  instrument.  Moreover,  it  has  been  repeatedly  decided 
by  the  courts  that  a  certificate  of  stock  is  not  negotiable,  and  no 
custom  of  trade  or  of  brokers  can  give  to  it  that  character. 

§413.  The  term  "  quasiwegotiaMlity"  as  applied  to  certificates  of 
stock,  throws  little  light  upon  the  subject1 — It  is  little  satisfaction 
to  the  court,  the  practitioner,  the  student  or  the  owner  of  stocks 
to  be  told  that  certificates  of  stock  have  a  quasi-negotia.bi\itj.  The 
terra  itself  has  been  coined  to  describe  the  character  of  certain 
things  which  can  be  understood  onlv  by  a  studv  and  knowledge  of 
the  characteristics  of  the  thing  described.  Especially  is  this  true 
of  certificates  of  stock.  The  information  sought  is  not  whether 
the  certificate  is  ^^.sv-negotiable,  but  whether  the  holder  of  it  is 
protected  under  different  states  of  fact  and  circumstances.  He 
who  intends  to  purchase  such  certificates  wishes  to  know  what  dan- 
gers or  risks  he  incurs  by  the  purchase.  The  practitioner  is  inter- 
ested, not  in  the  general  character  of  the  instrument,  but  in  the 
law  as  applicable  to  his  particular  case.  Many  of  the  cases  concede 
to  certificates  of  stock  a  quasirnegotmbiWtj ;  but  it  is  extremely 
doubtful  whether  such  discussions  do  not  confuse  the  understanding 
of  the  character  of  such  an  instrument  more  than  they  explain  it. 

§414.  The  distinction  between  the  "legal"  and  the  "equitable"  title 
in  the  transfer  of  certificates  of  stock  is  unsatisfactory. —  Many  of 
the  cases  involving  the  rights  of  a  transferee  of  stock  discuss  and 
treat  the  subject  from  the  point  of  view  that  the  transferee  is  pro- 

a  negotiable    character."     To  same  ef-  the   public  convenience."'     In    Bank  v. 

feet,   Mandk'l:auni   v.   North   Am.  Min.  Lanier,    11   Wall.,   869,   377,    the   court 

Co.,  4  Mich.,    40)0.    473    (1857),    holding,  Bay  that  although  certificates  of  stork 

however,   that  by  statute  in  that  state  "neither  in  form  nor  character  are  ne- 

certificates  of  stock  are  practically  ne-  gotiable  paper,  they  approximate  to  it 

gotiable.     Shaw  v.  Spencer.   100  Mass..  as  nearly  as  practical ila" 
382  (1808),  says:  "It  is  clear  that  a  cer-        'Daniel  on   Negotiable  Instruments, 

titicate  of  stock  transferred  in  blank  is  ^1708.  says:  "The  phrase  fgHnsj-nego- 

not    a    negotiable     instrument.     .    .     .  liability '  has  been  termed  an  uuhappy 

No  commercial  usage  can  give  to  such  one.  and  certainly  it  is  far  from  satisfac- 

an  instrument  the  attributes  of  negotia-  tory,  as  it  conveys  no  accurate,  well- 

bility."    Sherwood    v.    Meadow   Valley  defined  meaning.     But  still  it  describes. 

M.  Co..   50  Cal.,  412  (1875):  Bridgeport  better  than  any  other  short-hand  cxpre*- 

Bauk  v.  New  York  &  N.  H.  R.  K.  Co.,  30  sion,  the  natuie  of  those  instruments 

Conn.,    231,    275    (187i),     holding    that  which,  while  not  negotiable  in  the  sciim> 

"the   certificate    accompanied    by   the  of  the  law-merchant,  are  so  framed  and 

assignment  and  power  of  attorney  thus  so  dealt  with  as  frequently  to  convev  ;i- 

executed  in  blank  has,  perhaps,  a  spe-  good  a  title  to  the  transferee  as  if  they 

cies  of  negotiability,  although  of  a  pe-  were  negotiable." 
culiar  character,  but  one  necessary  to 

546 


CH. 


CTV  1 


RISK    IN    PURCHASING    STOCK. 


[§  414. 


tected  in  his  ownership  when  the  legal  title  passes  to  him,  but  is  not 
so  protected  when  only  the  equitable  title  passes.  Unfortunately 
it  happens  that,  under  the  same  state  of  facts,  one  court  will  hold 
that  only  the  equitable  title  passes;  another  that  the  legal  title 
passes;  and  a  third  court  will  hold  that  both  the  legal  and  equitable 
passes.  The  result  is  confusion,  doubt  and  difficulty,  with  little 
light  as  to  the  real  status  of  certificates  of  stock.1 


1  Such  also  seems  to  be  the  view  taken 
in  Lowell  on  Transfer  of  Stock  (1884), 
p.  105,  where  the  learned  authors  say : 
"It  is  often  supposed,  for  example,  that 
the  right  of  a  creditor  to  seize  stock 
which  has  been  sold  before  it  is  trans- 
ferred upon  the  books  depends  upon  the 
passing  of  the  legal  title;  but  we  shall 
attempt  to  prove  that  the  legal  title  has 
in  reality  no  effect  upon  the  matter." 
The  same  authority  shows  the  confusion 
resulting  from  this  distinction  of  the 
legal  from  the  equitable  title  in  the  fol- 
lowing note  to  page  103 :  "  That  the  legal 
title  passes  before  the  transfer  on  the 
books.  In  the  following  cases  this  is 
made  part  of  the  ratio  decidendi:  Ross 
v.  Southwestern  *R.  Co.,  53  Ga.,  514, 
532  :  Merchants'  Nat.  Bank  v.  Richards, 

6  Mo.  App.  454,  463 ;  S.  C,  74  Mo.,  77 ; 
Carroll  v.  Mullauphy  Savings  Bank,  8 
Mo.  App,  249.  252  ;  McNeil  v.  Tenth  Nat, 
Bank,  46  N.  Y.,  325;  Leitch  v.  Wells.  48 
N.  Y.,  585;  Smith  v.  American  Coal  Co., 

7  Lans.,  317;  Noyes  v.  Spaulding,  27  Vt, 
420;  Cherry  v.  Frost,  7  Lea,  1.  In  the 
following  cases  the  same  principle  was 
laid  down  obiter:  State  v.  Leete,  16 
Nev.,  242,  250 ;  Eastman  v.  Fiske,  9  N. 
H.,  182;  New  York,  etc.,  R.  v.  Schuyler, 
34  N.  Y,  30,  80 ;  Grymes  v.  Home.  49 
N.  Y,  17 ;  Johnson  v.  Underhill,  52  N. 
Y.  203 ;  Holbrook  v.  New  Jersey  Zinc 
Co.,  57  N.  Y.,  616:  Cushman  v.  Thayer 
Mfg.  Co.,  76  N.  Y,  365 ;  and  see  Purchase 
v.  Exchange  Bank,  3  Rob.,  164.  .  .  . 
That  the  legal  title  does  not  pass  until 
transfer  on  the  books.  In  the  following 
cases  this  principle  is  made  part  of  the 
ratio  decidendi:  Union  Bank  v.  Laird, 
2  Wheat,  390 ;   Lowry  v.  Commercial 


Bank.  Taney,  310 ;  Brown  v.  Adams.  5 
Biss.,  181  ;  Williams  v.  Mechanics*  Bank. 
5  Blatch.,  59  :  Becher  v.  Wells  Flouring 
Mill  Co.,  1  Fed.  Rep.,  276;  Marlborough 
Mfg.  Co.  v.  Smith,  2  Conn.,  579;  North- 
rop V.  Newton  &  Bridgeport  Turnpike 
Co.,  3  Conn.,  544;  Oxford  Turnpike  Co. 
v.  Bunnell,  6  Conn.,  552;  Dutton  V. 
Connecticut  Bank,  13  Conn..  493 ;  Van- 
sands  v.  Middlesex  Co.  Bank,  26  Conn., 
144 ;  Coleman  v.  Spencer,  5  Blackf.,  197 ; 
Helm  v.  Swiggett,  12  Ind.,  194  (semble); 
Weyer  v.  Second  Nat.  Bank  of  Franklin, 
57  Ind.,  198;  Fisher  v.  Essex  Bank.  5 
Gray,  373;  Boyd  v.  Rockport  Steam 
Cotton  Mills.  7  Gray,  406;  Blanchard 
v.  Dedman  Gas  Co.,  12  Gray,  213: 
McCourry  v.  Suydam,  5  Halst,  245 ; 
.  .  .  Stebbins  v.  Phoenix  Ins.  Co.,  3 
Paige,  350;  Mechanics'  Bank  v.  New 
York,  etc.,  R  Co.,  13  N.  Y,  599;  New 
York,  etc.,  R.  Co.  v.  Schuyler,  38  Barb., 
534 ;  Lockwood  v.  Mechanics'  Nat.  Bank, 
9  R  I.,  308,  331,  335.  In  the  following 
cases  the  same  doctrine  is  laid  down 
obiter:  Black  v.  Zacharie,  3  How.,  473 ; 
United  States  v.  Cutts,  1  Sumner,  133 
(this  was,  however,  a  case  of  govern- 
ment debt,  not  of  corporate  stock): 
Planters'  &  Merchants'  Ins.  Co.  v.  Selma 
Savings  Bank,  63  Ala.,  585  ;  Otis  v.  Gard- 
ner, 105  III.,  436  (semble);  and  see  Kel- 
logg v.  Stockwell,  75  111.,  68 ;  People's 
Bank  v.  Gridley,  91  111.,  457;  Bruce  v. 
Smith,  44  Ind.,  1 ;  State  v.  First  Nat. 
Bank  of  Jeffersonville,  89  Ind..  302; 
Shaw  v.  Spencer,  100  Mass.,  382 :  Sibley 
v.  Quinsigamond  Nat.  Bank,  133  Mass., 
515;  White  v.  Salisbury,  33  Mo.,  150; 
Boatmen's  Ins.  Co.  v.  Able,  48  Mo.,  136; 
.     .    Conant  v.  Seneca  Co.  Bank,  1 


547 


§§  4:15,   416]  RISK    IN    PURCHASING    STOCK.  ["CH.   XXIV. 

|  415.  The  only  method  of  treatment  of  the  subject  seems  to  be  by 
inquiring  under  what  facts  the  holder  or  purchaser  is  protected. — 

The  court,  the  practitioner,  the  purchaser  or  the  holder  of  cer 
tificates  of  stock  wishes  to  know  what  liability  and  what  dangers 
are  incurred  by  the  purchase  and  ownership  of  a  certificate  of 
stock.  It  becomes  important  for  him  to  ascertain  whether  forgery 
or  theft;  or  improper  registry  by  the  corporation:  or  breach  of 
trust  by  a  trustee,  executor  or  agent  formerly  holding  that  par- 
ticular stock:  or  fraud  whereby  a  former  owner  was  deprived  of 
that  same  stock:  or  legal  proceedings,  such  as  attachment,  execu- 
tion, mandamus  and  decrees  of  the  court;  or  any  other  fact  or 
equitable  right  between  former  owners  of  the  stock  which  he  pur- 
chases, can  affect  him,  a  bona  fide  purchaser  for  value  and  without 
notice  of  those  rights.  These  questions  cannot  be  solved  or  an- 
swered by  any  general  rules  or  theories,  since  certificates  of  stock 
have  a  law.  an  origin  and  a  nature  different  from  other  kinds  of 
securities.  The  fact  that  a  registry  of  transfer  is  required  to  l><- 
made  on  the  corporate  books  adds  further  complication  to  the 
rights  of  a  holder.  General  rules  formed  from  and  applicable  t<> 
other  instruments  or  securities  cannot,  with  any  certainty,  clear- 
ness or  satisfactory  results,  be  applied  to  certificates  of  stock. 
They  should  be  treated  of  by  themselves.  The  future  character 
and  status  of  certificates  of  stock  will  be  much  clearer,  better  and 
more  satisfactory  to  the  investing  public  if  the  law  governing  them 
be  formed  on  its  own  l>asi<. 

§  416.  The  particular  rules  protecting  a  bona  fide  purchaser  of 
certificates  of  stock  are  based  on  estoppel. —  Nearly  all  if  not  all  of 
the  rules  whereby  a  purchaser  of  stock  is  protected  against  the 
rights  of  previous  holders  grow  out  of  the  fact  that  such  previous 
holder  or  holders  have  enabled  persons  to  sell  the  stock,  and  con- 
sequently are  estopped  from  claiming  that  they  did  not  intend  so 
to  do.1  This  law  of  estoppel  protects  the  purchaser  against  not 
only  the  rights  of  previous  holders,  but  against  the  claims  of  the 

Ohio  St..  298  :  United  States  v.  Yaughan,  troit  Transit  R'y  Co..  47  Mich.,  338,  347 

3  Binn..  394  (semble);   Bank   of  Com-  (1882).     See,  also,   Fatman  v.  Lobach,  1 

merce's  Appeal,  73  Pa.  St..  59;  Fraser  v.  Duer.    854   (1852);    Moodie  v.   Seventh 

Charleston.  11  S/C,  486  (*embh    "  Natt    Bank.   8  W.  N.    C.    118   (1881): 

'Wood's  Appeal.  02  Pa.  St..    G79.  390  Matthews  V.  Mass.  Nat'l  Bank,  1  Holmes. 

(1880):  McNeil  v.  Tenth  Nat'l  Bank.  46  396  (1SS4).     The  agreement  of  a  stock - 

N.  Y..  325.  329  (ls71 1 ;  Weaver  v.  Barden,  holder  to  surrender  his  stock  in  liquida- 

49  N.  Y..  286,  287  (1S72  :  Moore  v.  Metro-  tion  of  an  unpaid  assessment  is  without 

politan   Nat'l   Bank,    55    N.  Y.,    41.   47  consideration  and  does  not  bind  a  pur- 

(1873) ;  Mount  Holly,  etc..  Co.  v.   Ferrie,  chaser  of  the  certificate.     Hill  v.  Atoka, 

17  N.  J.  Eq..  117  (1864);  Walker  v.  De-  etc.,  Co.,  21  S.  W.  Rep.,  508  (Mo.,  1893). 

548 


CH.  XXIV.] 


RISK    IN    PURCHASING  STOCK. 


[§  ^In- 


corporation itself.  Indeed,  to  such  an  extent  has  the  law  of  es- 
toppel been  applied  to  protect  a  lona  fide  purchaser  of  stock  that 
he  is  protected  now  in  almost  every  instance  where  he  would  be 
protected  if  he  were  purchasing  a  promissory  note  or  other  nego- 
tiable instrument.  The  courts  are  steadily  extending  the  applica- 
tion of  the  law  of  estoppel  herein,  and  in  the  course  of  time  it  is 
possible  that  certificates  of  stock  may  become  more  negotiable 
than  negotiable  instruments  themselves. 

In  England  an  entirely  different  rule  prevails.  Certificates  of 
stock  iu  that  country  are  merely  evidences  of  ownership  of  stock, 
and  this  muniment  of  title  is  not  negotiable  nor  quasi-negotiable. 
The  purchaser  of  it  is  not  protected  against  equities  involved  in 
the  title  of  prior  owners  of  the  certificate.  Only  a  transfer  on  the 
corporate  books  shuts  off  those  equities.  Indeed,  this  rule  is  in- 
sisted upon  in  England  so  rigidly  that  not  even  the  certificates  of 
stock  issued  by  American  corporations  and  held  by  Englishmen 
are  given  the  quasi-negotiability  of  the  American  law.1 


1  The  English  courts  refuse  to  follow 
the  American  rule  in  regard  to  the  prac- 
tical negotiability  of  certificates  of  stock 
transferred  in  blank,  although  such  cer- 
tificates of  stock  are  issued  by  an  Amer- 
ican corporation.  Hence,  where  the 
English  owner  of  such  cert'ficates  de- 
livered them  to  a  broker  to  forward  to 
America  for  a  transfer,  and  the  broker 
fraudulently  sold  them  for  his  own  pur- 
poses to  other  persons,  it  was  held  that 
no  title  was  conveyed  to  such  other 
persons,  and  that  the  American  law  did 
not  apply.  The  court  said,  however, 
that  there  was  sufficient  in  the  case  to 
put  the  purchasing  party  upon  notice. 
Colonial  Bank  v.  Cady,  63  L.  T.  Rep.,  27 
(1890).  As  between  the  trustee  in  bank- 
ruptcy of  a  defaulter  and  the  party  to 
whom  the  defaulter  has  transferred 
shares  of  stock  without  a  transfer  on 
the  corporate  books,  the  latter  is  en- 
titled to  the  stock.  Re  Dodds,  64  L.  T. 
Rep..  476  (1891).  In  England  the  de- 
posit of  the  certificates  with  the  com- 
pany for  transfer,  and  the  acceptance  of 
them  by  the  company,  does  not  constitute 
a  full  transfer  on  the  corporate  books, 
and  the  real  owner  of  the  certificates 
may  reclaim  them  before  the  complete 


transfer  is  made.  Moore  v.  North,  etc.. 
Bank.  64  L.  T.  Rep.,  456  (1891).  In  the 
case  of  Simmons  v.  The  London,  etc., 
Bank,  63  L.  T.  Rep..  789  (1890),  affirming 
62  id.,  427.  the  court  held  that  a  bank  to 
whom  a  broker  had  pledged  stocks  be- 
longing to  his  customer  was  not  a  bona 
fide  purchaser,  under  the  facts  in  that 
case,  and  consequently  wag  not  pro- 
tected even  though  a  bona  fide  pur- 
chaser might  have  been.  Although  in 
England  an  unregistered  transferee  of 
stock  is  not  protected  against  another 
transfer  which  is  registered,  yet  he  is 
protected  where  he  lodged  his  transfer 
with  the  corporate  secretary,  and  the 
latter  accepted  it  for  transfer  before  the 
second  transfer  was  made.  Xanney  i\ 
Morgan,  85  L.  T.  Rep.,  238  (18S7).  In 
England  an  American  certificate  of 
stock  indorsed  in  blank  gives  no  more 
rights  to  a  bona  fide  purchaser  than  to 
a  mala  fide  purchaser.  Until  a  registry 
is  made,  the  registered  owner  may  claim 
his  property  and  set  up  all  equities  to 
Tegain  possession.  "Williams  r.  London, 
etc..  Bank.  59  L.  T.  Rep.,  643  (1888); 
Dodds  v.  Hills,  2  H.  &  M,  424  (1865): 
Roots  v.  Williamson,  5  L  T.  Rep.,  802 
(1888).     In  England  certificates  of  stock 


549 


£j:  417-419.]  RISK    IN    PUfiOHASING    STOCK  [cH.  XXIV. 

B.    DANGERS    INCURRED    IN    PURCHASING    STOCK. 

§  41T.  Liabilities,  risks  and  rights  of  one  who  owns  or  purchases 
a  certificate  of  stock. —  It  is  proposed  to  state  separately  and  in  de- 
tail the  liabilities  on  the  subscription  price  and  by  statute  incurred 
by  one  who  owns  or  purchases  a  certificate  of  stock;  also  the  risks 
or  dangers  incurred  by  a  purchase  of  stock  as  affected  by  the  rights 
of  previous  holders  of  that  stock;  also  a  few  of  the  rights  of  an 
owner  or  purchaser  of  a  certificate  of  stock  as  regards  the  general 
incidents  appertaining  to  stockholdership.  These  subjects  are  dis- 
cussed in  full  in  other  parts  of  this  work,  and  consequently  the  au- 
thority for  rules  laid  down  herein  must  be  sought  for  in  those  parts. 
The  purpose  here  is  to  state  succinctly  and  m  language  free  from 
technical  phraseology  the  position  occupied  by  a  bona  n'<!>  pur- 
chaser of  a  certificate  of  stock. 

|  418.  Liability  on  unpaid  par  value,  that  is,  the  unpaid  sub 
scription  price  of  the  stock.1  —  In  general  the  purchaser  of  a  cer- 
tificate of  stock  is  immediately  liable  on  the  subscription  price  of 
the  stock  so  far  as  it  has  not  been  paid  by  previous  holders  of  the 
stock  purchased  and  has  not  been  called  by  the  corporation.  The 
transferrer  is  bound  to  pay  all  calls  made  before  the  transferee 
purchases.  If  the  transferee  does  not  immediatelv  register  his 
transfer  on  the  corporate  books  he  is  liable  to  pay  to  the  trans- 
ferrer such  calls  as  are  made  after  the  transfer  and  which  the  cor- 
poration compels  the  latter  to  pay.  The  transferee,  it  has  been 
held,  is  notliable  for  uncalled  ami  unpaid  parts  of  the  subscription, 
even  though  the  certificate  is  silent  as  to  whether  the  par  value  of 
the  stock  has  been  paid  in  or  not.  Where,  however,  the  certifi- 
cate states  that  the  stock  is  paid-up  stock,  or  the  transferee  before 
purchasing  inquires  of  the  corporation  and  is  told  that  the  stock  is 
paid  up,  he  may  purchase  in  reliance  thereon,  and  cannot  after- 
wards be  held  liable,  even  though  the  stock  turns  out  not  to  have 
been  fully  paid  up. 

^  419.  Forfeit itre  far  nonpayment  of  calls.1  -  Where  the  corpora- 
tion is  given  by  its  charter  or  by  statute  the  right  to  forfeit  and 

indorsed  in  blank  convey  title  by  estop-  L.    K..   22   Ch.    D.,  830  (1883),  gives  no 

pel  to  a  bona  fide  purchaser  when  the  protection  to  the  bona  fide  purchaser 

transfer  need  not  be  by  deed  under  seal,  until  he  is  registered.     See,  also,  Shrop- 

Runiball  r.   Metropolitan  Bank,  L,  R,  2  shire,  etc.,  Co.  v.  Queen,  L.  R,  7  H.  L., 

Q.  B.  D.,  194  (1877);  Ex  parte  Sargent,  496(1875);  Briggs  v.   Massey,  42  L.  T  . 

L.  R,   17   Eq.,  378  (1878).     Hut   this   is  49.(1880).     See,   also,   §§   32*5,   377, 

generally   not   the    case.      Ortigosa    v.  supra. 

Brown,  47  L.  J.  (Ch.),  168(1877);  Don-  >  See  cb.  XV. 

aldson  v.  Gillott.  L.  R,  3  Eq.,  274  (I860) ;  2  gee  c^  VIIL 
and  the  late  case  of  France  v.  Clark. 

550 


CH.  XXIV.]  RISK    IN    PURCHASING    STOCK.  [§§  420-422. 

sell  stock  for  non-payment  of  the  subscription  price  when  called  in 
by  the  corporation,  a  notice  to  the  stockholder  of  the  intended  for- 
feiture is  always  required.  This  notice,  however,  is  given  always 
to  him  who  appears  by  the  corporate  registry  to  be  the  stock- 
holder. Accordingly  a  transferee  or  owner  of  stock  who  has  not 
obtained  a  registry  of  his  transfer  on  the  corporate  books  is  liable 
to  lose  his  stock  by  a  forfeiture  for  non-payment  of  calls,  and  may 
lose  it  without  knowledge  of  the  call  or  forfeiture  unless  he  ap- 
pears on  the  registry  of  the  corporation  as  the  owner  of  the  stock. 
§420.  Statutory  liability.1  —  The  liability  by  statute  of  a  pur- 
chaser of  certificates  of  stock  to  corporate  creditors,  in  addition  to 
the  subscription  price  which  is  treated  of  above,  exists  in  a  great 
many  cases.  In  the  first  place  this  liability  may  not  exist  at  all 
against  any  one,  either  transferrer  or  transferee.  It  rarely  exists 
in  the  case  of  railroad  corporations.  Where  the  statutory  liability 
exists  the  liability  of  a  purchaser  of  stock  is  as  follows:  If  the 
transferee  immediately  registers  his  transfer  on  the  corporate  books 
he  becomes  at  once  liable  by  statute  for  debts  of  the  corporation 
contracted  after  such  registry,  and  the  transferrer  is  not  liable 
thereon.  The  transferee  may  or  may  not  be  liable  on  corporate 
debts  contracted  before  he  purchased,  according  to  the  words  of 
the  statute  creating  the  liabilitv.     The  transferrer  is  liable  on  cor- 

CD  «/ 

porate  debts  contracted  after  he  sold  the  stock  but  before  the 
transfer  was  registered.  In  the  latter  case  the  transferrer  has  re- 
course to  the  transferee. 

§  421.  Liability  where  the  purchase?'  has  the  transfer  made  to  a 
nominal  holder.- — Where  a  person  purchases  stock  and  takes  it  in 
the  name  of  a  "dummy,"  the  stock  never  having  been  registered 
in  the  name  of  the  real  owner,  the  latter  is  not  liable  on  such 
stock,  according  to  the  English  rule.  In  America  a  contrary  rule 
prevails,  and  the  courts  hold  him  liable  on  the  ground  that  he  is  a 
principal,  and  as  such  is  liable  as  an  undisclosed  principal  for  the 
acts  of  his  agent,  the  "dummy." 

§  422.  No  liability  for  assessments  after  the  par  value  of  the  stock 
has  been  paid  in.3 — By  well-established  principles  of  law  stock- 
holders are  liable  on  their  stock  only  to  the  extent  of  the  unpaid 
par  value  of  the  stock,  unless  the  statute  expressly  provides  other- 
wise. Neither  the  directors,  nor  all  the  other  stockholders  com- 
bined, in  corporate  meeting  assembled  or  otherwise,  can  compel  a 
dissenting  stockholder  to  pay  any  more  money  into  the  corpora- 
tion or  subject  him  to  further  liability  on  his  stock.     JSor  can  the 

i  See  ch.  XII.  *  See  ch.  XIIL 

2  See  §§  253,  265. 

551 


§§  423,  421.]  RISK    IN    PURCHASING    STOCK.  [CH.  XXIV. 

legislature,  subsequently  to  his  purchase  of  the  stock,  pass  a  law 
increasing  his  liabilitv,  unless  the  power  to  alter  or  amend  the 
charter  is  reserved  to  it,  in  which  case  such  a  law  would  be  consti- 
tutional. 

§  423.  LwMlity  when  stock  was  issued  for  property.^ —  Shares  of 
stock  may  be  issued  under  an  agreement  that  payment  is  to  be 
made  in  labor,  services,  material  or  contract  work.  If  so  issued, 
and  the  labor  or  material  received  by  the  corporation  is  fairly 
equal  in  value  to  the  par  value  of  the  stock,  the  transferee  of  sneh 
stock  takes  it  as  full-paid  stock,  and  cannot  be  held  liable  for  any 
further  amount,  even  though  the  value  of  the  property  turns  out 
subsequently  to  have  been  overestimated,  but  was  made  in  good 
faith.  Where,  however,  the  property  is  intentionally  overvalued 
and  stock  is  issued  for  it,  the  persons  receiving  the  stock  are  liable 
to  have  the  transaction  set  aside,  the  value  of  the  property  or  work 
done  credited  to  them,  and  the  real  value  of  the  stock,  not  neces- 
sarily the  par  value,  charged  to  them,  or  be  compelled  to  return 
the  stock.  As  to  transferees  the  case  may  be  different.  If  they 
purchased  with  notice  of  the  fraud  they  are  not  protected;  but  if 
they  purchased  without  notice  or  knowledge  that  the  property  was 
intentionally  overvalued,  but  supposed  that  the  stock  was  issued  as 
paid  up  by  payment  in  property  or  work  taken  at  a  bona  fide  value, 
or  if  they  have  no  knowledge  of  how  the  stock  was  paid,  but  take 
it  as  paid-up  stock,  they  may  retain  the  stock,  and  are  not  liable 
for  anv  further  amount  thereon. 

§  424.  Liability  as  partners  b>/  reason  of  defective  incorporation 
or  for  other  reasons.2 —  Where  a  supposed  corporation  has  not  been 
duly  incorporated,  owing  to  a  failure  of  the  incorporators  to  com- 
ply with  the  statutory  requisites,  or  because  a  corporation  for  that 
business  is  not  provided  for,  the  supposed  corporation  has  been 
held  to  be  but  a  partnership,  and  all  the  stockholders  held  liable 
as  partners.  A  failure  to  file  the  articles  of  association,  or  to 
sign  and  publish  them,  or  the  omission  from  them  of  any  of  the 
essential  facts  required  to  be  stated,  however,  does  not  ordinarily 
defeat  the  attempted  incorporation  and  render  the  stockholders 
liable  as  partners.  Again,  the  stockholders  are,  in  some  jurisdic- 
tions, liable  to  be  held  to  be  partners,  as  regards  creditors  of  the 
enterprise,  where  the  corporation  organizes  in  one  place  and  pro- 
ceeds to  do  all  its  business  in  another  place.  In  most  cases, 
however,  the  corporation  has  been  recognized  and  upheld,  and 
the  stockholders  protected  in  their  limited  liability.  The  latter 
class  of  decisions  is  the  stronger,  and  certainly  more  to  be  com- 
mended  and  followed.     In  any  case  a  transferee  is  not  liable  for 

i  See  cha  II  and  IIL  2  See  ch.  XIIL 

552 


CH.  XXIV.]  KISK    IN    PURCHASING    STOCK.  [§§  425-427. 

all  precedent  debts  of  the  concern,  but  only  for  those  incurred  sub- 
sequently to  the  registry  of  his  transfer. 

§  425.  Danger  of  corporate  lien}  —  Frequently  corporations  are 
given  by  charter  or  statute  a  lien  on  a  stockholder's  stock  for  debts 
due  from  him  to  the  corporation.  When  such  lien  exists  a  pur- 
chaser of  the  certificate  in  open  market  buys  subject  to  the  risk 
that  the  one  from  whom  he  buys  owes  the  corporation  a  debt,  and 
that  the  corporation  will  not  allow  the  transferee  of  the  certificate 
to  obtain  a  registry  until  such  debt  is  paid.  In  many  of  the  states 
the  lien  of  the  corporation  cannot  be  created  by  by-law.  Generally 
it  exists  by  reason  of  a  provision  of  the  charter.  When  it  does 
legally  exist  it  extends  to  all  debts  owed  by  the  last  registered 
stockholder,  whether  the  debt  be  due  or  not  due,  and  includes  un- 
called parts  of  the  subscription  price  of  the  stock.  It  does  not, 
however,  apply  to  debts  due  from  one  who  has  bought  and  sold 
the  certificate  without  appearing  on  the  registry  as  a  stockholder. 
The  corporation  may  waive  the  lien,  and  a  registry  without  insist- 
ing on  the  lien  is  such  a  waiver.  The  lien  of  the  corporation  ex- 
tends to  debts  incurred  by  the  transferrer  after  the  transfer  but 
before  the  corporation  is  notified  thereof. 

§  426.  Overissued  stock.2  —  The  capital  stock  of  a  corporation  is 
fixed  by  statute.  There  is  no  power  in  the  corporation  itself  to 
increase  that  amount.  It  can  be  done  only  by  a  legislative  enact- 
ment. Accordingly,  if  the  corporation  issues  certificates  of  stock 
when  the  whole  capital  stock  has  already  been  issued,  the  new 
issue,  if  an  equivalent  amount  of  outstanding  certificates  is  not 
surrendered,  is  an  overissue,  and  is  void.  Any  issue  of  stock  in 
excess  of  the  amount  of  the  capital  stock  as  fixed  by  the  charter 
is  null  and  void.  The  purchaser  of  such  certificates,  however,  is 
not  without  his  remedy.  His  certificate  is  so  much  waste  paper, 
and  he  is  not  a  stockholder;  but  he  .may  sue  the  corporation  for 
damages,  and  recover  to  the  extent  of  his  injury.  The  purchaser 
may  also  sue  the  corporate  officers  who  participated  in  the  issue  of 
the  spurious  stock,  and  may  recover  damages.  He  cannot,  how- 
ever, hold  an  innocent  transferrer  liable.  The  latter,  if  he  knew 
nothing  of  the  overissue,  is  not  to  be  held  as  a  guarantor  of  the 
validity  of  the  stock  which  he  sells.  t 

§  427.  Danger  that  transferrer  or  previous  holder  is  an  infant, 
married  woman  or  lunatic? —  A  purchase  of  stock  from  an  infant  is 
a  dangerous  investment.  When  the  infant  comes  of  age  he  may 
elect  to  disaffirm,  and  may  hold  the  transferee  liable  for  the  stock, 

iSee  chapter  XXXI.  8  See  §§  65,  66,  250,  308,  318,  319,  310. 

3  See  chapter  XVIL 

553 


§^  428,  429.]  BISK    IN    PURCHASING    STOCK.  [CII.   XXIV. 

There  is  less  danger,  however,  in  accepting  a  transfer  of  stock 
from  an  infant  who  has  previously  purchased  the  stock  which  he 
sells.  This  previous  purchase,  and  also  his  sale  of  the  stock,  are 
technically  voidable  acts;  but  after  the  stock  has  passed  from  his 
control  the  law  disregards  the  doubtful  medium  of  title,  and  con- 
siders the  purchaser  from  the  infant  as  the  legal  stockholder.  As 
regards  married  women,  the  common  law  allowed  the  husband 
to  sell  her  stock  after  he  had  reduced  it  to  possession  by  register- 
ing it  in  his  own  name  on  the  corporate  books.  In  modern  times, 
however,  the  right  of  a  married  woman  to  hold  and  convey  per- 
sonal property  as  though  unmarried  has  been  established  in  most 
states  by  statute.  Her  right  to  sell  shares  of  stock  owned  by  her- 
self exists  where  she  may  sell  other  personal  property  similarly 
owned,  and  this  right  depends  upon  the  law  and  statutes  of  her 
domicile.     A  purchase  of  stock  from  a  lunatic  is  void. 

§  428.  Purchase  of  stock  by  or  from  a  corporation} — In  England 
a  corporation  cannot  purchase  shares  of  its  own  capital  stock.  In 
this  country  there  is  a  difference  of  opinion  as  to  the  law.  The 
statutes  governing  the  corporation,  however,  sometimes  prohibit 
such  purchases.  Such  is  the  case  with  national  banks,  and  in 
New  York  with  railroad  and  banking  corporations.  In  any  case, 
however,- whether  the  corporation  purchased  the  stock  legally  or 
illegally,  a  purchaser  of  the  same  stock  from  the  corporation  itself 
is  not  affected  by  the  invalidity  of  the  title  of  the  corporation. 
Again,  it  is  a  general  rule,  both  in  England  and  America,  that  one 
corporation  has  no  right  to  purchase  stock  in  another  corporation. 
Sometimes  the  statutes  allow  such  purchases,  but  more  often  ex- 
pressly provide  to  the  contrary  by  prohibiting  them.  Neverthe- 
less, whatever  rule  applies  to  a  purchase  by  a  corporation  of  stock 
in  another  corporation,  the  law  is  very  clear  that  a  purchaser  of 
such  stock  from  the  corporation  is  protected  in  his  purchase.  The 
unauthorized  act  of  the  corporation  in  purchasing  has  no  effect 
upon  the  legality  of  its  sale  of  the  stock. 

§  429.  Purchase  from  joint  oivncrs,  partners  and  agents.2 —  One 
joint  owner  cannot  sell  stock  standing  in  the  name  of  two  or  more 
as  joint  owners.  One  partner  may  sell  and  convey  stock  standing 
in.  the  partnership  name.  As  regards  purchases  of  stock  from 
agents,  greater  difficulty  occurs.  If  the  purchaser  does  not  know 
that  the  vendor  is  selling  as  an  agent,  but  supposes  he  is  buying 
stock  owned  by  the  person  with  whom  he  is  dealing,  the  purchaser 
is  always  protected.  The  same  rule,  after  considerable  doubt  and 
discussion,  has  been  established,  even  though  the  purchaser  knows 
that  the  agent  is  selling  as  agent.     The  sale  is  valid,  and  the  pur- 

1  See  chapter  XIX.  2  See  chapter  XIX. 

554 


CH.  XXIV.]  KISK    IN    PURCHASING    STOCK.  [§§  430,  431. 

chaser  is  protected,  provided  he  has  no  reason  to  suspect  that  the 
agent  is  selling  in  fraud  of  the  owner's  rights  or  in  contradiction 
of  his  orders. 

§  430.  Purchase  of  stoclc  at  sheriff's  execution  sale,  or  from  as- 
signee in  bankruptcy,  or  for  benefit  of  creditors}  —  A  purchase  of 
stock  at  an  execution  sale  by  the  sheriff  is  a  dangerous  investment. 
Almost  always  the  judgment  debtor  has  already  sold  and  trans- 
ferred his  certificates  of  stock  to  a  hona  fide  purchaser.  If  such 
bona  fide  purchaser  has  registered  the  transfer  on  the  corporate 
books  before  the  attachment  or  execution  is  levied,  the  purchaser 
at  the  execution  sale  gets  nothing.  If  no  such  registry  has  been 
made,  but  the  judgment  debtor  sold  and  transferred  the  certificate 
before  the  levy  of  attachment  or  execution,  in  most  of  the  states, 
including  New  York,  such  a  purchaser  takes  title  and  the  execution 
purchaser  none.  In  Connecticut,  New  Hampshire  and  a  few  other 
states  a  contrary  rule  prevails.  If,  however,  the  judgment  debtor 
sells  the  certificate  after  the  attachment  or  execution  is  levied,  the 
purchaser  takes  no  title  — the  execution  purchaser  is  entitled  to  the 
stock.  A  purchaser  of  stock  from  an  assignee  in  bankruptcy  or  in- 
solvency, or  for  the  benefit  of  creditors,  takes  a  good  title  if  he  ob- 
tains the  certificates  of  stock.  If,  however,  the  insolvent  has  sold 
such  certificates  to  another,  the  latter  is  entitled  to  the  stock. 

§431.  Purchase  from  a  pledgee?  —  A  pledgee  of  stock  has  no 
right  to  sell  or  repledge  the  stock  held  as  collateral  by  him,  unless 
the  pledgor  intended  that  he  should  do  so.  If,  however,  the  pledgee 
sells  or  repledges  the  stock  to  one  who  takes  it  in  good  faith,  for 
value,  and  without  notice  of  the  fact  that  he  is  dealing  with  a 
pledgee  of  the  stock,  such  a  hona  fide  purchaser  is  protected.  He 
is  protected  absolutely,  and  can  keep  the  stock  if  he  purchased  it. 
If,  however,  he  merely  took  it  in  pledge  from  the  pledgee,  he  is 
obliged  to  give  up  the  stock  to  the  real  owner,  where  the  latter  tend- 
ers to  the  repledgee  the  amount  of  the  debt  owed  by  the  pledgee  to 
the  repledgee,  for  which  the  stock  was  given  as  security.  Where, 
however,  a  person  buys  or  takes  in  pledge  stock  from  one  who 
makes  known  the  fact  that  he  is  holding  the  stock  as  pledgee,  the 
former  is  not  a  hona  fide  purchaser.  Moreover,  he  is  not  a  hona  fide 
holder  where  he  would  not  be  a  hona  fide  holder  of  a  promissory 
note  transferred  under  similar  circumstances,  as,  for  instance,  where 
he  loans  the  money  at  an  usurious  rate  of  interest;  or  where  he 
knows  that  the  person  with  whom  he  is  dealing  is  but  an  agent,  and 
is  pledging  his  principal's  stock.  In  all  these  cases,  where  the  pur- 
chaser or  pledgee  of  stock  is  not  a  hona  fide  holder,  the  real  owner 
and  original  pledgor  of  the  stock  may  reclaim  his  stock  from  the 

» See  chapter  XXVL  2  See  chapters  XIX,  XXVL 

555 


§§  432-434.]  BISK   IN   PURCHASING    STOCK.  [CH.  XXIV. 

repledgee,  or  purchaser  from  the  pledgee,  where  the  original  pledgor 
could  recover  it  from  the  first  pledgee.  The  repledgee  or  purchaser 
from  the  pledgee  stands  in  the  shoes  of  the  first  pledgee,  and  has  no 
better  rights  than  the  latter. 

§  432.  Pledgee  is  protected  in  the  same  way  as  purchaser  of  stock} 
The  rules  contained  in  this  chapter  explain  the  rights,  dangers  and 
liabilities  incurred  by  the  purchaser  of  stock.  The  same  rules  pre- 
vail for  the  most  part  in  favor  of  one  who  receives  stock  in  pledge. 
A  purchaser  and  a  pledgee  are  treated  in  the  cases  as  being  simi- 
larly protected  or  similarly  not  protected.  There  is,  however,  one 
important  exception  to  this  rule.  If  a  person  who  is  about  to  take 
stock  from  another  knows  that  the  latter  is  disposing  of  the  stock 
as  an  agent,  the  former  may  purchase  the  stock  and  be  protected, 
but  cannot  take  it  in  pledge  and  be  similarly  protected.  An  agent 
to  sell  is  not  an  agent  to  pledge.  Another  exception  to  the  simi- 
larity of  position  of  a  vendee  and  pledgee  of  stock  is  that  by  stat- 
ute, frequently,  the  latter  is  not  liable  on  stock  where  the  former  is 
liable. 

§  433.  Danger  of  purchasing  from  an  executor,  administrator  or 
guardian.2 — There  is  practically  little  danger  incurred  in  purchas- 
ing stock  from  any  one  of  these.  It  is  the  duty  and  right  of  the 
executors  or  administrators  to  sell  the  personal  property  and  con- 
vert it  into  money.  As  regards  guardians  they  have  the  right  to 
change  the  funds  from  one  investment  to  another  unless  a  statute 
prescribes  otherwise.  Accordingly  a  purchaser  of  stock  from  any 
one  of  those  is  protected  in  his  purchase,  even  though  he  knows 
that  his  vendor  is  selling  in  his  official  capacity.  If,  however,  the 
vendee  knows  that  a  breach  of  trust  is  involved  or  contemplated, 
he  is  not  a  bona  fide  purchaser  and  is  not  protected.  All  the  ex- 
ecutors or  administrators  need  not  join  in  a  sale  of  the  stock  owned 
by  the  estate.     A  sale  and  transfer  by  one  is  sufficient. 

§  434.  Purchase  from  a  trustee.3 — An  entirely  different  rule  pre- 
vails as  regards  stock  held  by  a  trustee  as  trustee.  A  purchaser  of 
stock  which  he  knows  the  vendor  holds  as  belonmnn:  to  a  trust  es- 
tate  is  bound  to  ascertain  whether,  by  the  instrument  creating  the 
trust,  the  trustee  has  a  power  to  sell.  If  he  has  no  such  power,  and 
the  vendee  knows  that  he  is  buving  trust  estate  stock,  the  latter  is 
not  protected,  but  is  a  party  to  any  breach  of  trust  that  may  be  in- 
volved by  the  sale.  If,  however,  the  purchaser  has  no  notice  or 
knowledge  that  his  vendor  is  selling  trust  stock,  the  former  is  a  bona 
fide  purchaser  to  that  extent.  He  is  not  bound  to  know  that  the 
stock  is  trust  estate  stock,  and  consequently  he  is  protected  in  his 

1  See  chapter  XIX,  XXVL  »  See  chapter  XIX. 

1  See  chapter  XIX. 

556 


/ 
CH.  XXIV.]  RISK    IN    PURCHASING    STOCK.  [§§  435-437. 

purchase.  Any  facts  that  would  put  an  ordinarily  intelligent  man 
on,  inquiry  as  to  whether  the  stock  belongs  to  a  trust  estate  is 
notice,  and  prevents  the  purchaser  from  claiming  to  be  a  bona  fide 
purchaser.  Thus,  such  a  notice  is  held  to  be  given  by  the  fact  that 
on  the  face  of  the  certificate  of  stock,  and  following  the  name  of 
the  stockholder,  the  word  "  trustee  "  or  equivalent  words  are  writ- 
ten. In  California,  however,  the  mere  word  "  trustee"  conveys  no 
notice. 

§  435.  Sale  ay  vendor  to  another  purchaser  without  delivery  of 
certificate  of  stock.1  —  A  purchaser  of  certificates  of  stock  has  no 
reason  to  fear  that  the  vendor  can  sell  the  stock  to  another  person 
and  thereby  defeat  the  rights  of  the  purchaser  with  the  certificates. 
If  the  purchaser  without  certificates  does  not  obtain  registry  on 
the  corporate  books,  he  obtains  nothing  as  against  the  purchaser 
with  the  certificates,  even  though  the  latter's  transaction  was  sab- 
sequent  in  time  to  the  former.  If,  however,  the  former  obtains 
registry  on  the  corporate  books,  the  corporation  is  at  fault,  and  is 
liable  to  the  purchaser  with  the  certificates.  The  corporation  must 
either  issue  new  certificates  to  the  latter  or  pay  damages. 

§  436.  Danger  of  forgery.2  —  Forgery  cannot  be  the  source  of  a 
good  title  to  any  chose  in  action,  whether  a  promissory  note,  bond 
and  mortgage,  or  a  certificate  of  stock.  Consequently  a  purchaser 
of  stock  takes  the  risk  that  some  previous  owner  of  the  stock, 
whose  name  appears  on  the  certificate  either  as  the  registered 
owner  or  as  transferee,  was  deprived  of  his  title  by  forgery.  If 
the  forgery  has  been  made^the  purchaser  cannot  claim  or  hold  the 
stock,  although  he  had  no  actual  knowledge  of  the  forgery.  He, 
however,  has  recourse  to  his  vendor,  and  may  compel  him  to  repay 
the  amount  paid  for  the  stock.  Where,  however,  the  forgery  was 
committed  prior  to  the  last  registered  transfer  of  that  stock,  a  bona 
fide  purchaser  from  or  subsequent  to  the  last  registered  holder  of 
that  stock  is  protected.  All  rights  and  equities  to  particular  shares 
of  stock  are  cut  off  by  a  registry  and  sale  of  the  new  certificates. 
The  party  whose  name  was  forged  has  recourse  then  only  to  the 
corporation,  or  to  the  party  obtaining  registry,  or  to  previous 
holders.  This  limitation  to  the  dangers  incident  to  the  purchase  of 
stock  extends  to  other  rights  and  wrongs  as  well  as  to  a  case  of 
forgery,  and  is  of  great  importance  in  protecting  a  bona  fide  pur- 
chaser of  stock. 

§  437.  Loss  or  theft  of  certificates  indorsed  in  olank.3  —  It  is  ex- 
tremely doubtful  whether  a  purchaser  of  a  certificate  of  stock 
which  was  indorsed  in  blank,  and  which  has  been  lost  by  the  owner 

1  See  chapter  XXL  8  See  chapter  XXI. 

a  See  chapter  XXT. 

557 


§§  438,  439.]  RISK    IN    PURCHASING    STOCK.  [CH.  XXIV. 

and  found  by  another  who  sells  it,  or  which  has  been  stolen  by  the 
latter,  would  be  protected  in  his  purchase,  even  though  he  buys  in 
good  faith.  In  a  case  of  negotiable  paper,  such  a  purchaser  would, 
of  course,  be  protected.  But  probably  the  purchaser  of  the  certifi- 
cate of  stock  would  not  be.  No  case  holds  that  he  would  be  pro- 
tected, while  many  hold  that  he  would  not.  If  the  real  owner  was 
guilty  of  gross  negligence,  perhaps  the  purchaser  from  the  thief  or 
finder  of  the  certificate  indorsed  in  blank  would  be  protected.  In 
one  case  this  question  of  negligence  was  submitted  to  the  jury. 
Again,  sometimes  a  person  sells  stock  without  delivering  the  certifi- 
cate -  the  vendor  telling  the  vendee  that  the  certificates  have  been 
lost.  Such  a  title  is  very  precarious.  The  purchaser  should  refuse 
to  buy  until  new  certificates  are  issued  b}'  the  corporation  to  the 
vendor  —  an  issue  which  the  corporation  will  make  upon  a  suitable 
bond  of  indemnity  being  given  to  it  by  the  person  who  alleges  a 
loss.  If  the  purchaser  does  not  take  this  precaution,  he  buys  sub- 
ject to  having  his  title  defeated  by  another  purchaser  who  obtained 
the  certificates  which  are  alleged  to  have  been  lost. 

§438.  Danger  that  a  previous  holder  lias  been  deprived  of  that 
same  stock  by  fraud.1 — Shares  of  stock  are  the  same  as  other  kinds 
of  property,  in  that  a  person  who  has  been  deprived  of  his  stock  by 
fraud  cannot  follow  the  stock  and  take  it  from  the  hands  of  a 
bona  fide  purchaser  for  value.  The  remedy  of  the  defrauded  per- 
son is  for  damages  against  the  person  defrauding  him,  or  for  a  re- 
transfer  of  the  stock,  if  the  latter  still  holds  it,  together  with  an 
injunction  against  the  transfer  of  the  latter.  But  if  the  person  ob- 
taining the  stock  by  fraud  sells  it,  even  in  violation  of  an  injunc- 
tion,the  bona  fide  purchaser  for  valueand  without  notice  is  protected. 
The  defrauded  party  may,  however,  sue  the  person  defrauding  him 
in  the  state  of  the  corporation,  and,  by  an  attachment  or  execution, 
obtain  the  stock  if  it  has  not  passed  into  bona  fide  hands.  Such  a 
danger,  however,  is  the  ordinary  danger  of  an  attachment  or  execu- 
tion. A  lis  pendens  of  a  suit  involving  stock  never  charges  the 
vendo*  of  the  stock  with  notice,  as  is  the  case  of  a  Us  pendens  af- 
fecting real  estate.  Cases  of  fraud  in  the  sale  of  stock  frequently 
arise  in  cases  of  sales  by  agents  and  an  appropriation  of  the  pro- 
ceeds; also  when  fraudulent  representations  are  made  to  the 
vendor. 

§439.  Statute  of  frauds.2— The  statute  of  frauds  requires  that 
sales  of  personal  property  exceeding  in  value  a  certain  amount, 
generally  fifty  dollars,  shall  be  valid  and  enforceable  only  when  the 
property  is  partly  or  wholly  delivered,  or  partly  or  wholly  paid  for 
at  the  time  of  the  sale,  or  the  terms  of  the  sale  are  reduced  to  writ- 

1  See  chapter  XX.  *  See  chapter  XX 

558 


CH.  XXIV.]  RISK    IN    PURCHASING    STOCK.  [§§  440-442. 

ing.  In  this  country  a  sale  of  stock  must  conform  to  this  statute. 
Generally  the  sale  is  made  by  a  delivery  of  the  certificate  indorsed 
in  blank.  Such  a  sale  constitutes  a  delivery,  and  is  legal,  and  is  not 
void  by  the  statute  of  frauds.  The  statute  applies  both  to  sales  of 
stock  which  are  considered  as  completed  and  to  sales  which  are  to 
be  completed  in  the  future. 

§  440.  Gambling  sales  of  stock} — A  gambling  sale  or  contract  to 
sell  stock  is  void  absolutely,  and  cannot  be  enforced.  As  a  matter 
of  practical  experience,  however,  it  is  difficult  to  prove  that  a  stock 
sale  is  a  gambling  sale.  It  is  such  only  when  both  the  vendor  and 
vendee  intend,  not  to  actually  have  a  delivery  of  the  stock,  but  to 
wait  and  see  whether  the  stock  rises  or  falls  in  the  market,  and 
then  to  settle  the  contract  by  the  loser  paying  the  loss.  An  intent 
by  one  of  the  parties  that  there  shall  be  no  delivery  will  not  make 
the  sale  a  gambling  one.     It  must  be  the  intent  of  both. 

§  441.  Method  of  assigning  a  certificate  of  stock.2 — A  certificate 
of  stock  is  generally  assigned  by  the  owners  signing  the  blank  trans- 
fer and  power  of  attorney  on  the  back  of  the  certificate.  The 
transfer  gives  title  to  him  whose  name  is  afterwards  filled  into  the 
blank  transfer  thus  signed.  The  blank  power  of  attorney  is  for  an 
entirely  different  purpose.  It  enables  the  person  whose  name  is 
filled  in  to  register  the  transferee  as  a  stockholder  in  the  corporate 
books.  Generally  the  power  of  attorney  is  filled  in  with  the  name 
of  a  clerk  or  agent  of  the  transferee,  or  a  clerk  of  the  corporation 
who  has  charge  of  the  registry  books.  After  the  registered  holder 
has  signed  the  transfer,  leaving  the  transferee's  name  in  blank,  the 
certificate  passes  from  hand  to  hand  until  some  holder  cares  to  fill 
his  name  into  the  blank.  He  may  then  obtain  registr\'-,  or  he  may 
execute  another  transfer  and  sell  the  certificate.  Transfers  need 
not  be  under  seal  in  this  country.  In  England,  by  statute,  they 
generally  are  required  so  to  be. 

§442.  Registry  of  transfer.2  —  A  registry  of  transfer  is  made 
by  surrendering  an  old  certificate  of  stock  to  the  corporation, 
making  an  entry  of  the  transfer  on  the  corporate  registry,  and 
taking  from  the  corporation  a  new  certificate  issued  in  the  name 
of  the  transferee.  The  entry  is  generally  made  by  a  corporate 
officer,  but  he  may  insist  on  its  being  made  by  the  person  apply- 
ing for  transfer.  The  object  of  obtaining  the  registry  is  to  obtain 
a  right  to  vote,  to  receive  dividends,  and  various  other  incidental 
stockholders' rights;  also  to  cut  off  corporate  liens  and  the  rights 
of  third  parties  who  may  attach  or  claim  the  stock.  If  there  is  a 
reasonable  legal  doubt  as  to  the  right  of  the  applicant  to  obtain 
registry,  the  corporation  may  refuse  it,  and  thus  obtain  the  protec- 

i  See  chapter  XX.  2  See  chapter  XXII. 

5j9 


§§  443.  444.]  PJSK   IN   TUKCHASIXG   STOCK.  [ch.  XXIV. 

tion  of  being  compelled  to  make  it  by  legal  proceedings.  If  two 
parties  claim  the  stock,  each  denying  the  right  of  the  other,  the 
corporation  may  interplead,  provided  there  is  a  reasonable  legal 
doubt  as  to  who  is  entitled  to  the  stock.  If  the  corporation  im- 
properly refuses  to  register  a  transfer  when  requested,  the  applicant 
may  have  his  remedy  in  damages,  but  in  most  states  cannot  have  a 
mandamus. 

§  443.  Purchaser  not  affected  by  rights  of  holders  of  that  stock 
lack  of  the  last  registry.1 — This  rule  is  peculiar  to  stock  certificates, 
and  cuts  off  rights  even  of  a  former  owner  who  has  been  deprived 
of  the  stock  by  forgery.  In  this  respect  certificates  of  stock  are 
more  negotiable  than  negotiable  paper  itself.  The  person  who 
obtains  registry  first,  after  the  illegal  act  has  been  done,  is  not  pro- 
tected by  this  rule.  But  his  bona  fide  purchaser  of  the  new  certifi- 
cates and  all  subsequent  purchasers  are  protected,  and  cannot  be 
compelled  to  give  up  the  stock  to  the  prior  owner  who  was  de- 
prived of  it  illegally. 

§  444.  Summary. —  It  will  be  seen,  by  a  review  of  the  sections  of 
this  chapter,  that  the  dangers  of  loss  incurred  by  the  purchase  of  a 
certificate  of  stock  are  not  serious  or  numerous;  and  it  is  well  that 
such  is  the  result.  Perhaps  the  most  striking  industrial  feature  of 
modern  times  is  the  accumulation  of  personal  property,  and  the  in- 
vestment of  that  property,  not  in  landed  estates,  but  in  the  stocks 
and  bonds  of  corporations.  Such  investments  are  made,  not  alone 
by  capitalists,  but  by  thousands  whose  savings  have  no  other  satis- 
factory mode  of  disposition.  The  constant  tendency  of  the  statutes 
and  of  the  decisions  of  the  courts  to  protect  lona  fide  purchasers 
of  certificates  of  stock  is  to  be  commended  and  aided.  Beyond  all 
question,  the  surplus  wealth  of  the  future  will  be  invested  in  cor- 
porate bonds  and  stocks.  It  is  well,  then,  in  these  days  of  the  forma- 
tive period  of  the  lawgoverning  stock,  that  the  principles  governing 
the  transfer  of  certificates  should  be  formed  for  the  protection  and 
security  of  an  investing  public,  and  should  be  against  secret  liens, 
attachments,  claims  and  negligence  of  both  the  corporation  and 
third  persons. 

1  See  §§  367,  369. 

560 


PART  III. 

MISCELLANEOUS  EIGHTS  OF  STOCKHOLDERS. 


CHAPTER  XXV. 


STOCK-BROKERS  AND  THEIR  CONTRACTS. 


§  445.     Definitions  and  scope  of  the  sub- 
ject. 

446.  ~\\  ho  may  be  a  broker  and  cus- 

tomer. 

447.  Facts  making  person  a  broker  or 

customer  unintentionally. 

448.  Broker  must  obey  specific  orders 

of  customer. 

449.  Must   act  in  good  faith  and  in 

reasonable  time. 

450.  Cannot  purchase  from  or  sell  to 

himself. 

451.  Duties    and    liabilities    of   cus- 

tomer towards  broker. 

452.  Duties  and  liabilities  of  a  broker 

towards  customer. 

453.  Method  of  completing  a  broker's 

contract. 


,5  454. 
455. 
456. 
457. 
458. 
459. 
460. 
461. 
462. 


Privity  of  contract  between 
broker  and  opposite  parties. 

Privity  of  contract  between  the 
opposite  customers. 

Intervening  sub-brokers  and 
sub-customers. 

Purchases  or  sales  on  margins  — 
Broker  as  a  pledgee. 

Broker's  rights  and  duties  on 
failure  of  margin. 

What  will  excuse  notice  and  de- 
mand for  more  margin. 

Customer's  remedies  and  dam- 
ages herein. 

Broker's  remedies  and  damages 
herein. 

Broker's  customs  and  usages. 


§  445.  Definitions  and  scope  of  the  subject. —  By  far  the  greater 
part  of  purchases  and  sales  of  stock  is  made,  both  in  this  country 
and  in  England,  through  organizations  specially  formed  for  that 
purpose  and  called  stock  exchanges.  A  stock  exchange  is  a  place 
of  business  where  those  who  make  up  the  membership  of  the  ex- 
change buy  and  sell  stocks  and  bonds.  These  persons  are  called 
stock-brokers.  A  stock-broker  is  one  who  buys  and  sells  stock  as 
the  agent  of  another,  the  latter  being  called  a  customer  of  the 
stock-broker.1  Accordingly,  in  an  ordinary  purchase  of  stock 
through  stock-brokers,  there  are.  generally,  at  least  four  persons 


1  In  Sibbald  v.  The  Bethlehem  Iron 
Company,  83  X.  Y.,  378  (1SS1),  Finch, 
J.,  favors  the  definition  from  Pott  v. 
Turner,  6  Bing.,  702,  706,  where  a 
broker  is  defined  as  "  one  who  makes  a 
bargain  for  another  and  receives  a  com- 
mission    for     so     doing."     Storv     on 


Agency,  §  28  (9th  ed.),  says:  '-The 
true  definition  of  a  broker  seems  to  be 
that  he  is  an  agent  employed  to  make 
bargains  and  contracts  between  other 
persons  in  matters  of  trade,  commerce 
or  navigation,  for  a  compensation  com- 
monly called  brokerage." 


36 


561 


§  445.] 


BROKERS    AND    THEIR    CONTRACTS. 


[CH. 


XXV 


involved  —  the  two  brokers  and  their  respective  customers.  Stock- 
brokers have  a  language  of  their  own.  They  have  coined  and  put 
into  general  circulation  certain  phrases  and  terras  descriptive  of 
their  business.  These  terms  have  become  so  closely  identified  with 
the  subject  of  stock  and  transactions  in  stock  that  the  courts  have 
defined  their  meaning  and  explained  their  application.1 


1 A  "  bull "  is  a  dealer  who  endeavors 
to  make  the  price  of  stocks  go  higher. 
A  "  bear  "  is  a  dealer  who  endeavors  to 
make  the  price  of  stocks  go  lower.  A 
"short"  sale  is  a  sale  of  stocks  which 
the  seller  does  not  possess,  but  which 
he  expects  to  purchase  later  on  at  a  lower 
figure,  thus  fulfilling  his  coutract  and 
making  profit  by  the  decline.  In  the 
meantime  the  broker  generally  borrows 
the  stock  from  other  parties  to  deliver 
to  the  vendee,  and  to  be  returned  to  the 
person  loaning  the  stock  at  the  end  of 
the  transaction.  The  broker  is  bound 
to  continue  the  transaction  for  a  reason- 
able time.  The  customer  deposits  with 
the  broker  a  small  amount  of  money  as 
security,  called  a  margin,  and  he  is 
bound  to  keep  the  margin  good.  Hess 
v.  Rau,  95  N.  Y..  359  (1884);  Winter. 
Smith,  54  N.  Y.,  522  (1874);  Knowlton 
v.  Fitch,  52  N.  Y,  288  (1873) ;  Appleman 
v.  Fisher,  54  Md.,  540  (1871);  Sistareu 
Best,  88  N.  Y,  527,  533  (1882).  A  "  long  " 
purchase  of  stock  is  a  purchase  in  the 
expectation  that  the  stock  will  rise  in 
value. 

Stock  options  are  of  three  kinds  — 
puts,  calls,  and  straddles.  A  "put"  is 
a  contract  whereby  a  person  has  the 
privilege  of  requiring  another  person 
to  take  from  the  former  certain  specified 
ntock  at  a  specified  price  at  any  time 
within  a  specified  period  of  time,  the 
former  not  being  bound  to  sell.  See 
Bigelow  v.  Benedict,  70  $T.  Y,  202 
(1877).  A  "call  "  is  a  contract  whereby 
a  person  has  the  privilege  of  requiring 
another  person  to  sell  or  deliver  to  the 
former  certain  specified  stock  at  a 
specified  price  at  any  time  within  a 
certain  specified  period,  the  former  not 
being  bound  to  purchase.    A  "  straddle '" 


or  "spread-eagle"  is  a  combination  of 
a  put  and  a  call.  It  gives  a  person  the 
double  privilege  of  delivering  to  or  de- 
manding from  another  person  certain 
stock  at  a  certain  price  within  a  specified 
time.  Harris  r.  Tumbridge,  83  N.  Y.- 
92  (1880);  Story  v.  Salomon,  71  N.  Y. 
420  (1877).  A  '  corner"  exists  where 
the  "bears"  have  sold  a  large  quantity 
of  stock  "short,"  and  cannot  borrow  the 
stock  to  fill  their  contracts,  but  must 
buy  it  from  those  who  have  cornered 
the  market  on  that  stock.  See  Cameron 
v.  Durkheim,  55  N.  Y,  425,  438  (1874). 
As  to  the  legality  of  these  various  trans- 
actions, see  §§  341-348,  especially 
§  344,  n.  It  is  not  fraud  for  the  owner 
of  the  larger  part  of  the  capital  stock  of 
a  corporation  to  "corner"  the  market, 
that  is,  to  enter  into  contracts  with  vari- 
ous parties  to  purchase  stock  of  the  cor- 
poration, although  he  knew  that  such 
contracts  could  not  be  fulfilled  by  such 
parties  by  reason  of  the  fact  that  he 
himself  held  such  stock,  and  it  could 
not  be  obtained  elsewhere.  The  same 
rule  prevails  although  such  person  of- 
fered the  stock  for  public  subscription 
and  purchased  the  greater  part  himself. 
Salaroan  v.  Warner,  64  L.  T.  Rep..  598 
(1891). 

A  "loan"  of  stock  is  still  another 
transaction.  The  initiated  do  not  re- 
quire to  be  told  that  when  a  man  sells 
stock  on  the  exchange  he  must  deliver 
it,  and  if  he  does  not  own  any  he  must 
borrow  it  of  some  one  who  does.  When 
he  borrows  the  stock,  he  advances  the 
market  price  of  it  to  the  lender,  who 
pays  interest  on  this  money.  The  trans- 
action is  really  a  call  loan.  The  lender 
of  the  stock  can  call  for  his  stock  at  any- 
time, and  the  borrower  can  call  for  his 


562 


CH.  XXV.] 


BROKERS    AND    THEIR    CONTRACTS. 


[§§  446,  447. 


This  chapter  treats  of  the  rights,  duties  and  liabilities  of  stock- 
brokers.1 There  are  various  incidental  subjects,  however,  which 
enter  largely  into  brokers'  contracts, such  as  pledges  of  stock2  and 
gambling  sales  of  stock.3    These  subjects  are  fully  treated  elsewhere. 

§  446.  Who  may  be  a  broker  and  customer. —  Any  person  may  be 
a  stock-broker  who  may  make  a  contract,  but  it  is  beyond  the  power 
of  a  national  bank  to  act  as  a  broker.4  Strict  rules  prevail  as  to 
who  may  be  a  customer.  An  infant  is  not  bound  by  his  contracts 
.with  or  through  a  stock-broker  any  more  than  he  is  bound  by  his 
other  contracts.  Moreover,  if  the  broker  carries  on  stock  transac- 
tions for  an  infant  he  is  liable  to  the  latter  for  all  moneys  lost 
thereby.5  Again,  a  broker  who  sells  or  buys  stock  in  the  name  of 
an  infant  is  himself  liable  to  the  other  party  in  case  the  contract 
is  not  completed  by  reason  of  such  infancy.6  On  the  other  hand, 
if  the  broker's  customer  hands  in  the  name  of  a  third  person,  an 
infant,  as  the  seller  or  purchaser,  such  customer  is  liable  to  the 
broker  for  liabilities  thereby  incurred  by  the  latter.7 

§  447.  Facts  malting  person  a  broker  or  customer  unintentionally. 
The  relationship  of  broker  and  customer  may  be  established  and 
exist  although  one  of  the  parties  is  personally  ignorant  of  such  a 
relationship.8     A  broker  also  may  be  liable  as  such  in  transactions 


money.  When  a  strong  bearish  feeling 
is  running,  and  too  much  short  selling 
has  been  indulged  in,  stocks  become 
scarce,  and  those  who  have  them  will 
only  lend  at  a  concession,  either  at  less 
than  current  interest  rates;  or  "flat," 
that  is,  without  interest ;  or  actually  at 
a  premium,  according  to  the  urgency  of 
the  demand. 

1  See,  also,  on  this  subject,  Lindley  on 
Partnership,  721,  etc 

2  Ch.  XXVL 

3  See  ch.  XX. 

4  First  Nat'l  Bank  of  Allentown  v. 
Hock,  89  Pa.  St.,  324 ;  Weckler  v.  First 
Nat'l  Bank,  42  Md.,  581  (1879).  But 
Williamson  v.  Mason,  12  Hun,  97  (1877), 
holds  that  a  bank  has  power  to  take 
stock  from  a  customer  and  agree  to  sell 
it  and  credit  customer  with  the  proceeds, 
and  that  the  bank  is  liable  for  the  con- 
version of  such  stock  by  its  cashier. 

SRuchizky  v.  De  Haven,  97  Pa.  St.. 
202  (1881).  The  transactions  in  this  ca-e 
were  held  to  be  gambling  contracts. 
Heath  v.   Mahoney,  12  Week.  Dig.,  404 


(1881).  The  broker  himself  may  be  an 
infant  and  may  repudiate  his  obliga- 
tions.    See  4  Law  Notes,  314. 

« Nickalls  v.  Merry.  L.  R.,  7  H.  L.,  520 
(1875) ;  Heritage  v.  Paine,  34  L.  T.,  947 
(1876);  Maxted  v.  Paine,  L.  R,  4  Ex., 
81  (18691  The  first  case  holds  him  lia- 
ble although  ignorant  of  the  infancy  of 
his  customer.  See  same  case,  Merry  v. 
Nickalls,  41  L.  J.  (Ch.),  767  (1872).  Broker 
is  liable  although  the  name  of  the  in- 
fant was  passed  to  him  by  another 
broker.  Dent  v.  Nickalls,  29  L.  T.,  536 
(1873).  It  is  no  defense  to  the  broker 
that  the  infant's  father  was  the  real 
customer.  Nickalls  v.  Eaton,  23  L.  T., 
689  (1871).  See,  also,  §  250,  mpra,  as  to 
liability  to  the  corporation. 

:  Peppercorne  v.  Clinch,  26  L.  T.,  656 
(1872). 

8  Thus  the  customer  may  be  bound  by 
the  acts  of  his  clerk.  Webb  v.  Chal- 
loner,  2  F.  &  F,  120  (1860).  So  also 
where  the  firm  does  a  broker  business 
through  its  agents,  the  transactions  by 
the    agents   on   their   own  private  ac- 


563 


448.] 


BROKERS    AND    THEIR    CONTRACTS. 


[CH. 


XXV. 


where  he  had  no  intention  of  incurring  any  liability.1  A  broker  is 
nothing  more  nor  less  than  an  agent  for  a  special  purpose.  The  agency 
may  arise  by  the  acts  of  the  parties  without  any  specific  agreement. 
§  448.  Broker  must  obey  specific  orders  of  customer. —  A  broker 
is  bound  to  obey  and  carry  out  strictly  the  orders  of  his  customer 
in  the  purchase  or  sale  of  stock.  This  rule  is  rigidly  insisted  upon 
by  the  courts.  The  orders  of  the  customer  ma}r  be  such  as  he 
wishes  to  give,  and  when  given  they  must  be  obeyed,  or  liability 
will  be  incurred  by  the  broker.2  When  the  customer  fixes  a  limit 
at  which  the  broker  may  purchase,  the  latter  cannot  bind  the  cus- 
tomer by  a  purchase  at  a  higher  figure.3  Frequently  the  customer 
gives  to  the  broker  a  "stop  order,"  which  is  an  order  to  sell  or 
buy,  as  the  case  may  be,  at  a  certain  specified  figure,  or  upon  a 
specified  contingency.  Under  this  order  the  broker  must  sell  or 
buy  when  the  price  or  contingency  occurs,  but  not  until  after  it 
occurs.  If  the  market  changes  too  quickly  for  him,  he  must  sell 
or  buy  at  the  market  price  immediately  after  the  fixed  price  or 
contingency  arises.4     The  customer  may  leave  it  in  the  discretion 


counts,  but  ostensibly  for  the  firm,  will 
bind  the  firm.  Wells,  Fargo  &  Co.  v. 
Welter,  15  Nev.,  276  (1880).  Cf.  6  N.  Y. 
Supp.,  665. 

1  As  where  he  continues  to  allow  his 
name  to  remain  in  the  firm  name  after 
its  dissolution.  Hixon  v.  Pixley,  15 
Nev.,  475  (1880).  Also  where  one  of 
the  firm  is  a  trustee  and  defaults  therein, 
the  firm  having  charge  of  the  trust  es- 
tate's stocks.  De  Ribeyre  r.  Barclay.  23 
Beav.,  107  (1856).  As  a  silent  partner 
lie  cannot  prevent  a  customer  from  set- 
ting off  against  a  liability  a  debt  per- 
sonal to  the  ostensibly  sole  broker.  Read 
v.  Jaudon,  35  How.  Pr.,  803  (1868).  A 
stock-broker  is  bound  to  obey  orders 
promptly.  Galigher  v.  Jones,  129  U.  S., 
193. 

2  Parsons  v.  Martin,  77  Mass.,  Ill 
(1858).  Tims,  where  the  customer  au- 
thorizes a  sale  if  the  stock  goes  down  to 
51,  but  the  broker  sells  when  it  goes 
down  to  52,  he  is  liable  for  an  unauthor- 
ized sale.  Clarke  v.  Meigs.  10  Bosw.. 
337  (1863).  Cf.  Whelan  v.  Lynch,  60 
N.  Y.r  469  (1875) :  Jones  v.  Marks,  40  111., 
313  (1866).  But  the  broker  may  correct 
a  palpable  error  in  the  order  given  him 


by  his  customer.  Luff  man  v.  Hay,  13 
N.  Yr.  Week.  Dig.,  324  (1881). 

:J  Whether  a  limit  was  fixed  is  a  ques- 
tion for  the  jury,  if  the  facts  are  dis- 
puted. Cf.  Smith  v.  Bouvier,  70  Pa.  St., 
375  (1872).  The  customer  may  ratify 
the  unauthorized  purchase.  Genin  v. 
Isaacson,  6  N.  Y.  Leg.  Obs.,  213  (1848). 
If  the  power  to  sell  depends  on  the  con- 
struction of  writings,  it  is  a  question  of 
law  only.  Davis  v.  Gwynne,  57  N.  Y.. 
676  (1S74) ;  S.  C,  4  Daly,  218  (1871).  But 
the  written  order  may  be  subsequently 
modified  by  parol.  Burkitt  v.  Taylor, 
86  N.  Y.,  618  (1881);  Clarke  v.  Meigs,  10 
Bosw.,  337  (1863).  Or  be  waived.  Hope 
v.  Lawrence,  50  Barb.,  258  (1867), 

4  Porter  v.  Wormser,  94  N.  Y.,  431 
(1884);  Bertram  v.  Godfrey,  1  Knapps 
Rep.  P.  C.  381  (1830).  The  latter  case 
involved  an  absolute  order  to  sell  should 
the  stock  reach  a  certain  price.  Where 
a  broker  is  carrying  a  "short"  sale  on  a 
"stop  order,"  and  purchases  before  the 
price  of  the  "stop  order"  is  reached, 
and  the  customer  a  week  later  then 
orders  the  broker  to  purchase,  the 
purchaser  may  recover  the  profit  that 
a  purchase  at  the  latter    date   would 


564 


CH 


XXV.] 


BROKERS    AND    THEIR    CONTRACTS. 


[§  449. 


of  the  broker  as  to  the  best  time  for  buying  or  selling.1  When 
this  is  done  the  broker  must  exercise  such  discretion  in  good  faith. 
and  with  reasonably  good  judgment  and  care.2 

§  4:4:9.  Must  act  in  good  faith  and  in  reasonable  time.— The 
broker  must  make  the  purchase  or  sale  in  good  faith  on  the  best 
terms  possible,  and  must  give  the  enstomer  the  advantage  of  the 
transaction  as  actually  made.  Any  material  failure  to  do  this,  or 
to  make  the  sale  or  purchase  as  directed,  will  release  the  customer 
from  the  transaction,  although  it  was  reported  to  him  as  made  in 
accordance  with  orders.3  The  broker  is  allowed  a  reasonable  time 
within  which  to  make  the  sale  or  purchase.4 


have  netted.  Campbell  v.  Wright,  118 
N.  Y.,  594  (1890).  Brokers  cannot  disre- 
gard a  "  stop  order,"  and  act  before  that 
price  is  reached,  even  though  prices  are 
fluctuating  rapidly.  Id.  See,  also, 
§459. 

1  Such  discretion  when  given  is  re- 
voked only  by  clear  notice  of  revocation. 
Davis  v.  Gwynne,  4  Daly,  218  (1871). 

2  Harris  v.  Tumbridge,  83  N.  Y.,  92 
(1880). 

3  Where  the  broker  buys  in  his  own 
name  at  a  price  less  than  the  price  re- 
ported to  the  customer,  sells  without 
notice,  and  subsequently  pretends  to 
sell  again,  the  whole  transaction  is  void 
as  to  the  customer.  Levy  v.  Loeb,  85 
N.  Y,  365  (1881) ;  89  id.,  386.  So,  like- 
wise, where  he  purchases  an  option  in- 
stead of  cash  purchase,  and  reports  a 
higher  price  than  that  paid.  Voris  v. 
McCready,  16  How.  Pr.,  87  (1856).  So, 
likewise,  where  the  broker  varies  the 
order  from  a  cash  purchase  to  an  op- 
tion, he  himself  taking  the  risk  of  the 
option.  Dey  v.  Holmes,  103  Mass.,  306; 
Pickering  v.  Demerritt.  100  Mass..  416 
(1868).  A  broker  who  sells  bonds  and 
then  reports  no  sale,  but  loans  money 
to  the  customer  on  the  bonds  as  collat- 
eral, may  be  held  liable  to  account  for 
the  sale.  Bischoffsheim  v.  Brown,  34 
Fed.  Rep.,  145  (1888). 

■*  Fletcher  v.  Marshall,  15  Mees.  &  W., 
755  (1846).  Cf.  Dickinson  v.  Lilwal,  1 
Starkie,  128  (1815),  which  holds  that 
the  transaction  must  be  carried  out  on 
the  day  of  the  order.     The  broker  is  en- 


titled to  his  commission  although  his 
customer  fails  before  the  transaction  is 
made.  Inchbald  v.  The  Western  Coffee 
Co.,  43  L.  J.  (C.  P.),  15.  The  contract 
is  to  be  carried  out  within  a  reasonable 
time.  A  broker's  custom  is  evidence  as 
to  what  is  reasonable  time.  Stewart  r. 
Cauty,  8  Mees.  &  W.,  160  (1840).  A  few 
hours'  notice  held  insufficient.  Johnson 
v.  Mulvy,  51  N.  Y,  634  (1872).  '-Usu- 
ally the  broker  is  entitled  to  a  fair  and 
reasonable  opportunity  to  perform  his 
obligation,  subject  of  course  to  the  right 
of  the  seller  to  sell  independently.  But 
that  having  been  granted  him,  the 
right  of  the  principal  to  terminate  his 
authority  is  absolute  and  unrestricted, 
except  only  that  he  may  not  do  it  in 
bad  faith  and  as  a  mere  device  to  es- 
cape the  payment  of  the  broker's  com- 
missions." Sibbald  v.  The  Bethlehem 
Iron  Co.,  83  N.  Y,  378.  384  (1881).  A 
customer  is  under  no  obligation,  when 
he  learns  that  his  broker  has  not  sold 
stock  as  ordered,  to  notify  the  broker 
that  he  abandoned  any  claim  to  the 
stock  and  held  the  broker  responsible 
for  their  value.  Nor  is  he  obliged  to  re- 
deem the  stock  from  the  sub-broker. 
Allen  v.  McConihe,  124  N.  Y,  342  (1890). 
In  this  case  the  court  allowed  as  dam- 
ages against  a  broker  who  delayed  sell- 
ing when  ordered  to  sell,  the  difference 
between  the  price  when  the  order  was 
given  and  the  price  when  the  sale  was 
actually  made.  Where  for  four  years 
both  the  broker  and  the  customer  have 
apparently  abandoned  an  alleged  pur- 


565 


§§  I     ■    51.] 


BBOKEBS    AND    THEIU    OONTRAf 


[CH. 


annot  purchase  from  or  sett  to  himself.— A  broker  can- 
not, in  behalf  of  his  customer,  buy  or  sell  with  himself  as  the  other 
principal.  The  law  will  not  allow  him  to  act  both  as  agent  ami  as 
principal  at  the  same  time.  Such  an  act  is  a  constructive  fraud  on 
account  of  his  fiduciary  relation,  and  will  be  set  aside.1  Custom  or 
annot  Legalize  such  a  transaction.3  The  broker  ma  v.  how- 
eve:.  by  parol  evidence  that  he  did  not  deal  with  himself, 

though  writings  indicate  otherwise.1  And  there  is  no  rule  which 
prevents  the  broker  from  acting  as  agent  both  for  the  selling  and 
the  buying  customer.4 

■ 

151.   Duties   and  UabUiti  towards  broker,     A 

stock-broker  is  but   the  agent   of  his  customer.     Aa  such  he  mav 

- 

bind  his      stomer  by  acts  within  the  -       e  of  his  authority,  and 
compel  the  customer  to  respond  to  his  liability.     Thus,  the  br< 
may  proceed  the  transaction,  paying  out  his  own  money  as 

though  it  was  his  own  business,  and  may  then  compel  the  customer 
to  repay  to  him  the  money  so  expended  in  the  customer's  behalf.1 


chase  of  stock  on  a  margin,  it 
tion  for  the  jury  whether  ther 
abandonment  or  whether  the  i 

oued   to  be  liable.       v     .      .n   r. 

brokt-r  ordered  to  porchasi  on  a 

_in  need  r.  dry  porchas 

once.     Ir  is  sufficient  if  he  ly  to 

fulfill  when  cali  :  the 

price  on  the  day  of  the  giving  of  the 
order.    Ingraham  r.  Taj  Atl.  Rep. 

601 
i  Mayo   r.  Knowlton,   134  X.  Y. 

»•.  Bot  \  v..  4-:: 

kman    v.    Rothschi 

Kfarye  v.  Stroma,  5  Foil.  Rep. 
183(188  U   Uett,  L  K..  : 

H.  L.,  803,  818,  82        374)     Even  tl; 
the  purchase  was  in  good  faith  and  at  a 
than    the    market    | 
58   X.  Y..  48E 
Gillett  v.  Pe  ne.  3  Beav..  3 

In  Bryan  r.  Baldwin.  53  N.  Y..  832     87 
the  court  say :    "  The    plaintiff,   being 
-tx-k.  and  in  that  char- 
acter exposing  it  foi    -  raid  n> 
purchaser  unless  the  del' 
ant  assented  to  such  pur 

■310:  Torry  r.  Bank  of  Or- 
leans.  7   Paige,   64S     1842);   Hawl 
Cra:.-  3         ~."  -  sale  to 


plaintiff  was  I        table 

at  tl  tn   of  the  defendant     Ed- 

wards on  Bailment-    -  The  defend- 

ant was  at  liberty  to  ratify  the  sale,  and 
had  -    ;t  would  bare  been  valid 

J]  porpoaea    The  ratification  would 
hav,  it    lawful,  and    relieved   it 

from  any  imputation  of  b-  tious 

him.     .     .     .     But  the  defer 
has  •  but  has  elect- 

the  purchase  by  the  plaintiff  as 
illegal.     Th>  -   the  sale,  and  that 

_-   avoided   by   the    dt:  .    the 

part  remitted  to  their  rights  the 

same  as  though  no  sale  had  been  at- 
tempted." 

tonwealth  r.  Cooper.  1 

381)     The  custom  of   brok. 
buy  in  large  quantities  and  sell  in  small 
quantities   is  illegal.     Robinson  a 
lett.  L  R..  7  II.  I..  -    .      -71). 
>  Porter  r.   Wormeer,  94   N.   Y..  431 

♦Knowlton   r.    Fitch.    IS   K    Y..    M 

5  B  Wilk  ins.  7  C.  I 

Whitehooaa   n  Moore.  13  ; 

S       :  Dails  1.  12  C.  B..  53! 

-   n,  3  De  G.,  M.  &  G.,  556 
353> 


5(N 


XXV.] 


THEIE    C05 TE  ACTS. 


L5S 


rrv  out  the  transaction,  tbe  broker 
may  settle  with  the  opposite  party  by  paying  the  loss  incurred  by 
!ng  or  selling  the  stock  eh  nd  may  then  sue  his  cus- 

mer  for  the  diff<   .        -  thus  paid.1  rer  his  dis- 

bursements, commissions  and  ir."  The  customer  is  liable  to 

the  :  -d.  although  the  :  turns  out  to  be 

spur  r  unauth'  If  the  brol:  "  over 

the  full  value  of  the  b  he  must  first  tender  the  stock  to  the 

or  he  mi  -    sell  it  after  due       I        I  )  the  customer,  and 
-  accm  in  the  Ef  he  is  seeking  to  re    .rer  for 

diffe  -  paid  the  -  te        ker  in  settlement,  assui        \    s  his 

I  clear!-  bat  the  customer  authorized  the 

"_'.  Duties  and  —The 

rtain  d  and  incurs  certain  liabilities  in  his 


rani  .-.  T-:  ?  Mass  -  3 

Bay  line  r  Bu  rth.  5  Raihv.  Cas.. 

Parke.  B. ;  Mai 
L.  T..  561    187C  :  Biedenuan  v.  5!      ,  L_ 
a    . 

-        -  ind  inte 
were  paid  to  other  brok 
charged  to  stonier.     Robinson  r. 

-     "  I .    ■  I 
though  -jrious.  Smith 

v.  Heath.  4  On  com- 

mi.-.-       -  chbald  v. "Western  Cof 

-     L  J  ex- 

uses  will  not    be  allov  >h 

-.omary.     Mary 
Rei     -  -     1 880  .     But  the 
titled  to  commissi      -     nly  when  he  has 
rendered  some  -  :omer. 

-     bald  v.  '  hem  Iron  I 

N.  Y..  376    1881):    Hoffman  r.    L      ng- 
ston.   46    V    Y.    Super.    Cl     552      SE 
The  case  of  Hatch  v.  Dong     - 
116  (1880),  holds  that 
tomary  monthly  charges  and  in! 

n- 
son  Hue  1875>     The 

broker  may  recover  from  the  principal 
the  purchf-  ks  bought 

the  broker,  bat  not  delivered,  before  the 
corpora tion   becai-  ".vent     Chap- 

man v.   Shepherd.  L  R.  2   C.   P. 
Mem    era  of      syndicate  are  jointly  lia- 
ble to    a    broker    employed    by   them. 

56 


:.:.-...'    121  J\.    Y. 
.    -      - 

Adamson  v.   Jarv:';.  1  B     g    I  6 
I93fi      7Jeckham  v.  Ketchum,  5  E 

also,  for  spurious  stock 
innocently  given  to  the  broker  to  sell. 
- :  laman,    8    C.    B.,    345 
- 

*  Merwiri    r.    Hamilton.   6    Duer.  214 
Bell,  3  Com.  B 
But  after  once  tendering  it  he 
rep  it  on  hand. 
-    .:.  64  Pa 

In  B  k   r.  Tormey.  32  Md..  169. 

the  necessary  al  g  us  were  held  to 
be  a  purchase  of  stock  according  to  an 
order,  at  fair  market  price,  which  was 
paid,  and  the  custon:  •  :.ed  and  pay- 

ment demanded :  willingness  to  deliver 
-  :  refusal  of  customer  to  pay ; 
fsale:  a  proper  sale  and  loss, 
■llock  r.  81      ES.12Q.]      365(1848 
. b  ild  v.  Morley,  8  Term  R,  610 
Ifi 
'■  Ward  r.  Yan  Duser,  2  Hall   K  Y 
~        ..In  White  r.  Baxter,  71  EL  Y.. 
•         the  court  held  that  a  cus- 
th  his  broker  to 
latter  again-:  lose 
from  I        -"      :  -xchange  for  non-com- 
pliance with  its  rules  is  a  valid  and  en- 
Table  contract. 


452.] 


BROKERS    AND    THEIR    CONTRACTS. 


[CH.   XXV 


relations  towards  his  customer.  It  is  said  that  he  cannot  sell  on 
credit,  since  that  is  not  the  usual  course  of  his  business.1  He  is 
liable  in  damages  for  failure  to  buy  or  sell  in  accordance  with  his 
express  orders.5*  Where  the  customer  fails  to  carry  out  the  trans- 
action, but  the  broker  does  carry  it  out  at  a  profit,  the  profit  be- 
longs to  the  customer.3  But  the  customer  is  not  entitled  to  stock 
held  for  him  by  the  broker  until  he  pays  the  broker  all  his  reason- 
able disbursements  thereon.4  The  broker  may  deposit  a  margin 
with  the  opposite  broker,  according  to  custom,  and  not  be  respon- 
sible to  his  customer  if  it  is  lost,5  although  the  rule  may  be  other- 
wise as  to  a  delivery  of  the  stocks  themselves.6  The  broker  is 
required  to  exercise  reasonable  diligence  and  care  and  no  more.7 
The  broker  b&s  a  lien  on  the  customer's  property  in  his  hands  for 
all  debts  due  to  the  former.8  But  he  has  no  such  lien  if  he  knows 
that  the  customer  is  acting  as  agent  for  another.9  It  is  a  question 
of  doubt  whether  a  broker  who  has  received  in  good  faith  com- 
missions from  a  person  guilty  of  embezzlement  is  liable  to  pay  over 
to  the  persons  injured  by  his  customer  commissions  so  received.10 
A  broker  may,  by  bill  of  discovery,  be   compelled   to  disclose  acts 


i  2  Kent's  Com.,  622  (b).  12th  ed. 

2  Speyer  v.  Colgate,  4  Hun,  622  1 1 875  ; 
Whelan  v.  Lynch,  60  N.  Y,  469  (1875), 
the  case  of  a  wool-broker.  Sec.  also, 
Jones  v.  Marks.  40  111.,  313  (1806).  The 
damages  may  sound  in  tort,  thus  | in- 
venting a  release  in  bankruptcy  from 
barring  the  action.  Parker  v.  Crol.  5 
Bing.,  63  (1828).  Under  the  New  York 
code  he  may  be  arrested  if  he  does  not 
use  the  money  for  the  purpose  desig- 
nated. Dubois  v.  Thompson,  1  Dal}\  309. 
And  in  England  he  is  liable  criminally. 
Regina  v.  Cronmire,  54  L.  T.  Rep.,  580 
(1885). 

» Fowler  v.  N.  Y.  Gold  Ex.  Bank,  67 
N.  Y,  138  (1876). 

•»See  McEwan  v.  Woods,  11  Q.  B..  13, 
where  the  broker  paid  calls  made  on  the 
stock  after  its  sale. 

&Gheen  v.  Johnson,  30  Pa.  St,  38 
(1879). 

6  Brown  v.  Boorman,  11  CI.  &  F..  i 
(1844). 

-Phillips  v.  Moir,  69  111.,  155  (1873); 
Gheen  v.  Johnson,  90  Pa.  St,  38  (1879). 
As  to  the  construction  of  a  contract 
wherein  the  broker  invests  the  cus- 
tomer's   money  as  the  broker  sees  tit. 


and  the  broker  guaranties  the  return  of 
the  capital  and  interest  and  all  profits 
made,  sec  ///  re  Assignment  of  Ver- 
milye,  10  Atl.  Rep.,  605  (N.  J..  1887).  As 
to  the  liability  of  stock-brokers  and  job- 
bers and  vendees  towards  the  vendors, 
see,  also.  White  &  Tudor'a  Leading 
Cases  in  Equity,  vol.  I.  pp.  922-929. 

5  Jones  v.  IVppercorne,  5  Jur.  (N.  S.), 
Pt  1.  p.  140. 

■'Fisherr.  Brown,  104  Mass.,  259(1870) ; 
Pearson  v.  Scott,  L.  R.,  9  Ch.  D.,  198 
(1878). 

io  See  Butler  v.  Finck,  21  Hun,  210 
(1880).  The  case  of  Taft  v.  Chapman, 
50  N.  Y,  445  (1872),  seems  to  hold  that 
the  broker  is  not  liable  where  he  acted 
without  knowledge  of  his  customer's 
acts.  See,  also,  S.  C.  under  name  Brown- 
son  v.  Chapman,  63  N.  Y.,  625  (1875). 
Sec.  als<\  Porter  v.  Parks,  49  N.  Y.,  564 
(1872),  §  350,  n.  The  case  Kissam  v.  An- 
derson, 145  U.  S.,  435  (1892),  reversed 
the  decision  below  (Anderson  v.  Kissam, 
35  Fed.  Rep.,  699,  holding  the  broker 
liable)  on  the  ground  that  it  was  for  the 
jury  to  say  whether  the  bank,  whose 
funds  were  used  by  the  president  to  pay 
the   broker,  had  notice  of  payment  by 


568 


CH.  XXV.]  BROKERS    AND    THEIR    CONTRACTS.  [§§  453,  45  I . 

amounting  to  misconduct.1  The  question  of  the  broker's  liability, 
where  the  stock  delivered  by  him  to  his  customer  is  forged  or 
stolen  stock,  is  considered  elsewhere.2 

§453.  Method  of  completing  a  broker's  contract— The  formal- 
ities and  method  of  completing  a  stock-broker's  contract  are  gov- 
erned largely  by  the  usages  of  the  stock  exchange.  It  is  well 
established  law  that,  when  a  man  sells  or  buys  shares  through  his 
broker  on  the  stock  exchange,  he  enters  into  an  implied  contract 
to  sell  or  buy  according  to  the  custom  and  usages  prevalent  in 
that  body.3  These  usages  and  customs  are  to  be  found,  for  the 
most  part,  in  the  rules  of  the  stock  exchange,  so  far  as  the  formal- 
ities of  completing  the  contracts  are  concerned.  Occasionally, 
however,  such   formalities  are   reviewed  and   sanctioned  by   the 

courts.4 

§  454.  Privity  of  contract  between  IroTcer  and  opposite  parties  — 
A  broker  who  buys  or  sells  stock  does  so  subject  to  certain  liabili- 
ties towards  the  parties  to  whom  he  sells  or  from  whom  he  buys. 
If  he  does  not  send  in  the  name  of  his  customer,  he  is  liable  on  the 
transaction  as  though  he  were  the  principal  himself.5  He  has  been 
held  liable  for  a  forgery  perpetrated  by  his  customer.6  Where-, 
however,  the  broker  hands  in  the  name  of  his  customer,  and  that 
name  is  accepted,  the  broker  is  thereby  discharged,7  unless,  of 
course,  the  name  is  unauthorized,  or  is  that  of  an  infant.8  Upon 
the  disclosure  by  the  broker  of  his  customer's  name,  the  opposite 

the  broker  to  the  president.     A  broker  in  equity,  to  register  the  transfer  made 

who  takes  money  as  a  margin,  knowiflg  through  brokers.     Paine  v.  Hutchinson, 

that  the  money  comes  from  a  trustee  L.  R.,  3  Eq.  Cas.,  257  (1866). 

and   is  trust  estate  money,  is  liable  to  5  Wynne  v.  Price,  3  De  G.  &  Sm.,  310 

the  estate  for  money  lost  thereby.    Leake  (1849). 

v.  Watson,  20  Atl.  Rep..  343  (Conn.,  1890;.  « Royal  Exchange  Ins.  Co.  v.  Moore, 

i  Green  v.  Weaver,  1  Sim.,  404  (1827).  11  Week.  Rep.,  592  (1863).     The  broker 

See  Raulings  v.  Hall,  1  Carr.  &  P.,  11  herein  sold  in  his  own  name,  but  the  op- 

Mg23).  posite  party  knew  he  acted  as  a  broker. 

2  See  ch.  XXI;  also,  see  Andrews  v.  ^  Maxted  n  Paine  (2d  action),  L.  R.,  6 
Clark,  20  Atl.  Rep.,  429  (Ind.,  1890).  Ex.,  132  (1871),  holding  that  the  broker 

3  see  §462.  does  not  guaranty  his  customer's  re- 
*  Thus,  a  usage  by  which  the  ultimate  sponsibility,  nor  that  he  is  the  real  pur- 
purchasers  name  is  handed  to  the  seller  chaser.  So  also  of  the  stock-jobber. 
for  the  purpose  of  having  the  latter  ex-  Grissell  v.  Bristowe,  L.  R,  4  C.  P.,  36 
ecute  a  transfer  to  the  former  is  upheld.  (1868).  Contra,  Cruse  v.  Paine,  37  L.  J. 
Sheppard  v.  Murphy,  16  W.  R,  948  (1868).  (Ch.),  711  (1868). 

The  custom  of  giving  the  seller  time  to  8  See  §  446.  Broker  handing  in  the 
investigate  and  object  to  a  purchaser  name  of  a  customer  without  authority 
may  be  insisted  on  by  the  seller.  Sum-  is  himself  liable.  Maxted  v.  Norris,  21 
ner  r.  Stewart.  69  Pa.  St.,  321(1871).  The  L.  T.,  535.  Cf.  Shepherd  v.  Gillespie, 
purchaser  may  be  compelled,  by  a  bill    L.  R.,  5  Eq.  Cas.,  293  (1867). 

569 


§§  455,  456.] 


BROKERS    AND   THEIR   CONTRACTS. 


[CH.  XXV. 


party  has  the  option  of  holding  either  the  broker  or  his  customer 
responsible,  but  cannot  hold  both.1 

§  455.  Privity  of  contract  between  the  opposite  customers. — When 
the  broker  of  one  customer  has  agreed  with  the  broker  of  another 
customer  on  the  terms  of  a  purchase  and  sale  of  stock,  there  im- 
mediately arises  a  privity  of  contract  between  the  two  customers. 
The  purchasing  customer  is  liable  to  the  selling  customer  for  all 
calls  and  liabilities  arising  on  the  stock  after  the  broker's  contract 
is  made,  if  the  selling  customer  is  obliged  to  pay  such  liabilities  by 
reason  of  his  being  the  registered  stockholder.2  So  also  the  pur- 
chasing customer  may  hold  the  selling  customer  responsible  for  the 
carrying  out  of  the  contract.3  It  has  been  held  that  the  remedy 
may  be  an  action  at  law 4  or  in  equity.5  The  right  of  set-off  for 
other  debts  applies  as  between  the  two  customers,6  but  not  for 
debts  due  from  one  of  the  brokers  to  the  opposite  customer.7 

§  450.  Intervening  sub-brokers  and  sub-customers. — Where  a  cus- 
tomer's broker  employs  another  broker  to  transact  the  business, 
the  customer  cannot  compel  the  second  broker  to  complete  the 
contract  as  he  might  compel  the  first  broker.8  The  second  broker 
cannot  claim  a  lien  on  the  stock  for  debts  due  him  from  the  first 
broker.9     If  the  first  broker  merely  introduces  the  parties  he  can- 


1  Watson  v.  Miller,  11  Week.  Notes, 
18(1876),  A  custom  or  usage  releasing 
the  broker  from  this  liability  is  void. 
Magee  v.  Atkinson,  2  Mees.  &  W.,  440 
(1837).  Cf.  Jones  v.  Littledale,  1  Nev. 
&  Per.,  677  (1S37),  the  sale  being  of 
hemp.  Also  Thomson  v.  Davenport,  9 
Barn.  &  Cr.,  78  (1829),  holding  that  the 
purchaser's  option  remains  open  until 
the  name  of  the  undisclosed  principal  is 
given.  It  is  for  the  jury  to  say  which 
one  the  opposite  customer  gave  credit 
to,  irrespective  of  a  stock  exchange  cus- 
tom. Mortimer  v.  McCallau,  6  Mees.  & 
W..  58  (1840). 

2  Hawkins  v.  Maltby,  L.  R,  Ch.  App., 
200  (1869);  affirmed,  S.  C,  L.  R,  6  Eq., 
505 ;  Evans  v.  Wood,  L.  R,  5  Eq.  Cas., 
9  (1867);  Hodgkinson  v.  Kelly,  L.  R,  6 
Eq.  Cas.,  496  (1868);  37  L.  J.  (Ch.),  S37; 
Remfrey  v.  Rutter,  1  Ell.,  Bl.  &  Ell.,  ss; 
(1858);  Allan  v.  Graves,  39  L.  J.,  157 
(1870).  A  stock  exchange  custom,  mak- 
ing the  broker  a  principal,  does  not  pre- 
vent the  customer  suing  as  principal. 
Laugton  v.  Waite,  16  W.  R,  508  (1868). 


Refusal  of  directors  to  register  the  sale 
does  not  enable  the  purchasing  customer 
to  recover  back  the  purchase  price. 
Stray  v.  Russell,  1  El.  &  El.,  888  (1859). 

3  Even  though  the  selling  customer 
did  not  authorize  the  use  of  his  name. 
but  knew  of  it  and  did  not  object. 
Shepherd  v.  Gillespie,  L.  R.,  5  Eq.  Cas., 
293  (1807). 

4 Street  v.  Morgan,  L.  I!.,  I  Ex.,  3s J. 
See,  also.  Davis  v.  Haycock,  L.  R,  4  Ex., 
373(1869). 

5  Sheppard  v.  Murphy,  16  W.  R,  948 
(1868). 

6Carr  v.  Hinchliff,  4  Barn.  &  Cr.,  547 
(1825). 

7  Fish  v.  Kempton,  7  C.  B.,  687  (1849). 
See,  also,  Sweeting  v.  Pearce,  7  C.  B. 
(N.  S.).  449  (1859).  Unless,  possibly, 
where  the  customer  supposed  the  op- 
posite broker  was  the  principal.  See 
Keller  r.  Munson,  7  Mass..  318(1811). 

6  Booth  v.  Fielding,  1  Week.  Notes,  245 
(1866). 

9  Fisher  v.  Brown,  104  Mass.,  259  (1870). 


570 


CH.  XXV.]  BROKERS    AND   THEIR    CONTRACTS.  [§  457. 

not  charge  a  commission  therefor,  although  custom  allows  it.1  The 
real  customer  may  hold  an  intermediate  customer  liable.  A  sub- 
broker  or  correspondent  broker  is  not  obliged  to  ascertain  the  re- 
lations and  agreements  between  the  chief  broker  and  the  customer. 
The  sub-broker  may  hold  all  stocks  as  security  for  all  accounts  be- 
tween himself  and  the  chief  broker,  there  being  no  notice  given  of 
the  customer's  rights.  If  there  is  any  surplus  after  the  sub-broker's 
debt  is  paid,  a  customer  who  placed  his  own  stock  in  the  chief 
broker's  hands  to  sell  is  preferred  to  another  customer  who  had 
purchased  on  a  margin  and  left  the  stock  as  security.2  If  brokers 
in  New  York  take  orders  through  a  local  broker  in  another  place, 
they  are  liable  for  false  and  fictitious  orders  given  to  them  by  him 
in  the  name  of  a  customer.3 

§457.  Purchases  or  sales  on  margins  —  Broker  as  a  pledgee. — 
By  far  the  larger  part  of  a  stock-broker's  business  consists  of  pur- 
chases and  sales  of  stock  on  what  is  called  a  "margin."4  The  cus- 
tomer  deposits  with  the  broker,  as  security,  a  sum  of  money  equal 
to  but  a  small  part  of  the  value  of  the  stock  involved.  This  sum 
of  money  is  the  "  margin."  If  the  customer's  order  is  to  purchase, 
then  the  broker  keeps  both  the  margin  and  the  purchased  stock  as 
security  against  loss  in  the  final  closing  of  the  transaction.  If  the 
customer's  order  is  to  sell,  then  the  broker  sells ;  but,  having  no 
stock  to  deliver,  he  borrows  the  same  from  other  parties  and  de- 
livers it  to  the  purchaser,  the  broker  still  keeping  the  margin  as 
security.  Frequently  no  stock  passes,  nor  is  intended  to  pass,  but 
merely  the  ultimate  profit  or  loss  called  "  differences  "  is  paid ;  the 
losing  customer  loses  the  whole  or  part  of  his  margin,  the  winning- 
customer  getting  back  his  margin  and  also  the  profits,  less  com- 
missions. This  is  a  gambling  contract,  and,  like  all  gambling  con- 
tracts, whether  in  or  out  of  a  stock  exchange,  is  not  enforceable.5 
But  a  purchase  or  sale  of  stock  on  margins,  where  there  is  no  proof 

i  Gibson  v.   Crick,  1  Hurl.  &  C.,  142  3  Caswell  v,  Putnam,   120  N.  Y.,  153 

(1862).     He  may  hold  the  intermediate  (1890). 

customer  or  agent  liable  for  set-off  due  4  A  margin  "  means,  in  the  broker's 

from  the  latter  to  the  broker.     Jaycox  lexicon,    additional   collateral    security 

v.  Cameron,  49  N.  Y,  645  (1872).  against  loss   to   the  broker  while  he  is 

2  Willard  v.  White,  56  Hun,  581  (1890).  .  .  .  carrying  stock  for  his  em- 
See,  also,  §  460.  A  sub-broker  who  plover."  McNeil  v.  Tenth  Nat.  Bank  of 
knows  that  the  stock  deposited  as  col-  N.  Y.,  55  Barb.,  59  (1869). 
lateral  with  the  chief  broker  belongs  to  5  McBurney  v.  Martin,  6  Conn.,  502.  A 
the  customer  is  liable  in  damages  for  broker  cannot  recover  commissions  or 
conversion  where  he  receives  such  stock  disbursements  from  his  customer,  where 
on  further  orders  and  it  transpires  that  the  transactions  were  gambling  aud  in- 
such  use  of  the  stock  was  unauthorized,  tended  so  to  be  by  both.  Harvey  v.  Mer- 
Ryman  v.  Gerlach,  25  Atl.  Rep.,  1031  rill,  22  N.  E.  Rep.,  49  (Mass.,  1889). 
(Pa.,  1893). 

571 


457.] 


BROKERS    AND    THEIR    CONTRACTS. 


[cn.  XXV. 


of  an  intent  not  to  actually  deliver  the  stock,  is  legal.1  The  rela- 
tion between  a  customer  and  his  broker,  in  cases  where  the  broker 
buys  for  his  customer  and  retains  the  stock  as  security,  is  the  re- 
lation of  a  pledgor  towards  a  pledgee,  the  customer '  being  the 
pledgor,  the  broker  being  the  pledgee,  and  the  stock  being  the  arti- 
cle pledged.2  Some  of  the  most  important  questions  connected 
with  brokers'  contracts  arise  out  of  this  pledgee  relationship.  This 
subject,  however,  is  fully  treated  in  the  following  chapter.     Like 


1  See  chapter  XX,  where  the  char- 
acter, effect  and  non-enforceability  of 
a  broker's  gambling  contracts  are  fully 
treated.  A  "  margin  "  transaction  is  not 
necessarily  gambling  and  invalid.  The 
important  case  of  Hatch  v.  Douglas,  48 
Conn.,  116  (1880),  clearly  sets  out  the 
legality  of  such  contracts.  The  court 
said :  "  It  is  pretty  evident  that  the  par- 
ties did  not  contemplate  that  the  stock 
should  be  actually  transfen-ed  to  the 
defendant.  .  .  .  The  defendant  [cus- 
tomer], through  his  agents,  the  plaint- 
iffs, actually  purchased  the  stock,  and 
there  was  an  actual  delivery — not  to 
the  principal,  but  to  the  agents  for  the 
principal."  The  brokers  knew  "that 
the  defendant  wns  speculating,  and  that 
they  advanced  him  money  for  that  pur- 
pose. But  that  was  neither  illegal  nor 
immoral.  .  .  .  No  case  has  been  de- 
cided which  declares  such  a  contract 
illegal.  If  we  should  so  hold,  it  would 
be  difficult  if  not  impossible  to  draw 
the  line  between  legal  and  illegal  trans- 
actions." The  California  constitution 
renders  void  a  transaction  wherein  a 
broker  buys  stock  for  the  customer  with 
the  broker's  money  and  holds  the  stock 
as  security  and  charges  the 'customer  in- 
terest and  commissions.  Cusham  v.  Root, 
26  Pac.  Rep.,  883  (Cal.\  1891).  A  broker 
holding  as  pledgee  stock  purchased 
for  a  customer  on  margin  need  not  keep 
that  identical  stock  on  hand,  and  it  is 
sufficient  if  he  keeps  an  equal  quantity 
on  hand  over  and  above  stock  of  the 
same  kind  held  by  him  for  other  cus- 
tomers. Caswell  r.  Putnam.  130  N.  Y.. 
153(1890).  Iu  Massachusetts  it  is  held 
that  a  broker  carrying  stocks  on  a  mar- 


gin is  not  a  pledgee.  Covell  v.  Loud, 
135  Mass.,  41  (1883).  A  broker  holding 
stock  as  collateral  security  on  a  margin 
does  not  hold  the  stock  in  a  fiduciary 
capacity.  McBurney  v.  Martin,  6  Rob, 
51 13 :  Lambertson  v.  Van  Boskerk,  49 
1  Low.,  256  ?  4  Hun,  628.  In  England  the 
carrying  of  stock  by  a  broker  on  a  mar- 
gin is  called  "contango,"  and  the  broker 
is  held  to  be  the  owner  of  the  stock.  In 
the  case  of  Bentinck  v.  The  Loudon,  etc., 
Bank,  68  L.  T.  Rep.,  315  (1893),  the  court 
said:  "In  all  these  transactions,  there- 
fore, where  money  is  borrowed  by  a 
stock-broker  in  this  way  on  contango  or 
continuation,  whether  it  is  got  from  the 
dealer,  whether  it  is  got  from  other 
stock-brokers,  or  whether  it  is  got  from 
the  bankers,  the  result  is  the  same;  that 
the  arrangement  is  one  by  which  he  be- 
comes, as  between  himself  and  his  client, 
the  <nvinr  of  the  security  in  question, 
although  he  is  under  a  contract  to  pro- 
vide similar  stock  at  a  future  date." 

-Markham  v.  Jaudon.  41  N.  Y.,  235 
(1869);  Baker  v.  Drake,  66  N.  Y.,  518 
(1876).  The  broker  is  bound  to  keep 
constantly  on  hand  the  amountof  stock 
so  held  on  margin,  i.  e.,  pledged.  Taussig 
v.  Hart,  58  N.  Y..  425  (1874);  Rogers 
v.  Gould,  6  Hun,  229  (1875).  See,  also, 
r  169,tn/ra.  In  fact,  the  broker  is  obliged 
to  conform  to  the  rules  governing 
pledges  of  stock  —  a  subject  treated  in 
eh.  XXYI.  The  customer  as  pledgor 
may  claim  his  stock  from  the  broker's 
assignee  for  the  benefit  of  creditors  if 
the  customer  can  identify  it.  Chamber- 
lain v.  Greenleaf,  4  Abb.  N.  C,  178 
(1878).  See  Boylan  v.  Huguet,  8  Me..  345 
(1873). 
72 


CH.  XXV.] 


BEOKEES    AND    THEIE    CONTEACTS. 


[&  458. 


an  ordinary  pledgee  of  stock,  the  broker  ma}7  have  the  stock  trans- 
ferred into  his  own  name;1  he  is  not  allowed  to  repledge  the 
stock;2  and  he  can  put  his  customer  in  default  only  by  tendering 
the  stock  and  demanding  payment  for  their  whole  value  less  the 
margin.3  A  broker  or  pledgee  need  not  sell  the  stock  held  as  col- 
lateral before  bringing  an  action  against  the  pledgor  for  the  amount 
due,  and  a  brokers'  custom  cannot  compel  it.4 

§  458.  Broker's  rights  and  duties  on  failure  of  margin.— When 
the  "  margin  "  which  the  customer  deposits  with  his  broker  hap- 
pens to  become  exhausted  by  the  fluctuations  of  the  market  ad- 
versely to  the  customer,  difficult  questions  arise  as  to  the  several 
rights  and  duties  of  the  broker  and  of  the  customer.     If  the  broker 


i  Horton  v.  Morgan,  19  N.  Y..  170. 

^Dykers  v.  Allen,  7  Hill,  497.     Where 
it  was  understood  between  a  firm  of 
brokers  and   its  customers,  for  whom 
and  on  whose  order  it  bought  stocks  on 
the  security  of  a  mai'gin,  that  the  firm 
might,  according  to  the  usual  course  of 
business,  pledge  or  hypothecate  as  se- 
curity for  loans  to  the  firm  the  stocks 
thus  bought,  held,  that  a  mere  pledge  of 
such  stocks  would  not  be  of  itself  a  con- 
version.    Chamberlain   v.   Greenleaf,   4 
Abb.  N.  C,  178  (1S78).    See,  also,  Law- 
rence v.  Maxwell,  58  Barb.,  511  (1873); 
6  Laus.,  469 ;  53  N.  Y.,  19.     In  Wood  v. 
Hays,  15  Gray,  375  (1860),  it  was  held 
that  "  a  broker  who  advanced  money  to 
buy  stock  for  another,  and  held  it  in  his 
own  name,  might,  so  long  as  he  had  not 
been  paid  or  tendered  the  amount  of  his 
advances,  pledge  it  as  security  for  his 
own  debt  to  a  third   person,  without 
making  himself  liable  to  an  action  by 
his  employer ;  and  this  upon  the  ground 
that  the  contract  was  conditional  to  de- 
liver the  shares  upon  the  payment  of 
the  money."      Approved   in    Covell  v. 
Loud,  135  Mass..  41  (1S83),  where  it  was 
held  that,  where  the  customer  was  un- 
able to  advance  further  margin  and  tells 
the  broker  to  do  the  best  he  can,  he  may 
sell  without  notice.    The  decided  weight 
of  authority,  however,  holds  that,  unless 
the  power  is  expressly  given  to    the 
broker  to  repledge  the  stock,  he  cannot 
legally    repledge    it.     See    ch.    XXVI. 


This,  however,  does  not  affect  the  rights 
of  a  repledgee  or  a  purchaser  of  the 
stock   from   the  broker.     A   bona  fide 
transferee  absolutely  or  in  pledge  from 
a  broker  holding  his  customer's  stock  in 
pledge  is  protected  to  the  extent  of  the 
transfer,  the  transferee  having  no  notice 
of  the  fact  that  the  stock  was  held  in 
pledge  by   the    broker.      Thompson   v. 
Toland,  48   Cal.,  99  (1874);    McNeil    v. 
Tenth  Nat  Bank  of  N.  Y,  46  N.  Y,  325 
(1871) ;  Zulick  v.  Markham,  6  Daly,  129 
(1875);    and  see  many  cases   in  £  321. 
These  cases  apply  equally  whether  the 
person  transferring  contrary  to  law  is 
an  agent  or  a  pledgee,  and  equally,  also, 
whether   he    sells    or    only  repledges. 
Where  a  broker,  a  gratuitous  bailee  of 
corporate  stock,  delivers  the  same  to  the 
company  without    authority,   and   the 
stock  is  converted  to  the  use  of  the  com- 
pany, the  bailee  is  liable  for  its  value, 
irrespective  of  what  his  intentions  were 
in  the  premises.     In  such  case  the  bailor 
may  recover  the  value  of  the  stock  at 
the  time  of  conversion,  with  all  divi- 
dends paid  from  the  time  of  delivery, 
together  with  interest  on  the  value  of 
the  stock  from  date  of  conversion,  and 
on  the  dividends  from  date  of  respect- 
ive payments.     Hubbell   v.   Blandy,  49 
N.  W.  Rep,  502  (Mich.,  1891). 

3  Read  v.  Lambert,  10  Abb.  Pr.  (N.  S.), 
428  (1871). 

4De  Cordova  v.  Barnum,  130  N.  Y, 
615  (1892). 


Old 


§  458.] 


BROKERS    AND    THEIR    CONTRACTS. 


[CH.  XXV. 


is  under  orders  to  close  the  transaction  when  the  margin  becomes 
exhausted,  he  of  course  is  obliged  to  do  so.1  But,  otherwise,  the 
rule  is  that  the  broker  cannot  summarily  close  the  transaction,  even 
though  he  has  fear  of  greater  loss,  involving  a  loss  by  himself.  He 
is  obliged  to  demand  further  margin  from  his  customer,  at  the  same 
time  notifying  him  that  the  previous  margin  is  exhausted;  also 
that,  in  case  the  margin  is  not  made  good,  he  will  close  the 
transaction,  holding  the  customer  liable  for  the  loss;  also  stating 
the  time  and  place  of  such  threatened  sale.2  The  notice  must  be 
given  a  reasonable  time  before  such  closing  of  the  transaction,  and 
notice  may  be  sent  by  mail.3  If  the  broker  fails  to  comply  with 
these  rules  and  sells,  he  is  guilty  of  conversion  of  the  stock.4     Where 


1  See  §  448. 

2  In  the  usual  short  sale  of  stock 
through  a  broker  on  a  margin,  the 
brokers  "were  hound  to  cany  the  stock 
until  plaintiff  directed  them  to  close  the 
transaction,  so  long  as  he  complied  with 
the  terms  of  the  contract  on  his  part, 
and  to  give  the  plaintiff  reasonable  no- 
tice of  the  want  of  sufficient  margin, 
and  of  their  intention  to  buy  in  the 
stock  and  Cover  his  short  account  if  the 
margin  was  not  made  good,  in  accord- 
ance with  the  terms  of  the  notice." 
Rogers  v.  Wiley,  131  N.  Y.,  527  (1892). 
Where  a  customer  who  is  selling  on  a 
margin  desires  to  close  the  transaction, 
but  his  broker  dissuades  him  by  promis- 
ing to  carry  the  stock,  the  broker  can- 
not close  the  transaction  without  notice. 
Id.  Brokers  before  selling  a  customer's 
stock  which  they  hold  as  pledgees,  the 
stock  having  been  purchased  on  a  mar- 
gin, are  bound  to  demand  further  mar- 
gin and  give  notice  of  intent  and  time 
and  place  of  sale.  If  they  fail  to  do  so, 
but  sell  and  then  sue  the  customer  for 
the  loss,  they  cannot  recover  anything. 
They  cannot  claim  that  their  loss  has 
been  greater  *han  defendant's  loss  due 
to  their  conversion.  Gillett  v.  Whiting, 
120  N.  Y.,  02  (1890):  Markham  v. 
Jaudon,  41  N.  Y,  235  (1869),  overruling 
Hanks  v.  Drake.  49  Barb.,  186  (1867),  and 
Sterling  v.  Jaudon,  48  Barb.,  459  (1867). 
See,  also,  Kenfield  v.  Latham,  2  Cal.  Leg. 
Rec.  235  (1879),  and  §  461.     Cf.  Worth- 

51 


ington  v.  Tormey,  34  Md.,  182  (1870); 
and  see  ch.  XXVL  Leaving  notice  at 
office  held  insufficient  where  it  did  not 
reach  the  customer.  Bryan  v.  Baldwin, 
52  N.  V..  382  (1878).  A  formal  demand 
for  further  margin  is  insufficient  where, 
subsequently  to  that  demand,  the 
broker  negotiates  with  the  customer 
and  tells  him  that  he  will  consider  what 
to  do.  McGinnis  v.  Smythe,  4  N.  E. 
Rep.,  759  X.  Y..  1886).  The  broker's 
telegrams  and  conversations  with  his 
customers  may  amount  to  a  waiver  of 
his  right  to  demand  further  margin. 
Rogers  v.  Wiley,  1 1  N.  V.  Supp.,  622 
(1891).  When  called  upon  for  further 
margin,  a  customer  may  make  a  "  stop- 
order,"  the  price  fixed  in  such  "  stop- 
order  "  being  within  the  margin  already 
furnished.  Campbell  v.  Wright,  118  N. 
Y.,  594  (1890).  The  giving  of  a  note  to 
a  broker  pledgee  does  not  extend  the 
time  within  which  the  pledgor  was  to 
deposit  further  margin.  Gould  v.  Trask, 
ION.  Y.  Supp..  619(1890). 

3  Worthington  v.  Tormey.  34  Md.,  182 
(1870).  Two  days'  notice  held  sufficient 
Stewart  v.  Drake,  46  N.  Y,  449  (1871> 
See,  also,  in  general.  <'  477,  infra.  A 
notice  after  the  sale  is  insufficient,  and 
the  question  of  whether  a  notice  was 
given  is  for  the  jury  if  it  is  denied. 
Gillett  v.  Whiting,  120  N.  Y.  402  (1890), 

*  Baker  v.  Drake.  66  N.  Y,  518  (1876). 
Cf.  Gregory  v.  WendalL  40  Mich.,  432 
(1879),    involving  a    purchase  of  corn. 


CH.  XXV.] 


BROKERS    AND    THEIR    CONTRACTS. 


[§  459. 


the  broker  is  merely  authorized  to  sell  he  is  not  bound  to  sell.1  If 
a  broker  sells  illegally  without  giving  due  notice  he  cannot  recover 
anything  from  his  customer.2 

§  459.  What  will  excuse  notice  and  demand  for  more  margin. — 
All  these  rights  of  the  customer  to  notice  of  failure  of  margin,  de- 
mandofmore  margin,  notice  of  intent  to  sell,  and  of  time  and  place 
of  sale,  may  be  waived  ;  and  brokers  generally  require  their  custom- 
ers to  sign  written  contracts  to  that  effect.3  It  is  doubtful  whether 
the  death  of  the  customer  will  authorize  the  broker  to  close  the 
transaction  without  notice.4     A  custom  of  brokers  to  dispense  with 


Stocks  alone,  in  brokers'  transactions, 
give  rise  to  the  relation  of  pledgor  and 
pledgee.  Where  the  broker  closes  the 
transaction  without  notice,  and  later 
the  customer  gives  an  order  which,  if 
the  transaction  had  not  been  closed, 
would  have  yielded  a  profit,  the  cus- 
tomer may  recover  damages  to  the 
amount  of  that  profit.  Rogers  v.  Wiley, 
131  N.  Y.,  527  (1892). 

1  Robinson  v.  Norris,  51  How.  Pr.,  442 
(1874);  Esser  v.  Linderman,  71  Pa.  St., 
76  (1872).  Cf.  Harris  v.  'lumbridge,  83 
N.  Y.,  92  (1880).  On  a  short  sale  of 
grain  the  broker  is  not  bound  to  sell  as 
soon  as  the  principal  refuses  to  advance 
more  margin.  Perin  v.  Parker,  18  N.  E. 
Rep.,  747  (111.,  1888). 

2  See  note  2,  p.  574. 

3  Thus,  a  written  authority  to  the 
brokers  "to  sell  at  their  discretion,  at 
public  or  private  sale,  without  any  notice 
whatever,  the  stocks  or  gold  which  they 
might  be  carrying  for  the  plaintiff, 
whenever  the  margin  should  fall  below" 
a  certain  figure,  waives  all  the  custom- 
er's rights  herein.  Wicks  v.  Hatch,  62 
N.  Y,  535  (1875).  See,  also.  Cameron  v. 
Durkheim,  55  N.  Y,  425  (1874).  The 
customer  may  waive  his  rights  after  the 
broker  has  made  the  unauthorized  sale. 
Stewart  v.  Drake,  46  N.  Y,  449  (1876) ; 
Milliken  v.  Dehon,  27  N.  Y.,  364  (1863). 
But  authority  "to  close  the  account, 
without  notice,  by  purchase  or  sale,  at 
public  or  private  sale,"  does  not  waive 
right  to  notice  of  failure  of  margin  and 
demand  for  more.  Stenton  v.  Jerome, 
54  N.  Y,  480  (1873) ;  Keufield  v.  Latham, 


2  Cal.  Leg.  Rec,  235.  The  demand  for 
further  margin  may  be  waived,  and 
waiver  may  be  inferred  from  the  nego- 
tiations and  proposition.  Harris  v. 
Pryor,  18  N.  Y  Supp.,  128  (1892).  A 
common  form  of  the  contract  which 
the  broker  requires  the  customer  to 
sign  is  the  following : 

" hereby  agree  to  maintain  with 

you  at  all  times  a  margin  of  per 

centum  of  the  par  value  of  all  stocks 
and  bonds  against  which  you  have  made 

or  may  hereafter  make  advances  to , 

and  a  like  margin  on  stocks  or  bonds 
which have  borrowed  or  may  here- 
after borrow  through  you  to  make  de- 
liveries on  sales  made  for account 

or  otherwise. 

"  In  case margin  should  become 

impaired  and  the  same  is  not  promptly 
made  good  in  response  to  personal  no- 
tice or  notice  sent  by  wire  or  letter  and 

directed  to  usual  address,  you  are 

authorized  in  your  discretion  to  buy  or 
sell  at  the  New  York  Stock  Exchange 
or  at  public  or  private  sale,  without  fur- 
ther notice,  such  securities  as  may  be 
necessary  to  place  the  account  in  condi- 
tion satisfactory  to  you.  or  to  close  the 
same  entirely,  as  you  may  prefer. 

"  In  case  of  my  decease  you  are  hereby 
authorized  to  close  my  account  by  pur- 
chase or  sale  of  securities  as  the  same 
may  require.     " 

4  The  broker  Avill  be  protected  in  con- 
tinuing the  transaction  until  personal 
representatives  are  appointed.  Hess  v. 
Rau,  95  N.  Y.,  359  (18S4).  Cf.  Lacey  v. 
Hill,  L.  R,  8  Ch.  App.,  921  (1873). 


575 


§  460.] 


BROKERS  AND  THEIR  CONTRACTS. 


[CH.  XXV. 


these  notices  is  void,  and  not  binding  on  the  customer.1  The  fact 
that  a  panic  occurs,  or  unusual  fluctuations  of  the  market  happen, 
does  not  excuse  a  broker  from  giving  such  notice.2 

§460.  Customers  remedies  and  damages  herein. —  For  an  un- 
authorized sale  by  a  broker  of  stock  held  upon  a  margin,  the  cus- 
tomer has  ample  remedies.  He  may  claim  the  benefit  of  the  sale 
or  may  claim  the  value  of  the  stock.3  Or  the  customer  may  require 
the  broker  to  replace  the  stock,  and  upon  his  failure  so  to  do,  the 
customer  may  replace  it  himself  and  charge  the  broker  with  the 
loss.4  Or  the  customer  raav  recover  the  advance  in  the  market 
price  from  the  time  of  the  sale  up  to  a  reasonable  time  to  replace 
the  stock  after  notice  of  the  sale.'  The  unauthorized  sale  by  the 
broker  herein  is  not  necessarily  a  fraudulent  sale.fi  The  suit  should 
be  at  law,7  and  demand  and  tender  need  not  be  alleged.8 

Where  a  broker  bu}Ts  or  sells  stock  on  his  customer's  account  in 
violation  of  the  terms  of  his  contract,  and  thereby  makes  a  profit, 
the  customer  has  his  option  either  to  repudiate  the  transaction 
altogether  and  sue  for  damages,  or  he  may  adopt  it  and  claim  for 
himself  the  benefit  made  by  his  agent.9    It  has  been  held  that, 


1  Markham  v.  Jaudon,  41  N.  Y.  285 
(1869):  Taylor  v.  Ketchum,  35  How. 
Pr.,  289  (1861);  S.  G,  5  Robt,  507. 
Contra,  Appleman  v.  Fisher,  34  Mil.. 
540  (1871),  a  case  of  a  gold-broker ;  also 
Colkert  v.  Ellis.  10  Phil.,  375  (1875), 
where  both  parties  were  brokers  and 
knew  the  custom.  If  the  customs  are 
expressly  made  a  part  of  the  contract, 
insolvency  of  the  customer  authorizes 
sale  without  notice,  such  being  the  cus- 
tom. Lacy  v.  Hill,  L.  R„  18  Eq.,  182 
(1874). 

-Markham  v.  Jaudon,  41  N.  Y.,  235 
(1869);  Brass  v.  Worth,  40  Barb.,  648 
(1863);  Ritter  v.  Cushman.  7  Robt.  294 
(1867).     See,  also,  §  448. 

3  Taussig  v.  Hart.  58  X.  Y.,  425  (1874); 
Caswell  r.  Putnam,  N.  Y.  Daily  Reg., 
March  7,  1887;  Strong  v.  Nat'l,  etc., 
Ass'n,  45  N.  Y.  718  (1871). 

« Baker  v.  Drake,  53  N.  Y.,  211,  217 
(1873);  Colt  v.  Owens,  90  N.  Y,  368 
(1882). 

s  Colt  v.  Owens,  90  N.  Y,  368  (1882), 


418  (1881).  Cf.  Andrews  v.  Clerke.  3 
Bosw..  585  (1858). 

6  Stratford  v.  Jones,  97  N.  Y,  586 
(188 

"  Delevan  v.  Simonson,  3  J.  &  S.,  243 
(1873).  In  the  case  of  Butts  v.  Burnett,  6 
Abb.  Pr.  (N.  S.),  302  (1869),  involving  the 
arrest  of  a  broker  who  had  sold  the 
pledge  before  the  note  was  due,  the  court 
said  :  "  It  is  very  questionable,  I  think, 
whether  a  demand  after  default  in  pay- 
ment of  the  debt  for  which  property  is 
pledged  as  security  will  render  a  refusal 
to  deliver  the  pledged  property  a  tor- 
tious conversion  of  it.  No  doubt  the 
pledgor  can  redeem  upon  a  tender  of 
the  debt,  or  he  may  recover  the  differ- 
ence between  the  value  of  the  pledge 
and  the  debt.  But  to  lay  the  founda- 
tion for  an  action  for  commission,  I  am 
of  opinion  that  an  offer  and  demand 
must  be  made  on  the  day,  and  is  not 
sufficient  if  made  after  the  day  on  which 
the  debt  has  become  payable." 

8  Clark  t\   Meigs,   22    How.    Pr.,  240 


holding  that  prices  within  thirty  days    (1873);  13  Abb.  Pr.,  467. 
after  the  sale  is  a  reasonable  rule.     See,        "Kimber  i\  Barber,  L.  R.,  8  Chan.,  56 
also,   Gruman  v.   Smith,   81    N.  Y,  25    (1872);  Marsh  v.  Keating.  1  Bing.  N.  G, 
(1880);  Capron  v.  Thompson,  86  N.  Y.     198  (1834) ;  Taussig  v.  Hart,  49  N.  Y,  301 

576 


CH.  XXV.] 


BROKERS    AND    THEIR    CONTRACTS. 


[§  460. 


where  the  broker  fails  to  buy  according  to  the  instructions  of  his  cus- 
tomer, and  the  customer  suffers  a  loss  by  reason  of  the  failure,  the 
object  of  the  purchase  being  to  cover  a  short  sale,  the  measure  of 
damages  is  the  difference  between  the  price  at  which  the  stock  was 
sold  short  and  the  market  price  upon  the  day  when  the  order  was 
given  to  the  broker  to  buy  in.  In  other  words,  the  plaintiff  may 
in  such  a  case  recover  the  profits  which  he  would  necessarily  have 
made  had  his  order  been  properly  executed.1  And  the  rule  is  the 
same  when  the  loss  to  the  customer  results  from  the  failure  of  the 
broker  to  sell  as  instructed,  or  where  the  broker  sells  at  an  im- 
proper or  manifestly  unfavorable  time.2     A  customer  who  owns 


(1872) ;  S.  C,  58  N.  Y.,  425  (1874) ;  Pick- 
ering v.  Demeritt,  100  Mass.,  416  (1868) ; 
Day  v.  Holmes,  103  id.,  306  (1869).  For 
the  measure  of  damages  where  a  broker 
converts  his  customers  securities,  and 
then  is  unable  by  reason  of  his  insolv- 
ency to  replace  them,  see  Chamberlain 
v.  Greenleaf,  4  Abb.  New  Cas.,  92,  178. 
Sometimes  an  advance  in  the  price  of 
the  stock,  within  a  reasonable  time 
after  notice  of  the  conversion  is  re- 
ceived, is  allowed.  Gruman  v.  Smith, 
81  N.  Y.,  25  (1880).  See  §  460.  And 
what  is  a  reasonable  time  in  such  a  case 
is  a  question  for  the  jury.  Baker  v. 
Drake,  66  N.  Y,  518  (1876);  Stevens  v. 
Hurlbut  Bank,  31  Conn.,  146  (1862); 
Stewart  v.  Cauty,  8  Mees.  &  W.,  160 
(1841) ;  Field  V.  Lelan,  6  Hurl.  &  N.,  617 
(1861).  Cf.  Allen  v.  Dykers,  3  Hill,  593 
(1842);  6N.  Y.  Supp.,  137. 

1  In  an  action  to  recover  damages, 
where  a  firm  of  stock-brokers  sold  for 
a  customer,  upon  his  order  and  for  his 
account,  three  hundred  shares  of  stock, 
short,  at  186,  and  subsequently  without 
the  customer's  order  or  knowledge 
bought  in  stock  to  cover  the  sale,  and 
then  a  few  days  later,  the  stock  having 
declined  several  points,  the  customer 
ordered  them  to  cover  their  sale,  to 
which  order  no  attention  was  paid,  it 
was  held  that  the  proper  measure  of 
damages  was  the  difference  between  the 
price  at  which  the  stock  was  sold  short 
and  the  market  price  upon  the  day 
when  the  order  was  received  to  pur- 
chase, with  interest,  deducting  commis- 


sions, etc.  White  v.  Smith,  54  N.  Y., 
522  (1874).  See  Magee  v.  Atkinson,  2 
Mees.  &  W.,  440  (1837).  In  Allen  v.  Mc- 
Conihe,  124  N.  Y,  342  (1890),  the  court 
allowed  as  damages  against  a  broker 
who  delayed  selling  when  ordered  to 
sell,  the  difference  between  the  price 
when  the  order  was  given  and  the  price 
when  the  sale  was  actually  made. 

2  In  Harris  v.  Tumbridge,  83  N.  Y,  92 
(1880),  it  appears  that  the  plaintiff  pur- 
chased through  the  agency  of  the  de- 
fendant a  stock  option,  a  privilege 
known  as  a  "straddle,"  upon  which  the 
defendants  guarantied  that  the  fluctua- 
tions in  the  stock  during  the  pendency 
of  the  contract  should  amount  to  eight 
per  cent  On  the  next  day  after  the 
purchase  defendant  sold  the  stock 
short,  which  resulted  in  a  loss  to  the 
plaintiff,  who  had  at  the  time  of  the 
pui-chase  authorized  defendant,  as  her 
agent,  to  exercise  the  option.  As  to  the 
measure  of  damages  the  court  say : 
"  An  objection  is  taken  to  the  rule  of 
damages.  It  is  insisted  that  as  plaintiff 
never  gave  any  directions  to  '  put '  or 
'  call '  the  stock,  she  should  not  have 
recovered  as  if  she  had.  But  in  the  ab- 
sence of  such  directions  it  was  defend- 
ant's duty,  under  the  circumstances  of 
this  case,  as  we  have  already  said,  to 
have  closed  the  'straddle'  contract  by 
exercising  the  option  at  the  most  favor- 
able time,  and  to  have  acted  for  her  in 
that  respect  with  reasonable  care  and 
skill.  As  he  did  not  do  so,  she  is  en- 
titled to  recover  what  she  has  lost  by 


(37) 


577 


§  461.] 


BROKERS    AND    THEIR   CONTRACTS. 


[CH.  XX?. 


particular  certificates  of  stock  and  pledges  them  with  his  broker 
may  reclaim  such  certificates  from  the  broker's  assets  upon  the  in- 
solvency of  the  latter,  but  he  cannot  claim  any  particular  stocks 
which  the  broker  has  purchased  for  him,  even  though  he  is  able  to 
identify  them  as  being  the  ones  which  were  purchased  for  him,  in- 
asmuch as  his  equities  are  no  better  than  the  equities  of  other 
customers.1  "Where  a  party  telegraphs  to  sell  a  certain  stock,  the 
sale  to  be  "  short  "  and  speculative,  the  damages  for  failure  of  the 
telegraph  company  to  deliver  the  message  are  too  remote  and  spec- 
ulative even  though  the  stock  goes  down  on  the  market.2 

§  461.  Brokers'  remedies  and  damages  herein. —  If  a  broker  sells 
out  his  customer's  stock  without  notice,  he  cannot  recover  any  loss 
from  the  customer,  even  though  the  broker's  loss  is  greater  than 
the  customer's  usual  measure  of  damages  for  the  conversion.3  But 
where  the  broker's  act  is  strictly  according  to  law,  he  is  of  course 
entitled  to  recover  from  his  customer  any  loss  that  has  been  sus- 
tained in  excess  of  the  margin.4 

It  is  a  well-settled  rule  that  if  a  broker,  acting  in  good  faith 
and  without  default,  incurs  personal  loss  or  damage  in  the  course 


his  neglect ;  and  the  price  of  the  stock 
from  day  to  day  during  the  running  of 
the  option  having  been  shown,  it  was 
for  the  jury  to  determine  that  amount." 
Cf.  Speyer  v.  Colgate,  4  Hun,  622  (1875). 
"Where  a  broker  sold  stock  for  his  cus- 


Spencer,  Gl.  Cf.  Stewart  v.  Drake,  4(1 
X.  Y..  449  (1871).  In  Baker  v.  Drake, 
supra,  where  a  broker  unauthorized  to 
do  so  sold  stock  which  he  was  carrying 
for  his  customer,  it  was  held,  in  an  ac- 
tion for  damages,  that  the  measure  of 


tomer  without  authority  and  in  viola-    damages  was  the  advance  in  the  market 


tion  of  an  agreement  not  to  sell,  and  it 
appeared  that  for  thirty  days  after  no- 
tiqe  was  given  to  the  customer  of  the 
sale  the  stock  could  have  been  pur- 
chased in  the  market  for  the  price  at 


price  from  the  time  of  the  sale  up  to  a 
reasonable  time  to  replace  it  after  notice 
of  sale. 

1  Sillcocks  v.  Gallaudet,  66  Hun,  522 
(1892).      As    to    sub-brokers    or    corre- 


which  it  was  sold  or  even  for  less,  it  spondent  brokers,  see  §  456. 

was  held,  in  an  action  to  recover  dam-  2  Cahn  v.  W.  U.  Tel.  Co.,  48  Fed.  Rep., 

ages,  that  the  customer,  having  had  a  810(1891);  46  id.,  40.     The  measure  of 

reasonable  time  after  he  was  notitied  of  damages  for  error   in   the  delivery  of 

the  sale  of  his  stock  to  replace  it  at  the  telegraph  messages  to  buy  stock  is  the 


same  or  a  lower  price,  was  entitled  only 
to  nominal  damages.  Colt  i\  Owens,  90 
N.  Y.,  368  (1882).  Cf.  Randall  v.  Al- 
bany City  National  Bank,  1  N.  Y.  State 
Rep.,  592  (Sept.,  1886).  See,  also,  McAr- 
thur  v.  Seaforth,  2  Taunt,  257.  But 
when  the  action  of  the  broker  is  fraud- 
ulent the  customer  may,  upon  obtain- 
ing knowledge  of  the  facts,  repudiate 
the  whole  transaction  and  recover  back 
the  money  paid.  Levy  v.  Loeb,  89  N.  Y., 
386  (1882) ;  reversing  S.  C,  15  Jones  & 


"  difference  between  the  market  value 
of  the  shares  at  the  time  when  the  dis- 
patch should  have  been  delivered  and 
the  sum  paid  for  them  in  the  market  on 
the  receipt  of  the  message."  Pearsall 
v.  Western  U.  Tel.  Co.,  124  N.  Y..  356 
(1890). 

3  Gillett  v.  Whiting,  120  N.  Y.,  402 
(1890).  Contra,  Gruman  v.  Smith,  81 
N.  Y.  25  (1880).  See,  also,  Capron  v. 
Thompson,  86  N.  Y.,  418  (1881),  and  g  458 

*  Schepeler  v.  Eisner,  3  Daly,  11  (1869). 


578 


en.  XXV.] 


BROKERS    AND    THEIR    CONTRACTS. 


[§  4G2. 


of  transacting  the  business  of  his  agencv,  or  in  following  the  in- 
structions  of  his  principal,  he  may  recover  from  the  principal  full 
compensation  therefor.1  Accordingly,  where  a  broker  buys  stock 
upon  his  customer's  order  and  pays  for  it,  and  upon  a  decline  in 
value  the  customer  refuses  to  accept  it,  the  broker  may  recover  the 
price  paid  by  him,  and  not  merely  the  difference  between  that 
price  and  the  market  value  on  the  day  of  his  demand.2 

§  462.  Brokers'  customs  and  usages. —  It  has  been  a  greatly  dis- 
puted question  as  to  how  far  and  when  a  custom  or  usage  among 
stock-brokers  or  at  stock  exchanges  may  enter  into  and  govern 
stock-brokers'  contracts.  At  an  early  day  the  rule  was  laid  down 
by  the  English  courts,  that  he  who  buys  or  sells  stock  through  a 
stock-broker  must  be  considered  as  dealing  with  him  according  to 
the  usages  of  the  market  in  which  he  deals,  and  the  customs  which 
prevail  in  relation  to  that  species  of  business.3     The  American  rule 


1  Sedgwick  on  Damages  (7th  ed.),  86 ; 
Lindley  on  Partnership  (4th  ed.),  731, 
where  the  English  authorities  upon  the 
right  of  a  stock-broker  to  indemnity 
from  his  principal,  and  the  measure  of 
damages  in  such  cases,  are  collected 
and  fully  considered;  citing  Sutton  v. 
Tatham,  10  Ad.  &  E.,  27  (1889);  Bay- 
liffe  v.  Butterworth,  1  Exch.,  425  ; 
Bowlby  v.  Bell,  3  C.  B..  284 ;  Bayley  V. 
Wilhins,  7  id.,  886  (1849);  McEwen  v. 
Woods,  2  Car.  &  K.,  330;  Taylor  v. 
Stray,  2  C.  B.  (N.  S.),  175;  Stray  v.  Rus- 
sell, 1  El.  &  EL,  888 ;  Chapman  v.  Shep- 
herd, L.  R,  2  C.  P.,  228 ;  Biederman  v. 
Stone,  id.,  504 ;  Mollett  v.  Robinson,  L.  R, 
7  H.  L.,  802 ;  S.  C,  7  C.  P.,  84 ;  5  C.  P., 
646 ;  Pollock  v.  Stables,  12  Q.  B.,  765 ; 
Lacey  v.  Hill,  8  Chan..  921 ;  Dos  Passos 
on  Stock-brokers,  123,  802. 

2Giddings  v.  Sears,  103  Mass.,  311. 
Cf.  Field  v.  Kinnear,  4  Kan.,  470. 
Where  there  is  a  rescission  of  a  contract 
for  the  sale  of  stock,  the  measure  of  the 
damages  is  the  value  of  the  stock  at  the 
time  and  place  of  the  proposed  delivery. 
White  v.  Salisbury,  33  Mo..  150  (1862) ; 
Vance  v.  Tourne,  13  La.,  225. 

3  In  the  case  of  Biederman  v.  Stone, 
L.  R,  2  Com.  PL,  504  (1867),  the  court 
says :  "  It  has  been  held  in  a  great  num- 
ber of  cases  that  persons  buying  or  sell- 
ing stock  or  shares  through  members  of 
the  stock  exchange  are  bound  by  the 


rules  which  govern  the  transactions  of 
that  body."  To  the  same  effect,  see 
Bayliffe  v.  Butterworth,  5  Railw.  Cas., 
283,  per  Parke,  B. ;  Mitchell  v.  Newhall, 
15  Mees.  &  W.,  308  (1846);  Maxted  v. 
Paine  (2d  action),  L.  R.,  6  Ex.,  132  (1871); 
Grissell  v.  Bristowe,  L.  R.,  4  C.  P..  36,  47 
(1868) ;  Appleman  v.  Fisher,  34  Md.,  540 
(1871);  Coles  v.  Bristowe,  L.  R.,  4  Ch. 
App.,  3;  Stray  v.  Russell,  1  El.  &  EL, 
888  (1859) ;  Davis  v.  Maycock,  L.  R,  4  Ex., 
373  (1869);  Nickalls  v.  Merry,  L.  R.  7 
H.  L.,  530  (1875).  Cf.  Pollock  v.  Stables, 
12  Q.  B.,  765  (1848) ;  Taylor  v.  Stray,  2 
C.  B.  (N.  S.),  197  (1857) ;  Morrice  v.  Hun- 
ter, 14  L,  T.,  897  ;  Kingsbury  v.  Kirwin, 
43  Super.  Ct,,  451  (1878);  77  N.  Y.,  612. 
But  the  usage  must  not  be  illegal.  Robin- 
son v.  Mollett,  L.  R,  7  H.  L.,  802,  818, 
826  (1874);  Hodgkinson  v.  Kelly.  37 
L.  J.  (Ch.),  837  (1868);  Taylor  v.  The 
Great  Indian  Peninsular  R'y  Co.,  4  De  G. 
&  J.,  559,  573  I 1859).  ^or  be  the  custom 
established  by  that  one  transaction. 
Westropp  v.  Solaman,  8  C.  B.,  345  (1849). 
It  must  be  reasonable.  Goldschmidt  v. 
Jones,  32  L.  T.  (N.  S.),  220.  The  usage 
may  show  how  the  business  is  to  be 
transacted,  but  must  not  be  unreason- 
able. Rosenstock  v.  Tormey,  32  Md..  169 
(1869),  holding  also  that  the  broker's 
correspondence  with  his  city  broker  is 
not  competent  to  prove  purchases  and 
sales.     A  usage  that  is  contrary  to  an 


579 


§  462.] 


BROKERS    AND    THEIR    CONTRACTS. 


[CH.  XXV. 


is  more  guarded,  and  allows  usages  of  brokers  to  interpret  the  lan- 
guage of  the  contract,  and  where  it  is  obscure  to  ascertain  its  nat- 
ure and  extent,  but  not  to  vary  its  terms,  introduce  new  conditions 
or  authorize  acts  contrary  to  its  provision.1  The  customer  ma}', 
however,  b}T  express  agreement,  waive  his  common-law  rights  and 
allow  usage  to  govern  the  transaction.2 


act  of  parliament,  requiring  the  broker 
to  notify  his  customer  of  the  particular 
numbers  of  the  shares  purchased  on  his 
account,  is  void.  Perry  v.  Barnett,  L.  R, 
15  Q.  B.  D.,  388  (1885).  Cf.  Seymour  v. 
Bridge,  L.  R,  14  Q.  B.  D.,  460  (1885). 

'Parsons  v.  Martin,  77  Mass.,  Ill 
(1858);  Hopper  v.  Sage,  112  N.  Y.,  530 
(1889);  Lombardov.  Case,  30  How.  Pr., 
117  (1865);  1  Add.  Contr.  (4th  Araer., 
8th  Eng.,  ed.,  1883),  marg.  p.  GO,  c.  2 ; 
21  Am.  L.  Reg.  (N.  S),  176.  Cf.  Wi- 
nans  v.  Hassey,  48  Cal.,  634  (1874> 
The  case  of  Baker  v.  Drake.  60  N.  i '., 
•~>1>  (1876),  holds  that  stock-brokers' 
■  cannot  add  to  or  make  part  of 
the  contract  Cf.  Horton  v.  Morgan, 
19  N.  Y.,  170  (1859;;  Peckham  n  Keteh- 
um,  5  Bosw.,  506  (1859);  Whitehouse  v. 
Moore,  13  Abb.,  142  (1861).  If  there  is 
doubt  as  to  the  existence  of  the  usage 
the  question  is  for  the  jury.  Dent  v. 
Nickalls,  29  L.  T.,  636  (1873).  Upon  the 
effect  of  usage  in  other  transactions, 
see  Corn  Ex.  Bank  v.  Nassau  Bank,  91 
N.  Y.,  74  (1883);  Richmond  v.  Union 
Steamboat  Co.,  87  N.  Y.,  240  (1881); 
Walls  v.  Bailey,  49  N.  Y.,  464  (1872  j 
Vail  v.  Rice.  5  N.  Y,  155  (1851) ;  Dela- 
field  v.  State  of  Illinois.  26  Wend..  192 
(1841);  Dawson  v.  Kittle,  4  Hill,  107 
(1843):  Boardman  v.  Gaillard,  1  Hun, 
217  (1874);  Minnesota  C.  R'y  Co.  v.  Mor- 
gan, 52  Barb.,  217  (1868);  Sipperly  v. 
Stewart,  50  Barb.,  62,  68  (1867);  Duguid 
v.  Edwards,  50  Barb.,  288  (1867) ;  Haskms 
v.  Warren,  115  Mass.,  514,  536  (1- 
Dickinson  v.  Gay.  89  Mass.,  29;  Parrott 
v.  Thatcher,  26  Ma-..  4'J'i  1 1830);  Green- 
leaf  v.  Moody,  13  Allen,  363  (1866); 
Tilley  v.  County  of  Cook,  103  U.  S..  155 
(1880);  National  Bank  v.  Burkhardt.  100 
U.  S.,  686  (1879);  Vermilye  r.  Adams 
Ex.  Co.,  21  Wall.,  138  (1874);   Forrester 


v.  Boardman,  1  Story,  43  (1839) :  Oelrichs 
v.  Ford,  23  How.,  49  (1859);  Renner  v. 
Bank  of  Columbia.  9  Wheat.,  582  (1824) ; 
Cape  v.  Dodd,  13  Pa.  St,  33  (1850);  Cor- 
bett  v.  Underwood,  83  111.,  324  (1876); 
Phillips  r.  Moir,  69  111.,  155  (1873) ;  Bissell 
v.  Ryan,  23  111.,  566  (i860):  Williams  v. 
Gilman,  3  Maine,  276  (1825);  Partnd-e 
v.  Forsythe,  29  Ala.,  200  (1856);  Halwer- 
son  v.  Cole,  1  Spear  (S.  C),  321  (1843); 
Hagg  v.  Snaith,  1  Taunton,  347  (1808); 
Gibson  v.  Crick,  1  H.  &  C,  142  1 18 
Fleet  v.  Murton,  L.  R,  7  Q.  B.,  126 
Brokers'  usages  cannot  vaiv 
lixed  principles  of  law.  Hopper  v.  Sage, 
2n  X.  E.  Repi,  350  (N.  Y.,  1889). 

2  Van  Brunt,  J.,  in  Robinsou  v.  Nor- 
ris,  .->1  Bow.  Pr..  442  (1874),  says,  in  his 
clear  and  decisive  diction  :  "It  has  been 
settled  by  our  court  of  appeals  that  no 
custom  among  brokers  can  deprive  par- 
ties of  rights  which  the  law  gives  them, 
but  they  have  not  decided  that  these 
rights  may  not  be  waived  by  agree- 
ment I  think  it  perfectly  clear  that  if 
the  broker  informs  his  customer  of  the 
terms  upon  which  he  will  act  for  him 
as  his  broker,  and  in  view  of  that  no- 
tice the  customer  gives  an  order,  he  is 
bound  by  the  terms  on  which  the  broker 
proposed  to  act  for  him."  See,  also, 
Baker  v.  Drake,  66  N.  Y.  578  (1876). 
See,  in  general,  Colket  v.  Ellis,  32  Leg. 
Int,   82  Sutton   v.   Tatham,    10 

Ad.  &  El.,  25  (1839);  Bayley  ?•.  Wilkins. 
18  L.  J.  (C.  P.),  273  (1849);  Duncan  v. 
Hill.  L.  R,  6  Ex.,  255  (1871);  Sheppard 
r.  Murphy,  Ir.  L.  R„  2  Eq.,  569  (1868); 
Bowring  v.  Shepherd,  L.  R.,  6  Q.  B., 
309  (1871);  Evans  r.  Wain,  71  Pa.  St.. 
69  (1872) ;  Sweeting  v.  Pearce,  7  C.  B. 
N.  S.),  449  (1859);  Shaw  v.  Spencer,  100 
Mass.,  382  (1868);  Day  v.  Holmes,  103 
Mass.,  306  (1869). 


580 


CHAPTER  XXVI. 


PLEDGES  AND  MORTGAGES  OF  STOCK 


463.  Definitions  of  pledge,  mortgage 

and  lien. 

464.  Mortgages  and  pledges  of  stock. 

465.  How  a  pledge  of  stock  arises  or 

is  made. 

466.  Pledgee  may  have  the  stock  reg- 

istered in  his  own  name  or  the 
name  of  another. 

467.  Stock-broker    purchasing    stock 

for  a  customer  on  a  margin  is 
a  pledgee. 

468.  Miscellaneous   rights  of  pledgee 

and  pledgor. 

469.  Pledgee  need  not  retain  or  return 

to  the  pledgor  the  identical 
certificates  or  shares  of  stock 
which  were  pledged,  but.  must 
have  equal  quantity  always  on 
hand. 

470.  Pledgee's    liability  on    subscrip- 

tion and  statutory  liability  on 
stock. 


471.  Pledgee  has  no  right  to  sell  or 

repledge  the  stock,  even  tem- 
porarily, except  upon  notice, 
unless  the  debt  is  assigned 
with  the  stock. 

472.  Purchasers  or  pledgees  of  stock 

from  pledgee  with  notice  are 
not  protected. 

473.  Bona    fide    repledgees    or    pur- 

chasers of  pledged  stock  are 
protected. 

474.  Pledges  by  agents,  trustees,  ex- 

ecutors, etc.,  legally  and  in 
breach  of  trust. 

475.  Pledgor's  remedies. 

476.  Pledgee's    remedies    when    debt 

secured  is  not  paid. 

477.  Notice  of  sale  of  stock  by  pledgee 

to  apply  to  debt  secured  — 
Waiver  of  notice. 

478.  Formalities  of  sale. 

479.  Pledgee  himself  cannot  purchase 

at  the  sale. 


§463.  Definition  of  pledge,  mortgage  and  lien. —  A  pledge  may 
be  defined  to  be  a  delivery  of  personal  property  as  a  security  for 
some  debt  or  engagement.  A  mortgage  of  personalty,  on  the 
other  hand,  is  a  sale  with  the  condition  attached,  that,  if  the  mort- 
gagor performs  some  act,  the  sale  shall  be  void.  In  a  pledge  the 
title  remains  in  the  pledgor,  and  the  pledgee  has  a  special  property 
in  the  thing  pledged.1  In  a  mortgage  the  title  passes  to  the  mort- 
gagee, subject  to  being  revested  in  the  mortgagor  upon  payment 
of  the  debt.  In  pledges  the  thing  pledged  must  be  delivered  to 
the  pledgee.  In  mortgages,  generally,  the  possession  of  the  thing 
mortgaged  remains  with  the  mortgagor. 

A  pledge  differs  also  from  a  lien.  A  pledge,  by  implication, 
gives  the  pledgee  a  power  to  sell  on  due  notice,  in  case  the  debt  is 
not  paid  at  maturity,  while  a  lien  gives  merely  the  power  of  de- 
tention until  the  debt  is  paid.2 

§  464.  Mortgages  and  pledges  of  stoclc. —  Shares  of  stock  may  be 
the  subject  of  a  mortgage  or  pledge.3     A  mortgage  of  stock,  how- 

1  See  Parsons  on  Contracts,  I,  p.  569 ;        s "  Nothing  is  better  settled  than  that 
II,  p.  113;  III,  p.  272.  shares  in  the  capital  stock  of  a  corpora- 

2  Donald  v.  Suckling,  L.  R,  1  Q.  B.,  604     tion  are  the  subject  of  pledge."    Dayton 

581 


§  464.] 


PLFDGE    OF    STOCK. 


[ch.  xxvr. 


ever,  is  not  often  made ;  and,  unless  there  is  a  clear  intent  to  the  con- 
trary, the  courts  will  treat  the  transaction  as  a  pledge  rather  than 
a  mortgage.1  In  fact,  it  is  difficult  to  ascertain  from  the  cases  how- 
shares  of  stock  may  be  mortgaged  ;  and  a  few  early  decisions,  which 
held  certain  transactions  to  be  mortgages,  would  to-day  be  held 
to  be  pledges.2     There  are  but  few  clear  cases  of  a  mortgage  of  stock 


Nat'l  Bauk  v.  Merchants'  Nat'l  Bank,  37 
Ohio  St.,  208  (1881).     "  It  was  formerly 
doubted  whether  it  [stock]  could  be  the 
subject  of  a  pledge,  but  it  is  now  held 
that  it  can  be."      Newton  v.   Fay,    92 
Mass.,  505  (1865).     The  pledge  may  be 
for  a  running  liability,  and'  is  not  re- 
leased by  an  extension  of  any  particu- 
lar debt.     Merchants'  Nat'l  Bank  v.  Hall, 
83  N.   Y.,   338  (1881).      Stock   may    be 
given  by  the  debtor  to  his  creditor  to 
sell  for  the  benefit  of  the  creditor,  and 
the  surplus  to  be  returned  to  the  debtor. 
Beckwith   w,   Burrough,    13  R.    I.,    294 
(1881).     This  probably  makes  the  cred- 
itor the  agent  of  the  debtor.    The  pledge 
may  he  to  secure  the  carrying  out  of  a 
contract.     Vaupell    r.    Woodward,    2 
San. If.   Ch.,  143  (1844).     If   the  loan  se- 
cured by  the  pledge  of  stock  is  usurious. 
the  pledgor  may  recover  back  the  stock 
without  payment    The  pledge  is  void. 
Couslan.l  v.   Davis.  5  Bosw.,  619  (1859). 
If  stock  is  pledged  to  secure  an  usurious 
note,  the  pledgor   may   under   the  New 
York  law  sue  to  recover  back  the  stock 
without  paying  the  debt    Dickson  r.  Val- 
entine.'! N.Y.Supp.,  540  (1889);  also§  166. 
The  pledge  of  stock  may  provide  that, 
for    part    payments    of   the    deht,    the 
pledgor  may  withdraw  part  of  the  stock 
pledged.     First  Nat'l  Bank   r.  Root,  8  N. 
E.   Rep,  105  (Ind.,    1886).     If  a  person 
agrees  to  deposit    stock   to  secure  the 
debt  of  another  and  fails  to  do  so,  he  is 
liable,  not  for  the  debt,  but  for  the  value 
of  the  stock.     Appeal  of  American,  etc.. 
Co.,  12  Atl.  Rep,  270  (Pa.,  18s;  .      \<  to 
pledges  to  secure  parties  who  advance 
money  to  the  company,  see  ch.  XX  and 
§76. 

'Newton  v.   Fay,    supra;  Nabring  >: 
Bank  of  Mobile,  58  Ala.,  204  (1877) ;  Mer- 


chants' Bank  v.  Cook,  4  Pick.,  405  (1826) ; 
Mechanics',  etc.,  Association  v.  Conover, 
14  N.  J.  Eq.,  219  (1862);  Doak  r.  Bank 
of  the  State,  6  Ired.  L.,  309  (1846).  In 
England  security  is  given  by  a  pro. 
called  a  sale  with  a  contract  of  repur- 
chase. The  court  holds  that  this  is  not 
a  pledge.  "  An  essential  term  of  a 
pledge  is  that  on  fulfillment  by  the 
pledgor  of  the  conditions  of  the  bar- 
gain, commonly  called  redemption,  the 
pledgee  is  bound  to  hand  back  to  the 
pledgor  the  very  thing  deposited  with 
him."  Whereas  in  a  sale  and  contract 
of  repurchase,  the  identical  property  in 
numbers,  eta,  need  not  be  returned. 
Simmons  r.  Joint,  etc.,  Bank,  62  L.  T. 
Rep.,  427  (1890). 

2  Thus,    in   Huntington    V.    Mather.   2 
Barb..  538  (1848),  the  court  Bay:  "There 
are   two  leading    considerations   to  be 
regarded   in   determining   whether  the 
transaction  is  a  pledge  or  a  mortgage, 
namely,  the  title  and  the  possession.     If 
it  is  a  mortgage,  the  legal  title  pass,  s  to 
and  is  vested  in  the  creditor.     With  a 
pledge  it  is  different;  the  legal    title, 
until  a  sale  on  default  of  payment  or  re- 
demption,  continuing   in   the    pledgor. 
.     .     .     The    essential   difference  as   to 
matter  of  right  is  that  in  one  the  title 
passes  and  in  the  other  it  does  not    But 
the  difference  in  substance  and  fact  is 
that,  in  the  case  of  a  pawn  or  pledge, 
the  possession  must  pass  out  of  the  paw- 
nor, but  in  the  case  of  a  mortgagor  it 
need  not."    The  court,   however,  influ- 
enced probably  by  the  equities  of  the 
case,  held  the  transaction  to  be  a  mort- 
gage, and  that  the  right  of  the  debtor  to 
redeem  was  barred  by  the  ten-year  stat- 
ute of  limitations.     In  the  case  of  Smith 
v.  49  and  56  Quartz  Win.  Co..  14  Cal.. 


582 


€H.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  464. 


to  be  found.  It  seems  that  a  formal  instrument  of  chattel  mort- 
gage of  stock,  duly  executed  and  registered  at  the  municipal  clerk's 
office,  as  required  by  law  in  case  of  chattel  mortgages,  would  not 
constitute  an  effectual  mortgage  of  stock,  and  the  mortgagee  would 
not  be  protected  where  he  does  not  receive  the  certificate  of  stock 
from  the  mortgagor,  or  does  not  obtain  a  registry  of  transfer  on 
the  corporate  books.1     Where  a  railroad  company  owns  shares  of 


242  (1859),  the  court  held  the  transaction 
to  be  a  mortgage  rather  than  a  condi- 
tional sale  of  the  stock.  The  question 
of  pledge  was  not  considered.  Manns 
v.  Brookville  Nat'l  Bank,  73  Ind,  243 
(1881),  speaks  of  the  transaction  as  a 
mortgage ;  and  Williamson  v.  New  Jer- 
sey Southern  R.  R.  Co.,  26  N.  J.  Eq., 
398  (1875),  says  that  such  a  mortgage 
need  not  be  recorded  in  the  municipal 
clerk's  office,  as  required  by  the  chattel 
mortgage  act.  In  both  cases  the  trans- 
action might  better  have  been  treated 
as  a  pledge.  In  Adderly  v.  Storm,  6 
Hill,  624  (1844),  the  court  said  :  "  I  have 
already  said  that  this  was  not  a  pawn 
or  pledge  of  the  stock ;  neither  was  it 
strictly  a  mortgage."  At  the  present 
day  it  would  be  held  to  be  a  pledge.  Wil- 
son v.  Little,  2  N.  Y.,  443  (1849);  Has- 
brouck  v.  Vandervoort,  4  Sand.,  74 
(1850).  In  the  case  of  Brewster  v.  Hart- 
ley, 37  Cal.,  15  (1869),  the  court  say: 
"  The  transfer  in  writing  of  shares  of 
stock  not  only  does  not  prove  that  the 
transaction  is  not  a  pledge,  but  the 
stock,  unless  it  is  expressly  made  assign- 
able by  the  delivery  of  the  certificates, 
cannot  be  pledged  in  any  other  man- 
ner. In  the  case  of  Thompson  v.  Hol- 
laday,  14  Pac.  Rep.,— (Oreg.,  1887),  a  chat- 
tel mortgage  on  shares  of  stock  was  in- 
volved. It  was  declared  void  because 
it  was  given  to  a  receiver  who  pre- 
viously held  the  stock  as  receiver.  Some- 
times a  chattel  mortgage  of  stock  arises 
where  a  railroad  mortgage  covers  not 
only  real  estate,  but  also  all  personal 
property,  bonds  and  stock  which  ai*e  or 
shall  be  owned  by  the  mortgagor  corpo- 
ration. 

1  The   clearest  ax  d  most  satisfactory 


case  is  Spalding  v.  Paine's  Aduvr,  81 
Ky.,  416  (1883),  where  a  chattel  mort- 
gage of  a  share  of  stock  was  duly  re- 
corded in  the  proper  county,  the  mort- 
gagor retaining  the  certificate  of  stock. 
The  mortgagor  subsequently  sold  and 
transferred  the  certificate  of  stock  to  a 
bona  fide  purchaser.  The  court  held 
that  the  recording  of  the  mortgage  was 
of  no  avail,  that  there  could  be  no  mort- 
gage of  choses  in  action,  and  that  the 
bona  fide  transferee  took  the  stock. 
Pryor,  J.,  well  says :  "  Much  of  the 
business  of  the  country  is  conducted  on 
the  faith  of  the  pledge  of  such  stock  as 
collaterals;  and  to  adjudge  that  the 
holder  of  the  stock  by  transfer  on  the 
books  of  the  corporation,  or  by  indorse- 
ment and  delivery  by  the  owner,  is  sub- 
ordinate m  his  claim  to  the  mortgagee, 
upon  the  doctrine  of  constructive  notice, 
would  paralyze  trade  and  open  a  wide 
field  for  the  fraudulent  disposition  of 
such  valuable  interests  at  the  expense 
of  honest  and  confiding  purchasers." 
Cf.  Manns  v.  Brookville  Nat'l  Bank,  72 
Ind.,  243  (1881);  Foster  v.  Potter,  37  Mo., 
525 ;  Vowell  v.  Thompson,  3  Cranch,  428 
(1859).  See,  also,  Holyoke  v.  McMurtry, 
50  N.  W.  Rep.,  767  (Neb.,  1891).  A  mort- 
gage of  stock  is  valid  as  between  mort- 
gagor and  mortgagee  without  a  trans- 
fer of  certificates.  The  mortgagee  after 
foreclosure  may  compel  the  corporation 
to  transfer  without  making  the  trans- 
feree a  party.  Tregear  v.  Etiwanda, 
etc.,  Co.,  18  Pac.  Rep.,  658  (Cal.,  1888). 
Stock  may  be  mortgaged  and  no  deliv- 
ery of  the  certificates  need  be  made. 
Though  a  foreclosure  is  made  irregu- 
larly, the  mortgagor  may  ratify  it,  or 
may  be  barred  by  the  six-year  statute 


583 


§  404.] 


PLEDGE    OF    STOCK. 


[CH.  XXVI. 


stock  in  an  elevator  compan}',  such  stock  is  not  subject  to  the  gen- 
eral mortgage  executed  by  the  railroad  company.1  A  pledge  of 
stock  without  a  delivery  is  not  strictly  and  legally  a  pledge.  It 
"may  have  amounted  to  a  mortgage,  but  it  could  amount  to  noth- 
ing more ;  and  if  a  mortgage,  it  did  not  place  the  mortgagee  in 
possession,  but  gave  him  merely  a  naked  right  to  have  the  prop- 
erty appropriated  and  applied  to  the  payment  of  his  debt." 2  A 
mere  direction  to  the  corporation  cannot  constitute  a  pledge.3  But 
where  no  certificate  has  been  issued  to  the  stockholder  he  may 
pledge  the  stock  by  an  instrument  in  writing.4  Where,  on  the 
other  hand,  the  certificate  of  stock  is  delivered  to  the  creditor  as 
security,  it  is  evident  that  possession  of  the  property  is  given  to 


of  limitations.     Campbell  v.  "Woodstock 
Iron  Co.,  3  S.  Rep.,  369  (Ala.,  1887). 

1  Humphreys  v.  McKissock,  140  U.  S., 
304  (1891).  A  chattel  mortgage  does 
not  include  shares  of  stock,  although 
broad  enough  in  its  terms  to  do  so, 
where  both  parties  testify  that  it  was 
not  the  intent  to  include  the  stock,  and 
the  mortgagee  allowed  the  mortga- 
gor's assignee  to  take  away  the  stock. 
Younkin  v.  Collier,  47  Fed.  Rep.,  571 
(1891). 

2 Christian  v.  Atlantic,  etc.,  R  R.  133 
U.  S.,  233,  242  (1890).  A  pledge  to  se- 
cure the  debt  of  another  is  not  waived 
by  temporarily  allowing  that  other  to 
have  the  pledge  for  a  short  time.  Wing 
V.  Holland  T.  Co.,  5  N.  Y.  Supp.,  382 
(1889).  An  agreement  that  certain  bonds 
in  the  possession  of  a  third  party  shall 
be  held  in  pledge  is  not  a  good  pledge. 
Actual  delivery  is  necessary  to  consti- 
tute a  pledge.  Seymour  v.  Hendee,  54 
Fed.  Rep.,  563  (Vt.,  1893).  Where  stock 
is  placed  in  a  trustee's  hands  and  a 
trustee's  certificate  is  taken  therefor,  a 
pledge  of  the  trustee's  certificate  is  not 
a  pledge  of  the  stock  sufficient  to  cut  off 
subsequent  attachments  of  the  stock. 
Bidstrup  v.  Thompson,  45  Fed.  Rep.,  452 
(1891).  "Where  one  party  loans  money  to 
another  party  to  buy  stock  in  a  certain 
company,  such  stock  to  be  delivered  to 
the  former  party  in  pledge,  and  the  lat- 
ter party  uses  the  stock  for  another  pur- 
pose, the  loan  of  the  money  is  not  a 


mere  loan,  but  the  money  is  impressed 
with  a  trust,  and  this  trust  follows  the 
stock  except  as  against  bona  fide  hold- 
ers. Barnard  v.  Hawks,  16  S.  E.  Rep, 
329  (N.  C,  1892).  A  pledge  made  by 
a  separate  written  assignment  of  the 
stock,  the  certificates  remaining  in  the 
pledgor's  possession  and  continuing  to 
stand  in  his  name  on  the  corporate 
books,  is  not  good  as  against  the  pledg- 
or's receiver  who  takes  possession  of  the 
certificates.  Atkinson  v.  Foster,  25  N.  E. 
Rep,  528  (111.,  1890). 

aCumming  r.  Prescott,  2  Y.  &  C. 
(Ex.),  488  (1837);  Lallaude  v.  Ingram,  19 
La.  Ann.,  364  (1867),  the  court  saying: 
"In  all  cases  of  pledge,  the  pledgee 
must  be  put  in  possession  of  the  thing 
pledged ;  and,  if  it  be  a  claim,  the  evi- 
dence of  the  obligation  must  be  trans- 
ferred and  delivered.  Shares  in  stock  can- 
not be  pledged  unless  they  be  evidenced 
by  certificates  which  must  be  transferred 
and  delivered  to  the  pledgee."  But  see 
§  465. 

*  First  Nat  Bank  v.  Gifford,  47  Iowa. 
575  (1877),  where  such  a  pledgee  was 
protected  against  a  third  person  who 
had  advanced  the  money  to  the  pledgor 
to  purchase  the  stock.  See,  also,  Brig- 
ham  v.  Mead,  92  Mass.,  245  (1865);  Thorp 
v.  Woodhull,  1  Sand.  Ch„  411  (1844). 
Unissued  stock  may  be  pledged  by  the 
person  entitled  to  it  When  issued,  it 
at  once  becomes  a  pledge.  Appeal  of 
Harris,  12  Atl.  Rep.,  743  (Pa.,  1888). 


584 


CH.  XXVI.]  PLEDGE    OF    STOCK.  [§  465. 

the  creditor,  but  that  the  debtor  still  considers  the  stock  to  be  his. 
Such  a  transaction  is  a  pledge  and  a  mortgage;  and  consequently, 
since  the  giving;  0f  stock  certificates  as  security  is  almost  invariably 
effected  by  a  delivery  of  the  certificates,  a  mortgage  of  stock  may 
be  said  to  be  possible,  but  not  probable  or  even  sensible.  The  de- 
livery of  a  certificate  of  stock  with  a  blank  power  of  attorney,  as 
collateral  security,  constitutes  a  pledge  and  not  a  mortgage;1  and 
the  same  rule  prevails  even  though  an  absolute  transfer  or  registry 
is  made  on  the  corporate  books.2 

§  465.  How  a  pledge  of  stock  arises  or  is  made. —  A  pledge  of 
stock  is  general!}'-  made  by  a  delivery  of  the  certificates  of  stock 
indorsed  in  blank  to  the  pledgee,  and  a  memorandum  in  writing 
to  the  effect  that  the  stock  is  held  in  pledge  is  generally  signed  and 
given  to  the  pledgor,  and  a  copy  thereof  attached  to  the  certificates 
of  stock.  In  a  few  cases  a  mere  delivery  of  the  certificate  without 
a  written  transfer  has  been  held  sufficient  to  constitute  a  pledge." 
A  mere  delivery  of  the  certificate  of  stock  indorsed  in  blank,  how- 
ever, is  sufficient  to  constitute  a  pledge,  without  any  memorandum 
in  writing  to  that  effect,  and  without  a  registry  of  the  same  being 
made  on  the  corporate  books.4  Not  even  a  provision  of  the  char- 
ter or  a  by-law  of  the  corporation  to  the  effect  that  transfers  are 
not  valid  until  registered  on  the  corporate  books  can  prevent  a 
pledge  of  stock  being  made  by  a  mere  delivery  of  the  certificates 
indorsed  in  blank,  or  indorsed  to  the  pledgee,  without  such  regis- 
try.5    The  provision  requiring  such  registry  would  seem  not  to 

1  Mechanics'  B.  &  L.  Association  v.  corporation.  Crescent,  etc.,  Co.  v.  De- 
Conover,  14  N.  J.  Eq.,  219  (1862);  Lewis    blieux,  3  S.  Rep.,  726  (La.,  1888). 

v.  Graham,  4  Abb.  Pr.,  106  (1857).     But  4  Mount  Holly,  etc.,  Co.  v.-  Ferree,  17 

see    Greene  v.   Dispean,   14   R.    I.,   575  N.  J.  Eq.,  117  (1864);  Finney's  Appeal, 

(1884).  59  Pa.  St,  398  (1868) ;  Blouin   v.   Liqui- 

2  Nabring  v.  Bank  of  Mobile,  58  Ala.,  dators,  etc.,  30  La.  Ann.,  714  (187S): 
204  (1877) :  \Yilson  v.  Little,  2  N.  Y.,  443  Merchants'  Nat'l  Bank  v.  Richards.  6 
(1849).  The  question  of  whether  a  sale  Mo.  A  pp.,  454  (1879);  aff  d,  74  Mo.,  77; 
or  pledge  was  involved  in  the  relations  Broadway  Bank  v.  McElrath,  13  N.  J. 
between  a  contractor  and  the  party  who  Eq.,  24  (1860) ;  Cornick  v.  Richards,  3  Lea. 
financed  the  matter  for  him  was  dis-  1  (1879);  Baldwin  r.Canfield,  26  Miun., 43 
cussed  in  Griggs  v.  Day,  11  N.  Y.  Supp.,  (1879);  Pitot  v.  Johnson,  33  La.  Ann., 
885  (1890).  1286  (1881) ;  New  Orleans  Nat'l  Banking 

s  See  Brewster  v.  Hartley,  37  Cal.,  15;  Ass'n  v.  Wiltz,  10  Fed.  Rep.,  330  (1881); 

Jarvis  v.  Rogers,  13  Mass.,  105 ;  Robin-  Continental   Nat'l  Bank  v.  Eliot   Nat'l 

son   v.   Hurley,   11    Iowa,   410;  but  see  Bank.  12  Rep.,  35  (1881).     Cf.  State   v. 

Lollande  v.   Ingram,   19  La.  Ann.,  364  First  Nat'l  Bank,  89  Ind.,  302  (1883).    The 

(1867);  United  States  v.  Cutts,  Sumner,  pledgor  may,  by  word  of  moutb,  extend 

133.     Contra,  Nisbit  v.  Macon,  etc.,  Co.,  stock  already  pledged   to  further    ad- 

12  Fed.  Rep.,  686  (1882).     See,  also,  §  375,  vancements  by  the  pledgee.  YanBlarcom 

infra.  A  pledge  of  the  certificates  of  v.  Broadway  Bank,  9  Bosw.,  532  (1862). 
stock  is  effective  without  notice  to  the        5  McNeil  v.  Tenth  Nat'l  Bank,  46  N.  Y, 

585 


§  165.] 


PLEDGE    OF    STOCK. 


[CH.   XXVI. 


concern  the  pledgee  in  any  way,  except  that  he  could  not  claim 
the  dividends  without  the  registry;  and  in  a  few  states,  where  an 
attachment  of  the  stock  for  the  pledgor's  debts  would  cut  off  a 
previous  unregistered  vendee's  or  pledgee's  rights,  he  by  not  regis- 
tering encounters  that  risk.1  A  transfer  of  stock,  whether  regis- 
tered on  the  corporate  books  or  not,  may  be  shown  to  be  a  pledge, 
and  parol  evidence  is  admissible  to  prove  that  fact.2 


325  (1871);  Dickinson  v.  Central  NaVl 
Bank.  129  Mass.,  279  (1880);  Fraser  r. 
Charleston,  11  S.  G,  480 
&  T.  Ins.  I  to.  v.  Marine  D.  D.  Co..  31  La. 
Ann..  149  (1879);  Pitot  r.  Johnson.  33 
La.  Ann.,  1286  (1881);  Continental  Nat'l 
Bank  v.  Eliot  Nat'l  Bank,  supra;  Lowry 
v.  Com.  Bank,  Taney,  310  (1848);  Bloniu 
v.  Liquidators,  etc.,  30  La.  Ann.,  714 
(1878  :  Lightness  Appeal, 82  Pa.St.301  ; 
CTnited  States  v.  Cutts,  1  Sumn.,  133 
:  Leitch  v.  Wells,  4s  N.  Y 
oinmercial  Bank  of  Buffalo'-. 

K ight,  22  Wend 

Wend.,  91 ;  Otis  v.  Gardner,  105  III..  436 
(1883).  As  regards  Buch  provisions  re- 
quiring  registry,  a  pledge  of  stock  stands 
on  the  same  footing  as  a  sale  of  stock. 
See,  also,  /  379,  supra.  The  unr 
pledge  is  protected  against  the  pledgor's 
assignee  in  bankruptcy.  Re  Shell 
L.  J.  (Bankr.),  6  (1865> 

'Thus,  in  states  where  am  attachment 
has  precedence  over  not  only  trans- 
fers without  registry  made  alter  the  at- 
tachment is  levied,  but  over  unregis- 
tered transfers  made  before  the  levy  of 
attachment,  a  pledge,  like  a  sale  of 
stock,  is  protected  against  attachment 
on  the  pledgor's  debts  only  by  registry. 
Weston  v.  Bear  R.  &  A.  Co.,  5  CaL, 
186  (1855);  Williams  V.  Mechanics'  Bank, 
5  Blatchf.,  59  (1862:  State  Ins.  Co.  v. 
Sax,   2  Tenn.  Ch..    507  State  v. 

First  Nat'l  Bank.  89  Ind.,  802(1883)  ;Ship- 
man  v.  .Etna  Ins.  Co..  29  Conn.,  945 
(1860) ;  Pinkerton  v.  Manchester,  etc., 
R  R.  Co.,  42  N.  H..  424  (1881);  Oxford 
Turnpike  Co.  v.  Brund,  6  Conn.,  552 
(1827).  Of.  Strout  v.  Natoma  W.  &  M. 
Co.,  9  CaL,  78  (1838).  But  the  purchaser 
at  the  execution  sale   is  not  protected 


against  the  pledgee,  if  he  purchased 
with  notice.  Weston  v.  Bear  R.  &  A. 
Co.,  6  CaL,  425  1 1856).  And  if  notice  of 
the  pledge  is  given  to  the  corporation, 
the  pledgee  is  protected  against  attach- 
ments, although  no  registry  is  had. 
■  ■  Ins.  Co.  v.  Genuett.  2  Tenn.  Ch.. 
100  (1874).  See.  also,  §  486  et  seq.  As 
regards  the  ordinary  rights  of  stock- 
holderahip,  it  is  no  object  to  the 
pledgee  to  obtain  registry.  Even  if 
red  he  cannot  vote  nor  have  a 
■  •e  in  corporate  meetings.  See  i  468. 
As  to  the  dividends,  however,  he  is  en- 
titled to  them  as  against  the  pledgor, 
bin  irse  can    obtain   them   from 

the  corporation  only  by  obtaining  reg- 
istry. 

2 Brick  v.  Brick.  98  U.  S..  514  (18 
Wilson  r.   Little.  2   N.    Y.,   443 
Ginz   v.   Stumpb.  73    End.,     - 
Newton  v.  Fay.  92  Masa,  505 (1865) ;  Mc- 
Mahon    V.    Mary.   .-,1    N.    Y.,    155  (187S 
Becher    v.   Wells   Flouring  Mill   Co.,    1 
Fed.  Rep,  276  (1880);  Burgess  r.  Selig- 
man.  107  XT.  i  i   Pinkerton  v. 

Railroad  Co.,  42  N.  II..  424;  Batman  r. 
Howell,  10  N.  E.  Sep.,  504  Mass.,  1883  , 
An  apparent  sale  of  stock  is  not  proven 
to  be  a  pledge  on  the  evidence  of  plaint- 
iff contradicted  by  defendant,  when  the 
full  value  of  the  stock  was  paid  and  a 
receipt  therefor  given  by  the  plaintiff. 
Travels  V.  Leopold.  16  N.  E.  Rep.,  902 
ill!..  1888).  A  pledgor  may  bring  a 
suit  for  an  accounting  and  to  establish 
the  fact  that  the  transfer  of  stock  was 
a  pledge,  and  he  may  restrain  a  suit  by 
the  pledgee  against  the  corporation  for 
the  stock.  McDowell's  Appeal,  16  Atl. 
Rep.,  753  (Pa.,  1889);  5  N.  Y.  Supp.,  050. 


586 


CH.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  466. 


A  corporation  may  pledge  its  unissued  stock,1  but  there  is  a  dif- 
ference of  opinion  as  to  whether  the  pledgee  is  liable  as  an  abso- 
lute stockholder  on  such  stock.2  The  question  of  usury  in  the  note 
secured  by  a  pledge  of  stock  may  affect  the  pledge  itself."  A  lona 
fide  pledgee  of  stock  is  protected  against  claims  of  former  owners 
of  that  stock  to  the  same  extent  that  an  absolute  purchaser  of  the 
stock  would  be  protected.  The  g"i/flwi-negotiability  of  certificates 
of  stock  protects  a  pledgee  and  a  vendee  alike.4  The  negotiability 
of  a  note  is  not  destroyed  by  a  provision  that  certain  bonds  are 
given  as  collateral  security  for  its  payment.5 

VQQ.  Pledgee  may  have  the  stoelc  registered  in  his  own  name  or 
the  name  of  another. —  Where  certificates  of  stock  indorsed  in  blank 
are  delivered  to  a  person  in  pledge  as  collateral  security  for  a  debt 
or  for  any  other  purpose,  the  pledgee  may  fill  in  the  blanks  and 
have  the  sto.ck  registered  in  his  own  name  on  the  corporate  books;6 


i  Fisher  v.  Seligman.  7  Mo.  App.,  383 
(1879);  Griswold  v.  Seligman.  72  Mo.. 
110(1880):  Burgess  v.  Seligman.  107  U. 
S.,  20  (1882);  Melvin  v.  Lamar  Ins.  Co., 
80  111..  446  (1875);  Protection  Ins.  Co.  v. 
Osgood,  93  111.,  69  (1879)  Contra,  Brew- 
ster v.  Hartley,  37  Cal..  15  (1869  .  Where 
a  corporation  pledges  its  own  stock,  the 
pledgee  may  sell  that  stock  for  non- 
payment of  the  debt  at  less  than  par. 
This  rule  prevails  even  though  the  char- 
ter provides  that  the  stock  shall  not  be 
sold  below  par.  Peterborough,  etc.,  R 
R.  Co.  v.  Nashua,  etc..  R  R  Co.,  59  N. 
H.,  385  (1879).  Unissued  stock  may  be 
issued  by  the  corporation  as  a  pledge  to 
secure  a  loan,  and  the  corporation  can- 
not set  up  that  it  was  issued  at  less  than 
par  in  violation  of  the  constitution.  The 
issue  is  good  in  the  hands  of  the  pledgee 
to  the  extent  of  the  loan.  Casquet  r. 
Crescent  City  B.  Co..  49  Hun.  496  08921 
Where  the  company  issues  its  stock  as 
collateral  security  to  notes  given  to  it 
by  its  subscribers  in  payment  for  such 
stock  and  then  sells  the  notes,  the  stock 
follows  the  notes  and  may  be  subjected 
to  the  payment  of  judgments  on  the 
notes.  If  the  corporation  has  issued  the 
stock  to  others  it  must  pay  the  judg- 
ments. Houston,  etc..  R'y  v.  Bremond. 
18  S.  W.  Rep.,  448  (Tex..  1886).  A  mort- 
gage is  valid  as  against  the  corporation 


giving  it.  although  the  officers  give  to 
the  mortgagee  their  individual  notes  as 
additional  security  and  cause  the  corpo- 
ration to  issue  stock  to  themselves  with- 
out payment,  which  they  deposit  also  as 
collateral  with  the  mortgagee.  The  giv- 
ing  of  the  mortgage  is  not  an  increase 
of  indebtedness  such  as  is  prohibited  by 
the  Pennsylvania  constitution.  Powell's 
Appeal.  19  Atl.  Rep..  559  (Pa..  1890). 
Questions  relative  to  the  pledge  by  a 
company  of  its  own  bonds  are  consid- 
ered elsewhere.     See  eh.  XLVL 

2See^  138.  247.  474 

-  See  Little  v.  Barker.  1  Hoff.  Ch.,  487 
(1840).  and  cases  on  p.  5Sl,n.3.sHnra;<and 
see  Frost  v.  Stokes.  55  N.  Y.  Sup.  Ct..  76 
(1887  I,  holding  that  the  New  York  stat- 
ute of  1882  allows  any  interest  if  the 
debt  is  over  $5,000  and  stock  is  pledged. 

4  See  £  432.  supra. 

5  Valley  Xat'l  Bank  r.  Crowell.  23  At!. 
Rep..  1068  (Pa.,  1892). 

«Hubbell  v.  Drexel.  11  Fed.  Rep..  115 
(1882);  Be  Angelo,  5  De  G.  &  S,  278 
(1852);  Horton  r.  Morgan.  19  N.  Y.  170 
(1859);  Union  &  P.  Bank  v.  Farringtoo, 
13  Lea  (Tenn.),  333  (1884';  Hiatt  v. 
Griswold.  5  Fed.  Rep..  573  (1881),  hold- 
ing also  that  a  surety  is  not  thereby 
discharged;  Smith  v.  Traders'  Nafl 
Bank.  17  S.  W.  Rep.,  779  (Tex.,  1891); 
Day   v.  Holmes,   103  Mass.,  306  (1869); 


587 


467,  468.] 


PLEDGE    OF    STOCK. 


[CH.  XXVI. 


or  the  pledgee  may  have  the  stock  registered  in  the  name  of  an- 
other person,  in  order  that  he  may  protect  his  special  property  in 
the  stock  and  at  the  same  time  not  be  liable  thereon.1 

§  467.  Stock-broker  purchasing  stock  for  a  customer  on  a  mar- 
gin is  a  pledgee  of  the  stoch — It  has  been  well  established  that, 
where  a  stock-broker  purchases  stock  on  an  order  from  his  customer, 
and  the  customer  does  not  pay  for  the  stock,  but  deposits  with  the 
broker  a  sum  of  money  called  a  "margin,"  to  protect  the  broker 
against  loss,  the  broker  is  bound  to  have  on  hand  the  stock  so  pur- 
chased during  the  entire  time  of  the  contract,  and  has  the  rights, 
duties  and  liabilities  of  a  pledgee,  with  the  customer  as  a  pledgor.2 
The  broker  under  such  circumstances  must  conform  to  all  the  rules 
governing  a  pledgee's  attitude  towards  a  pledgor.  He  cannot  re- 
pledge,  nor  sell  without  due  notice,  unless  such  rights  be  waived  by 
the  customer,  the  pledgor.3 

§468.  Miscellaneous  rights  of  pledgee  and  pledgor. —  Dividends 
declared  during  the  continuance  of  the  pledge  belong  to  the  pledgee, 
even  though  the  latter  is  not  registered  as  owner  on  the  corporate 
books.4  The  pledgee  is  entitled  to  the  dividends  on  the  stock,  but 
must  account  for  them  when  the  pledge  is  redeemed.5  A  pledgee 
may  surrender  his  certificate  to  the  corporation  and  take  a  new 
certificate  for  a  larger  number  of  shares  where  the  corporation  has 
decreased  the  par  value  of  the  stock.6    "Where  the  pledgor  pledged 


Fitchburg  Sav.  Bank  v.  Torrey,  134 
Mass.,  239  (1883),  also  holding  that  a  re- 
lease  of  the  stock  by  the  pledgee  releases 
a  surety;  Fay  v.  Gray,  124  Mass.,  500 
(1878).  Cf.  State  v.  Smith,  15  Oreg.,  98, 
114,  but  see  p.  132(1887).  The  pledgee 
may  sue  to  have  the  pledge  transferred 
to  himself  and  determine  the  rights  of 
other  claimants.  Newcombe  v.  Lotti- 
mer,  12  N.  Y.  Supp.,  381  (1890).  Corpo- 
ration must  allow  the  registry.  Cornick 
v.  Richards,  3  Lea  (Tenn.),  1  (1879). 

1  Day  v.  Holmes,  supra;  Heath  «.  Gris- 
wold,  5  Fed.  Rep.,  573;  Anderson  tt, 
Philadelphia  Warehouse  Co.,  Ill  TJ.  S., 
479  (1884).     See,  also,  §  470. 

2  Baker  r.  Drake,  66  N.  Y.,  518  (1876); 
Mark  ham  v.  Jaudon,  41  N.  Y,  235  (1869) ; 
and  see  ch.  XXV.  A  broker  holding 
stock  as  collateral  security  on  a  margin 
does  not  hold  the  stock  in  a  fiduciary 
capacity.  McBurney  v.  Martin,  6  Rob, 
502;  Lambertson  v.  Van  Boskerk,  49 
How.,  266 ;  4  Hun,  62a 


3 Seech.  XXV. 

4  Herrman  t'.  Maxwell,  47  Super.  Ct, 
317  (1881).  And  the  pledgor  who  collects 
them  holds  them  in  trust  for  the  pledgee. 
Hill  v.  Newichawanick  Co.,  8  Hun,  459; 
affirmed,  72  N.  Y,  599  (1887).  In  Cen- 
tral Nebraska,  etc.,  Bank  v.  Wilder,  49 
X.  W.  Rep.,  369  (Neb.,  1891),  it  was  held 
that  not  only  was  the  pledgee  entitled  to 
the  dividends,  but  was  entitled  to  them 
although  the  stock  stood  on  the  corpo- 
rate books  in  the  name  of  the  pledgor, 
where  the  officers  knew  all  about  the 
pledge.  "Where  a  pledge  of  stock  is 
renewed  and  a  new  note  given,  divi- 
dends accruing  before  the  renewal  go  to 
the  pledgor.  Fairbank  v.  Merchants', 
etc.,  Bank.  22  N.  E.  Rep.,  524  (111.,  1889). 

5  Isaac  v.  Clarke,  2  Bulst,  306  (1858)  ; 
Hasbrouck  v.  Vaudervoort,  4  Sandf.,  74 
(1850);  Edwards  on  Bailments,  300. 

6Donnell  v.  Wyckoff,  7  AtL  Rep., 
672  (N.  J.,  1887). 


588 


€H.  XXVI.]  PLEDGE    OF    STOCK.  [§  4:68. 

the  stock  to  secure  the  debts  of  another  at  a  bank  and  renewals 
thereof,  the  pledge  continues  though  the  pledgor  dies.1  As  against 
the  pledgor  a  pledgee  has  not  the  right  to  vote  on  the  pledged 
stock,  even -though  he  is  registered  as  a  stockholder.2  If  so  reg- 
istered the  pledgor  may  compel  him,  by  legal  proceedings,  to  give 
a  proxy  for  voting  purposes.3  A  pledgee  is  not  bound  to  protect 
the  stock  from  forfeiture  for  non-payment  of  calls.4  A  pledgee  of 
certificates  of  stock  is  protected  against  further  sales  or  pledges  of 
the  same  stock  by  the  pledgor,  such  other  sales  or  pledges  being 
without  the  delivery  of  any  certificate,  the  same  as  the  vendee 
of  a  certificate  of  stock  is  protected  against  another  sale  of  the 
stock  to  a  purchaser  who  takes  without  any  certificate.5  The  pos- 
session of  the  certificate  protects  the  pledgee  herein.  The  pledgee 
is  not  liable  for  a  loss  of  the  pledge  by  theft,  there  being  no  negli- 
gence on  his  part." 

A  pledgee  of  a  certificate  of  stock  is  not  bound  by  an  agreement 
of  all  the  stockholders  to  surrender  to  the  corporation  a  part  of 
their  stock,  which  part  is  to  be  then  considered  preferred  stock  and 
is  to  be  sold  by  the  corporation  for  the  purpose  of  paying  corpo- 
rate debts.7  The  stockholders  of  a  corporation  may  together  with 
the  directors  cause  the  corporate  property  to  be  sold  to  a  new  cor- 
poration in  exchange  for  the  stock  of  the  latter.  A  pledgee  of 
stock  in  the  former  corporation  cannot  after  the  sale  undo  it, 
nor  hold  the  latter  corporation  liable.  His  remedy  is  against 
the  pledgor  and  the  first  corporation.8     Although  the  pledgor  of 

1  Cotton  v.  Atlas  Nat'l  Bank,  12   N.  E.  equally  to  both.     A  person  to  whom  a 
Rep.,  850  (Mass.,  1887).  pledgor  fraudulently  transfers  his  equity 

2  Baldwin  v.  Canfield,  26  Minn.,  43  and  who  redeems  the  stock  cannot  be 
(1879).  See,  also,  Merchants'  Bank  v.  compelled  to  turn  it  over  to  creditors 
Cook,  4  Pick.,  405  (1826);  Ex  parte  except  upon  repayment  of  the  amount  so 
Willcock,  7  Cowen,  402 ;  McDaniels  v.  paid  by  him.  Hamilton  Nat'l  Bank  v. 
Flower,  etc.,  Co.,  22  Vt..  274  (1850);  Halsted,  9  N.  Y.  Supp.,  852  (1890). 
Laws  of  N.  Y.,  1850,  ch.  140,  §  5:  But-  6 Fleming  v.  Northampton  Nat'l  Bank, 
terworth  v.  Kennedy,  5  Bosw.,  143  (1859).  62  How.  Pr.,  177  (U.  S.  C.  C,  1881). 
The  pledgor  may  cause  the  corporate  7  Although  all  the  other  stock  has  had 
property  to  be  leased  at  a  rental  which  this  agreement  stamped  on  the  certifi- 
will  not  yield  any  dividends,  and  yet  the  cates,  yet  the  corporation  cannot  insist 
pledgee  cannot  attack  the  validity  of  that  the  purchaser  of  the  stock  so  pledged 
the  lease.  Gibson  v.  Richmond,  etc.,  R.  shall  allow  the  same  agreement  to  be 
R.  Co.,  37  Fed.  Rep.,  743  (1889).  stamped  on  the  new  certificates  issued 

3  Seech.  XXXVII.  to  such  purchaser.     The  court  will  or- 

4  Southwestern  R.  R.  Bank  v.  Douglas,  der  a  transfer  free  from  the  agreement. 
2  Spear  (S.  C),  329  (1844).  Campbell    v.   American,   etc.,   Co.,   122 

^Maybin  v.   Kirby,  4  Rich.  Eq.,  105.     N.  Y,  455  (1890). 
See  §  321.    The  cases  therein  cited  are        8  Leathers  v.   Janney,  6   S.   Rep.,  884 
partly  cases  of  pledge  and  partly  of  sale    (La.,  1889).     In  the  case  of  Allist'.  Jones, 
of  certificates  of  stock.    The  rule  applies    45  Fed.  Rep.,  148  (1891),  it  is  intimated 

589 


§  469.] 


PLEDGE    OF    STOCK. 


[CH.  XXVI. 


stock  votes  the  stock  in  favor  of  a  lease  of  the  corporate  property 
on  such  terms  that  no  dividends  on  the  stock  are  possible,  yet  in 
the  absence  of  fraud  the  pledgee  is  bound.1  A  pledgee  is  not 
bound  to  prosecute  suits  to  protect  the  pledge,  nor  to  sell,  and  a 
provision  that  the  pledgee  may  claim  repayment  of  any  sums  ex- 
pended in  the  prosecution  of  claims  is  not  an  agreement  of  the 
pledgee  to  prosecute.2  If  a  note  is  secured  b}T  collateral,  an  accom- 
modation indorser  is  not  liable  if  the  collateral  is  withdrawn  from 
being  security  for  the  note.3  A  pledge  for  any  "note  or  claim 
against  me"  applies  to  a  claim  against  the  pledgor's  firm.4 

§  4G9.  Pledgee  need  not  retain  or  return  to  the  pledgor  the  identi- 
cal certificates  or  shares  of  stock  which  were  pledged,  but  must  hare 
equal  quantity  always  on  hand. —  One  share  of  stock  does  not  dif- 
fer from  another  share  of  the  same  capital  stock.  Each  is  but  an 
undivided  interest  in  the  corporate  rights,  privileges  and  property. 
Accordingly,  it  is  held  that  a  pledgee  of  stock  need  not  retain  in 
his  possession  the  identical  shares  of  stock  which  were  pledged  to 
him,  but  that  the  rights  of  the  pledgor  are  fully  preserved  if  sim- 
ilar stock  is  retained  by  the  pledgee  until  the  termination  of  the 
pledge.5  The  pledgee  must  have  on  hand  at  all  times  the  full 
amount  of  the  stock  pledged,  whether  the  debt  secured  is  due  or 
not,  since  the  law  will  not  allow  the  pledgee  to  speculate  or  deal 


with  the  stock  of  another  as 


though 


it   were  his  own.6     It  is  not 


that  a  pledgee  lias  not  the  same  right 
to  attack  an  ultra  vires  corporate  debt 
that  the  pledgor  has,  especially  where 
the  stock  is  worthless. 

1  Gihson  v.  Richmond,  etc.,  R  R.,  37 
Fed.  Rep.,  743  (1889). 

2  Culver  v.  Wilkinson,  14.-,  U.  S.,  205 
(1892).  The  pledgee  may  claim  credits 
for  defending  the  pledge  against  at- 
tacks by  law  suits,  and  in  soinr  c 
for  adding  to  its  value  by  aidiug  tin- 
subject  of  the  pledge.  Cridge's  Appeal, 
18  Atl.  Rep.,  1010  (Pa.,  1890). 

3  Smith  v.  Traders'  Nat'l  Bank,  17  S. 
VY.  Rep.,  779  (Tex..  1891). 

4  Hallow  ell  r.  Blackstone.  etc..  Rink. 
28  N.  E.  Rep.,  281  (Mass..  1891). 

5  Caswell  v.  Putnam.  100  N.  Y.,  153 
(1890);  Nourse  v.  Prince,  4  Johns.  Ch., 
490  (1820);  S.  C,  7  Johns.  Ch..  G9  (1823); 
Horton  v.  Morgan,  19  N.  Y..  170  (1859); 
Barclay  v.  Culver,  30  Hun,  1  (1883); 
Noyes  ?\  Spaulding,  27  Yt.  420  (1855); 
Atkins  v.   Gamble,  42  Cal.,  86;  Price  v. 


Grover,   I"   Md.,   102  (1874);   Gilpin  r. 

Howell.  5  Pa.  St..  41    (1846);    Harden- 
burgh  v.  Bac.m.  33  Cal..  856  (1867);  Tay- 
lor v.  Ketchum,  85  How.  Pr.,  289  (1 
Langton   i:   YVaite.    K    P.,  (i   Eq.,    165 

(1868);  Thompson  v.  Toland,  48  Cal..  99 
(1874);  I.e  Cray  v.  Eastman.  10  Mod., 
199  (1785);  Hubbell  r.  Dre.x.l.  21  Am. 
L.  Reg.  (X.  s...  452(1882);  s.  C,  11  Fed. 
Rep.,  115:  Baylan  r.  Huguet,  8  New,  345 
(1873),  In  the  case  of  Dykers  v.  Allen, 
7  Hill, 497  (18441  the  pledgee  at  one  time 
seems  to  have  had  no  stock  on  hand.  In 
selling  the  pledgor's  stock  on  notice  for 
non-payment  of  the  debt,  the  pledgee 
need  not  sell  the  identical  stock  pledged. 
Berlin  v.  Eddy.  33  Mo..  426  (1863).  In 
the  case  Mayo  r.  Knowlton,  134  N.  Y.. 
250  (1892),  I  lie  court  said:  "The  stock 
had  no  ear-mark;  one  share  was  the 
same  as  another  and  could  not  he  iden- 
tified or  distinguished  therefrom." 

6  Ex  parte  Dennison,  3  \\  -..  552  (1797) ; 
Taussig   v.  Hart,  58  N.   Y,  425  (181 


590 


CH.   XXVI.] 


PLEDGE    OF    STOCK. 


[§§  470,  471. 


i 

enough  that  he  can  at  once  procure  the  stock  from  one  to  whom 
it  is  loaned,1  or  that  he  had  sufficient  on  hand  for  the  plaintiff 
pledgor,  but  not  enough  for  all  the  pledgors  whom  he  had  at  any 
particular  time.-'  The  law  requires  him  to  set  aside  as  much  stock 
as  has  been  pledged  to  him. 

§470.  Pledgees  liability  on  subscription  and  statutory  UaMlity 
on  stock? — A  pledgee  who  has  obtained  registry  on  the  corporate 
books  appears  to  third  parties  as  a  full  stockholder.  Accordingly, 
in  case  the  corporation  becomes  insolvent,  the  registered  pledgee 
is  held  liable  on  his  stock,  as  though  he  were  an  absolute  stock- 
holder. In  order  to  avoid  this  danger  the  law  allows  the  pledgee 
to  have  the  pledged  stock  registered  on  the  corporate  books  in  the 
name  of  a  nominee  of  the  pledgee.4  Where  such  a  registry  is  ob- 
tained the  pledgee  has  the  advantage  of  a  control  of  the  stock,  and 
at  the  same  time  escapes  the  danger  of  liability  as  a  stockholder. 

§  471.  Pledgee  lias  no  right  to  sell  or  repledge  the  stock  even  tem- 
porarily, except  upon  notice,  unless  tlie  debt  is  assigned  with  the 
stock. —  "Equity  will  not  tolerate  a  separation  of  the  pledge  from 
the  debt,  and  they  must  stand  together,  and  will  force  upon  a 
wrong-doer  the  character  of  a  trustee,  and  thus  compel  him  to  do 
justice."  Such  is  the  language  of  the  New  York  court  of  appeals.5 
In  no  other  way  can  the  pledgee  legally  part  with  the  possession  of 
such  stock  by  a  sale  or  repledge  of  it.  If  he  does  so  he  is  guilty  of 
a  conversion.6     In  Pennsylvania  it  is  a  penal  offense  for  the  pledgee 


Thompson  v.  Toland,  48  Cal.,  99  (1874); 
Hubbell  v.  Drexel,  21  Am.  L.  Reg.  (N. 
S.),  452  (1881).  The  pledgor  may  waive 
this  restriction  by  express  agreement. 
Ogden  v.  Lathrop,  65  N.  Y.,  158  (1875). 

i  Dykers  v.  Allen,  3  Hill,  593 ;  7  id.,  497 
(1844) ;  Ex  parte  Dennison,  supra. 

*  Fay  v.  Gray,  124  Mass.,  500  (1878). 

3  See  ch.  XIV,  §  247. 

4  Newry,  etc.,  R'y  Co.  v.  Moss,  14  Beav., 
64(1851).     See  §466. 

5  Bennett  v.  Austin,  81  N.  Y.,  308,  322 
(1880).  Cf.  Easton  v.  Hodges,  18  Fed. 
Rep.,  677  (1883). 

6Goss  v.  Hampton,  16  Nev.,  185  (1881). 
The  case  of  Ex  parte  Sargent,  L.  R.,  17 
Eq.,  273  (1874),  contained  a  dictum  giv- 
ing a  contrary  rule ;  but  the  case  of 
France  v.  Clark.  L.  R,  22  Ch.  Div.,  830 
(1883),  disapproves  such  dictum  and 
says :  "As  a  general  rule  the  pawnee  of 
chattels  has  no  right  to  sell  them,  unless 


a  time  was  originally  fixed  for  their  re- 


demption, and  that  time  has  expired,  or 
unless  he  had  made  a  demand  upon  the 
pawnor  for  the  payment  of  what  is  due 
to  him."  Fay  v.  Gray,  124  Mass.,  500 
(1878),  holds  that  the  pledgee  has  no 
right  to  sell,  lend  or  repledge  the  stock. 
A  broker  has  no  right  to  repledge  the 
stocks  held  by  him  as  collateral  to  ad- 
vances to  a  customer,  especially  so  after 
the  customer  has  repaid  the  advances. 
Van  Voorhis  v.  Rea,  25  Atl.  Rep.,  800 
(Pa.,  1893).  In  the  notes  contained  in 
21  Am.  Law  Reg.  (N.  S),  454,  a  conten- 
tion is  made  that  the  pledgee  should  be 
allowed  to  repledge,  but  it  is  admitted 
that  the  weight  of  authority  holds  other- 
wise. The  following  cases  are  cited : 
Bank  v.  Trenholm,  12  Heisk.  (Tenn.), 
520  (1873) ;  Bank  r.  Bryce,  19  Am.  Law 
Reg.  (N.  S.).  503  (1880) ;  Taussig  v.  Hart, 
58  N.  Y.  425  (1874);  Work  v.  Bennett, 
70  Pa.  St.,  484  (1872);  Wood  v.  Hayes,  15 
Gray,  375  (1860) ;  Thompson  v.  Patrick, 


591 


§  ATI.] 


PLEDGE    OF    STOCK. 


[ch.  XXV  r. 


to  re  pledge  the  stock.1  Although,  apparently,  the  pledgor  would 
not  be  injured  by  the  pledgee's  separating  the  stock  from  the  debt 
and  by  transferring  to  another  the  stock  pledged  as  collateral  se- 
curity, yet  the  law  rigidly  protects  the  interests  of  the  debtor  and 
pledgor,  and  will  not  compel  him  to  submit  to  the  danger  of  such 
transfers  by  the  pledgee.  There  may,  of  course,  be  an  express 
agreement  or  understanding-  to  the  contrary.2 

A  pledgee  may  assign  the  principal  debt  to  a  third  person  and 
"  give  him  the  benefit  of  the  collateral  securities  to  secure  the  pay- 
ment of  the  principal  debt.  So  long  as  nothing  is  done  to  deprive 
the  pledgor  of  the  right  to  redeem,  on  payment  of  the  amount  due 
on  the  principal  debt,  the  pledgor  is  not  injured."  3 


4  Watts  (Pa.),  414  (1835) ;  and  see  §  469. 
In  Lawrence  v.  Maxwell,  53  N.  Y.,  19 
(1873),  the  court  say :  "  Ordinarily,  and 
in  the  ahsence  of  an  agreement  or  assent 
by  the  pledgor,  the  pledgee  would  have" 
no  right  to  use  the  thing  pledged,  and  a 
use  of  it  would  be  illegal.  But,  under 
special  circumstances,  depending  some- 
what upon  the  nature  of  the  pledge, 
and  in  all  cases  with  the  assent  of  the 
pledgor,  express  or  implied,  the  prop- 
erty pledged  may  be  used  by  the  pledgee 
in  any  way  consistent  with  the  general 
ownership  and  the  ultimate  rights  of 
the  pledgor." 

1  Act  of  May  25,  1878  (Purdon's  Di- 
gest, 2107),  modified  as  to  purchases  by 
broker  on  margin  by  act  of  June  10, 
1881  (P.  L.,  1881,  107). 

*Choteau  v.  Allen.  70  Mo.,  290  (1879). 

3  Chapman  v.  Brooks.  31  N.  Y.,  74,  84 
(1865) ;  Duncomb  v.  New  York,  etc., 
R.  R.  84  N.  Y,  190,  208  (1881).  The 
pledgee  may  assign  his  interest  in  the 
pledge  and  transfer  the  pledge  to  such 
assignee.  Overton  on  Liens,  §§  168, 172 ; 
Schouler  on  Bailments  (2d  ed.),  §  218,  etc. 
Story  on  Bailments.  §  324,  says  the 
pawnee  "  may  sell  or  assign  all  his  in- 
terest in  the  pawn,  or  he  may  convey 
the  same  interest  conditionally,  by  way 
of  pawn,  to  another  person,  without  in 
either  case  destroying  or  invalidating 
his  security."  See,  also,  Talty  v.  Freed- 
man's  Sav.,  etc.,  Co.,  93  U.  S..  321 
<1876);  2  Kent's  Com.,  579;  Jarvis  v. 
Eogers,  13  Mass.,  105 ;    15  id.,  3S9,  408 ; 


Mores  v.  Conham,  Owen,  123  (1854); 
Ratcliffe  v.  Davis,  1  Buls.,  29  (1857); 
Anon.,  2  Salk.,  522.  The  right  of  the 
pledgee  to  re  pledge  may  exist  by  force 
of  a  custom  understood  by  both  parties. 
Chamberlain  v.  Greenleaf,  4  Abb.  N.  C, 
178  (1878);  Oregon,  etc.,  Co.  «.  Hilmers. 
20  Fed.  Rep.  717  (1884).  In  the  case  of 
Lewis  r.  Mott,  36  N.  Y,  394  (1867), 
where,  after  the  debt  was  due  and  un- 
paid, the  pledgee  turned  over  the  debt 
and  security  to  another  without  a  fore- 
closure or  sale  on  notice,  the  court  held 
that  the  latter  could  hold  the  collateral 
stuck  until  the  pledgor  tendered  the 
amount  of  the  debt  The  latest  English 
cases  hold  that,  although  the  repledge 
may  be  wrong,  yet  that  the  pledgor 
cannot  reclaim  the  stock  from  the  re- 
pledgee  until  the  former  pays  the  debt 
for  which  the  pledge  was  made.  Don- 
ald v.  Suckling,  L.  R,  1  Q.  B.,  585 
(1866) ;  Halliday  v.  Holgate,  L.  R,  3  Ex., 
299  (1868).  Where  a  broker,  holding 
stock  in  pledge  on  a  margin,  repledges 
it  without  the  consent  of  his  customer, 
it  has  been  held  that  he  can  recover  the 
value  of  the  stock  from  the  customer  on 
a  tender  of  the  certificate.  Clarkson  v. 
Snider,  5  Canadian  Law  Times,  587 
(1885).  In  Langton  v.  Waite,  L  R,  6 
Eq.,  165  (1868),  the  court  say:  "The  law 
is  clear  that,  in  the  absence  of  express 
contract  to  the  contrary,  a  pawnee  can- 
not sell  without  the  express  permission 
of  the  owner,  and  that  if  he  does,  the 


owner  can  charge  him  with  the  excess 


592 


CH.  XXVI.]      t  PLEDGE   OF   STOCK.  [§§  472,  473. 

§  472.  Purchasers  or  pledgees  of  stoclc  from  pledgee  with  notice 
are  not  protected. —  A  person  who  purchases  or  takes  in  pledge 
stock  which  he  knows  is  held  in  pledge  by  the  person  from  whom 
he  takes  it  is  not  a  hona  fide  holder  of  such  stock,  and  is  not  en- 
titled to  the  rights  of  such.  At  the  best  he  stands  merely  in  the 
place  of  the  pledgee  from  whom  he  receives  the  stock.  He  must 
restore  the  stock  to  the  owner  in  case  the  pledgee  would  be  obliged 
to  restore  it,  had  no  second  sale  or  pledge  been  made.  The  second 
pledgee  or  vendee,  with  notice  that  he  was  taking  pledged  stock, 
has  no  rights  which  the  first  pledgee  has  not.  He  is  but  an  equi- 
table assignee  of  the  latter,  and  can  be  compelled  by  the  owner  to 
deliver  the  stock  in  any  case  where  the  first  pledgee  could  be  so 
compelled.1  The  same  rule  applies  whether  the  pledgee  assigns  or 
repledges  both  the  debt  and  the  stock  or  the  stock  alone.2 

§  473.  Bona  fide  repledgees  or  purchasers  of  pledged  stoclc  are 
protected. —  Where,  however,  a  pledgee  of  certificates  of  stock 
indorsed  in  blank  takes  the  certificates  and  sells  or  pledges  them 
to  another,  who  takes  such  certificates  in  good  faith  and  for  value 
and  without  notice  that  his  vendor  or  pledgor  held  them  as  a 
pledge,  the  purchaser  or  pledgee  from  the  pledgee  is  as  fully  pro- 
tected in  his  rights  as  though  the  person  with  whom  he  dealt  was 
the  absolute  owner  of  the  stock.3     This  rule  arises,  not  on  the  ground 

of  the  price  over  the  loan."    The  court,  Mass.,  382  (1868) ;  Ellis'  Appeal,  8  "Weekly 

however,    seemed    to    think    that    the  Notes  of  Cases    (Pa.),    538;    Porter   v. 

pledgee  could  repledge  the  stock.     In  Parks,  49  N.  Y.,  5G4  (1872) ;  Chouteau  v. 

Gould  v.  Farmers'  Loan  &  Trust  Co.,  23  Allen,  sapra. 

Hnn,  322  (1880),  the  court  said  that  the  2Felt  v.  Heye,  supra  (1862).     Nor  can 

pledgee  might  repledge  the  stock  so  far  the  repledgee  claim  the  benefit  of  the 

as  he  had  an  interest  in  it.  debt    not  assigned    to  him.     See,  also, 

i  Any  fact,  such  as  usury  in  the  sec-  Talty  v.  Freedman's,  etc.,  Co.,  93  U.  S., 

ond    transaction,   which    prevents    the  321  (1876). 

second  pledgee  or  purchaser  from  being  3The  important  case  of  McNeil  v. 
a  bona  fide  purchaser,  applies  to  a  re-  Tenth  Nat'l  Bank,  46  N.  Y.,  325  (1871), 
pledgee  of  stock.  The  repledgee  is  not  was  on  the  rights  of  a  bona  fide  re- 
protected.  Felt  v.  Heye,  23  How.  Pr.,  pledgee  of  stock,  and  fully  sustains  the 
359  (1862);  Littler.  Barker,  1  Hoff.  Ch.,  general  rule.  See,  also,  Fatman  v.  Lo- 
487  (1840).  So,  also,  where  the  repledgee  bach,  1  Duer,  354  (1852) ;  Wood's  Appeal, 
takes  in  consideration  of  a  pre-existing  92  Pa.  St,  379  (1880) ;  Wood  v.  Smith,  8 
indebtedness.  Ashton's  Appeal,  73  Pa.  Week.  Notes,  441 ;  Goss  v.  Hampton,  16 
St.,  153  (1873).  A  bank  receiving  a  Nev.,  185  (1881);  Mount  Holly,  etc.,  Co. 
collection  with  collateral  is  not  en-  ?.\  Ferree,  17  N.  J.  Eq.,  117  (1864);  Otis 
titled  to  the  latter  where  it  becomes  v.  Gardner.  105  111.,  436  (1883);  Ex  parte 
insolvent  before  the  collection  is  re-  Sargent,  L.  K.,  17  Eq.,  273  (1874);  Cherry 
mitted.  Corn  Exchange  Bank  v.  Blye,  v.  Frost,  7  Lea  (Tenn.),  1  (1881),  the  court 
N.  Y.  Daily  Reg.,  Sept.  9,  1886.  In  gen-  saying  that  in  general  a  pledgee  of  per- 
eral,  see  also  Duncan  v.  Jaudon,  15  sonal  property  cannot  convey  a  good 
Wall.,  165  (1872);  Shaw  v.  Spencer,  100  title  to  another;  but  "if  the  owner  in- 
(38)                                                  593 


§  ±73.] 


PLEDGE    OF    STOCK. 


[CH.  XXVI. 


that  the  certificate  of  stock  is  negotiable,  but  for  the  reason  that 
the  owner  is  held  to  have  enabled  his  pledgee  to  sell  the  stock  as 
the  pledgee's  own.  and  that  as  between  the  owner  and  the  bona  fide 
purchaser  or  pledgee  from  the  pledgee  the  owner  must  bear  the  loss. 
The  law  of  estoppel  prevents  his  denying  the  right  of  his  pledgee 
to  sell  or  pledge  as  against  a  bona  fide  purchaser  or  pledgee  from 
the  pledgee.  So,  also,  this  principle  arses  under  the  well-estab- 
lished rule  that,  where  one  of  two  innocent  parties  must  suffer  from 
the  fraud  of  a  third,  the  loss  must  fall  upon  him  who  enabled  the 
third  party  to  perpetrate  the  fraud.  If  the  pledgee  has  repledged 
the  stock  the  owner  can  obtain  the  stock  only  by  paying  to  the 
repledgee  the  amount  of  the  latter's  advancement  to  the  first 
pledgee.1  The  pledgor  of  stock,  under  these  rules,  has  practically 
no  protection  as  to  his  stock  except  the  honesty  and  responsibility 
of  his  pledgee.  The  bona  fid:  purchaser  or  pledgee  from  the 
pledgee  is  equally  protected  whether  the  certificates  of  stock  are 
indorsed  by  the  pledgor  or  vendor,  or  are  indorsed  in  blank  by  some 
previous  holder.2  The  repledgee  or  vendee  is  held  to  be  a  bona  fide 
holder  only  where  he  would  be  held  so  to  be  in  cases  of  promissory 
notes  and  other  similar  cases.3     If  the  repledgee  has  also  other 

trusts  to  another  not  merely  the  posses-     quently  to  the  repledge  do  not  inure  to 

the  benefit  of  the  latter.    See,  in  general, 
Donald  v.  Suckling,  L  R,  1  Q.  B.,  G 

Moore    v.   Conhani,   Owen,  123 

Ratcliffe   t\    Davis,    Yelv.,    178 

(1710);  Johnson  v.  Cumming,  Scott's  C. 

B.  (N.  S.),  331  (1819);  Jarvis,  Adm'r,  v. 

Rodgers,  15  Masa,  ::C9  (1819). 

2Goss  v.  Hampton,  16  Nev.,  185  (1881). 

3  In  California  the  peculiar  doctrine 
is  sustained  that  the  word  "  trustee"  on 
the  face  of  the  certificate  is  no  notice, 
and  does  not  deprive  the  pledgee  of  his 
character  of  being  a  bona  fide  holder. 
Brewster  «,  Sime,  42  Cal.,  139  (1871); 
Thompson  r.  Toland,  48  Cat,  99  (1874  . 
If  the  repledgee  receives  the  stock  as 
security  for  an  antecedent  indebted- 
ness he  is  not  a  bona  fide  holder.  Gould 
f.  Farmers'  Loan  &  Trust  Co.,  23  Hun, 
322  (1880).  A  pledgee  is  not  bona  fide 
when  the  name  of  another  pledgee  in 
the  certificate  is  erased  and  his  own  in- 
serted. Denny  r.  Lyon,  38  Pa.  St,  98 
(I860).  "Where  a  party  receives  from  his 
debtor  certain  stock  as  security  for  the 
•purchase  of  other  stock  and  holds  it  for 
the  old  debt,  and  sells  it  after  being  no- 


sion  of  the  property,  but  also  written 
evidence  over  his  own  signature  of  title 
thereto  and  of  unconditional  power  of 
disposition  over  it,  the  case  is  vastly  dif- 
ferent." Thus  a  pledgee,  without  notice, 
of  bonds  from  a  pledgor,  who  turns  out 
to  have  held  the  bonds  as  securities  for 
the  cancellation  of  a  mortgage,  is  pro- 
tected in  his  pledge.  Saloy  v.  Hibernia, 
etc..  Bank.  1  &  Rep,  657  (La.,  I 
In  New  York  a  pledgee  is  not  bona  fide 
when  he  takes  bonds  in  pledge  for  a 
precedent  debt  Dun  comb  r.  N.  Y.,  etc., 
R.  R  Co.,  84  N.  Y.,  190  (1881).  In  the 
case  of  Ortigosa  t\  Brown,  47  L  J. 
-  "the  court,  following  the 
ish  doctrine  that  an  unregistered 
transferee  of  certificates  of  railway 
stock  has  no  more  rights  than  his  trans- 
ferrer, refused  to  protect  the  unregis- 
tered repledgee  of  stock. 

1  Wood's  Appeal,  92  Pa.  St,  379  (1880) ; 
Fatman  r.  Lobach,  1  Duer,  354  (li_  . 
Ex  parte  Sargent  L  R..  17  Eq..  273 
;  ;  Cherry  r.  Frost  7  Lea  Tenn.),  1 
(1881),  holding,  however,  that  payments 
on  the  subscription  by  the  owner  subse- 


594 


CH.  XXVI.] 


PLEDGE    OF    STOCK. 


L§  474, 


collateral  for  his  debt,  a  court  of  equity  will  marshal  the  assets  and 
compel  resort  to  such  other  collateral  first,  where  it  is  equitable  so 
to  do.1 

^74.  Pledges  bij  agents,  trustees,  executors,  etc.,  legally  and  in 
breach  of  trust  —  It  is  within  the  power  of  an  executor  or  admin- 
istrator to  pledge  shares  of  stock  belonging  to  the  estate,  and  the 
pledgee  is  protected  even  though  he  knew  that  the  executor  pledged 
it  as  an  executor.2  A  trustee,  on  the  other  hand,  has  no  implied 
power  to  pledge  or  sell  corporate  stock  belonging  to  the  trust.3 
An  agent's  pledges  of  his  principal's  stock  follow  the  same  rules 
as  where  a  pledgee  repledges  the  stock  given  to  him  in  pledge.  A 
bona  fide  holder  for  value  and  without  notice  is  protected,  while 
one  who  takes  with  notice  is  not  protected.     Where,  however,  the 


tified  that  it  belongs  to  another  party. 
he  is  liable  to  the  latter  party  for  con- 
version. Xiles  v.  Edwards.  27  Pac.  Rep., 
159  (Cal.,  1891). 

1  If  the  repledgee  has  other  collateral 
also,  it  will  be  applied  to  the  debt  before 
the  repledged  stock  is  applied.  Gould 
v.  Farmers'  Loan  &  Trust  Co.,  23  Hun, 
322  (18S0  u  The  assets  applicable  to  the 
debt  will  be  marshaled.  Hurbert  v.  Me- 
chanics' Bldg.  &  Loan  Ass'n,  1?  X.  J. 
Eq..  497  (1864).  Where  the  pledgee  re- 
pledges  the  stock  illegally  with  other 
stock,  the  first  pledgor  may  enjoin  the 
second  pledgee  from  selling  the  stock 
until  the  other  stock  of  the  pledgee  is 
sold  and  an  account  rendered  and  no- 
tice of  intent  to  sell  the  remainder 
given.  Myers  v.  Merchants"  Naf  1  Bank, 
16  *X.  Y.  Supp.,  58  (1891).  Where  a 
broker  pledgee  with  the  assent  of  the 
pledgor  has  repledged  the  stock,  the 
second  pledgor,  having  no  notice  of  who 
the  first  pledgor  is,  may  hold  all  stocks 
until  all  debts  from  the  second  pledgor 
to  him  are  paid.  A  person  who  gave 
stock  to  the  first  broker  to  sell  is  pre- 
ferred to  one  who  purchased  stock  on  a 
margin.  Willard  v.  White,  56  Hun,  581 
(1890).  Where  pledged  stock  is  re- 
pledged and  sold  out  by  the  repledgee 
together  with  various  other  stock  held 
as  collateral  by  the  repledgee.  a  court 
of  equity  will  marshal  the  assets.  Smith 
v.  Savin.  9  N.  Y.  Supp..  106  (1890). 
Where  the  pledgee  sells  the  securities 


and  has  a  surplus  he  cannot  interplead 
between  two  claimants  where  he  is  sued 
by  one  of  them  for  more  than  he  ad- 
mits the  surplus  amounts  to.  Dodge  v. 
Lawson,  N.  Y.  L  J.,  April  20,  1892,  A 
pledgee  need  not  resort  to  the  pledge  in 
order  to  obtain  payment,  but  if  the 
pledgor  becomes  insolvent  the  court 
will  marshal  the  assets.  Chemical  Xat'l 
Bank  v.  Armstrong,  50  Fed.  Rep,  79S 
(1892).    See,  also,  §  476,  infra. 

2  Goodwin  v.  American  Xat'l  Bank, 
48  Conn.,  550  (1881) ;  Wood's  Appeal.  92 
Pa.  St,  379  (1880) ;  Carter  v.  Mfs.'  Xat'l 
Bank,  71  Me..  44S  (1880),  §  329 ;  Manhat- 
tan Bank  v.  Walker,  130  U.  S.,  267  (1889). 
A  pledgee  from  an  executor  is  protected. 
Gottberg  r.  United  States  Xat'l  Bank. 
13  N.  Y.  Supp.,  841  (1891).  A  pledge  of 
stock  by  an  executor  is  illegal  and  the 
pledgee  is  not  protected  where  the 
pledgee,  not  trusting  to  the  executor's 
power  as  executor,  causes  the  stock  to 
be  transferred  first  to  a  legatee.  Moore 
v.  American,  etc.,  Co.,  115  X.  Y.,  65 
(1889).  Where  an  executor  pledges 
stock  for  his  own  debt,  the  pledgee 
knowing  the  fact  so  to  be,  the  latter  be- 
comes trustee  and  the  statute  of  limita- 
tions does  not  run  against  redemption 
until  after  the  pledgee  has  notified  the 
cestuique  trust  of  the  estate  that  he  holds 
the  stock  adversely.  In  re  Marshall's 
Estate.  22  Atl.  Rep.,  24  (Pa..  1891). 

3  See  ch.  XIX,  §§  323-327:  Shaw  r. 
Spencer,  100  Mass.,  382  (1868),  §  465. 


595 


§  4W.] 


FLEDGE    OF    STOCK. 


[CH.  XXVI. 


one  taking  stock  in  pledge  from  an  agent  knows  that  the  latter  is 
acting  as  agent,  he  is  bound  to  inquire  whether  the  principal  has 
authorized  his  agent  to  pledge  the  stock,  since  a  power  to  pledge 
cannot  be  presumed  from  a  power  to  sell.1  The  right  of  corpora- 
tions and  persons  to  give  and  take  stock  in  pledge  is  considered 
elsewhere.2 

§  475.  Pledgors  remedies.— Where  the  pledgee  of  stock  has  been 
guilty  of  a  conversion  of  it,  the  pledgor's  remedy  against  him  is 
generally  by  an  action  at  law  for  damages.  He  need  not  tender 
to  the  pledgee  the  amount  of  the  debt  secured  by  the  pledge,  since 
the  pledgee  may  recoup  to  that  extent  and  thus  decrease  the  dam- 
ages of  the  pledgor.3  The  pledgor's  damages  are  measured  by  the 
market  value  of  the  stock  at  the  time  of  the  conversion,  together 
with  interest  and  subsequent  damages.4  The  pledgor  may  be 
barred  from  his  action  for  damages  by  a  waiver  of  the  particular 
act  of  conversion  by  the  pledgee.5  He  has  the  option,  however,  of 
ratifying  the  transaction  and  claiming  the  proceeds,  or  he  may  re- 
pudiate the  sale  and  sue  for  conversion.6     This  remedy  at  law  may 


'Seech.  XIX,  §321. 

2 Seech.  XIX 

'Allen  v.  Dykers,  3   Hill,  93  (18 
7  id.,  497 ;  New  York,  L,  E.  &  W.  R.  R. 
Co.    v.    Davies,    38    Hun,    477    (1886); 
Work  v.  Bennett,  70  Pa.  St,  484  (1872); 


condition  of  payment  Trover  lies  for  a 
refusal  of  pledgee  to  deliver.  The  pledgee 
is  liable  for  depreciations  of  stock  after 
such  tender.  An  attachment  of  stock 
against  the  pledgor,  but  after  sale  by  him, 
is  no  defense  to  the  pledgee.     Loughbor- 


Fisher  v.  Brown,  104  Mass.,  259;  Neiler    ough  V.  BTNevin,  14  Pac.  Rep.,  369  (Cal., 
v.  Kelly,   69  Pa.  St,  403  (1871);  Lang-.    1887).  An  assignee  of  the  pledgor  of  stock 


ton  u  Waite,  L.  R„  6  Eq.,  165  (1868); 
Felt  v.  Heye,  23  How.  Pr.,  359  (1862;; 
Lewis  v.  Graham,  4  Abb.  Pr.,  106  (1857  ; 
Cortelyou  «,  Lansing,  2  Caines'  Cas., 
200.  However,  a  later  case  in  Massa- 
chusetts —  Cumnock  v.  Institution  for 
Sav.,  142  Mass.,  342  (1886)  —  holds  that  a 
tender  of  payment  of  a  debt  is  neces- 
sary to  enable  a  pledgor  to  maintain 
trover  for  a  conversion  of  property 
pledged,  unless  the  lien  created  by  the 
pledge  has  been  otherwise  discharged 


may  tender  the  amount  due  and  demand 
the  stock.  The  pledgee  cannot  refuse, 
because  the  stock  has  been  attached,  the 
assignee  not  being  a  party  thereto. 
Tender  is  sufficient  without  payiDg  the 
money  into  court  Id.,  15  Pac*  Rep, 
773  (Cal.,  1887).  See,  also,  Thompson  v. 
St  Nicholas,  etc.,  Bank,  113  N.  Y.,  325 
(1889). 

See  ch.  XXXV.  In  Fowle  a  Ward, 
113  Mass.,  548  (1873),  the  court  said 
the    damages    should    be    "a    sum    of 


"After    the    sale    by  the  pledgee,  the    money  which  would  enable  him  to  pur- 
pledgee  need  not  make  a  lender  of  the    chase  seventeen  new  shares  to  replace 


amount  due  nor  a  demand  of  the  se- 
curities before  bringing  his  action.  .  .  . 
A  formal  tender  of  the  amount  of  the 
notes  would  have  been  a  useless  cere- 
mony, such  as  the  law  never  requires." 
Fletcher  v.  Dickinson,  7  Allen,  23.  A 
pledgor's  vendee  may  tender  the  amount 
of  the  debt  and  demand  the  stock  as  a 


those  which  have  been  taken  from  him, 
with  such  additional  sum  as  would  in- 
demnify him  for  the  dividends  which 
he  has  lost  since  the  sale,  and  also  an 
equitable  allowance  for  interest" 

5  Child  v.   Hugg,  41   CaL,  519  (1871). 
See,  also,  sub. 

6  Atkins   v.   Gamble,   42    Cal.,   86,  91 


596 


CH.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  475. 


be  on  contract  or  in  tort.1  The  pledgor  may,  if  he  prefers,  begin 
suit  in  a  court  of  equity,  when  the  pledgee  has  converted  the  stock, 
and  compel  him  either  to  replace  the  stock  or  give  compensation 
in  damages.     The  jurisdiction  of  a  court  of  equity  in  such  a  case 

on  the 


has  been  denied,2  but  has  been  sustained 


ground  that  onlv 


(1871).  If  there  are  several  pledgors, 
and  the  pledge  is  redeemed,  and  the 
pledgee,  at  the  request  of  one  of  the 
pledgors,  transfers  the  stock  to  third 
parties,  the  pledgee  is  liable  to  the  other 
pledgors  for  loss  incurred  thereby. 
Magnus  v.  Queensland,  etc.,  Bank,  57 
L.  T.  Rep.,  136  (1887). 

1  The  form  of  a  complaint  or  declara- 
tion in  an  action  by  a  pledgor  against  a 
pledgee  for  the  conversion  of  the  stock 
held  in  pledge  may  be  in  tort  or  in  as- 
sumpsit but  not  in  both.  Stevens  v. 
Hurlbut  Bank,  31  Conn.,  146  (1862).  It 
is  a  conversion  for  the  pledgee  to  retain 
the  stock  after  the  principal  of  the  debt 
is  paid,  nothing  being  said  about  interest. 
Kull man  v.  Greenebaum,  28  Pac.  Rep., 
674  (Cal.,  1891).  A  complaint  which, 
after  stating  that  shares  of  stock  had 
been  pledged  to  defendant,  avers  that 
"defendant,  in  consideration  of  the 
premises,  then  and  there  undertook  and 
promised  plaintiff"  to  hold  the  stock 
only  as  pledgee,  but  that,  in  violation  of 
its  promise,  defendant  sold  and  converted 
the  stock  to  its  own  use,  without  giving 
plaintiff  notice  of  the  sale,  and  in  which 
plaintiff  seeks  to  recover  as  damages  the 
full  value  of  the  shares  alleged  to  have 
been  converted,  though  informal,  is 
good  as  a  complaint  in  case.  Sharp  v. 
National  Bank,  7  S.  Rep,  106  (Ala., 
1888).  This  case  discussed  also  the  differ- 
ence between  assumpsit  and  in  case  in 
6uch  an  action.  In  the  case  of  Butts  v. 
Burnett,  6  Abb.  Pr.  (N.  S.),  302  (1869),  in- 
volving the  arrest  of  a  broker  who  had 
sold  the  pledge  before  the  note  was  due, 
the  court  said :  "  It  is  very  questionable, 
I  think,  whether  a  demand  after  default 
in  payment  of  the  debt  for  which  prop- 
erty is  pledged  as  security  will  render  a 
refusal  to  deliver  the  pledged  property  a 
tortious  conversion  of  it     No  doubt  the 


pledgor  can  redeem  upon  a  tender  of 
the  debt,  or  he  may  recover  the  differ- 
ence between  the  value  of  the  pledge 
and  the  debt.  But  to  lay  the  foundation 
for  an  action  for  conversion,  I  am  of 
opinion  that  an  offer  and  demand  must 
be  made  on  the  day,  and  is  not  sufficient 
if  made  after  the  day  on  which  the  debt 
has  become  payable."  As  to  the  com- 
plaint in  action  by  pledgor  against 
pledgee  for  not  returning  goods  pledged, 
see  2  Chitty  on  Pleading,  69;  Stanton  v. 
Collier,  3  El.  &  Bl.,  274.  An  answer  is 
not  good  where  it  merely  denies  the  con- 
version and  does  not  deny  the  possession 
by  the  defendant  of  certain  stocks  be- 
longing to  the  plaintiff,  nor  the  tender  of 
the  balance  due,  nor  the  demand  for 
such  stocks,  nor  the  non-delivery  of  the 
same.  Dubois  v.  Sistare,  N.  Y.  L.  J., 
Dec.  9,  1890.  Where  the  repledgee  con- 
verts the  stock  the  remedy  for  conver- 
sion is  with  the  first  pledgee,  not  with 
the  first  pledgor.  Thompson  v.  Toland,  48 
Cal.,  99  (1874).  Contra,  Smith  v.  Savin, 
N.  Y.  L.  J.,  June  21,  1893.  A  pledge  of 
stock  to  secure  future  liabilities  does  not 
secure  past  liabilities.  If  the  pledgee 
refuses  to  surrender  the  stock  on  de- 
mand and  tender,  the  pledgor  may  re- 
cover the  value  of  the  stock  on  that  day, 
less  the  amount  tendered.  Presdt.  etc, 
of  Franklin  Bank  v.  Harris,  26  Atl.  Rep., 
523  (Md.,  1893). 

^Lacombe  t'.  Forstall's  Sons,  123  U.  S., 
562  (1887);  Genet  v.  Howland,  45  Barb., 
560  (1866).  Remedy  of  pledgor  is  at  law 
after  a  tender,  not  by  bill  in  equity  to 
redeem.  Doak  v.  Bank  of  the  State.  6 
Ired.  L.,  309  (1846).  Where  the  pledgee 
has  sold  the  stock,  the  pledgor  cannot 
compel  him  to  restore  it  by  a  bill  in 
equity,  even  though  he  alleges  that  the 
sale  was  to  a  person  who  holds  the  stock 
as  trustee  for  the  pledgee.   The  pledgor's 


591 


§  ±75.] 


PLEDGE    OF    STOCK. 


[oil.   XXVI. 


a  court  of  equity  can  compel  a  retransfer  of  the  stock  or  an  account- 
ing of  the  dividends  declared  while  the  pledge  was  running,  or  an 
accounting  by  third  persons  to  whom  the  pledgee  has  assigned  the 
debt  and  pledge,  or  enjoin  an  illegal  transfer  of  the  stock.1     An 


remedy  is  at  law.     Hinckley  v.  Pfister. 
53  N.  W.  Rep.,  21  (Wis.,  1892).     A  bill  in 
equity  does  not  lie  for  damages  due  to 
an   illegal  sale  of  stock   by  a  pledgee. 
Henry   v.  Travelers',  etc.,  Co.,  45   Fed. 
Rep.,  299  (1891).    A  pledgor  cannot  file 
a  bill  in  equity  to  hold  the  pledgee  liable 
for  selling  the  stock  in  violation  of  the 
pledge,   there    being    no    disputed    ac- 
counts.  Roland  v.  Lancaster,  etc.,  Bank, 
19  Atl.  Rep.,  951  (Pa.,  1890);  Augus  v. 
Robinson's    Adm'r,    19    Atl.   Rep.,   993 
(Vt,  1890).     "It  is    well   settled  that  a 
bill  in  equity  will  not  ordinarily  lie  to 
redeem  property  from  a  pledge.    Kemp 
V.    VVestbrook,    1   Ves.,   278;   Story,  Eq. 
Juris.,  §  1032.      The  reason  is  obvious. 
The  legal  title  to  the  thing  pledged  does 
not  p;iss  to  the  pledgee,  as  it  does  to  ;i 
mortgagee  in  possession  in  the  case  of  a 
mortgage.   The  pledgor  retains  the  legal 
title  and  parts  only  with  possession  and 
a  special   property.     Jones  on  Pledges, 
§  552.     He  has  therefore  a  legal  right 
to    redeem,    and    upon    tendering    the 
amount  due  to  the  pledgee  lie  may  bring 
replevin  for  the  collateral  or  an  action 
to  recover  its  value.     It  is  only  when 
his  legal  remedies  are  insufficient  that 
the  pledgor  can  come  into  equity.   Jones 
on  Pledges,  §  556,  and  cases  cited.     If, 
for   instance,  the  collaterals   consist  of 
shares  of  stock  which  have  been  trans- 
ferred into  the  pledgee's  name  upon  the 
books  of  a  corporation,   an   action   in 
equity  will  lie,  for  the  reason  that  such 
an  action  is  necessary  to  secure  the  re- 
transfer  of  the  shares.      So  equity  may 
be   invoked  where  an  accounting  or  a 
discovery  is  needed  or  where  the  pledgee 
has  assigned    the   pledge."      Stokes    r. 
Stokes,  N.  Y.  L,  J.,  Nov.  15,  1892. 

1  Bryson  r.  Raynor,  25  Md.,  424  (1866) ; 
Conyngham's  Appeal,  57  Pa.  St,  471 
(1868);  Hasbrouck  v.  Yamlervoort,  4 
Sand.,  74  (1850);  Koons  r.   First    Nat'l 


Bank,  89  Ind.,  178  (1883).     The  pledgee 
must  return  the  stock  and  stock  divi- 
dends and  account  for  money  dividends. 
Vaughan  v.  Wood,  1  M.  &  KL,  403  (1833). 
A  court  of  equity  has  power  to  decree 
the  return  of  pledged  stock  and  money 
deposited   as    collateral.     Post   v.   Sim- 
iin .us,  9  N.  Y.  Supp.,  112  (1890);  Brown 
v.  Runals,  14  Wis..  698.     A  pledgor  may 
file  a  bill  in  equity  to  have  a  surplus  de- 
livered up  and  the  notes  for  which  the 
collateral  was  given  delivered  up  also. 
Cahoon  r.  Bank  of  Utica,  7  N.  Y,   186 
(1858X  reversing  7   How.   Pr..  134.    In 
of  a  wrongful  repledge  the  pledgor 
may  claim  the  proceeds  or   redeem  the 
stock  from  the  second  pledgee.     Cham- 
berlain  r.  Greenleaf,  4  Abb.   N.  ('.,  178 
(1878).     Where  the  second  pledgee  has 
sold  the  stock   for  non-payment  of  his 
debt  the  first  pledgor  may  claim  the  ex- 
cess, the  amount  retained    by   the   re- 
pledgee     being     more     than    the    first 
pledgor's  debt     Be  Bonner,  8  Daly,  7". 
(1878).     See,    also,    Fowle  v.  Ward,    113 
Mass.,  548(1873).    An  action  to  redeem  a 
pledge  of  stock  is  to  be  tried  without  a 
jury,  even  though  the  defendant  sets  up 
a  counter-claim  of  false  representations. 
Lynch  v.  Maedonald,  58  L.  T.  Rep.,  396 
(1888).     Where  the  pledgee  is  about  to 
sell    the    stock  and  denies  the  pledge, 
the     pledgor     may    enjoin     the     sale. 
Thielens  v.  Dialogue,  19  Atl.  Rep.,  970  (N. 
J.,  1890).     For  other  cases  sustaining  the 
jurisdiction  on  the  ground  that  an  in- 
junction   was    proper,    see     Hower    v. 
Weiss,  etc.,  Co.,  55  Fed.  Rep.,  356  (1893); 
Myers  r.  Merchants',  etc.,  Bank,  N.  Y.  L. 
J.,  Sept.    1.  1891.     The  pledgor  cannot 
enjoin   a   sale  by    the  pledgee  on   the 
ground  that  the  sale  will  be  at  a  sacri- 
fice.    Park   v.  Musgrave,  2  T.  &  C,  571. 
Where  a  purchaser  of  stock  agrees  to 
give  a  long-time  note  with  the  stock  as 
security,  and  subsequently,  for  the  ac- 


598 


CH.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  475. 


unreasonable  delay  or  laches  on  the  part  of  the  pledgor  will  bar  his 
remedy  against  the  pledgee.1    In  New  York  a  contrary  rule  prevails.2 


commodation  of  the  vendor,  a  short-time 
note  with  the  stock  as  security  is  deliv- 
ered to  a  third  person  named  by  the 
vendor,  and  the  vendor  then  obtains 
possession  of  the  stock  and  note,  and 
after  the  short-time  note  becomes  due, 
proposes  to  collect  the  note  and  sell 
out  the  stock,  the  pledgor  may  enjoin 
the  sale  of  the  stock.  In  this  case  the 
stock  was  of  uncertain  value,  and  rep- 
resented a  controlling  interest  in  the 
company,  and  damages  for  its  con- 
version would  not  have  been  an  ade- 
quate remedy.  The  court  held  that  an 
action  for  replevin  was  not  adequate, 
inasmuch  as  in  order  to  bring  replevin 
the  pledgor  would  have  to  tender  the 
debt,  which,  according  to  the  original 
agreement,  was  not  yet  due.  Hower  v. 
Weiss,  etc.,  Co.,  55  Fed.  Rep.,  356  (1893). 
1  Eight  years'  delay  by  pledgor  in  com- 
plaining of  refusal  of  pledgee  to  deliver 
up  the  stock  on  tender  of  the  debt,  the 
stock  having  subsequently  declined  in 
value,  held  fatal  under  the  facts  of  this 
case.  Murriam  v.  Childs,  5  S.  W.  Rep., 
615  (Mo.,  1887).  Where  the  pledgor's 
executor  for  value  received  sells  the 
pledgor's  interest  to  the  pledgee,  long 
lapse  of  time  after  full  knowledge 
of  the  facts  by  all  parties  will  raise  a 
presumption  in  favor  of  the  pledgee's 
complete  ownership.  Lockwood  v. 
Brantly,  103  N.  Y.,  680  (1886).  Equity 
has  jurisdiction  to  ascertain  the  amount 
due  on  a  pledge  and  to  decree  that 
the  pledgor  may  redeem.  As  to 
the  statute  of  limitations,  see  May- 
nard  v.  Tilden,  28  Fed.  Rep.,  688,  703 
(1886);  Child  v.  Hugg,  supra.  In 
Greene  v.  Dispean,  14  R.  I.,  575  (1884). 
a  pledge  of  stock  was  treated  as  a 
mortgage,  and  the  right  to  redeem 
was  held  to  be  barred  six  years  after 
the  date  of  the  mortgage.  Pledgor 
waives  informality  of  notice,  where, 
after  the  sale,  he,  as  an  officer  of  the 
corporation,   enters    a  transfer    of  the 


stock  to  the  one  who  purchased  at  the 
sale.  Downing  v.  Whittier,  11  N.  E 
Rep.,  585  (Mass.,  1887).  Four  years'  de- 
lay in  complaining  is  fatal.  Receiving 
the  benefit  of  the  sale  is  a  waiver  of  ob- 
jections. M'Dowell  v.  Chicago  Steel 
Works,  16  N.  E.  Rep.,  854  (111.,  1888). 
Although  the  pledgee  gives  no  public 
notice  of  the  sale,  and  although  he  pur- 
chases the  stock  at  the  sale,  yet  the 
pledgor  ratifies  the  sale  by  acquiescing 
and  by  negotiating  to  buy  the  stock. 
Hill  v.  Finigan,  19  Pac.  Rep.,  494  (Cal., 
1888).  The  statute  of  limitations  is  no 
bar  to  an  action  to  redeem  a  pledge  of 
stock,  unless  the  statute  was  set  running 
by  demand  of  payment  and  notice  of  in- 
tent to  sell.  Gilmer  v.  Morris,  35  Fed. 
Rep.,  682  (1888).  See  S.  C,  80  Ala.,  78. 
In  the  case  of  a  pledge  of  stock  to  secure 
future  advances  the  statute  of  limita- 
tions begins  to  run  against  the  right  of 
the  pledgor  to  redeem  from  the  time 
when  the  pledgee,  by  some  positive  act, 
repudiates  the  pledge  and  claims  the 
property  as  his  own  or  improperly  dis- 
poses of  it.  Gilmer  v.  Morris,  43  Fed. 
Rep.,  456  (1890).  If  the  pledge  is  recog- 
nized by  extension  to  other  debts,  the 
statute  of  limitations  runs  from  the 
latter  date.  Gilmer  v.  Morris,  46  Fed. 
Rep.,  333  (1891).  The  statute  of  limita- 
tions runs  against  a  receipt  reciting  a 
first  payment  on  stock  "  standing  in  my 
name  but  owned  by  him,  and  he  re- 
maining responsible  for  the  balance  of 
the  instalments  when  called  in,"  there 
being  no  agreement  as  to  the  future  dis- 
position of  the  stock  and  of  dividends. 
Cone  v.  Dunham,  20  Atl.  Rep.,  311 
(Conn.,  1890).  A  pledge  is  not  legally 
abandoned  although  no  demand  is  made 
for  it  during  a  long  lapse  of.  time. 
Cridge's  Appeal,  18  Atl.  Rep,  1010  (Pa., 
1890).  Redemption,  laches,  etc.,  see 
Schouler  on  Bailments  (2d  ed.),  §  250. 

2  Bailey  v.  Chamberlain,  N.  Y.  Daily 
Reg.,  July  23,  1888.    See  Miner  v.  Beek- 


599 


§  476.] 


r LEDGE    OF    STOCK. 


[CH.  XXVI. 


A  pledge  of  stock  to  secure  another  person's  debt  is  released  by 
an  extension  of  that  debt.1  A  pledgor  cannot  compel  his  pledgee 
to  sell  the  stock  and  apply  the  proceeds  to  the  debt  by  a  notice  to 
make  such  a  sale.2  "When  the  pledgee  causes  the  stock  to  be  sold 
the  pledgor  is  entitled  to  the  surplus  proceeds  of  the  sale  remain- 
ing after  the  debt  and  the  expenses  of  the  sale  have  been  paid.3  In 
certain  cases  a  pledgor  may  defeat  an  action  by  the  pledgee  on  the 
debt  by  showing  that  the  pledgee  has  converted  the  pledge.4 

§  476.  Pledgee's  remedies  when  debt  secured  is  not  paid. —  "Where 
shares  of  stock  are  pledged  as  collateral  security  for  a  debt  and 
the  debt  is  not  paid,  and  the  pledgee  wishes  to  apply  the  stock  to 
the  payment  of  the  debt,  he  has  the  right  to  pursue  either  one  of 
two  remedies:  he  ma}'  file  a  bill  in  equity  for  the  foreclosure  and 
sale  of  the  pledge,5  or  he  may  give  notice  to  the  pledgor  of  an 


man,  50  N.  T.,  337.  Pledgee  cannot 
claim  that  he  has  held  the  stock,  ad- 
versely to  the  pledgor,  for  a  time  more 
than  sufficient  to  give  him  title  to  it 
under  the  statute  of  limitations.  He  is 
not  allowed  to  assert  that  he  holds  the 
stock  adversely.  Cross  tt  Eureka,  etc., 
Co.,  73  Cal.,  302  (1887). 

1  Price  tt  Reed,  15  N.  E.  Rep.,  754  (111., 
1888). 

2  Lawrence  v.  Maxwell,  53  N.  Y.,  19; 
Robinson  v.  Hurley,  11  Iowa,  412; 
O'Neill  v.  Whigham,  88  Pa.  St,  394; 
Rozet  v.  McClellan.  48  111.,  345 ;  Smouse 
v.  Bail,  1  Grant,  397;  Taggard  tt  Cur- 
tenius.  15  Wend.,  155;  Fisher  tt  Fisher, 
98  Mass.,  303;  Napier  v.  Central,  etc., 
Bank,  68  Ga.,  637,  holding,  however,  that 
where  the  pledgee  does  not  sell,  because 
he  and  others  were  '■  hearing  "  the  mar- 
ket, there  may  be  an  element  of  fraud 
which  gives  a  cause  of  action.  The 
pledgor  cannot  by  request  compel  the 
pledgee  to  sell.  Minneapolis,  etc.,  Co.  tt 
Betcher,  44  N.  W.  Rep.,  5  (Minn.,  1889). 

3  And  the  pledgor's  assignee  for  the 
benefit  of  creditors  may  claim  it  The 
pledgee  hank  has  no  banker's  lien  on 
the  su?plus  for  other  debts.  Brown  tt 
New  Bedford  Inst  for  Sav.,  137  Mass., 
262  (1884).  A  pledgee  bank  cannot  re- 
fuse to  deliver  back  the  stock  to  pledgor 
who  tenders  the  amount  due,  on  the 
ground   that  the  pledgee  owes  it  still 


another  debt  Mclntire  tt  Blakeley,  12 
Atl.  Rep.,  325  (Pa.,  1888).  If  the  officers 
of  a  pledgee  bank  refuse  to  deliver 
back  the  pledged  stock  upon  a  tender 
of  the  debt  they  are  liable  personally 
in  damages  to  the  pledgor.  Mclntire 
tt  Blakeley,  supra.  If  pledgee  has  also 
other  security,  an  unsecured  creditor  of 
the  pledgor  may  compel  the  pledgee 
to  resort  to  such  other  security  first 
Bishop,  etc.,  Assoc.  tt  Kennedy,  12  Atl. 
Rep.  141  (X.  J.,  1887).  Pledgee  on  sale 
of  pledge  cannot  apply  the  excess  to  an- 
other debt  due  him  from  the  pledgor, 
who  died  before  the  sale  was  made. 
Peters  tt  Nashville  Savings  Bank,  6  S. 
W.  Rep.,  133  (Tenn.,  1887). 

*  See  §§  461,  458,  note.  In  an  action  by 
the  pledgee  for  the  debt,  the  pledgor 
may  set  up  a  conversion  of  the  stock 
pledged.  Donnell  tt  Wyckoff,  7  Atl. 
Rep.,  672  (N.  J.,  1887). 

5Vaupell  «,  "Woodward,  2  Sand.  Ch., 
143  (1844).  The  pledge  may  be  made  to 
secure  the  carrying  out  of  a  contract, 
and  a  court  of  equity  will  foreclose  it 
although  the  damages  are  unliquidated. 
Robinson  v.  Hurley,  11  Iowa,  410,  from 
which  it  seems  that  where  the  pledge 
was  made  without  a  written  transfer  of 
the  certificate  this  is  the  only  remedy. 
See,  also,  Merchants'  Nat'l  Bank  tt  Hall, 
83  N.  Y.,  338  (1881);  Smith  v.  Coale,  34 
Leg.   Intel.,  54;  Blouin  tt   Liquidators,. 


600 


CH.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  476. 


intent  to  sell  the  stock,  and  may  so  sell  it  without  any  judicial  pro- 
ceedings, and  apply  the  proceeds  to  the  payment  of  the  debt.1  No 
express  power  to  sell  need  be  contained  in  the  memorandum  of 


etc.,  30  La.  Ann.,  714  (1878) ;  Johnson  v. 
Dexter.  2  MacArthur,  530.  A  person 
holding  and  carrying  stock  for  himself 
and  others  may  file  a  bill  in  equity  to 
bring  about  a  sale  and  an  adjustment 
of  the  accounts.  Goodwin  v.  Evans,  19 
At].  Rep.,  49  (Pa.,  1890).  An  action  lies 
for  judgment  on  a  note  and  for  a  sale  of 
the  collateral  and  the  application  to  the 
judgment  of  the  amount  realized  on 
such  sale.  Farmers',  etc.,  Nat'l  Bank  v. 
Rogers,  1  N.  Y.  Supp.,  757. 

i  Story  on  Bailments,  9th  ed.  (1877), 
§310,  saying:  "The  law  as  at  present 
established  leaves  an  election  to  the 
pawnee.  He  may  file  a  bill  in  equity 
against  the  pawnor  for  a  foreclosure 
and  sale ;  or  he  may  proceed  to  sell  ex 
mero  motu,  upon  giving  due  notice  of 
his  intention  to  the  pledgor.  In  the 
latter  case,  if  the  sale  is  bona  fide  and 
reasonably  made,  it  will  be  equally  ob- 
ligatory as  in  the  first  case."  The  lead- 
ing case,  allowing  this  remedy  of  the 
pledgee  against  the  pledge,  is  Tucker  v. 
Wilson,  5  Bro.  Par.  Cases,  193  (1714), 
rev'g  1  P.  Wins.,  261.  In  Brown  v.  Ward, 
3  Duer,  660  (1854),  the  court  say :  "  Since 
the  time  of  the  case  of  Hart  v.  Ten 
Eyck  [2  Johns.  Ch.  Cas.,  180J,  before 
Chancellor  Kent,  the  right  of  the 
pledgee  to  sell  after  the  debt  is  due, 
upon  reasonable  notice,  has  been  un- 
questioned, and  a  custom  has  grown  up 
and  has  been  sanctioned  by  the  courts 
of  selling  stocks  at  the  Merchants'  Ex- 
change." To  same  effect,  Diller  v.'  Bru- 
baker,  52  Pa.  St.,  498  (1866);  Finney's 
Appeal,  59  Pa.  St,  398  (1866);  Easton  v. 
German,  etc.,  Bank,  127  U.  S.,  532  (1888) ; 
Mount  Holly,  etc.,  Co.  v.  Ferree,  17  N.  J. 
Eq.,  117  (1864),  where  the  court  say :  "  A 
sale  of  a  pledge  by  the  pawnee  where 
reasonably  and  bona  fide  made,  and 
after  notice  to  the  pawnor,  is  equally 
obligatory  as  if  made  by  judicial  pro- 


cess." 2  Kent's  Com.,  582,  saying  that  the 
pledgee  "may  file  a  bill  in  chancery 
and  have  a  judicial  sale  under  a  regular 
decree  of  foreclosure,  .  .  .  and  he 
may  sell  without  judicial  process,  upon 
giving  ^reasonable  notice  to  the  debtor  to 
redeem."  Sitgreaves  v.  Bank,  49  Pa.  St, 
359;  Stearns  v.  Marsh,  4  Denio,  227 
(1847);  Markham  v.  Jaudon,  41  N.  Y., 
235,  241  (1869);  Drury  v.  Cross,  7  Wall., 
299  (1868).  The  parties  may  provide  for 
any  manner  of  disposing  of  the  pledge 
to  satisfy  the  claim  upon  it  which  is  not 
in  contravention  of  statute,  against 
public  policy  or  fraudulent.  McNeil  v. 
Tenth  Nat  Bank,  46  N.  Y,  325,  334, 
says:  "The  distinction  between  a  lien 
and  a  pledge  is  said  to  be  that  a  mere 
lien  cannot  be  enforced  by  sale  by  the 
act  of  the  party^but  that  a  pledge  is  a 
lien  with  a  power  of  sale  superadded." 
Pledgee's  power  of  attorney  to  sell  is 
coupled  with  an  interest  and  is  not 
revocable.  Renshaw  v.  Creditors,  3  S. 
Rep.,  403  (La.,  1888).  Person  secured  by 
pledge  of  stock  in  another's  name  may 
sue  latter  for  the  amount  received  by 
latter  on  a  sale  of  the  stock.  Maynard  v. 
Lumberman's  Nat  Bank,  11  Atl.  Rep., 
529  (Pa.,  1887).  Although  the  pledgee 
has  not  advanced  all  that  he  agreed  to, 
yet,  where  he  ceased  advances  after  the 
pledgor's  default  in  paying  the  part  al- 
ready advanced,  the  pledgee  may  pro- 
ceed to  sell  the  pledge  after  notice. 
Midland  R'y  v.  Loan,  etc.,  Co.,  N.  Y  L 
J.,  May  24,  1890.  The  pledgee  cannot 
be  enjoined  from  selling  the  pledge 
on  notice,  merely  because  by  legal  pro- 
ceedings he  has  injured  the  value  of  the 
pledge.  Id.  A  pledgee  who  has 
brought  an  action  to  foreclose  his 
pledge  may  nevertheless  abandon  the 
suit  and  resort  to  his  remedy  of  a  sale 
after  notice.  Id.  A  sale  by  a  pledgee 
will  not  be  enjoined  merely  because  the 


601 


§  476.] 


PLEDGE    OF    STOCK. 


[CH.  XXVI. 


me 


pledge  in  order  to  authorize  the  latter  remedy.     It  exists  by  force 

of  law. 

The  pledgee,  however,  is  not  bound  to  pursue  either  remedy 
erely  because  the  debt  is  due  and  unpaid.1  He  need  not  sell  the* 
stock  upon  the  maturity  of  the  note  secured,  nor  is  he  liable  because 
the  stock  declines  in  value.2  He  may  sue  on  the  debt  without  tend- 
ering back  the  stock.3  The  pledgor  cannot  compel  him  to  sell  by 
merely  giving  him  notice  so  to  do.4  Kor  is  the  pledgee  bound  to 
sell  on  non-payment  of  the  debt,  although  the  memorandum  of 
pledge  expressly  authorizes  a  sale,  but  he  may  file  a  bill  in  equity 
to  foreclose  instead  of  pursuing  the  other  remedy.5  The  pledgee's 
remedy  bv  attaching  the  stock  and  selling  it  at  an  execution  sale6 
is  his  remedy  as  a  creditor  and  not  as  a  pledgee  of  the  person  in- 
debted to  him.     A  pledgee  may  prove  his  entire  claim  against  the 


corporation  is  in  insolvency  proceedings 
in  another  state  and  the  sale  has  been 
enjoined  by  courts  of  that  state.  Union 
Cattle  Co.  v.  International,  etc.,  Co.,  21 
N.  E.  Rep.,  962  (Mass.,  1889). 

lO'Xeil  v.  Whigham,  87  Pa.  St.. 
394  (1878);  Rezet  V.  McClellan.  48  111.. 
345(1808);  Palmer  r.  Uaw.s.  40  N.  W. 
Rep.,  07(5  (Wis..  1888 

*Simonton  v.  Kelly,  133  U.  S..  330 
(1887);  Palmer  v.  Hawes,  40  N.  W.  Rep., 
676  (Wis.,  1888). 

3  Taylor  v.  Cheever,  6  Gray,  146;  But- 
man  v.  Howell,  10  N.  E.  Rep.,  504 
(Mass.,  1887).  A  broker  or  pledgee  need 
not  sell  the  stock  held  as  collateral  be- 
fore bringing  an  action  against  the 
pledgor  for  the  amount  due,  nor  does  a 
broker's  custom  compel  it.  De  Cordova 
v.  Barnum,  130  N.  Y.,  615  (1893) 
Pledgee  having  sold  the  stock,  and 
there  still  being  a  balance  due  him 
from  the  pledgor,  may  sue  for  such  bal- 
ance, and  need  not  allege  that  the  sale 
was  on  due  notice  and  demand.  Wal- 
lace v.  Berdell,  24  Hun,  379  (1881). 
Where  stock  pledged  to  secure  a  note  is 
to  be  transferred  as  payment  in  case 
the  note  is  not  paid,  the  pledgee  may 
sue  on  the  note  if  the  pledgor  has  not 
transferred  the  stock.  Fullerton  v.  Mob- 
ley,  15  Atl.  Rep.,  856  (Pa.,  1888).  As  to 
the  duties  of  the  pledgee  towards  an 
indorser  of  the  note,  see  Payne  v.  Com. 


Bank.  14  Miss.,  24  (1846).  Misrepresen- 
tations by  pledgee  of  stock  as  to  the 
value  of  the  stock  made  after  its  pledge 
are  no  defense  for  the  pledgor  when 
sued  on  the  debt  Palmer  r.  Hawes,  40 
N.  W.  Rep.,  r,70  Wis.,  18881.  The  fact 
that  stocks  are  deposited  as  collateral 
security  to  a  note  does  not  prevent  the 
statute  of  limitations  running  against 
the  note.  In  re  Hartranft's  Estat 
Atl.  Rep.,  104  (Pa.,  1893).  Although  the 
debt  is  barred  by  the  statute  of  limita- 
tions, the  pledgee  may  compel  the  cor- 
poration to  transfer  the  stock  to  him  on 
the  books.  Miller  v.  Houston,  etc.,  Co., 
65  Fed.  Rep..  366  (1893). 
«  See  g  475. 

5  Comtek  v.  Richards,  3  Lea  (Tenn.),  1 
(1879) ;  Coffin  v.  Chicago  &  N.,  etc,  Co., 
4  Hun,  025(187-. 

6  Lee  v.  Citizens'  Nat.  Bauk,  2  Cin.  Su- 
per. Ct,  298  (1872>.  His  remedies  as  a 
pledgee  are  not  released  or  affected  by 
his  pursuit  of  other  remedies.  See 
Sickles  v.  Richardson,  23  Hun,  559  (1881). 
Judgment  on  the  debt  does  not  release 
the  stock  pledged.  "Until  the  debt  is 
paid,  the  pledgor,  under  the  terms  of 
the  bailment,  has  no  right  to  have  the 
pledge  given  up  to  him."  Donnell  >.\ 
WyckulT.  7  Atl.  Rep.,  672  (N.  J..  1887} 
See,  also,  Hill  v.  Beebe,  13  N.  Y.,  556,  563, 
567. 


603 


cir.  xxvi.] 


PLEDGE    OF    STOCK. 


[§*?' 


insolvent  estate  of  the  pledgor,  and  obtain  his  proportionate  part 
thereof.1 

§  477.  Notice  of  sale  of  stoclc  vy  pledgee  to  apply  to  debt  secured  - 
Waiver  of  notice. —  In  case  the  pledgee  pursues  the  remedy  of  sell- 
ing the  stock  without  any  judicial  proceedings,  he  must  give  the 
pledgor  reasonable  notice  of  the  intent  to  sell  and  of  the  time  and 
place  of  sale.2  A  sale  without  a  notice  is  a  conversion  of  the  stock.3 
The  pledgee  must  demand  payment  of  the  debt  secured  by  the 
pledge  of  stock,  and  a  waiver  of  notice  of  sale  is  not  a  waiver  of 
a  right  to  have  such  a  demand  made.4  A  notice  of  intent  to  sell, 
however,  is  equivalent  to  a  demand  of  payment.5  A  broker's  cus- 
tom to  the  effect  that  no  notice  is  necessarv  is  illegal  and  void.6 
The  time  and  place  of  the  proposed  sale  must  be  specified  in  the 
notice.7     The  time  between  the  service  of  the  notice  and  the  time 


1  People  v.  Remington,  121  N.  Y.,  328 
(1890).  The  pledgee  may  prove  his  en- 
tire claim  against  the  insolvent  pledg- 
or's estate  without  first  resorting  to  sui-- 
rendering  or  accounting  for  the  pledge. 
In  re  Ives,  11  N.  Y.  Supp.,  655  (1890). 
See,  also,  §  473,  supra.  Where  stock  is 
pledged  to  secure  several  debts,  some  of 
which  are  secured  in  other  ways,  the 
pledgee  may  apply  the  proceeds  of  the 
pledge  to  those  debts  which  are  not  se- 
cured by  indorsements.  Fall  River  Nat. 
Bank  v.  Slade,  26  N.  E.  Rep.,  843  (Mass., 
1891).  In  a  suit  to  foreclose  a  pledge  of 
stock  where  the  pledgee  has  other  se- 
curities also,  the  court  will  not  compel 
the  pledgee  to  sell  the  other  securities 
first.  Work  v.  Ogden,  N.  Y.  L.  J.,  May 
20,  1890. 

2  "  To  authorize  the  defendants  to  sell 
the  stock  purchased,  they  were  bound, 
first,  to  call  upon  the  plaintiff  to  make 
good  his  margin;  and,  failing  in  that, 
he  was  entitled,  secondly,  to  notice  of 
the  time  and  place  where  the  stock 
would  be  sold ;  which  time  and  place, 
thirdly,  must  be  reasonable."  Mark- 
ham  v.  Jaudon,  41  N.  Y,  235,  243  (1869). 
See,  also,  Stratford  v.  Jones,  97  N.  Y, 
586  (1885);  Baker  n  Drake,  66  N.  Y, 
518  (1876);  Conyngham's  Appeal,  57 
Pa.  St.,  474 ;  Stearns  v.  Marsh,  4  Demo, 
227(1847);  Neiler  v.  Kelley,  69  Pa.  St, 
403  (1871) ;  Cushman  v.  Have;,  46  111.,  145 


(1867).  A  joint  owner  is  entitled  to  no- 
tice. Clark  v.  Sparhawk,  2  Weekly 
Notes,  115  (1875). 

3  Fowle  v.  Ward,  113  Mass..  548  (1873) ; 
Hemppling  v.  Burr,  26  N.  W.  Rep, 
496  (Mich.,  1886);  21  N.  E.  Rep,  510(111., 
1889). 

4  Lewis  v.  Graham,  4  Abb.  Pr  ,  106 
(1857):  Brass  v.  Worth,  40  Barb.,  59 
(1863);  Wilson  v.  Little.  2  N.  Y.  443 
448  (1849),  saying:  "It  is  well  settled 
that  where  no  time  is  expressly  fixed 
by  contract  between  the  parties  for  the 
payment  of  a  debt  secured  by  a  pledge, 
the  pawnee  cannot  sell  the  pledge  with- 
out a  previous  demand  of  payment,  al- 
though the  debt  is  technically  due  im- 
mediately." Genet  v.  Howland,  45 
Barb..  560  (1866). 

3Nabring  v.  Bank  of  Mobile,  58  Ala., 
204  (1877).  So,  also,  of  notice  of  intent 
to  foreclose.  Howe  v.  Bemis,  2  Gray,  203. 
Demand  of  payment  may  be  made  by 
long  urging  for  payment,  even  though 
the  word  "demand"  is  not  used.  Car- 
son v.  Iowa,  etc.,  Co.,  45  N.  W.  Rep., 
1068  (Iowa,  1890).  The  giving  of  a  note 
to  a  broker  pledgee  does  not  extend  the 
time  within  which  the  pledgor  was  to 
deposit  further  margin.  Gould  v.  Trask, 
10  N.  Y  Supp.,  619  (1890). 

6Markham  v.  Jaudon,  41  N.  Y,  235 
(1869). 

"Conyngham's    Appeal,   57    Pa.    St, 


603 


§  477.] 


PLEDGE    OF    STOCK. 


[CH.  XXVI. 


when  the  sale  is  to  take  place  must  be  reasonable  in  length,  so  as 
to  give  the  debtor  on  opportunity  to  obtain  money  to  pay  the 
debt.1  In  Massachusetts,  by  statute,  sixty  days'  notice  must  be 
given.2  A  notice  by  a  newspaper  advertisement  is  insufficient.3 
It  must  be  served  personally,  and  it  seems  that  it  cannot  be  served 
on  one  who  has  charge  of  the  pledgor's  office  for  the  transaction 
of  business.4 

By  an  express  agreement  the  pledgor  may  waive  his  right  to 
notice  of  the  time  and  place  of  the  sale.5     Such  contracts  are  fre- 


474  (1868) ;  Genet  v.  Howland,  siqira; 
Canfield  v.  Minn.,  etc.,  Ass'n,  14  Fed. 
Rep.,  801.  See  Schouler  on  Bailments, 
206-212.  It  lias  been  held  in  Maryland 
that  a  notice  of  the  place  is  unneces- 
sary. Worthington  v.  Tormey,  34  Md., 
182  (1870).  But  such  decision  would  be 
unsafe,  and  probably  would  not  be  fol- 
lowed elsewhere.  In  New  York,  the 
place  of  sale  formerly,  by  custom,  was 
at  the  Merchants'  Exchange,  No.  Ill 
Broadway,  but  is  now  both  there  and  at 
the  Real  Estate  Exchange  in  Liberty 
street. 

1  In  Maryland,  etc.,  Co.  v.  Dalrymple, 
25  Md.,  242,  a  week's  notice  was  held 
sufficient.  Lewis  tt  Graham,  4  Abb. 
Pr.,  106  (1857),  holding  that  thirty-four 
days,  where  the  pledgor  resides  in  Illi- 
nois and  the  sale  is  to  be  in  New 
York,  is  sufficient;  Bryan  tt  Baldwin,  7 
Lans.,  174  (1872) ;  affirmed,  52  N.  Y,  232, 
holding  that  two  days  was  sufficient ; 
Stevens  tt  Hurlbut  Bank,  31  Conn.,  146 
(1862),  holding  that  a  sale  on  the  same 
day  is  unreasonable  and  the  notice  in- 
sufficient. See  other  cases  in  ch.  XXV, 
§§  457,  458;  Willoughby  tt  Comstock, 
3  Hill,  389  (1842),  where  two  days 
was  held  sufficient.  Edwards  on  Bail- 
ments, 285.  As  to  place  of  sale,  see 
ch.  XXV,  §S  458,  476. 

2  Gen.  Stat,  ch.  151,  §  9. 

3  Lewis  tt  Graham,  supra;  and  see  §  119. 
*  Bryan  v.   Baldwin.    52    N.   Y,    232 

(1873).  Of.  Milliken  tt  Dehon,  27  N.  Y, 
364  (1853). 

5  Maryland  Fire  Ins.  Co.  tt  Dalrym- 
ple, 25  Md.,  242  (1866) ;  Genet  tt  How- 
land,  supra;  and  see  ch.  XXV,  §§  459, 


462;  Milliken  r.  Dehon.  27  N.  Y,  364: 
Stevens  tt  Hurlbut  Bank.  31  Conn.,  146; 
Hyatt  tt  Argenti,  3  Cal.,  151;  "Wheeler 
tt  Newbould,  16  N.  Y,  392 ;  Stenton  tt 
Jerome,  54  N.  Y,  4S0 ;  Wicks  tt  Hatch, 
62  N.  Y.,  535;  Butts  tt  Burnett,  6  Abb. 
Pr.  (N.  S.),  302  (1869).  Pledgor  of  stock- 
may,  by  the  terms  of  the  agreement 
creating  the  pledge,  waive  his  right  to  no- 
tice of  sale  for  non-payment  of  the  debt 
Appeal  of  Jeanes,  11  Atl.  Rep.,  862  (Pa., 
1887).  Formerly  the  validity  of  a  waiver 
was  doubted.  Campbell  v.  Parker,  9 
Bosw.,  322:  Wilson  v.  Little,  2  N.  Y, 
443.  448;  Gilpin  tt  Howell,  5  Pa.,  41; 
Hanks  v.  Drake,  40  Barb.,  186;  Sterling 
tt  Jaudon,  48  id.,  459.  Authority  to  the 
pledgee  to  sell  "  at  public  or  private 
sale,  at  his  discretion,"  thirty  clays  after 
notice,  waives  notice  of  sale.  McDowell 
tt  Chicago,  etc.,  16  N.  E.  Rep..  851  (111., 
1888).  Notice  may  be  waived.  Chou- 
teau tt,  Allen,  70  Mo.,  290  (1879).  In  the 
case  of  Huiskamp  tt  Wise,  47  Fed.  Rep., 
236,  249  (1891),  where  the  pledgee  was  au- 
thorized to  sell  before  maturity  and  with- 
out notice  if  the  security  became  insuffi- 
cient, the  court  held  that  "  the  pledgee 
could  not  make  sale  of  the  collateral 
until  after  the  default  in  the  payment 
of  the  note,  without  notice  and  demand 
of  payment  to  the  pledgor."  In  the 
case  of  Williams  tt  United  States  Trust 
Co.,  14  N.  Y  Supp.,  502  (1891),  a  provis- 
ion that  the  pledgee  might  sell  without 
notice  and  at  the  exchange  or  at  public 
or  private  sale,  and  that  the  note  should 
become  due  at  once  if  the  security  de- 
preciated a  certain  amount,  was  upheld. 
The   pledgor   may,  subsequently  to  the 


604 


CH.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  478. 


quently  entered  into  with  stock-brokers  by  customers  buying  stock 
on  a  margin.  But  an  express  power  to  the  pledgee  to  sell  the 
pledge  on  certain  contingencies  is  not  a  waiver  of  a  right  to  notice.1 
§  478.  Formalities  of  sale. —  A  sale  of  stock  on  notice  by  a 
pledgee,  for  the  purpose  of  applying  the  proceeds  to  the  pledgor's 
debt,  must  be  at  public  auction.2     A  private  sale  is  unauthorized 


making  of  the  pledge,  release  his  right 
to  redeem.  He  may  agree  that  the 
pledgee  may  sell  the  pledge  at  any  time 
at  privale  sale  and  that  the  proceeds 
shall,  after  repayment  of  the  amount 
loaned,  be  divided  equally  between  the 
pledgor  and  pledgee.  Rutherford  v.  Mass. 
M.,  etc.,  Ins.  Co.,  45  Fed.  Rep.,  712(1891). 
The  fact  that  the  pledgee,  under  a 
waiver  of  notice,  of  demand  and  public 
sale,  sells  the  stock  and  debt  to  an 
enemy  of  the  corporation  does  not  in- 
validate the  sale.  Carson  v.  Iowa,  etc., 
Co.,  45  N.  W.  Rep.,  1068  (Iowa,  1890).  Al- 
though the  pledgor  agrees  that  the 
pledgee  may  sell  part  of  the  pledge 
without  notice  upon  default,  this  does 
not  release  the  remainder  of  the  pledge 
from  being  additional  security  for  the 
debt  Bank  of  Africa  v.  Salisbury,  etc., 
Co.,  66  L.  T.  Rep.,  237  (1892).  Where 
the  pledgees  are  given  power  to  sell  "  in 
such  manner  as  they,  in  their  discretion, 
may  deem  proper,  without  notice,"  a 
sale  without  notice  after  the  maturity 
of  the  loan  is  legal.  Williams  v.  United 
States  Trust  Co.,  133  N.  Y.,  660  (1892). 

An     approved   form   of  a    note  and 
waiver  is  as  follows : 

"  $ .  New  York, ,  18—. 


after  date 


promise  to  pay 


to  the  order  of , dollars,  at , 

for  value  received,  with  interest  at  the 
rate  of per  cent,  per  annum,  having 


pledged  to  the  said 


the  under- 


mentioned securities  (with  authority  to 
sell  the  same  on  non-performance  of  this 
promise,  in  such  manner  as  they,  in  their 
discretion,  may  deem  proper,  without 
notice,  either  at  any  brokers'  board  or 
at  public  or  private  sale,  and  to  apply 

the  proceeds  thereon),  viz. :  . 

"  In  case  of  depreciation  in  the  mar- 
ket value  of  the  security  hereby  pledged, 


or  which  may  hereafter  be  pledged,  for 
this  loan,  a  payment  is  to  be  made  on 
account  on  demand,  so  that  the  said 
market  value  shall  always  be  at  least 

per  cent   more   than  the  amount 

unpaid  of  this  note.  In  case  of  failure 
to  do  so,  this  note  shall  be  deemed  to  be 
due  and  payable  forthwith,  anything 
hereinbefore  expressed  to  the  contrary 

notwithstanding,  and  the ■ —  may 

immediately  reimburse by  sale 

of  the  security.  It  is  understood  and 
agreed   that  if  such  sale  be  by  public 

auction,  the  said shall  be   at 

liberty  to  purchase  for own  account 

any  property  offered  at  such  sale ;  and  it 
is  further  agreed  and  understood  that 
the  above-mentioned  securities,  or  sub- 
stitutes therefor,  or  additions  thereto, 
shall  also  be  held  as  collateral  and  be 
applicable  to   any  other  note  or  claim 

held  against by  said , 

and  that  in  case  the  proceeds  of  the 
whole  of  the  collaterals  shall  not  cover 

principal,   interest    and  expenses,   

hold bound  to  pay  on  demand 

any  deficiency. 

"  Due . 


1  Stevens  v.  Hurlbut  Bank,  31  Conn., 
146  (1862) ;  Lewis  v.  Graham,  4  Abb.  Pr., 
106.  See,  also,  Wilson  v.  Little,  2  N.  Y., 
443;  Genet  v.  Howland,  30  How.  Pr. 
360 ;  Stenton  v.  Jerome,  54  N.  Y,  480. 
Cf.  Milliken  v.  Dehon,  27  N.  Y,  364 
(1863).  But  an  express  power  to  sell  on 
a  specified  day  is  held  to  waive  right  of 
notice.  Bryson  v.  Raynor,  25  Md.,  424 
(1866). 

2  Conyngham's  Appeal,  57  Pa.  St., 
474  (1868);  Rankin  v.  McCullough,  12 
Barb.,  103(1851);  Genet  v.  Howland,  45 
Barb.,  560  (1866);  Ogden  v.  Lathrop,  65 
N.  Y,  158  (1875).     An  express  power  to 


605 


§  479.] 


FLEDGE  OF  STOCK. 


[CH.  XXVI. 


and  illegal,  even  though  the  utmost  market  price  is  obtained.1  The 
pledgee  cannot  have  the  sale  made  at  a  broker's  board  or  in  a  stock 
exchange,  since  only  the  members  of  the  association  are  allowed  to 
bid  for  stocks  sold  therein,  while  the  law  requires  that  the  public 
shall  be  allowed  to  bid  at  a  pledgee's  sale.2  Frequently  a  special 
agreement  is  made  between  the  pledgor  and  pledgee,  especially  be- 
tween a  customer  and  his  stock-broker,  whereby  the  pledgee  is 
allowed  to  sell  at  a  broker's  board.3  Such  an  agreement,  however, 
does  not  authorize  a  private  sale  at  a  broker's  board.1  A  sale  is 
valid  though  the  stock  is  sold  for  only  a  small  part  of  its  value.5 

§  479.  Pledgee  himself  cannot  purchase  at  the  sale. —  It  is  a  well- 
established  rule  that,  where  a  pledgee  pursues  the  remedy  of  selling 
the  stock  upon  notice,  the  pledgee  himself  is  disqualified  from  pur- 
chasing the  stock.6  The  rule  is  based  on  the  principle  that  the  law 
carefully  protects  the  interest  of  the  pledgor,  and  will  not  open  the 

sell  has  been  held  to  authorize  a  private    stock,  and  in  that  character  exposing  it 


sale.     Bryson  v.   Ray  nor,   35   MA,    424 
( 1 866).     Or  a  sale  at  a  broker's  board.  Id. 

1  Castello  v.  City  Bank  of  Albany.  1 
Leg.  Obs.,  25(1842);  Willoughby  r.  Corn- 
stock,  3  Hill,  389  (1842) ;.  Cf.  Nabring  v. 
Hank  of  Mobile,  58  Ala.,  205  (1877).  The 
pledgee's  right  to  object  is  waived  by 
long  delay.  Hayward  v.  National  Bank. 
96  U.S.,  611(1877). 

2  Brass  v.  Worth.  40  Barb.,  648  (1863): 
Rankin  v.  McCullough,  12  Barb..  103 
(1851).  A  sale  in  New  York  is  legal. 
King  v.  Texas,  etc.,  Ins.  Co.,  58  Texas. 
6G9  (1883). 

s  Wicks  r.  Hatch,  62  N.  Y.  535  (1875). 
In  Maryland  a  contrary  rule  prevails. 
Maryland  Fire  Ins.  Co.  v.  Dalrymple.  35 
Md,  242  (1866).     See  ch.  XXV. 

*  Allen  v.  Dykers,  3  Hill,  503;  7  id, 
497. 

5  A  bona  fide  purchaser  at  a  pledgee's 
sale  is  protected,  though  he  purchased 
for  less  than  the  real  value  of  the  stock, 
and  though  a  receiver  had  previously 
been  appointed  of  the  pledgor's  prop- 
erty and  it  had  been  transferred  to  the 
receiver.  Dudley  v.  Gould,  6  Hun,  97 
(1875). 

6Easton  v.  German,  etc.,  Bank,  127 
U.S.,  532  (1888);  Bryan  v.  Baldwin,  52 
N.  Y,  432  (1873).  the  court  saying: 
"The  plaintiff  being  the  pledgee  of  the 


for  sale,  could  not  become  the  purchaser 
unless  the  defendant  assented  to  such 
purchase.  This  sale  to  the  plaintiff  was 
not  void,  but  voidable,  at  the  election  of 
the  defendant"  Maryland  Fire  Ins.  Co. 
V,  Dalrymple.  85  Md..  242(1866).  Nor  can 
he  buy  where  the  pledge  is  being  sold  on 
a  forfeiture  sale  for  non-payment  of 
calls.  Freeman  v.  Harwood,  49  Me.. 
195  (1859).  See,  also.  Sickles  i\  Richard- 
son, 23  Hun,  559  (1881>  where  the  sale 
of  the  property  pledged  was  on  an  at- 
tachment The  pledgor's  sdence  may 
constitute  a  ratihVation  of  the  pledgee's 
purchase.  Carroll  v.  Mullanphy  Sav. 
Bank.  8  Mo.  App.  219  (1880).  If  the 
pledgee  is  a  corporation,  its  president 
caunot  purchase  for  it  Star  Fire  Ins. 
Ckx  r.  Palmer,  41  Super.  Ct,  267  (1876). 
Lewis  r.  Graham,  4  Abb.  Pr.,  106  (1857), 
holds  that  a  special  partner  of  the 
pledgee  firm  may  purchase.  And  see 
Ch.  XXV.  p  l.m  Cf.  Finney's  Appeal. 
59  Pa.  St,  398  (1868).  Where  a  pledgee 
bank  having  a  right  to  sell  at  private 
sale  and  without  notice  sells  the  pledge 
through  its  president,  who  buys  the 
pledge  himself,  and  the  president  openly 
pays  the  bank  for  it  long  delay  on  the 
part  of  the  bank  in  complaining  is  fatal. 
Raymond  v.  Palmer,  6  S.  Rep,  692  (La.. 
18891 


606 


CU.  XXVI.] 


PLEDGE    OF    STOCK. 


[§  479. 


door  to  possible  devices  of  the  pledgee  for  purchasing  the  stock  for 
himself  at  a  low  price.  The  pledgee  cannot  purchase,  either  di- 
rectly or  indirectly,  in  his  own  name  or  in  the  name  of  another.1 
The  effect  of  a  purchase  by  the  pledgee  for  himself  is  that  the 
whole  proceeding  of  the  pledgee  for  subjecting  the  pledge  to  the 
payment  of  the  debt  is  utterly  futile,  and  voidable  at  the  election 
of  the  pledgor.  The  pledgor  cannot  claim  that  the  pledgee  has 
converted  the  stock  by  purchasing  at  the  sale,'2  but  he  may  disre- 
gard the  notice  and  sale  and  whole  proceeding  as  being  ineffectual 
and  voidable.  The  pledge  relationship  continues  as  though  no 
attempt  had  been  made  by  the  pledgee  to  subject  the  pledge  to  the 
payment  of  the  debt.3  "Where,  however,  the  pledge  is  foreclosed 
by  legal  proceedings  similar  to  those  for  the  foreclosure  of  chattel 
mortgages,  either  party  may  bid  at  the  public  judicial  sale.4  The 
pledgor  may  authorize  the  pledgee  to  purchase  at  the  sale  and 
retain  the  pledge.5  Stock  held  in  pledge  to  secure  a  debt  cannot 
be  sold  before  the  debt  is  due.6  The  pledgor  may  release  his  equity 
to  the  pledgee.7 


1  Minnesota  Assoc,  v.  Canfield,  121  U. 
S.,  295  (1887). 

2  Bryan  v.  Baldwin,  52  N.  Y.,  232 
(1873).  If  the  pledgee  buys  it  in  there 
is  no  conversion.  The  pledge  continues. 
Terry  v.  Birminghan,  etc.,  Bank,  9  S. 
Rep.,  299  (Ala.,  1891). 

» Bryson  v.  Raynor,  25  Md.,  424  (1866) : 
Middlesex  Bank  v.  Minot,  45  Mass.,  325 
(1842);  Hestonville,  etc.,  R.  R.  Co.  v. 
Shields,  3  Brews.  (Pa.),  257  (1869).  If 
the  pledgee  purchases  at  the  sale  the 
pledge  continues.  The  pledgor  does  not 
waive  his  rights  by  settling  in  igno- 
rance that  the  pledgee  purchased. 
Sharpe  v.  National  Bank,  7  S.  Rep.,  106 
(Ala.,  1888). 

*  Pewabic  Min.  Co.  v.  Mason,  145  17. 
S.,  349  (1892).  In  Newport,  etc.,  Bridge 
Co.  v.  Douglass,  12  Bush  (Ky.),  673,  720 
(1877),  the  pledgee  of  bonds  from  the 
company  issuing  them  obtained  a  fore- 
closure of  the  pledgery  suit,  and  bought 
the  bonds  in  and  was  then  held  to  be 
the  absolute  ownei  of  them. 


5  Chouteau  v.  Allen,  70  Mo.,  290  (1879). 
A  pledgee  cannot  himself  purchase  the 
stock  at  the  sale,  but  the  pledgor  may 
lawfully  contract  so  as  to  allow  the 
pledgee  to  purchase  at  such  sale,  or  may 
ratify  such  purchase  after  it  has  been 
made.  If  there  is  no  such  contract  or 
ratification,  however,  the  sale  is  void 
and  the  parties  remain  in  the  same  posi- 
tion as  though  no  sale  had  taken  place. 
Appleton  v.  Turnbull,  24  Atl.  Rep.,  592 
(Me.,  1891)) 

"National  Bank  v.  Baker,  21  N.  E. 
Rep.,  510  (111.,  1889). 

'Small  v.  Saloy,  7  S.  Rep.,  450  (1890). 
A  pledgor  may  sell  the  securities  pledged, 
and  the  sale  may  be  to  the  pledgee.  The 
sale  may  be  oral  and  will  be  upheld,  the 
debt  being  canceled  thereby.  Brown  v. 
Farmers',  etc.,  Co.,  117  N.  Y.,  266  (18S9). 
Cf.  Ryle  v.  Ryle,  41  N.  J.  Eq.,  582.  Re- 
ceiving the  surplus  in  ignorance  of  ille- 
gality is  no  waiver.  Allen  v.  American, 
etc.,  Ass'n,  52  N.  W.  Rep.,  144  (Minn.. 
1892). 


607 


CHAPTER  XXVII. 


LEVY  OF  ATTACHMENT  AND  EXECUTION  UPON  SHARES  OF  STOCK 


§  480.  An   execution    at    common  law 
could  not  reach  shares  of  stock. 

481.  Nor,  it  seems,  could  a  court  of 
equity  subject  stock  to  the 
payment  of  debts. 
.  482.  By  statutory  provisions  execu- 
tions are  genprally  sufficient 
to  reach  the  debtor's  stock  — 
Strict  compliance  necessary  — 
Levy  on  stock  fraudulently 
conveyed  away. 

4S3.  Attachment  of  stock  as  allowed 
by  the  statutes  of  the  various 
states. 

484.  Attachment    of    stock     held    in 

pledge  or  by  trustee,  and  of 
stock  which  the  debtor  has 
fraudulently  transferred  away. 

485.  Stock   can   be  attached  only  in 

the  state  creating  the  corpora- 
tion. 


§  486.  Rights  of  an  unregistered  trans- 
feree of  a  certificate  of  stock 
as  against  au  attachment  or 
execution  levied  on  that  stock. 

487.  Rule  in  New  York,  Pennsylvania, 

New  Jersey.  Minnesota,  South 
Carolina.  Texas,  Louisiana  and 
the  federal  courts. 

488.  Rights  aud  duties  of  the  corpora- 

tion in  such  cases. 

489.  Rule  in  Connecticut.  Maine,  Ver- 

mont, Indiana,  Iowa,  Maryland, 
Wisconsin,  Alabama  and  Cali- 
fornia. 

490.  Rule  in  Massachusetts  and  New 

Hampshire. 

491.  Shares  of  stock  cannot  be  sub- 

jected to  the  payment  of  the 
stockholder's  debts  by  the  pro- 
cess of  garnishment 


§  480.  An  execution  at  common  law  could  not  reach  shares  of 
stoclc. —  A  share  of  stock  is  in  the  nature  of  a  chose  in  action,  and 
at  common  law  a  chose  in  action  could  not  be  reached  by  or  made 
subject  to  a  levy  of  execution.  Consequently  it  has  been  uniformly 
held  bv  the  courts  that  at  common  law  a  levv  of  execution  could 
not  be  made  on  shares  of  stock.  Unless,  therefore,  the  process  of 
execution  has  been  extended  by  statute  so  as  to  reach  such  prop- 
erty, the  stock  of  a  judgment  debtor  cannot  be  subject  to  the  pay- 
ment of  his  debts  by  means  of  an  execution.1     An  attachment, 


•Van  Norman  v.  Jackson  County 
Circuit  Judge,  45  Mich.,  204  (1881); 
Ooss  v.  Phillips,  etc.,  Co.,  4  Bradw., 
510  (1879)  Blair  v.  Compton,  33  Mich., 
414  (1S76);  Slaymaker  v.  Bank  of 
Gettysburg,  10  Pa.  St.,  373  (1849); 
Foster  v.  Potter,  37  Mo.,  525  (1866); 
Howe  v.  Starkweather,  17  Mass.,  240 
(1821);  Nabring  v.  Bank  of  Mobile,  58 
Ala.,  204  (1877);  Denton  v.  Livingston, 
9  Johns.,  96  (1812),  per  Chancellor  Kent ; 
Nashville  Bank  v.  Ragsdale,  Peck  (Tenn.), 
296  (1823).    Even  where  the  stock  is  held 


to  be  real  estate.  Cooper  v.  Canal  Co., 
2  Murph.  (N.  C),  195  (1812).  Cf.  Gue  r. 
Tide- water  Canal  Co.,  24  How.  (U  S.), 
257  (1860).  At  an  early  day,  when  the 
nature  of  stock  was  little  understood, 
an  attachment  was  attempted  on  the 
corporate  property  for  the  debts  of  a 
stockholder.  It  failed.  Williamson  v. 
Smoot,  7  Mart  (La),  31  (1819).  Stock 
cannot  be  taken  on  a  tax  warrant. 
Barnes  v.  Hall,  55  Vt  Rep.,  420.  Cf 
M'Neal  v.  Mechanics',  etc.,  Assoc,  3 
Atl.    Rep.,    125   (N.    J.,    1885);   Smith  v. 


608 


CH.   XXVII.] 


ATTACHMENT    AND    EXECUTION. 


[§  481. 


bring  entirely  statutory,  can  be  levied  on  shares  of  stock  only 
when  the  words  of  the  statute  declare  that  an  attachment  may  be 
levied  on  such  property.1 

§  481.  Nor,  it  seems,  could  a  court  of  equity  subject  stock  to  the 
payment  of  debts. —  There  is  some  doubt  whether  a  court  of  equity 
has  power  to  subject  a  judgment  debtor's  choses  in  action  to  the 
payment  of  his  debts,  where  the  only  ground  for  the  interference  of 
the  court  is  that,  unless  it  does  interfere,  such  property  cannot  be 
reached  by  the  judgment  creditor.  In  New  York,  previous  to  the 
statutes  regulating  this  subject,  the  jurisdiction  of  a  court  of  equity 
therein  was  emphatically  denied  in  one  case,2  and  with  equal  em- 
phasis declared  to  exist  in  another  case.3  The  English  authorities 
are  quite  uniform  in  holding  that  a  court  of  equity  has  no  such 
jurisdiction.4  And  in  America,  for  the  most  part,  a  similar  con- 
clusion is  arrived  at.5  Where,  however,  the  debtor  has  conveyed 
away  his  stock  for  the  purpose  of  defrauding  his  creditors,  a  court 
of  equity  will  aid  the  judgment  creditor,  inasmuch  as  it  has  juris- 
diction in  all  matters  involving  fraud,  trust  or  accident,  or  other 


ingredient  of  similar  character.6 

Northampton  Bank,  4  Cush.,  1  (1849).  A 
tax  collector  caunot  levy  on  and  sell 
stock  under  the  law  relative  to  attach- 
ments. Kennedy  v.  Neary,  etc.,  R'y,  9 
S.  Rep.,  608  (Ala.,  1891);  and  §  566. 
Execution  against  a  corporation  cannot 
be  levied  on  stock  owned  by  the  corpo- 
ration itself,  such  stock  having  been 
purchased  by  it  under  statutory  author- 
ity at  a  forfeiture  sale  for  non-payment 
of  calls.  Robinson  v.  "Spaulding,  etc., 
Co.,  13  Pac.  Rep.,  65  (Cat,  1887).  An  at- 
tachment of  stock  does  not  prevent  a 
sale  of  property  by  the  corporation. 
Gottfried  v.  Miller,  104  U.  S.,  521  (1881). 
The  question  of  whether  an  execution 
may  levied  on  a  seat  in  an  exchange  is 
considered  in  ch.  XXIX. 

1  Plimpton  v.  Bigelow,  93  K  Y„  592, 
602  (1883);  Merchants' Mut  Ins.  Co.  v. 
Brower,  38  Tex.,  230  (1873). 

2  Donovan  v.  Finn,  Hopk.  Ch.,  67,  91 
(1823).  See,  also,  Daniell's  Ch.  Pr.,  vol. 
II,  p.  1037,  note. 

3  Storm  v.  Waddel,  2  Sand.  Ch.,  495, 
511  (1845). 

*  Dundas  v.  Dutens,  1  Ves.,  196  (1790); 
Bank  of  England  v.  Lunn,  15  Ves.,  5G9 
(1809);  Grogan  v.  Cooke,  2  Ball   &  B. 


(Ir.  Ch.),  230  (1812);  Nantes  v.  Corrock, 
9  Ves.,  183  (1803) ;  McCarthy  r.  Gould,  1 
Ball  &  B.  (Ir.  Ch.),  387  C1810),  applying 
the  same  rule  to  dividends.  In  King  v. 
Dupine,  2  Atk.,  G03,  note  (1744),  a  court 
of  equity  subjected  to  the  payment  of  a 
debt  the  debtor's  reversionary  interest  in 
an  annuity.  In  Horn  v.  Horn,  AmbL, 
79  (1749),  the  court  refused  aid,  inas- 
much as  the  debtor  had  been  impris- 
oned under  a  cap.  satis. 

5  Williams  v.  Reynolds,  7  Ind.,  622 
(1856);  Disborough  v.  Outcalt,  Saxton's 
Ch.  (N.  J.),  298,  306  (1831):  McFerran  u 
Jones,  2  Litt.  (Ky.),  219  (1822);  Erwin  v. 
Oldman,  6  Yerg.,  185  (1834).  Contra, 
dictum,  Watkins  v.  Dorsett,  1  Bland's 
Ch.,  530  (182S).  In  Brightwell  v.  Mal- 
lory.  10  Yerg.  (Tenn.).  198  (1836),  the 
proceeding  was  statutory. 

*  See  §§  339, 340,  on  Statute  of  Frauds ; 
also  Taylor  v.  Jones,  2  Atk.,  600  (1743), 
holding  that  the  debtor's  transfer  of 
stock  in  trust  was  in  fraud  of  creditors ; 
Hadden  v.  Spader,  20  Johns.  (N.  Y.\ 
554  (1822);  Scott  v.  Indianapolis  Wagon 
Works,  48  Ind.,  75  (1874) ;  Van  Norman 
v.  Jackson  Circuit  Judge,  45  Mich.,  204 
(1881);    Lathrop   v.  McBurney,  71  Ga., 


(39) 


609 


§  482.] 


ATTACHMENT    AND    EXECUTION. 


[CH.   XXVII. 


§  482.  By  statutory  provisions  executions  are  generally  sufficient 
to  reach  the  debtor's  stock  —  Strict  compliance  necessary  —  Levy  on 
stock  fraudulently  conveyed  away. —  Nearly  all  of  the  states  of  the 
Union  have  enacted  statutes  extending  the  scope  of  executions  so 
as  to  render  subject  to  them  all  choses  in  action,  including  shares 
of  stock  in  a  corporation.  Frequently  special  provisions  are  made 
applicable  to  stock,  and  prescribing  the  steps  which  are  necessary 
in  rendering  the  execution  lew  effectual.     Where  an  execution  is 

CD  «. 

levied  in  accordance  with  such  statutes  its  provisions  must  be  sub- 
stantially complied  with,  and  if  not  complied  with  the  sale  is  not 
merely  voidable,  but  is  wholly  unauthorized  and  void.1  It  is  fatal 
to  the  lev)'-  and  sale  if  the  sheriff  fails  to  give  to  the  corporation 
the  notice  that  is  generally  required  bv  statute;2  or  if  the  sale  by 
the  sheriff  is  not  made  promptly  as  advertised  in  accordance  with 
the  statute.3  The  sale  itself  is  not  complete  until  the  sheriff  gives  the 
proper  instruments  of  title  to  the  purchaser,  and  until  then  the  cor- 
poration is  not  obliged  to  recognize  the  latter  as  having  any  rights.4 


815  (1883);  Gillett  v.  Bate.  86  N.  Y..  87; 
State  Bank  v.  Gill,  23  Hun,  410  (1881), 
and  §§  482,  484. 

•Blair  v.  Compton,  33  Mich..  414 
(1876).  holding  that,  where  the  sheriff 
sold  without  knowing  or  stating  how 
many  shares  of  stock  the  debtor  owned, 
and  which  were  being  sold,  the  sale 
was  void.  See,  also,  People  ?'.  Goss, 
etc.,  Mfg.  Co.,  99  111.,  355  (1881),  revers- 
ing Goss,  etc.,  Mfg.  Co.  v.  People,  4 
Bradw.,  510.  The  procedure  in  levy  of 
execution  on  stock,  as  laid  down  by  the 
charter  of  the  corporation,  supersedes 
the  procedure  of  a  previous  general 
statute.  Titcomb  v.  Union  Marine,  etc, 
Ins.  Co..  8  Mass..  326  (1811).  And  vice 
versa,  Howe  v.  Starkweather,  17  Mass., 
240  (1821).  The  sheriff  need  not  sell  the 
stock  in  parcels,  but  may  sell  the  whole 
at  once.  Morris  v.  Conn.,  etc.,  R.  R  Co. 
(Montreal  Ct.  of  Appeal,  September, 
1886).  An  execution  sale  of  stock  will 
be  set  aside  where  it  was  made  with  an 
intentional  concealment  of  the  sale  from 
the  stockholder,  the  execution  debtor. 
Voorhis  v.  Terhune,  13  Atl.  Rep.,  391  (N. 
J.,  1888).  If  no  notice  is  given  to  the 
debtor  of  the  levy  on  his  stock,  a  sale 
under  the  attachment  is  not  good.  Com- 
mercial   Nat    Bank   v.   Farmers',   etc., 


Bank,  47  N.  W.  Rep..  1080  (Iowa,  1891). 
A  levy  and  sale  of  "all  the  shares" 
which  defendant  owns  is  not  good.  The 
number  of  shares  must  be  ascertained 
ami  stated.  Keating  v.  J.  Stove,  etc., 
Co.,  18  S.  W.  Rep.,  797  (Tex.,  1^92). 

2  Princeton  Bank  v.  Crozer,  22  N.  J. 
Law,  383  (1850),  where  no  notice  was 
given,  but  the  stock  was  merely  men- 
tioned in  the  inventory  returned  by  the 
sheriff.  Oral  notice  by  the  sheriff  to  the 
corporation  that  stock  has  been  attached 
is  insufficient.  Moore  v.  Marshalltown, 
etc.,  Co.,  46  N.  W.  Rep.,  750  (Iowa,  1890). 

3  Titcomb  v.  Union  Marine,  etc.,  Ins. 
Co.,  8  Mass.,  326  (1811),  and  Howe  v. 
Starkweather,  17  Mass.,  240  (1821), 
where  the  sale  was  made  after  the  proper 
day,  without  a  re-advertisement,  and 
consequently  was  held  to  be  void.  The 
court  said  :  "  The  sale  of  them  upon  exe- 
cution not  being  justifiable  at  common 
law.  the  statute  must  be  strictly  pursued 
to  give  any  property  to  the  purchaser." 
An  execution  sale  of  stock  at  9  o'clock 
at  night,  when  few  are  present,  is  void. 
McNaughton  r.  McLean,  41  N.  W.  Rep., 
267  (Mich.,  1889). 

4  Morgan  v.  Thames  Bank,  14  Conn., 
99  (1840). 


610 


CH.  XXVII.]  ATTACHMENT    AND    EXECUTION.  [§  483. 

A  court  of  equity  will  not  compel  a  corporation  to  allow  a  transfer 
of  stock  by  a  purchaser  at  an  execution  sale  where  the  price  paid 
at  such  sale  is  so  small  as  to  shock  the  conscience  of  the  court.1 

Whether  or  not  an  execution  can  be  levied  on  stock  which  has 
been  fraudulently  transferred  away  by  the  judgment  debtor  de 
pends  upon  the  wording  of  the  statute  allowing  the  levy  of  execu- 
tion on  stock.  If  it  allows  a  levy  on  all  interests  of  the  debtor, 
whether  legal  or  equitable,  then  the  fraudulent  transfer  may  be 
disregarded  and  the  stock  seized  as  though  still  standing  in  the 
name  of  the  judgment  debtor.2  If,  however,  the  statute  does  not 
expressly  provide  for  a  levy  on  an  equitable  interest,  the  judg- 
ment creditor's  remedy  is  not  an  execution,  but  a  suit  in  equity  to 
set  aside  the  fraudulent  transfer.3 

§  483.  Attachment  of  stoclc  as  allowed  l>y  the  statutes  of  the  vari- 
ous states. —  The  states  of  the  Union  have  quite  generally  passed 
statutes  providing  for  the  attachment  of  a  debtor's  property  where 
the  debtor  is  a  non-resident  or  is  guilty  of  a  fraud,  or  where  other 
facts  exist  which  bring  the  case  within  the  attachment  statute.  In- 
asmuch as  in  modern  times  a  large  part  of  the  property  of  indi- 
viduals consists  of  shares  of  stock  in  corporations,  the  attachment 
statutes  generally  provide  specially  for  the  attachment  of  stock, 
and  give  specific  directions  in  reference  to  the  steps  necessary  to 
be  taken  in  making  such  attachment.4     In  New  York  an  attach- 

1  Mississippi,  etc.,  E.  R  v.  Cromwell.  91  ell's  Annotated  Stat,  1883 ;  Minnesota, 
U.  S.,  643;  Randolph  v.  Quidnick  Co.,  Gen.  Stat.  1878,  §  156;  Missouri,  R.  S. 
135  U.S.,  457(1890).  Inadequacy  of  price  1879,  §  417;  Nebraska,  Common  Laws 
is  not  sufficient  cause  for  setting  aside  1881,  cli.  3,  §  201 ;  Nevada,  Gen.  Stat 
an  execution  sale  of  stock.  Conway  V.  1885,  ch.  4,  §§  3149,3150;  New  Hamp- 
John,  23  Pac.  Rep.,  170  (Cal.,  1890).  shire,  Gen.  L  1878,  ch.  224,  §  13;  New 

2  Scott  v.  Indianapolis  Wagon  Works,  York,  Code  of  Civil  Proa,  §  647 ;  also 
48  Ind.,  75  (1874).  Cf.  State  v.  Warren  §  649,  as  amd.  by  L.  1879,  ch.  541 ;  also 
Foundry,  etc.,  Co.,  32  N.  J.  L.,  439  (1868).  §§  650,  651,  708  (2);  Ohio,  R  S.  1880, 
See,  also,  §  484,  infra,  relative  to  attach-  title  1,  div.  6,  ch.  2,  §  5524 ;  Pennsyl- 
ments  on  stock  that  has  been  fraudu-  vania,  Brightley's  P.  Dig.,  §  71 ;  South 
lently  conveyed  away.  Carolina,  Code  of  C.  Proa,  ch.  4,  §§  256, 

3  Van  Norman  v.  Jackson  County  Cir-  258;  Wisconsin,  R.  S.  1878,  §  2738. 
cuit  Judge,  45  Mich.,  204  (1881).  See  Where  both  an  attachment  and  an  exe- 
§  481.  cution  on  stock  are  allowed  by  statute, 

4  California,  Code  of  C.  Proa,  §  5141 ;  the  former  is  said  to  be  the  preferable 
Colorado,  Code  of  C.  Proa,  §  97 ;  Con-  remedy  when  the  corporation  has  a 
necticut  Gen.  Stat.  (1875),  §  6;  Georgia,  lien  on  the  stock  or  there  is  a  claimant 
Code  of  1882,  §§  3289-3291 ;  Indiana,  to  the  stock.  AVeaver  v.  Huntingdon, 
R  S.  (1881),  §  933;  Iowa,  McClain's  An-  etc.,  Coal  Co.,  50  Pa.  St.,  314  (1865);  Lex 
notated  Stat,  1880,  §  2967;  Maine,  R.  S.  v.  Potters,  16  Pa.  St,  295  (1851).  An  at- 
1884,  ch.  81,  §27;  Maryland,  R  Code  of  tachment  of  stock  covers  the  dividends 
1874,  §  20;  Massachusetts,  Public  Stat.  also.  Upon  vacating  the  attachment 
1882,  ch.  161,  §§  71-73;  Michigan,  How-  damages  maybe  recovered.     Jacobus  r. 

611 


483.] 


ATTACHMENT    AND    EXECUTION. 


[CH.  XXVII. 


ment  of  stock  is  provided  for;  but  an  execution  without  a  previous 
attachment  is  not  allowed.1  It  has  been  held  that  shares  of  stock 
may  be  attached  under  the  general  provisions  of  an  attachment 
law  which  does  not  specif}7  shares  of  stock  as  being  subject  to  an 
attachment.2  The  formalities  prescribed  by  the  statute  must  be 
complied  with  fully  as  in  the  case  of  a  levy  of  execution  upon 
stock.3 


Mononagahela,  etc.,  Bank,  35  Fed.  Rep., 
395  (1888).     Decrease  in  value  of  stock 
while  subject  to  attachment   does  not 
render  the  sureties  on  the  undertaking 
liable  therefor.    Miller  v.  Ferry,  50  Hun, 
256  (1888).     An  attachment  bond  should 
not  be  increased   merely  because    the 
price  of  the  stock  may  go  down.     Id. 
In  New  York  shares  of  stock  cannot  be 
levied  on  under  a  writ  of  execution,  al- 
though they  may  be  attached  and  sub- 
sequently sold  by  execution  in  that  suit. 
Code  of  Civil  Procedure,  §§  647,  6-19-651. 
See  4  Wait's  Pr.,  36,  J.     Stock  may  be 
reached,  however,   by  proceedings  sup- 
plementary to  execution.     See.  in  gen- 
eral,   Barnes    v.    Morgan,    3    Hun,  703 
(1875);  O'Brien  v.  Mechanics'  &  T.  Ins. 
Co.,  56  N.  Y.,  52  (1874);  Smoot  v.  Heim, 
1    Civ.    Proc.  Rep.,    208    (1881)  — cases 
arising  under  the  attachment  law.    The 
statute   may   provide   for   the    sale    of 
stock  at  the  place  where  the  corpora- 
tion exists,  in  case  the  taxes  upon  such 
6tock  are  not  paid.     A  purchaser  of  the 
outstanding  certificates  after  the  assess- 
ment has  been  made    takes  subject  to 
the  tax  and  tax  seizure.     Parker  v.  Sun 
Ins.  Co.,  8  S.  Rep.,  618  (La.,  1890).     Un- 
der the  English  statute,  1  and  2  Vict, 
ch.  110,  §  14,  and  3  and  4  Vict.,  ch.  82, 
§  1,  stock  in  any  public  company  stand- 
ing in  the  name  of  any  person  against 
whom   judgment   shall    have  been  ob- 
tained, whether   "in   his  own  right  or 
in  the  name  of  any  person  in  trust  for 
him,"  may  be  charged  by  a  judge's  or- 
der with  the  payment  of  the  amount  of 
the  judgment.     The  statute  says :  "  The 
interest     of     any     judgment     debtor, 
whether    in    possession,   remainder    or 
reversion,   and  whether  vested  or  con- 


tingent," may  be  so  reached.  Cragg  v. 
Taylor,  L  R,  2  Ex.,  131  (1867);  Baker 
v.  Tynte,  2  Ell.  &  E.,  897  (1860). 

1  See  preceding  note. 

2  Chesapeake  &  O.  R.  R.  Co.  v.  Paine, 
29  Gratt  (Va.),  502  (1877),  where  stock 
was  held  to  be  included  under  the  word 
"  estate,"  and  the  procedure  prescribed 
for  garnishment  was  followed  and  up- 
held. So,  also,  Curtis  t>.  Steever,  36 
N.  J.  L  Rep.,  304  (1873),  where  an  at- 
tachment of  stock  was  upheld  though 
the  statute  merely  allowed  attachment 
of  "  rights  and  credits."  In  Haley  v. 
Reid,  16  Ga.,  437  (1854),  however,  an  at- 
tachment  of  stock  was  not  allowed 
where  the  statute  allowed  levy  "upon 
the  estate  both  real  and  personal."  See, 
also.  Merchants'  M.  Ins.  Co.  v.  Brovver, 
38  Tex.,  230  (1873).  It  has  been  held 
that  there  can  be  no  attachment  of 
stock  under  a  statute  which  allows  an 
attachment  of  "  real  and  personal  prop- 
erty." Foster  v.  Potter,  37  Mo.,  525. 
Shares  of  stock  are  "personal  property  " 
subject  to  attachment,  although  the  stat- 
utes provide  only  for  levy  of  execution 
upon  them.  Union  Nat'l  Bauk  v.  Byram, 
22  N.  E.  Rep.,  842  (111.,  1889).  The  or- 
dinary attachment  statute  authorizing 
the  attachment  of  shares  of  stock  is  not 
applicable  to  shares  of  stock  in  a  club 
organized  for  lawful  sporting  purposes 
and  being  more  of  the  nature  of  a  stat- 
utory joint-stock  association  than  a  cor- 
poration. Lyon  v.  Denison,  45  N.  W. 
Rep.,  358  (Mich.,  1890). 

3  Stamford  Bank  v.  Ferris,  17  Conn., 
259  (1845),  where  the  attachment  failed 
because  the  sheriff  did  not  leave  a  copy 
of  the  writ,  duly  indorsed,  with  the  cor- 
poration, even   though   the   cashier  of 


612 


OH.  XXVII.] 


ATTACHMENT    AND    EXECUTION. 


[§  4S4. 


§  484.  Attachment  of  stock  held  in  pledge  or  by  trustee  and  of 
stock  which  the  dibtor  has  fraudulently  transferred  away. —  As 
has  been  said  in  the  case  of  an  execution  levied  on  shares  of  stock, 
an  attachment  may  be  levied  on  the  same  when  the  words  of  the 
attachment  statute  are  so  broad  as  to  render  subject  to  the  attach- 
ment all  equitable  interests  of  the  debtor  whose  stock  is  attached. 
Thus,  it  has  been  held  in  Ohio  and  ~±sew  Jersey  that,  although  the 
debtor  has  transferred  his  stock  for  the  purpose  of  defrauding  his 
creditors,  an  attachment  of  the  stock  will  lie  nevertheless.1  An 
attachment  may  be  levied  upon  stock  although  the  stock  has  been 
mortgaged  or  pledged,  and  the  attaching  creditor  is  seeking  to 
reach  merely  the  equity  of  redemption.2  An  attachment  is  not 
the  best  remedy  for  a  pledgee  who  wishes  to  subject  the  pledge  to 


the  corporation  was  absent  A  transfer 
subsequent  to  such  irregular  attach- 
ment is  valid  and  carries  title.  See, 
also,  §  484. 

1  National  Bank  of  N.  L.  v.  Lake 
Shore  &  M.  S.  R.  R.  Co.,  21  Ohio  St.,  221 
(1871),  holding  also  that  the  attachment 
is  good,  even  though  the  corporation 
deny  that  the  defendant  owns  any  stock 
therein ;  Curtis  v.  Steever.  36  N.  J.  L. 
Rep.,  304  (1873)  the  court  saying  that 
the  attachment  is  good,  since  the  fraud- 
ulent transfer  is  void ;  and  holding  that 
the  transferee  may  bring  a  suit  for  tres- 
pass, and  that  the  attaching  creditor 
may  then  set  up  the  fraud  in  defense. 
Of.  State  v .  Warren  Foundry,  etc.,  Co.,  32 
N.  J.  L.,  439  (18G8).  See,  also,  §  482,  supra. 
Where  an  insolvent  debtor  transfers  all 
his  property  to  trustees  for  the  benefit 
of  creditors,  excepting  certain  shares  of 
stock  which  are  transferred  to  them  in 
trust  in  order  not  to  render  the  trustees 
liable  thereon,  and  ten  years  later  a 
creditor  levies  on  the  equity  in  such 
stock,  causes  its  sale  and  purchases  it  at 
a  nominal  figure,  equity  will  not  com- 
pel the  corporation  to  transfer  the  stock 
to  such  creditor  on  the  corporate  books. 
Randolph  v.  Quidnick  Co.,  135  IT.  S.,  457 
(1890). 

2  Edwards  v.  Beugnot,  7  Cat,  162 
(1857),  holding  also  that,  if  the  mort- 
gage is  recorded  on  the  corporate  books, 


notice  must  be  served  on  the  mortgagee 
also;  and  that,  where  one  attachment 
was  served  on  the  corporation  and  an- 
other on  the  mortgagee,  the  latter  at- 
tachment prevails  and  takes  the  sur- 
plus :  Norton  v.  Norton,  43  Ohio  St.,  509 
(1885),  holding  that  the  court  will  order 
the  stock  to  be  sold,  the  pledgee  paid 
and  the  balance  held  uuder  the  attach- 
ment See.  also,  Vantine  v.  Morse,  104 
Mass.,  275  (1870);  New  England,  etc., 
Co.  v.  Chandler,  16  Mass.,  275  (1820). 
Of.  Cooke  v.  Hallett,  119  Mass.,  148 
(1875).  A  garnishment  for  the  surplus 
is  ineffectual.  Kyle  v.  Montgomery,  73 
Ga..  337  (1884);  Seeligson  v.  Brown,  61 
Texas,  114(1884);  Mechanics',  etc.,  Ass'n 
v.  Conover,  14  N.  J.  Eq.,  219  (1862); 
Foster  v.  Potter,  37  Mo.,  525  (1866); 
Manns  v.  Brookville  Nat'l  Bank,  73  Ind., 
243  (1881);  Nabring  v.  Bank  of  Mobile, 
58  Ala.,  204  (1877).  If  a  purchaser  at  an 
execution  sale  purchases  merely  a  nom- 
inal equity  of  redemption  and  pays  a 
fair  price  for  the  same,  the  court  will 
order  the  corporation  to  allow  a  trans- 
fer to  him  in  order  that  he  may  so 
redeem.  See  dictum  in  Randolph  r. 
Quidnick  Co.,  135  U.  S.,  457  (1890). 
Stock  held  as  collateral  is  property  sub- 
ject to  garnishment  under  the  statutes 
of  Texas.  Smith  v.  Traders'  Nat'l  Bank, 
12  S.  W.  Rep.,  113  (Texas,  1889).  See, 
also,  §§  340,  491. 


613 


8  485.]  ATTACHMENT    AND    EXECUTION.  [CH.  XXVII. 

the  payment  of  the  debt.1  His  remedy  is  by  foreclosure  or  a  pub- 
lic sale  on  notice  to  the  pledgor.  Dividends  on  the  stock  which  is 
attached  follow  the  stock,  and  are  covered  by  the  attachment.2 
An  attachment  on  stock  standing  on  the  books  in  a  debtor's  name 
is  not  good  where  it  is  shown  that  in  fact  he  held  the  stock  as 
trustee  for  another.3  An  attachment  will  lie  in  Rhode  Island  for 
stock  which  is  registered  in  the  name  of  a  person  other  than  the 
defendant,  the  transfer  by  the  defendant  having  been  in  fraud  of 
creditors.4  Where  the  corporation  has  a  lien  on  stock  for  debts 
due  from  the  stockholder  to  the  corporation,  it  may  enforce  the 
lien  by  an  attachment.5 

§  4S5.  Stock  can  be  attached  only  in  the  state  creating  the  corpo- 
ration.—  Shares  of  stock  in  a  corporation  are  personal  property, 
whose  location  is  in  the  state  where  the  corporation  is  created.6  It 
is  true  that,  for  purposes  of  taxation  and  some  other  similar  pur- 
poses, stock  follows  the  domicile  of  its  owner;  but,  considered  as 
property  separated  from  its  owner,  stock  is  in  existence  only  in  the 
state  of  the  corporation.  All  attachment  statutes  provide  for  the 
attachment  of  a  non-resident  debtor's  property  in  the  state,  and 
generally,  under  such  statutes,  the  stock  owned  by  a  non-resident 
in  a  corporation  created  by  the  state  wherein  the  suit  is  brought 
may  be  attached  and  jurisdiction  be  thereby  acquired  to  the  extent 
of  the  value  of  the  stock  attached.7  But  under  no  circumstances 
can  a  defendant's  shares  of  stock  be  reached  by  levy  of  attachment 
in  an  action  commenced  outside  of  the  state  wherein  the  corpora- 
tion is  incorporated.  For  purposes  of  attachment,  stock  is  located 
where  the  corporation  is  incorporated  and  nowhere  else.8     The 

iLee  v.   Citizens'  Nat'l  Bank,  2  Ciu.  *Sabin  v.  Bank  of  Woodstock,  21  Vt., 

Super.  Cfc,  298,  312  (1872).     See  §  476.  353  (1849). 

-  .Moore  v.  Gennett,  2  Tenu.  Ch.,  375  «  Evens  v.  Monet,  4  Jones'  Eq.  (N.  G), 

(1875).  227  (1858). 

;i  Mowry  v.  Hawkins,  18  Atl.  Rep.,  784  T  National    Bank    of    N.    L.   r.  Lake 

(Conn.,  1889).     Execution   or  garnishee  Shore  &  M.  S.  R  R  Co.,  21  Ohio  St., 

process  cannot  be  levied  on  stock  held  221  (1871);  Chesapeake  &  O.  R  R.  Co. 

by  an  individual  as  trustee,  where  the  v.  Paine,  29  Gratt  (Va.),  502  (1877).     An 

debt  is  his  individual  debt     Nor  can  it  attachment  and  sale  of  stock  made  on  a 

be  levied   on   the  dividend  from  such  debt  not  justly  due  will  be  enjoined  as 

stock.     So  held  where  stock  was  owned  regards  registry  on  the  corporate  books, 

by  a  city  in  trust  for  the  citizens.    Hitch-  and  the  sale  declared  void.     Seligman  v. 

cock  v.  Galveston  W.  Co.,  50  Fed.  Rep.,  St,  Louis,  etc.,  R  R  Co.,  22  Fed.  Rep., 

263(1890).  39(1884), 

*  Beckwith  v.  Burroughs.  14  R.  L,  366  8  Winslow  j.  Fletcher,  13  Am.  &  Eng. 

(1884).     And  the  purchaser  at  the  exe-  Corp.  Cas.,  39  (Conn.,   1886),  the  court 

cution  sale  may  file  a  bill  in  equity  to  saying  that  "stock  in  a  corporation  for 

clear  the  title  to  the  stock.     Cf.  S.  C,  the  purposes  of  an  attachment  has  its 

13  R  L,  294  ( 1881).  situs  where  the  corporation  is  located." 

614 


CH.  XXVII.] 


ATTACHMENT    AND    EXECUTION. 


[§  485. 


shares  owned  by  a  non-resident  defendant  in  the  stock  of  a  foreign 
corporation  cannot  be  reached  and  levied  upon  by  virtue  of  an  at- 
tachment, although  officers  of  the  corporation  are  within  the  state 
engaged  in  carrying  on  the  corporate  business.1  Nor  can  such  an 
attachment  be  levied  although  the  foreign  corporation  has  a  branch 
registry  office  in  the  state  where  the  attachment  is  levied,  and  al- 
though  the  certificates  of  stock  are  also  in  such  state.2  Certificates 
of  stock  are  not  the  stock  itself  —  they  are  but  evidence  of  the 
stock;  and  the  stock  itself  cannot  be  attached  by  a  levy  of  attach- 
ment on  the  certificate.3  As  was  well  said  by  the  supreme  court  of 
Pennsylvania,  stock  cannot  be  attached  by  attaching  the  certificate 
any  more  than  lands  situated  in  another  state  can  be  attached  by 
an  attachment  in  Pennsylvania  levied  on  the  title  deeds  to  such 
land.4     There  can  be  no  attachment  of  stock  as  the  property  of  an 


Under  the  statutes  of  Tennessee,  how-    corporation  to  exercise  certain  powers 


ever,  requiring  a  foreign  corporation 
doing  business  in  that  state  to  file  its 
articles  of  incorporation  with  the  secre- 
tary of  state,  it  was  held  that  it  became 
a  domestic  corporation  sufficiently  to 
authorize  an  attachment  of  stock  in 
that  state.  Young  v.  South,  etc..  Iron 
Co.,  2  S.  W.  Rep.  202  (Tenn.,  1886). 
Bonds  which  are  pledged  by  a  non-resi- 
dent cannot  be  attached  by  serving  a 
notice  on  the  pledgee.  Tweedy  v.  Bo- 
gart.  15  Atl.  Rep.,  374  (N.  J.,  1888). 

i  Plimpton  v.  Bigelow,  93  N.  Y.,  592 
(1883),  reversing  29  Hun,  362,  the  court 
saying:  "We  do  not  doubt  that  shares 
for  the  purpose  of  attachment  proceed- 
ings may  be  deemed  to  be  in  the  posses- 
sion of  the  corporation  which  issued 
them,  but  only  at  the  place  where  the 
corporation  by  intendment  of  law  al- 
ways remains,  to  wit,  in  the  state  or 
country  of  its  creation.  .  .  .  Mani- 
festly the  res  cannot  be  within  the  juris- 
diction, as  a  mere  consequence  of  a 
legislative  declaration,  when  the  actual 
locality  is  undeniably  elsewhere."  To 
same  effect,  Preston  v.  Pangburn,  N.  Y. 
L  J.,  March  7,  1892.  Garnishment  pro- 
ceedings also  will  not  apply.  The  de- 
fendant may  move  to  have  the  attach- 
ment levy  set  aside.  Martin  v.  Mobile 
&  O.  R,  R.  Co.,  7  Bush  (Ky.),  116  (1870), 
holds  that  a  statute  authorizing  a  foreign 


does  not  make  it  a  domestic  corporation. 
Certificates  of  stock  in  a  corporation  of 
another  state  cannot  be  subjected  to  the 
payment  of  the  stockholders'  debts, 
either  by  attachment  or  a  bill  in  equity. 
Morton  v.  Grafflin,  13  Atl.  Rep.,  341  (Md., 
1888). 

'^Christmas  v.  Biddle,  13  Pa.  St., 
223  (1850),  approved  in  Childs  v.  Digby. 
24  Pa,  St.,  23  (1854).  In  this  case  the 
attachment  was  levied  in  Pennsylvania 
on  certificates  of  stock  in  Pennsylvania, 
but  belonging  to  a  citizen  of  Mississippi, 
and  the  corporation  was  created  by  the 
laws  of  Mississippi.  Certificates  of  stock 
in  a  corporation  cannot  be  attached  any- 
where except  in  the  state  where  the 
corporation  is  incorporated.  Armour, 
etc.,  Co.  v.  Smith,  20  S.  W.  Rep.,  690 
(Mo.,  1892). 

3  Christmas  v.  Biddle,  supra;  Moore  v. 
Gennett,  2  Tenn.  Ch.,  375  (1875). 

4  Christmas  v.  Biddle,  supra.  In  Wins- 
low  v.  Fletcher,  13  Am.  &  Eng.  Corp. 
Cas.,  39  (Conn.,  1886),  the  court  well 
says :  "  While  the  certificates  are  in 
themselves  valuable  for  some  purposes, 
and  to  some  extent  may  properly  be  re- 
garded as  property,  yet  they  are  dis- 
tinct from  the  holders'  interest  in  the 
capital  stock  of  the  corporation,  and  are 
not  goods  and  effects  within  the  mean- 
ing of  the  statute  relating  to  foreign  at- 


615 


§  486.]  ATTACHMENT   AND    EXECUTION.  [CH.  XXVII. 

unregistered  holder  through  whom  title  has  passed  to  another.1 
This  rule  is  peculiar  to  certificates  of  stock. 

§  486.  Hi yhts  of  an  unregistered  transferee  of  a  certificate  of 
stock  as  against  an  attachment  or  execution  levied  on  that  stock. — 
The  most  difficult  and  unsettled  question  connected  with  an  attach- 
ment or  execution  levied  on  stock  is  the  question  of  how  far  a  pur- 
chaser of  the  certificate  of  stock  from  the  stockholder  and  debtor  is 
protected  in  his  ownership  where  such  purchaser  does  not  have  his 
transfer  registered  on  the  corporate  books  before  the  attachment 
or  execution  is  levied.  The  question  is  especially  important,  since 
it  affects  the  rights  of  a  bona  fide  purchaser  of  stock  in  the  open 
market,  and  constitutes  one  of  the  greatest  dangers  incurred  in 
the  purchase  of  certificates  of  stock.  It  has  been  held  that  if 
a  stockholder  whose  stock  has  been  already  attached  or  sold  on 
execution  sells  his  certificate  of  stock  after  the  lew  of  such  attach- 
ment  or  execution,  the  vendee  or  transferee  buys  subject  to  such 
levy,  even  though  he  had  no  knowledge  of  it.  The  stock,  in  con- 
templation of  law,  has  already  been  seized  by  the  levy,  and  the 
purchaser  is  bound  to  take  notice  of  that  fact.2  The  only  means  of 
avoiding  this  danger  in  the  purchase  of  stock  is  by  an  inquiry  at 
the  office  of  the  corporation  at  the  time  of  making  the  purchase. 

A  different  question,  however,  presents  itself  when  the  stock- 
holder against  whose  stock  an  attachment  or  execution  is  levied  has 
already  and  before  such  levy  sold  and  transferred  his  certificate  of 
stock,  but  that  transfer  has  not  been  registered  on  the  corporate 
books.  The  courts  of  the  different  states  are  in  irreconcilable  con- 
flict on  this  question  of  whether  the  unregistered  transferee  is 
protected  in  his  purchase.  The  better  rule,  and  the  rule  which 
ultimately  will  prevail,  is  that  an  unrecorded  transfer  of  stock  is 
in  this  respect  like  an  unrecorded  deed  of  land,  and  gives  good 

tachment.      They  are  no  more  subject  being  in  the  state.     Id     Cf.  p.  615,  note 

to  an    attachment  or  a  trustee  process  supra. 

than  a   promissory  note.     The  debt  is  1  Lippett   7'.    American,   etc..    Co.,    14 

subject    to    attachment,    but  the   note  R    I.,    301  (18*5).     Thus,  where  A.,  the 

itself,  which  is  simply  evidence  of  the  registered  stockholder,  transfers  the  eer- 

d  br,  is  not    So  with  stock.     That  may  tificate  of  stock  to  B.  and  B.  transfers  it 

be  attached,  but  the  certificate  cannot  to  C,  and  C.  obtains  registry  directly 

be."    Negotiable  bonds  held  outside  of  from  A.,  there  can  be  no  attachment  of 

the  jurisdiction  of  the  court  cannot  be  the  stock  against  B. 

attached  by  serving  the  attachment  on  2  Chesapeake  &  O.  R.  R  Co.  v.  Paine, 

the  corporation  which  issued  the  bonds.  29  Gratt.  (Va.),  502  (1877);  Shenandoah 

Von   Hesse  v.   Mackaye,   55   Hun,   365  Valley  R  R  Co.  v*  Griffith,  76  Va.,  913 

(1890);  affirmed,  121  N.  Y.,  694.     An  at-  (1882).     Cf.  Dudley  v.  Gould,  6  Hun,  97 

tachment  cannot  be  levied  on  bonds  in  (1875). 
a  foreign  corporation,   the  bonds   not 

616 


CH.  XXVII.] 


ATTACHMENT    AND    EXECUTION. 


[§  487. 


title  as  against  subsequent  attachments  or  levies  of  execution,  even 
though  made  in  ignorance  of  the  unrecorded  transfer  or  deed. 

§487.  Rule  in  New  York,  Pennsylvania,  New  Jersey,  Minne- 
sota, South  Carolina,  Texas,  Louisiana  and  the  federal  courts. — ■ 
The  decided  weight  of  authority  holds  that  he  who  purchases  for  a 
valuable  consideration  a  certificate  of  stock  is  protected  in  his 
ownership  of  the  stock,  and  is  not  affected  by  a  subsequent  attach- 
ment or  execution  levied  on  such  stock  for  the  debts  of  the  regis- 
tered  stockholder,  even  though  such  purchaser  has  neglected  to 
have  his  transfer  registered  on  the  corporate  books,  thereby  allow- 
ing his  transferrer  to  appear  to  be  the  owner  of  the  stock  upon 
which  the  attachment  or  execution  is  levied.  Such  is  the  rule  pre- 
vailing in  the  federal  courts  and  in  the  courts  of  the  above-named 
Frequently   this  rule  is  justified   and  explained  on  the 


'to 

states.1 


lJS!ew  York:  The  case  of  Smith  v. 
American  Coal  Co.,  7  Lans.,  317  (1873), 
fully  discusses  and  sustains  this  rule. 
See,  also,  Comeau  r.  Guild  Farm  Oil  Co., 
3  Daly,  218  (1870),  where  Van  Brunt,  J., 
says  that  the  sheriff,  "by  the  levy  of 
such  an  attachment,  could  not  acquire 
any  better  or  greater  title  to  the  stock 
than  a  person  would  have  done  who 
had  purchased  this  stock  of  the  person 
in  whose  name  it  stood  on  the  day  of 
the  levy  of  the  attachment.  And  the 
principle  is  well  established  in  this  state 
that  such  a  purchaser  would  not  acquire 
any  interest  whatever  as  against  a  prior 
purchaser  for  value."  Where  the  cor- 
poration causes  an  attachment  to  be 
levied  on  the  stock  of  a  stockholder  of 
record  who  has  sold  his  certificates  to  an- 
other person  and  causes  a  sale  to  be  made 
to  deprive  the  latter  of  his  stock,  he  may 
hold  the  corporation  liable.  Sims  v. 
Bonner,  16  N.  Y.  Supp.,  801  (1891).  See 
also,  in  general,  Dunn  v.  Star,  etc.,  Ins. 
Co.,  19  N.  Y.  Week.  Dig,  531  (1884).  An 
assignment  of  the  certificates  to  a  re- 
ceiver in  another  state  takes  precedence 
of  an  attachment  against  the  stock  at 
the  home  of  the  corporation.  The  court 
will  direct  the  corporation  to  register 
the  transfer.  Weller  v.  Pace,  etc.,  Co.,  5 
R'y  &  Corp.  L.  J.,  5  (N.  Y.  Sup.  Ct,  1888). 

Pennsylvania:  For  Pennsylvania,  see 
Eby  v.  Guest,  94  Pa.  St.,  160  (1880);  Fin- 
ney's Appeal,  59  Pa.  St,  398  (1868);  Com- 


monwealth v.  Watmouth,  6  Whart.,  117 
(1840),  holding  also  that  the  sheriff  need 
not  levy  on  stock  which  he  knows  has 
ahead}-  been  sold  to  an  unregistered 
transferee.  When  the  transferrer  noti- 
fies the  corporation  of  the  transfer,  a 
subsequent  attachment  of  the  stock  as 
the  property  of  the  transferrer  is  not 
good,  although  the  transfer  was  not  re- 
corded in  the  corporate  book.  Tilford,  J 
etc.,  Co.  v.  Gerhab,  13  Atl.  Rep.  90  (Pa., 
1888);  United  States  v.  Vaughan,  3 
Binn.,  394  (1811),  where  the  unregistered 
transferees  resided  in  foreign  lands. 

Minnesota:  A  sale  and  transfer  of 
corporate  stock,  although  not  entered 
on  the  books  of  the  corporation,  is 
effectual  as  between  the  parties,  and 
takes  precedence  of  a  subsequent  at- 
tachment in  behalf  of  a  creditor  of  the 
vendor.  Lund  et  ah  v.  Wheaton,  etc., 
Co.,  52  N.  W.  Rep.,  268  (Minn.,  1892). 

New  Jersey:  Broadway  Bank  v.  Mc- 
Elrath,  13  N.  J.  Eq.,  24  (1860);  S.  C,  sub 
nom.  Hunterdon  Bank  v.  Nassau  Bank, 
2  C.  E.  Gr.,  496;  Rogers  v.  Stevens,  8  N. 
J.  Eq.,  167  (1849). 

South  Carolina:  Fraser  v.  Charleston, 
11  S.  C,  486,  519  (1878). 

Texas:  Seeligson  v.  Brown,  61  Texas, 
114  (1884). 

Louisiana:  Pitot  v.  Johnson,  33  La. 
Ann.,  1286  (1881);  Smith  v.  Crescent 
City,  etc.,  Co.,  30  La.  Ann.,  1378  (1878). 
The  attaching  creditor  of  one  who  ap- 


617 


§  487.] 


ATTACHMENT    AND    EXECUTION. 


[CH.  XXVII. 


ground  that  registry  and  by-laws  or  charter  provisions  requiring 
registry  of  transfers  on  the  corporate  books  are  not  for  the  pur- 
pole  of  notifying  the  creditors  of  the  old  registered  stockholder 
that  he  no  longer  owns  the  stock,  nor  for  any  similar  purpose,  but 
are  for  the  purpose  of  protecting  the  corporation  in  paying  divi- 
dends and  allowing  the  stock  to  be  voted.  Another  and  stronger 
reason  is  that  the  law  favors  the  transfer  of  stock  certificates,  and 
decreases,  so  far  as  possible,  all  secret  dangers  incurred  in  their 

purchase. 

By  protecting  the  purchaser  against  subsequent  attachments  and 
executions  the  law  removes  one  of  the  chief  risks  incurred  by  hold- 
ing certificates  of  stock  without  a  registry,  and  thereby  increases 
the  safety  and  desirability  of  such  investments.  If  the  corporation 
improperly  refuses  to  allow  the  transferee  of  stock  to  register  his 


pears  on  the  books  of  a  corporation  as 
registered  owner  of  share;  of  its  stock 
cannot  hold  the  stock  against  the  true 
equitable  owner,  who  holds  the  certifi- 
cate of  stock  duly  indorsed  by  the 
debtor.  Kern  v.  Day,  12  S.  Rep.,  6  (La., 
1893).  Cf.  Bidstrup  v.  Thompson,  15 
Fed.  Rep.,  452  (1891),  where  the  pledge 
had  not  been  completed. 

Federal  Courts:  In  regard  to  stock  in 
national  banks,  the  federal  courts  have 
firmly  established  the  rule  that  the  un- 
registered transferee  is  protected  against 
a  subsequent  attachment  or  execution. 
Continental   Nat'l  Bank   v.  Eliot  Nat'l 
Bank,  5  Fed.  Rep.,  369  (1881),  with  a  full 
review    of    the    authorities    by    Judge 
Lowell;     Scott    V.     Pequonnock     Nat'l 
Bank,  15  Fed.  Rep,  491  (1883),  where  the 
rule  was  applied,  although  the  national 
bank  was  in  Connecticut,  a  state  which 
strongly  favors  the  opposite  rule.     The 
court  said:    "The  tendency  of  modern 
decisions    is    to    regard    certificates  of 
stock  attached  to  an  execution  blank, 
assignment,  and  power  to  transfer,  as 
approximating  to  negotiable  securities, 
though  neither  in  form  nor  character 
negotiable."    Under  the  federal  statutes, 
the  rights  of  a  transferee  of  national 
bank  stock,  under  an  unrecorded  trans- 
fer, good  at  common  law,  are  superior 
to  the  rights  of  a  subsequent  attaching 
creditor  of  the  transferrer  without  no- 


tice. Doty  v.  First  Nat'l  Bank  of  Lari- 
more,  58  N.  W.  Rep,  77  (N.  Dak.,  1892). 
Even  in  Massachusetts,  where  the  courts 
upheld  an  opposite  rule,  the  state  courts 
will  follow  the  above  rule  when  the 
Btock  of  a  national  bank  is  in  question. 
Sibley  tt  Quinsigamond  Nat'l  Bank,  133 
Mass.,  515(1882);  but  see  State  v.  First 
Nat'l  Bank  of  J..  69  Ind..  302  (1883). 
The  statute  of  a  state  cannot  restrict  or 
interfere  with  the  transferability  of  cer- 
tificates of  stock  in  national  banks. 
Doty  V.  First  Nat'l  Bank  of  Larimore, 
53  N.  W.  Rep.,  77  (N.  Dak.,  1892).  Will- 
iams r.  Mechanics'  Bank,  5  Blatch.,  59 
(1862),  is  not  in  accord  with  the  other 
federal  decisions. 

Tennessee:  As  regards  Tennessee,  com- 
pare Cornick  v.  Richards,  3  Lea,  1  (1879), 
with  State  Ins.  Co.  v.  Sax,  2  Tenn.  Ch., 
507  (1875). 

Maryland:  In  Maryland,  by  statute, 
stock  which  is  pledged  cannot  be  at- 
tached. Morton  v.  Grafflin,  15  Atl.  Rep., 
298  (1888).  But  see  Noble  t'.  Turner,  16 
id.,  124. 

In  England  the  creditor  of  a  regis- 
tered stockholder  cannot  subject  the 
stock  to  his  debt  as  against  the  owner 
of  the  certificates,  who  has  allowed  the 
stock  to  remain  in  the  name  of  the 
debtor  in  order  to  qualify  the  latter  as  a 
director.  Cooper  v.  Griffin,  66  L  T. 
Rep,  660  (1892). 


618 


CH.  XXVII.]  ATTACHMENT    AND    EXECUTION.  [§  488. 

transfer,  and  the  stock  is  afterwards  attached  by  a  creditor  of  the 
stockholder,  the  transferee  may,  if  he  chooses,  hold  the  corporation 
liable  in  damages  for  its  refusal  to  allow  the  registry.1 

§  488.  Bights  and  duties  of  the  corporation  in  such  cases. —  The 
corporation  has  a  dangerous  duty  to  perform  when  stock  has  been 
attached  or  sold  under  levy  of  execution,  and  a  registry  is  requested 
by  the  purchaser  at  such  sale  or  by  a  purchaser  of  the  outstanding 
certificate  of  stock.  If  the  purchaser  of  the  certificate  demands 
registry  before  registry  has  been  allowed  to  the  purchaser  at  the 
execution  sale,  and  if  the  former  claims  to  have  purchased  the  cer- 
tificate before  the  attachment  or  execution  was  levied,  the  right  of 
the  corporation  is  clear.  It  may  refuse  to  allow  the  registry,  and 
when  sued  therefor  may  interplead  and  compel  the  claimants  to 
litigate  the  matter  between  themselves.2  But  where  the  corpora- 
tion does  not  know  whether  the  outstanding  certificate  is  in  the 
hands  of  a  purchaser  or  not,  and  a  registry  is  demanded  by  a  pur- 
chaser at  an  execution  sale,  the  rights  and  duties  of  the  corporation 
are  not  so  clear.  It  has  two  courses  open  to  it:3  it  may  refuse  to 
allow  a  registry  until  compelled  to  do  so  by  a  court,  or  it  may 
allow  registry  without  being  so  compelled.  The  former  is  the  safer 
course,  since  the  corporation  will  probably  be  thereby  protected 
from  all  liability  to  a  possible  purchaser  of  the  outstanding  certifi- 
cate.4 The  corporation,  it  seems,  is  protected  in  its  obedience  to 
the  decree  of  a  court.5  It  is  quite  probable,  also,  that  no  court  in 
any  of  the  above-named  states  would  require  the  corporation  to 
issue  new  certificates  of  stock  to  a  purchaser  of  stock  at  an  execu- 
tion sale  unless  such  purchaser  give  to  the  corporation  a  bond  of 
indemnity,  whereby  an  unknown  purchaser  of  the  outstanding  cer- 

i  Robinson  v.  National  Bank  of  New  fair  contest  in  good  faith  by  the  corpo- 

Berne,  95  N.  Y.,  637  (1884).     See,  also,  ration,  orders  the  stock  to  be  transferred 

Plymouth  Bank  v.  Bank  of  Norfolk,  27  to  the  purchaser  under  such  seizure  and 

Mass.,  454  (1830).  sale,  the  corporation  cannot  be  liable  to 

2  See  ch.  XXII,  §  387.  The  proper  the  holder  of  the  certificate  who  took 
remedy  for  the  purchaser  from  the  judg-  no  steps  to  protect  himself."  Fried- 
ment  debtor  to  pursue  under  such  cir-  lander  v.  Slaughter-house  Co.,  31  La. 
cumstances  is  to  enjoin  the  corporation  Ann.,  523  (1879).  Where,  also,  the  un- 
and  the  purchaser  at  the  execution  sale  registered  transferee  contested  in  the 
from  registering  the  latter  as  a  stock-  courts  the  right  of  the  purchaser  at  the 
holder.  Smith  v.  Crescent  City,  etc.,  Co.,  execution  sale,  and  was  defeated  in  the 
30  La.  Ann.,  1378  (1878).  If  an  attach-  lower  court,  and  appealed  without  stay- 
ment  has  been  levied  he  should  enjoiu  ing  the  decree  below,  the  corporation  is 
that.     Cheever  v.  Meyer,  52  Vt.  66  (1879).  not  liable  for  obeying  the  decree  of  the 

3  Robinson  v.  National  Bank  of  New  lower  court,  although  the  appeal  is  suc- 
Berne,  95  N.  Y.,  637  (1884).  cessful.     Chapman  v.  New  Orleans  Gas 

4  "  Where  a  judicial  tribunal  of  com-  Light,  etc.,  Co.,  4  La  Ann.,  153  (1849). 
petent  jurisdiction  of  last  resort,  after  a  5  See  §§  359,  388. 

619 


§  488.] 


ATTACHMENT   AND   EXECUTION. 


[CH.  XXVII. 


tificate  may  be  protected.1  The  other  course  open  to  the  corporation, 
that  of  allowing  a  registry  by  the  purchaser  at  the  execution  sale 
without  being  compelled  to  do  so  by  a  court,  is  pursued  by  the  cor- 
poration at  its  peril.  If  it  afterwards  transpires  that  the  outstanding 
certificate  had  been  purchased  before  the  attachment  or  execution 
was  levied,  the  corporation  is  liable  in  damages  to  such  purchaser 
for  allowing  the  registry,2  but  not  unless  such  purchaser  gave  a 
valuable  consideration  for  the  certificate  and  alleges  that  fact  in 
his  pleading.3  Until  such  purchaser  demands  a  registry  from  the 
corporation  it  may  safely  pay  dividends  to  the  execution  purchaser.4 
These  rules  are  complicated,  but  they  protect  all  parties.  If  the 
statute  prescribes  that  the  corporation  shall  register  as  a  stock- 
holder the  purchaser  at  the  execution  sale,  the  writ  of  mandamus 
will  lie  to  compel  the  corporation  to  make  such  registry;5  but  the 
relator  must  allege  that  he  presented  to  the  corporation  the  re- 
quired papers,  and  was  refused  such  registry.6  A  court  of  equity 
will  not  compel  a  corporation  to  allow  a  transfer  of  stock  by  a 
purchaser  at  an  execution  sale  where  the  price  paid  at  such  sale  is 
so  small  as  to  shock  the  conscience  of  the  court.7 


1  The  supreme  court  of  Ohio,  in  Naf  1 
Bank  of  N.  L.  v.  Lake  Shore  &  M.  S.  R 
R  Co.,  21  Ohio  St.,  221  (1871),  very  prop- 
erly and  very  distinctly  refused  to  com- 
pel a  registry,  although  conceding  that 
the  execution  purchaser  is  entitled  to 
dividends.  The  court  said  :  "  Can  it  be 
that,  because  the  defendant  refused  to 
assume  the  peril  of  deciding  between 
the  contending  claimants  by  issuing 
other  certificates  for  the  same  stock  to 
the  plaintiff  upon  demand,  that  it 
thereby  became  a  wrong-doer  and  con- 
verted the  plaintiff's  stock  to  its  own 
use,  and  rendered  itself  liable  to  respond 
in  the  full  value  of  the  stock  to  the 
claimant  who  could  establish  his  right 
in  a  court  of  law?  The  very  statement 
of  the  proposition  refutes  it."  Where 
the  attachment  is  on  stock  that  the 
complainant  alleges  was  transferred  in 
fraud  of  creditors,  mandamus  will  not 
lie  to  compel  the  corporation  to  allow  a 
registry  under  the  execution  sale.  State 
v.  Warren  Foundry  &  M.  Co.,  32  N.  J. 
L.,  439  (1868).  As  to  the  mode  of  plead- 
ing that  the  defendant  company  has 
been  compelled  to  transfer  the  stock  to 
a  purchaser  at   an  execution  sale,  see 


Wyoming,    etc.,   Assoc,    r.   Talbott,   21 
Pac.  Rep.,  700  (Wyom.,  1889). 

2  Smith  r.  American  Coal  Co.,  7  Lans. 
(N.  Y.),  817  (1873).  If  the  purchaser  at 
the  execution  sale  still  has  the  certifi- 
cates the  purchaser  of  the  old  certifi- 
cate may  bring  suit  against  him  and 
the  corporation  to  compel  a  retransfer. 
Rogers  v.  Stevens,  8  N.  J.  Eq.,  167 
(1849).  In  a  suit  by  a  purchaser  at  an 
execution  sale  to  cut  off  the  rights  of  a 
judgment  debtor  the  corporation  is  an 
indispensable  party,  since  it  alone  can 
allow  a  transfer  on  the  books.  St  Louis 
&  San  F.  R'y  Co.  v.  Wilson,  114  U.  S., 
60  (1884).  See,  also,  the  late  case  of 
Hazard  v.  Nat'l  Ex.  Bank,  26  Fed.  Rep., 
94  (1886),  holding  the  corporation  liable 
in  damages  to  the  purchaser  of  the  out- 
standing certificate. 

3  Littell  v.  Scran  ton  Gas  &  Water  Co., 
42  Pa  St,  500  (1862). 

4  Smith  v.  American  Coal  Co.,  supra. 

5  Bailey  r.  Strohecker,  38  Ga,  259 
(1868).    See,  also,  §  390. 

5Lippett  V.  American  Wood  Paper 
Co.,  14  R  I.,  301  (1883). 

"Mississippi,  etc.,  R.  R  r.  Cromwell, 
91  U.  S.,   643;   Randolph   v.  Quidnick, 


620 


en.  xxvii.] 


ATTACHMENT    AND    EXECUTION. 


[§  489. 


§  4S9.  Rule  in  Connecticut,  Maine,  Vermont,  Indiana,  Iowa, 
Mart/land,  Wisconsin,  Alabama  and  California. —  The  courts  of 
these  states  all  hold  that,  where  regulations  exist  requiring  a 
transfer  of  stock  to  be  registered  on  the  corporate  books  in  order 
to  be  effectual,  an  attachment  or  execution  levied  on  stock  stand- 
ing in  the  defendant  debtor's  name  will  cut  off  the  rights  of  a 
previous  purchaser  of  the  certificate  who  has  not  completed  his 
transfer  b}r  registry.1  Sometimes  these  regulations  requiring  a 
registry  are  contained  in  the  charter,  sometimes  only  in  the  by- 
laws, and  sometimes  are  merely  printed  on  the  face  of  the  certifi- 
cate of  stock.2     Even  in  these  states,  however,  it  is  well  established 


135  U.  S.,  457  (1890).  Inadequacy  of 
price  is  not  sufficient  cause  for  setting 
aside  an  execution  sale  of  stock.  Con- 
way v.  John,  23  Pac.  Rep.,  170  (Cal., 
1890). 

1  See  note  following. 

2  Oxford  Turnpike  Co.  v.  Bunnell,  6 
Conn.,  552  (1827);  Dutton  v.  Conn. 
Bank,  13  Conn.,  493  (1840),  where  the 
provision  was  in  the  by-laws ;  Skowhe- 
gan  Bank  v.  Cutler  49  Me.,  315  (1860); 
Fiske  v.  Carr,  20  Me.,  301  (1841) ;  Warren 
v.  Brandon  Mfg.  Co.,  cited  in  52  Vt,  75 
(1879);  State  v.  First  Nat'l  Bank  of  J., 
89  Ind.,  302  (1883) :  Coleman  v.  Spencer, 
5  Blackf.  (Ind.),  197  (1839);  Fort  Mad- 
ison, etc.,  Co.  v.  Batavian  Bank,  32  N. 
W.  Rep.,  336  (Iowa,  18S7);  42  id.  331; 
Re  Murphy,  51  Wis.,  519  (1881),  where 
the  provision  was  by  statute.  Also, 
under  a  statute,  Weston  v.  Bear  River, 
etc.,  Min.  Co.,  5  Cal.,  186  (1855);  Nagle 
v.  Pacific  Wharf  Co.,  20  Cal.,  529  (1862). 
Of.  Supply,  etc.,  Co.  v.  Elliott,  15  Pac. 
Rep,  691  (Cal.,  1887).  In  California  an 
attachment  takes  precedence  over  an 
unrecorded  prior  transfer  of  the  certifi- 
cate, the  by-laws  providing  for  transfer 
of  title  by  registry.  Conway  v.  John, 
23  Pac.  Rep.,  170  (Cal.,  1890).  If  the 
unregistered  purchaser  buys  the  judg- 
ment obtained  under  the  attachment 
the  latter  is  merged.  Strout  v.  Natoma 
Water  &  Min.  Co.,  9  Cal.,  78  (1858).  As 
to  North  Carolina,  see  Morehead  v. 
Western  N.  C.  R.  R  Co.,  2  S.  E.  Rep., 
247  (1887).  The  statutory  law  of  Ala- 
bama on  this  subject  is  indicated  in 


Fisher  v.  Jones,  3  S.  Rep,  13  (Ala., 
1887).  In  Alabama  by  statute  the  at- 
taching creditor  takes  title  in  preference 
to  an  unregistered  transferee,  and  the 
same  rule  prevails  where  the  registered 
holder  is  a  mere  "dummy  "  for  another. 
White  v.  Rankin,  8  S.  Rep.,  118  (Ala., 
1890).  In  Alabama  the  unregistered 
pledgee  is  not  protected  against  attach- 
ments. Notice  to  the  corporate  officer 
of  the  attachment  may  be  oral.  Abels 
v.  Mobile,  etc..  Co.,  9  S.  Rep,  423  (Ala., 
1891).  Under  the  Alabama  attachment 
statute  the  attachment  takes  precedence 
over  a  prior  transfer  of  the  certificates, 
where  such  transfer  is  not  recorded  on 
the  corporate  books  within  fifteen  days. 
Berney  Nat'l  Bank  v.  Pinckard,  6  S. 
Rep.,  364  (Ala.,  1889).  In  Maryland  a 
subsequent  attachment  precedes  a 
pledge  of  the  certificates.  Noble  v. 
Turner,  16  Atl.  Rep.,  124  (Md.,  1888). 
Where  an  agreement  to  sell  is  negoti- 
ated, but  before  the  certificate  is  trans- 
ferred an  attachment  is  levied  on  the 
stock,  it  is  held  in  Tennessee  that  the 
attachment  prevailed.  Young  v.  South, 
etc.,  Iron  Co.,  2  S.  W.  Rep.,  202  (Tenn., 
1886).  A  sale  of  stock  after  an  attach- 
ment suit  has  failed,  and  before  that 
decision  is  reversed,  gives  the  purchaser 
good  title.  Loveland  v.  Alvord,  etc., 
Co.,  18  Pac.  Rep.,  682  (Cal.,  1888).  For  a 
lurid  and  yet  just  invective  against  the 
decisions  of  California,  Indiana,  Colo- 
rado and  other  states  allowing  attach- 
ments in  those  states  to  have  priority 
against  a  prior  transfer  of  stock,  see  12 


621 


§  489.] 


ATTACHMENT    AND    EXECUTION. 


[CH.  XXVII. 


that  if  the  person  who  levies  the  attachment  or  purchases  at  the 
execution  sale  has  notice  that  the  defendant  debtor  had  transferred 
his  certificate  before  the  attachment  or  execution  was  levied,  the 
purchaser  of  the  outstanding  certificate  may  have  his  remedy.  If 
the  attaching  creditor  has  notice  before  the  attachment  is  levied 
the  purchaser  may  obtain  a  perpetual  injunction  against  the  attach- 
ment.1 Moreover,  if  the  purchaser  at  the  execution  sale  has  notice, 
he  may  be  prevented  from  obtaining  registry  and  claiming  the 
stock.2  It  is  also  held  that  where  the  unregistered  transferee  of 
the  certificate  of  stock  has  notified  the  corporation  thereof  and  de- 
manded registry,  which  is  not  granted,  any  attachment  or  execution 
levied  subsequently  to  the  improper  refusal  by  the  corporation  to 
register  does  not  take  precedence  over  such  purchaser.3     Where 


R'y  &  Corp.  L.  J.,  145.  As  to  Illinois, 
see  People's  Bank  v.  Gridley.  91  111..  457 
(1879).  The  laws  of  1883,  p.  110,  changed 
the  rule  for  that  state. 

iCheever  v.  Meyer,  52  Vt.  66  (1879); 
Scripture  v.  Francistown  Soapstone  Co., 
SON.  H.,  571  (1871);  Black  v.  Zacharie, 
3  How.,  482  (1845).  A  purchaser  at  an 
execution  sale  takes  no  title  as  against 
a  prior  purchaser  of  the  certificate 
where  the  former  knew  of  the  latter's 
purchase  when  the  execution  sale  took 
place.  Wilson  v.  St.  Louis,  etc.,  R  R, 
18  S.  W.  Rep,  28G  (Mo.,  1891).  If  the 
purchaser  at  the  execution  sale  buys 
with  knowledge  that  the  judgment 
debtor  does  not  own  the  stock  at  the 
time  of  the  sale  he  takes  no  title  to  the 
stock.  Blakeman  v.  Puget  Sound  Iron 
Co.,  13  Pac.  Rep.,  872  (Cal.,  1887). 

2  People  v.  Elmore,  35  Cal.,  653  (1868); 
Weston  v.  Bear  River,  etc.,  Min.  Co.,  6 
Cal.,  425  (1856);  Van  Cise  n  Merchants' 
Nat  Bank,  33  N.  W.  Rep.  897  (Dak., 
1887);  Farmers'  Nat  Gold  Bank  v.  Wil- 
son, 58  Cal.,  600  (1881),  holding,  also, 
that  the  execution  sale  will  not  be  en- 
joined, since  the  claimant  may  attend 
and  give  notice  of  his  claim  ;  Newberry 
v.  Detroit,  etc.,  Iron  Co.,  17  Mich.,  141, 
158  (1868),  per  Cooley,  J.  Where  the 
plaintiff  bought  for  itself  at  the  execu- 
tion sale  and  had  notice  it  is  liable  in 
tort  to  the  unregistered   purchaser  of 


the  old  certificates.     Bridgewater  Iron 


Co.  v.  Lissberger.  116  U.  &,  8  (1885). 
But  Jones  v.  Latham,  70  Ala.,  164,  seems 
to  hold  that,  if  the  execution  is  levied 
without  uotice  of  an  unrecorded  traus- 
fer,  a  subsequent  notice  before  the  sale 
to  the  purchaser  at  the  sale  is  ineffectual, 
and  docs  not  affect  the  latter. 

:;  Merchants'  Nat.  Bank  v.  Richards.  6 
Mo.  App.,454  (1879);  afFd,  72  Mo..  77: 
Colt  r.  [ves,  31  Conn..  25  (1862);  state 
Ins.  Co.  v.  Gennett,  2  Tenn.  Ch..  100 
(1874);  Plymouth  Bank  0.  Bank  of  Nor- 
folk. 27  M;i>s..  454  (1830);  Sargent  v. 
Franklin  Ins.  Co..  25  Mass.,  90  (1829). 
Contra.  Fiske  r.  Carr,  20  Me.,  301  (1841). 
But  not  if  the  transferee  merely  sends  a 
letter  to  the  corporation  requesting  a 
transfer,  without  sending  the  evidences 
of  his  title  and  the  old  certificate.  New- 
all  v.  Williston,  138.  Mass.,  240  (1885*. 
The  corporation  is  liable  in  damages  if 
it  levies  the  attachment  under  such  cir- 
cumstances.  Sargent  v.  Franklin,  etc.. 
Co.,  supra.  Where  registry  is  allowed 
it  cuts  off  a  subsequent  attachment, 
even  though  the  transferee  has  not 
formally  accepted  the  stock  as  required 
by  statute.  Woodruff  v.  Harris,  11 
U.  C,  Q.  B.,  490  (1854).  A  memorandum 
on  the  stock  book  that  the  stock  has 
been  transferred  as  collateral  security  is 
sufficient  to  give  the  transfer  precedence 
over  an  attachment  Moore  v.  Marshall- 
town,  etc.,  Co.,  46  N.  W.  Rep.,  750  (Iowa, 
1890). 


622 


CH.  XXVII.] 


ATTACHMENT    AND    EXECUTION. 


[§  490. 


the  unregistered  purchaser  is  cut  off  by  au  attachment  ho  cannot 
compel  his  vendee  to  pay  for  the  stock  which  is  made  valueless  by 
the  attachment.1 

§  490.  Rule  in  Massachusetts  and  New  Hampshire—  The  courts 
of  Massachusetts  were  the  first  to  lay  down  the  rule  which  places 
an  attachment  or  execution  levy  ahead  of  an  unregistered  pur- 
chaser of  the  certificate  of  stock.  The  evil  consequences  of  the 
rule,  however,  seem  to  have  becolne  apparent  to  her  courts;  and 
it  was  held  that,  although  the  unregistered  purchaser  was  not  pro- 
tected where  the  charter  of  the  corporation  required  registry,2  yet, 
where  only  the  by-laws  or  the  certificate  itself  created  such  a  re- 
quirement, the  unregistered  purchaser  was  protected  and  took  pre- 
cedence over  the  attachment  or  execution.3  The  legislature  of 
Massachusetts  seems  to  have  had  a  still  clearer  perception  of  the 
demands  of  trade  and  of  the  interests  of  those  who  invest  in  cer- 
tificates of  stock,  and,  in  1884,  enacted  a  statute  which  probably 
will  be  construed  to  make  an  attachment  or  execution  levied  on 
stock  no  more  effective  than  in  New  York  state.4  A  similar  stat- 
utory change  has  been  made  in  New  Hampshire.5 


i  Rock  v.  Nichols,  85  Mass.,  342  (1862). 

2  Fisher  v.  Essex  Bank,  71  Mass.,  373 
(1855);  Newall  v.  Williston,  138  Mass., 
240  (1885);  Central  Nat'l  Bank  v.  Willis- 
ton,  138  Mass.,  244  (1885) ;  Boyd  v.  Rock- 
port  Steam  Cotton  Mills,  73  Mass.,  406 
(1856);  Blanchard  v.  Dedham  Gas  Light 
Co.,  78  Mass.,  213  (1858). 

3  Sargent  v.  Essex  M.  R'y  Co.,  26  Mass., 
202  (1829) ;  Boston  Music  Hall  v.  Cory, 
129  Mass..  435  (1880),  holding  that  a 
delay  of  four  years  was  not  fatal  to  the 
unregistered  purchaser's  rights. 

4 "  The  delivery  of  a  stock  certificate 
of  a  corporation  to  a  bona  fide  purchaser 
or  pledgee  for  value,  together  with  a 
written  transfer  of  the  same,  signed  by 
the  owner  of  the  certificate,  shall  be  a 
sufficient  delivery  to  transfer  the  title 
as  against  all  parties  ;  but  no  such  trans- 
fer shall  affect  the  right  of  the  corpora- 
tion to  pay  any  dividend  due  upon  the 
slock,  or  to  treat  the  holder  of  record 
as  the  holder  in  fact,  until  such  trans- 
fer is  recorded  upon  the  books  of  the 
corporation,  or  a  new  certificate  is 
i  sued  to  a  person  to  whom  it  has  been 


so  transferred."  Act  of  May  9,  1884. 
The  enactment  of  a  similar  statute  is 
respectfully  recommended  to  the  states 
mentioned  in  §  489.  Since  the  first 
edition  of  this  work  was  printed  several 
states  have  enacted  a  statute  similar  to 
this  Massachusetts  statute.  Where  a 
father  delivers  stock  to  his  son  in  order 
to  qualify  the  latter  as  director,  and  the 
son  transfers  the  certificate  back  to  his 
father,  the  creditor  of  the  son  cannot  at- 
tach the  stock  as  against  the  father,  al- 
though the  stock  stands  on  the  corporate 
books  in  the  name  of  the  son.  Andrews 
v.  Worcester,  etc..  Co.,  33  N.  E.  Rep., 
1109  (Mass.,  1893). 

5  Formerly  in  New  Hampshire  an  at- 
taching creditor  took  precedence  over 
an  unrecorded  transferee.  Pinkerton  v. 
Railroad  Co.,42N.H.,424  (1861);  Buttrick 
v.  Nashua,  etc.,  R.  R,  62  N.  H.,  413(1882). 
But  in  1887  the  legislature  passed  an 
act  to  the  effect  that  the  delivery  of  a 
certificate  of  stock  to  a  bona  fide  pur- 
chaser or  pledgee  should  transfer  the 
title  as  against  all  parties.  (Ch.  16,  L. 
1887.) 


623 


§491.] 


ATTACHMENT    AND    EXECUTION. 


[CH.  XXVII. 


§  491.  Shares  of  stock  cannot  he  subjected  to  the  payment  of  the 
stockholder  s  debts  by  the  process  of  garnishment. —  The  process  of 
garnishment  is  proper  only  where  a  debt  is  due  from  a  third  per- 
son to  the  defendant  debtor.  It  is  not  a  proper  remedy  for  reach- 
ing shares  of  stock  owned  by  the  debtor.1  The  corporation  owes  the 
stockholder  no  debt,  and  by  no  fiction  of  law  can  it  be  held  to  be 
a  debtor  of  the  defendant  debtor.  Consequently,  where  the  sheriff 
levies  an  attachment,  not  according  to  the  procedure  governing  at- 
tachments, but  according  to  the  procedure  of  garnishment,  the 
whole  proceeding  is  void,  and  a  subsequent  transfer  of  the  stock  by 
the  defendant  debtor  is  valid.2 


1  Planters  &  M.  Bank  v.  Leavens,  4 
Ala.  (N.  S.),  753  (1843) ;  Ross  v.  Ross,  25 
Ga.,  297  (1858),  where  the  court  say  :  "  Is 
stock  in  this  railroad  such  a  debt  (' in- 
debtedness ')  of  the  railroad  to  the  stock- 
holder that  a  garnishing  creditor  of  the 
stockholder  can  enter,  up  judgment  for 
it,  against  the  railroad?  It  is  not;  it  is  a 
debt  which  the  railroad  dare  not  pay, 
even  to  the  stockholder  himself.  The 
road  may  pay  him  dividends  on  it,  but 
that  is  all."  See,  also,  Foster  v.  Potter, 
37  Mo.,  525 ;  §  484,  n.,  supra.  Stock  held 
as  collateral  is  property  subject  to  gar- 


nishment under  the  statutes  of  Texas. 
Smith  v.  Traders'  Natl  Bank,  12  S.  W. 
Rep.,  113  (Tex.,  1889). 

*Mooar  v.  Walker.  4G  Iowa,  164  (1877). 
Cf.  Chesapeake  &  O.  R  R.  Co.  v.  Pain-, 
29  Gratt.  (Va.  •.  502.  But  see  Harrell  v. 
Mexico,  etc.,  Co.,  11  S.  W.  Rep.,  863 
(Texas,  1889).  Garnishee  process  must 
conform  to  the  statute  relative  to  at- 
tachments, and  if  served  on  the  holders 
of  the  certificates  instead  of  on  the  cor- 
poration it  is  ineffectual.  Younkin  v. 
Collier,  47  Fed.  Rep.,  571  (1891). 


624 


CHAPTER  XXVIII. 


CONSTITUTIONALITY  OF  AMENDMENTS  TO  CHARTERS 

STOCKHOLDER  TO  OBJECT. 


RIGHT  OF  A 


§  492.  A  corporate  charter  is  a  contract 
between  three  parties  —  the 
state,  the  corporation  and  the 
stockholders. 

493.  The  charter  as  a  contract  between 

the  corporation  and  tli6  stock- 
holders. 

494.  Charter  as  a  contract  between 

the  state  and  the  corporation. 

495.  496.  Charter    as    a  contract  be- 

tween the  state  and  the  stock- 
holders. 

497.  Charter     amendments     imposed 

upon  the  stockholders. 

498.  Charter   amendments  offered  to 

the  stockholders. 


§  499.  Auxiliary  and  incidental  amend- 
ments are  constitutional, 
though  some  of  the  stockhold- 
ers dissent. 

500.  Material  amendments  offered  to 

the  stockholders  can  be  ac- 
cepted only  by  a  unanimous 
vote. 

501.  Amendments  under  the  reserved 

power  of  the  state  to  alter  or 
amend  the  charter. 

502.  Dissenting  stockholder's  remedy 

against  an  illegal  amendment. 

503.  Assent    and    acquiescence   as    a 

bar  to  the  stockholder's  remr 
edy. 


§  492.  A  corporate  charter  is  a  contract  between  three  parties  — 
the  state,  the  corporation  and  the  stockholders. —  The  charter  of  a 
corporation  having  a  capital  stock  is  a  contract  between  three  par- 
ties, and  forms  the  basis  of  three  distinct  contracts.1  The  charter 
is  a  contract  between  the  state  and  the  corporation;  second,  it  is  a 
contract  between  the  corporation  and  the  stockholders;  third,  it  is 
a  contract  between  the  stockholders  and  the  state. 

§  493.  The  charter  as  a  contract  between  the  corporation  and  flic 
stockholders. —  That  the  charter  is  a  contract  between  the  corpora- 
tion and  the  stockholders  has  within  the  last  fifty  years  been  firmly 
established,  and  is  now  unquestioned  law.     The  cases  of  ISTatusch. 


1  See  State  Bank  of  Ohio  v.  Knoop,  16 
How.,  369  (1853);  Port  Edwards,  etc., 
R'y  v.  Arpin,  49  N.  W.  Rep.,  828  (Wis.. 
1891);  Northern  R.  R.  Co.  v.  Miller.  10 
Barb.,  260  (1851);  Cooley  on  Constitu- 
tional Limitations  (5th  ed.).  p.  337,  where 
the  learned  author  says :  "  Those  char- 
ters of  incorporation,  however,  which 
are  granted,  not  as  a  part  of  the  ma- 
chinery of  the  government,  but  for  the 
private  benefit  or  purposes  of  the  cor- 
porators, stand  upon  a  different  footing. 


and  are  held  to  be  contracts  between  the 
legislature  and  the  corporators,  having 
for  their  consideration  the  liabilities  and 
duties  which  the  corporators  assume  by 
accepting  them ;  and  the  grant  of  the 
franchise  can  no  more  be  resumed  by 
the  legislature,  or  its  benefits  diminished 
or  impaired  without  the  consent  of  the 
grantees,  than  any  other  grant  of  prop- 
erty or  valuable  thing,  unless  the  right 
to  do  so  is  reserved  in  the  charter  it- 
self." 


(40) 


625 


494.] 


AMENDMENTS    TO    CHARTERS. 


[CH.  XXVIII. 


v.  Irving'1  in  England,  and  Livingston  v.  Lynch2  in  this  country, 
followed  by  a  long  line  of  supporting  decisions,  distinctly  hold  that 
the  charter  is  a  contract  prescribing  to  the  corporation  that  it  shall 
not  attempt  to  materially  change,  extend,  alter  or  abandon  the 
particular  business  which  that  charter  authorizes  the  corporation  to 
do.  Any  attempt  of  the  corporation  to  make  such  a  change,  ex- 
tension, alteration  or  abandonment  of  that  business  is  called  an 
ultra  vires  act.  It  is  an  act  which  a  single  stockholder  may  pre- 
vent by  injunction  or  set  aside  by  a  suit  in  equity.  This  subject, 
however,  is  fully  treated  in  another  part  of  this  work." 

§  494.  Charter  as  a  contract  bettveen  the  state  and  the  corpora- 
tion.—  As  between  the  state  and  the  corporation  the  corporate 
charter  is  a  contract,  protected  by  that  provision  of  the  United 
States  constitution  which  prohibits  a  state  from  passing  any  law 
which  will  impair  the  obligation  of  the  contract.4  Hence  it  is  be- 
yond the  power  of  the  state  to  repeal  or  materially  annul  such  a 
corporate  charter,  unless  the  power  of  amendment  and  repeal  has 
been  expressly  reserved  by  the  state,  or  unless  all  the  parties  to  the 
contract  consent  to  the  change.  All  the  franchises,  privileges  and 
express  and  implied  powers  necessary  and  essential  to  carrying 
out  the  corporate  purposes  arc  protected  by  this  contract.5     This 


1  This  case,  decided  by  Lord  Eldon  in 
1824,  is  reported  in  (Jow  on  Partnership, 
398;  also  2  Cooper's  Ch,  358. 

2  4  Johns.  Ch.,  573  (1820).  Thus,  in 
Clearwater  v.  Meredith.  1  "Wall.,  23 
(1863),  the  court  say  :  "  The  relation  be- 
tween  the  corporation  and  the  stock- 
holders is  one  of  contract.  The  stock- 
holder subjects  his  interest  to  the  con- 
trol of  the  proper  authorities  to  accom- 
plish the  object  of  the  organization; 
but  he  does  not  agree  that  the  purpose 
shall  be  changed  in  its  character  at  the 
will  of  the  directors,  or  a  majority  of 
the  stockholders  even.  The  contract 
cannot  be  changed  without  the  consent 
of  both  contracting  parties." 

3 Seech.  XL, 

4  This  rule  of  law,  first  enunciated  in 
the  ease  of  Trustees  of  Dartmouth  Col- 
lege v.  Woodward,  4  Wheat,  518  (1819), 
by  Marshal],  C.  J.,  has  become  thor- 
oughly established.  As  early  as  1806  a 
court  said :  "  We  are  also  satisfied  that 
the  rights  legally  vested  in  this  or  in 
any  corporation   cannot  be  controlled 


or  destroyed  by  any  subsequent  statute, 
unless  a  power  for  that  purpose  be  re- 
served to  the  legislature  in  tin' act  of  in- 
corporation." Wales  r.  Stetson,  2  Mass.. 
143  (1806).  In  England  the  unwritten 
constitution  is  not  superior  to  the  pow- 
ers of  parliament,  and  consequently  the 
rule  is  different  In  that  country,  as  is 
said  by  Lord  Coke,  "the  power  and  ju- 
risdiction of  parliament  is  so  transcend- 
ental and  absolute  that  it  cannot  be 
controlled  or  confined,  either  for  causes 
or  purposes,  within  any  bounds."  Stev- 
ens v.  Rutland  &  Burlington  R.  R  Co., 
29  Vt,  545  (1854);  Thorpe  v.  Rutland 
&  Burlington  R  R  Co.,  27  Vt,  140 
(1857);  Trustees  of  Dartmouth  College 
V.  Woodward,  4  Wheat.  518.  613(1819). 
Consequently,  the  English  authorities 
are  of  little  use  in  this  chapter. 

5  State  Bank  of  Ohio  v.  Knoop,  16 
How.,  369  (1853);  Thorpe  v.  Rutland  & 
Burlington  R  R  Co.,  27  Vt,  140  (1857), 
per  Redfield,  J.  The  latter  case  dis- 
cusses the  nature  of  the  privilege  thus 
protected. 


626 


CH.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§§  495,  496. 


branch  of  the  law  is  important  to  stockholders  in  cases  where  the 
corporation  neglects  or  refuses  to  protect  itself  against  legislative 
amendments  or  repeals  violating  the  charter  contract  between  the 
corporation  and  the  state.  In  such  cases  the  stockholder  ma}^  en- 
join or  remedy  the  wrong  by  bringing  an  action  in  place  of  and  on 
behalf  of  the  corporation,  making  it  a  party  defendant,  together 
with  the  parties  who,  under  the  authority  of  the  state,  have  vio- 
lated the  contract.1  A  stockholder's  action  to  prevent  the  payment 
of  a  tax  levied  upon  the  corporation  in  violation  of  a  statutory  ex- 
emption from  taxation  is  an  action  of  this  character.2  Corporate 
charters,  however,  are  subject  to  constitutional  provisions  enacted 
subsequently  to  the  granting  of  the  charters  unless  there  is  a  clear 
contract  to  the  contrary.3 

§§  495,  496.  Charter  as  a  contract  oetween  the  state  and  the  stoclc- 
liolders. —  As  between  the  state  and  the  stockholders,  also,  the  cor- 
porate charter  is  a  contract  protected  by  the  United  States  consti- 
tution.4 In  consequence  thereof  the  state  cannot  materially  amend 
the  charter,  except  by  the  unanimous  consent  of  the  stockholders, 
unless  the  power  of  amendment  is  expressly  reserved  by  the  state 


1  Greenwood  v.  Freight  Co.,  105  U.  S., 
13  (1881).  The  character  of  such  an 
action,  also  the  parties,  pleadings  and 
rules  of  relief,  are  explained  in  Part  IV. 

2  Dodge  v.  Woolsey,  18  How.,  331 
(1855) ;  State  Bank  of  Ohio  v.  Knoop,  16 
How.,  369  (1853).  See,  also,  Wilmington 
R.  R.  v.  Reid,  18  Wall.,  264  (1871) ;  Dela- 
ware R.  R.  Tax,  18  Wall.,  206  (1873). 
See.  also,  §  562. 

3  Pennsylvania  R.  R.  v.  Miller,  132  U. 
S.,  75  (1889). 

4  "  A  charter  of  incorporation  granted 
by  a  state  creates  a  contract  between 
the  state  and  the  corporators  which  the 
state  cannot  violate."  This  has  been 
held  so  often  by  this  court  that  "  it  is 
supererogation  to  repeat  it."  Wilming- 
ton R.  R.  v.  Reid,  13  Wall.,  264  (1871). 
It  "  has  been  the  settled  law  of  this 
court  since  the  Dartmouth  College  case." 
Delaware  R.  R.  Tax,  18  Wall.,  206  (1873). 
To  the  same  effect,  see  Zabriskie  v. 
Hackensack  &  N.  Y.  R.  R.  Co.,  18  N.  J. 
Eq.,  178  (1867) ;  Lothrop  v.  Stedman,  42 
Conn.,  583  (1875);  Stevens  v.  Rutland  & 
Burlington  R.  R  Co.,  29  Vt,  545  (1854). 
"  An  act  granting  corporate  privileges 
to  a  body  of  men  is,  when  accepted,  a 

627 


contract  between  the  state  and  the  cor- 
porators. .  .  .  It  is  sustained  by 
everything  that  we  are  bound  to  regard 
as  authority " —  by  the  courts,  by  the 
opinion  of  the  legal  profession  and  by 
the  acquiescence  of  the  people.  Erie  & 
Northeast  R.  R.  v.  Casey,  26  Pa.  St.,.  287 
(1856),  per  Jeremiah  Black,  J.  See,  also, 
Sinking  Fund  Cases,  99  U.  S.,  700  (1878). 
"That  an  act  of  incorporation  is  a  con- 
tract between  the  state  and  the  stock- 
holders is  held  for  settled  law  by  the 
federal;  courts  and  by  every  state  court 
in  the  Union.  All  the  cases  on  the  sub- 
ject are  saturated  with  this  doctrine.  It 
is  sustained  not  by  a  current  but  by  a 
torrent  of  authorities.  No  judge  who 
has  a  decent  respect  for  the  principle 
of  stare  decisis  —  that  great  principle 
which  is  the  sheet-anchor  of  our  juris- 
prudence—  can  deny  that  it  is  immov- 
ably established."  "  If  anything  is 
settled  it  is  this  rule  of  construction 
that  a  corporation  takes  nothing  by  its 
charter  except  what  is  plainly,  ex- 
pressly and  unequivocally  granted." 
Per  Black,  J.  Bank  of  Pennsylvania  v. 
Commonwealth,  19  Pa.  St,  144  (1852). 


497.] 


AMENDMENTS    TO    CHARTERS. 


[CH.  XXVIII. 


at  the  time  of  granting  the  charter.     It  is  this  contract  which  con- 
stitutes the  subject  of  the  present  chapter. 

§  497.  Charter  amendments  imposed  upon  tlie  stockholders. —  The 
right  of  the  legislature  to  amend  a  charter  against  the  will  of  the 
stockholders  has  been  the  subject  of  much  litigation.  Such  amend- 
ments are  clearly  divisible  into  two  kinds.  The  first  are  those 
which,  by  their  terms,  are  absolute  and  compulsory,  and  become  a 
part  of  the  charter  irrespective  of  the  action  or  willingness  of  the 
corporation  or  the  stockholders  to  accept  them.  Such  amend- 
ments are  unconstitutional  and  void,  unless  made  under  a  re- 
served power  to  amend.1  Of  such  a  kind  are  amendments  repealing 
an  exemption  of  stockholders  from  taxation.2  So,  also,  a  statute 
passed  subsequent  to  the  granting  of  a  charter,  and  increasing  the 
liability  of  a  stockholder  on  his  stock  for  the  debts  already  incurred, 
is  unconstitutional  and  void  unless  the  legislature  has  reserved  the 
rio-ht  to  alter  or  amend  the  charter.3    Under  such  a  reservation  the 


1  Such  as  an  amendment  changing  the 
route  and  terminus.  Ames  v.  Lake,  etc., 
R.  R,  21  Minn.,  241  (1875).  Amend- 
ment under  reserved  right  cannot  affect 
rights  of  previous  creditors  against  the 
corporation.  Bank  of  Old  Dominion  v. 
McVeigh,  20  Gratt.  467  (1871).  A  cor- 
porate charter  right  to  take  certain  rate 
of  interest  is  a  contract  and  is  protected 
against  subsequent  legislation.  Hazen 
v.  Union  Bank  of  Tennessee,  1  Sneed.  115 
(1853).  See,  also,  dictum  in  Phil.,  etc., 
Co."s  Appeal,  102  Pa.  St..  123  (1888),  that 
an  amendment  to  a  charter  which  en- 
larges it  without  imposing  any  new  or 
additional  burden  upon  it  is  a  mere 
license  and  may  be  revoked,  citing  John- 
son v.  Crow,  6  Norris,  184  ;  Christ  Church 
v.  Philadelphia,  24  How.,  300.  May  sub- 
sequent to  charter  authorize  sale  of  cor- 
porate franchises,  etc.,  to  pay  debts. 
Louisville,  etc.,  T.  R  Co.  v.  Ballard,  2 
Mete.  (Ky.\  165(1859). 

The  case  of  Cross  v.  Peach  Bottom 
R'y  Co.,  90  Pa.  St.,  392  (1879),  holds  that 
"  the  legislative  reservation  is  in  the 
nature  of  a  police  power,  designed  for 
the  protection  of  the  public  welfare ;  and 
where  such  protection  becomes  neces- 
sary, the  law-making  power  may  act 
without  consulting  either  the  interests 
or  will  of  the  company ;  and  in  such  case 


it  may  well  be  that  not  only  the  com- 
pany but  its  stockholders  must  submit. 
,  .  .  The  reservation  .  .  .  was 
only  intended  to  enable  the  legislature 
to  act  without  the  consent  and  against 
tli«'  will  of  the  corporation."  Under  its 
reserved  power  to  amend,  the  legisla- 
ture may  require  several  railroads  to  ac- 
quire, build  to  and  use  a  union  depot 
Mayor,  etc.,  v.  Norwich,  etc.,  R  R,  109 
Mass.,  103(1871). 

2  Thus,  in  a  case  of  a  statute  authoriz- 
ing t lie  taxation  of  stock  which  by  the 
corporate  charter  is  exempt,  the  statute 
is  unconstitutional.  Gordon  v.  Appeal 
Tax  Court,  3  How.,  133  (1845);  Farring- 
ton  v.  Tennessee,  95  U.  S„  679  (IK I  .  An 
exemption  from  taxation  which  is  a  gift 
may  he  repealed.  Philadelphia  v.  Con- 
tributors, etc..  19  Atl.  Rep.,  490  (Pa., 
1890).    See  §  66a 

3  It  certainly  is  as  regards  corporate 
debts  already  incurred.  Commonwealth 
v.  Cochituate  Bank.  8  Mass.,  42 ;  Wheeler 
v.  Frontier  Bank,  23  Me.,  308.  And  has 
been  held  to  be  so  as  regards  future  cor- 
porate debts.  Ireland  v.  Palestine,  etc., 
Turnpike  Co.,  19  Ohio  St.,  369  (1869). 
Contra,  Stanley  v.  Stanley,  26  Me.,  191 
(1846) ;  Coffin  v.  Rich.  45  Me.,  507  (1858 
Shufeldt  v.  Carver,  8  111.  App.,  645 
(1881);  Fogg  v.  Sidwell,  8  111.  App.,  551 


628 


CII.  XXVIII.] 


AMENDMENTS    TO    CHAKTERS. 


[§  497. 


statute  is  legal  and  binding.1     The  limits  of  this  reserved  power  of 
the  legislature  are  stated  elsewhere  in  this  chapter. 

A  statute  imposing  additional  liability  upon  the  shareholders 
cannot  be  repealed  so  as  to  affect  those  who  were  corporate  cred- 
itors previously  to  the  repeal.2    But,  whenever  the  statute  imposing 

(1881);    Child    v.    Coffin.   17   Mass.,    64  been  incorporated  and  gone  into  busi- 

(1820),  dictum;  Gray  v.  Coffin,  G3  Mass.,  ness  under  a  charter  which  does  notim- 

192,  200  (1852) ;    Stanley  v.  Stanley,   20  pose  such  liability.     The  exercise  of  this 

Me.,  191  (1846) ;  Hauthorne  v.  Calef,  53  power  by  the    legislature,   in    such    a 

Me.,  471  (1866).     See  Weidenger  v.  Spru-  case,  is  held  to  be  only  a  repeal  of  part 

ance,  101  111.,  278  (1881).     And  it  is  said  of  the  corporate  franchises.     South  Bay 

that  a  stockholder  may  restrain  by  a  Meadow  Dam  Co.  v.  Gray,  30  Me..  547 

proper  proceeding  the  acceptance  by  the  (1849);    Sleeper  v.  Goodwin.  31   N.  W. 

corporation  of  an  unconditional  amend-  Rep.,  335  (Wis.,  1887).    Cf.  Close  v.  Glen- 

ment  to  the  charter  by  which  the  lia-  wood    Cemetery,  107  U.  S.,  466    (1882). 


bility  of  the  shareholders  is  increased. 
Owen  v.  Purdy,  12  Ohio  St.,  73  (1861); 
Fry's  Ex'r  v.  Lexington,  etc.,  R  R.  Co., 
2  Mete.  (Ky.),  314  (1859).  Cf.  Bailey  v. 
Hollister,  26  N.  Y.,  112  (1862);  Thomp- 
son v.  Guion,  5,  Jones'  Eq.  (N.  G),  113 
(1859);  Mowrey  v.  Indianapolis,  etc.,  R 
R.  Co.,  4  Biss.,  78  (1866);  Lauman  v. 
Lebanon  Valley  R  R  Co.,  30  Pa.  St., 
42  (1858);  Hamilton,  etc.,  Ins.  Co.  v. 
Hobart,  2  Gray,  543  (1854) ;  Gardner  v. 
Hamilton,  etc.,  Ins.  Co.,  33  N.  Y.,  421 
(1865).  Where  the  incident  of  individ- 
ual liability  was  repealed  by  an  amend- 
ment to  the  state  (Missouri)  constitution 
after  the  debt  accrued,  but  before  the  in- 
crease of  stock  was  issued,  the  holders  of 
the  new  stock  were  not  held  liable  under 
the  former  constitution.  Ochiltree  v. 
Railroad  Co.,  21  Wall.,  249  (1874). 

1  Frequently,  and  now  almost  univer- 
sally,   the   legislature    has   a    reserved 


See  §§  242,  280,  supra.  So,  also,  it  is 
said  that  under  this  reserved  power  the 
legislature  may  impose  a  statutory  lia- 
bility for  the  future  debts-  and  obliga- 
tions of  the  corporation.  Sherman  v. 
Smith,  1  Black,  5S7  (1861);  Matter  of 
Lee's  Bank  of  Buffalo,  21  N.  Y,  9  (1860) ; 
Matter  of  the  Empire  City  Bank,  18  id., 
199  (1858).  Cf.  Bailey  v.  Hollister,  26 
N.  Y,  112  (1862);  Sinking  Fund  Cases, 
99  U.  S.,  700  (1878) ;  Oldtown.  etc.,  R  R 
Co.  r.Veazie,  39  Me.,  571  (1855);  Greeu 
v.  Biddle.  8  Wheaton,  1,  84  (1823);  Gard- 
ner v.  Hope  Ins.  Co.,  9  R  I.,  194  (1869). 
Such  increased  liability  may  be  imposed 
by  a  new  constitution  of  the  state.  Re 
Reciprocity  Bank,  22  N.  Y,  9  (1860);  Re 
Empire  Bank,  18  N.  Y.  199  (1858); 
Re  Lee's  Bank  of  Buffalo,  21  N.  Y,  9 
(1860) ;  affirmed,  sub  nom.  Sherman  v. 
Smith,  1  Black,  587  (1861).  In  The  Con- 
solidated  Ass'n   v.  Lord,   35   La.   Ann., 


power  to   alter,    amend   or   repeal  the    425  (1883),  the  court  refused  to  uphold 

charters  of  corporations  granted  by  it. 

New  York  Const,  of  1846,  art.  8,  §£  1  and 

2 ;  Matter  of  New  York  Elevated  R  R. 

Co..  70  N.  Y,   327  (1877);    Johnson   v. 

Hudson  River  R    R.    Co.,    49   id.,    455 

(1872);  Bank  of  Chenango  v.  Brown.  26 

id.,  467   (1863);  Ashuelot  R.   R    Co.   v. 

Elliott,  58  N.  H.,  451,  454  (1878).    Under 


an  amendment  which  imposed  further 
liability  on  the  stockholder. 

2  Hawthorne  v.  Calef,  2  Wall.,  10 
(1864);  Conanttt  Van  Shaick,  24  Barb., 
87(1857);  Norris  v.  Wrenschall,  34  Md., 
492  (1871);  Provident  Savings  Institu- 
tion v.  Jackson  Place,  etc.,  Co.,  52  Mo., 
552  (1873);  St.  Louis  R  R,  etc.,  Co.  v. 


this  reserved  power  the  legislature,  it  is  Harbine,  2  Mo.  App.,  134  (1876) ;  Cen- 
held,  may  impose  a  statutory  liability,  tral,  etc.,  Mechanical  Association  v.  Ala- 
in addition  to  the  liability  at  common  bama.  etc.,  Insurance  Co.,  70  Ala.,  120 
law,  upon  stockholders  after  they  have    (1881);  Woodruff  v.  Trapnall,  10  How., 

629 


498,  499.] 


AMENDMENTS    TO    CHARTERS. 


[CH.  XXVIII. 


the  liability  is  penal  in  its  nature,  a  repeal  of  it,  even  so  as  to  affect 
existing  debts,  is  constitutional  at  any  time  before  the  corporate 
creditor  obtains  judgment  on  his  claim.1  An  important  exception 
to  the  general  rule  stated  above  exists  in  regard  to  amendments 
under  the  police  power  of  the  state.  The  state  may  amend  the 
charter  of  a  railroad  corporation  by  reducing  its  traffic  charges. 
requiring  it  to  build  fences,  and  in  various  other  ways  for  the  pro- 
tection of  the  public.2 

§  49S.  Charter  amendments  offered  to  the  stockholders. —  The  sec- 
ond class  of  amendments  to  a  charter  —  the  amendments  which 
occur  most  frequently  and  give  rise  to  many  difficulties  - — are  those 
which  allow  the  corporate  directors  or  a  majority  of  the  stockhold- 
ers in  corporate  meeting  assembled  to  engage  in  anew  or  different 
or  more  extensive  or  more  contracted  business  than  that  author- 
ized by  the  original  and  unamended  charter. 

§499.  Auxiliary  and  incidental  amendments  are  constitutional, 
though  some  of  the  stockholders  dissent. —  An  amendment  made  to 
a  corporate  charter  is  either  a  material  and  fundamental  change 
from  the  original  plan,  or  it  is  an  auxiliary  and  incidental  change, 
consistent  with  the  carrying  out  of  the  original  plan.3     The  latter 


190.  See.  also.  Story  v.  Furman,  35  X.  V., 
21  1 1 1862);  Rochester  v»  Barnes,  26  Barb,, 
1858);  Sinking  Fund  Cases.  99 U.S., 
700  (1878).  Cf.  Jerman's  Adm'r  v.  Ben- 
ton, 79  Mo..  148;  Woodhouse  v.  Com- 
monwealth Ins.  Co.,  54  Pa  St..  307 
(1867);  #e  State  Insurance  Co.,  14  Fed. 
Rep.,  28(1883);  S.  C,  11  Biss.,  301  ;  Pal- 
frey r.  Paulding,  7  La.  Ann.,  363  (IS 
Re  Telegraph  Construction  Co.,  L.  R,  10 
Eq.,  384  (1870);  Cooper  r.  Frederick,  9 
Ala.,  743  (1846);  Tn  r<  Credil  Fonri<  r  of 
England.  L.  R..  11  Eq.,  856  (1871  ;  <  toffin 
v.  Rich,  15  Me,,  507;  5  S.  Rep..  120  (Ala., 
1888).  A  statutory  liability  of  stock- 
holders cannot  be  repealed  as  regards 
corporate  creditors  ■who  are  such  at  the 
time  of  the  repeal.  McDonnell  v.  Ala., 
etc.,  Ins.  Co.,  5  S.  Rep.,  130  (Ala,  1888). 
Registered  transferees  are  liable  the 
same  as  their  transferrers,  even  though 
before  the  transfer  the  statutory  liabil- 
ity was  decreased  by  statute.  The  lia- 
bility to  old  creditors  follows  the  stock. 
Nat'l  Com.  Bank  v.  McDonnell,  s»  S.  Rep., 
149  (Ala.,  1891).  A  statute  giving  the 
corporation  a  summary  remedy  against 
a  stockholder  for  non-payment  of  calls 


may  be  repealed.  Ex  parte  Northeast, 
etc.,  R.  R.  Co.,  37  Ala..  679. 

1  Breitung  v.  Lindauer,  37  Mich..  217 
dv?7>:  Onion  Iron  Co.  v.  Pierce,  4  Biss.. 
307  (1869);  Gregory  r.  German  Bank,  S 
Col.,  832  (1877);  Cooley's  Constitutional 
Limitations  (5th  ed.\  444,  474.    Bee  §  333. 

*See  ;•  675,  infra. 

3  The  general  principle  of  law  govern- 
ing this  branch  of  the  subject  is  well 
expressed  in  Woodfork  v.  Union  Bank, 
3  Coldw.  (Tenu.),  488  (1866).  "The  con- 
tract or  charter,  after  acceptance,  is 
inviolable  between  the  state  and  the  cor- 
poration, as  it  is  also  between  the  corpo- 
ration and  stockholders.  Neither  the 
one  nor  the  other  can  disregard  its  obli- 
gations or  alter  its  essential  franchises 
without  the  unanimous  concurrence  of 
the  stockholders.  ...  If  the  alter- 
ations proposed  in  the  charter  of  a 
private  corporation  by  legislative  enact- 
ment are  merely  auxiliary  and  not  fun- 
damental, they  may  be  accepted  by  a 
majority  of  the  corporators;  and  when 
so  assented  to  they  are  binding  on  the 
whole ;  but  it  is  otherwise  .  .  .  when 
the  alterations  are  fundamental,  radical 


630 


CH.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§  499. 


class  of  amendments  are  constitutional  and  valid.  The  acceptance 
of  an  auxiliary  amendment  should  be  by  the  stockholders  in  meet- 
ing- assembled  instead  of  by  the  board  of  directors.1  But  acceptance 
may  arise  from  user;2  and  hence  it  generally  happens  that  an  inci- 
dental or  auxiliary  amendment  to  a  charter  is  deemed  to  have  been 
accepted  by  user  and  a  vote  of  acceptance  by  the  directors  or  by 
user  alone.3  An  amendment  may  be  said  to  be  auxiliary  and  inci- 
dental when  it  merely  grants  new  powers  or  authorizes  new  meth- 
ods and  new  plans  for  the  purpose  of  carrying  out  the  original 
plan  and  effecting  the  real  object  of  that  plan.  The  individual 
motives  and  interests  of  a  stockholder  are  disregarded.  Whatever 
is  for  the  benefit  of  the  corporation  is  conclusively  presumed  to  be 
for  the  benefit  of  each  stockholder.  A  change  immaterial  to  the 
corporation  is  immaterial  to  each  and  every  stockholder.4 

Whether  an  amendment  materially  changes  the  corporate  plans 
or  not  is  a  question  of  law  for  the  court.5  Accordingly  each  case 
is  to  be  decided  according  to  the  peculiar  circumstances  of  that 
case,  and  no  general  rules  can  be  laid  down  which  will  apply  to  all 


cases.0 

and  vital.     The  acceptance  must  then  be 
unanimous." 

'Marlborough  Mfg.  Co.  v.  Smith,  2 
<  bnn.,  579  (1818);  Brown  v.  Fairmount 
Mine  Co.,  10  Phil.,  32  (1873).  Cf.  Ven- 
ner  v.  Atchison,  etc.,  R  R,  sub. 

2  See  §  640. 

3  Illinois,  etc.,  R  R  v.  Znumer,  20  111., 
658  (1858).  See,  also.  Blatchford  v.  Ross, 
5  Abb.  Pr.  (N.  S.),  434  (1869);  Re  Excel- 
sior Co.,  16  Abb.  Pr.,  14  (1862).  In  Ven- 
ner  v.  Atchison,  etc.,  R  R,  28  Fed.  Rep., 
581  (1866),  it  is  held  that  the  directors 
are  the  proper  persons  to  accept  an 
amendment 

4  Supervisors  of  Fulton  County  v. 
Miss.  &  Wabash  R  R  Co.,  21  111.,  338 
(1859);  Delaware  R  R  Co.  v.  Tharp,  1 
Hous.  (Del.),  149  (1856) ;  Irvine  v.  Turn- 
pike Co.,  2  Penr.  &  W.,  466;  111.  Riv. 
R  R  Co.  v.  Zimmer,  20  111.,  654  (1858): 
Sprague  v.  111.  River  R  R  Co..  19  III., 
174 ;  Banet  v.  Alton  &  Sangamon  R.  R. 
Co.,  13  111.,  504  (1851).  Cf.  Hester  v. 
Memphis  &  Charleston  R  R  Co.,  32 
Miss.,  378  (1856);  Witter  v.  Miss.,  Oua- 
rhita  &  Red  River  R  R  Co.,  20  Ark., 
463  (1859).  The  cases  of  Zabriskie  v. 
Hackensack  &  N.  Y.  R  R.  Co.,  18  N.  J. 


Eq..  178  (1867);  Dayton  &  Cincinnati 
R  R  Co.  v.  Hatch,  1  Disney,  84,  and 
Central  R  R  Co.  v.  Collins,  40  Ga.,  617, 
repudiate  the  distinction  between  the 
material  and  immaterial  changes.  All 
changes  are  held  to  be  equally  material. 

5  Winter  v.  Muscogee  R  R.  Co.,  11 
Ga.,  438  (1852);  Witter  v.  Miss.,  Oua- 
chita &  Red  River  R  R  Co.,  20  Ark., 
463  (1859) ;  Memphis  Branch  R  R  Co. 
v.  Sullivan,  57  Ga.,  240  (1876).  Cf. 
Soutbern  Pa.  Iron  &  R  R  Co.  v.  Stev- 
ens, Ex'r,  87  Pa.  St.,  190  (1878). 

b  Certain  changes  in  the  route  of  a 
railroad  have  been  held  to  be  immate- 
rial, Wilson  v.  Wiiles  Valley  R  R.  Co.. 
33  Ga.,  466  (1863) ;  Johnson  v.  Pensacola 
&  Ga.  R.  R  Co.,  9  Fla.,  299  (1860) ;  Peo- 
ria &  Oquawka  R.  R.  Co.  v.  Elting,  17 
111..  429  (1856) ;  Banet  v.  Alton  &  Sanga- 
mon R  R  Co.,  13  111.,  504  (1851) ;  build- 
ing branch  lines,  Peoria  &  Rock  Island 
R  R  Co.  v.  Preston,  35  Iowa,  115  (1872); 
Greenville  &  Columbia  R  R  Co.  v. 
Coleman,  5  Rich.  Law  (S.  C).  118  (1851); 
issuing  preferred  stock,  Everhart  v. 
West  Chester  &  Pbila.  R  R.  Co.,  28  Pa. 
St.,  339  (1857);  Rutland  &  Burlington 
R  R  Co.  v.  Thrall,  35  Vt,  536  (1863); 


631 


§  500.] 


AMENDMENTS    TO    CHARTERS. 


[ch.  xxvnr. 


§  500.  Material  amendments  offered  to  the  stockholders  can  be 
accepted  only  uy  a  unanimous  vote. —  On  the  other  hand,  a  mate- 
rial and  fundamental  change  in  the  charter  by  an  amendment  to 
that  charter  is  an  unconstitutional  violation  of  the  contract  rights 
of  any  stockholder  who  does  not  assent  to  such  an  amendment. 
Considerable  difficulty  is  experienced    in   determining  what  is  a 


Curry  v.  Scott,  54  Pa.  St.,  270  (1867);  or 
more  common  stock,  City  of  Cov.  v. 
Cov.  &  Cm.  Bridge  Co.,  10  Bush.  69 
(1873);  Buffalo,  etc.,  R  R  v.  Dudley,  14 
N.  Y.,  336(1856);  Joslyn  v.  Pacific,  eta, 
Co.,  12  Abb.  Pr.  (N.  S.),  329  (1872*  Cf. 
Hughes  v.  Autietam,  etc.,  Co.,  34  Md., 
316  (1870);  extending  the  time  for  com- 
pleting the  road.  Agri.  Branch  R.  R. 
Co.  v.  Winchester,  13  Allen,  29  (1866  ; 
Poughkeepsie,  etc.,  Co.  v.  Griffin,  24 
N.  Y.,  150  (1861):  Bailey  v.  Hollister, 
26  N.  Y.,  112  (1862);  power  to  amend 
being  reserved,  Taggart  v.  Western 
R  R.  Co.,  24  Md.,  563  (1866);  Union 
Hotel  Co.  v.  Hersee,  79  N.  Y..  454 
(1880);  Danbury,  eta,  R  R  Co.  v. 
Wilson,  22  Conn..  435  (1853);  consoli- 
dations that  take  the  place  of  part  of 
the  line  as  laid  out.  Sprague  v.  111. 
Riv.  R  R  Co.,  19  111..  174  (1857); 
Hauua  v.  Cin.  &  Fort  Wayne  R.  R. 
Co.,  20  Ind.,  30  (1863);  change  of  cor- 
porate name,  Bucksport  &  Bangor 
R.  R.  Co.  v.  Buck,  (is  Me.,  81  (1878  ; 
Clark  r.  Monongahela  Nav.  Co.,  10 
Watts  (Tenn.),  364  (1840);  changing  the 
terminus,  Pacific  R.  R  v.  Renshaw,  Is 
Mo..  210  (1852);  Ross  v.  Chicago,  etc.. 
R  R.  Co.,  77  111.,  134  (1875);  reduction 
of  capital  stock  and  shortening  of  the 
road,  Troy  &  Rutland  R.  R.  Co.  ?\  Kerr. 
17  Barb.,  588(1854).  Cf.  Oldtown,  etc., 
R  R  v.  Veazie,  39  Ma,  571  (1855 
enlarging  the  capital  stock  and  extend- 
ing the  road,  such  changes  not  appearing 
on  the  record  to  be  detrimental.  Peoria 
&Oquawka  R.  R.  Co.  v.  Elting,  17  III.. 
420  (1856);  Rice  r.  Rock  Island  R.  R.  Co.. 
21  111.,  93 ;  and  minor  changes  in  general, 
Union  Agri.  &  Stock  Ass'n  r.  Mill,  31 
Iowa,  95  (1870);  also  extensive  changes, 
111.  River  R  R.  Co.  i:  Zimmer,  20  111.. 


1858);  such  as  extending  the  road. 
Cross  v.  Peach  Bottom  R'y  Co.,  90  Pa. 
St,  392  'Is T'.i  :  purchasing  another  rail- 
road. Venner  v.  Atchison,  etc..  R  R  Co., 
28  Fed.  K.p..  581  (1886);  or  increasing 
the  Dumber  of  directors,  Mower  r. 
Staples,  32  Minn..  284  (1884).  See,  also. 
day  r.  Coffin,  9  Cush.,  192  (1852);  Child 
r.  Collin.  17  Mass..  64  (1820):  Langley  v. 
Little,  26  Me.,  162  (1846);  Payson  v. 
Withers.  :.  Biss„  269  (1873);  Joy  o.  Jack- 
son.  etc.  Co.,  11  Mich.,  155  (1863) ;  Bank 
v.  Richardson,  1  Me.,  79;  Greenville,  etc., 
R  R  Co.  v.  Johnson,  8  Baxt.  332:  Fall 
River  Iron  Works  v.  Old  Colony  R  R. 
Co.,  5  Allen,  221.  An  amendment  may 
authorize  the  directors  to  change  the  lo- 
cation of  toll  gates.  Bardstown,  •  tc., 
Co.  v.  Rodman.  13  S.  W.  Rep..  917  (Ky.. 
1890>  In  thecaseof  Atchison, el  ■..  R  R 
Co.  v.  Fletcher,  tOPac,  Rep.  596  (Kan.. 

.  an  amendment  authorizing  a  cor- 
poration to  buy  the  stock  of  another 
railroad  corporation  and  to  guaranty  us 
bonds  was  held  to  be  valid.  The  court 
sni'l:  -It  is  settled  that  the  legislature 
may  authorize  a  body  of  corporators  to 
exercise  new  powers  or  franchises  with- 
out impairing  those  previously  granted, 
and,  if  the  new  powers  can  be  exercised 
without  a  departure  from  the  original 
compact  between  the  corporators,  there 
is  no  reason  why  they  should  not  be  ac- 
cepted and  exercised  on  behalf  of  the 
company  by  a  majority  of  the  stock- 
holders. .  .  .  No  franchises  are  di- 
minished, no  contract  impaired.  At 
most  its  powers  are  enlarged  to  carry 
out  successfully  the  object  of  its  incor- 
poration. So  to  speak,  auxiliary  powers 
are  added,  but  its  charter  not  violated 
or  the  benefits  thereby  granted  in- 
fringed. 


632 


CiT.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§  500. 


material  and  fundamental  change.  Each  case  is  decided  upon  its 
own  facts,  and  consequently  the  best  light  as  to  the  spirit  of  what 
constitutes  a  material  change  is  obtained  by  a  study  of  the  facts  of 
cases  which  have  been  decided.1 


1  Under  the  circumstances  of  the 
cases  it  has  been  held  a  material  change 
to  shorten  and  vary  the  route.  Winter 
v.  Muscogee  R  R  Co.,  11  Ga.,  438 
(1852);  to  vary  the  route,  Middlesex 
Turnpike  Corporation  v.  Locke,  8  Mass., 
268  (1811);  Same  v.  Swan,  10  Mass.,  384 
(1813);  Hester  v.  Memphis  &  Charleston 
R  R  Co.,  32  Miss.,  378  (1856);  Witter 
v.  Miss.,  Ouachita  &  Red  River  R  R 
Co.,  20  Ark.,  463  (1859);  Champion  v. 
Memphis,  etc.,  R  R  Co.,  35  Miss.,  692 ; 
Simpson  v.  Denison,  10  Hare,  54 ;  chang- 
ing a  terminus,  Manheim,  etc.,  Co.  v. 
Arndt,  31  Pa.  St.,  317  (1858);  Mari- 
etta, etc.,  R  R  Co.  v.  Elliott,  10  Ohio  St., 
57;  Middlesex,  etc.,  Co.  v.  Locke,  8 
Mass.,  267;  Same  v.  Swan,  id.,  385; 
Thompson  v.  Guion,  5  Jones'  Eq.,  113; 
permitting  a  railroad  to  go  into  water 
transportation  business.  Hartford  & 
New  Haven  R  R  Co.  v.  Croswell,  5 
Hill,  383  (1843),  a  leading  case;  Marietta 
&  Cin.  R  R.  Co.  v.  Elliott,  10  Ohio  St., 
57  (1859) ;  shortening  the  line,  Bank  v. 
City  of  Charlotte,  85  N.  C,  433  (1881); 
allowing  business  to  be  commenced  be- 
fore the  full  capital  stock  is  subscribed, 
Memphis  Branch  R  R.  Co.  v.  Sullivan, 
57  Ga.,  240  (1876) ;  dividing  the  line  and 
forming  two  or  more  corporations, 
Leed  &  Evensburg  Turnpike  Road  Co. 
v.  Phillips,  2  Penr.  &  Watts  (Pa.),  184 
(1830);  Supervisors  of  Fulton  County  v. 
Mississippi  &  Wabash  R  R  Co.,  21  111., 
338  (1859);  Carlisle  v.  Terre  Haute  & 
Richmond  R.  R  Co.,  6  Ind.,  316  (1855) ; 
transferring  a  railroad  subscription 
from  one  railroad  to  another,  Pitts- 
burg, etc.,  R.  R  v.  Gazzam.  32  Pa.  St., 
340  (1858) ;  making  the  charter  perpet- 
ual and  increasing  power  to  hold  prop- 
erty, Prop,  of  the  Union  Lock  &  Canals 
v.  Towne,  1  N.  H.,  44  (1817);  allowing 
ii  life  insurance  company  to  insure 
against  fire  and  marine  loss,  Ashlon  v. 


Burbank,  2  Dill.,  435;  extending  the 
line,  Stevens  v.  Rutland  &  Burlington 
R  R  Co.,  29  Vt,  545  (1855).  See,  also, 
Noesen  v.  Town  of  Port  Washington, 
37  Wis.,  168  (1875),  where  there  was  an 
amendment  authorizing  the  purchase 
of  a  railroad  running  at  right  angles  to 
the  old,  but  a  release  was  upheld;  in- 
creasing the  par  value  of  the  stock, 
Mahon  v.  Wood,  44  Cal.,  462  (1872); 
consolidating  the  corporation  with  an- 
other corporation,  Illinois  Grand  Trunk 
R  R  Co.  v.  Cook,  29  111.,  237  (1862); 
McCray  v.  Junction  R  R.  Co.,  9  Ind., 
358  (1857) ;  Shelby  ville  &  Rushville Turn- 
pike Co.  v.  Barnes,  42  Ind,  498  (1873); 
Booe  v.  Junction  R  R.  Co.,  10  Ind.,  93 
(1857) ;  New  Orleans,  Jackson  &  Great 
Northern  R  R  Co.  v.  Harris,  27  Miss.,  •* 
517  (1854);  Clearwater  v.  Meredith.  1 
Wall..  25  (1863);  Knoxville  v.  Railroad 
Co.,  22  Fed.  Rep.,  758 ;  Kean  v.  John- 
son, 1  Stock.  (9  N.  J.  Eq.),  401  (1853); 
Black  v.  Delaware  &  Raritan  Canal  Co.. 
24  N.  J.  Eq.,  455  (1873) ;  criticised  in  Mow- 
rey  v.  Ind.  &  Cin.  R  R  Co.,  4  Biss.,  78. 
Cf.  Lauman  v.  Lebanon  Valley  R.  R. 
Co.,  30  Pa.  St.,  42  (1858) ;  Fry's  Execu- 
tor v.  Lexington,  etc.,  R.  R.  Co.,  2 
Mete.  (Ky.),  314  (1859),  the  court  say- 
ing: "Each  shareholder  in  an  incorpo- 
rated company  has  a  right  to  insist  on 
the  prosecution  of  the  particular  objects 
of  the  charter.  He  cannot  be  deprived 
of  his  rights  and  privileges  without  his 
assent.  Such  alterations  of  the  charter 
as  are  necessary  to  carry  into  effect  its 
main  design  may  be  made  without  his 
consent.  But  an  alteration  which  ma- 
terially and  fundamentally  changes  the 
responsibilities  and  duties  of  the  com- 
pany, or  which  superadds  an  entirely 
new  enterprise  to  that  which  was  orig- 
inally contemplated,  ma}r  be  resisted 
by  the  stockholders,  unless  such  altera- 
tions are   provided   for  in  the  charter 


633 


501.] 


AMENDMENTS    TO    CHAETEES. 


[CH.  XXVIII. 


§  501.  Amendments  under  the  reserved  power  of  the  state  to  alter, 
amend  or  repeal  the  charter.—  The  extent  of  the  power  of  the  leg- 
islature to  amend  a  charter,  where  it  has  reserved  that  power,  is 
not  yet  fully  settled,  and  is  full  of  difficulties. 


There  is  a  strong 


itself,  or  in  the  general  laws  of  the 
state  in  force  at  the  time  the  act  of  in- 
corporation was  passed."  Until,  how- 
ever, the  corporation  accepts  such 
amendment  the  stockholders  cannot 
complain.  To  same  effect.  Delaware,  etc., 
R.  R.  Co.  v.  Irick,  23  N.  J.  L.,  321  (18E 
Amendments  which  have  not  been 
acted  upon  do  not  release  the  subscriber. 
Gravely  v.  Commonwealth,  10  S.  E.  Rep. 
431  (Va.,  1889).  See,  in  general,  Pearce 
v.  Madison  R  R.  Co.,  21  Hew.,  Ill  ;  Tut- 
tle  v.  Michigan  Air  Line  Co.,  85  Mich., 
247  (1877);  New  Jersey,  eta,  R  R  Co.  v. 
Strait,   35  N.   J.  L.,  In  all 

these  cases  neither  a  mandatory  statute, 
nor  a  vote  of  the  directors,  nor  a  ma- 
jority of  the  stockholders,  can  compel  a 
dissenting    stockholder    to    accept    lne 
'change.     It  would  be  unconstitutional. 
The    stockholder    may  say:     "I    have 
agreed  to  become  interested  in  a  rail- 
road company,  and  have  contracted  in 
view  of  the  profits  to  be  expected  and 
the  perils  and  losses  incident  to  that  de- 
scription  of  business;  but  I   have  not 
agreed  that  those  to  be  intrusted  with 
the  capital  I  contribute  shall  have  power 
to  use  it  in    a   business  of  a  different 
character,  and  attended  with  hazards  of 
a  different  description."     Marietta,  etc., 
R.  R.  Co.  v.  Elliot,  10  Ohio  St,  57    L859) 
Even   though    the  legislature,   after  a 
turnpike   corporation  is  organized,   au- 
thorizes it  to  issue  stock  in  payment  for 
another  turnpike,  yet  a  dissenting  stock- 
holder  may  prevent   the   purchase   by 
showing  that  it  decreases  the  value  of 
his  stock.    Shaw  v.  Campbell,  etc..  Co., 
15  S.  W.  Rep.,  245  (Ky..  1891  n    Acts  rel- 
ative to  a  corporation  may  be  so  radi- 
cal as  to  constitute  a  new  charter  in- 
stead of  amendments   to  the  old  one. 
Youngblood  v.   Georgia  Imp.  Co.,  10  S. 
E.  Rep.,  124  (Ga.,  1889).     Where  a  mu- 
nicipality has  subscribed  for  stock  and 


issued  its  bonds  indorsed  by  the  rail- 
road company  to  raise  money  to  pay 
the  subscription,  the  legislature  cannot 
authorize  the  company  to  apply  its  as- 
sets to  the  payment  of  such  bonds.     A 
stockholder  may  enjoin  it     Hill  v.  Glas- 
gow R.  R,  41  Fed.  Rep.,  610  (1890).    The 
legi.lature  cannot,  in  the    amendment 
itself,  authorize  the  majority  to  bind  the 
minority  herein.     New  Orleans,  etc.,  R 
R  Co.  v.  Harris,  27  Miss.,  517  (1854).  An 
amendment  cannot  deprive  the  mem- 
bers of  the  corporation  of  the  privilege 
of  electing  its  directors.     The  legislature 
cannot   arbitrarily   name   and    appoint 
trustees  of  an  educational  corporation, 
the    charter   providing   that   vacancies 
shall  he  tilled  by  the  remaining  trusb 
Sheriff    V.    Lowndes.  10   Md..  357  (1SC0). 
It  cannot  give  to  the  city  of  Louisville 
the   power   to  elect  the  trustees  of  the 
University  of  Louisville,  an  educational 
corporation.     City  of  Louisville  v.  Presi- 
dent, etc.,  15   B.  Monr.,   642  (1855).     It 
cannot  vest  the  government  of  an  in- 
corporated academy  in  a  new  board  of 
trustees,     Noiris  v.  Trusties,  etc.,  7  Gill 
&  J.,  7  (1834).    On  the  right  of  a  dissent- 
ing stockholder    in   general,   see,   also, 
Goodwin  u.  Evans,  18  Ohio  St,  150,  106 
(1868);    Railway    Co.    U     Allerbon,     18 
Wall.,  233,  235  (1873);  Printing  House 
v.  Trustees,  104  U.  &,  711    (1881);   Rob- 
ert^ Appeal,  92  Pa   St,   407;  Buffalo, 
etc.,  it.  R.    Co.  v.  Potter,   23  Bail...  21 
356  :   Efoey  i:  Henderson.  32  La.  Ann.- 
1069;  Waring  v.  Mayor,  etc.,  of  Mobile, 
24  Ala.,  701  (1851; ;  M,  ..  R   R  Co- 

r.  Cross,  20  Ark.,  443  (1859);  Clinch  v 
Financial  Co.,  L.  R,  4  Ch.,  117  (1868); 
Dougan's  Case,  L.  R,  8  Ch..  540;  Bar- 
rett v.  Alton,  etc.,  R  R.  Co.,  13  111.,  504 
(1857).  See.  also,  Gray  v.  Monongahela 
Nav.  Co..  2  Watt.  &  S..  156  (1841);  Cur- 
rie  V.  Mut.  Ass.  Soc,  4  Hen.  &  M.,  315 
(1809);  Zabriskie  v.  Cleveland,  etc..  R. 
634 


CH.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§  501. 


tendency  in  the  decisions,  and  a  tendency  which  is  deserving  of 
the  highest  commendation,  to  limit  the  power  of  the  legislature  to 
amend  a  charter  under  this  reserved  power.  It  should  be  restricted 
to  those  amendments  only  in  which  the  state  has  a  public  interest. 
Any  attempt  to  use  this  power  of  amendment  for  the  purpose  of 
authorizing  a  majority  of  the  stockholders  to  force  upon  the  mi- 
nority a  material  change  in  the  enterprise  is  contrary  to  law  and 
the  spirit  of  justice.  Under  such  reserved  power  the  legislature 
ha£  only  that  right  to  amend  the  charter  which  it  would  have  had 
in  case  the  Dartmouth  College  case  had  decided  that  charters  were 
not  contracts.1  In  other  words,  by  this  reserved  right  the  restraint 
of  the  federal  constitution  is  done  away  with.  The  power,  how- 
ever, to  make  a  new  contract  for  the  stockholders  is  not  thereby 
given. 

The  power  to  make  amendments  and  to  repeal  and  alter  charters 
has  been  reserved  in  most  of  the  states  of  the  Union.2  It  is  clearly 
established  that  the  legislature  cannot,  under  this  reserved  power, 
amend  the  charter  so  as  to  change  the  whole  character  of  the  en- 
terprise and  compel  the  corporation  to  proceed  under  the  amended 


R.  Co.,  23  How.,  381  (1859) ;  Cincinnati, 
etc.,  R.  R.  Co.  v.  Cole,  29  Ohio  St.,  126 
(1876);  St  Mary's  Church,  7  Serg.  &  R, 
517 ;  Lyons  v.  Orange,  etc.,  R  R.  Co.,  32 
Md.,  18  (1869);  111.  Riv.  R.  R  Co.  n 
Beers,  27  111.,  185  (1862) ;  Hope  Ins.  Co.  v. 
Beckman,  47  Mo.,  93  (1870);  Same  v. 
Koeller,  47  id.,  129  (1870) ;  Wetumka  & 
Cooso  R.  R.  Co.  v.  Bingham,  5  Ala.,  657 
(1843) :  Palfrey  v.  Paulding,  7  La.  Ann., 
363  (1852);  State  v.  Sibley,  25  Minn.,  387 
(1879);  Bangor,  etc.,  R.  R.  Co.  v.  Smith, 
47  Me.,  34(1859);  Shields  v.  Ohio,  26  Ohio 
St,  86  (1875) ;  S.  C,  95  U.  S.,  319 ;  State 
v.  Maine,  etc.,  R.  R  Co.,  66  Me.,  488 ; 
S.  C,  96  U.  S,,  499;  New  Jersey  v. 
Yard,  95  id.,  104,  113  (1877);  S.  C, 
contra,  37  N.  J.  L,  228 ;  Smead  v.  In- 
dianapolis, etc.,  R  R.  Co.,  11  Ind.,  104 
(1858);  Sumrall  v.  Mut  Ins.  Co.,  40 
Mo.,  27  (1867);  Kenton  Co.  Court  v. 
Bank  Lick  Turnp.  Co.,  10  Bush,  525 
(1874) ;  Regents  v.  Williams,  9  Gill  &  J., 
365  (1839);  S.  C,  31  Am.  Dec,  72;  St. 
John's  College  v.  Purnell,  etc.,  23  Md., 
629  (1865);  White  v.  Syracuse  R.  R.  Co., 
14  Barb.,  560  (1853) ;  Schenectady,  etc., 
Plank  R.  Co.  v.  Thatcher,  11  N.  Y..  102 


(1854);Caley  v.  Philadelphia,  etc.,  R.  R 
Co.,  80  Pa.  St.,  363  (1876).  See,  also, 
Burlington,  etc.,  R  R  Co.  v.  White,  5 
Iowa,  409  (1857) :  South  Georgia,  etc., 
R.  R.  Co.  v.  Ay  res,  56  Ga.,  230  (1876), 
where,  however,  a  sale  of  the  road  was 
made  without  legislative  authority. 

1  County  of  San  Mateo  v.  Southern 
Pacific  R.  R.  Co.,  8  Sawyer,  238,  279 
(1882);  Detroit  v.  Detroit  &  Howell 
Plank-road  Co.,  43  Mich.,  140  (1880). 

2  Constitution  of  Alabama,  XIII,  1  ; 
Arkansas,  V,  48 ;  California,  IV,  31 : 
1879,  XII,  1;  Colorado,  1876,  XV,  3; 
Delaware,  II,  17 ;  Iowa,  VIII,  12 ;  Kan- 
sas, XII,  1 ;  Maine,  Laws  of  1831 ;  Mas- 
sachusetts, St.  1830,  ch.  81 ;  R  S.,  ch.  44 ; 
§23,   Gen.   St,  ch.   68,  §41;  Maryland, 

III,  48,  par.  2 ;  Michigan,  XV,  1,  8 ;  Mis- 
souri, VIII,   14;    New   Jersey,  Amend. 

IV,  7,  par.  11,  cl.  11  :  New  York,  VIII. 
1,  R.  S.,  pt  I,  ch.  XVIII,  title  3,  §  8 ; 
North  Carolina,  VIII,  1  ;  Nebraska, 
1875,  XI ;  Nevada,  VIIL'l ;  Ohio,  XVIII. 
2;  Oregon,  XI,  2:  Pennsylvania,  XVI. 
10 ;  South  Carolina,  XII.  1 ;  Tennessee, 
XI,  8 ;  Texas,  1875,  XII,  5,  7 ;  Wisconsin, 
XI,  1. 


635 


§  501.] 


AMENDMENTS    TO    CHARTERS. 


CH.  XXVIII. 


charter.1  The  restrictions  of  the  state  constitution  still  exist,  and 
individuals  cannot  be  forced  by  the  state  into  new  contracts.2  An 
amendment  under  the  reserved  power  cannot  change  the  character 
of  the  enterprise,  nor  take  away  rights  already  acquired  under  the 
charter.  It  must  not  be  foreign  to  the  purposes  and  objects  of  the 
original  charter.3 


1  In  Pennsylvania  it  is  held  that  the 
reserved   power,   when  used   so   as   to 
make  an  amendment  compulsory  on  the 
corporation,  "  is  in  the  nature  of  a  po- 
lice power,  designed  for  the  protection 
of  the  public  welfare."    Cross  v.  Peach 
Bottom  R'y  Co.,  90  Pa,  St.,  392  (1879). 
"The  power  of  amendment  was  never 
reserved  with  reference  to  any  question 
between  the  corporation  and  its  stock 
subscribers,  but  solely  with  reference  to 
questions  between  the  corporation  and 
the  state,   where    the   latter   desired   to 
make  compulsory  amendments  against 
the  will  of  the  former."    The  corpora- 
tion cannot  be  compelled   t<>  proceed. 
All  the  state  "can  do  is  to  grant  it  the 
power,  and  then  it  is  for  the  corporation 
to  accept  it  or  not,  as  it  pleases."    Under 
its  reserved  power  to  amend,  the  state 
may  give  a  remedy  against  a  mill-dam 
corporation  for  injuries  by  Qood.     Mo- 
nongahela  Nav.  Co.  u.  Coon,  6  Pa  St.. 
379  (1847),  holding,  also,  that  by  accept- 
ing an  amendment  which  is  granted  on 
condition  that    the  reserved    power   to 
amend  shall  apply  to  the  corporation,  it 
is   subject  to    such    power,     Kenosha, 
Rockford  &  Rock    [sland    R    R  Co.  v. 
Marsh,  17  Wis.,   13  (1862);  Troy  &  Rut- 
land   R  R  Co.  v.  Kerr,    17  Barb.,   581 
(1854).     In    The    City   of  Knoxville    r. 
Railroad   Co.,   22  Fed.  Rep.,  758  (1884), 
the  court  say:  "  It  was  not  competent 
for  tlie  legislature  to  do  more  in  this  re- 
spect than  to   waive  the  public  rights, 
It  could  not  divest  or  impair  the  rights 
of  the  shareholders,  as  between  them- 
selves, as  guarantied  by  the  company's 
charter,  without  their  conseut.     It  was 
upon  the  faith  of  the  stipulations  con- 
tained in  the  said  charter  that  the  share- 
holders subscribed  to  the  capital  stock, 
and  thereby  made  themselves  members 


of  the  corporation."  In  the  case,  also, 
of  Orr  v.  Bracken  County,  etc.,  81  Ky., 
593  (1884).  an  amendment  under  the  re- 
served power,  changing  the  method  of 
voting,  was  decided  to  be  of  no  effect 
until  the  stockholders  accepted  it.  The 
court  said:  "The  right  to  amend  the 
charter  may  he  expressly  reserved,  but 
that  right  does  not  confer  the  favor  of 
taking  from  the  corporators  the  control 
of  the  corporate  property."  See,  also, 
ch.  XXXVII,  as  to  amendments  affect- 
ing the  right  to  vote.  Query,  whether  a 
mandatory  consolidation  would  belt 
Mowrey  v.  Ind.  &  Cm.  R  R  C  I 
Biss.,  78  (1866).  When  legal,  a  manda- 
tory change  does  not  require  acceptance 
l>y  the  stockholders.  Zabriskiev.  Hack- 
ensack  &  X.  Y.  R  R  Co..  is  N.  J.  Eq., 
178  1867).  But  when  the  mandatory 
amendment  goes  beyond  the  legal  lim- 
it--, ii  musl  he  accepted  by  the  corpora- 
tion as  though  it  were  made  optional 
with  the  corporation.  Kenosha,  Rock- 
ford  &  Rock  Island  R  R,  Co.  i:  Marsh, 
17  Wis.,  13  1863;.    See,  also.  §  497,  supra. 

- lev  on  Constitutional  Limita- 
tions (5th  til.),  454  As  to  repeals  of 
charters  under  this  reserved  power,  see 
ch.  XX XV III. 

3 This  power  has  its  limits.  "It  can 
repeal  or  suspend  the  charter;  it  can 
alt.r  or  modify  it;  it  can  take  away  the 
charter;  hut  it  cannot  impose  a  new  one 
and  oblige  the  stockholders  to  accept 
iu  .  .  .  The  power  to  alter  and 
modify  does  not  give  power  to  make 
any  substantial  additions  to  the  work." 
Zabriskie  v.  Eackensack  &  N.  Y.  R  R 
Co.,  18  X.  J.  Eq.,  178  (1867).  "The 
power  of  alteration  and  amendment  is 
not  without  limit ;  the  alterations  must 
be  reasonable;  they  must  be  made  in 
good  faith,  and  be  consistent  with  the 


G30 


CH.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§  501. 


It  may,  however,  go  to  any  extent  in  authorizing  the  corpora- 
tion itself,  by  a  unanimous  vote  of  the  stockholders,  to  make  funda- 
mental changes.  The  latest  and  best  view  taken  of  this  reserved 
power  of  the  state  is  that  under  it  a  fundamental  amendment  to 
the  6harter  does  not  authorize  a  majority  of  the  stockholders  to 
accept  the  amendment  and  proceed,  but  that  unanimous  consent 
of  the  stockholders  is  necessary.1 

The  constitutionality  of  various  amendments  to  charters  in  which 
the  legislature  reserved  the  right  to  amend  or  repeal  is  considered 
in  the  notes  below.2 


scope  and  object  of  the  act  of  incorpo- 
ration. Sheer  oppression  and  wrong 
cannot  be  inflicted  under  the  guise  of 
amendment  or  alteration."'  Shields  v. 
Ohio,  95  U.  S.,  325  (1877) ;  Spring  Val- 
ley Water-works  v.  Board  of  Supervis- 
ors of  San  Francisco,  61  Cal.,  3  (1881). 
The  amendment  must  "not  defeat  or 
subsequently  impair  the  object  of  the 
grant,  or  any  rights  vested  under  it." 
Close  v.  Glenwood  Cemetery,  107  U.  S., 
466  (1882).  See,  also,  Miller  v.  State,  15 
Wall.,  478  (1872);  Mayor,  etc.,  of  Wor- 
cester v.  Norwich  &  Worcester  R  R. 
Co.,  109  Mass.,  103  (1871).  The  motives 
of  the  legislators  cannot  be  inquired 
into.  Northern  R.  R.  Co.  v.  Miller,  10 
Barb.,  260  (1851) ;  Matter  of  Elevated  R.  R. 
Co.,  70  N.  Y.,  327,  351.  See  113  N.  Y.,  111. 
i  Mills  v.  Central  R.  R  Co.,  41  N.  J. 
Eq.,  5  (1886),  where  a  statute  subsequent 
to  the  charter  authorized  the  consolida- 
tion of  railroad  companies.  The  court 
said :  "  The  legislature  did  not  intend  to 
affect  the  rights  of  stockholders  inter 
sese,  and  the  act  does  not  do  so,  either 
expressly  or  by  implication. 
After  shareholders  had  entered  into  a 
contract  among  themselves,  under  leg- 
islative sanction,  and  expended  their 
money  in  the  execution  of  the  plan 
mutually  agreed  upon,  the  plan  could 
not,  even  by  virtue  of  legislative  enact- 
ment, be  radically  changed  by  the  ma- 
jority alone,  and  dissentient  stockhold- 
ers be  compelled  to  engage  in  a  new  and 
totally  different  undertaking,  because 
such  action  would  impair  the  obligation 
of  the  dissenting  stockholders'  contract 


with  their  associates  and  the  state." 
The  court  said  also,  that^  under  its  re- 
served power  to  amend  a  charter,  the 
state  cannot  give  "  a  power  to  one  part 
of  the  corporators  as  against  the  other 
which  they  did  not  have  before."  It 
has  been  held,  however,  that,  under  its 
reserved  power,  the  legislature  may 
authorize  a  road  to  lease  to  another. 
Durfee  v.  Old  Colony  &  Fall  River  R.  R 
Co.,  87  Mass.,  230  (1862).  A  consolida- 
tion thereunder  has  been  held  legal. 
Bishop  v.  Brainerd,  28  Conn.,  289  (1859) ; 
Durfee  v.  Old  Colony,  etc.,  R  R,  87 
Mass..  230  (1862).  Also  not  legal.  Ke- 
nosha, Rockford  &  Rock  Island  R  R. 
Co.  v.  Marsh.  17  Wis.,  13  (1862);  Mow- 
rey  v.  Ind.  &  Cin.  R  R.  Co.,  4  Biss.,  78 
(1866).  Authorizing  one  railroad  to  sub- 
scribe for  stock  in  another  railroad  has 
been  held  legal.  White  v.  Syracuse  & 
Utica  R  R  Co.,  14  Barb,  559  (1853). 
Also  borrowing  money  and  building 
branches.  Northern  R  R.  Co.  v.  Miller, 
10  Bark,  260  (1851).  Also  reducing  cap- 
ital stock.  Joslyn  v.  Pacific  Mail  Steam- 
ship Co.,  12  Abb.  Pr.  (N.  S.),  329 
(1872).  See,  also,  White  Hall  &  Platts- 
burgh  R  R  Co.  v.  Myers,  16  Abb.  Pr. 
(N.  S.),  34  (1872);  State  v.  Accommoda- 
tion Bank  of  La.,  26  La.  Ann.,  288  (1874) ; 
Kenosha.  Rockford  &  Rock  Island  R  R 
Co.  v.  Marsh.  17  Wis.,  13  (1863).  The 
extension  of  the  line  from  six  to  seven- 
teen miles  was  held  to  require  a  unan- 
imous acceptance  in  Zabriskie  v.  Hack- 
ensack  &  N.  Y.  R  R  Co.,  18  N.  J.  Eq., 
178(1867). 
2 The  case  of  Commissioners,  etc.,  v. 


637 


§  502.] 


AMENDMENTS    TO    CHARTERS. 


[CH.  XXTIII. 


§  502.  Dissenting  stockholder's  remedy  against  an  illegal  amend- 
ment.  Where  an  unauthorized  arid  illegal  amendment  has  been 

accepted  by  a  corporation  and  is  about  to  be  acted  upon,  a  stock- 
holder has'two  remedies.     If  he  has  not  paid  his  subscription,  he 


Green,  etc.,  Co.,  79  Ky.,  73,  holding  that 
the  right  to  take  tolls  cannot  be  abol- 
ished where    the   company    has   main- 
tained and  kept  in   repair  the  rivers, 
nlving  upon  the  right  to  take  toll,  is  re- 
ferred to    in    Louisville  Water  Co.  v. 
Clark,    143  U.S.,  1  (1892).     Concerning 
this  subject,  see  Part  VI,  infra.     In  the 
case  of  Ohio  &  M.  R'yi).   People.  123 
111.,  467  (1888),  the  court  referred  to  but 
did  not  decide  the  question  whether  a 
state  could  withdraw  its  consent  to  a 
consolidation     after    the   consolidation 
had  been   made.     Under  the  reserved 
power  to  amend  or  repeal  a  charter  the 
legislature  may  amend  the  charter  of 
an  agricultural  college,  which  has  pri- 
vate stockholders  but  to  which  the  state 
contributes  funds,  so  that  instead  of  the 
state  having  four  directors  out  of  eleven, 
the  state  shall  have  seven  out  of  twelve. 
Jackson  v.  Walsh.  28  Atl.  Rep.,  778  (Mb*., 
1892).     Where  a  gas  company   has  an 
exclusive  right  to  supply  gas  to  a  city, 
subject  to  the  right  of  the  legislature  to 
alter  or  revoke  the  same,  the  legislature 
may  authorize  the  city  to  construct  its 
own  gas  works.    A  municipal  ordinance 
is  not  such  a  contract  as  is  protected  by 
the  constitution  of  the  United  States  in 
regard  to  impairing  the  validity  of  con- 
tracts.    It  is  a  contract  that  is  protected 
in  the  same  way  as  contracts   of  indi- 
viduals.    Hamilton,  etc.,  Co.  v.  Hamil- 
ton City,  146  U  S.,  258  (1892).     Where 
an  amendment  exempts  the  company 
from  taxation  and  provides  that  it  shall 
furnish  the  city  with  water  free  of  cost, 
a  repeal  of  the  exemption   repeals  the 
obligation  as  to  water.  Louisville  Water 
Co.  v.  Clark,  143  U.  S.,  1  (1892).     An  ex- 
emption from  taxation  may  be  repealed 
under  the  reserved  right  to  amend,  etc. 
Wagner,  etc..  Institute's  Appeal,  19  AtJ. 
Rep.,   297   (Pa.,    1890).     Under    the    re- 
served power  to  amend  or  repeal  a  char- 

638 


ter  the  legislature  may  compel  it  to  pay 
wages  weekly  to  its  employees.     State 
v.  Brown,  25  Atl.  Rep.  246  (R  I.  1892). 
Under  the  reserved  right  to  amend  the 
charter   the  legislature  may  amend  so 
as  to  confine  the  road   to  a  particular 
route,  and  outstanding  contracts  of  the 
company  do  not  prevent  such  an  amend- 
ment.    Macon,  etc..  R.  R.  r.   Stamps,  11 
S.  E.  Rep..  442  (Ga..  1890).     Where,  sub- 
sequently to  the  incorporation  of  a  com- 
pany, a  general  act  reserves  to  the  legis- 
lature the  right  to  amend  or  repeal  any 
and  all  charters,  the  legislature  may  re- 
peal any  amendments  to  the  charter,  so 
tar   as   such    amendments    are    passed 
after  the  general  act,  where  the  amend- 
ments do  net  expressly  waive  the  legis- 
lative  right   of  amendment  or  repeal. 
But  any  amendment  should  lie  "saving, 
whenever  that   power  was  exerted,  all 
rights  previously  vested."    An  exemp- 
tion   from    taxation    may   be    repealed 
under  the  reserved  power.     (Approving 
Tomlinson  v.  Jessug,  15  Wall.,  454,  and 
Railroad  Co.  v.  Maine,  96  U.  S,  499.) 
Creditors  stand  upon  the  same  footing 
in  this  respect.     Louisville  Water  Co.  V. 
Clark,    1t:5  U.   S.,   1  (1892>     In   regard 
to  the  question  as  to  the  constitution- 
ality of  a  radical  amendment  to  a  char- 
ter under  the  reserved  right  to  amend, 
see  Railroad  Co.  v.  Maine.  96  U  S„  499; 
Sinking  Fund  Cases,  99  U.  S.,  700 ;  Com- 
monwealth r.  Essex  Co.,  13  Gray,  253; 
Commonwealth   r.    BonsaU,   3   Whart.. 
559;    Pennsylvania   College    Cases,    13 
Wall..    190;    State  V.   Miller.    15   Wall., 
478;    Spring     Valley     Water-works    v. 
Shottler,  110  U.S..  317:  Close  of  Glen- 
wood  Cemetery,  107  U.  S.,  466 ;  Jack- 
son r.  Walsh.  23  Atl.  Rep,  778;  Sage  v. 
Dilliard,    15   B.    Monroe.    357;  State   r. 
Adams,  44  Mo.,  570 ;  Allen   v.  McKean, 
1  Sumner,  276. 


CH.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§  50L>. 


may  consider  himself  released  from  his  liability  to  pay  the  sub- 
scription, or  he  may  begin  suit  in  equity  to  obtain  an  injunction 
against  or  to  set  aside  any  action  by  the  corporation  under  the 
amendment.1  If  the  stockholder  has  already  paid  his  subscription, 
then  his  only  remedy  is  an  injunction  or  a  suit  to  set  aside.2     In 


1  This  rule  is  recognized  and  applied 
in  most  of  the  cases  of  this  chapter. 
See,   also,    Clearwater    v.    Meredith,    1 
Wall.,  25,  holding  that  the  stockholder 
was  released,  and  saying :  "  Clearwater 
could  have  prevented  this  consolidation 
had  lie  chosen   to  do  so."    Nugent  v. 
Supervisors,    19    Wall.,    241   (1873).     A 
change  of  the  termini  under  an  amend- 
ment to  the   charter  releases  previous 
subscribers,    there    being    no    reserved 
right  to  make  such  amendment.     Snook 
v.  Georgia  Imp.  Co.,  9  S.  E.  Rep.,  1104 
(Ga.,  1889).     A  subscriber  is  released  by 
an  amendment  changing  the  termini, 
the  original  charter  not  providing  for 
such  changes.     Youngblood  v.  Georgia 
Imp.  Co.,  10  S.  E.  Rep.,  124  (Ga.,  1889). 
A  fundamental  change  in  the  corpora- 
tion   releases  subscribers.      Greenbrier, 
etc.,  Exposition  v.   Rodes,  17  S.  E.  Rep., 
305  (W.  Va.,  1893).     A   change  in   the 
plan  of   organization  so  as  to  have  a 
larger  capital  stock  than  was  originally 
intended  releases  a  subscriber.  Norwich, 
etc.,  Co.  v.  Hockaday,  16  S.  E.  Rep.,  877 
(Va.,  1893);  Champion  v.  Memphis,  etc.. 
R.  R.  Co.,  35  Miss.,  692  (1858).     A  charter 
amendment  enlarging  the  corporate  ob- 
jects from  fire  and  accident  to  Are,  ma- 
rine and  inland  insurance  releases  dis- 
senting stockholders.  Ashton  v.  Burbank, 
2   Dill.,  435  (1873).     In   England  cases 
generally  arise  releasing  the  subscriber 
when   the    memoranda  of    association 
vary  from  the   prospectus.      Stewart's 
Case,  L.  R.,  1  Ch.,  574  (1866) ;  Webster's 
Case,    L.   R,    2   Eq.,   741   (1866);  Ship's 
Case,  2  De  G,  J.  &  S.,  544(1865);  Dawes 
v.  Ship,  L.   R,   3   H.  of  L.,   343   (1868). 
Cf.  Nixon  v.  Brownlaw,  3  H.  &  N.,  686 
(1858);  Norman  v.  Mitchell,  5  De  G,  M. 
&  G,   648    (1854).     See,   also,  Dorris  v. 
Sweeney,  60  N.  .¥.,  463  (1875).     After  a 
winding-up  has  commenced  there  can 


be  no  release  herer'n.    Oakes  v.  Turquand, 
L.  R,  2  H.  I..,  325  (1S67).     In  opposition 
to  this  rule  of  law  there  are  some  decis- 
ions holding  that  the  subscribers'  only 
remedy  is  an  injunction.     Were  it  not 
that  the  great  weight  of  authority  holds 
otherwise,   this  view   would    be    com- 
mended as  the  only  logical  result  of  the 
law.     There  is  no  reason  why  a  stock- 
holder who  has  not  paid  his  subscrip- 
tion should  be  better  off  than  he  who 
has  met  that  obligation.    See  §  187 ;  also 
Hays  v.  Ottawa,  etc.,  R  R.  Co..  61  III., 
422  (1871) ;  Pacific  R  R.  v.  Hughes,  22 
Mo.,  291  (1855) ;  Martin  r.  Pensacola  R. 
R  Co.,  8  Fla.,  389  (1859) ;  Ware  v.  Grand, 
etc.,  R'y  Co.,  2  Russ.  &  M.,  470  (1831): 
Bank  v.   Charlotte,  85  N.  C,  433  (1881). 
The  plea  of  release  must  allege  accept- 
ance by  the  corporation,  and  injury  to 
the  defendant  sued  on  his  subscription. 
Hawkins  v.  Miss.  &  Tenn.  R.  R.  Co.,  35 
Miss.,   688  (1858).     An   increase  of  the 
capital  stock  as  allowed  by  the  charter 
does  not  release  subscribers.     Port  Ed- 
wards, etc.,  Ry.  v.  Arpin,  49  N.  W.  Rep., 
828  (Wis.,  1891).      Where   the  statutes 
under  which  the  company  is  organized 
allow  the  objects  of  the  company  to  be 
changed  on  a  vote  of  the  stockholders. 
a  dissenting  stockholder  is  not  released 
from  his  subscription  by  such  change. 
Mercantile   Statement  Co.  v.  Kneal,  53 
N.  W.  Rep.,  632  (Minn.,  1892). 

2  This  remedy  also  is  supported  by  a 
large  number  of  the  cases  in  this  chap- 
ter. See  Stevens  v.  Rutland  &  Burling- 
ton R.  R.  Co.,  29  Vt„  545  (1855) ;  Black 
v.  Del.  &  Raritan  Canal  Co.,  24  N.  J. 
Eq.,  455  (1873);  Mourey  v.  Ind.  &  Cin. 
R.  R.  Co.,  4  Biss.,  78  (1866).  The  stock- 
holder cannot  enjoin  parties  from  ap- 
plying to  the  legislature  for  the  amend- 
ment. Story  v.  Jersey,  etc.,  Co.,  16  N. 
J.  Eq.,  13  (1863),  reviewing  the  cases; 


639 


§  503.] 


AMENDMENTS    TO    CHAJJTEES. 


[ch.  xxv in. 


Pennsylvania  it  has  been  held  that  the  stockholder  may  have  an 
injunction  herein,  but  only  until  the  corporation  shall  have  pur- 
chased his  interest  in  the  corporation.1  This  decision,  however, 
has  been  doubted,  and  hardly  seems  consistent  with  well-estab- 
lished principles  protecting  persons  in  their  rights  to  retain  their 
property  except  as  taken  from  them  under  the  power  of  eminent 
domain.2 

§  503.  Assent  and  acquiescence  as  a  bar  to  the  stockholders  rem- 
,,/,,.—  A  stockholder  may  be  estopped  from  objecting  to  an  amend- 
ment by  his  express  or  implied  acquiescence  therein.  Any  acts 
indicating  an  acceptance  by  him  of  the  amendment  bind  him  and 
bar  his  suit.3  Acquiescence  may  sometimes  grow  out  of  his  silence 
or  delay,  under  circumstances  that  called  on  him  to  dissent  if  he  so 
intended.4    His  assent,  however,  is  not  to  be  presumed,  but  must  be 


Stevens  v.   Rutland,  etc.,  R  R.  Co..  29 
Vt,  545(1855)l 

1  Luuman  v.  Lebanon  Valley  R  R  Co., 
.  -12  fis:,s);  approved  in  State 
v.  Bailey,  16  Ind.,  4G  (1861>  <  '/•  Ship  v. 
Crosskill,  L.  R,  10  Eq.,  73  (1870k  Stew- 
art v.  Austin,  L.  R.  B  Eq.,  399  (1866), 
holding  that  the  recovery  back  cannot 
be  in  a  court  of  equity. 

-Mowreyr.  Ind.  &  Cin.  R.  R  Co.,  i 
Hiss..  78  (1866).  Changes  and  amend- 
ments as  to  the  route  do  not  release  the 
subscriber  where  he  took  part  therein. 
Ovventon,  etc..  Co.  V.  Smith,  13  S.  W. 
Rep.,  126  (Ky.,  1890). 

:'  Bedford  R  1!.  Co.  v,  Bowaer,  48  Pa. 
St,  29(1864).  Longdelay  may  constitute 
a  ratification  herein.  Gifford  v.  New 
y  R.  K  <  •>.  10  N.  .1.  Eq.,  171  (1854); 
Bangor, etc.,  R.  R.  Co.  v.  Smith,  47  Me..  34 
(1859); State r.Sibley,25Minn.,887(1879  ; 
Hope,  etc..  Ins.  Co.  t\  Beckman,  47  Mo.. 
93  (1870);  Hope,  etc.,  Ins.  Co.  v.  Koel- 
ler,  47  Mo.,  129  (1870);  Covington  v. 
Covington,  etc.,  Co.,  10  Bush,  69  (1873); 
Kenton,  etc.,  Court  r.  Bank.  etc..  Co.,  10 
Bush,  529  (1874);  Sumrall  «.  Sun,  etc.. 
Co.,  40  Mo.,  27  (1867);  Smead  r.  Indian- 
apolis, etc.,  R  R,  11  Ind.,  104  (1858).  Cf. 
Pingry  r.  Washburn.  1  Aiken  (Vt),  264 
(1826).  See,  in  general,  Memphis,  etc., 
R.  R  Co.  i\  Sullivan,  57  Ga.,  240; 
Houston  v.  Jefferson  College,  63  Pa.  St. 
428 ;  Danbury,  etc.,  R.  R  Co.  r.  Wilson 


22  Conn..  185;  Vermont,  etc.,  R  R.  Co. 
r.  Vermont  Cent  R  R  Co.,  34  Vt..  2; 
Hayworth  v.  Junction  R.  R  Co.,  13  Ind., 
848  (1859);  Milla  v.  Central  R  R  Co.,  41 
N.  .1.  Eq.,  l  (1886);  Zabriskie  v.  Hacken- 
sack,  etc..  R.  R  Co.,  18  N.  J.  Eq.,  178: 
parte  Booker,  18  Ark.,  338;  Upton  v. 
Jackson,  1  Flipp  C  ft,  413;  Goodin  v. 
Evans,  18  Ohio  St,  150,  and  ch.  XLIV. 
If  the  stockholder  subscribed  after  the 
amendment  was  made  he  cannot  com- 
plain. Eppes  r.  Miss.,  etc.,  R  R.  Co.,  35 
Ala.  (N.  S.).  54  (1859);  McClure  P.  Peo- 
ple's Freight  Co.,  90  Pa.  St.,  2C9  (1879). 
If  a  stockholder  does  not  object  to  an 
amendment,  it  is  not  for  a  person  whose 
land  is  being  taken  under  eminent  do- 
main proceedings  to  object  Ames  v. 
Lake  Superior,  etc.,  R  R.,  21  Minn.,  241, 
291  (1875) 

*  Commonwealth  v.  Cullen,  13  Pa.  St., 
133  (1850);  Martin  v.  Pensacola  &  Ga. 
R  R.  Co.,  8  Fla..  370  (1869);  Owen  t. 
Purdy,  12  Ohio  St.,  73  (1861).  Contra, 
Hamilton  Mutual  Ins.  Co.  v.  Hobart,  2 
Gray.  548  (1854>  Although  a  stock- 
holder may  enjoin  a  consolidation  of  his 
company  with  another  under  a  statute 
passed  after  the  incorporation,  the  ob- 
ject of  the  consolidation  being  different 
from  that  of  the  original  corporation, 
yet  where  the  stockholder  delays  apply- 
ing to  the  court  for  nearly  a  year  and 
in  the  meantime  the  consolidated  com- 


640 


CH.  XXVIII.] 


AMENDMENTS    TO    CHARTERS. 


[§  503. 


proven.1  A  court  of  equity  will  go  far  to  aid  a  dissenting  stock- 
holder, where  he  applies  promptly  and  before  large  investments 
and  many  changes  are  made  on  the  faith  of  the  acts  complained  of. 
But  laches  will  not  be  tolerated  by  the  courts,  especially  where 
important  interests  are  involved.2 


party  has  borrowed  money  and  given 
mortgages,  and  such  mortgages  are 
about  to  be  foreclosed,  the  complaining 
stockholder  is  guilty  of  laches  and  his 
remedy  is  barred.  Rabe  v.  Dunlap,  25 
Atl.  Rep.,  959  (N.  J.,  1893).  A  consolida- 
tion of  railroads  under  an  amendment 
to  the  charter  may  be  prevented  by  a 
single  stockholder.  But  several  years 
delay  in  complaining  is  fatal.  The  stock- 
holder then  can  only  recover  the  value 
of  his  stock  and  past  dividends.  Deposit 
Bank  v.  Barrett,  13  S.  W.  Rep.,  337  (Ky., 
1890).    Where  stockholders  in  a  college 


exchange  their  stock  for  scholarships,  a 
removal  of  the  college  to  another  loca- 
tion under  an  amendment  to  the  charter, 
such  amendment  having  been  made 
twenty-five  years  prior  to  such  removal, 
will  not  be  enjoined.  Bryan  v.  Board, 
etc.,  13  S.  W.  Rep.,  276  (Ky.,  1890). 

1  March  v.  Eastern  R.  R  Co.,  43  N.  H., 
515  (1862) ;  Prop.,  etc.,  Union  Lock  & 
Canals  v.  Towne,  1  N.  H.,  44  (1817) ;  Ire- 
land v.  Palestine,  etc.,  Turnpike  Co.,  19 
Ohio  St.,  369  (1869). 

2  See  ch.  XLIV. 


(41) 


641 


CHAPTER  XXIX. 

"TRUSTS"  AND  UNINCORPORATED  JOINT-STOCK  ASSOCIATIONS. 


A.    "TRUSTS." 

§  503a.  Definition    and    legality    of    a 
"trust" 
'>.  Further   inquiry  as  to  the    le- 
B  .iitv  of  a  "trust" 
503c.  Liability  of  trustee  and  certifi- 

Adera 
503J.  Qualificati<  US,   powers,   et- 

the    trustees   and  of  certifi- 
cate-holders. 


R,   UNINCORPORATED    JOINT-STOCK   ASSO- 
CIATIONS. 

§  504.  Definitions  — Joint-stock  compa- 

-.   clubs,    exchanges,  etc. — 

( Ownership  of  land. 

505.  8  joint-stock  companies. 

Joint-stock  companies  may  arise 

by  implication  of  law. 
How  a  person  becomes  a  mem- 
ber —  Transfers. 
508.  Liability  of  members  to  creditors 
and  to  the  company. 

OS  by  ineiu  Ust  offi- 

-  ana  the  company. 
510.  Dissolution. 


nition  andUgaiity  of  a  ~  trust"— The  word  "trust" 
was  first  used  to  mean  an  agreement,  between  many  stockholders 
in  many  corporations,  to  place  all  their  stock  in  the  hands  of  trust- 
ees and  to  receive  therefor  trust  certificates  from  the  trusts 
The  stockholders  thereby  consolidate  their  interests  and  become 
trust  certificate-holders.  The  trustees  own  the  stuck,  vote  it.  elect 
the  others  of  the  various  corporations,  control  the  business,  re- 
ceive all  the  dividends  on  the  stock,  and  use  all  these  dividends  to 
pay  dividends  on  the  trust  certificates.  The  trustees  are  period- 
ically elected  by  the  trust  certificate-holders.  The  purpose  of  the 
••trust  "  is  to  control  prices,  prevent  competition  and  cheapen  the 
cost  of  production.  The  Standard  Oil  Trust,  the  American  Cot- 
ton-Seed  Oil  Trust  and  the  Sugar  Trust  were  examples  of  this 
method  of  combination.1 


i  The  committee  of  the  house  of  rep- 
resentatives at  Washington,  in  their  re- 
explain  the  nature  of  tl  -  'lard 
Oil  Trust  and  Sugar  Trust  very  clearly. 
The  committee  reports  "that  there  exist 
a  certain  number  of  corporations  Oi 
ized  under  the  laws  of  the  din" 
Btstoa  and  -ubject  to  their  control ;  that 
these  corporations  have  issued  their 
stock  to  various  individuals,  and  that 
these  individual  stockholders  have  sur- 
rendered   their    stock    to  the    trustees 


named  in  the  agreements  creating  these 
tru>ts.  and  accepted  in  lieu  thereof 
tific;.  led   by  the  trustees  named 

therein.  The  agreements  provide  that 
the  various  corporations  whose  stock  is 
surrendered  to  the  trustees  shall  pre- 
serve their  identity  and  carry  on  their 
business."  See  4  R'y  &  Corp.  L.  J 
Mr.  S.  C  T.  Dodd,  the  general  solicitor 
and  originator  of  the  Standard  Oil 
Trust,  defines  a  tn.  an   arrange- 

ment by  which  the  stockholders  of  va- 


64-2 


•   H.  XXIX.]       •"..:     STS"    AND    DNDfC  .TED    ASSOCIATION  IE 


But  the  word  "trust"  has  a  wider  and  more  popular  use.  It  is 
used  to  designate  any  combination  of  producers  for  the  purpose  of 
controlling  prices  and  suppressing  competition.  In  this  sense  of 
the  word,  all  contracts,  agreements  and  schemes  whereby  those 
who  were  competitors  combine  to  regulate  prices  are  "trusts.** 

During  the  past  five  years  these  trusts  have  come  into  great 
prominence.  They  multipled  rapidly  and  extended  into  many 
branches  of  business.  They  became  the  object  of  great  popular 
opposition  and  their  legality  was  fiercely  assailed,  both  in  the  courts 
and  by  means  of  prohibitory  statutes. 

The  courts  have  held  with  great  uniformity  that  these  combina- 
tions are  illegal  if  their  purpose  is  to  restrict  production,  raise  prices 
or  restrain  trade.  The  law  is  clear  that  any  combination  of  com- 
peting concerns  for  the  purpose  of  controlling  prices,  or  limiting 
production,  or  suppressing  competition,  is  contrary  to  public  policy 
and  is  void.  This  principle  of  law  has  been  applied  with  great 
rio-or  to  trusts,  the  recent  combinations  in  trade.  ATanv  cases  show- 
ing  the  different  circumstances  under  which  this  rule  has  been  ap- 
plied are  given  in  the  notes  below.1 

on  this  subject  arranged  in  the  order  of 
the  states  are  as  follows : 

California:  A  contract  whose  effect 
is  to  give  a  monopoly  in  bags  by  the 
vendor  agreeing  to  sell  to  one  party  ex- 
clusively is  illegal,  and  no  damages  can 
be  collected.  Pacific,  etc..  Co.  v.  Adler, 
27  Pac.  Rep,  36  (Cal.,  1891).  Although 
the  state  is  prosecuting  a  suit  to  forfeit 
the  charter  for  entering  into  a  combina- 
tion, yet  a  sale  of  part  of  the  corporate 
property  to  a  stockholder  pending  the 
suit  is  legal  and  the  receiver  cannot 
follow  the  property.  A  writ  of  prohibi- 
tion will  issue  against  him.  Havemeyer 
v.  Superior  Court.  24  Pac.  Rep.,  121 
(Cal..  1890}  Where  all  the  manufactur- 
ers of  lumber  at  a  certain  point  con- 
tracted to  sell  to  a  corporation  all  the 
product  of  the  mills  so  far  as  such  prod- 
uct was  sold  in  four  counties,  and  the 
mills  agreed  not  to  sell  to  any  other 
parties  in  those  counties  except  upon  a 
forfeit  to  the  corporation,  the  court 
held  that  any  one  of  the  mills  could 
repudiate  the  contract  In  a  suit 
brought  by  the  corporation  against  one 
of  the  mills  for  refusing  to  live  up  to 
the  contract,  the  court  held  that   the 


rious  corporations  place  their  stocks  in 
the  hands  of  certain  trustees,  and  take 
in  lieu  thereof  certificates  showing  each 
shareholder's  equitable  interest  in  all 
the  stock  so  held.  The  result  is  twofold ; 
1.  The  stockholders  thereby  become  in- 
terested in  all  the  corporations  whose 
stocks  are  thus  held.  2.  The  trustees 
elect  the  directors  of  the  several  corpo- 
rations."   See  7  Ry.  &  Corp.  L.  J.  236. 

1  The  state  will  at  the  instance  of  the 
attorney-general  forfeit  the  charter  of  a 
corporation  whose  stockholders  have 
entered  into  a  "  trust  *'  with  the  stock- 
holders of  competing  corporations  for 
the  purpose  of  forming  a  monopoly  in 
and  raising  the  price  of  sugar.  People 
v.  North  R  S.  Rep.  Co..  121  N.  Y..  582 

-  I .  This  case  broke  up  the  "  Sugar 
Trust "  and  drove  it  into  transferring  all 
its  property  to  a  New  Jersey  corpora- 
tion organized  for  that  purpose.  The 
next  important  case  was  State  r.  Stand- 
ard Oil  Co.,  30  N.  E.  Rep.  279  (Ohio, 
1892)  This  case  declared  illegal  the 
Standard  Oil  Trust.  That  trust  is  now 
in  process  of  liquidation.  These  two 
cases  are  now  the  leading  authorities  on 
this   subject.     Various  other  decisions 


643 


§  503a.] 


"teusts"   and    UNINCORPORATED   ASSOCIATIONS. 


[CH.  XXIX. 


These  cases  indicate  the  complicated  questions  and  important 
litigation  that  have  arisen  by  reason  of  the  trusts.  It  is  believed, 
however,  that  the  volume  of  such  litigation  will  decrease  rather 

great  trusts  have  been 


than  increase  in  the  future.     Most  of  the 


corporation  could  not  recover.  Santa 
Clara,  etc.,  Co.  v.  Hayes,  18  Pac.  Rep., 
891  (Cat,  1888). 

Illinois:  Although  the  general  stat- 
ute authorizes  incorporation  for  any 
•lawful  purpose,"  yet  an  incorporation 
to  buy  a  majority  of  the  stock  of  each 
of  four  competing  gas  corporations  in  a 
city  is  illegal  where  the  purpose  is  to 
create  a  monopoly.  The  state  may  by 
suit  have  the  charter  forfeited.  People 
v.  Chicago  Gas  T.  Co.,  22  N.  E.  Rep., 
798  (111.,  1889).  All  gas  companies  owe 
a  duty  to  the  public.  An  agreement  of 
two  companies  in  one  city  to  keep  out 
of  each  other's  territory  is  void.  Chi- 
cago, etc.,  Co.  v.  People's,  eta,  Co.,  13 
N.  E.  Rep.,  169  (111.,  1887).  Iu  Illinois  all 
the  grain  dealers  in  a  town  secretly 
combined  and  made  contracts  by  which 
they  controlled  the  price  of  grain  and 
the  local  store-house  accommodations. 
The  parties  succeeded,  but  disagreed  in 
their  division  of  the  profits.  An  action 
for  an  accounting  was  brought  by  one 
against  another.  The  court  refused  to 
aid  either  party.  The  law  will  leave  the 
guilty  conspirators  as  it  finds  them. 
Craft  v.  McConoughy,  79  111.,  34G  (1875) 

Kansas:  Insurance  business  is  not  in- 
ter-,! ate  business.  Foreign  insurance 
companies  that  combine  to  control  and 
increase  the  rates  of  insurance  on  prop- 
erty inside  the  state  violate  the  statute 
against  trusts,  and  their  local  agents  are 
subject  to  prosecution  therefor.  State 
v.  Phipps,  31  Pac.  Rep.,  1097  (Kan.,  1893). 

Kentucky:  The  agreement  of  two  rival 
boats  to  divide  their  earnings  in  a  cer- 
tain proportion,  and  if  either  owner 
sells  he  shall  not  go  into  the  business 
again  for  a  year,  is  void.  The  party 
who  has  sold  and  then  returned  at  once 
to  the  business  is  not  liable  iu  damages. 
Anderson  v.  Jett,  12  S.  W.  Rep.,  G70 
(Ky.,  1889). 


Louisiana:  A  stockholder  cannot  hold 
a  director  liable  for  the  stock  becomiug 
worthless  by  reason  of  the  fact  that  the 
director  and  others  sold  their  stock 
amounting  to  three-fourths  of  the  stock 
to  the  Cotton  Seed  Oil  Trust,  and  that 
the  trust  then  dissolved  the  corporation 
by  a  three-fourths  vote  as  allowed  by 
statute,  although  the  directors  as  such 
voted  for  the  dissolution.  Trisconi  v. 
Winship,  9  S.  Rep.,  29  (La.,  1891).  A 
pooling  contract  between  two  railroads 
competing  for  business  between  the 
Bame  points  is  void  as  against  public 
policy.  The  court  will  leave  the  parties 
where  they  are.  The  arrangement  in 
this  case  w  as  for  a  division  of  earnings. 
Texas,  etc.,  R'y  v.  Southern  Pac.  R'y,  6 
S.  Rep.,  888  (La.,  1889).  In  Louisiana, 
\\  here  several  firms  owned  a  large  quan- 
tity of  Indian  bagging,  and  combined 
and  agreed  not  to  sell  except  upon  the 
consent  of  a  majority  of  these  who  were 
parties  to  the  agreement,  the  court  re- 
fused to  uphold  the  agreement)  and  re- 
fused  to  enjoin  one  of  the  parties  from 
violating  his  compact  India  Bagging 
iation  v.  Kock,  14  La.  Ann.,  168 
1 1 B59). 

Massachusetts:  The  combination  of 
two  parties  who  each  claim  a  patent  on 
an  article  not  a  prime  necessity  nor  a 
staple  commodity  iu  the  market  is  legal 
and  may  be  specifically  enforced.  Glou- 
cester, etc.,  Co.  «,  Russia,  etc.,  Co.,  27 
N.  E.  Rep.,  1005  (Mass.,  1891).  In  Com- 
monwealth v.  Smith,  9  N.  E.  Rep.,  62!) 
(Mass.,  1887),  where  certain  shade-roller 
manufacturers  formed  a  corporation  to 
sell  their  product,  the  court  enjoined 
one  of  the  parties  from  repudiating  the 
agreement,  but  said:  "The  agreement 
does  not  refer  to  an  article  of  prime  ne- 
cessity, nor  to  a  staple  of  commerce,  nor 
to  merchandise  to  be  bought  and  sold  in 
the  market     ...    It  does  not  look  to 


644 


CII.  XXIX.] 


"  TRUSTS  " 


AND    UNINCORPORATED    ASSOCIATIONS.  [§  503«. 


driven  from  their  original  mode  of  organization  and  have  reorgan- 
ized b}'  conveying  all  their  property  to  a  corporation  organized  for 
the  purpose  of  taking  over  the  property.  Such  has  been  the  case 
with  the  Sugar  Trust  and  the  Cotton-seed  Oil  Trust.  The  decisions  of 


affecting  competition  from  outside  — 
the  parties  have  a  monopoly  by  their 
patents  —  but  only  to  restrict  competi- 
tion in  price  between  themselves.  .  .  . 
When  it  appears  that  the  combination 
is  used  to  the  public  detriment,  a  differ- 
ent question  will  be  presented  from  that 
now  before  us." 

Michigan:  In  ascertaining  the  market 
price  of  articles  sold,  the  price  as  fixed 
by  a  combination  in  the  trade  will  not 
be  considered.  Love  joy*  r.  Michels,  49 
N.  W.  Eep.,  901  (Mich.,  1891).  A  con- 
tract of  a  concern  not  to  manufacture  a 
certain  line  of  articles  in  some  states  for 
five  years  is  void.  Western,  etc.,  Ass'n 
v.  Starkey,  47  N.  W.  Rep.,  604  (Mich., 
1890).  Where  three  persons  interested 
in  a  match  factory  agreed  to  unite  their 
property  with  that  of  their  competitors 
in  one  large  corporation,  a  monopoly  — 
the  Diamond  Match  Company  —  the 
courts  will  not  enforce  the  contract  be- 
tween these  three  persons  which  speci- 
fies the  proportion  in  which  each  of  the 
three  was  to  participate  in  the  profits 
coming  to  them  jointly  from  the  monop- 
oly. The  history,  character  and  purpose 
of  the  match  monopoly  are  fully  stated 
in  this  decision.  Richardson  v.  Buhl,  43 
N.  W.  Rep.,  1102  (Mich.,  1889). 

Minnesota:  By-laws  of  an  exchange 
restricting  the  freedom  of  members  to 
reduce  prices  and  establish  offices  for 
selling  are  void.  Kolff  v.  St.  Paul,  etc., 
Exchange,  50  N.  W.  Rep.,  1036  (Minn., 
1892). 

Missouri:  See  Skrainka  v.  Scharring- 
hausen,  8  Mo.  App.,  522  (1880),  uphold- 
ing a  pooling  contract  of  certain  owners 
of  stone  quarries  located  in  St.  Louis,  on 
the  ground  that  the  restraint  was  local 
in  its  effect. 

Nebraska:  Where  the  stockholders  of 
a  distilling  corporation  transfer  their 
stock   to  trustees,   for  the    purpose  of 


entering  into  a  trust,  such  trustees  being 
the  holders  of  the  stock  of  various 
other  corporations  engaged  in  the  same 
business,  and  trust  certificates  are  issued 
by  them  in  place  of  the  stock,  the  state, 
at  the  instance  of  the  attorney-general, 
will  cause  the  charter  to  be  annulled  on 
the  ground  of  misuser,  the  corporation 
being  no  longer  engaged  in  a  lawful 
business.  Although  the  corporate  prop- 
erty was  transferred  just  before  judg- 
ment, the  court  will  not  allow  its  de- 
cree to  be  evaded.  State  v.  Nebraska 
Distilling  Co.,  46  N.  W.  Rep.,  155  (Neb., 
1890). 

New  Jersey:  Where  a  contract  be- 
tween a  domestic  railroad  company  and* 
a  foreign  railroad  company  is  declared 
illegal  and  void  by  the  court  on  the 
ground  that  it  seeks  to  create  a  mo- 
nopoly in  the  coal  business,  and  the  court 
orders  the  domestic  railroad  company 
to  cease  complying  with  such  contract, 
the  court  will  appoint  a  receiver  of  such 
company  if  it  attempts  to  evade  the  de- 
cree, but  on  proof  that  no  evasion  has 
been  attempted,  the  court  will  refuse  to 
appoint  a  receiver.  Stockton,  Att'y- 
Gen'l,  v.  Central  R.  Co.  of  N.  J.,  25  Atl. 
Rep.,  942  (N.  J.,  1893).  It  is  not  illegal 
for  one  stockyard  company  to  buy  out 
another  stockyard  company.  Will- 
lcughby  v.  Chicago,  etc.,  Co.,  25  Atl. 
Rep.,  277  (N.  J.,  1892) ;  Ellerman  v.  Chi- 
cago, etc.,  S.  Y.  Co.,  23  Atl.  Rep.,  287 
(N.  J.,  1891). 

New  York:  See  People  v.  North  River, 
etc.,  Co.,  supra.  Where  several  carbon 
manufacturers  have  formed  a  combina- 
tion by  leasing  their  several  concerns  to 
a  trustee  and  also  assigning  to  him  their 
orders  for  carbons,  and  subsequently 
one  of  them  withdraws,  the  withdraw- 
ing concern  cannot  sue  for  and  claim 
the  amount  due  upon  one  of  the  orders 
assigned  to  and  filled  by  such  trustee. 


645 


503a.] 


"  TRUSTS  " 


AND    UXINCOEPORATED   ASSOCIATION-.       [en.  XXIX. 


the  New  York  court  of  appeals  against  the  Sugar  Trust  and  of  the 
supreme  court  of  Ohio  against  the  Standard  Oil  Trust  have  convinced 
the  trusts  that  their  original  mode  of  organization  was  illegal  and 
must  be  abandoned.     The  result  has  been  that  the  trusts  for  the 


The  defendant  having  interpleaded,  the 
trustee  takes  the  money.  Pittsburg  C. 
Co.  v.  McMillan,  119  N.  Y.,  46  (1890). 
Where  a  manufacturer  of  a  peculiar 
kind  of  machinery  under  a  patent 
agrees  with  a  trustee  for  several  corpo- 
rations that  he,  the  manufacturer,  will 
sell  his  machinery  to  them  alone,  and 
they  agree  to  give  him  a  percentage  of 
their  profits,  the  agreement  is  legal  and 
may  be  enforced  by  him.  Good  v.  Da- 
l.n id,  121  N.  Y.,  1  (1890).  A  combina- 
tion of  coal  dealers  for  the  purpose  of 
preventing  the  solicitation  of  Inl- 
and for  the  purpose  of  regulating  the 
•retail  price,  is  a  conspiracy,  and  is  pun- 
ishable as  a  criminal  offense  under  the 
New  York  law.  People  r.  Sheldon,  <>*> 
Hun,  590  (1893).  Where  many  manu- 
facturers under  various  patents  form  a 
corporation  and  convey  to  it  the  patents 
and  take  hack  licenses  under  which  the 
corporation  regulates  the  price,  and  they 
agree  nol  to  use  any  new  patents  and 
not  to  manufacture  any  new  kind  of 
harrow,  the  combination  is  illegal.  Any 
one  of  the  parties  may  by  suit  in  equity 
be  relieved  from  its  terms.  Strait  17. 
National  Harrow  Co..  18  N.  Y.  Supp.,  224 
(1891).  It  is  established  "that  no  con- 
tracts are  void  as  being  in  general  re- 
straint of  trade  where  they  operate 
simply  to  prevent  a  party  from  engag- 
ing or  competing  in  the  same  business." 
Hence,  an  agreement  of  one  steamship 
company  to  pay  another  company  a 
certain  sum  for  withdrawing  its  line  of 
boats  was  upheld  as  against  the  dissent 
of  a  stockholder  in  the  former  company. 
Leslie  v.  Lorillard.  110  N.  Y.  019(1888). 
A  large  number  of  the  proprietors  of 
boats  on  the  canals  made  a  combina- 
tion. The  income  from  every  boat, 
over  and  above  a  certain  amount  al- 
lowed to  the  boat  for  expenses  for  wear 
and  tear,  was  turned   into   the  "pool." 


At  certain  times  the  fund  in  the  "pool" 
was  to  be  divided  among  the  parties  ac- 
cording to  the  number  of  their  boats. 
In  an  action  to  enforce  payment  under 
the  agreement  the  court  held  that  the 
whole  arrangement  was  illegal,  void 
and  not  enforceable.  Stanton  r.  Allen. 
5  Denio,  434  (1848).  The  proprietors  of 
five  lines  of  boats  engaged  in  canal 
transportation  agreed  to  combine  and 
do  business  at  certain  rates  for  freight 
and  passage.  The  net  earnings  were  to 
be  divided  among  themselves  in  a  fixed 
proportion.  One  of  the  parties  sued  an- 
other to  compel  1 1 i in  to  make  payment 
The  court  held  that  the  combination 
was  void  under  the  statutes  of  New 
York,  and  said  :  "  It  is  a  familiar  maxim 
that  competition  is  the  hfe  of  trade.  It 
follows  that  whatever  destroys  or  even 
relaxes  competition  in  trade  is  injurious 
if  not  fatal  to  it."  Hooker  v.  Vande- 
water,  4  Denio,  349  1847)  A.  coal  com- 
pany b<  ught  coal  from  several  corpora- 
tions upon  their  contract  not  to  sell  to 
any  other  pai  tie-  in  that  locality.  The 
purpose  was  to  enable  the  purchaser  of 
the  coal  to  have  a  monopoly  of  the  mar- 
ket. The  party  which  purchased  the 
coal  diii  not  pay  for  it.  The  coal  com- 
pany which  had  sold  brought  suit  for 
the  price,  but  the  court  held  that  the 
suit  must  fail.  The  company  had  taken 
part  in  an  illegal  contract  and  combina- 
tion. In  such  cases  the  parties  are  out- 
side of  the  pale  and  protection  of  the 
law.  The  courts  will  not  aid  either 
party.  Aruot  r.  Pittston,  etc.,  Coal  Co., 
G8  N.  Y,  558  (1877).  Many  salt  manu- 
facturers in  New  York  state  combined 
to  limit  the  production  and  control  the 
price  of  salt.  They  formed  a  corpora- 
tion, and  each  of  the  parties  leased  to 
the  corporation  his  manufactory  of  salt. 
Each  of  the  parties  was.  however,  to 
continue  the  manufacture  of  salt  in  his 


616 


ch.  xxix.]     "trusts"  and  unincorporated  associations.       [§  503a. 


most  part  have  reorganized  and  reappeared  in  the  form  of  gigantic 
corporations.  How  far  the  law  will  interfere  with  this  class  of 
corporations  remains  to  be  seen.  In  the  Chicago  Gas  Company  case 
the  supreme  court  of  Illinois  forfeited  the  charter  of  the  company 


manufactory,  but  only  to  a  limited  ex- 
tent, and  was  to  sell  the  product  to  a 
corporation  at  a  fixed  price.  The  agree- 
ment was  carried  out.  One  of  the  par- 
ties could  not  collect  from  the  corpora- 
tion the  price  for  the  salt  delivered  to 
it,  and  accordingly  he  brought  suit. 
But  the  court  decided  that  he  could  not 
collect.  He  lost  his  salt,  and  also  the 
price  of  it.  The  law  declares  such  com- 
binations illegal,  and  will  not  aid  any  of 
the  parties.  Clancy  v.  Onondaga  Fine 
Salt,  etc.,  Co.,  62  Barb..  395  (1862).  The 
agreement  of  the  various  members  of 
the  "Wire  Trust"  not  to  sell  at  less 
than  a  certain  price  is  void.  A  forfeit 
cannot  be  recovered  back  by  one  of  the 
parties.  De  Witt,  etc.,  Co.  v.  N.  J.,  etc., 
Co.,  9  Ry.  &  Corp.  L.  J.,  314  (N.  Y.  O, 
1891).  The  receiver  of  one  of  the  corpo- 
rations forming  a  "trust"  may  enjoin 
it  from  reorganizing  in  the  shape  of  one 
large  corporation.  Gray  v.  De  Castro, 
etc.,  Co.,  10  N.  Y.  Supp.,  632  (1890).  Al- 
though the  charter  of  one  of  the  corpo- 
rations whose  stock  is  held  by  a  "  trust " 
is  forfeited,  yet  the  receiver  cannot 
have  a  receiver  appointed  of  the  "trust" 
property.  This  would  amount  to  a  re- 
ceivership of  all  the  property  of  a  stock- 
holder in  an  insolvent  corporation. 
Gray  v.  North  River,  etc.,  Co.,  N.  Y.  Law 
J.,  June  6,  1890.  The  receiver  of  the 
company  whose  charter  is  forfeited  has 
no  right  to  an  accounting  from  the 
other  corporations  as  partners.  He  is 
confined  to  the  property  of  his  own 
company.  Gray  v.  Oxnard,  etc.,  Co.,  11 
N.  Y.  Supp.,  118  (1890);  affirmed  in  59 
Hun,  387  (1891),  on  the  ground  that  an 
illegal  contract  cannot  be  enforced. 
A  receiver  of  an  insolvent  corporation 
may  recover  money  due  it  from  an 
illegal  "  trust,"  though  the  corporation 
was  a  party  to  the  "  trust."  Pittsburgh, 
etc.,  Co.  V.  McMillan,  6  N.  Y.  Supp.,  433 


(1889).  A  contract  between  two  corpo- 
rations whereby  the  stockholders  of  the 
former  were  to  buy  only  from  the 
stockholders  of  the  latter  and  the  stock- 
holders of  the  latter  were  to  sell  only  to 
the  stockholders  of  the  former  was  up- 
held in  Live-Stock  Assoc,  etc.  v.  Levy, 
3  N.  Y.  St.  Rep.,  514  (1886).  A  trust  be- 
ing illegal,  a  certificate-holder  may  have 
a  receiver  appointed  of  all  the  stock  and 
assets  held  by  the  trustees,  and  may 
have  an  accounting  by  the  trustees. 
Cameron  v.  Havemeyer,  12  N.  Y.  Supp., 
126  (1890).  Where  a  "  trust "  passes  into 
a  receiver's  hands  by  reason  of  insolv- 
ency, the  receiver  may  recover  debts 
due  the  "  trust "  from  the  constituent 
corporations.  Pittsburgh,  etc.,  Co.  v. 
McMillan,  6  N.  Y.  Supp,  433  (1889).  The 
purchaser  of  a  trust  certificate  issued 
by  the  trustees,  the  certificate  being  in 
a  form  similar  to  that  of  certificates  of 
stock,  may  compel  the  trustees  to  trans- 
fer the  same  to  him  on  their  books,  al- 
though he  is  a  competitor  of  the  trust 
and  has  opposed  it  in  all  ways  possible. 
Rice  v.  Rockefeller  et  al,  134  N.  Y,  174 
(1892).  In  this  case  the  court,  speaking 
of  the  nature  of  a  trust,  said :  "  The 
agr-eement  constituted  not  a  partner- 
ship, but  a  trust  in  behalf  of  the  bene- 
ficiaries. And  while  it  is  not  a  corpo- 
ration, it,  by  the  agreement,  took  some 
of  the  attributes  of  a  corporation  in  so 
far  that,  through  its  trustees,  certificates 
of  shares  in  the  equity  to  the  property 
held  by  them  were  issued,  and  were 
transferable  in  like  manner  apparently 
as  are  those  of  corporations."  The  case 
of  Diamond  Match  Co.  v.  Roeber,  106  X. 
Y,  473  (1887),  was  not  a  "  trust "  case, 
and  is  no  authority  on  the  subject. 

Ohio:  The  Candle  Manufacturers  un- 
incorporated association,  formed  to  con- 
trol prices,  etc.,  is  illegal.  A  member 
cannot  recover  his  share  of  the  profits. 


647 


§  503a.] 


"  TRUSTS " 


AND    UNINCORPORATED    ASSOCIATIONS.       [CH.  XXIX. 


on  the  ground  that  it  was  formed  to  bring  about  an  illegal  combi- 
nation. New  Jersey,  on  the  other  hand,  grants  broad  charters  to 
the  combinations  and  receives  a  heavy  toll  for  the  privileges  and 
immunities  granted. 


Emery  v.  Ohio  Candle  Co.,  24  N.  E.  Rep., 
660  (Ohio,  1890).  Many  salt  manufact- 
urers formed  a  "  trust,"  by  agreeing  to 
sell  all  their  product  to  an  unincorpo- 
rated joint-stock  association.  The  lat- 
ter was  composed  of,  and  its  directors 
were  elected  by,  the  manufacturers. 
The  purpose  of  the  combination  was  to 
have  the  association  buy  the  salt  from 
the  manufacturers  and  sell  it  to  the  pub- 
lic. Competition  would  thereby  be  pre- 
vented. The  court  held  that  the  com- 
bination was  void,  and  refused  to  enjoin 
one  of  the  parties  from  breaking  his 
contract  with  the  association.  Central 
Ohio  Salt  Co.  v.  Guthrie,  35  Ohio  St, 
666  (1880). 

Pennsylvania:  Five  Pennsylvania  coal 
corporations,  which  together  controlled 
a  certain  kind  of  coal,  combined  and 
agreed  that  sales  should  be  made 
through  a  committee  and  a  general 
agent,  and  that  thereby  prices  should  be 
fixed,  freights  made,  and  sales  and  de- 
liveries adjusted.  If  any  company  sold 
more  than  a  fixed  proportion  it  was  to 
pay  a  certain  amount  to  the  others. 
The  combination  was  made  and  carried 
out  in  New  York.  In  the  course  of 
time  one  of  the  companies  sued  another 
to  recover  its  proportion  of  the  amount 
which  tlu>  latter  was  to  pay  for  the  ex- 
cess of  coal  sold  by  it  The  Pennsylva- 
nia court  held  that  it  could  not  recover ; 
that  the  combination  was  illegal  and 
void  ;  and  that  it  was  a  conspiracy  under 
the  New  York  statute  against  the  com- 
mission of  any  act  by  two  or  more  per- 
sons " injurious  ...  to  trade  or 
commerce."  Morris  Run  Coal  Co.  v. 
Barclay  Coal  Co.,  68  Pa.  St,  173  (1871). 
The  courts  will  refuse  a  charter  to  a 
company  whose  business  is  to  be  "  to 
promote  the  business  of  such  retail 
dealers  as  become  members  thereof,  and 
to  protect  them,"  etc.,  the  intent  being 


to  combine  the  retail  coal  dealers.  Mat- 
ter of  Richmond  Retail  Coal  Co.,  9  R'y 
&  Corp.  L.  J.,  81  (Phil.,  1890). 

Tennessee:  It  is  illegal  for  an  Ohio 
corporation  to  purchase  a  majority  of 
the  stock  of  a  Tennessee  corporation  for 
the  purpose  of  controlling  the  latter, 
even  though  they  are  engaged  in  a  sim- 
ilar business,  the  object  being  to  form  a 
monopoly.  Hence  the  purchasing  com- 
pany cannot  enforce  the  contract  as  to 
certain  things  which  were  to  be  done 
by  the  vendor  of  the  stock.  Buckeye, 
etc..  Co.  v.  Harvey.  20  S.  W.  Rep,  427 
(Tenn.,  1892).  A  combination  of  four 
cotton-seed  oil  corporations  by  an  agree- 
ment that  the  possession  and  use  of  all 
their  property  should  be  turned  over  to 
certain  persons  to  run  is  a  partnership, 
and  contrary  to  the  rule  of  law  that  a 
corporation  cannot  become  a  partner. 
One  of  the  four  corporations  sued  and 
recovered  repossession  of  its  property. 
Mallory  v.  Hanover,  etc.,  Works,  8  S. 
W.  Rep.,  346  (Tenn.,  1888). 

Wisconsin:  See  Kellogg  v.  Larkin,  3 
Pin.  (Wis.).  128(1851). 

Tlie  United  States  Courts:  Where  a 
car  manufacturing  corporation  leases  all 
its  property  to  another  corporation  for 
a  term  of  years  and  agrees  not  to  en- 
gage in  business  during  that  time,  "the 
contract  between  the  parties  is  void,  be- 
cause in  unreasonable  restraint  of  trade, 
and  therefore  contrary  to  public  policy." 
Central  Trans.  Co.  r.  Pullman's  Car  Co., 
139  U.  S.,  24  (1891),  quoting  from  and 
approving  of  Alger  v.  Thacher,  19  Pick., 
51.  In  the  case  United  States  v.  Trans- 
Missouri  Freight  Assoc,  53  Fed.  Rep., 
440  (1892),  the  court  held  that  an  agree- 
ment  between  several  competing  rail- 
way companies,  that  an  association  be 
formed  for  the  purpose  of  maintaining 
just  and  reasonable  rates,  preventing 
unjust  discriminations    by    furnishing 


648 


en.  xxix.]     ''trusts"  and  unincorporated  associations.       [§  503a. 


In  more  recent  times,  in  England,  the  genuine  "  trust  "  has  been 
used  for  legitimate  investment  purposes.  The  trustees  are  author- 
ized to  invest  the  funds  of  the  "trust"  in  the  stocks  and  bonds  of 


adequate  and  equal  facilities  for  the  in- 
terchange of  traffic  between  the  several 
lines,    without    preventing  or  illegally 
limiting  competition,  is  legal,  and  is  not 
in  violation  of  the  federal  statute  against 
trusts.     The  court  said:    "The   rule  of 
law  which  recognizes  the  rights  of  the 
public  to  have  the  benefit  of  fair  and 
healthy  competition,  and  to  require  that 
equal    facilities    and    reasonable    rates 
shall  be  secured   to  all,  does  not  con- 
demn a  contract  between  railway  com- 
panies operating  competing  lines,  which 
is  made  for  the  sole  purpose  of  prevent- 
ing strife,  and  preventing  financial  ruin 
to  one  or  the  other,  so  long  as  the  pur- 
pose and  effect  of  such  an  agreement  is 
not  to  deprive  the  public  of  its  right  to 
have  adequate  facilities  and  fixed  and 
reasonal>'"  ''rices.     .     .     .     The  object 
and  puipose  of  the  agreement  and  the 
formation  of  the  association  thereunder 
was   to   maintain   just  and   reasonable 
rates,  and  to  prevent  unjust  discrimina- 
tions, in  compliance  with  the  terms  of 
the  act  regulating  commerce  by  furnish- 
ing equal  facilities  for  the  interchange 
of  traffic  between  the  several  lines."    A 
copy  of  the  agreement  itself  was  given 
in  this   report.     It  is  an   agreement  to 
regulate  rates,  but  does  not  provide  for 
a  division  of  the  traffic.     A  contract  by 
a  manufacturing  company  not  to  man- 
ufacture for  a  certain  period  if  it  is  paid 
a  certain  percentage  on  sales  made  by 
others  is  illegal  and    void.      Oliver  v. 
Gilmore,  52  Fed.  Rep.,  562  (1892).     It  is 
no  defense  to  an  infringement  suit  that 
the  complainant  has  formed  a  monop- 
oly of    all  patents   bearing    upon   the 
matter.  Strait  v.  National  Harrow  Co.,  51 
Fed.  Rep.,   819  (1892).     An  assignment 
of  patents  by  one  of  several  parties  to  a 
corporation  formed  to  unite  various  pat- 
ents in  a  certain  business  is  absolute  and 
cannot    be  revoked,    even   though  the 
party  was  by  agreement  to  have  a  salary 


of  $6,000  per  year  and  this  salary  has 
not  been  paid.  Bracher  v.  Hat  Sweat 
Mfg.  Co.,  40  Fed.  Rep..  921  (1892).  A 
person  who  has  sold  his  bakery  to  a  cor- 
poration which  is  a  "  trust,"  taking 
stock  in  the  corporation  in  payment, 
may  tender  back  the  stock  and  retake 
possession  of  his  bakery.  The  act  of 
congress  against  combinations  applies. 
American,  etc.,  Co.  v.  Klotz,  44  Fed. 
Rep.,  721  (1891).  Where  the  stockhold- 
ers of  a  corporation  enter  into  a  con- 
tract for  and  in  behalf  of  the  corpora- 
tion and  for  its  benefit,  and  the  corpo- 
ration accepts  that  benefit,  the  latter  is 
bound  and  affected  by  the  contract  and 
subject  to  the  liabilities  of  the  contract 
the  same  as  though  it  had  directly  en- 
tered into  it.  Hence  it  is  that  a  corpo- 
ration is  guilty  of  entering  into  a 
"  trust "  in  a  case  where  its  stockholders 
enter  into  the  "  trust."  American  P. 
Trust  v.  Taylor,  etc,,  Co.,  46  Fed.  Rep., 
152  (1891).  In  this  case  the  court  held 
that  the  trustees  were  agents,  and  that 
the  corporations  were  among  the  prin- 
cipals, and  that  it  was  ultra  vires  of  the 
corporations  to  purchase  stocks,  bonds 
and  various  properties  through  these 
agents,  the  trustees.  Hence  one  of  the 
corporations  cannot  be  enjoined  from 
breaking  the  contract  Where,  in  order 
to  enter  into  a  combination,  one  of  the 
corporations  assigns  all  its  property  to 
its  stockholders,  and  they  assign  it  to 
the  new  consolidated  and  absorbing  cor- 
poration, and  also  agree  with  that  cor- 
poration not  to  compete  with  it  in 
business,  the  first-named  corporation 
may  be  started  in  the  business  anew  and 
will  not  be  enjoined.  American  Pre- 
servers Co.  v.  Norris.  43  Fed.  Rep.,  711 
(1890).  In  controversies  between  a  cer- 
tificate-holder and  the  trustees  the  court 
will  not  consider  the  legality  of  the 
"trust."  Gould  v.  Head,  41  Fed.  Rep., 
240  (1890).     A  certificate-holder  cannot 


649 


§  503<Z.]  "  TRUSTS  "    AND    UNINCORPORATED    ASSOCIATIONS.       [CH.  XXIX- 

miscellaneous  corporations.  Generally,  however,  they  are  limited 
in  the  amount  which  they  may  invest  in  any  one  direction.  That 
which  is  lost  in  one  investment  is  expected  to  be  made  up  by  large 


enjoin  an  ultra  vires  or  illegal  act  of  the 
trustees  where  he  obtains  service  on  only 
four  out  of  the  nine  trustees.  Each 
trustee  is  liable  personally  for  past 
breaches  of  trust,  but  an  injunction 
against  future  acts  can  only  be  where 
all  the  trustees  are  made  parties.  Wall 
v.  Thomas.  41  Fed.  Rep.  620  (1890).  Va- 
rious decisions  haye  been  made  under 
the  act  of  congress  against  monopolies. 
A  combination  of  coal  dealers  to  regu- 
late prices  and  provide  for  the  division 
of  prices  with  the  miners  of  the  coal  is 
contrary  to  the  act  of  congress,  where 
the  coal  mining  companies  operate 
chiefly  in  one  state  and  the  contract  is 
made  and  carried  out  in  a  city  in  an- 
other state.  United  States  v.  Jellico, 
etc.,  Co..  4C  Fed.  Rep,  432 (1891).  A  Buit 
for  damages,  based  on  the  federal  anti- 
trust law,  tailed  in  Bishop  v.  American 
Preservers  Co.,  51  Fed  Rep,  272  (1892> 
The  statutf  applies  to  illegal  trusts  of 
stork  to  unite  competing  railroads. 
Clarke  v.  Central  R  R»,  50  Fed.  Rep^ 
338  (1892).  In  the  case  United  States  r. 
Patterson,  54  Rep,  l (tor,  (Mass..  1898)  the 
federal  statute  was  held  to  apply  in  cer- 
tain particulars,  and  not  to  apply  in 
others.  The  act  of  congress  relative  to 
monopolies  does  not  authorize  an  in- 
junction except  on  the  part  of  the  gov- 
ernment. Blindell  v.  Hagan,  54  Fed. 
Rep..  40  (1893).  An  indictment  of  a 
number  of  lumbermen  for  raising  the 
price  of  lumber  fifty  cents  a  thousand 
feet  will  not  lie  under  the  federal  stat- 
ute. United  States  v.  Nelson,  52  Fed. 
Rep.,  646(1892).  Indictment  under  the 
federal  law  against  monopolies  quashed. 
In  re  Corning.  51  Fed.  Rep,  205  (1892); 
In  re  Terrell,  id.,  213;  In  re  Greene,  52 
Fed.  Rep..  104  (1892). 

England:  The  house  of  lords,  the 
highest  court  in  England,  in  1891  af- 
firmed the  decisions  of  the  courts  below 
in  the  case  Mogul  Steamship  Co.  v.  Mc- 


Gregor (66  L.  T.  Rep,  1,  affirming  61  id., 
820  and  59  id.,  514),  and  held  that  an  ac- 
tion of  conspiracy  would  not  lie  against 
a  company  that  gave  lower  rates  of 
freight  to  parties  who  shipped  exclu- 
sively by  them,  there  being  in  the  trans- 
action no  desire  to  injure  others  and  no 
ill-will.  The  defendant  shipping  com- 
panies and  owners  had  combined  to- 
gether and  formed  a  "conference"  or 
'•  ring,"  and  their  agents  in  China  had 
issued  circulars  to  shippers  there  to  the 
effi  ct  that  exporters  in  China  who  con- 
fined  their  shipments  of  goods  to  vessels 
owned  by  members  of  the  "conference" 
should  be  allowed  a  certain  rebate,  pay- 
able half-yearly,  on  the  freight  charged. 
The  court  held  that  the  "conference," 
being  formed  by  the  defendants  with 
the  view  of  keeping  the  trade  in  their 
own  hands,  and  not  with  the  view  of 
ruining  the  trade  of  the  plaintiffs,  or 
through  any  personal  malice  or  ill-will 
tow  aids  them,  was  not  unlawful,  and 
that  uo  action  for  conspiracy  was  main- 
tainable. Lord  Coke,  in  the  great  and 
leading  "Case  of  the  Monopolies,"  11 
( Joke,  sl  (171 1),  declared  that  a  monopoly 
was  illegal  aud  void.  Lord  Coke  said 
that  a  monopoly  led  to  three  results:  au 
increase  in  price,  a  decrease  in  quality, 
and  the  impoverishment  of  artisans  and 
others.  An  agreement  of  manufactur- 
ers that  oue  ■  shall  not  employ  the  dis- 
charged hands  of  any  other  except 
upon  the  written  consent  of  the  latter 
is  void.  Mineral  Water,  etc.,  Co.  v. 
Booth,  57  L  T.  Rep..  573  (1887).  A  com- 
pany which  is  organized  in  violation  of 
a  statute  cannot  collect  debts  which  are 
due  to  it.  Jennings  v.  Hammond,  51 
L.  J.  (Q.  B.),  492  (1882),  the  company  in 
this  case  being  organized  in  violation  of 
a  statute  which  prohibited  more  than 
twenty  persons  uniting  in  an  associa- 
tion or  partnership  except  under  certain 
conditions.    In  another  case  many  man- 


650 


Oh.  xxix.] 


"  TRUSTS " 


AND    UNINCORPORATED    ASSOCIATIONS. 


[§  503&. 


profits  in  another.  It  is  a  mode  of  investment  on  a  large  scale, 
and  is  made  on  the  principle  of  an  average  gain  and  loss.1 

The  American  "Car  Trust "  is  practically  an  agreement  of  several 
owners  of  cars  to  place  them  in  the  hands  of  an  agent  to  sell  on  the 
instalment  plan,  the  agent  having  the  power  to  issue  certificates 
representing  an  interest  in  the  instalments.2 

§  503&.  Further  inquiry  as  to  the  legality  of  a  lt trust" — There 
are  other  things  to  be  considered  in  determining  whether  or  not  a 
"trust"  is  legal.  Does  it  vest  personal  property  or  real  estate  in 
a  trustee  for  a  longer  period  than  is  allowed  by  law?  Is  the  for- 
mation of  a  trust  for  the  purpose  of  carrying  on  business  author- 
ized by  law?  Is  the  shifting  of  the  parties  interested  —  that  is,  the 
certificate-holders — allowed  in  cases  of  trusts?  These  questions 
will  be  considered  in  the  order  named. 

It  is  the  policy  of  the  law  to  limit  the  time  during  which  a  per- 
son may  tie  up  his  personal  property  or  real  estate.  Generally  this 
time  is  fixed  as  the  life-time  of  the  survivor  of  any  two  persons 
then  living  and  designated  by  the  person  creating  the  trust.  Each 
state,  by  its  statutes,  generally  provides  and  names  the  time  during 
which  property  may  be  tied  up  by  a  trust,  and  if  a  trust  is  formed 
for  a  period  longer  than  that  allowed  by  statute  the  trust  itself  is 
void.3  There  is  little  doubt  that  merchandise,  land  and  shares  of 
stock  may  be  placed  in  trust.     The  law  is  clear  that  "every  kind 


ufacturers,  in  consequence  of  troubles 
between  themselves  and  their  employees, 
entered  into  an  agreement  and  gave  a 
bond  that  they  all  would  abide  by  the 
rates  of  labor,  hours  of  work  and  other 
regulations  which  a  majority  of  those 
who  entered  into  the  combination 
should  decide  upon.  The  court  held 
that  the  compact  was  in  restraint  of 
trade ;  that  it  was  illegal  and  void,  and 
that  the  bond  could  not  be  enforced. 
Hilton  v.  Eckersley,  6  El.  &  BI.,  47 
(1856).  Cf.  Ontario  Salt  Co.  v.  Mer- 
chants' Salt  Co.,  18  Grant's  Ch.,  540 
(1871 ),  where  a  Canadian  "  pool "  on  salt 
was  sustained ;  "Wicken  r.  Evans,  3  G. 
J.,  318  (1829).  The  word  "monopoly" 
originally  meant  an  exclusive  privilege 
granted  by  the  crown.  The  courts  held 
that  the  crown  could  not  grant  it.  See 
Case  of  Monopolies,  supra;  Mitchell  v. 
Reynolds,  I  P.  Williams,  181,  187.  Con- 
cerning the  subject  of  trusts  and  mo- 
nopolies   and    exclusive    privileges    in 


general,  see  Cook   on  The  Corporation 
Problem,  ch.  V,  and  pp.  114-116. 

1  See  Healey  on  Company  Law  and 
Practice,  p.  191.  For  the  form  of  arti- 
cles of  agreement  of  this,  kind  of  a 
"  trust,"  and  for  a  detailed  statement  of 
the  various  provisions  that  are  made, 
varying  according  to  the  character  of 
the  enterprise  and  the  purposes  of  the 
participants,  see  Sykes  v.  Beadon,  L.  R, 
11  Ch.  D.,  170(1879i ;  Smith  v.  Anderson, 
L.  R,  15  Ch.  D.,  247  (1880) ;  Wig-field  v. 
Potter,  45  L.  T,  612  (1882) ;  Credit  Mo- 
bilier  v.  Commonwealth,  67  Pa.  St.,  233 
(1870),  the  last  case  being  a  "  trust " 
created  to  construct  a  railroad,  the 
cestui  que  trust  being  the  stockholders 
of  a  designated  corporation. 

2  See  ch.  L,  infra. 

3  Gerard's  "Titles  to  Real  Estate," 
p.  228.  Moreover,  if  the  time  is  to  be 
measured  by  the  life  of  a  person  then 
living,  a  trust  which  is  to  exist  for  a 
fixed   period,    however  short,   without 


651 


503k] 


"  TRUSTS  " 


AND    UNINCORPORATED    ASSOCIATIONS.       [CH.  XXIX. 


of  valuable  property,  both  real  and  personal,  that  can  be  assigued 
at  law  may  be  the  subject-matter  of  a  trust."  ! 

A  different  question  arises,  however,  in  determining  whether  a 
trust  may  be  created  to  carry  on  business  and  trade,  or  to  control 
a  concern  which  carries  on  business.2 

At  common  law  the  placing  of  personal  property  in  trust  for 
the  purpose  of  carrying  on  business  in  the  name  and  under  the 
management  of  the  trustees  is  legal  and  allowable.3  The  statutes 
of  the  various  states,  however,  must  be  consulted  in  reference  to 
this  point.4 


reference  to  the  life  of  a  person  then 
living,  is  void.  Id.,  pp.  228,  229.  In 
New  York  the  suspension  can  be  for 
only  two  lives  in  being,  and,  in  certain 
.  twenty-one  years  thereafter.  2  R. 
S.,  723,  §  15  (p.  2176,  7th  ed}  This  stat- 
ute applies  equally  to  real  and  persona] 
property.  Gerard  on  Titles  to  1 
Estate,  235;  Howe  v.  Van  Schaick,  7 
Paige,  221  (1838);  Bean  v  Bowen,  17 
How.  Pr.,  306:  Holmes  v.  Mead,  52 
X.  V..  332,  344  1878>  The  statutory 
prohibition  against  the  accumulation  of 
the  income  of  trust  property,  except  in 
the  rase  of  infants,  applies  both  to  real 
estate  and  per-' malty.  Gerard's  "Titles 
to  Real  Estate,"  p  2 

1  PeVry  on  Trusts,  §  67. 

2  Under  the  statutes  of  New  York  a 
trust  of  property  consisting  of  real 
estate  is  void,  unless  the  purpose  of  the 
trust  is  to  sell  the  land  for  the  benefit  of 
creditors;  or  to  sell,  mortgage  or  lease 
it  for  the  henefit  of  legatees  or  for  satis- 
fying a  lien  on  the  land;  or  to  receive 
the  rent  and  use  it  for  the  support  of  a 
eei  tain  person;  or  to  accumulate  the 
rent  for  a  certain  person.  See  2  R  S.  of 
N.  Y,  728,  §  55  (p.  2181,  7th  ed.).  Ac- 
cordingly a  modern  "  trust,"  whose 
property  consists  of  real  estate  in  New 
York,  would  be  void.  But  as  to  per- 
sonal property  the  law  is  generally  dif- 
f  eren  t. 

3  For  decisions  at  common  law  to  the 
effect  that  property  may  be  vested  in 
trust.rs  for  the  purpose  of  carrying  on 
business,  see  Ex  parte  Garland,  10  Ves., 
110  (1883):  Scott  v.  Izou,  34  Beav.,  434 


(1865).  In  the  case  of  Holmes  V.  .Mead, 
52  X.  Y.  332  (1873),  the  court  said:  "A 
trust  in  personal  property,  which  is  not 
in  conflict  with  the  statute  regulating 
the  accumulation  of  interest  and  pro- 
tecting the  suspension  of  absolute  own- 
ership in  property  of  that  character,  is 
valid  when  the  trustee  is  competent  to 
take,  and  a  tru>t  is  for  a  lawful  purpose 
well  defined,  so  as  to  be  capable  of  be- 
ing specifically  executed  l>y  the  court. 
.  .  .  Trusts  of  personal  property  are 
not  alTected  by  the  statute  of  uses  and 
trusts,  which  applies  only  to  trusts  in 
real  property."  IuGottr.  Cook.  7  1' 
521,  584  (1889  .  the  chancellor  said: 
"The  Revised  Statutes  have  not  at- 
tempted  to  define  the  obj<  cts  for  width 
express  trusts  of  personal  property  may 
be  created,  as  they  have  done  in  relation 
to  trusts  of  real  estate.  Such  trusts, 
fore,  may  be  created  for  any  pur- 
poses which  are  not  illegal."  See,  also, 
Graff  v.  Bonnett,  31  N.  Y„  139  (1865). 
In  Power  v.  Cassidy.  79  N.  Y,  602,  613 
(1880),  the  court  said:  "The  law  does 
not  limit  or  confine  trusts  as  to  personal 
property  except  in  reference  to  the  sus- 
pension of  ownership,  and  they  may  be 
created  for  any  purpose  not  forbidden 
by  law."  To  same  effect,  Bucklin  v. 
Bucklin,  1  Keyes  (N.  Y.\  141  (1864); 
Yoebel  v.  Wolf,  113  N.  Y,  405  (1889). 

4  Many  of  them,  including  Michigan, 
Wisconsin,  Minnesota,  California,  Da- 
kota. North  Carolina,  Georgia,  Penn- 
sylvania, Connecticut,  Kentucky  and 
Vermont,  have  statutes  expressly  speci- 
fying the  objects  for  which  a  trust  may 


652 


€H.  XXIX.]       "  TRUSTS "    AND    UNINCORPORATED    ASSOCIATIONS.  [§  503c. 

There  is  little  difficulty  in  determining  the  question  whether  it  is 
allowable  in  law  to  create  a  trust  where  the  cestuis  que  trust  —  that 
is,  the  certificate-holders  —  change  and  fluctuate  in  their  identity. 
The  law  does  not  require  the  cestui  que  trust  to  remain  continuously 
one  and  the  same  person.  He  is  not  indefinite,  even  though  by 
transfer  of  interest  his  identity  may  change.1 

A  more  formidable  objection  to  the  legality  of  "trusts"  is  that 
they  are  similar  to  an  unincorporated  joint-stock  association,  and 
that  the  latter  are  illegal,  inasmuch  as  they  assume  the  powers, 
privileges  and  name  of  a  corporation.  It  was  on  this  ground  that 
the  decision  in  Louisiana  declared  that  the  American  Cotton  Oil 
Trust  was  illegal,  and  was  disqualified  to  do  business  within  that 
state.  The  court  held  that,  under  the  statutes  of  Louisiana,  an  un- 
incorporated joint-stock  association  is  illegal;  that  a  "trust"  was 
one  kind  of  an  unincorporated  joint-stock  association,  and  conse- 
quently that  it  was  illegal  and  void.2 

But  this  view  of  the  law  would  not  be  sustained  elsewhere  in  this 
country;  nor  would  it  be  sustained  under  the  old  common  law  of 
England.  Unincorporated  joint-stock  companies  have  existed  for 
vears  and  are  common  throughout  all  the  other  states  of  the  Union. 
They  are  legal  methods  of  carrying  on  business.3 

§  503c.  Liability  of  trustee  and  certificate-holders. —  The  law  is 
clear  that  a  trustee  who  carries  on  any  kind  of  business  is  liable 
personally,  and  to  the  entire  extent  of  his  private  fortune,  for  all  the 
debts  incurred  in  the  management  and  execution  of  the  trust.4     It 

be  created.     See    Stimson's    American  corporated    companies.      At  that  time 

Statute  Law,  §  1703.  they  were  regarded  as  "  dangerous,  mis- 

1  See  Harrison  v.  Harrison,  36  N.  Y.,  chievous  and,  in  short,  public  nui- 
543  (1867),  affirming  32  Barb.,  162 ;  sances."  But  the  statute  was  repealed 
Holmes  v.  Mead,  52  N.  Y.,  332,  343  (1873) ;  in  1826,  and  Lindley,  the  great  English 
Conkling  v.  Washington  University,  2  judge  and  jurist,  says  of  it :  "  Juster 
Md.  Ch.,  497  (1849);  Perry  on  Trusts,  views  of  political  economy  and  of  the 
§66.  In  regard  to  this  matter,  a  "  trust "  limits  within  which  legislative  enact- 
is  legal  on  the  same  principle  that  it  is  ments  should  be  confined  have  led  to 
legal  for  a  bondholder  secured  by  a  rail-  the  repeal  of  the  statute  in  question, 
way  trust  deed  or  mortgage  to  sell  and  which,  though  deemed  highly  beneficial 
transfer  his  interest  to  anothei\  half  a  century  ago,  probably  gave  rise 

2  State  of  Louisiana  v.  American  Cot-  to  much  more  mischief  than  it  pre- 
ton  Oil  Trust,  1  R'y  &  Corp.  L.  J.,  vented."  Lindley  on  Partnership,  193  — 
509  (1887),  the  court  saying:  "A  joint-  the  great  English  work  on  corporations, 
stock  company  is  not  known  to  the  laws  Moreover,  a  careful  examination  of  the 
of  Louisiana."  English  authorities  up   to  the1  present 

3  See  §  504,  infra.  In  England  there  day  shows  conclusively  that  at  common 
formerly  was  doubt  upon  this  subject,  law  an  unincorporated  joint-stock  asso- 
but  this  doubt  was  due  to  the  "Bubble  ciation  is  legal  and  valid.  Id.,  192,  196. 
Act."    This  statute  was  passed  in  1720  Cf.  21  N.  E.  Rep.,  605  (111.,  1889). 

for  the   purpose  of  suppressing  unin-        4  Thompson   v.  Brown,  4  Johns.  Ch., 

653 


§  503c] 


"  TKUSTS  " 


AND    UNINCORPORATED    ASSOCIATIONS.       [CH.  XXIX. 


is  possible,  however,  that  the  use  of  the  words  "as  trustee,"  in  the 
contract  entered  into,  will  protect  him  against  this  liability.1  And 
there  is  little  doubt  that  the  creditors  of  the  trust  may  collect  their 
debts  from  its  property.  This  has  been  a  doubtful  point,  but  is 
now  reasonably  well  settled.  It  matters  not  whether  the  trustees 
have  expressly  bound  the  trust  property  to  pay  the  debts.  Where 
the  trustee  is  insolvent,  a  creditor  of  the  trust  may  proceed  against 
its  property  to  procure  payment  of  a  debt  incurred  in  the  execution 
of  the  trust.2 

But  a  different  rule  prevails  as  regards  the  cestui  que  trust,  the 
beneficiary.  The  cestui  que  trust  cannot  be  held  liable  for  the 
debts  created  by  the  trustees  or  for  debts  incurred  in  the  execution 
of  the  trust.  This  question  has  arisen  chiefly  in  cases  where 
trustees  have  carried  on  the  business  of  an  insolvent  person  for  the 
benefit  of  the  creditors  of  the  latter.3  And  the  same  conclusion  is 
reached  in  cases  where  an  executor,  administrator  or  trustee  carries 
on  a  business  for  the  benefit  of  a  beneficiary.4 


619  (1820);  Wild   v.    Davenport,  7  Atl. 
Rep.,    295    (N.    J.,    1887);    Stephens   V. 
.lames,  3S.  E.  Rep.,  160  (Ga..  1887);  Rog- 
ers  r.   Wheeler,  43  N.  V..   598  (16 
Jones  v.  Seligman,  81  N.  Y.,  190  (1880). 

1  Contracts  entered  into  by  Che  tin 

of  a  trust  deed  for  many  shareholders 
bind  the  latter  but  not  the  former  per- 
sonally, where  the  trustees  were  author- 
ized to  make  the  contracts  and  did  so  as 
trustees.  It  is  immaterial  that  the  con- 
tracts are  under  seal.  Cook  r.  ( I  ray,  133 
Mass.,  106  (18S2).  But  see  Stephenson  v. 
Told.  82  N.  W.  Rep.,  340  (Iowa,  1887);  1 
Parsons  on  Contracts  (6th  ed.\  *122. 
As  to  the  mode  of  compelling  payment 
of  a  debt  incurred  by  a  trustee  who  has 
issued  scrip  to  represent  the  property, 
see  Mayo  v.  Moritz,  24  N.  E.  Rep.,  1083 
(Mass.,  1890),  holding  that  the  remedy  is 
not  for  a  receiver  to  wind  up  the  trust. 

2  Cater  v.  Everleigh,  4  Desaus..  19 
(1809);  James  v.  May  rant,  4  Desaus.,  691 
(1815);  Montgomery  v.  Everleigh,  1  Mc- 
Cord  Ch.,  267  (1826);  Magwood  r.  Pat- 
terson, 1  Hiles  Ch.,  228  (1833);  Gaudy 
v.  Barrit,  56  Ga.,  640  (1876) ;  Tennant  v. 
Stoney.  1  Rich.  Eq.,  222,  243  (1845  : 
Wylly  v.  Collins,  9  Ga.,  223  (1851):  Frost 
v.  Shackleford,  57  Ga..  261  (1876) ;  Ferriu 
r.  Myrick,  41  N.  Y.,  315  (1869).     Contra. 


Worral  v.  Harford,  8  Ves.  Jr.,  8  (1802); 
Mulliall  r.  Williams.  82  Ala..  489  (1858  : 
Jones  r.  Dawson,  lit  Ala.,  672  (1851). 
See,  also.  New  v.  Nicoll,  73  N.  Y.,  107 
(1878);  Noyea  v.  Blakernan,  6  N.  Y.,  567 
(185S 

•its  v.  Flint,  14  J.  &  S.  (N.  Y.\ 
498  (1880);  <',,x  ,-.  Hickman,  8  H.  L. 
Cases.  368  (1860);  fie  Stanton  Iron  Co., 
21  Beav.,  164  (1855);  Selwyn  r.  Harri- 
son. 2  J.  &  II..  834  i  L862).  See  Bingaman 
r.  Hickman,  8  Atl.  Rep.,  644  (Pa..  L88*S  . 
4  In  the  case  of  E.v  parte  Garland,  10 
Yes..  110  (1808),  where  a  testator  di- 
rected that  a  certain  sum  be  used  to 
carry  on  a  business,  and  the  executor 
so  used  it,  and  the  business  became  in- 
solvent, liekl,  per  Lord  Eldon,  that  no 
other  part  of  the  testator's  property  was 
liable  for  the  debts  thereby  incurred; 
overruling  Hankey  r.  Hammond,  1 
Cooke's  Bank.  Law,  67  (1786).  Lord 
Eldon  further  said :  "  On  the  other 
hand,  the  ease  of  the  executor  is  hard. 
He  becomes  liable,  as  personally  re- 
sponsible, to  the  extent  of  all  his  prop- 
erty, .  .  .  though  he  is  but  a  trustee. 
But  he  places  himself  in  that  position 
by  his  own  choice."  In  the  case  of  In  re 
Johnson,  L.  R,  15  Ch.  D,  548  (1880), 
the  cases  are  reviewed.     Lord  Eldon's 


654 


CH.  XXIX.] 


"  TKUSTS  " 


AXD    UNINCORPORATED    ASSOCIATIONS. 


[§  503c. 


It  has  been  held  also  that  the  trustee  cannot  render  the  cestui 
que  trust  liable,  even  though  the  trustee  contracts  with  the  creditor 
to  that  effect.1 

There  is  little  doubt  that  these  old  principles  of  law  are  appli- 
cable to  "  trusts."  The  courts  of  England  have  decided  that  a  modern 
'•  trust"  is  not  a  partnership  or  mere  association,  but  is  similar  to  an 
old  common-law  trust  estate.  This  conclusion  was  reached  in  con- 
struing an  English  statute  which  prohibits  certain  partnerships  or 
associations  from  doing1  business.2 


decision  that  it  is  not  the  general  estate 
of  the  testator  which  is  liable,  but  only 
so  much  as  he  has  authorized  to  be  em- 
ployed in  the  business,  is  stated  to  be 
still  the  law.  See,  also,  Strickland  v. 
Symons,  L.  R,  26  Ch.  D.,  245  (1884).  An 
estate  is  not  liable  for  debts  created  by 
a  partnership  continued  by  order  of  the 
will.  Stewart  v.  Robinson,  115  N.  Y., 
328  (1889). 

1  Stanton  v.  King.  8  Hun  (N.  Y.),  4 
(1876);  affirmed,  69  N.  Y,  609.  See  15 
Am.  L.  Rev.,  456;  Burch  v.  Brecken- 
ridge,  16  B.  Mon.,  488;  New  v.  Nicoll, 
12  Hun,  431  (1877) ;  affirmed,  73  N.  Y, 
127. 

2  In  England  a  statute  exists  which 
forbids  any  company,  association  or 
partnership  consisting  of  more  than 
twenty  persons  from  carrying  on  any 
business  for  the  acquisition  of  gain,  un- 
less it  is  registered  as  a  company  under 
the  Joint-stock  Company's  Act,  and 
complies  therewith  as  regards  reports, 
etc.  It  has  been  held  that  a  "  trust "  is 
not  a  "company,  association  or  part- 
nership," and  consequently  is  not  af- 
fected by  this  statute.  "Wigfield  v.  Pot- 
ter, 45  L.  T.,  612  (1882);  Crowther  v. 
Thorley,  32  W.  R,  330  (1884);  In  re 
Siddall,  L.  R,  29  Ch.  D.,  1  (1885) ;  Smith 
v.  Anderson,  L.  R,  15  Ch.  D.,  247 
(1880).  The  last  case  cited  was  an  ac- 
tion to  have  the  "  trust "  dissolved  on  the 
ground  that  it  was  a  partnership,  and 
was  doing  business  in  violation  of  the 
statute.  The  court  refused  to  grant  the 
relief  desired,  and  said  that  the  cer- 
tificate-holders were  not  partners  and 
did  not  form  an  association.     "  There 


has  never  been  anything  creating  any 
mutual  rights  or  obligations  between 
these  persons.  They  are  from  the  first 
entire  strangers,  who  have  entered  into 
no  contract  whatever  with  each  other, 
nor  has  either  of  them  entered  into  any 
contract  with  the  trustees  or  any  trustee 
on  behalf  of  the  other,  there  being 
nothing  in  the  deed  pointing  to  any 
mandate  or  delegation  of  authority  to 
aot  for  the  certificate-holders  as  between 
themselves,  and  nothing,  as  it  appears 
to  me,  by  which  any  liability  could 
ever  be  cast  upon  the  certificate-holders 
either  as  between  themselves  or  as  be- 
tween themselves  and  anybody  else. 
.  .  .  If  there  is  any  business  at  all, 
it  is  to  be  carried  on  by  the  trustees. 
Whatever  is  to  be  done  is  to  be  done  by 
the  trustees."  And  Cotton,  L.  J.,  said; 
"  The  trustees  here  are  the  only  persons 
who  are  dealing  with  the  investments, 
and  they  are  dealing,  not  as  agents  for 
some  principal,  but  as  trustees  in  whom 
the  property  and  the  management  of  it 
are  vested,  and  who  have  the  power  of 
changing  the  investments  and  securi- 
ties. That  is  just  like  the  case  which 
often  occurs  where  the  executors  or 
trustees  of  a  will  are  directed  to  carry 
on  a  business.  The  fact  that  they  are  to 
account  to  others  for  the  profits  made 
is  a  matter  utterly  immaterial  as  be- 
tween them  and  those  with  whom  they 
deal.  They  deal  with  those  persons  as 
the  only  persons  contracting,  and  hold 
themselves  out  as  personally  liable. 
These  persons  have  no  right  whatever  as 
as  against  the  persons  beneficially  en- 
titled."   This  case  was  one  involving  a 


65c 


§  503cZ.]       "trusts"  axd  unincorporated  associations,     [ch.  xxix. 


Such  being  the  case,  it  seems  to  be  clear  that  the  trustees  and 
the  property  of  a  modern  "  trust "  are  liable  for  all  debts  incurred 
by  it,  but  that  the  holders  of  the  trust  certificates  are  not  in  any 
way  liable  therefor,  unless  they  have  expressly  agreed  to  assume 
that  liability. 

§  503«:Z.  Qualifications,  powers,  rights  and  duties  of  the  managers 
and  certificate-holders  of  a  "  trust." — Any  person  may  serve  as  a 
trustee,  "provided  that  person  is  competent  to  take  the  legal  title 
to  the  property.1 

The  trustees  of  a  "trust"  correspond  somewhat  to  the  directors 
of  a  corporation.  They  generally  are  elected  annually  by  the 
certificate-holders  in  a  regularly  called  meeting  of  themselves. 
The  instruments  creating  the  "trust"  usually  provide  for  the  elec- 
tion of  trustees,  and  for  their  succession  and  term  of  office.  There 
is  nothing  in  the  old  law  of  trust  estates  which  forbids  this  change 
of  trustees.2 

Where,  by  the  trust  deed,  a  majority  of  the  cestui*  que  trusth&XQ 
power  to  fill  a  vacancy  caused  by  the  incapacity  or  inability  of  the 


H  trust"  See,  also,  dicta  to  the  same  ef- 
fect in  Credit  Mobilier  '•.  Common- 
wealth, 61  Pa.  St..  338(1870). 

1  Perry  on  Trusts,  ?•  39. 

2  "The  person  who  creates  the  trust 
may  mould  it  into  whatever  form  he 
pleases;  he  may  therefore  determine  in 
what  manner,  in  what  event  and  upon 
what  conditiou  the  original  trustees 
may  retire  and  new  trustees  may  be 
substituted.  All  this  is  fully  within  his 
power,  and  he  can  make  any  legal  pro- 
visions which  he  may  think  proper  for 
the  continuation  and  succession  of 
trustees  during  the  continuation  of  the 
trust"  Perry  on  Trusts,  £  287.  In 
England,  under  the  vesting  acts,  the 
court  held  that  it  had  power  to  vest  the 
estate  of  a  modern  "trust"  in  new 
trustees  where  one  of  the  old  trustees 
was  dead,  another  was  insane,  and 
under  the  trust  agreement  the  certili- 
cate-holders  had  elected  new  trustees. 
In  re  Siddall,  L.  R,  29  ChfcD.,  1  (1885). 
A  similar  power  was  given  to  trustees 
of  personal  property  in  New  York  by 
ch.  185,  L.  1882.  As  regards  the  com- 
mon-law rules  and  powers  of  the  courts 
herein,  see  Perry  on  Trusts.  £  356 
■et  seq.    At  common  law,  upon  the  death 


of  the  surviving  trustee,  his  executor 
or  administrator  became  the  trustee. 
Boone  r.  Citizens'  Bank,  etc.,  84  N.  Y.f 
83,87  (1881):  De  Peyster  v.  Beekman, 
55  Bow.  1'r.  Kep.,  90  (1877).  In  the 
Cost-book  Company  Case  of  Johnson  v. 
Goslett  18  G  R,  728  (1856),  the  follow- 
ing provision  appears:  "The  trustees 
of  the  said  lease  shall,  when  and  if  re- 
quired by  the  directors,  execute  a  deed 
Bring  that  they  hold  the  said  mine 
under  and  by  virtue  of  such  lease  as 
trustees  for  the  benefit  of  the  share- 
holders in  the  said  company,  according 
to  their  respective  shares  and  interests 
therein  ;  and  if  any  or  either  of  the  said 
trustees  or  any  future  trustees  shall 
resign  or  die  or  become  incapable  or 
unwilling  to  act  then  new  trustees 
or  a  new  trustee  may  be  appointed 
by  any  of  the  general  meetings  of 
shareholders  hereinafter  provided  for. 
in  the  place  of  the  trustees  or  trustee 
so  resigning  or  dying  or  becoming  in- 
capable or  uuwilling  to  act  as  afore- 
said; and  the  said  premises  shall  be 
forthwith  assigned  to  and  vested  in  the 
said  new  trustee  or  trustees  jointly  with 
the  continuing  trustee  or  trustees,  or  in 
such  new  trustees  only,  as  the  case  may 


656 


CH.  XXIX.] 


"trusts"  and  unincorporated  associations. 


[§  503^. 


trustee,  thev  mav  substitute  a  new  trustee  when  the  old  trustee  re- 
moves  to  and  becomes  a  resident  of  a  foreign  country.1 

The  extent  of  the  powers  of  the  trustees  of  a  "  trust  "  is  a  mat- 
ter of  great  interest  to  the  public  and  the  certificate-holders.  Espe- 
cially is  this  the  case  since  the  extent  of  the  trustees'  powers  is  kept 
a  secret  from  all  except  the  favored  few.  Often  the  certificate- 
holders  are  not  allowed  to  examine  and  know  the  contents  of  the 
trust  instrument  which  defines  the  powers  of  trustees.  It  is  true 
that  the  law  guards  jealously  against  any  assumption  of  powers  by 
the  trustee  be}Tond  those  which  are  expressly  conferred  by  the 
trust  instrument.2 

The  trustees  who  hold  the  stock  in  the  various  corporations 
which  make  up  the  "  trust "  are  trustees  and  not  vendees  of  the 
stock.3     The  trustee  ordinarily  has  no  power  to  sell  the  stock.4 

There  are  other  incidents  which  explain  the  position  of  the- 
trustee.  He  mav  sue  and  be  sued  in  his  own  name  on  all  matters* 
and  contracts  pertaining  to  the  trust.5 

He  is  not  liable  to  the  cestui  que  trust  for  losses  incurred  by  his- 
management  of  the  property  of  the  trust.  He  is  bound  merely  to 
exercise  ordinary  discretion  and  to  obey  the  directions  of  the  instru- 


require,  at  the  expense  of  the  said  com- 
pany." 

1  Farmers'  Loan  &  Trust  Co.  v. 
Hughes,  11  Hun,  130  (1877).  In  this 
case  the  deed  of  trust  provided  that  the 
trustees  or  their  survivor  might  be  re- 
moved by  the  vote  of  a  majority  in 
interest  of  the  holders  of  the  bonds  re- 
ferred to  in  the  trust  deed,  at  any  meet- 
ing called  for  that  purpose ;  and  fur- 
ther, by  a  separate  and  distinct  provis- 
ion, that  in  case  of  the  death,  removal, 
resignation,  incapacity  or  inability  of 
both  or  either  of  said  trustees  to  act  in 
the  execution  of  the  trust,  then  a  ma- 
jority of  the  holders  of  such  bonds  might 
designate  and  select,  in  writing,  one  or 
more  competent  persons  to  fill  the  va- 
cancy so  occurring.  The  property  may 
be  made  to  vest  in  new  trustees  without 
transfer,  if  the  trust  instrument  is  so 
drawn.     Perry  on  Trusts,  §  284. 

!  Perry  on  Trusts,  §§  454,  460. 

3  People  v.  North  River  S.  Rep.  Co., 
121  N.  Y.,  582  (1890). 

*  See  ch.  XIX.    The  trustees   of   the 


American  Cattle  Trust  cannot  sell  shares 
of  stock  which    they   hold.     Gould   v. 
Head,  38  Fed.  Rep.,  886  (1889; ;  Id.,_41i 
Fed.  Rep..  242  (1890). 

5  In  this  respect  the  trustee  is  not  the 
same  as  the  director  of  a  corporation. 
"  A  trustee  is  a  man  who  is  the  owner 
of  the  property,  and  deals  with  it  as 
principal,  as  owner  and  as  master,  sub- 
ject only  to  an  equitable  obligation  to 
account  to  some  persons  to  whom  he 
stands  in  the  relation  of  trustee,  and 
who  are  his  cestuis  que  trust.  .  .  . 
The  office  of  director  is  that  of  a  paid 
servant  of  the  company.  A  director 
never  enters  into  a  contract  for  himself, 
but  he  enters  into  contracts  for  his  prin- 
cipal ;  that  is,  for  the  company  of  whom 
he  is  a  director  and  for  whom  he  is  act- 
ing. He  cannot  sue  on  such  contracts, 
nor  be  sued  on  them  unless  he  erceeds 
his  authority.  That  seems  to  me  to  be 
the  broad  distinction  between  trustees 
and  directors."  Smith  v.  Anderson,  L. 
R.,  15  Ch.  D.,  247  (1880). 


(42) 


657 


%  503d J         "  TRUSTS  "    AND    UNINCORPORATED    ASSOCIATIONS.       [en.  XXIX. 

ment  creating  the  trust.     It  is  only  for  a  breach  of  trust  that  he 
may  be  made  to  account  to  the  cestui  rws  trust.1 

In  the  case  of  the  modern  '  trust"  it  has  been  doubted  whether 
the  consent  of  all  the  trustees  is  essential  to  its  contracts  and  acts, 
as  is  the  case  with  the  old  common-law  trust.2  But,  in  general, 
these  matters  are  regulated  and  provided  for  by  the  instrument 
which  creates  the  "  trust." 

The  compensation  of  the  trustee  is  usually  fixed  by  the  trust 
deed.  If  not,  it  falls  within  the  provisions  of  the  statutes,  or  a  rea- 
sonable compensation  is  allowed  by  the  common  law.3 

The  property  of  the  "trust  "  cannot  be  seized  for  the  individual 
debts  of  the  trustee,4  but  the  interest  of  the  certificate-holder  may 
be  reached  so  as  to  subject  it  to  the  payment  of  his  debts.5  In  this 
respect  the  certificates  resemble  shares  of  stock. 

The  trust  property,  where  it  consists  of  personal  property  in  the 
nature  of  bonds,  stocks,  notes  or  evidences  of  indebtedness,  or  cor- 
responds to  the  capital  stock  of  a  corporation,  may  be  taxed  at  the 
place  where  the  main  oflice  or  place  of  business  of  the  " trust" 
exists.  The  extent  of  the  taxation  depends,  of  course,  upon  the 
statutes  of  the  state  wherein  the  tax  is  laid.6 

There  is  more  difficulty  in  determining  whether  a  certificate- 
holder  may  terminate  his  interest  in  the  "  trust  "  and  demand  his 
proportion  of  the  property.  In  certain  "trusts,"  whose  property 
consists  of  shares  of  stock,  he  undoubtedly  may.7  But  in  general 
a  single  certificate-holder  cannot  have  the  whole  "trust"  dissolved 

fSimonton    v.   Sibley,   122  U.  S.,  220  see  2  Albany  L  Journal.  201,  288.    In 

(1887).     Where  a  railroad  construction  New  York,  by  'statute,  all  transfers  of 

contract  is  assigned  to  trustees  to  be  personal  property  made  in  trust,  for  use 

carried  out  and  the  profits  to  be  paid  to  of  the  person   making   the  same,  are 

the  stockholders  of  a  designated  corpo-  void  as  against  his  creditors,  existing  or 

ration,  the  stockholders  may  compel  the  subsequent    2  R.  S..  135,  g  l  i?th  ed, 

trustees   to  pay  over  such  profits.    The  p.  3827,  and  cases  there  cited),    See.also, 

trustees  cannot  set   up  that  they  were  Graff  v.  Bonuett.  31  N.  V.,  1.  14,  18. 
also  directors  of  tlie  railroad.   Hazard  tt         6  Ricker    r.    Aim  ri can  Loan  &  Trust 

Dillon,  34  Fed.  Rep.,  185(1888  Co.,    140    Mass.,    S46   (1885).     See,   also, 

-'.Mills  v.  Burd,  29  Fed  Rep.,  410  (1887).  People  r.  Assessors,  etc.,  40  N.  Y.,   154 

3  Perry  on  Trusts,  §  917.  (1869);  In  re  County  of  Washington  r. 

•  Gibson  v.  Stevens,  7  N.  H..  352  (1834),  Estate  of  Jefferson,  28  N.  W.  Rep.,  256 

where  a  trustee  was  authorized  to  con-  (Minn.,  1886),  citing  many  cases  on  this 

tinue  the  testator's  business.     The  prop-  subject.     It  is  well  settled  in  New  York 

erty    was    held     not     subject     to    the  state  that  under  its  statutes  no  shares  of 

trustee's  personal  debts.  stock  in  either  domestic  or  foreign  cor- 

5  It  can  be  reached,  doubtless,  just  as  porations  are  subject  to  taxation  except 

the  bonds  of  a  bondholder  under  a  rail-  shares  of  stock  in  national  banks.     See 

road  mortgage   or    trust    deed  may  be  §  565,  infra. 
reached.    As  to  the  rule  at  commm  law,        '  See  §  5036. 

658 


CH.  XXIX.]       "  TRUSTS "    AND    UNINCORPORATED    ASSOCIATIONS.  [§  504. 

and  wound  up  before  the  time  fixed  by  the  trust  agreement  for  its 
dissolution  has  arrived.1 

If  the  "  trust "  itself  is  forbidden  by  the  statutes  of  the  state 
wherein  it  exists,  it  never  will  be  wound  up  by  the  courts.  The 
law  will  not  compel  a  trustee  to  account  for  property  or  transac- 
tions which  grow  out  of  a  contract  which  is  prohibited  by  statute. 
The  courts  leave  the  parties  where  they  are  found.  They  are  out- 
side of  the  protection  of  the  law.2 

If,  however,  the  "trust"  is  legal  it  may  be  terminated  at  any 
time  by  a  decree  of  a  court,  upon  the  consent  of  all  the  parties 
who  are  interested  in  it.3  But  a  "  trust  "  will  not  be  dissolved  and 
wound  up  merely  because  the  trustees  have  been  guilty  of  a  breach 
of  trust.  The  remedy  in  such  a  case  is  to  enjoin  or  remove  the 
trustees.4  "Where,  however,  the  trust  is  insolvent  and  incapable  of 
proceeding,  a  dissolution  and  winding  up  of  its  business  will  be  de- 
creed by  a  court.5 

B.    UNINCORPORATED   JOINT-STOCK    ASSOCIATIONS. 

§  504.  Definitions  —  Joint-stock  companies,  clubs,  exchanges, 
etc. —  Ownership  of  land.—  A  joint-stock  company  may  be  defined 
to  be  an  association  of  persons  for  the  purpose  of  business,  having 
a  capital  stock  divided  into  shares,  and  governed  by  articles  of  as- 
sociation which  prescribe  its  objects,  organization  and  procedure, 
and  the  rights  and  liabilities  of  the  members,  except  that  the  arti- 
cles cannot  release  the  members  from  their  liability  as  partners  to 
the  creditors  of  the  company.6 

i  Smith  v.  Anderson,  L.  R,  15  Ch.  D.,  20  N.  J.  Eq.,  172  (1869) ;  Howell  v. 
247  (1880).  The  same  rule  prevails  in  Harvey,  5  Ark.,  270  (1842) :  Van  Ness  v. 
unincorporated  joint-stock  associations.  Fisher,  5  Lans.,  236  (1871);  Brien  v. 
See  Smith  v.  Virgin,  33  Me.,  148  (1851).  Harriman,  1  Tenn.  Ch.,  467  (1873);  Hal- 
See,  also%  Waterbury  v.  Mercantile,  etc.,  laday  v.  Elliott,  8  Oreg.,  84  (1879) ;  Bag- 
Ex.  Co.,  50  Barb.,  157  (1867),  holding  that  ley  v.  Smith,  10  N.  Y.,  489  (1853).  In 
such  company  will  not  be  wound  up  Sibley  v.  Minton,  27  L.  J.  (Eq.),  53 
merely  because  the  directors  have  been  (1858),  the  court  held  that,  in  an  action 
guilty  of  a  breach  of  trust.  by  an  adventurer  in  a  cost-book  mining 

2  In  re  Padstow,  etc.,  Co.,  L.  R,  20  company  to  wind  up  the  company  and 
Ch.  D.,  137  (1882).  adjust  the  losses,  all  the  co-adventurers 

3  Perry  on  Trusts,  §  920,  were  necessary  parties. 

4  Id.,  §§  816-853.  6  in  Hedge  &  Home's  Appeal,  63  Pa. 
5 See  Baring  v.  Dix,  1  Cox,  213  (1786);     St.,  273  (1869),  it  is  denned   to  be   "a 

Bailey  v.  Ford,  13  Sim.,  495  (1843) ;  Jen-  partnership  whereof  the  capital  is  di- 

nings  v.  Baddeley,  3  K.  &  J.,  77  (1856),  vided  or  agreed  to  be  divided  into  shares, 

where    insolvent    copartnerships    were  and  so  as  to  be  transferable  without  the 

wound  up,  though  the  time  for  which  express  consent  of  all  the  copartners." 

they  were  to  exist  had  not  yet  expired.  In    the    statutes  of    Massachusetts  the 

See,  also,  Seighortner  v.  Weissenborn,  words  "  joint-stock  company  "  are  used 

659 


§  504.] 


"trusts"  and  unincorporated  associations. 


[CH.  XXIX. 


A  joint-stock  company  lies  midway  between  a  corporation  and  a 
copartnership.     It  is,  however,  to  be  distinguished  from  them,1  and 


to  mean  a  corporation  organized  under 
the  general  incorporation  act  of  the 
state,  Attorney-General  v.  Mercantile 
Ins.  Co.,  121  Mass.,  524  (1877).  But  this 
is  not  an  accurate  use  of  the  terra. 
••  The  articles  of  association  of  an  unin- 
corporated joint-stock  company  bear 
the  same  relation  to  it  that  the  charter 
bears  to  an  incorporated  company. 
They  regulate  the  duties  of  the  officers 
and  the  duties  and  obligations  of  the 
members  of  such  a  company  among 
themselves;  they  specify  the  capital, 
limit  the  duration  and  define  the  busi- 
ness of  the  company."  Bray  >:  Harwell, 
si  N.  Y.,  600  (1880),  per  Earl,  J.  See. 
also,  White  v.  Brownell,  42  Abb.  Pr. 
(N.  S.),  162,  193  (1862).  In  Bobbins  >: 
Butler,  24  111.,  387,  426,  432  (1866),  it  is 
said  that  joint-stock  companies  "have 
none  of  the  rights  and  immunities  of 
.  .  .  a  regularly  incorporated  com- 
pany. These  stock  companies  are  noth- 
ing more  than  partnerships;  and  every 
member  of  the  company  is  liable  for  the 

debts  of  the  c «rn,  no  matter  what 

the  private  arrangements  among  them- 
selves may  be."    To  the  Bame  effect,  see 
Moore  r.  Brink.  4  Hun.  402  (1875);  Skin- 
ner v.   Dayton.   19  Johns.,   518  (1888); 
Wells  v.  Gates,    18   Barb.,   564    (1864); 
Keasley  v.  Codd,  2  Carr.  &  P.,  408(1836> 
'The  term  joint-stock  company  appears 
to  have  originated  in   England  in  com- 
paratively   recent    times.  .  Joiut  stock 
companies  may  be  said  to  be  partner- 
ships or  individuals  associated  for  some 
specified  purpose    under    a  designated 
name  or  description,  to  which,  by  some 
general   or  special   statute,   when  they 
have   been   formed  or  composed  in  a 
specified  manner,  some  of  the   powers 
or  proper  attributes  of  a  corporation 
have  been  given."     Dayton,  etc.,   R  R 
Co.  v.  Hatch,  1   Disney,  Cin.   Super.  Ct, 
84,  90  (18551     Factors',  etc.,  Insurance 
Co.  i'.  Harbor,  etc.,  Co.,  37  La.  Ann.,  888, 
239  (1885),  speaks  of  a  joiut-stock  com- 


pany as  "a  nondescript  organization, 
composed  of  the  owners  of  certificates 
showing  the  proportion  of  their  respect- 
ive interests  in  its  assets  and  liability 
for  its  obligations,  and  who  are  co- 
owners  or  proprietors  in  common.  As 
no  one  is  bound  to  own  property  in 
indivision,  it  follows  that  such  owners 
who  wish  a  division  have  a  right  to 
have  that  property  sold,  and  after  a 
liquidation  of  the  affairs  of  the  concern 
to  have  the  residue  distributed  ratably 
among  themselves."  At  common  law 
a  partnership  or  joint-stock  association 
may  do  business  under  any  name  that  it 
cl looses.     8  888,   note;  Preachers', 

etc..  Soc.  r.  Rich,  45  Ma,  568;  2  Perry 
on  Trusts,  g  730;  Bwasey  v.  American 
Bible  Soc..  57  Me.,  583;  Cory,  etc.,  Soc, 
v.  Beatty,  81  N.  J.  Eq.  570. 

•  It  differs  from  a  corporation  in  that 
a  joint-stock  company  has  no  limited 
liability  as  regards  its  stockholders;  and 
it  raim.it  sue  or  be  BUed  in  the  name  of 
the  association.    It  differs  from  a  co- 
partnership in  that  it  is  not  dissolved 
by  a  transfer  of  stock ;  and  each  mem- 
ber has  not  the  same  powers  of  trans- 
acting business  and  disposing  of  the  as- 
sets as  in   a  partnership     See  Cox  n 
Bodfish,  86  Ma,  802  (1853).    A  company 
organized   under  the  statutes  of  Penn- 
sylvania  and   having  mixed  character- 
istics of  a  partnership  and  corporation, 
is  a  corporation  bo  far  as  removal  to  the 
federal  court  is  concerned.     Bushnell  r. 
Park    Bros.    &  Co.,   46   Fed.   Rep.,   209 
(1891).     The  ordinary  attachment  stat- 
ute authorizing  the  attachment  of  shares 
of  stock  does  not  apply  to  a  club  organ- 
ized for  lawful  Bporting  purposes  and 
being  more  of  the  nature  of  a  statutory 
joint-stock  association  than  a  corpora- 
tion.    Lyan  v.   Denison,  45  N.  W.  Rep.. 
858   (Mich..  1890).     In    Illinois    it  is    a 
criminal  offense  for  individuals  or  an 
incorporated  association  to  use  a  name 
that    implies   incorporation.     Hazelton, 


660 


CH.  XXIX.] 


"  TRUSTS  " 


AND    UNINCORPORATED    ASSOCIATIONS. 


[§  504. 


also  from  clubs,1  from  social,  benevolent2  and  mutual  aid3  organi- 
zations, and  from  associations  formed  for  business  purposes,  but 
without  a  capital  stock,4  especially  in  respect  to  the  right  of  ex- 


etc,  Co.  v.  Hazelton,  etc.,  Co.,  30  N.  E. 
Rep..  339  (111.,  1892). 

i  Park  v.  Spaulding,  10  Hun,  128  (1877) ; 
Ridgely  v.  Dobson.  3  Watts  &  S.,  118 
(1842);  Loubat  v.  Le  Roy,  40  Hun,  546 
(1886);  Flemyng  v.  Hector,  2  Mees.  & 
W.,  172  (1836);  Re  St,  James  Club,  2 
De  G.,  M.  &  G.,  383  (1852);  Ewing  v. 
Midlock,  5  Port  (Ala.),  82  (1837);  Todd 
v.  Enily,  8  M.  &  W.,  505  (1841);  Raynell 
v.  Lewis,  15  M.  &  W.,  517  (1846);  Wood 
v.  Finch,  2  F.  &  F.,  447  (1861);  Cross  v. 
Williams,  10  W.  R,  302  (1862) ;  Cockerel 
v.  Aucompe,  5  W.  R,  633  (1857);  Koeh- 
ler  v.  Brown,  31  How.,  235  (1866) ;  Waller 
v.  Thomas,  42  How.,  337  (1871);  Hop- 
kinson  v.  Marquis  of  Exeter,  16  W.  R, 
266  (1869) ;  Gardner  v.  Frunatte,  19  W. 
R,  256  (1870);  Delanney  v.  Strickland, 
2  Stark.,  416;  Coldicott  v.  Griffiths,  8 
Ex.,  898 ;  Ebbinghousen  v.  Worth  Club, 
4  Abb.  N.  G,  300. 

2Penfield  v.  Skinner,  11  Vt,  296  (1839) ; 
Beaumont  v.  Meredith,  3  Ves.  &  B.,  180 
(1814).     See,  also,  Thomas  v.  Ellmaker, 

1  Parsons'  Sel.  Eq.  Cases,  98  (1844).  Or 
Masonic  lodges.  See  Ash  v.  Guie,  97 
Pa.  St.,  493  (1881).  See,  also,  Cohn  v. 
Boi  st,  36  Hun,  562  (1885) ;  Goodman  v. 
Jedidjah  Lodge.  9  Atl.  Rop.,  13  (Md., 
1887);  Schmidt  v.  Abraham,  etc.,  Lodge, 

2  S.  W.  Rep.,  156  (Ky.,  1886).  By-law  of 
benevolent  society  that,  for  non-pay- 
ment of  dues,  name  shall  be  dropped,  is 
legal  and  self-executing.  Rood  v.  Rail- 
way, etc.,  Ass'n,  31  Fed.  Rep.,  62  (1887). 
See  McCallion  v.  Hibernia,  etc.,  Soc,  12 
Pac.  Rep.,  114  (Cat,  1886),  involving  a 
secession  from  a  benevolent  association. 
Benevolent  associations  are  not  neces- 
sarily copartnerships.  Brown  v.  Stoer- 
kel,  41  N.  W.  Rep.,  921  (Mich..  1889). 

SLafand  v.  Deems,  81  N.  Y.,  507 
(1880);  Frits  v.  Muck,  62  How.  Pr.,  69 
(1881);  Pipe  v.  Bateman,  1  Iowa,  369 
(1875).  Of.  Thomas  v.  Ellmaker,  1  Par- 
sons' Sel.  Eq.  Cases,  98  (1844);  Olery  v. 


Brown,  51  How.  Pr.,  92  (1875).     See,  also, 
Boone  on  Corporations,  §  338. 

4  Such  as  stock  exchanges.  See  White 
v.  Brownell,  4  Daly,  162 :  Clute  v.  Love- 
land,  California  (1885);  Leech  v.  Harris, 
2  Brews..  571  (1869) ;  Slate  v.  Chamber 
of  Com.,  20  Wis.,  63  (1865) ;  Weston  v. 
Ives,  97  N.  Y.,  222  (1884),  relative  to  sale 
of  a  seat  by  the  exchange  to  pay  the 
member's  debts.  See,  also,  Piatt  v.  Jones, 
96  N.  Y,  24  (1884).  As  to  a  levy  of  exe- 
cution on  a  seat  in  an  exchange,  see 
Bowen  v.  Bull,  12  N.  Y.  Supp.,  325  (1890) ; 
Powell  v.  Waldron,  89  N.  Y,  328 ;  Rit- 
terband  v.  Baggett,  4  Abb.  N.  C,  67; 
Laudheim  v.  White,  67  How.  Pr.,  467.  A 
seat  in  the  exchange  is  property  which 
may  be  reached  by  creditors.  But  if  an 
assignee  in  bankruptcy  refuses  to  take 
it  and  pay  the  dues,  the  bankrupt  who 
pays  them  may  retain  the  seat  Spar- 
hawk  v.  Yerkes,  142  U.  S.,  1  (1891).  A 
stock  exchange  may  expel  a  member 
who  does  not  fulfill  his  contracts  made 
within  the  exchange,  due  notice,  etc., 
being  given  to  him  in  the  matter.  Lewis 
v.  Wilson,  121  N.  Y,  284  (1890).  Seat  of 
a  member  of  an  exchange  may  be 
reached,  though  by-laws  contra.  Haben- 
icht  v.  Lissak,  20  Pac.  Rep.,  874  (Cat, 
1889).  Stock  exchanges  cannot  expel 
members  for  carrying  case  into  courts 
instead  of  arbitrating.  People  v.  N.  Y. 
Cotton  Ex.,  8  Hun,  216  (1876).  As  to 
power  of  board  of  trade  to  expel  mem- 
ber, see  Pitcher  v.  Board  of  Trade  of 
Chicago,  13  N.  E.  Rep.,  187  (111.,  1887). 
Expulsion  from  unincorporated  associa- 
tions. Ottor.  Journeymen,  etc.,  Union, 
17  Pac.  Rep.,  217  (Cat,  1888).  See,  also, 
§  700b,  infra.  For  improving  a  water- 
power.  Troy  Iron  &  Nail  Factory  v. 
Corning,  45  Barb.,  231  (1884).  For  build- 
ing a  school-house.  Maustin  v.  Durgin, 
54  N.  H.,  347  (1874).  For  protecting 
business  interests.  Caldicott  v.  Griffiths, 
8  Ex.,  898  (1853).    See,  also,  Tenney  v. 


661 


§  504.] 


"  TRUSTS " 


AND    UNINCORPORATED    ASSOCIATIONS.       [CH.  XXIX. 


pulsion.1  A  joint-stock  company,  although  it  exercises  the  power 
to  issue  stock,  the  same  as  a  corporation,  yet  when  organized  for 
the  purpose  of  transacting  any  lawful  business  is  itself  a  lawful 
mode  of  carrying  on  business.2 


New  Eng.  Protection  Union,  37  Vt,  64 
(1864):  Abels  v.  McKean,  18  N.  J.  Eq., 
462  (1867);  Henry  v.  Jackson,  37  Vt, 
431  (1865);  Frost  v.  Walker,  60  Me., 
468(1865).  Building  associations.  Strohen 
v.  Franklin,  etc.,  Ass'n,  8  Atl.  Rep.. 
843  (Pa.,  1887) ;  Quoin  v.  Smith,  108  Pa. 
St.,  325 ;  Jackson  v.  Cassidy,  4  S.  W.  Rep., 
541  (Tex.,  1887);  Auld  v.  Glasgow,  etc., 
Society.  56  L.  T.  Rep.,  776  (1887).  A 
building  association  has  power  to  bor- 
row money  and  give  security  for  it 
North,  etc.,  Assoc,  v.  First  Nat'l  Bank, 
47  N.  W.  Rep.,  300  (Wis.,  1890).  A  budd- 
ing and  loan  association  can  foreclose 
a  mortgage  irrespective  of  payments  by 
the  mortgagor  on  his  stock  in  the  asso- 
ciation. Peoples',  etc.,  Assoc,  v.  Fur.  v. 
30  Atl.  Rep,  890  (N.  J..  1890).  For  a  full 
explanation  of  the  character  and  mode 
of  business  of  a  mutual  benefit  building 
association  or  corporation,  where  regu- 
lar dues  are  paid  and  the  money  loaned 
to  the  members  on  mortgages  without 
interest,  see  People  r.  Lowe,  117  N.  Y.. 
175  (1889).  As  to  the  stockholder's  right 
in  a  building  association  to  withdraw 
and  sue  for  his  payments  under  a  by- 
law providing  therefor  to  the  extent  of 
one-third  of  the  funds  in  the  treasury, 
see  Texas,  etc.,  Assoc,  v.  Kerr,  13  S.  W. 
Rep.,  1020  (Tex..  1890>  Concerning  a 
building  association,  stock  complication 
and  the  rights  of  creditors  of  a  stock- 
In  >lder.  see  Wilson  v.  Schoenlaub,  12  B. 
W.  Rep.,  361  (Mo.,  18S9).  In  Pennsyl- 
vania by  statute  the  law  against  usury 
does  not  apply  to  building  co-operative 
associations.  See  Albright  i:  Lafayette, 
etc.,  Assoc,  102  Pa.  St.,  411  (1883);  Win- 
get  V.  Quincy,  etc.,  Assoc.  21  N.  E.  Rep., 
12(111.,  1889).  In  a  Michigan  co-opera- 
tive savings  and  loan  corporation  if  a 
member  sells  his  stock  to  the  company, 
he  cannot  afterwards  redeem  or  sell  it- 
It  is  not  a  loan  as  other  authorities  have 


held.  Michigan  Bldg..  etc.,  Assoc,  v. 
McDcvitt,  43  N.  W.  Rep,  760  (Mich., 
1889).  See  Atwood  v.  Dumas,  21  N.  E. 
Rep,  236  (Mass.,  1889). 

1  An  action  is  not  maintainable  to  com- 
pel an  unincorporated  voluntary  polit- 
ical association  to  admit  a  person  to  mem- 
bership,  McKane  v.  Adams,  123  N.  Y., 
609  (18G0).  A  member  of  a  union  can- 
not bring  a  suit  in  equity  to  declare  void 
and  illegal  a  by-law  that  members  shall 
be  fined  for  accepting  employment  in 
connection  with  non-union  persons,  and 
to  enjoin  the  infliction  of  a  fine  upon 
himself.  His  remedy  is  at  law  or  by 
application  to  the  attorney-general. 
Thomas  v.  Musical,  etc.,  Union,  121  N. 
Y„  45  (1890).  A  by-law  that  the  mem- 
bers of  a  news  association  shall  not 
publish  news  furnished  by  other  as- 
BOCiations  in  the  same  territory  is 
valid.  The  penalty  for  violation  may 
be  suspension,  Matthews  u.  Associated 
Pre.-s.  til  Hun.  199 1  i*9i).  Bee, also, notes 
gupra.  Where  a  member  of  a  lodge 
was  expelled  for  entering  into  a  con- 
spiracy to  blackball  applicants  for  ad- 
mission, the  court  refused  to  restore 
him  by  mandamus,  and  said  that  such 
a  case  was  different  from  one  where 
property  rights  or  money  demands  are 
involved.  State  r.  ( I  rand  Lodge,  22  Atl. 
Rep.,  63  (N.  J..  1S911  Where  the  ex- 
pelled member  has  the  right  by  by-law 
to  appeal  from  the  decision  to  a  corpo- 
rate meeting,  the  courts  will  not  inter- 
fere until  such  appeal  is  taken.  Screw- 
man's,  etc.,  Assoc.  «,  Benson,  13  S.  W. 
Rep.,  379  (Tex.,  1890).  Expulsion  from 
a  club  under  a  by-law.  Commonwealth 
r.  Union  League,  19  Atl.  Rep.,  1030  (Pa., 
1890). 

8  "  It  is  too  late  to  contend  that  part- 
nerships with  transferable  shares  are 
illegal  in  this  commonwealth.  .  .  . 
The   grounds   upon    which   they   were 


602 


CH.  XXIX.] 


"trusts"  and  unincorporated  associations. 


[§  504. 


The  earlier  cases  declaring  that  joint-stock  companies  were  ille- 
gal were  so  decided  largely  because  of  the  Bubble  Act,  existing  from 
1720  to  1726.1 

Very  high  English  authority,  after  a  thorough  review  of  the 
English  cases,  gives  the  opinion  that  at  common-law  joint-stock 
associations  are  legal.2 

In  Louisiana  and  Illinois  a  contrary  conclusion  has  been  arrived  at.3 


formerly  said  to  be  illegal  in  England, 
apart  from  statute,  have  been  aban- 
doned in  modern  times."  Phillips  v. 
Blatchford,  137  Mass..  510(1884).  "These 
companies,  being  consonant  with  the 
wants  of  a  growing  and  wealthy  com- 
munity, have  forced  their  way  into  ex- 
istence, whether  fostered  by  the  law  or 
opposed  to  it."  Greenwood's  Case,  3 
De  G..  M.  &  G.,  459,  477  (1854);  Towns- 
end  i\  Goewey,  19  Wend.,  423.  A  labor- 
ing men's  association  for  the  purpose  of 
opposing  capitalists  has  been  upheld. 
Snow  v.  Wheeler,   113  Mass.,  179  (1873). 

i  Enacted,  6  Geo.  1.  ch.  18,  §  18;  re- 
pealed, 6  Geo.  4.  ch.  91.  Lindley  says 
of  this  act :  "Juster  views  of  political 
economy  and  of  the  limits  within  which 
legislative  enactments  should  be  con- 
fined have  led  to  the  repeal  of  the  stat- 
ute in  question,  which,  though  deemed 
highly  beneficial  half  a  century  ago, 
probably  gave  rise  to  much  more  mis- 
chief than  it  prevented." 

2  Lindley  on  Partnership,  192.  In  a 
thorough  and  exhaustive  note  on  this 
subject  the  learned  author  refers  to  Rex 
r.  Dodd,  9  East,  406  (1808),  holding  that 
a  company  with  a  prospectus  limiting 
the  liability  of  subscribers  is  illegal,  as  a 
trap  to  ensnare  the  unwary  ;  Josephs  v. 
Pebrer,  3  B.  &  C,  639  (1825),  holding 
that  unincorporated  companies  with 
transferable  shares  are  illegal,  and  Buck 
v:  Buck,  1  Campb.,  547  (1808).  R.  v. 
Stratton,  id.,  549,  n.,  to  same  effect. 
That  Kinder  v.  Taylor,  Coll.  on  Partn., 
917,  2d  ed.  (1810);  Du verger  v.  Fellows, 
5  Bing.,  248 ;  affirmed,  10  B.  &  C,  826, 
and  Blundell  v.  Winsor,  8  Sim.,  601, 
contained  dicta  only  so  far  as  they 
passed  on  the  legality  of  these  compa- 


nies. The  following  cases  clearly  estab- 
lish the  legality  of  joint-stock  associa- 
tions :  Harrison  v.  Heathorn,  6  Man.  & 
Gi\,  81  (1843);  Garrard  v.  Hadley,  5 
Man.  &  Gr.,  471 ;  Ex  parte  Barclay,  26 
Beav.,  177;  Ex  parte  Aston,  27  Beav., 
474;  Ex  parte  Grisewood,  4  De  G. 
&  J.,  544;  Shepparf  v.  Oxenford,  1  K. 
&  J.,  491;  R.  v.  Webb,  14  East,  516; 
Walburn  v.  Ingilby,  1  M.  &  K,  61 :  and 
see  Pratt  v.  Hutchinson.  15  East,  511  : 
Ellison  v.  Bignold,  2  J.  &  W.,  510; 
Nockels  v.  Crosby,  3  B.  &  C,  814: 
Kimpson  v.  Saunders,  4  Bing.,-5 ;  Brown 
v.  Holt,  4  Taunt,  587.  And  the  learned 
jurist  comes  to  this  conclusion  :  '*  The 
case  of  Blundell  v.  Winsor,  always  re- 
lied upon  as  an  authority  by  those  who 
contend  that  such  a  company  is  illegal, 
has  never  met  with  approbation  from 
the  bench,  nor  has  it  ever  been  fol- 
lowed. Upon  the  whole,  therefore,  it 
appears  that  there  is  no  case  deciding 
that  a  joint-stock  company  with  trans- 
ferable shares,  and  not  incorporated  by 
charter  or  act  of  parliament,  is  illegal 
at  common  law :  that  opinions  have 
nevertheless  differed  upon  this  ques- 
tion ;  that  the  tendency  of  the  courts 
was  formerly  to  declare  such  companies 
illegal;  that  this  tendency  exists  no 
longer:  and  that  an  unincorporated 
company  with  transferable  shares  will 
not  be  held  illegal  at  common  law  un- 
less it  can  be  shown  to  be  of  a  danger- 
ous and  mischievous  character,  tending 
to  the  grievance  of  her  majesty's  sub- 
jects. The  legality  at  common  law  of 
such  companies  may  therefore  be  con- 
sidered as  finally  established." 

3  See  §  503b,  supra;  21  N.  E.  Rep.,  605 
(111.,  1889). 


663 


§  504.  j 


"trusts"  and  unincorporated  association's. 


[CH.  XXIX. 


The  real  estate  of  an  unincorporated  joint-stock  association  is 
generally  held  in  the  names  of  trustees  for  its  benefit.1  The  English 
cost-book  raining  companies  were  organized  on  this  principle.2 


i  Where  the  association  holds  laud  in 
the  name  of  trustees  for  the  benefit  of 
certificate-holders,  the  latter  are  an  equi- 
table lien  on  the  proceeds  from  tbe  sale 
of  the  land,  and  even  a  consolidation 
with  another  association  does  not  dis- 
turb this  lien.  Crawford  r.  Gross 
At!.  Rep.,356  (Pa.,  1891).  A  conveyance 
of  land  to  certain  individuals  as  trustees 
for  the  members  of  an  unincorporated 
association  is  not  void  by  the  statute  of 
uses  and  trusts.  Turner  v.  I  nt  maj  an. 
etc..  Co..  18  N.  W.  Rep.,  1062  (Mich., 
1889).  In  matters  of  deeds,  usage  and 
long  lapse  of  time  may  validate  deeds 
made  out  by  an  unincorporated  associa- 
tion as  a  corporation.  Baeder  o.  Jen- 
nings, 40  Fed.  Rep.,  199  (1889).  Where 
an  unincorporated  association  owns  land 
which  is  held  in  trust  for  it  by  individ- 
uals, it  may.  upon  becoming  incorpo- 
rated, comp  I  the  trustees  to  deed  to  it 
the  land.  Organized  Labor  Hall  v. 
Gebert.  22  Atl.  Rep.,  578  X.  J.,  1891%  A 
deed  to  a  corporation  not  in  existence 
is  void.  Provosl  i».  Morgan's,  etc.,  s.  Co., 
8  S.  Rep.,  584  (La.,  1890).  If  a  tr. 
who  holds  land  for  the  benefit  of  a  cor- 
poration commits  a  breach  of  trust,  any 
stockholder  may  cause  him  to  be  re- 
moved. Fisk  r.  Patton,  27  Pac.  Rep.,  1 
(Utah,  1891).  A  new  unincorporated 
association  cannot  claim  the  land  of  the 
one  which  it  succeeds  where  the  mem- 
bers are  not  the  same.  Allen  i:  Long, 
16  S.  W.  Rep..  43  (Tex..  1891).  Although 
the  association  has  been  dormant  for 
many  years,  yet  a  new  association 
formed  of  part  of  the  members  of  the 
old  cannot  convey  the  land  of  the  old 
one.  Allen  v.  Long,  16  S.  W.  Rep.,  43 
(Tex.,  1891).  A  deed  to  an  unincorpo- 
rated association  vests  title  in  it  as  soon 
as  it  is  incorporated.  Clifton,  etc.,  Co. 
v.  Randall.  47  N.  W.  Rep.,  905  (Iowa. 
1891).  A  deed  to  a  corporation  not  in 
existence  is  void.     Provost  r.  Morgan's, 


etc.,  S.  Co.,  8  S.  Rep..  584  (La.,  1890).    Cf. 
ch.  XLI.  infra. 

-These  mining  companies  existed  in 
the  counties  of  Cornwall  and  Devon- 
shire. They  were  first  heard  of  in  the 
courts  about  the  year  1850.  Their  plan 
of  organization  and  operation  arose 
from  custom.  Their  organization  and 
mode  of  business  were  as  follows : 
Many  persons,  desirous  of  working  a 
mine,  would  cause  the  title  or  lease 
thereto  to  be  taken  in  the  names  of  one 
or  more  persons  called  trustees.  The 
business  was  then  carried  on  by  an 
agent  called  a  "purser."  or  by  a  board 
of  managers  elected  by  the  participants, 
who  were  culled  tbe  "adventurer-." 
The  latter,  of  course,  were  (he  bene- 
ficiaries of  the  "trust.*'  Any  advent- 
urer bad  a  right  to  transfer  bis  interest 
to  a  transferee.  There  was  DO  fi 
capital  stock.  Calls  for  money  were 
made  <»n  the  adventurers,  according  to 
their  sli  often  a<  it  was  needed. 

Kur  a  full  Statement  of  the  character  of 
■  mining  companies,  see  Kittow  r. 
Liskeard  Union,  L.  R.,  10  Q.  B.  D. 
(1874)l  See,  also,  In  n  Bodwin,  etc., 
Co.,  28  !'■.  :iv..  870  (1857),  holding  that 
the  court  would  not  take  judicial  notice 
of  the  nature  of  a  cost-book  mining 
company  :  Bybart  v.  Parker,  4  C.  B.  (N. 
S.),209  (1858),  holding  that  the  purser 
could  not  sue  at  law  on  an  unpaid  call; 
In  re  Wrysgan,  etc.,  Co.,  28  L  J.  (<  h.\ 
894  (1859),  as  to  right  to  relinquish 
shares,  also  describing  the  functions  of 
the  purser  and  managing  directors; 
Johnson  v.  Goslett,  18  C  R.  728(1856), 
affirmed  in  8  C.  B.  (N.  &),  569  (1857), 
giving  the  full  terms  of  the  articles  of 
agreement;  Thomas  r.  Clarke,  18C.  R, 
662  1 1856),  where  the  court  said  :  "Every 
partnership  has  a  right  to  make  its  own 
regulations  as  to  the  mode  of  transfer- 
ring shares  or  interests  therein  :  "  In  re 
Prosper,  etc.,  Co.,  L  R,  7  Ch.,  286  (1878fc 


664 


CH.  XXIX.] 


"  TRUSTS  " 


AND    UNINCORPORATED    ASSOCIATIONS. 


[§  505. 


§  505.  Statutory  joint-stock  company. — There  is  an  essential  dif- 
ference between  a  joint-stock  company  as  it  exists  at  common  law 
and  a  joint-stock  company  having  extensive  statutory  powers  con- 
ferred upon  it  by  the  state  within  which  it  is  organized.     The  lat- 


relative  to  rights  upon  a  resignation ; 
Mayhew's  Case,  5  De  G.,  M.  &  G.,  837 
(1854),  holding  that  by  a  transfer  of  his 
share  "  the  liability  of  the  transferrer  is 
entirely  divested  from  him  and  passes 
to  the  transferee ;  "    In  re  Wrysgan  Co., 

5  Jur.  (N.  S.),  215  (1859),  where  the  court 
said :  "  The  various  phases  of  absurdity 
which  these  joint-stock  companies  dis- 
play are  such  that  the  marvel  in  my 
mind  is  daily  increasing  how  any  man 
can  become  a  member  of  a  joint-stock 
company ;  "  Northey  v.  Johnson,  19  L. 
T.,  104  (1852),  holding  that  after  trans- 
fer the  transferrer  is  not  liable  for  the 
debts  incurred. 

It  is  clearly  established  that  the  ad- 
venturers in  a  cost-book  mining  com- 
pany ai-e  personally  and  individually 
liable  as  partners  for  the  debts  incurred 
in  the  enterprise.  Peel  v.  Thomas,  15 
C.  B.,  714  (1855);   Newton  v.  Daly,  1  F. 

6  F.,  26  (1858) ;  Harvey  v.  Clough,  8  L. 
T.  (N.  S.),  324  (1863);  Tredwen  v.  Bourne, 
6  M.  &  W.,  461  (1840) ;  Ellis  v.  Schmoeck, 
5  Bing..  521  (1829);  Lauyon  v.  Smith,  3 
B.  &  S.,  938  (1863),  holding  a  transferrer 
liable  for  debts  incurred  previous  to 
the  transfer.  To  same  effect,  Teake  v. 
Jackson,  15  W.  R.,  338  (1867).  They  are 
liable,  also,  to  indemnify  the  directors 
or  trustees.  Ex  parte  Chippendale,  4 
De  G,  M.  &  G,  19,  52  (1854).  See,  also, 
Birch's  Case,  2  De  G  &  J.,  10  (1857), 
and  Fenn's  Case,  4  De  G,  M.  &  G.,  285 
(1854),  where  the  members  who  had 
exercised  their  right  to  withdraw  were 
held  not  liable.  In  Hart  v.  Clarke,  6 
De  G,  M.  &  G,  232  (1855),  an  advent- 
urer compelled  the  company  to  ac- 
count to  him  for  his  share  of  the  profits. 
The  adventurers  have  no  interest  in  the 
land,  and  consequently  a  transfer  of 
their  shares  is  not  a  transfer  of  an 
interest  in  land.  Sparling  v.  Parker, 
9  Beav.,  450;  Powell  v.  Jessopp,  18  C. 


B.,  336  (1856) ;  Hayter  v.  Tucker,  4  K. 
&  J.,  243  (1857).  The  cost-book  mining 
company  was  frequently  spoken  of  as  a 
species  of  joint-stock  company.  In  re 
Wrysgan  Co.,  supra;  Teake  v.  Jackson, 
15  W.  R.,  338  (1867);  Watson  v.  Sprat- 
ley,  10  Ex.,  222  (1854).  See  Watson  v. 
Spratley,  supra,  where  the  court  said  : 
"The  interest  of  the  shareholder  in  the 
great  incorporated  joint-stock  compa- 
nies, and  in  the  smallest  mine  con- 
ducted upon  the  cost-book  principle,  is, 
in  its  essential  nature  and  quality,  iden- 
tical. For  an  American  mining  case 
applying  similar  principles,  see  Treat  v. 
Hiles,  32  N.  W.  Rep.,  517  (Wis.,  1887). 
It  is  well  settled  that  the  shareholders 
in  an  unincorporated  association  cannot 
convey  or  dedicate  to  the  public  any 
land  that  may  be  held  by  trustees  for 
its  benefit.  Ward  v.  Davis,  3  Sandf. 
Rep.  (N.  Y.),  502  (1850).  The  interest  of 
one  of  the  cestnis  que  trust  of  such  a 
trust,  consisting  of  real  estate,  is  per- 
sonalty, and  descends  as  such  upon  his 
death.  Mallory  v.  Russell,  32  N.  W. 
Rep.,  102  (Iowa,  1887).  As  to  the  effect 
of  a  deed,  grant  or  bequest  of  real 
estate  to  an  unincorporated  association, 
see  Webb  v.  Weatherhead,  17  How., 
576  (1854) ;  Gerard's  Titles  to  Real  Estate, 
p.  490  (2d  ed.);  Owens  v.  Missionary 
Soc.  of  the  M.  E.  Church,  14  N.  Y„  380 
(1867);  Washburn  on  Real  Prop.,  vol. 
Ill,  p.  264  (4th  ed.) ;  Holmes  v.  Mead,  52 
N.  Y.,  332  (1873);  Goesele  v.  Bimeler,  5 
McLean,  223(1851);  German  Land  As- 
sociation v.  Scholler,  10  Minn.,  331 
(1865);  Peabody  v.  Eastern  Methodist 
Society  in  Lynn,  87  Mass.,  540  (1857); 
Towar  v.  Hale,  46  Barb.,  361  (1866); 
Dart  on  Vendors  and  Purchasers,  vol.  I, 
p.  21  (5th  ed.);  Chapm  v.  First,  etc., 
Soc,  74  Mass.,  582  (1857);  African,  etc., 
Church  v.  Conover,  27  N.  J.  Eq.,  157 ; 
Leonard    v.    Davenport,  58    How.  Pr., 


665 


§  505.]  "  TRUSTS  "    AND    UNINCORPORATED    ASSOCIATIONS.       [ciI.  XXIX. 


ter  kind  of  joint-stock  companies  are  found  in  England  and  in  the 
state  of  New  York.  To  such  an  extent  have  these  statutory  powers 
been  conferred  on  joint-stock  companies  that  they  differ  from  cor- 
porations only  in  not  having  a  seal,  and  in  the  members  not  being 
exempt  from  liability  as  partners  for  the  debts  of  the  company. 
Accordingly,  joint-stock  companies,  both  those  of  England  and 
New  York,  have  been  held  to  be  corporations  in  many  respects 
although  expressly  declared  by  statute  not  to  have  that  character.1 


3S4;  Sherwood  tt  American  Bible  Soc., 

4  Abb.  App.,  227 ;  McKeon  tt  Kearney,  57 
How.    Pr.,    349;    Gibson    r.    McCall,  1 
Rich.,    174;    Byam    v.    Beckford,     140 
Mass.,  31  (1885),  holding  that,  although 
a  deed  to  the  association  is  ineffectual, 
yet  that  it  passes  title  to  the  members 
of  the  association.     They  cannot  take 
by    devise    in    New    York.      "White  v. 
Howard.  46  N.  Y..  144  (1871);  Trustees, 
etc.,  v.  Hart's  Ex'rs,  I  Wheat,  1  (1819) 
1  See  Thomas  tt  Dakin.  22  Wend,  9 
(1830);  Warner  v.  Beers.  25  Wend.,  103; 
Parmley  V.  Tenth  Ward  Bank.  3  Edw., 
395  (1838):  People  tt  Watertown,  1  Hill. 
610(1841):  Bank  of  Watertown  v.  Wa- 
tertown. .25    Wend.,    686    (1841);    Wil- 
loughby  v.  Comstock.  3  Hill,  389  (1 
Leavitt    o.    Yates,    4    Edvr..   l::t  ,1840); 
L.  avitt  tt  Tyler,  1  Sandf.  Ch„  007;  Peo- 
ple v.  Niagara,  4  Hill,  00  (1842);  Bois- 
gerard   v.    New  York    Banking  Co..    2 
Sandf.  Cb..  231  (1844);  Matter  of  Bank 
of  Danville,  6  Hill,  370;  Gifford  tt  Liv- 
ingston, 2  Den.,  380  i  L845  ;  Case  tt  Me- 
chanics' Banking   Ass'u,  1  Sandf.,  693; 
Leavitt    tt    Blatchford,    17   N.    Y.   501 
(1842);  5  Barb.,  9;  Culver  tt  Sanford,  8 
Barb..  00".   (1850);    Gillett  tt    Moody,  3 
N.   Y..   478   (1850);    Talmage  r.  Pell,  7 
N.  Y,  328  (1852);  Tracy  w  Talmage,  18 
Barb.,  456(1854);  Gillett  tt  Phillips,  13 
N.  V..  114(1855);  Falconer  tt  Campbell, 
2  McLean,  195  (1840);  Duncan  r.  Jones, 
32  Hun,   12  (1884).     The  English  joint- 
stock    company    is    much    the    same. 
'•The  company  has  a  name  as  an  asso- 
ciation, maintaining  the  identity  of  the 
body  through  all  changes  of  its  mem- 
bers; its  property  is  divided  into  trans- 
ferable shares,   and    it    has    conferred 


upon  it  the  legal  capacity  to  sue  and  be 
sued  in  the  name  of  one  of  its  officers, 
and  such  a  suit  .  .  .  may  be  brought 
by  or  against  a  member  as  well  as 
a  third  person."  It  is  a  corporation 
though  the  English  statute  declares  it 
is  not.  Oliver  tt  Liverpool  &  London 
Life  A:  Fire  Ins.  Co.,  100  Mass.,  531 
(1868);  affirmed,  sub  nom.  Liverpool  Ins. 
Co.  a  Massachusetts,  1<>  Wall..  566(1870). 
So,  also,  with  the  New  York  joint-stock 
companies.  Fargo  tt  Louisville,  New 
Albany  &  Chicago  R'y  Co..  6  Fed.  Rep., 
787(1881);  Sanford  v.  Board  of  Supervis- 
ors of  N.  Y..  15  How.  Pr.,  172  (1858); 
Waterbury  tt  Merchants'  Union  Ex. 
Co.,  50  Pari...  157  (1867).  As  regards 
the  liability  of  the  members  for  the 
debts  of  the  company,  it  is  held  to  be  a 
copartnership  Boston  &  Albany  R.  R 
Co.  tt  Pearson,  128  Mass.,  445  (1880): 
Oliver  tt  Liverpool  &  London  Life  & 
Fire  Ins.  Co.,  ubi  supra.  The  refusal 
of  the  legislature  to  call  them  corpora- 
tions is  important  as  cutting  off  the  ex- 
emption of  the  members  from  liability 
to  creditors:  an  exemption  which,  at 
common  law,  belongs  to  all  corpora- 
tions. Joint-stock  companies  in  Eng- 
land have  always  been  largely  statu- 
tory. See  Van  Sandau  v.  Moore,  1  Russ., 
391  [*441],  (1826).  In  the  state  of  New 
York  the  English  decisions  on  these 
companies  are  doubtless  good  authority, 
since  they  exist  under  statutes  which 
are  much  alike.  A  New  York  joint- 
stock  association  cannot  sue  as  such  in 
the  federal  courts.  Chapman  tt  Barney, 
129  U.  S.,  677  (1889).  In  New  York  the 
statutes  relative  to  taxation  of  corpora- 
tions do  not  apply  to  joint-stock  com- 


666 


CH.  XXIX.] 


"trusts"  and  unincorporated  associations. 


50G-8. 


§  506.  Joint-stock  companies  may  arise  hy  implication  of  law. — 
Joint-stock  companies  are  generally  formed  by  the  mutual  agree- 
ment and  direct  intent  of  the  parties.  They  may,  however,  arise 
by  implication  of  law.  Thus,  an  ineffectual  attempt  at  an  incorpo- 
ration may  make  the  parties  members,  not  of  a  corporation,  but  of 
a  joint-stock  company.1  In  like  manner,  after  the  charter  of  a  cor- 
poration expires  and  the  parties  continue  to  do  business,  they  do 
so  as  a  joint-stock  company.2 

§  507.  How  a  person  becomes  a  member —  Transfers.—  A  person 
becomes  a  member  of  a  joint-stock  company  by  any  act  which  in- 
dicates an  intent  to  become  a  member  on  his  part,  and  a  consent 
or  acquiescence  therein  by  the  company  itself.3  He  may  also  be- 
come a  member  by  a  transfer  made  to  him  of  another  member's 
interest,  unless  the  articles  of  association  restrict  the  right  of 
transfer.4 

§  508.  Liability  of  members  to  creditors  and  to  the  company.— 
A  joint-stock  company  is,  in  regard  to  the  liability  of  its  members 
to  creditors  of  the  company,  a  partnership;5  its  members  are  liable 
as  partners;6  and  the  ordinary  rules  of  partnership  exist  between 


pauies.  They  are  not  corporations. 
People  v.  Coleman,  133  N.  Y.,  279  (1892) ; 
Hoey  v.  Coleman,  46  Fed.  Rep.,  221 
(1891).  An  unincorporated  joint-stock 
association  is  legal  in  New  York. 
Under  the  statutes  of  that  state  such 
associations  are  corporations  for  many 


60  Me.,  468  (1872).  But  not  of  subscrip- 
tion without  any  participation.  Hedge 
&  Home's  Appeal.  63  Pa.  St.,  273  (1869). 
i  Transfer  of  the  certificate  of  stock 
has  such  effect  although  not  regis- 
tered in  the  stock-book.  Butterfield  c. 
Beardsley,  28  Mich  ,  412  (1874).     Trans- 


purposes.     People  v.  Wemple,  117  N.  Y,  fer  may  be  before  the  certificates  are 

136  (1889).  issued.     Butterfield  v.  Spencer,  1  Bosw., 

1  Re  Mendenhall,  9  Bankr.  Reg.,  497 ;  1  (1856).     But  if  the  articles  of  associa- 

Whipple  v.   Parker,  29   Mich.,  369,  380  tion   prohibit    transfer,    the    transferee 

(1874) ;  and  see  ch.  XIII.     Cf.  Foster  v.  takes  only  the  right  to  profits,  not  as  a 

Pray,  29  N.  W.  Rep.,  155  (Minn.,  1886).  partner  but  as  an  assignee.     Harper  v. 

-  National  Bank  of  Watertown  v.  Lon-  Raymond,  3  Bosw.,  29  (1858).     So  also 

don.  45  N.  Y.  410  (1871).  where  transfer  is  allowed  only  on  con- 

3  The  formalities  need  be  no  greater  sent    of    certain    officers    who    refuse, 

than  in  forming  an  ordinary  partner-  Kingman  v.  Spurr,  7  Pick.,  234  (1828). 

ship.     National  Bank  v.  Van  Derwerker,  A  transfer  does  not  carry  dividends  al- 

74   N.   Y.  234  (187S);  Pettis  v.  Atkins,  ready   declared.     Harper  v.   Raymond. 

60  111.,  454  (1871);  Machinists'  Bank  v.  ubi  sujwa.     If  a  transfer  is  improperly 

Dean,  124  Mass.,  81  (1878).     Cf.  Volger  allowed,   the  company  is  liable  to  the 

v.  Ray,  131  id.,  439  (1881).     It  is  not  nee-  party  injured.     Cohen  v.  Gwynn,  4  Md. 


essary  that  certificates  of  the  stock  be 
issued  in  order  to  constitute  member- 
ship. Dennis  v.  Kennedy,  19  Barb,  517 
(1854);  Boston  &  Albany  R.  R.  Co.  v. 
Pearson,  128  Mass.,  445  (1880).  Evidence 
of  subscription  and  payment  of  an  as- 
sessment is  sufficient.     Frost  v.  Walker, 


Ch.,  357  (1848).  As  to  the  liability  of 
the  transferee  see  next  section. 

5  Kellogg  Bridge  Co.  v.  United  States, 
15  Ct.  of  CI.,  Ill;  Allen  v.  Long,  16  S. 
W.  Rep,  43  (Tex.,  1891).  Cf.  Chandler 
v.  Brainard,  31  Mass.,  285  (1833). 

6Westcott  v.   Fargo,  61    N.  Y.,  543 


667 


§  508.] 


"trusts"  and  unincorporated  associations. 


[CH.  XXIX. 


the  members  themselves,1  including  the  right  to  contribution  as  be- 
tween themselves,2  and  also  between  a  member  and  third  persons.3 
The  question  whether  a  stockholder  may  limit  his  common-law  or 


(1875);  Witherhead  v.  Allen,  3  Keyes, 
562 ;  Cross  v.  Jackson,  5  Hill,  478  (1843) ; 
Skinner  v.  Dayton,  19  Johns.,  513  (1822); 
Wells  v.  Gates,  18  Barb.,  554  (1854); 
Boston  &  Albany  R.  R,  Co.  v.  Pearson, 
128  Mass.,  445  (1880):  Taft  v.  Ward,  106 
Mass.,  518  (1871);  S.  C,  111  Mass.,  518 
(1873);  Bodwell  v.  Eastman.  106  Mass., 
525  (1871);  Tappan  v.  Bailey,  45  Mass., 
529  (1842);  Cutter  v.  Estate  of  Thomas, 
25  Vt,  73  (1852);  Frost  v.  Walker,  60 
Me.,  468  (1872);  Kramer  v.  Arthurs,  7 
Pa.  St.,  165  (1847);  Gott  v.  Dinsmore, 
111  Mass.,  45  (1872);  Newell  v.  Borden. 
128  id.,  31  (1879).  See,  also,  §  504.  Con- 
tra, Irvine  v.  Forbes,  11  Barb,  587 
(1852);  Livingston  v.  Lynch,  4  Johns. 
Ch.,  573  (1820;,  overruled  as  dicta  by 
Townsend  v.  Goewey,  19  Wend..  428 
(1838);  Ridenour  a  Mayo,  40  Ohio  St,  9 
(1883).  In  Frost  v.  Walker,  60  Me.,  468 
(1872),  the  court  said:  "An  unincorpo- 
rated joint-stock  company  is  a  mere 
partnership,  and  each  member  is  per- 


sonally liable  for  all  its  debts.  It  is  im- 
portant for  the  public  to  know  that  if 
persons  connect  themselves  with  a  com- 
pany of  this  description  they  are  every 
one  of  them  liable  to  pay  the  demands 
upon  it."  The  officers  who  enter  into  a 
contract  for  the  company  are  liable 
thereon  personally.  "  It  is  immaterial 
whether  they  be  so  held  because  they 
held  themselves  out  as  agents  for  a 
principal  that  had  no  existence,  or  on 
the  ground  that  they  must,  under  the 
contract,  be  regarded  as  principals,  for 
the  simple  reason  that  there  is  no  other 
principal  in  existence."  Lewis  «.  Tiltou, 
64  Iowa,  220  (1884);  FredenhaU  a  Tay- 
lor, 26  Wis.,  286  1 1870)  A  lease  to  an  un- 
incorporated  association  binds  person- 
ally all  members  assenting  to  it.  Reding 
r.  Anderson,  84  N.  W.  Rep.,  800  (Iowa, 
1887).  Members  of  co-operative  trading 
associations  are  liable  as  partners  for 
the  debts  of  the  concern.  Davison  v. 
Holden,  10  Atl.   Rep.,  515  (Conn.,  1887). 


i  Bullard  r.  Kinney,  10  Cal.,  60  (1858). 
The  remedy  of  one  member  against 
another  is  in  equity.  Huth  v.  Hum- 
boldt, etc.,  23  Atl.  Rep.,  1084  (Conn., 
1892).  One  member  cannot  sue  another 
at  law  for  his  part  of  the  profits  of  the 
business,  which  is  under  control  of 
the  latter.  Myrick  r.  Dame,  68  Mass.. 
248  (1852;;  Dull  r.  Maguire,  99  Mass., 
300  (1868);  Whitehouse  v.  Sprague,  7 
Atl.  Rep-  1?  (Conn..  1886).  Person  in- 
duced to  put  money  into  an  enterprise 
on  false  representations  that  it  is  a  joint- 
stock  company  may  recover  back  his 
money.  Libby  i\  Ahrens,  2  S.  E.  Rep., 
387  (S.  C,  1887).  Director  of  an  unin- 
corporated association  who  contracts 
for  it  is  not  liable  personally.  Abbott 
v.  Cobb,  17  Vt,  593  (1845);  Alexander 
v.  Worman,  6  H.  &  N.,  100  (I860). 

2Morrissey    v.    Weed.    12    Hun.    401 
(1878);   Skinner  v.  Dayton,   19  Johns., 


513  (1822);  Ray  r.  Powers,  134  Mass., 
22  (18881:  Witman  v.  Porter,  107  Masa, 
622  (1871);  Tyrrell  v.  Washburn,  88 
Mass.,  466  (1863).  But  not  if  the  expense 
was  incurred  contrary  to  the  articles  of 
association.  Danforth  v.  Allen,  8  Mete, 
334  (1844);  Clark  v.  Reed,  28  Mass.,  446 
(1831).  One  stockholder  cannot  sue  an- 
other at  law  for  his  part  of  the  assets. 
Whitehouse  v.  Sprague,  7  AtL  Rep.,  17 
(1886). 

3  His  interest  cannot  be  reached  by 
execution.  Kramer  i\  Arthurs,  7  Pa. 
St..  165  (1847).  But  see  Lindley  on 
Parte.  (2d  ed.),  696.  Acquiescence  in 
the  dealings  of  other  members  with 
third  persons  binds  a  member.  Penn. 
Ins.  Co.  r.  Murphy,  5  Minn.,  36  (1860); 
Wells  v.  Yates.  18  Barb,  554  (1854). 
For  the  liability  as  affected  by  the  trans- 
fer of  stock,  see  Smith  r.  Virginia,  33 
Me.,  148  (1851). 


668 


CH.  XXIX.] 


"  TRUSTS " 


AND    UNINCORPORATED    ASSOCIATIONS. 


[§  508. 


statutory  liability  by  an  express  contract  with  the  company's  cred- 
itors to  that  effect  is  discussed  elsewhere.1  The  member's  subscrip- 
tion may  be  enforced  by  a  suit  at  law.2 


And  sometimes  are  liable  also  for  debts 
contracted  after  they  have  sold  their 
stock.  See  Shamburg  v.  Abbott,  4  Atl. 
Rep.,  518  (Pa.,  1886).  The  members  of 
an  unincorporated  association  to  en- 
force the  liquor  laws  are  not  liable  to  an 
attorney  for  services  in  prosecuting 
cases.  McCabe  v.  Goodfellow,  133  N.  Y., 
89  (1892).  The  vice-president  and  the 
treasurer  of  an  unincorporated  fair  as- 
sociation are  liable  for  premiums  of- 
fered. Murray  v.  Walker,  48  N.  W.  Rep., 
1075  (Iowa,  1891).  Members  of  a  joint- 
stock  company  are  personally  liable  for 
the  debts  of  the  company.  Durham,  etc., 
Co.  v.  Clute,  17  S.  E.  Rep.,  419  (N.  C, 
1893).  The  members  of  a  joint-stock 
company  are  liable  for  its  debts.  Peo- 
ple v.  Coleman,  133  N.  Y.,  279  (1892).  In 
the  case  of  Seacord  v.  Pendleton,  55 
Hun,  579  (1890),  the  court  reviewed  the 
authorities  and  decided  that  the  stock- 
holders in  a  bank  which  was  not  incor- 
porated were  not  liable  to  depositors, 
there  being  no  allegation  that  the  stock- 
holders had  any  articles  of  association 
or  partnership,  or  had  performed  any 
act,  or  had  knowledge  of  the  business 
or  consented  thereto.  A  subscription 
agreement  prior  to  incorporation  in 
which  the  parties  state  the  number  of 
shares  taken  and  in  which  they  agree 
to  pay  the  contractors,  who  are  parties 
to  the  contract,  a  specified  sum  is  a 
joint  undertaking  on  the  subscriber's 
part.  The  contractors  may  hold  them 
liable  as  partners,  the  agreement  not 
limiting  their  liability  to  the  number  of 
shares  taken  by  each.  An  immaterial 
alteration  after  a  part  have  signed  does 
not  release  any  one.  The  agreement  of 
the  contractors  to  hold  each  subscriber 
liable  only  on  his  subscription  if  he 
would  pay  that  is  without  consideration 
and  void.  Any  subscriber  could  ex- 
pressly limit  his  liability  to  his  subscrip- 
tion.   Davis  v.  Shafer,  50  Fed.  Rep.,  764 


(1892).  If  proof  is  given  by  plaintiff 
that  a  copartnership  existed  and  the  de- 
fense is  that  it  was  a  corporation,  the 
defendant  must  prove  that  fact.  Al- 
though the  company  had  a  president 
and  secretary,  this  in  itself  does  not  raise 
a  presumption  of  a  corporation.  Clark 
v.  Jones,  6  S.  Rep.,  362  (Ala.,  1889).  A 
notice  to  stockholders  that  they  will  be 
held  liable  under  a  statute  is  not  served 
on  the  members  of  an  unincorporated 
association  by  serving  such  notice  on 
the  chief  officer  of  such  association. 
Wells  v.  Robb,  23  Pac.  Rep.,  148  (Kan., 
1890).  Where  a  creditor  of  a  bank  sues 
the  stockholders  as  partners  the  burden 
of  proof  is  on  him  to  prove  that  no  cor- 
poration existed,  it  being  shown  that 
the  bank  always  acted  as  a  corporation 
and  held  itself  out  as  such  and  was  sup- 
posed so  to  be  by  the  stockholders. 
Hallstead  v.  Curtis,  22  Atl.  Rep.,  977 
(Pa.,  1891).  The  supposition  or  belief  of 
the  members  that  they  are  not  liable  be- 
yond the  par  value  of  their  stock  does 
not  protect  them  from  liability.  Far- 
num  v.  Patch,  60  N.  H.,  294 ;  and  see 
§  233,  note. 

1  See  §  216,  supra. 

2  If  the  subscription  runs  to  the  trust- 
ees personally  they  may  sue  thereon. 
Otherwise  all  must  join  as  plaintiffs. 
Cross  v.  Jackson,  5  Hill,  478  (1843); 
Townsend  v.  Goewey,  19  WTend.,  423 
(1838).  It  seems  that  a  subscription  to 
a  voluntary  association  is  enforceable 
by  a  corporation  which  took  the  place 
of  the  proposed  voluntary  association, 
where  the  subscriber  knew  of  the 
change  of  plan  and  did  not  object 
City  Sav.  Bank  v.  Whittle,  63  N.  H.,  587 
(1885).  Subscription  to  its  stock  is  col- 
lectible the  same  as  subscriptions  to 
stock  of  corporations.  Bullock  v.  Fal- 
mouth, etc.,  Co.,  3  S.  W.  Rep.,  129  (Ky., 
1887). 


609 


§  508.]  "  TRUSTS "    AND    UNINCORPORATED    ASSOCIATIONS.       [CH.  XXIX. 

In  enforcing  the  liability  of  members  of  a  joint-stock  company 
by  a  suit  in  equity,  if  the  parties  are  very  numerous  or  unknown 
they  need  not  all  be  joined  as  defendants.1  Suits  by  or  against  un- 
incorporated associations  must  be  brought  in  the  name  of  all  the 
members.2  A  member  who  transfers  his  interest  is  nevertheless 
liable  for  precedent  debts  of  the  association.3  A  purchaser  of  stock 
in  an  unincorporated  association  is  not  liable  for  debts  contracted 
before  he  became  a  member.4  The  rights  and  liabilities  of  a  mem- 
ber depend  upon  the  law  of  the  place  of  the  domicile  of  the  com- 
pany itself.5  The  rules  applicable  to  stockholders  in  corporations 
are,  by  analogy,  applied  to  members  in  these  companies,  especially 
as  regards  their  defenses  to  subscriptions6  and  meetings  of  the 
com  pan  v.7  These  associations  cannot  be  taxed  on  a  franchise,  as 
corporations  may  be.8 


'Mandeville  v.  Riggs,  2  Pet,  482 
(1829).  reversing  Rigfts  r.  Swann,  3  Cr., 
183.  See,  also,  Phipps  v.  Jones,  20  Pa. 
St,  260  (1853);  Dennis  v.  Kennedy,  19 
Barb.,  517  (1854);  Wo,, a  v.  Draper,  21 
Barb.,  187  (1857);  Smith  v.  Lockwood,  1 
Code  Rep.  X.  S.),  319  (1851);  Birming- 
ham v.  Gallagher,  113  Mass.,  10 
Snow  v.  Wheeler,  118  Maes.,  179  [It 
Pipe  r.  Bateman,  1  Iowa,  369  (18 
Marshal]  v.  Loveless,  Cam.  &  N.,  217 
(1801);  Lloyd  r.  Loaring,  6  Vea,  77:; 
(1802);  Deem-  r.  Albany,  etc.,  Line,  14 
Blatch.,  471  (1878).  As  regards  the  prac- 
tice in  bringing  action-  against  mem- 
bers of  an  unincorporated  association. 
see  Kueeland  on  Attachments,  ch.  XVI 

i  Williams  v.  Bank  of  Mich.,  7  W«>n,l., 
542(1*31);  Detroit,  etc.,  Bank  v.  Detroit 
etc..  Verein,  44  Mich.,  31:',  (1880);  Mears 
v.  Moulton,  30  Bid.,  142  [1868);  Mo- 
Giearyv.  Chandler,  58  Me.,  587  (1870). 
One  or  more  members  of  an  unincor- 
porated association  may  sue  for  the 
benefit  of  all.  Liggett  U  Ladd,  21  Pac. 
Rep.,  133  (Oreg.,  1888). 

'Morgan's  Case,  1  De  G.  &  Sm..  750 
(1849):  Tyrrell  v.  Washburn,  88  Mass., 
466  (1*03). 

♦  Stockdale  r.  Moginn,  19  AtL  Rep.,  295 
(Pa.,  1S90).  Transferee  of  a  share  m  an 
unincorporated  company  is  liable  for  all 
debts  existing  at  the  time  of  or  after  the 
transfer.     Taylor  r.    Hill,  1    N.   R,  566 


(1863).  Although  a  stockholder  pur- 
chased his  stock  from  the  association 
which  was  insolvent  at  the  time,  yet  he 
cannot  offset  this  as  capital  contributed 
by  him.  BarndoUar  v.  De  Bois.  21  Ail. 
Ei<  p.,  988  (Pa.,  1891). 

"-Cutler  v.  Estate  of  Thomas.  25  Vt, 
78(1852* 

6  That  the  full  capital  stock  must  be 
subscribed  before  any  subecriptioD  is 
collectible,  see  Bray  r.  Farwell,  81  N.  Y., 
600  (1880}  Contra,  Tappan  v.  Bailey, 
45  Mass.,  529  (1842);  Boston  &  Albany 
R  R  Co.  v.  Pearson.  128  Masa,  445 
(1880);  Pitchford  v.  Davis,  5  Mees.  & 
W.,  2  (1839).  Forfeiture  of  stock  re- 
leases the  member  only  as  to  subse- 
quent debts.  Skinner  v.  Dayton,  19 
Johns.,  513 

7  Notice  of  the  time  and  place  must 
be  given.  Irvine  V.  Forbes,  11  Barb., 
587  (1852),  The  members  cannot  act 
except  in  meeting  assembled.  The  ma- 
jority do  not  rule.  Livingston  r. 
Lynch.  4  Johns.  Ch.,  573  (1820);  Irvine 
?'.  Forbes,  ubi  supra.  But  the  articles 
may  provide  otherwise.  "Waterbury  v. 
Merchants'  Union  Ex.  Co.,  50  Barb.,  157 
(1867). 

8HoadIey  v.  County  Com'rs,  105 
Mass.,  519  (1870);  Gleason  r.  McKay, 
134  Masa,  419  (1878).  holding  the  statute 
to  be  unconstitutional     Cf.  %  505. 


670 


CH.  XXIX.] 


"trusts"  and  unincorporated  associations. 


[§§  509,  510. 


§  509.  Actions  by  members  against  officers  and  the  company. — 
The  members  may  bring  an  action  to  remedy  the  fraud,1  ultra  vires 
acts2  and  negligence3  of  the  trustees.  In  New  York  a  member 
may,  by  statute,  sue  the  company,  in  the  same  manner  that  a  stock- 
holder in  a  corporation  may  sue  the  corporation.4 

§  510.  Dissolution. —  Where  the  term  of  existence  of  a  joint-stock 
company  is  fixed  by  its  articles  of  association,  it  cannot  be  dis- 
solved at  the  instance  of  a  member  before  the  expiration  of  that 
time.5     It  may  be  dissolved  where  the  enterprise  becomes  wholly 

1  The  other  members  are  not  proper    ultra  vires  act  he  is  not  liable  thereon. 


parties.  Boody  r.  Drew,  46  How.  Pr., 
459  (1874).  An  officer  may  be  enjoined 
but  not  removed.  The  suit  must  not 
be  in  the  interest  of  a  rival  company. 
Waterbury  v.  Merchants'  Union  Ex- 
press Co.,  50  Barb.,  157  (1867).  Trustees 
receiving  gifts  are  liable  therefor  to  the 
company.  In  re  Fry,  4  Phil.  Rep.,  129 
(1860).  Cannot  sell  to  the  company. 
Robbins  v.  Butler,  24  111.,  387  (1860). 
Treasurer-  may  be  compelled  to  pay 
over  funds  belonging  to  the  company. 
Sharp  v.  Warren,  6  Price,  131  (1818). 
The  trustees  are  liable  in  tort  for  their 
frauds  on  the  company.  Dennis  v.  Ken- 
nedy, 19  Barb,  517  (1854).  A  committee 
to  build  may  be  made  to  account  where 
they  secretly  contract  with  themselves, 
though  the  contract  is  nominally  with 
other  persons.  Whitman  v.  Bowden,  2 
S.  E.  Rep,  630  (S.  C,  18S7). 

2  A  member  cannot  be  compelled  to 
accept  the  stock  of  another  company 
for  his  interest,  a  consolidation  of  the 
two  having  been  made.  Frothingham 
v.  Barney.  13  Hun,  366.  But  he  may 
not  be  able  to  prevent  the  consolidation. 
McVicker  v.  Ross,  55  Barb.,  247  (1869). 
An  ultra  vires  act  may  be  enjoined. 
Abels  v.  McKean,  18  N.  J.  Eq.,  462 
(1867).  The  members  need  not  make 
good  to  the  officers  debts  paid  by  the 
latter,  growing  out  of  ultra  vires  acts. 
Cram's  Appeal,  66  Pa.  St.,  474  (1878). 
But  the  officers  themselves  are  liable  to 
third  persons.  Sullivan  v.  Campbell,  2 
Hall.  (N.  Y.),  271  (1829).  And  possibly 
the  members.  Id.  If  a  member  has 
not   participated   or    acquiesced  in  the 


Roberts'  Appeal,  92  Pa.  St.,  407  (1880). 
Cf.  Van  Aernam  v.  Bleistein,  102  N.  Y., 
355  (18S6),  holding  the  members  liable 
for  a  libel ;  aff'g  32  Hun,  316. 

3  In  re  Fry,  4  Phil.  Rep.  129  (I860). 

4  Code  of  Civil  Procedure,  §  1919: 
Westcott  v.  Fargo.  61  N,  Y.,  542  (1874) : 
Saltsman  v.  Shults,  14  Hun,  256.  At 
common  law  the  name  is  not  recognized 
and  the  suit  would  fail.  Habicht  v. 
Pemberton,  4  Sandf.,  657  (1851);  Pipe  v. 
Bateman,  1  Iowa.  369  (1855);  Ewing 
v.  Medlook,  5  Port.  (Ala.),  82  (1837); 
Schmidt  v.  Gunther,  5  Daly,  452  (1874). 

5  Von  Schmidt  v.  Huntington.  1  Cal., 
55.  See,  also,  Smith  v.  Virgin,  33  Me., 
148  (1851).  Cf.  Lindley  on  Partn.,  234: 
Lafond  v.  Deems,  81  N.  Y,  507  (1880). 
The  minority  cannot  force  a  dissolution 
as  in  the  case  of  partnership.  Equity 
will  not  aid,  unless  there  be  good  reason 
for  dissolution.  Hinkley  v.  Blether,  3 
Atl.  Rep.,  655  (Me.,  1886).  Minority  of 
an  Odd  Fellows  lodge  cannot  compel 
sale  of  property  and  distribution.  Rob- 
bins  v.  Waldo,  7  Atl.  Rep.,  540  (Me.. 
1887);  and  seeBagley  r.  Smith,  10  N.  Y.. 
489.  A  court  will  wind  up  a  partner- 
ship even  before  its  fixed  time  of  exist- 
ence has  expired,  if  it  is  insolvent  or 
unprofitable  or  incapable  of  proceeding. 
Jennings  v.  Baddeley,  3  K.  &  J.,  78: 
Baring  v.  Dix,  1  Cox,  213;  Bailey  v. 
Ford,  13  Sim.,  495 ;  Holliday  v.  Elliott. 
8  Oreg.,  84;  Seighortner  v.  Weissen- 
born,  20  N.  J.  Eq.,  172;  Brien  r.  Har- 
riman,  1  Tenn.  Ch.,  467;  Howell  v.  Har- 
vey. 5  Ark.,  270 ;  Van  Ness  v.  Fisher,  5 
Lans.,  236.     The  death  of  a  member  does 


671 


§  510.] 


"tkusts"  and  unincokporated  associations. 


[cii.  XXIX. 


impracticable  or  its  attainment  impossible,  but  not  always  because 
of  the  misconduct  of  its  officers.1  The  death  of  a  member  does 
not  dissolve  it;2  nor  does  a  transfer  of  one's  interest.3  The  disso- 
lution of  one  of  the  subordinate  unincorporated  organizations  by 
the  general  organization  does  not  vest  in  the  latter  the  property 
of  the  former.4  The  incorporation  of  the  association  by  a  part  of 
the  members  does  not  dissolve  the  association.5  Upon  dissolution 
the  trustees  of  the  company  are  bound  to  convert  the  property 
into  cash  and  distribute  it.6  In  proceedings  for  a  dissolution  all 
the  members  need  not  be  made  parties.7 


not  dissolve  it.  Phillips  v.  Blatchford, 
137  Mass..  510  (1884). 

1  Waterbury  v.  Merchants'  Union  Ex- 
press Co.,  50  Barb.,  157  (1867).  Contra. 
Mills  v.  Hurd:  32  Fed.  Rep..  127(188 

*McNeish«,  Hulless  Oal  Co.,  51  Vt.. 
316.  Cf.  Walker  r.  Wait,  50  Vt.  66a 
The  death  of  a  stockholder  does  not  dis- 
solve the  association,  nor  release  his  es- 
tate from  subsequently  incurred  debts. 
Phillips  v.  Blatchford,  137  Mass.,  510 
(1884). 

3  A  transfer  of  his  stock  by  a  member 
does  not  dissolve  a  joint-stock  associa- 
tion under  the  Pennsylvania  law.  In  re 
Globe  Refining  Co.,  25  Atl.  Rep.,  128 
(Pa.,  1892). 

<  Wicks  t'.  Monihan,  130  N.  Y.,  232 
(1891).  The  withdrawal  of  a  charter  by 
a  higher  body  from  one  of  its  branches 
does  not  affect  the  right  of  the  latter  to 
its  property.  Wells  v.  Monihan,  13  N.  Y. 
Supp.,  156  (1891). 

5  A  part  of  the  members  of  an  un- 
incorporated association  cannot  pro- 
ceed to  incorporate  it  against  the  ob- 
jections of  the  others.  Rudolph  v. 
Southern,  etc.,  League,  23  Abb.  N.  C, 
199  (1889).    Where  an  unincorporated 


association  appoints  a  committee  to  in- 
corporate, and  they  do  so,  and  then  pro- 
ceed to  run  an  opposition  business,  the 
association  cannot  enjoin  them  from  so 
doing.  Paulino  r.  Portuguese  Ben. 
Aae'n,  2G  Atl.  Rep.,  36  (R  I.,  1893). 

'Frothingham  v.  Barney,  13  Hun, 
366 ;  Butterfield  v.  Beardsley,  28  Mich., 
413(1874).  Upon  the  expiration  of  the 
time  for  which  the  company  was  organ- 
ized it  becomes  dissolved,  and  the  assets 
must  be  distributed  if  any  one  of  the 
members  insists  thereon.  Mann  t>.  But- 
ler, 2  Barb.  Ch.,  362  (1847).  Distribution 
of  funds  of  incorporated  association.  As- 
ton r.  Dashaway.  22  Pac.  Rep.,  660 ;  aff' d 
in  23  id.,  1091  (1890).  As  to  the  land,  see 
g  504,  supra.  As  to  the  rules  govern- 
ing the  distribution  of  the  assets  of  a 
mutual  benefit  building  corporation,  see 
People  r.  Lowe,  117  N.  Y.,  175  (1889). 

7 Such  as  non-residents  who  cannot 
be  reached.  Angell  v.  Lawton,  76  N.  V.. 
540  (1879).  The  complainant  may  bring 
the  proceeding  in  behalf  of  himself  and 
others  having  a  common  interest  with 
him.  Mann  v.  Butler,  2  Barb.  Ch.,  362 
(1847> 


672 


CHAPTER  XXX. 


STOCKHOLDERS'  RIGHT  TO 


INSPECT  THE  BOOKS  OF  THE  CORPORA- 
TION. 


S  511.  Common-law  rights. 

512.  Common-law  action  for  damages 

for  refusal. 

513.  Mandamus  is  the  preferable  rem- 

edy. 

514.  Not   granted    as    a    matter    of 

course  unless  the  right  is  stat- 
utory. 

515.  When   it  will  and  will    not  be 

granted. 


§  516.  Allegations  and  form  of  writ 

517.  Right    to     inspect     minutes    of 

meetings  of  directors. 

518.  Statutes  giving  right  of  inspec- 

tion. 

519.  Orders    to   corporation  to  allow 

inspection  —  Subpoena    duces 
tecum  —  Bill  of  discovery. 


§  511.  Common-law  rights, —  The  stockholders  of  a  corporation- 
had,  at  common  law,  a  right  to  examine  at  any  reasonable  time 
any  one  or  all  of  the  books  and  records  of  the  corporation.1     This 


1  Stockholders  "have  the  right,  at 
common  law,  to  examine  and  inspect 
all  the  books  and  records  of  the  corpo- 
ration at  all  seasonable  times,  and  to 
be  thereby  informed  of  the  condition  of 
the  corporation  and  its  property."  Per 
Redfield,  J.,  in  Lewis  v.  Brainard,  53 
Vt.,  519  (1881).  In  the  case  of  Common- 
wealth v.  Phoenix  Iron  Co.,  105  Pa.  St., 
Ill  (1884).  the  court  said:  "In  the  ab- 
sence of  agreement,  every  shareholder 
has  the  right  to  inspect  the  accounts  — 
a  right  subject  to  the  necessities  of  the 
company,  yet  existing."  Also,  "  The 
doctrine  of  the  law  is  that  the  books  and 
papers  of  the  corporation,  though  of 
necessity  kept  in  some  one  hand,  are 
the  common  property  of  all  the  stock- 
holders." The  right  exists  although 
"  its  exercise  be  inconvenient  to  the 
book-keepers  and  managers  of  the  part- 
nership business."  In  the  case  of  Huy- 
lar  v.  Cragin  Cattle  Co.,  40  N.  J.  Eq., 
392  (1885),  the  court  said :  "  Stockhold- 
ers are  entitled  to  inspect  the  books  of 
the  company  for  proper  purposes  at 
proper  times,  and  they  are  entitled  to 
such  inspection  though  their  only  ob- 
(43)  6 


ject  is  to  ascertain  whether  their  affairs 
have  been  properly  conducted  by  the 
directors  or  managers.  Such  a  right  is 
necessary  to  their  protection."  Dead- 
erick  v.  Wilson,  8  Baxt  (Tenn.),  108. 
Mr.  Simon  Sterne,  in  the  Cyclopaedia 
of  Political  Science,  Political  Economy 
and  United  States  History,  vol.  HI, 
p.  526,  says :  "Another  problem  pre- 
sented by  the  existing  condition  of  the 
railways  in  the  United  States  is  that 
which  arises  from  secrecy  of  manage- 
ment This  evil  must  be  dealt  with 
radically.  One  of  tlie  prime  motives 
for  secrecy  of  management  is  the  enor- 
mous advantage  which  at  the  present 
day  it  gives  to  the  managers  in  the 
maintenance  of  their  power.  They 
alone  know  where  the  stockholders  are 
to  be  found,  and  can  therefore  control 
votes  by  the  knowledge  of  how  to  reach 
or  buy  them,  thus  perpetuating  their 
control.  Another  motive  is  the  advan- 
tage thus  afforded  for  stock  speculations. 
The  board  of  managers,  by  keeping  unto 
themselves  the  knowledge  that  their 
property  is  losing  heavily  in  compara- 
tive traffic,  can  sell  their  own  holdings 
73 


§  512.] 


INSPECTION    OF    CORPORATE    BOOKS. 


[CH. 


XXX. 


rule  grew  out  of  an  analogous  rule  applicable  to  public  corpora- 
tions and  to  ordinary  copartnerships,  the  books  of  which,  by  well- 
established  law,  are  always  open,  to  the  inspection  of  members.1 

A  director  has  an  absolute  right  to  examine  all  the  books  of  the 
company,2  even  though  he  is  hostile  to  the  corporation.3  But  in 
Connecticut  a  contrary  rule  is  laid  down  where  he  is  seeking  infor- 
mation in  order  to  organize  a  rival  company.4 

A  creditor  of  the  corporation  or  any  person  who  is  a  stranger  to 
it  can  obtain  access  to  its  records  by  a  bill  in  equity  for  discovery.5 

§  512.  Common-Jaw  action  for  damages  for  refusal—  The  legal 
right  of  a  stockholder  of  a  corporation  to  examine  the  corporate 
books  is  a  right  which  gives  him  a  cause  of  action  at  law  for  dam- 
ages against  the  corporate  officers  if  they  refuse  to  allow  the  in- 
spection.6    The  plaintiff   is  entitled   to  nominal  damages,  and  to 


and  go  short  of  the  market  under  cir- 
cumstances which  will  yield  them  an 
absolute  certainty  of  profit  on  the  tians- 
nction.  This  gives  them  an  enormous 
advantage  over  the  community  by  de- 
pleting the  pockets  of  the  unwary,  who 
find  themselves  saddled  with  stocks  at 
high  prices,  bought  months  in  advance 
of  the  public  announcement  that  the 
road  is  in  difficulties.  The  knowledge 
of  rapid  gains  in  the  development  of 
business  likewise  gives,  so  longa^  it  can 
be  kept  secret,  a  like  advantage  in  pur- 
chase of  stock.  Tins  a  Ivantage  has  been 
exploited  to  such  a  degree  in  the  United 
St  a  s  that  the  investing  public  has  be- 
come inspired  with  a  general  distrust 
for  railroad  stock  investment." 

1  Commonwealth  v.  Phoenix  Iron  Co., 
sitjira. 

2PeopleuThroop.l2WendL,181(18 
Charlick  v.  Flush,  etc.,  R.  R.  1«»  Abb.  Pr., 
130  (I860) ;  ///  re  t  iaucimino,  N.  Y.  L  J., 
Dec.  23  (1890> 

'People  v.  Throop,  supra. 

4  A  director  who  is  actively  organizing 
a  rival  company  has  no  right  to  examine 
the  letter  files  of  the  former  in  order  to 
aid  the  latter.  The  secretary  may  forci- 
bly take  them  from  him.  Hemingway 
v.  Hemingway,  19  Atl.  Rep.,  766  (Conn., 
1890). 

5  Bill  of  discovery  lies  at  instance  of 
corporate   creditors    in    courts  of    one 


state  to  compel  corporate  officers  to 
give  names  of  stockholders  of  corpora- 
tion in  another  state  with  view  to  en- 
forcing statutory  liability  in  latter  state. 
Tost  v.  Toledo,  etc,,  R  R  Co..  11  X.  E. 
Rep.,  ■"•I"  (Masa,  1887);  144  Mass.,  841. 
As  to  the  remedy  by  subpoena,  etc..  see 
519,  infra.  As  to  the  general  right  of 
a  stockholder  to  examine  the  hooks  of  a 
corporation  an  1  tie  recognition  of  such 
right  in  equity  by  discovery,  see  Cires- 
ley's  Eq. Ev.,  116,  117:  Kynaston  r.  East 
India  Co.,  3  Swansfc,  249:  Bolton  v. 
Liverpool,  3  Sim.,  467;  1  Myl.  &  K.,  88: 
Brace  v.  Ormond,  1  Meriv., 

Lewis  v.  Brainerd,  68  \'t..  510  (1 
as  to  the  right  to  inspection  and  to  take- 
copies  of  records  in  a  county  clerk's  or 
register's  office,  see  Randolph  r.  State.  -J 
s.  Rep.,714  (Ala.,  1883  ;  11  inson  >:  Eich- 
stae.lt.  85  N.  W.  Rep.,  80  (Wis..  1887); 
Brewer  v.  Watson,  71  Ala.,  299;  Phelan 
r.  state.  76  Ala.,  in-.  Webber  v.  Townley, 
43  Mich..  •".:'.!  :  Diamond  Match  Co.  v. 
Powers.  51  Mich..  Mo;  People  v.  Cornell, 
47  Bail...  829;  People  r.  Reilly,  38  Hun, 
429;  People  v.  (adv.  99  N.  Y ..  620.  A 
stockholder  lias  the  legal  right  to  inspect 
the  books  of  the  corporation  of  which 
he  is  a  member,  but  the  company  is  not 
liable  for  a  refusal  of  the  secretary  to 
allow  a  stockholder  to  examine  the 
books.  Legendre  IX  New  Orleans,  etc., 
Ass'n.  12  S.  Rep..  837  (La,  1893). 


674 


CH.   XXX.]  INSPECTION    OF    CORPORATE    BOOKS.  [§§  513,  511. 

such  further  damages  as  he  may  prove.  He  ueed  not  allege  or 
prove  any  special  reason  or  purpose  of  his  desire  and  request  to 
examine  the  books.1 

§  513.  Mandamus  is  the  preferable  remedy. —  But  an  action  for 
damages  is  generally  totally  inadequate  as  a  remedy.2  The  stock- 
holder wishes  to  inspect  the  corporate  books  and  does  not  wish 
damages  or  a  lawsuit.  Accordingly,  in  certain  cases,  upon  the 
application  of  a  stockholder  who  has  been  denied  the  privilege  of 
examining  the  corporate  records,  it  has  been  the  practice  of  the 
courts  to  issue  a  mandamus  to  the  corporate  officers  commanding 
them  to  allow  a  specified  stockholder  to  examine  the  books  of  the 
corporation.3 

§  514.  Not  granted  as  a  matter  of  course  unless  the  right  is  statu- 
tory. —  The  writ  of  mandamus,  however,  does  not  issue  herein  as  a 
matter  of  course.  It  is  an  extraordinary  remedy  to  be  invoked 
only  upon  special  occasions.  The  courts  do  not  grant  the  manda- 
mus until  it  has  taken  into  careful  consideration  all  the  facts  and 
circumstances  of  the  case.  The  condition  and  character  of  the 
books,  the  reasons  for  refusal  by  the  corporatic  n,  the  specific  pur- 
pose of  the  stockholder  in  demanding  inspection,  the  general  rea- 
sonableness of  the  request,  and  the  effect  on  the  orderly  transaction 
of  the  corporate  business  in  case  it  is  granted,  are  all  considered  in 
granting  or  refusing  the  writ.  It  is  granted  only  in  furtherance  of 
essential  justice.4 

1  Lewis  v.  Brainerd,  53  Vt,  510  (1881).  allow  it,  and  not  otherwise."    Comraou- 

2  In  Coekburn  v.  Union  Bank,  13  La.  wealth  v.  Phoenix  Iron  Co.,  supra; 
Ann.,  289  (1858),  the  court  said  a  suit  S.  C,  6  Atl.  Rep.,  75  (1886).  explaining 
for  damages  "  might  Jast  for  a  long  the  method  of  procedure,  and  holding 
time  and  petitioner  suffer  gi-eat  loss  by  that  the  applicant  need  not  apply  to  a 
being  debarred  from  an  examination  "  court  of  equity.  The  old  rule  that  man- 
of  the  books.  "  He  does  not  ask  for  damns  will  issue  only  for  a  public  pur- 
damages,  but  for  the  exercise  of  a  right,  pose  is  no  longer  a  rule  of  law  so  as  to 
If  he  has  the  right  he  ought  to  have  prevent  its  use  herein.  Commonwealth, 
the  exercise  of  it  as  soon  as  possible ;  etc.,  supra,  questioning  King  v.  Bank  of 
for  the  deprivation  of  his  right  cannot,  England,  2  B.  &  Aid.,  620  (1819) ;  and 
perhaps,  be  accurately  estimated  in  King  v.  London,  etc.,  Co.,  5  B.  &  Aid., 
damages.  It  maybe  many  years  before  899  (1822).  See,  also,  King  v.  Clear,  4 
the  amount  of  the  damage  can  be  Barn.  &  C,  899  (1825);  6  S.  Rep.,  88  (Ala., 
known."'  1889). 

3  "  It  would  seem,  from  the  weight  of  4  "  The  application  is  addressed  to  the 
authority  and  in  reason,  that  a  share-  sound  discretion  of  the  court"  The 
holder  is  entitled  to  mandamus  to  com-  reasons  for  granting  it  "  should  be  clear 
pel  the  custos  of  corporate  documents  and  cogent  ...  To  hold  that  every 
to  allow  him  an  inspection  and  copies  person  who  shows  himself  to  be  a  holder 
of  them  at  reasonable  times  for  a  speci-  of  stock  is  at  liberty  to  demand  an  ex- 
fied  and  proper  purpose  upon  showing  animation  of  the  transfer  books  when 
a  refusal  on  the  part  of  the  custos  to  and  as  often  as  he  pleases,  and  if  re- 

675 


515.] 


INSPECTION  OF  CORPORATE  BOOKS. 


[CH.  XXX. 


"Where  a  statute  gives  to  stockholders  the  right  to  examine  cor- 
porate books,  mandamus  seems  to  be  granted  as  a  matter  of  right.1 

§515.  When  it  will  and  will  not  be  granted. —  It  will  not  be 
granted  to  satisfy  curiosity,  nor  to  aid  the  stock-market  specula- 
tions of  the  stockholders.2     Either  some  property  rights  of  the 

holds  the  certificates  made  out  in  his 
name,   to   compel    the    corporation    to 


fused  to  apply  for  a  writ  of  mandamus 
to  enforce  an  absolute  right,  would  be 
to  establish  a  rule  highly  prejudicial  to 
the  interests  of  all  corporations  and 
their  stockholders.  .  .  .  The  power 
of  the  court  should  be  exercised  in  such 
cases  with  great  discrimination  and 
care."  People  v.  Lake  Shore  &  M.  S. 
R.  R.  Co.,  11  Hun,  1  (1877);  affirmed, 
sub  nom.  Re  Sage,  70  N.  Y.,  220  (1877> 
See,  also,  People  ex  rel.  Field  r.  North- 
ern Pac.  R  R  Co.,  50  N.  Y.  Super.  Ct, 
456  (1884);  S.  C,  18  Fed.  Rep..  471. 
"  Discretion  in  these  matters  should  be 
exorcised  in  a  reasonable  manner  and 
subject  to  precedent"  Reg.  0.  Wilts. 
&  Berks.  Canal  Nav.,  29  L  T.,  922 
(1874).  A  reference  may  be  ordered  by 
the  court  to  determine  the  truth  of 
tin' allegations  in  the  affidavits  used  to 
obtain  a  mandamus.  People  r.  St.  Louis, 
etc.,  Ry  Co.,  If  Hun.  552  (1887).  Man- 
damus is  tin'  preferable  remedy.  Le- 
gend re  v.  New  Orleans,  etc.,  Ass'n,  12 
S.  Rep.,  837  (La.,  1893). 

1  Under  the  "Wisconsin  statute  author- 
izing a  stockholder  to  examine  the 
stock  books  and  accounts,  a  mandamus 
may  be  issued  to  the  officer  having  the 
books  in  charge.  State  ft  Bergenthal. 
39  N.  W.  Rep.,  506  (Wis.,  1888).  Under 
a  constitutional  right  to  see  the  list  of 
stockholders,  a  stockholder  has  no  abso- 
lute right  to  take  a  list  of  them.  Em- 
pire P.  Ry  Appeal,  19  Atl.  Rep.,  659 
(Pa.,  1890).  Mandamus  lies  to  enforce 
th"  statutory  right  of  inspection.  Peo- 
ple v.  Pacific  Mail  Steamship  Co.,  50 
Barb.,  280  (1861).  Mandamus  lies  to 
compel  the  resident  agent  of  a  foreign 
corporation  to  open  its  transfer  books  to 
a  stockholder  as  required  by  statute. 
People  ft  Paton,  20  Abb.  N.  C,  195 
(1887).  Mandamus  will  lie  in  behalf  of 
the  wife  of  a  deceased  stockholder,  who 


allow  her  to  examiue  the  transfer  books 
in  order  that  she  may  vote  intelligently 
at  a  coming  election.  People  v.  Eadie, 
63  Hun,  320  (1892).  Mandamus  lies  to 
open  for  the  inspection  of  a  stockholder 
and  for  taking  memorandum  therefrom 
such  corporate  books  as  the  statute  pre- 
BCribes  shall  be  opened  to  him.  Matter 
of  Martin,  02  Hun,  557  (1891).  Man- 
damus lies  to  allow  inspection  as  re- 
quired by  the  statute,  and  the  fact  that 
the  applicant  holds  a  certificate  of  stock 
is  sufficient  Martin  r.  Williams,  etc., 
Co.,  25  Abb.  N.  C,  350  (1890).  Where 
there  is  a  state  statute  allowing  stock- 
holders to  examine  the  corporate  books, 
a  national  bank  in  the  state  is  subject 
thereto  and  mandamus  will  issue. 
Winter  a.  Baldwin,  7  S.  Rep.,  734  (Ala., 
1890).  Under  a  statute  to  the  effect  that 
"  the  stockholders  of  all  private  corpora- 
tions have  the  right  of  access  to,  of  in- 
spection and  examination  of  the  books, 
records  and  papers  of  the  corporation, 
at  reasonable  and  proper  times,"  a 
stockholder  has  the  "right  to  examine 
the  books  at  any  and  all  reasonable 
times,"  and  "when  this  right  is  claimed 
and  refused,  he  is  entitled  to  a  man- 
damus on  the  averments  that  he  is  a 
stockholder  of  the  corporation ;  that  he 
has  demanded  the  right  of  inspection ; 
that  the  time  was  reasonable  and  proper ; 
and  that  the  right  was  denied  him." 
He  may  make  the  examination  through 
an  agent  Foster  ft  White,  6  S.  Rep, 
88  (Ala.,  1889). 

2  The  writ  will  not  be  "  granted  to  en- 
able a  corporator  to  gratify  idle  curios- 
ity." People  v.  Walker,  9  Mich.,  828 
(1861).  "  The  interests  of  all  the  corpo- 
rators require  that  the  writ  shall  not  go 
at  the  caprice  of  the  curious  or  susni- 


676 


OH.  XXX.j 


INSPECTION    OF    CORPORATE    BOOKS. 


[§515 


stockholder  must  be  involved,  or  some  controversy  exist,  or  some 
specific  and  valuable  interest  be  in  question,  to  settle  which  an  in- 
spection of  the  corporate  records  becomes  necessary.1  Mandamus 
will  be  granted  in  order  to  enable  the  applicant  to  ascertain  wrho 


cious."  Commonwealth  v.  Phoenix  Iron 
Co.,  supra.  "  Courts  should  guard 
against  all  attempts  by  combinations  to 
use  its  writ  of  mandamus  to  accomplish 
their  personal  or  speculative  ends." 
People  v.  Lake  Shore  &  M.  S.  R.  R.  Co., 
supra.  Nor  will  the  court  grant  "  a 
mere  wrecking  petition  to  ruin  a  going 
concern."  In  re  West  Devon,  etc., 
Mine,  L.  R.,  27  Ch.  D.,  100  (1884).  Mere 
suspicion  is  not  enough,  even  though 
the  applicant  stockholder  intends  to 
bring  suit  against  the  directors.  Cen- 
tral, etc.,  R  R.  Co.  v.  Twenty,  etc.,  R'y 
Co.,  53  How.  Pr.,  45  (1877). 

1  Thus,  where  there  had  been  no  divi- 
dends for  nine  years,  and  the  officers 
were  partners  in  a  competing  concern, 
and  refused  to  allow  inspection,  it  was 
granted  in  order  to  enable  the  applicant 
to  ascertain  whether  the  real  facts  jus- 
tified an  action  for  fraud  on  the  part  of 
the  officers.  Commonwealth  v.  Phoenix 
Iron  Co.,  supra.  Granted  also  to  allow 
applicant  to  ascertain  whether  a  by-law 
existed  entitling  him  to  an  office  by 
promotion.  Reg.  v.  The  Saddlers'  Co., 
10  W.  R.,  77  (1861).  Mismanagement 
and  intent  to  bring  suit  need  not  be  al- 
leged. "  Oftentimes  frauds  are  discov- 
erable only  by  examination  of  the  books 
by  an  expert  accountant."  Huyler  v. 
Cragin  Cattle  Co.,  supra.  It  is  granted 
also  to  a  stockholder  who  has  a  suit  or 
controversy  with  a  party  other  than  the 
corporation  itself.  Mayor  of  Southamp- 
ton v.  Graves,  8  T.  R,  590  (1800);  Rex 
v.  Newcastle,  2  Strange,  1223  (1737).  It 
has  been  granted  to  enable  a  stock- 
holder to  see  the  discount  book,  al- 
though there  is  no  suit  between  him 
and  the  corporation,  and  no  intent  to 
bring  one.  Cockburn  v.  Union  Bank. 
13  La.  Ann.,  289  (1858).  At  an  early 
day,  however,  it  was  held  that  "  the 
members  have  no  right,  on  speculative 


grounds,  to  call  for  an  examination  of 
the  books  and  muniments  in  order  to 
see  if,  by  possibility,  the  company's  af- 
fairs may  be  better  administered  than 
they  think  they  are  at  present.     If  they 
have  any  complaint  to  make,  some  suit 
should  be  instituted,  some  definite  mat- 
ter charged,     ...     or  there  should  be 
some   particular  matter  in  dispute  be- 
tween members,  or  between  the  corpo- 
ration and  individuals  in  it;  there  must 
be  some  controversy,  some  specific  pur- 
pose, in  respect  of  which  the  examina- 
tion becomes  necessary."     King  v.  The 
Merchant  Tailors'  Co.,  2  Barn.  &  Ad., 
115  (1832).     The  applicant  must  allege 
the  extent  of  his  interest,  also  wherein 
his  object  of  inspection  is  just  and  use- 
ful. Hatch  v.  City  Bank  of  New  Orleans, 
1  Rob.  (La.),  470  (1842).  The  case  of  State 
v.    Bienville  Oil  Works,   28   La.   Ann., 
204  (1876),  states  that  the  two  preceding 
cases  "  failed  through  want  of  precision 
and  deSniteness  in  stating  some  well- 
defined  purpose,  some  reasonable  cause, 
and  showing  that  they  had  some  inter- 
est in  the  matter."    A  charter  provision 
that  the  corporate  powers  "  shall  be  ex- 
ercised by  a  board  of  directors  "  is  im- 
material herein.    Id.  Where  a  reduction 
of  capital  stock  is  contemplated,  a  large 
stockholder  has  a  right  to  inspection  to 
ascertain  whether  the  business  is  being 
"  prudently  and  profitably  "  carried  on. 
Id.     Not  granted  to  allow  applicant,  a 
director,  to  inspect  and  make  entries. 
Rosenfeld  v.  Einstein,  46  N.  J.  L.,  479 
(1884).     General  purpose  of  ascertaining 
"the  condition  of  the  company"  held 
insufficient.     People  v.  Walker,  9  Mich., 
328  (1861).     The  stockholder  may  take 
memoranda  or  a  list  of  the  stockholders. 
Commonwealth  v.  Phoenix  Iron  Co.,  105 
Pa.  St.,  Ill  (1884);  Cotheal  v.  Brower, 
5  N.  Y.,  562  (1851) ;  affirming  Brower  v. 
Cotheal,    10  Barb.,  216  (1850):   Hide  v. 


677 


516.J 


INSPECTION    OF    CORPORATE    BOOKS. 


[CH.  XXX. 


are  stockholders,  with  a  view  to  canvassing  their  votes  for  an  elec- 
tion.1 Mandamus  will  not  be  granted  to  allow  a  stockholder  to 
make  a  list  of  the  stockholders  where  the  object  is  to  combine 
them  in  attacking  a  lease  made  by  the  corporation.2 

§516.  Allegation  and  form  of  writ— The  writ  should  run  to  the 
person  or  officer  who  has  control  of  the  records.3  The  stockholder 
may  make  the  inspection  through  an  agent,  and  may  have  the  aid 
of  an  interpreter,  attorney  or  expert.4  The  request  to  inspect  the 
books,  for  refusal  of  which  the  mandamus  is  asked,  must  be  alleged 
to  have  been  made  at  a  proper  time  and  place,  and  of  the  proper 
person,  and  to  have  been  refused.5  The  application  should  also 
state  what  information  the  applicant  needs,  and  what  books  of  the 
corporation  he  wishes  to  inspect.6     "  The  order  should  be  so  drawn 


Holmes.  2  Molloy.  372.  In  the  case  of 
Stettaner  v.  New  York,  etc.,  ('.>.,  6  Atl. 
Rep.,  303  (X.  J.,  1880),  where  a  st 
holder  filed  a  bill  in  equity  to  compel 
corporate  officers  to  allow  himself  ami 
his  accountant  to  examine  the  corporate 

books,  its  business   having   1 D  closed 

and  distribution  of  assets  made,  but  a 
statement  of  its  affairs  refused,  the 
court  held  that  the  bill  would  not  lie. 
since  no  fraud  or  insufficient  distribu- 
tion of  asM'ts  were  alleged.  Mandamus 
is  the  proper  remedy.  Swift  v.  State,  6 
Atl.  Rep.,  856  I'd..  1886),  holds  that 
mandamus  will  issue  to  the  officers  of  a 
foreign  corporation  to  exhibit  its  books 
then  in  the  state  and  allow  copies  of 
records  to  be  taken  by  a  stockholder 
who  int.  nds  to  commence  suit  against 
a  pledgee  of  his  stock,  the  controversy 
turning  on  the  question  of  the  earnings 
and  expeuses  of  the  corporation.  Man- 
damus to  open  the  stock-ledger  was  de- 
nied in  a  case  where  the  owner  of  four 
shares  of  stock  alleged  that  little  or  no 
dividends  were  paid,  and  the  stock  was 
depreciating,  no  mismanagement  being 
charged.  A  by-law  authorizing  inspec- 
tion of  books  of  account  does  not  au- 
thorize inspection  of  stock-ledger.  Lyon 
V.  American,  etc.,  Co.,  17  Atl.  Rep.,  01 
(R.  I.,  1889). 

1  Mandamus  was  granted  in  People  y. 
Eadie,  N.  V.  L.  J.,  Dec.  30,  1891,  to  open 
the  stock  books  to  a  stockholder  who 
wished  to  ascertain   who   were  stock- 


holders in  order  to  confer  with  them  for 
the  purpose  of  changing  the  board  at  an 
approaching  election.  Mandamus  was 
grant)  it"  a  stockholder  who  wished  to 
persuade  other  stockholders  not  to  ap- 
peal a  suit  in  which  he  was  intere 
adversely  to  the  corporation,  the  de- 
feated  party,  leg.  v.  Wilts.  &  Berks. 
Canal   Nav.",  29  L.  T..  9  See, 

also,  People  v.  Lake  Shore  &  M.  S.  R.  R, 
11  Hun.  1  (1877). 
-  Empire  P.  R'y  Appeal,  19  Atl.  Rep., 
uid  note.    See  criticism 
on  this  case  in  N.  Y.  L.  J.,  Oct.  13,  1890. 

3  "The  writ  shall  he  directed  to  him 
who  is  to  do  the  thing  required  to  be 
done."  A  director  may  demand  inspec- 
tion though  hostile  to  the  corporation. 
People  17.  Throop,  12  Wend.,  181  ( 1*34). 

4  May  ins]  ect  through  his  duly-author- 
ized agent     State  v.  Bienville  Oil  Works 

.  -   I  .a.  Ann.,  204  (1870).     See,  also, 

519. 

s  The  stockholder  must  first  apply  to 
the  proper  corporate  officer  having  au- 
thority to  grant  inspection.  King  v. 
Proprietors  of  the  Wilts.  &  Berks.  Canal 
Nav..  :;  Ad.  &  EL,  477  (1835\  And  must 
state  to  him  the  reason  why  he  desires 
inspection.  Id.;  also  King  v.  Clear.  4 
Mam.  &  Cr.,  t>99  (1825);  People  v. 
Walker.  9  Mich..  328  (1861> 

6  Morgan's  Case,  L.  R,  28  Ch.  D.,  620 
i  1884).  This  ease  also  states  that  in  Eng- 
land it  is  customary  for  many  banking 
companies  to  insert  in  their  constitu- 


te 


CH.  XXX.] 


INSPECTION    OF    CORPORATE    BOOKS. 


[§§  517,  518. 


as  not  to  inconvenience  the  transaction  of  business."  '  Technical 
objections  to  the  writ  are  not  favored  by  the  courts.  Nevertheless 
the  substantial  allegations  must  be  made. 

§517.  Bight  to  inspect  minutes  of  meetings  of  directors. —  It 
would  take  a  strong  case  to  induce  a  court  to  issue  a  mandamus 
commanding  the  corporate  officers  to  allow  a  stockholder  to  inspect 
the  minutes  of  the  meetings  of  the  directors.-  The  success  of  the 
corporate  enterprise  depends  frequently  upon  the  secrecy  of  the 
plans  of  the  directors.  In  connection  with  litigations  the  rule,  of 
course,  is  different ;  but,  aside  from  this,  it  seems  that  a  stockholder 
is  not  entitled  as  a  matter  of  right  to  a  mandamus  to  allow  him  to 
inspect  the  minutes  of  the  directors'  meetings.  The  same  rule 
would  seem  to  apply  to  miscellaneous  questions  asked  of  the  direct- 
ors at  stockholders'  meetings. 

§  518.  Statutes  (jiving  right  of  inspection.—  The  right  to  inspect 
corporate  records  is  frequently  given  to  stockholders  by  statutory 
provisions.  Sometimes  this  statutory  right  extends  only  to  the 
corporate  transfer  book.3  Sometimes  it  includes  all  corporate  rec- 
kons a  provision  forbidding  the  inspec-  found  very  prejudicial  to  the  sharehold- 
tion  of  customers'  accounts  by  share- 
holders or  creditors.  Irrelevant  parts  of 
the  books  may  be  sealed  up.  Jones  v. 
Andrews,  58  L.  T.  Rep.,  601  (1888): 
Earp  v.  Lloyd.  3  K.  &  J..  549 ;  Napier  v. 
Staples,  2  Moll.,  570 :  Hill  v.  Great  W. 
R'y  Co.,  10  C.  B.  (N.  S.),   148 ;  Clifford     charter ;     and     consequently     and 


v.  Taylor,  1  Taunt.,  167;  Gerard  v. 
Penswick,  1  Swanst,  533;  Dias  v.  Merle, 
2  Paige,  494;  Titus  r.  Cortelyou,  1 
Barb.,  444;  People  v.  Pacific  Co..  50 
Barb.,  280;  Pynchou  v.  Day  (111.),  22  Re- 
porter, 234.  But  if  such  irrelevant  mat- 
ter cannot  be  separated,  the  party  must 
produce  the  whole.  Carew  v.  "White,  5 
Beav..  172. 

1  Duffy  r.  Mutual  Brewing  Co..  N.  Y. 
L.  J.,  Oct  3,  1892,  p.  18,  approving  of 
text. 

2  "  It  is  highly  proper  that  an  inspec- 
tion of  the  books  containing  the  pro- 
ceedings of  the  directors  should  be 
obtained  on  special  occasions  and  for 
special  purposes;  .  .  .  but  the  pro- 
posed daily  and  hourly  inspection  and 
publication  of  all  their  proceedings 
would  be  tantamount  t j  admitting  the 
presence  of  strangers  at  all  their  meet- 
ings, and  would  probably  ere  long   be 


ers.  Queen  v.  Mariquita  Mining  Co.,  1 
Ell.  &  Ell.,  289  (1858).  "  A  private  stock- 
holder of  an  incorporated  company  has 
no  right  to  have  access  to  the  minutes 
of  the  proceedings  of  the  directors  un- 
less that  right  is  expressly  given  by  the 

of 

necessity  he  must  remain  ignorant  of 
their  action  until  they  choose  to  make 
that  action  known "  (dictum).  Ala.  & 
Fla.  R.  R  Co.  v.  Ro%vley.  9  Fla.,  508.  514 
(1861).  See,  also,  Lindley  on  Partn.,  (4th 
ed.).  809. 

3  In  New  York,  see  1  R  S.,  ch. 
XVIII.  title  4,  §  1,  applying  to  all  cor- 
porations. Construed  in  Cotheal  v. 
Brower,  5  N.  Y,  562  (1851);  People  v. 
Pacific  Mail  Steamship  Co.,  50  Barb., 
280  (1867) ;  Kennedy  r.  Railroad  Co..  14 
Abb.  N.  CL,  326;  People  v.  Mott  1  How. 
Pr..  247  :  Kelsey  v.  Pfaudler,  etc.,  Co., 
3  N.  Y.  Supp..  723  (1889);  1  R  S.,  ch. 
XVIII.  title  2,  £  45.  for  moneyed  corpo- 
rations, applied  in  People  v.  Throop.  12 
Wend..  183  (1834):  Laws  1842,  ch.  165. 
for  transfer  agents  in  this  state  of  for- 
eign corporations :  construed  in  People 
v.  Lake  Shore  &  M.  S.  R,  R  Co.,  il 
Hun,    1   (1877);   People  ex  ret.  Field  r. 


079 


§519.] 


INSPECTION    OF    CORPORATE    BOOKS. 


[CH.  XXX. 


ords.1  Mandamus  lies  to  enforce  this  right.2  Frequently  the 
charter  itself  states  that  the  stockholder  shall  have  certain  rights 
of  inspection.  In  England  the  Companies  Act  regulates  specific- 
ally the  stockholders'  right  of  inspection,  and  provides  for  a  com- 
mittee of  investigation  in  behalf  of  the  stockholders  whenever  an 
investigation  is  desired  by  them.3 

§  519.  Orders  to  corporation  to  allow  inspection  — Subpana  duces 
tecum  —  Bill  of  discovery. —  An  inspection  of  corporate  records  is 
often  desired  in  connection  with  an  action  which  is  pending  in  the 
courts,  and  it  has  been  the  practice  of  the  courts  to  grant  applica- 


Northern  Pacific  R  R  Co.,  50  N.  Y. 
Super.  Ct,  456  (1884);  S.  C,  18  Fed. 
Rep.,  471 ;  Kennedy  v.  Chicago,  etc.,  R 
R,  14  Abb.  N.  C,  326  (1884) ;  People  v. 
IT.  S.,  etc.,  Co.,  20  Abb.  N.  C.  192;  Peo- 
ple v.  Peyton,  id..  VM;  In  re  Commer- 
ford  v.  Williams,  etc.,  Co.,  X.  Y.  L.  J., 
Oct  7,  1800;  Laws  of  1848,  g  25,  for 
manufacturing  corporations.  For  New 
Jersey,  see  Revision  of  is??,  p.  ls:'-. 
Huylar  v.  ( iragin  (  attle  Co.,  40  N.  J.  Eq., 
392  (1885):  S.  C,  7  Atl.  Rep.,  531  1 1 
Iud.  R  S.  (188.1),  g§  8010,  BOIL  Con- 
necticut, see  Pratt  v.  Meriden  Co.,  86 
Conn.,  36;  Sykes'  Case,  10  Beav.,  162; 
Ervin  v.  Oregon  R  Co..  22  Hun,  566; 
Cain  v.  Pullen,  34  La.  Ann..  511.  A  de- 
lay of  one  day  in  allowing  the  inspec- 
tion, owing  to  the  absence  of  the  per- 
son having  charge  of  them,  does  not 
cause  the  penalty  to  attach.  Kelsey  a. 
Pfaudler,  etc.,  Co.,  41  Hun.  20  (1881 

»  Rev.  Stat  of  Ohio  1 1886),  g  8812  ;  (  al- 
ifornia  Civil  Code,  g§  877,  878;  Penal 
Code,  565 ;  Rhode  Island  Pub.  St,  ch. 
L58,  g  21,  and  ch.  158,  §  24  (1882);  Michi- 
gan Gen.  St,  $  3173,  for  banks.  See. 
also.  Colorado  Gen.  St  (1882),  £  240; 
Missouri  R  S.  (1870),  §§  720,  701:  Ver- 
mont R  Laws  (1880),  §§  8294,  8295; 
Mass..  1860,  ch.  68,  §  10 ;  Illinois  &  S. 
(1874),  ch.  32.  §  13.  The  pleadiug  in 
a  cause  of  action  arising  under  a 
statute  herein  must  clearly  briny;  the 
case  within  the  statute.  Lewis  v.  Brain- 
erd,  53  Vt,  510  (1881).  That  the  officer 
had  notice  of  plaintiff's  stockholdership 
must  be  alleged.  Williams  r.  College 
Corner  &  Richmond  Gravel  Road  Co.. 


45  Ind.,  170  (1873).  The  purpose  of  the 
inspection  need  not  be  Btated  to  the 
officer.  Lewis  ix  Brainerd.  53  Yt,  510 
(1881).  Cf.  Queen  v.  Undertakers  of 
the  Grand  Canal.  1  Ir.  L.  R,  337.  The 
common-law  right  of  inspection  re- 
mains, although  a  special  statutory 
right  is  also  given.  People  v.  Lake 
Shore  &  M.  S.  R.  R  Co..  BUprtL  Under 
the  statutes  of  New  J<  rsey  the  court 
will  order  the  books  of  the  company  to 
be  brought  within  the  State  on  the  pe- 
tition of  the  president  and  a  ilirector.  A 
person  having  a  right  to  examine  the 
books  of  the  company  may  do  so 
through  an  attorney.  It  is  immaterial 
what  tli"  motive  of  the  applicant  may 
be.  Mitchell  v.  Rubber,  etc.,  Co.,  24 
Atl.  Rep.,  407  (X.  J.,  18S 

2  See  S  514,  supra 

:>  25  and  *>  Vict,  ch.  89,  Table  A,  No.  78 
and  Xos.  60  and  86.  In  England,  under 
a  statute  allowing  a  stockholder  to  in- 
spect the  corporate  rights  of  stockhold- 
er.-, etc.,  an  injunction  lies  to  restrain 
corporate  officers  from  refusing  this 
right.  Holland  v.  Dickson,  58  L.  T.  Rep., 
1888)  Under  the  English  statute 
a  stockholder  may  inspect  the  transfer 
book  and. take  copies,  even  though  he  is 
acting  in  the  interest  of  a  rival  com- 
pany. Mutter  v.  Eastern,  etc.,  R'y,  59 
L.  T.  Rep..  117  (1888) ;  also  36  W.  R,  401. 
A  stockholder  suing  to  set  aside  a  fraud- 
ulent contract  may  have  inspection  even 
of  privileged  matters  between  the  com- 
pany and  its  attorney.  Gourand  v. 
Edisou,  etc.,  Co.,  59  L.  T.  Rep.,  812 
(1888). 


6^0 


CH.  XXX.] 


INSPECTION    OF    CORPORATE    BOOKS. 


[§  519. 


tions  for  this  purpose.1  The  order  to  allow  an  inspection  may  be 
made  at  any  stage  of  the  action.  A  stockholder  has  this  right  to 
aid  him  in  suits  with  strangers,  and  his  right  herein  is  more  extensive 
than  the  rights  of  the  other  party  to  the  action.  In  fact,  a  person  who 


1  The  evidence  sought  must  be  di- 
rectly material  to  the  cause.  Rex  v. 
Newcastle,  2  Strange,  1223  (1737);  Rex 
v.  Babb,  3  Term  R,  579  (1790) ;  Mayer, 
etc.,  v.  Graves,  8  T.  R,  590  (1800),  hold- 
ing that  a  stranger  has  no  more  right  to 
have  an  inspection  here  than  in  a  case 
where  he  sues  a  copartnership.  See 
Central  Nat.  Bank  v.  White,  5  J.  &  S., 
297  (1874).  holding  that  in  New  York  the 
inspection  is  proper  if  the  evidence  is 
material  and  cannot  otherwise  be  ob- 
tained ;  Clinch  v.  Financial  Co.,  L.  R,  2 
Eq.,  271  (1866),  where  a  director  was 
compelled  to  produce.  In  the  federal 
courts  an  inspection  will  not  be  granted 
in  order  to  frame  a  complaint.  Paine 
v.  Warren,  33  Fed.  Rep.,  357  (1888). 

In  a  bill  alleging  fraud  on  the  part 
of  the  directors,  whereby  complainant, 
a  stockholder,  has  been  injured,  he 
may  obtain  such  inspection.  Walburn 
v.  Ingilby,  1  Myl.  &  K,  61  (1832) ;  Stan- 
ton v.  Chadwick,  3  Macn.  &  G.,  575 
(1851).  See  Bassford  v.  Blakesley,  6 
Beav.,  131.  On  a  verified  petition  by 
a  single  shareholder  stating  that  a 
mine  owned  by  the  company  is  being 
worked  at  a  loss,  an  inspection  of  the 
company's  books  will  be  granted.  West 
Devon,  etc.,  Case,  L  R,  27  Ch.  Div., 
106.  In  a  suit  to  hold  the  directors  of  a 
life  insurance  company  personally  re- 
sponsible for  large  losses  alleged  to 
have  been  caused  by  moneys  improperly 
paid  on  policies,  an  inspection  has  been 
allowed,  although  plaintiff  was  said  to 
have  but  a  trifling  interest  in  the  com- 
pany and  was  desirous  of  injuring  it, 
and  had  published  prejudicial  state- 
ments in  regard  to  the  matter.  Will- 
iams v.  Prince  of  Wales  Ins.  Co.,  23 
Beav.,  338.  Where  a  company  was 
being  wound  up.  an  application  on  be- 
half of  twenty -four  out  of  eight  hun- 
dred   and    fifty-six    shareholders,    who 


had  associated  themselves  together  for 
an  investigation  into  the  company's  af- 
fairs, was  allowed,  with  permission  to 
employ  an  accountant  to  carry  on  the 
examination  of  the  books.  Joint-stock 
Discount  Co.'s  Case,  36  L.  J.,  Eq.,  150. 
See  Emma  Silver  Mining  Co.  Case,  L,  R, 
10  Ch.  App.,  194 ;  People  v.  Lake  Shore 
Road,  11  Hun,  1  (1877);  70  N.  Y.,  220; 
Ex  parte  Buchan,  36  L.  J.,  Ch.,  150 
(1867).  Not  granted  to  fish  out  a  de- 
fense. Birmingham  Co.  v.  White,  1 
Q.  B.,  282  (1841);  Imperial  Gas  Co.  v. 
Clarke,  7  Bing.,  95  (1S30).  See  Hoyt  v. 
Amer.  Ex.  Bank,  1  Duer,  652  (1853): 
Shoe  and  Leather  Ass'n  v.  Bailey,  17 
Jones  &  S.  (N.  Y.),  385  (1883).  Nor  to 
furnish  materials  to  the  other  side  for  a 
new  trial.  Pratt  v.  Goswell,  9  C.  P. 
(N.  S.),  706  (1861).  Nor  to  ascertain 
whether  petitioner  might  better  accept, 
with  the  other  shareholders,  what  was 
offered  her  for  her  holding  in  an  old 
company,  which  was  being  wound  up. 
instead  of  proceeding  jvith  an  arbitra- 
tion. Glamorganshire  Banking  Co., 
L.  E.,  28  Ch.  Div.,  620.  Nor  to  estab- 
lish a  justification  in  an  action  against 
the  petitioner  for  libel,  imputing  insolv- 
ency to  the  company.  Metropolitan 
Co.  v.  Hawkins,  4  H  &  N.,  146  (1859). 
See  Finlay  v.  Lindsay,  7  Irish  C.  L.  1  ; 
Collins  v.  Yates,  27  L.  J,  Exch..  150 
(1858);  Opdyke  v.  Marble,  44  Barb.,  64 
(1864).  Nor  to  examine  all  the  books 
of  the  company  for  fifty  years  back, 
because  petitioner  alleges  that  he  is 
dissatisfied  with  the  management  of 
the  company  and  with  the  accounts, 
besides  other  grounds.  Reg.  v.  Grand 
Canal.  1  Irish  Law  Rep..  337  (1839).  Nor 
where  the  petition  does  not  specify  the 
particular  books  asked  for,  nor  the  ob- 
ject of  the  petitioner  in  making  the 
application  to  the  officers  and  to  the 
court.     Reg.  v.  London  and  St.  Cather- 


681 


§  519.] 


INSPECTION  OF  CORPORATE  BOOKS. 


[on.  XXX. 


is  not  a  stockholder  has  no  more  right  to  an  inspection  of  the  cor- 
porate books  than  he  has  to  inspect  the  books  of  a  copartnership. 
This  is  the  rule  even  though  he  is  suing  or  being  sued  by  a  stock- 
holder.1 If  a  stockholder,  and  sometimes  a  third  person,  is  suing 
or  being  sued  by  a  corporation,  he  is  entitled  to  the  usual  right  of  a 
notice  to  produce  documents,2  or  by  an  order,3  or  by  compelling 


ine's  Docks  Co.,  44  L.  J..  Q.  B..  4  (1874). 
See  Hunt  v.  Hewitt  7  Exch.,  236  (1852 
Pepper  v.  Chambers,  7  Exch..  220  (1852 
New  England  Iron  Co.  v.  N.  Y.  Loan 
Co.,  55  How.  Pr..  351  (1878);  Central 
R.  R.  v.  Twenty-third  St.  R,  53  How. 
Pr.,  45  (1877);  Comm'rs  v.  Lemley,  B5 
N.  C,  341  (1881);  Walker  v.  Granite 
Bank,  44  Barb.,  39  (18G5).  The  court 
may  direct  the  manner  of  the  exami- 
nation. Williams  v.  Prince  <>f  Wal 
Ins.  Co.,  23  Beav.,  888  (1857>  An  ap- 
peal may  be  taken  from  an  order 
granting  a  party  leave  to  inspect  and 
examine  the  books  of  a  corporation,  the 
appellant  Thompson  ft  Erie  I.'.  Co,  9 
Abh.  Pr.  (N.  s.i,  212  (1870);  Lancashire 
Co.  ft  Greatorex,  14  L  T.  (N.  s.>.  290 
(1866);  Cummer  ft  Kent,  88  Mich., 
851  .  Comm'rs  ft  Lemley, 85  N.  C., 

841   (1881).    See  Saxby  ft  Easterbrook, 
L   R.,   3    Exch.,  207  (1872  :    Bustros  ft 
White,  L   l:..  l  Q.  a  Div.,  428 
Clyde   ft    Rogers,   21   Hun,   145  (1881  : 
McCargo  ftCrutcher,  27  Ala..  171 
Sage's  Case,  70  N.  Y..  221.      A-  to  the 
costs  of  an  inspection,  see  Hill  v.  Philp, 
7  Exch.,  233    1852);  Davey  ft  Pemb 
ton,  11  C  R  (N.  S.),  629  (1862);  Gardner 
r.    Dangerfield,    5     Beav., 
Stockholders  obtaining  inspection  may 
he  ordered  not  to  disclose  the  informa- 
tion received.    In  re  Birmingham,  eta, 
Co..  36  L.  J.,  Cb.,  I-  :    Williams 

v.  Prince,  etc.,  Co.,  28  Beav.,  840  (181 
May  examine  through  an  attorney. 
Williams  v.  Prince,  etc.,  Co..  23  Beav., 
338(1857).  Professional  accountant  may 
be  used.  Bonnardet  ft  Taylor,  1  J.  & 
11..  386  (1861);  1  GreenL  on  Ev.,  §  474. 
Inspection  of  stock-ledger  allowed. 
People  v.  Pacific,  etc.,  Co,  50  Barb., 
280  (1864).  Of  discount  book.  Cock- 
burn   ft  Union  Bank,  13  La.  Ann..  289 


(1858) ;  People  r.  Throop,  12  Wend.,  183. 
Of  by-laws.  Harrison  ft  Williams,  3  B. 
&  C,  162  (1824);  Reg.  tt  Saddlers' Co., 
10  W.  l:..  77  1 1861).  See,  also,  Walburn 
r.  [ngleby,  1  MyL  &  K..  61  where 

the  order  was  to  a  third  person  having 
charge  of   the   books.     "The  courts  of 
common  law  may  also  make  an  order 
for   the  inspection   of   writings  in  the 
on  of  on<-  party  to  a  suit  in  favor 
of  the  other."    Greenleafe  Ev.,  vol.  I, 
59.    An  article  of  the  company  tak- 
away  the  right  of  inspection  does 
not  previ  nt  a  rule  issuing  requiring  its 
allowance  in  pending  litigation.     Hall 
,-.  Connell,  ::  Younge  &  CoL,  7o7  (1M0). 
The    rule   applies    to     joint-stock   com- 
paniea     Woods  v.  De  Figaniere,  1  Rob., 
681.     In  tin-  federal  courts  the  right  is 

statutory.      r.  S.   1,\  S..  g  724 

1  Strangers  have  no  more  right  to  de- 
mand  inspection  of  the  books  of  a  cor- 
poration during  litigation  in  which  the 

rporation  is  not  interest- d  than  they 
have  to  demand  a  similar  right  of  any 
other  person.  Mayor  of  Southampton 
r.  Gravi  -.  -  T.  P..  590  (1800),  overruling 
i  arlier  cases.  See,  also.  Opdyke  «  Mar- 
1,1.'.  u  Barb.,  64  (1864);  Morgan  v.  Mor- 
gan, M  AM,.  Pr.  N.  S.,.  291  (1874).  A 
corporation  will  not  be  compelled  to 
open  its  records  for  the  purposes  of  a 
litigation  in  which  it  is  not  a  party. 
Henry  ft  Travelers'  Ins.  Co.,  35  Fed. 
Rep.,  I'.  (1888). 

2See  Wait  on  Insolvent  Corporations, 
714,  infra. 

a  King  ft  Travannion,  2  Chitty,  366 
(1818);  Swansea  Yale  R'y  Co.  v.  Budd, 
L.  P..  2  Eq.  Caa.  271  (1866);  Macintosh 
v.  Flint,  etc..  R.  R,  Co..  1  R'y  &  Corp. 
L.  J..  3S4  (Mich.,  1887),  a  stockholder's 
case.  Where  a  stockholder  files  a  hill 
to  obtain   an   accounting,  and  charges 


682 


CH".  XXX.] 


INSPECTION    OF    CORPORATE    BOOKS. 


[§  519. 


the  corporate  officers  to  swear  to  the  pleading  of  the  corporation, 
where  the  facts  sought  for  are  brought  out  by  that  pleading l  or  by 
a  bill  of  discovery.2 


misappropriation,  and  makes  a  motion 
that  he  be  allowed  to  examine  the 
books,  the  court  will  wait  until  the  cor- 
poration pleads  or  answers  before  grant- 
ing the  motion.  Banger  v.  Champion, 
etc.,  Co.,  51  Fed.  Rep..  61  (1892).  A  cor- 
poration may  appeal  from  an  order  for 
the  examination  of  one  of  its  officers. 
Sherman  v.  Beacon,  etc.,  Co.,  11  N.  Y. 
Supp.,  369  (1890).  Under  the  statutory 
practice  in  Rhode  Island  the  court  may 
order  the  production  of  the  record 
book  of  the  corporation  in  court  or  for 
an  inspection.  Arnold  v.  Pawtuxet,  etc., 
Co.,  26  Atl.  Rep.,  55  (R.  I.,  1893).  By 
examination  before  trial  may  ascertain 
whether  defendants  are  proper  defend- 
ants or  whether  they  are  a  corporation. 
Sweeny  v.  Sturges,  24  Hun,  162.  The 
affidavit  to  obtain  the  order  must  show 
that  the  information  sought  is  essential. 


Imperial  Gas  Co.  v.  Clarke,  7  Bing.,  95 ; 
Williams  v.  Savage,  etc.,  Co.,  3  Md.  Ch., 
418,  428  (1851).  See  Lindley  on  Partn.. 
809.  The  officers  may  be  orally  ex- 
amined by  the  court  with  reference  to 
where  the  books  are.  Lacharme  v. 
Quartz  Rock  Mariposa  Gold  Min.  Co.,  1 
Hurl.  &  Colt.,  134  (1S62).  They  may  be 
required  to  make  affidavits.  Ranger  v. 
Great,  etc.,  R.  R.  Co.,  4  De  G.  &  J.,  74 
(1859);  lie  Barton,  31  L.  J.,  Q.  B.,  62 
(1861).  Such  inspections  may  be  through 
agents.  Bonnardet  v.  Taylor,  1  J.  &  H, 
383  (1861);  Draper  v.  Manchester,  etc., 
R.  R.  Co.,  7  Jur.  (N.  S.),  pt.  1,  86  (1861). 
But  see  In  re  West  Devon;  etc..  Mine, 
L.  R.,  27  Ch.  D,  106  (1884);  Bank  of 
Utica  v.  Hilliard,  6  Cowen,  62.  In  an 
action  against  a  corporation  the  plaintiff 
is  entitled  to  inspect  all  the  minutes  and 
entries  in  the  company's  books  having 


1  Formerly  in  equity  suits  it  was  the 
practice  to  make  as  co-defendants  with 
the  corporation  such  officers  as  could 
answer  under  oath  such  matters  as  the 
complainant  desired  to  know.  See  §  738, 
infra;  Glasscott  v.  Copper,  etc.,  Co.,  11 
Sim.,  305  (1840);  In  re  Barnet's,  etc., 
Co.,  L.  R,  2  Ch.,  350  (1867) ;  French  v. 
First  Nat'l  Bank,  7  Ben.,  488  (1874). 
This  rule  prevails  because  the  corpora- 
tion itself  cannot  be  convicted  of  per- 
jury. McKim  v.  Odom,  3  Bland  Ch. 
(Md.),  407,  420  (1828);  Wych  v.  Meal, 
3  P.  Wms.,  311  (1734);  Bevans  v.  Ding- 
man's,  etc.,  10  Pa.  St.,  174  (1849).  The 
corporation  itself  may  be  compelled  to 
answer  fully.  See  Gamewell,  etc.,  Co. 
v.  Mayor,  etc.,  31  Fed.  Rep.,  312,  citing 
cases. 

2  A  bill  lies  in  equity  to  compel  a  cor- 
poration to  discover,  in  aid  of  a  suit  at 
law,  for  damages  for  infringement  of 
patent.  Colgate  v.  Compagnie,  etc.,  23 
Fed.  Rep.,  82  (1885).  See,  also,  as  to  a 
bill  of  discovery,  McComb  r.  Chicago, 
etc.,  R.  R,  19  Blatch.,  69  (1881);    Costa 


Rica  v.  Erlanger,  1  Ch.  D,  171  (187.")): 
Glasscott  v.  Copper,  etc.,  Co.,  11  Sim., 
305  (1840) ;  Moodalay  v.  Morton,  1  Bro. 
C.  C,  469  (1785);  Colgate  v.  Compagnie, 
etc.,  23  Fed.  Rep.,  82 :  Stettauer  v.  New 
York,  etc.,  Co.,  42  N.  J.  Eq.,  46  (1886) ; 
French  v.  First  Nat'l  Bank,  7  Ben.,  488 
(1874).  But  a  bill  of  discovery  will  not 
lie  against  one  who  is  merely  a  witness. 
Fenton  v.  Hughes,  7  Ves.,  288  (1802); 
Dummer  v.  Corporation,  etc.,  14  id.,  245 
(1807).  As  to  the  difference  between  a 
bill  of  discovery  and  other  bills,  see 
Mclntyre  v.  Trustees,  etc.,  6  Paige,  2o'.) 
(1837);  Many  v.  Beekman,  etc.,  Co.,  9 
Paige,  188  (1S41).  Where  discovery  is 
sought  from  an  officer  he  should  be 
made  a  party  defendant.  Virginia,  etc., 
Co.  v.  Hale,  9  S.  Rep.,  256  (Ala.,  1891). 
A  discovery  will  not  be  granted  where 
there  is  no  allegation  that  information 
is  refused  or  that  the  party  cannot  ex- 
amine the  hooks  or  that  a  mandamus 
was  inadequate.  Wolf  et  al.  v.  Under- 
wood et  al.,  11  S.  Rep.,  344  (Ala.,  1892). 


683 


§  519.] 


INSPECTION    OF   CORPORATE    BOOKS. 


[CH.  XXX. 


A  bill  of  discovery  may  be  brought  to  discover  the  names  of 
stockholders  in  order  to  enforce  their  statutory  liability.1  Some- 
times a  subpoena  duces  tecum  may  be  issued  in  behalf  of  a  stock- 
holder or  of  a  third  person.2 


reference  to  the  subject  in  litigation. 
Hill  v.  Great  Western  R  Co.,  10  C.  R 
(N.  S.),  148;  Harrison  r.  Williams,  3  B. 
&  C,  162;  Burton  &  Saddlers'  Co.,  31 
L.  J.,  Q.  B.,  62  Sinclair  v.  Gray,  9  Fla., 
71.  See  Hill  v.  Manchester  Co.,  5  B.  & 
Ad.,  866;  Rex  v.  Buckingham,  8  B.  & 
C,  375;  Imperial  Gas  Co.  v.  Clarke,  7 
Bing.,  95.  It  includes  the  agent,  solic- 
itor, counsel  or  expert  of  the  party  ask- 
ing the  inspection.  Hyde  v.  Holmes,  2 
Moll.,  372;  Blair  v.  Maasey,  L.  R,  5 
Irish  Eq.,  623;  Joint-stock  Discount 
Co. 'a  Case,  36  L.  J.,  Eq.,  150;  Bonnanl.  t 
r.  Taylor,  1  Johns.  &  H,  383;  Attorney- 
General  v.  Whitwood,  40  L.  J.  (Ch.  Div.), 
598 :  Lindsay  v.  Gladstone,  L.  R,  9  Eq., 
132;  Williams  v.  Prince  of  Wales  Ins. 
Co.,  23  Beav.,  338;  State  r.  Bienville 
Co.,  28  La.  Ann.,  204;  Ballin  v.  Ferst,  58 
Ca..  54G.  But  see  Bartley  r.  Bartley,  1 
Drew.,  233;  Summerfield  v.  Pritchard, 
17  Beav.,  9:  Draper  r.  Manchester  R  R, 
3  De  G.,  F.  &  J.,  :.':{;  West  Devon  Mine 
Case,  L  R,  27  Ch.  Div.,  106.  And  a 
shareholder  who  is  also  the  solicitor  of 
opposing  litigants  is  nevertheless  so  en- 
titled. Reg.  r.  Wilts  Co.,  29  L,  T.  (N.  S.i, 
!).".';  Kingsford  v.  Great  Western  R'y 
<  V.  16  C.  B.  (N.  S.),  761.  But  see  Hutt's 
Case,  7  Dowl.  Pr.,  690;  Herschiiekl  v. 
Clark,  11  Exch.,  712.  See,  also,  notes 
supra.  Manner  of  inspection  must  be 
gentlemanly.  Williams  v.  Prince,  etc., 
Co.,  23  Beav.,  338  (1857).  The  plaintiff 
may  have  inspection  of  corporate  min- 
utes in  a  suit  by  a  superintendent 
against  the  corporation.  Hill  v.  Great, 
etc.,  R'y,  10  C.  B.  (N.  S.),  148  (1861).  Or 
in  a  suit  by  a  claimant  of  office.  In  re 
Burton,  etc.,  Co.,  31  L  J.  (Q.  B.\  62 
(1861).  See,  also.  £  711.  infra.  An  order 
will  not  be  granted  for  the  purpose  of 
fishing  out  a  defense.  Birmingham, 
Bristol  &  Thames  Junction  R'y  Co.  r. 
White,  1   Q.  B.,  282.    See,  also,  Credit 


Co.  v.  Webster,  53  L  T.  Rep,  419  (1885). 
In  New  York  the  right  of  inspection  by 
order  is  regulated  by  statute.  Code  of 
Civil  Proa,  §§  803-S09.  See  Boorman 
v.  Atlantic  &  Pacific  R  R  Co.,  78  N.  Y„ 
599  (1879; ;  Ervin  v.  Oregon  R'y  &  Nav. 
Co.,  22  Hun,  566  (1880),  holding  that 
where  the  books  are  in  use  only  sworn 
copies  can  be  required;  Johnson  tt  Con- 
sol.  Silv.  Min.  Co..  2  Abb.  Pr.  (N.  S.), 
413:  Walker  v.  Granite  Bank,  19  Abb, 
111:  Thompson  r.  Erie  R'y  Co.,  9  Abb. 
(N.  S.),  230;  N.  Y.  Daily  Reg.,  October 
22,  1887;  January  31,  1888;  January  26, 
1888.  So,  also,  is  the  right  to  subpoena 
a  corporation  Code  of  Civil  Proa, 
§§  868,  869,  872,  873.  See  N.  Y,  etc., 
R  R  Co.  v.  Carhart,  86  Hun,  288  (1885); 
Richman  r.  Manhattan  Co.,  26  Hun.  433 
(1882);  ch.  536,  L.  1880;  Fenlon  v. 
Dempsey,  50  Hun.  131  (1888  :  Russell  v. 
Manhattan  R'y  Co..  Daily  Register,  Dec. 
31  People  r.  Mutual  Gas,  etc.,  Co., 
71  N.  Y..  484  (1878);  N.  Y.  Daily  Reg., 
Dec.  17.  iss7.  The  transfer-book  may 
be  thus  examined.  See  Fenlon  v.  Denip- 
Bey,  50  Hun,  131  (1888). 

1  Post  v.  Toledo,  etc.,  R  R,  144  Mass., 
346  (18S 

-  The  right  of  a  stockholder  to  compel 
a  corporation  to  produce  in  court  the 
corporate  records  has  been  the  subject 
of  some  controversy.  It  has  been  held 
that  a  Bubpoena  duces  tecum  will  not 
always  lie  herein,  but  that  an  order  to 
the  corporation  to  allow  an  inspection 
is  the  proper  remedy.  La  Farge  v. 
La  large  Fire  Ins.  Co.,  14  How.  Pr.,  26 
(1857);  Central  Nat'l  Bank  v.  White, 
37  N.  V.  Super.  Ct,  297  (1874X  In  Iowa 
a  corporate  servant  who  is  required  by 
a  subpoena  to  produce  the  corporate 
books,  which  show  that  the  corporation 
has  violated  the  liquor  laws,  need  not 
do  so  if  the  hooks  are  not  in  his  posses- 
sion.    But  otherwise  he  is  guilty  of  con- 


684 


CH.  XXX.] 


INSPECTION    OF    CORPORATE    BOOKS. 


[§  519. 


Most  of  the  states  have  statutes  regulating  this  subject,  and  these 
statutes  frequently  displace  the  common-law  procedure. 

tempt.  United  States  Ex.  Co.  v.  Hen-  party.  Johnson,  etc.,  Co.  v.  North,  etc., 
derson,  28  N.  E.  Rep.,  426  (Iowa,  1886).  Co.,  48  Fed.  Rep.,  195  (1891).  Stock  ex- 
See,  also,  preceding  notes.  The  presi-  change  books  as  evidence  must  be 
dent  may  be  compelled  by  subpoena  duces  proved  by  the  secretary.  Terry  v.  Bir- 
tecum  to  produce  drawings  owned  by  mingham,  etc.,  Bank,  9  S.  Rep.,  299  (Ala,, 
the  company  in  a  suit  in  which  it  is  a  1891). 

685 


CHAPTER  XXXI. 


LIENS  OF  THE  CORPORATION  ON  STOCK  FOR  THE  STOCKHOLDER'S 

DEBTS  TO  THE  CORPORATION. 


530-521.  No  lien  at  common  law. 

522  -524  A  Men  may  be  created  by  stat- 
ute, by  charter,  or  possibly  by 
by-law  or  contract —  Notice  of 
the  lien. 

525.  What  phrases  in  charters  or  stat- 

utes will  or  will  not  authorize 
the  corporation  to  create  or  en- 
force a  lien  on  stock. 

526.  The  lien,  when  established,  cov- 

ers all  the  stockholders'  shares 
and  dividends. 


§  527.  The  lien  protects  the  corporation 
as  to  all  the  debts  due  to  it  from 
the  shareholders. 

528.  Right  of  lien  as  against  miscel- 

laneous parties. 

529.  The  lien  can  be  enforced  for  the 

benefit  of  the  corporation  only. 

530.  Methods  of  enforcing  the  lien. 

531.  The  corporation   may  waive  its 

lien. 
'.  The  lien  a^  alected  by  transfers 
and  notice. 
533.  The  lien  on    national  bank  stock. 


§§  520-521.  Xo  lien  at  common  law. —  Corporations,  both  in  this 
country  and  in  England,  frequently  possess  and  exercise  a  lien  on 
a  shareholders  stock  for  debts  due  from  that  shareholder  to  the 
corporation.  In  this  chapter  it  is  proposed  to  consider  the  origin 
of  the  lien;  the  extent  to  which  it  may  be  exercised  and  enforced; 
the  waiver  of  it  by  the  corporation;  and  its  effect  generally  upon 
the  transfer  of  shares. 

It  is  clear  that  at  common  law  a  corporation  has  no  lien  upon  the 
shares  of  its  stockholders  for  debts  due  from  them  to  the  company.1 

Case,  L.  R,,  4  Chan.,  20  (1868).  See, 
also,  Gibson,  Assignee  of  Evans,  tt  Hud- 
son's Bay  Company,  Ms.  Rep,  Michael., 
12  Geo  L  (1726);  7  Viner's  Abridgment 
(2d  London  ed.),  125;  Pinkett  tt  Wright, 
2  Hare's  Chan.,  120  (1842);  Byrne  tt 
Union  Bank  of  Louisiana,  9  Rob.  (La.), 
433  (1845);  Hussey  tt  Mauuf.  &  Mech. 
Bank.  27  Mass.,  415  (1830);  Bryon  tt 
Tarter,  22  La.  Ann.,  98  (1870).  In  New 
York  the  rule  that  there  is  no  lien  at 
common  law  is  applied  to  banking  cor- 
porations. Bank  of  Attica  tt  Manuf., 
eta.  Bank,  20  N.  Y.,  501  (1839).  And  to 
corporations  formed  under  the  General 
Manufacturing  Companies  Act.  Dris- 
coll  r.  West  Bradley,  etc.,  Manuf'g  Co., 
59  id,  9G  (lb74). 


i  Gemmel  r.  Davis,  23  Atl.  Rep.,  1032 
(Md,  1892);  Massachusetts  Iron  Co.  v. 
Hooper,  61  Mass.,  183  (1831);  Bates  v. 
New  York  Insurance  Co.,  3  Johns.  Cas., 
238  (1802);  Steamship  Dock  Co.  tt  Her- 
on's Adm'x,  52  Pa.  St.,  280  (1866) ;  Mer- 
chants' Bank  tt  Shouse,  102  id.,  488 
(1883) ;  Fitzhugb  tt  Bank  of  Shepberds- 
ville,  3  Monroe,  126  (1825);  Williams  tt 
Lowe,  4  Neb.,  382,  398  (1876);  Dana  tt 
Brown,  1  J.  J.  Marsh.,  304  (1829) ;  Heart 
tt  State  Bank,  2  Dev.  Eq.  (N.  C),  111 
(1831);  Farmers',  etc.,  Bank  tt  Wasson, 
48  Iowa,  336  (1878) ;  People  tt  Crockett, 
9  Cal.,  112(1858):  Sargent  tt  Franklin 
Insurance  Co.,  25  Mass.,  90  (1829);  Neale 
v.  Janney,  2  Cranch  C.  C,  188  (1819); 
McMumcb  tt  Pond  Head  Harbor  Co., 
9  U.  C,  Q.  B.,  333  (1852).     Cf.  Weston's 


6S6 


CH.  XXXI.] 


LIEN    OF   THE    COEPOEATION    ON    STOCK. 


[§  522. 


The  policy  of  the  common  law  has  always  been  to  discountenance 
secret  liens,  inasmuch  as  thev  hinder  trade  and  restrict  the  safe  and 
speedy  transfer  of  property.  It  is  upon  this  ground  that  the  courts 
refuse  to  enforce  a  lien  upon  stock  when  such  lien  is  not  created 
by  charter  or  by  by-law. 

§  522.  A  lien  may  be  created  by  statute,  by  charter ,  or  possibly  by 
by  law  or  contract  —  Notice  of  the  lien. —  Such  a  lien  as  this  in  favor 
of  the  corporation  may  be  created  by  statute,1  by  charter,2  and  the 
weight  of  authority  holds  that  it  may  be  created  by  by-law. 

With  respect  to  the  right  of  a  corporation  to  enact  a  by-law 
creating  such  a  lien,  it. is  held  in  many  jurisdictions  that  such  a  by- 
law is  valid  and  binding  upon  all  persons  who  buy  or  transfer  the 
shares.3  There  is  nevertheless  strong  authority  for  the  rule  that 
such  a  by-law  cannot  create  a  lien  on  the  stock  so  as  to  bind  a  bona 
fide  purchaser,  or  other  person  into  whose  hands  the  shares  may 


1  Pittsburg,  etc.,  R.  R.  Co.  v.  Clarke, 
29  Pa.  St.,  146  (1857);  First  National 
Bank  v.  Hartford,  etc.,  Ins.  Co.,  45 
Conn.,  22  (1877);  Presbyterian  Cong.  v. 
Carlisle  Bank,  5  Pa,  St.,  345  (1847); 
Rogers  v.  Huntington  Bank,  12  Serg.  & 
R,  77  (1824);  National  Bank  v.  Watson- 
town  Bank,  105  U.  S.,  217  (1881).  In 
New  York  a  statute  gives  railway  cor- 
porations which  operate  railroads  in 
foreign  countries  a  lien  upon  the  stock 
for  the  amount  of  the  unpaid  calls. 
New  York  Sess.  Laws,  1881,  ch.  468.  §  12. 

2  Bradford  Banking  Co.  r.  Briggs,  L. 
R,  31  Chan.  Div.,  19  (1885);  S.  C.  53  L. 
T.  Rep.  (N.  S.),  846;  reversing  S.  C, 
L.  R.,  29  Chan.  Div.,  149  (1885):  Union 
Bank  v.  Laird,  2  Wheat.,  390  (1817); 
Stebbins  v.  Phoenix  Fire  'Ins.  Co.,  3 
Paige,  350  (1832);  Reese  v.  Bank  of 
Commerce,  14  Md.,  271  (1859) ;  Brent  v. 
Bank  of  Washington,  10  Peters,  596 
(1836);  German  Security  Bank  v.  Jeffer- 
son, 10  Bush  (Ky.),  326  (1874);  Arnold 
v.  Suffolk  Bank,  27  Barb.,  424  (1857); 
Leggett  v.  Bank  of  Sing  Sing,  24  N.  Y., 
283  (1863) ;  Bank  of  Utica  v.  Smalley.  2 
Cowen,  770  (1824);  Farmers'  Bank  of 
Maryland  v.  Iglehart,  6  Gill,  50  (1847); 
Bohmer  v.  City  Bank,  77  Va.,  445  (1883) ; 
Hodges  v.  Planters'  Bank,  7  Gill  &  J., 
306  (1835);  Sabin  v.  Bank  of  Woodstock. 


21  Vt.,  353  (1849) ;  Cross  v.  Phenix  Bank, 
1  R.  I,  39  (1840). 

3  Knight  v.  Old  National  Bank,  3  Clif- 
ford, 429  (1871);  McDowell  v.  Bank  of 
Wilmington,  1  Harr.  (Del.),  27  (1832); 
Bank  of  Holly  Springs  v.  Pinson,  58 
Miss.,  421  (1880);  St.  Louis  Perpetual 
Ins.  Co.  v.  Goodfellow,  9  Mo.,  149  (1845) ; 
Mechanics'  Bank  v.  Merchants'  Bank. 
45  Mo.,  513  (1870);  Spurlock  v.  Pacific 
R.  R  Co.,  61  Mo..  319  (1875);  In  re  Bach- 
man,  12  Nat.  Bank.  Reg.,  223  (1875); 
People  v.  Crockett,  9  Cal.,  112  (1858); 
Pendergast  v.  Bank  of  Stockton,  2  Saw- 
yer, 108  (1871);  Lockwood  v.  Mechanics' 
National  Bank,  9  R.  I.,  308  (1869) ;  Cun- 
ningham v.  Alabama,  etc.,  Trust  Co.,  4 
Ala.  (N.  S.),  652  (1843);  Geyer  v.  West- 
ern Ins.  Co.,  3  Pittsb.,  41  (1867);  In  re 
Dunkerson,  4  Biss.,  227  (1868):  Young 
v.  Vough,  23  N.  J.  Eq.,  326  (1873);  Brent 
v.  Bank  of  Washington,  10  Peters,  565, 
615(1836);  Child  v.  Hudson  Bay  Co.,  2 
P.  Wms.,  207  (1723) ;  Planters',  etc.,  Ins. 
Co.  v.  Selma  Savings  Bank,  63  Ala,,  585 
(1879).  Cf.  Heart  v.  State  Bank,  2  Dev. 
Eq.  (N  C),  111  (1831);  Farmers',  etc., 
Bank  v.  Wasson,  48  Iowa,  336,  340  (1878). 
In  Tuttle  v.  Walton,  1  Ga.,  43  (1846),  it 
was  said  that  as  between  the  corpora- 
tors themselves  such  a  by-law  will  be 
held  valid. 


687 


§  522.]  LIEN   OF   THE    COBPOEATION    ON    STOCK.  [CH.  XXXI. 

come,  to  whom  actual  knowledge  of  the  by-law  cannot  be  im- 
puted. 

Such  is  the  rule  in  New  York,1  Louisiana,2  Massachusetts,3  Ala- 
bama,4 Pennsylvania,5  California,6  Mississippi 7  and,  it  seems,  in  some 
other  states/  It  is  also  the  rule  declared  by  the  supreme  court  of 
the  United  States  in  cases  that  involve  the  right  of  the  national 
banks  to  enact  such  by-laws.9 

Upon  the  whole  it  may  be  said  that  the  question  whether  a  cor- 
poration may,  by  by-law,  create  a  lien  in  its  own  favor  upon  the 
shares  of  its  stockholders  for  debts  due  by  them  to  the  corporation 
is  not  settled.  The  weight  of  authority  in  this  country  is  against 
the  validity  of  the  by-law,  and  such  would  seem  to  be  a  result 
most  in  accord  with  a  wise  and  broad  public  policy. 

i  Driscoll  v.  West  Bradley,  etc.,   Co.,    90  (1829),  there  is  a  somewhat  decided 


59  N.  Y.,  96   (1874) ;  Bank  of  Attica  v. 
Manufacturers'  Bank,  20  id.,  501  (1859); 
Rosenback  v.  Salt  Spring  National  Bank, 
53  Barb.,  495  (1868) ;  Conklin  r.  Second 
National   Bank,   id.,  512  (1868);   S.   C, 
aff'd,  45  N.  Y.,  655  (1871).     In   the   case 
last  cited   it   was  held   that    not  even 
where  the  certificate  of  stock  contained 
a  provision  that  the  stock  was  not  trans- 
ferable until   all   the    liabilities  of  the 
stockholder  to  the  bank  were  paid  did 
the  bank  acquire  a  lien  upon  the  shares 
for  the  subsequent  indebtedness  of  the 
share-owner.     And   all  the   New  York 
decisions  proceed  upon  the  broad  ground 
that  the  policy  of  the  law  is  to  protect 
a  bona  fide  vendee  of  shares  of  stock 
against     secret     or    equitable     claims 
thereto.     Cf.  Leggett  v.  Bauk  of  Sing 
Sing,  24  N.  Y„  283  (1863) ;  McCready  v. 
Rumsey,  6   Duer,  574  (1857);  Arnold  r. 
Suffolk  Bank,  52  Barb.,  424  (1857). 

-  Bryon  v.  Carter,  22  La.  Ann.,  98 
(1870);  Pitot  v.  Johnson,  33  id.,  1286 
(1881).  Cf.  New  Orleans  National  Bank- 
ing Association  r.  Wiltz,  4  Woods,  43 
(1881);  S.  C,  10  Fed.  Rep.,  230. 

3  In  Nesmith  v.  Washington  Bank,  23 
Mass.,  324  (1828),  the  court  doubted 
whether  a  by-law  could  under  any  cir- 
cumstances create  a  lien  on  the  shares 
as  against  the  creditors  of  the  share- 
owner,  but  did  not  decide  the  point  In 
Sargent  v.  Franklin  Ins.  Co.,  25  Mass., 


ground  taken  against  the  validity  of 
any  by-law  which  tends  to  limit  the 
free  transfer  of  shares.  In  Plymouth 
Bank  v.  Bank  of  Norfolk,  27  Mass.,  454 
(1830),  Chief  Justice  Shaw  seems  to 
doubt  the  validity  of  a  by-law  giving 
the  bank  a  lien  on  its  own  stock. 

♦Planters',  etc..  Mutual  Ins.  Co.  r. 
Selma  Savings  Bank,'  63  Ala,  585  (1879). 

5  Steamship  Dock  Co.  v.  Heron's 
Adm'x,  52  Pa.  St,  280  (1866);  Mer- 
chants' Bank  v.  Shouse,  102  Pa.  St,  488 
(1881 

6  Anglo-Californian  Bank  v.  Grangers' 
Bank,  63  Cal,  359  (1883). 

"  Bank  of  Holly  Springs  v.  Pinson,  58 
Miss.,  421  (1880). 

8  Carroll  v.  Mullanphy  Savings  Bank. 
8  Ma  App.,  249  (1880);  Evansville  Na- 
tional Bank  V.  Metropolitan  National 
Bank.  2  Biss.,  527  (1871);  Lee  v.  Citizens' 
National  Bank,  2  Cin.  Super.  Ct,  298 
(1872).  Cf.  Neale  r.  Janney,  2  Cranch 
C.  C,  188  (1819).  A  lien  of  the  corpora- 
tion on  stock  is  prevented  by  a  statu- 
tory provision  that  the  company  should 
not  loan  money  on  the  security  of  its 
own  stock.  Nicollet  National  Bank  v. 
City  Bank,  35  N.  W.  Rep.,  577  (Minn., 
1887). 

9  Bank  r.  Lanier,  11  Wall.  369  (1870); 
Bullard  v.  Bank,  18  id.,  589  (1873). 
Vide  §  533,  infra. 


688 


CH.  XXXI.]  LIEN    OF    THE    COEPOEATION    ON    STOCK.  [§§  523,  524. 


§  523.  In  Pennsylvania  it  is  the  statutory  law  that  the  transfer 
of  shares  of  stock  in  a  railway  corporation  can  be  made  only  upon 
payment  of  any  indebtedness  that  may  exist  on  the  part  of  the 
shareholders  who  seek  to  transfer,  unless  the  lien  is  waived  by  the 
corporation.1  In  New  Hampshire  liens  upon  shares  are  forbidden 
by  statute.2 

"When  a  lien  is  expressly  given  to  the  corporation  by  its  charter 
or  by  statute,  all  persons  dealing  with  the  corporation  are  affected 
by  it  and  must  take  notice  of  it.3  A  statutory  lien  need  not  be  set 
out  in  the  certificate  in  order  to  give  notice  to  the  transferee.4  And 
where  the  lien  is  not  authorized  by  the  charter  or  by  statute,  the 
mere  declaration  of  its  existence  in  the  certificate  will  not  avail 
against  a  honafide  purchaser.5 

§  524.  It  is  a  salutary  rule  that  a  lien  created  by  by-law  can  bind 
only  those  who  take  the  stock  with  notice  of  the  by-law.  This  is 
because  by-laws  do  not  of  themselves  impart  or  convey  notice.0   So, 


1  Pittsburgh,  etc.,  R  R.  Co.  v.  Clarke, 
29  Pa.  St,  146  (1857) ;  Rogers  v.  Hunt- 
ingdon Bank,  12  Serg.  &  R,  77  (1824). 
Cf.  Everhart  v.  West  Chester  R  R  Co., 
28  Pa.  St,  339  (1857). 

2  Hill  v.  Pine  River  Bank,  45  N.  H, 
300,  309  (1864). 

3  Bishop  v.  Globe  Company,  135  Mass., 
132  (1883) ;  Union  Bank  of  Georgetown  v. 
Laird,  2  Wheat,  390  (1817);  Bohmer  v. 
City  Bank  of  Richmond,  77  Va.,  445 
(1883);  Downer's  Adm'r  v.  Zanesville 
Bank,  Wright  (Ohio),  477  (1833) ;  Grant 
v.  Mechanics'  Bank,  15  Serg.  &  R,  140 
(1826);  St  Louis  Perpetual  Life  Insur- 
ance Co.  v.  Goodfellow,  9  Mo.,  149  (1845); 
Bank  of  Utica  v.  Smalley,  2  Cowen,  770 
(1824);  Rogers  v.  Huntingdon  Bank,  12 
■Serg.  &  R,  77  (1824);  Sewall  v.  Lan- 
caster Bank,  17  id.,  285  (1828).  Cf.  Steb- 
bins  v.  Phoenix,  etc.,  Insurance  Co.,  3 
Paige,  350  (1832). 

4McCready  v.  Rumsey,  6  Duer  594 
(1857);  Reese  v.  Bank  of  Com.,  14  Md., 
271  (1859) ;  First  Nat'l  Bank  v.  Hartford, 
etc.,  Ins.  Co.,  45  Conn.,  22  (1877).  A 
lien  on  stock  created  by  statute  gives 
the  corporation  a  prior  right  in  the  stock 
as  against  a  subsequent  pledgee  and  pur- 
chaser at  the  pledgee's  sale,  even  though 
the  certificate  of  stock  gives  no  intima- 
tion of  a  lien.     Hammond  v.  Hastings, 


(44) 


689 


134  U.  S.,  401  (1890).  But  where  the  by- 
law under  which  the  lien  is  claimed  di- 
rects that  notice  of  the  lien  should  be 
given  in  the  certificate  of  stock,  this 
provision  must  be  regarded  as  meaning 
that  the  lien  should  not  be  asserted 
against  a  person  not  having  notice  by 
the  certificate.  And  the  issuance  of 
certificates  not  containing  this  notice  is 
a  waiver  of  the  lien  contemplated  by 
such  by-law.  Bank  of  Holly  Springs  v. 
Pinson,  58  Miss.,  421  (1880). 

5  Conklin  v.  Second  National  Bank,  45 
N.  Y.,  655  (1871).  But  in  Vansands  v. 
Middlesex  County  Bank,  26  Conn.,  144 
(1857),  it  is  held  that  a  statement  on  the 
face  of  the  certificate  of  stock  that  it  is 
issued  subject  to  all  debts  due  from  the 
owners  to  the  corporation  will  bind  a 
transferee  as  a  qualification  or  restric- 
tion of  the  transferrer's  title,  and  that, 
too,  although  no  charter  provision  or 
by-law  authorizes  such  a  lien  on  the 
stock.  So,  also,  21  Pac.  Rep.,  852  (Cal., 
1889). 

&Driscoll  v.  West  Bradley,  etc.,  Co., 
59  N.  Y.,  96,  109  (1874);  Bank  of  Holly 
Springs  v.  Pinson,  58  Miss.,  421,  435 
(1S80);  Anglo  -  Californian  Bank  v. 
Grangers'  Bank,  63  Cal.,  359  (1883). 
See.  also,  People  ex  rel.  Krohn  v. 
Miller,  Treas.,  39  Hun,  557  (1886),  con- 


§  525.]  LIEN    OF    THE   CORPORATION    ON    STOCK.  [cil.  XXXI. 

too.  a  by-law   enacted  subsequently  to  a  transfer,  although  the  ■ 
transfer  has  not  been  recorded  on  the  corporate  books,  cannot  affect 
the  rights  of  the  parties  as  to  that  transfer.1  By-laws  creating  liens 
on  stock  have  been,  however,  held  valid  and  enforceable  as  against 
the  assignees  in  bankruptcy  or  in  insolvency.2 

A  clause  in  a  charter  declaring  that  debts  due  from  the  stock 
holders  must  be  paid  before  a  transfer  will  be  allowed  is  sufficient 
to  create  a  lien  on  the  stock  without  other  action  on  the  part  of 
the  corporation.3  And  so,  also,  a  power  conferred  by  the  charter 
upon  the  directors  to  refuse  a  transfer  so  long  as  the  shareholder 
who  wishes  to  transfer  is  indebted  to  the  corporation,  when  exer- 
cised by  the  corporate  management,  supports  the  lien.4 

A  lien  may  be  created  by  special  agreement  among  the  share- 
holders.5 And  even  a  mere  usage  of  a  corporation  not  to  trans- 
fer shares  while  the  owner  is  indebted  to  the  corporation  is  suf- 
ficient to  create  a  lien  on  stock,  valid  between  the  corporation 
and  its  shareholders,  and  one  which  will  bind  a  shareholder  who 
borrows  money  with  knowledge  of  it.6 

§525.  What  phrases  in  charters  or  statutes  u-ill  or  will  not 
authorize  Ike  corporation  to  create  or  enforce  a  lien  on  stock. — 
The  question  sometimes  arises  whether  or  not  the  corporation,  by 
the  charter  or  the  statute  under  which  it  acts,  has  authority  to 
enact  a  by-law  creating  a  lien  upon  its  stock  in  favor  of  the  corpo- 
ration for  debts  due  it  by  the  shareholders.  It  has  been  held  that, 
where   the  directors  are  authorized  to  make  "regulations'' as  to 

cernins  the  validity  and  effect  of  by-  ration   lias  a  lien   on  it  for  debts  due 

laws  regulating  the  sale  and  transfer  of  to   the   corporation,  a  purchaser   takes 

seats  or  membership  in  the  commercial  subject  thereto.     It  is  a  contract  lien, 

exchanges,  and  the  enforcement  of  the  Jennings  v.  Bank  of  CaL,  21  Pad  Rfp.. 

liens  created  thereupon  by  such  by-laws  852    (Cat,    1889).      By  consent    of    all, 

in  favor  of  other  members  of  the  corpo-  a    lien    given    to  the    corporation   for 

ration.  debts  due  to  it  by  the  stockholders  is 

People  v.  Crockett,  9  CaL,  112  (1858).  valid  and  the  method  of  foreclosing  it 

'-'  Morgan  v.  Bank  of  North  America,  may  also  be  so  prescribed.      The  statute 

8  Serg.  &  R.  73  (1822);  S.  C,  11  Am.  of  limitations  does  not  run  against  it 

Dec.  575;    Vansands  v.  Middlesex  Co.  Reading,    etc.,    Co.     r.    Reading,     etc.. 

Bank,  26  Conn.,  144  (1857);  In  re  Bige-  Works,  21  Atl.  Rep.,  170  (Pa.,  1891). 
low.  1  Nat.  Bank.  Reg.,  632,  667(1S68).  6  Wain's  Assignees  v.  Bank  of  North 

s  Farmers'  Bank  of   Maryland  Case,  2  America,  8  Serg.  &  R,  73.  88  (1822) ;  S. 

Bland's  Chan.,  394(1830);  Kenton  Ins.  C,  11  Am.  Dec,  575.      Cf.  Vansands  v. 

Co.  v.  Bowman,  1  S.  W.  Rep.,  717  (Ky.,  Middlesex    Co.    Bank,    26     Conn.,    144 

1886).  (1857).      So  in  Bryon  v.  Carter,  22  La. 

*  Arnold  r.   Suffolk  Bank,    27   Barb,  Ann.,  98  (1870),  it  is  held  that  a  by-law 

424  (1857).  creating  a  lien,  while  it  may  be  valid  as 

5  Vansands  v.  Middlesex  County  Bank,  between  the  parties  if  it  be  brought  to 

26  Conn.,  144  (1857).      By  inserting  in  their  knowledge,  is  not  binding  on  the 

the  certificate  of  stock  that  the  corpo-  judgment  creditors  of  the  shareholders. 

690 


CH.   XXXI.] 


LIEN    OF    THE    CORPORATION    ON    STOCK. 


[§  526. 


transfers,  they  may  make  a  by-law  creating   a  lien.1      So  various 
other  phrases  have  been  held  sufficient  to  confer  this  power.2 

§  526.  The  lien,  when  established,  covers  all  the  stockholder's 
shares  and  dividends.—  A  valid  lien  in  favor  of  the  corporation, 
when  regularly  established,  attaches  to  all  the  shares  and  dividends 
of  the  indebted  stockholder.  Thus,  it  attaches  to  all  the  shares  the 
stockholder  owns,  although  the  debt  be  for  calls  due  and  unpaid 
upon  only  a  part  of  them.3  The  lien  attaches  not  only  to  the  stock 
itself  but  to  dividends  declared  on  the  stock.4  It  is  accordinglv 
held  that  a  corporation  may  lawfully  retain  dividends,  and  apply 
them  to  the  payment  of  a  debt  due  to  it  from  the  shareholder, 
since  in  an  action  by  the  shareholder  to  enforce  payment  of  his 
dividends  the  corporation  may  plead  the  debt  by  way  of  set-off.5 


1  Cunningham  v.  Alabama,  etc.,  Trust 
Co.,  4  Ala.  (N.  S.),  652  (1843):  Spurlock 
v.  Pacific  R  R.  Co.,  61  Mo.,  319  (1875); 
Pendergast  v.  Bank  of  Stockton,  2  Saw- 
yer, 108  (1871).  Cf.  Tuttle  v.  Walton,  1 
Ga.,  43  (1846). 

2Bryon  v.  Carter,  22  La,  Ann.,  98 
(1870);  Brent  v.  Bank  of  Wash.,  10 
Peters,  596,  611  et  seq.  (1836);  Pender- 
gast v.  Bank  of  Stockton,  2  Sawyer,  108 
(Cat,  1871).  Except  when  such  power 
is  expressly  given  to  the  directors  it  can 
only  be  exercised  by  vote  of  the  stock- 
holders. Carroll  v.  Mullanphy  Sav. 
Bank.  8  Mo.  App.,  249  (1880).  A  char- 
ter power  given  to  the  directors  of  a 
corporation  "to  make  all  by-laws  not 
inconsistent  with  any  existing  law  of 
the  state  for  the  management  of  its 
property,  the  regulation  of  its  affairs 
and  the  transfer  of  its  stock,"  has  been 
held  in  Missouri  to  include  the  power  in 
question.  Mechanics'  Bank  v.  Mech. 
Bank,  45  Mo.,  513  (1870).  But  in  New 
York  the  same  language  used  in  the 
general  statute  was  held  not  to  include 
it.  Driscoll  v.  West  Bradley,  etc.,  Co., 
59  N.  Y.,  96  (1874).  See,  also,  Perpetual 
Ins.  Co.  v.  Goodfellow,  9  Mo.,  149  (1845) ; 
Vansands  v.  Middlesex  Bank,  26  Conn., 
144  (1857);  Bank  of  Attica  v.  Manuf., 
etc.,  Bank,  20  N.  Y,  501  (1859).  For  a 
discussion  of  this  question  as  applied  to 
natioual  banks,  see  §  533. 

3  Stebbins  v.  Phoenix  Fire  Ins.  Co.,  3 


Paige,  350  (1832).  Cf.  Brent  v.  Bank  of 
Washington,  2  Cranch  G  C,  517  (1824). 
In  Virginia,  however,  it  seems  that 
there  can  be  no  lien  on  wholly  paid  up 
shares  to  secure  the  payment  of  an  un- 
paid subscription  to  other  shares.  Shen- 
andoah Valley  R.  R.  Co.  v.  Griffith,  76 
Va„  913  (1882).  Cf  Va.  Code,  1887, 
§§  1127,  1128,  1130;  Petersburg  Savings, 
etc.,  Co.  v.  Lumsden,  75  Va.,  327  (1881). 
And  in  England  a  lien  on  stock  for  un- 
paid calls  is  a  lien  only  on  those  partic- 
ular shares  upon  which  the  calls  is  made 
and  not  on  other  shares.  Hubbersty  v. 
Manchester,  etc.,  R'y  Co.,  L.  R.,  2  Q.  B., 
471  (1867). 

4  Thus  it  attaches  to  the  dividends 
even  though  only  "shares  and  stock" 
be  specifically  named  in  the  statute  or 
charter  as  subject  to  the  lien  (Hague  v. 
Dandeson,  2  Exch.,  147  —  1848),  and 
though,  in  the  absence  of  express  pro- 
vision, it  is  held  that  no  such  lien  im- 
pliedly exists.  Sargent  v.  Franklin  Ins. 
Co.,  25  Mass.,  90  (1829) ;  Bates  v.  N.  Y. 
Ins.  Co.,  3  Johns.  Cas.,  238  (1802).  So, 
in  Hagar  v.  Union  Nat'l  Bank,  63  Me., 
509  (1874),  it  was  held  that  the  terms  of 
the  act  of  1864  which  are  inconsistent 
with  the  existence  of  a  stock  lien  do  not 
preclude  a  lien  on  dividends. 
»5  Hagar  v.  Union  National  Bank,  63 
Me.,  509  (1874);  Sargent  v.  Franklin  Ins. 
Co.,  25  Mass.,  90  (1829);  Bates  v.  New 
York  Ins.  Co.,  3  Johns.  Cas.,  238  (1802). 


691 


§  527.] 


LIEN   OF   THE    CORPORATION    ON    STOCK. 


[CH.  XXXI. 


But  dividends  declared  after  the  death  of  the  stockholder  are  not 
subject  to  a  lien  for  his  debts.1  The  lien  attaches  to  the  shares 
even  after  a  liquidation  or  dissolution  of  the  company.2  It  attaches 
not  only  to  valid  stock,  but  to  spurious  stock  obtained  by  forgery.5 
So  also  the  lien  attaches  to  trust  stock  for  debts  due  from  a  trustee 
who  holds  stock  in  trust,  but  in  his  own  name,  and  without  any  in- 
dication of  the  trust.4  Where  a  cestui  que  trust  owes  the  corpora- 
tion a  debt,  the  lien  attaches  to  his  stock  though  held  for  him  in 
the  name  of  a  trustee.5  And  stock  standing  on  the  corporate  books 
in  the  name  of  a  fictitious  person  is  subject  to  a  lien  for  the  indebt- 
edness of  the  real  owner.6 

§  527.  The  lien  protects  the  corporation  as  to  all  the  debts  due  to 
it  from  the  shareholder. —  It  is  a  general  rule  that  alien  upon  stock 
is  a  lien  for  all  debts  of  the  shareholder  due  to  the  corporation;7 
and  it  is  not  necessary  that  the  debt  be  due  and  payable  at  the 
time  when  the  lien  is  sought  to  be  enforced.  It  covers  debts  which 
are  not  due  as  well  as  those  that  are  due,  and  all  indebtedness  to 
the  corporation,  whether  payable  presently  or  at  a  future  time.8 


Cf.  Merchants'  Bank  r.  Shouse,  102  Pa. 
St..  lsS  (1883);  S.  C,  1G  Rep.,  442;  Brent 
v.  Bank  of  "Washington,  2  Cranch  C.  C, 
517  (1824).     See,  also,  §  545,  infra. 

1  Brent  v.  Bank  of  Washington,  supra; 
Merchants'  Bank  v.  Shouse,  supra. 

2  In  re  General  Exchange  Bank,  L.  P., 
C  Chan.,  818  (1871). 

*Mt  Holly  Paper  Co.'s  Appeal,  99  Pa 
St,  513  (1882). 

4  Now  London  &  Brazilian  Bank  v. 
Brocklebank,  L.  R,  21  Chan.  Div.,  302 
(1882);  Young  v.  Vough,  23  N.  J.  Eq., 
.°>25  (1873);  Burns  v.  Lawrie's  Trustees, 
2  Scotch  Ct  of  Sessions  Cas.  (2d  series  i, 
1348  (1840);  otherwise  cited,  2  Dunlap, 
Bell  &  Murray,  1348. 

6  Stebbins  v.  Phoenix  Fire  Ins.  Co.,  3 
Paige,  350  (1832). 

6  Stebbins  v.  Phoenix  Fire  Ins.  Co.,  3 
Paige,  350  (1832),  where  the  president  of 
a  corporation  with  fraudulent  intent 
procured  shares  to  be  recorded  in  a  ficti- 
tious name,  and,  having  himself  become 
indebted  to  the  corporation,  procured  an 
assignment  of  the  shares  to  another 
creditor,  who  sought  to  have  the  trans- 
fer recorded.  Held,  that  the  lien  still 
attached  for  the  debts  of  the  original 
holder. 


7 1'nion  Bank  of  Georgetown  v.  Laird, 
2  Wheat,  890(1817);  Mobile  Mutual  Ins. 
Co.  v.  McCallum,  19  Ala.,  558  (1873); 
Cunningham  r.  Ala,  etc.,  Trust  Co.,  4 
Ala.  (N.  S.),  652  (1843);  Rogers  v.  Hunt- 
ingdon Bank,  12  Serg.  &  11,11  (1824); 
!■:.■■  parte  Stringer,  L  R,  9  Q.  B.  Div., 
43G  (1882);  In  re  Peebles,  2  Hughes,  394 
(Va..  1875);  Planters',  etc.,  Mutual  Ins. 
Co.  v.  Selma  Savings  Bank,  G3  Ala.,  585 
(1879). 

s  Pittsburg,  etc.,  R  R  Co.  v.  Clarke, 
29  Pa.  St.,  146  (1857);  In  re  Bachman, 
12  Nat  Bank.  Reg.,  223  (1875);  Down- 
er's Adm'r  v.  Zanesville  Bank,  Wright 
(Ohio),  477  (1833);  Brent  v.  Bank  of 
Washington,  10  Peters,  596(1836);  Grant 
v.  Mechanics'  Bank,  15  Serg.  &  R,  140 
(1826);  Rogers  v.  Huntingdon  Bank,  12 
id,  77  (1824);  Sewall  v.  Lancaster  Bank, 
17  id..  285  (1828);  McCready  r.  Rumsey, 
6  Duer.  571  (1857);  St.  Louis  Perpetual 
Insurance  Co.  v.  <  r<  o  1  lei  low,  9  Mo.,  149 
(1845);  Cunningham  v.  Ala.,  etc.,  Trust 
Co.,  4  Ala.  (N.  S),  652  (1843;;  Hall  v. 
United  States  Ins.  Co.,  5  Gill  (Md.),  484 
(1847):  Leggett  v.  Bank  of  Sing  Sing, 
24  N.  Y.,  283  (1862) ;  In  re  Stockton  Mal- 
leable Iron  Co.,  L  R,  2  Chan.  Div.,  101 
(1875).     In   Grant  V.  Mechanics'   Bank, 


692 


OH.    XXXI.] 


LIEN    OF    THE    COKPORATION    ON    STOCK. 


[§  527. 


The  lien  also  will  continue  for  the  benefit  of  the  corporation,  al- 
though the  debt  be  barred  bv  the  statute  of  limitations.1  The  lien 
attaches  whether  the  stockholder's  debt  to  the  corporation  accrued 
before  or  after  he  became  a  stockholder.2  It  also  secures  debts  for 
which  the  shareholder  is  liable  only  as  surety,3  and  debts  due  from 
a  partnership  in  which  the  stockholder  is  a  partner.4  So,  also,  it 
secures  the  corporation  for  unpaid  calls  upon  the  original  subscrip- 
tion.5    But  the  lien  does  not  attach  until  a  call  is  made.6 


supra,  it  was  held  that  a  bank  organ- 
ized under  the  Pennsylvania  law  of 
March  21,  1814,  might  lawfully  refuse 
to  permit  the  transfer  of  the  stock  of  a 
shareholder  who  was  the  drawer  of  a 
bill  discounted  by  the  bank,  but  not 
payable  at  the  time  the  transfer  was  de- 
manded —  both  the  shareholder  and  his 
indorser  having,  since  the  discount  of 
the  paper,  become  insolvent  So,  also, 
Downer's  Adm'r  v.  Zanesville  Bank, 
supra.  But  where  the  lien  is  expressly 
made  a  security  for  debts  "  actually  due 
and  payable,"  it  will  be  held  to  cover 
only  debts  due  and  payable.  Beese  v. 
Bank  of  Commerce,  14  Md..  271  (1859). 
Cf.  Downer's  Adm'r  v.  Zanesville  Bank, 
supra. 

1  Farmers'  Bank  of  Md.  v.  Iglehart,  6 
Gill  (Md.),  50  (1847);  Geyer  v.  Western 
Ins.  Co.,  3  Pittsb.,  41  (1867);  Brent  v. 
Bank  of  Washington,  10  Peters,  596,  617 
(1836). 

2  Schmidt  v.  Hennepin,  etc.,  Co.,  35 
Minn.,  511  (1886). 

3  McLean  v.  Lafayette  Bank,  3  McL, 
587(1846) ;  Leggettn  Bank  of  Sing  Sing, 
24  N.  Y.,  283  (1862);  Union  Bank  of 
Georgetown  v.  Laird,  2  WTheat.,  390 
(1817);  McDowell  v.  Bank  of  Wilming- 
ton, 1  Harr.  (Del.),  27  (1832);  Brent  v. 
Bank  of  Washington,  10  Peters,  596, 
615  (1836);  St  Louis  Perpetual  Ins. 
Co.  r.  Goodfellow,  9  Mo.,  149  (1845). 
Cf.  Miles  v.  New  Zealand,  etc.,  Co.,  54 
K  T.  Rep.,  582  (1886);  West  Branch 
Bank    v.   Armstrong,    40  Pa.    St.,   278 


(1861).  A  corporation,  on  discounting 
a  bill  or  note,  may  take  security  from 
one  of  the  parties,  and  also  hold  the 
shares  of  another  party  as  security  for 
the  same  loan.  Union  Bank  v.  Laird, 
sujwa.  Cf.  Conant  v.  Seneca  Co.  Bank, 
1  Ohio  St,  298  (1853) ;  Helm  v.  Swiggert, 
12  Ind.,  194  (1859);  Dunlop  v.  Dunlop, 
L.  R.,  21  Chan.  Div.,  583  (1882),  holding 
that  where  the  corporation  has  other 
security  it  is  not  obliged  to  resort  to  the 
lien. 

4  In  the  Matter  of  Bigelow,  2  Benedict, 
469  (N.  Y.,  1868);  Geyer  v.  Western  Ins. 
Co.,  3  Pittsb.,  41  (1867) ;  Arnold  v.  Suffolk 
Bank,  27  Barb.,  424  (1857) ;  Planters',  etc., 
Ins.  Co.  v.  Selma  Savings  Bank,  63  Ala,, 
585  (1879). 

»Spurlock  v.  Pacific  R  R  Co.,  61  Mo., 
319  (1875);  McCready  v.  Rumsey,  6 
Duer,  574  (1857):  Regina  v.  Wing,  33 
Eng.  L.  &  E.,  80  (1855);  Ex  parte  Lifc- 
tledale,  L.  R,  9  Chan.,  257  (1874) ;  Com- 
panies Clauses  Consolidation  Act  1845 
(8  Vict,  ch.  16,  §  16);  Shaw  v.  Row- 
ley, 5  Eng.  R'y  &  Canal  Cas..  47  (1847); 
Ex  parte  Tooke,  6  id.,  1  (1S49V  Cf. 
Newry,  etc.,  R'y  Co.  v.  Edmunds,  2 
Exch.,  118  (1848);  Ambergate,  etc.,  R'y 
Co.  v.'  Mitchell,  4  id.,  540(1849);  Great 
North  of  Eng.  R'y  Co.  v.  Biddulph,  7 
Mees.  &  W.,  243  (1840);  Pittsb.,  etc., 
R  R  Co.  v.  Clarke,  29  Pa.  St.  146 
(1857);  Rogers  r.  Huntingdon  Bank.  12 
Serg.  &  R,  77  (1824) ;  Petersburg  Sav., 
etc.,  Co.  v.  Lumsden,  75  Va.,  327  (1S81). 
Cf.  Hall  v.  U.  S.  Ins.  Co.,  5  Gill  (Md.), 


6  A  director  transferring   his   shares    is  fixed  and  not  by  a  mere  general  reso- 
before  the  call  avoids  the  lien  although    lution.     Re  Cowley,  etc,,  Co.,  61  K  T. 
he  knew  the  call  was  to  be  made.     The     Rep.,  601  (1889). 
call  is  made  when  the  date  of  payment 

693 


§§  523,   520.]  LIEN    OF    THE    COEPOEATION    ON    STOCK.  [(I'll.  XXXE 

Whether  the  lien  will  avail  to  protect  the  corporation  as  to  in- 
stalments on  the  stock  not  called  seems  not  to  be  settled.  "Whether 
it  does  or  not  will  depend  upon  the  wording  of  the  provision  au- 
thorizing the  lien.  Generally  no  such  lien  exists.1  The  lien  also 
attaches  to  the  stock  of  a  depositor  who  has  overdrawn  his  ac- 
count.2 

§  528.  Right  of  lien  as  against  miscellaneous  parties. —  The  lien 
of  a  corporation  on  shares  of  stock  as  security  for  the  payment  of 
debts  due  to  the  corporation  from  the  owner  is  a  lien  only  as  to 
the  indebtedness  of  duly  recorded  shareholders.3  There  is  no  lien 
on  the  stock  as  to  debts  of  an  intervening  unrecorded  owner  of  the 
stock.4 

§  529.  The  lien  can  be  enforced  for  flu  benefit  of  the  corporation 
only. —  The  right  of  a  corporation  to  a  lien  on  the  stock  of  its 
shareholders  as  security  for  the  payment  of  their  debts  to  the  cor- 
poration is  a  right  to  be  enforced  only  by  the  corporation  ami 
exclusively  for  its  own  benefit.  Accordingly,  it  is  held  that  the 
corporation  cannot  become  the  assignee  of  the  claim  of  some  third 
person  against  one  of  its  shareholders  in  order  to  enforce  payment 
of  that  claim  for  the  benefit  of  the  third  person  by  a  recourse  to 
the  corporate  lien  on  the  shareholder's  stock.5  Neither  can  the 
corporation  be  compelled,  for  the  benefit  of  sureties  as  to  a  part  of 
the  shareholder's  indebtedness,  to  apply  the  proceeds  of  the  sale  of 
the  stock  to  the  liquidation  of  that  part  of  their  claim  which  is 
secured.*    The  lien  is  for  the  benefit  of  the  corporation,  and  it  may 

484,  4' 99  '  Is  IT  <,  holding  that  instalments  wise  acquired,  and  the  lien  may  attach 

not  called    in  constituted  no  such   in-  thereto. 

dehtedness  as  was  contemplated  in  the  *  Helm  v.  Swiggert,  12  Ind.,  194  (1859). 

statutory  provision  for  the  lien.     Such  ■>  White's   Bank   r.   Toledo,    etc.,    Ins. 

a   construction    "would    he  to  render  Co..  12  Ohio  St.,  GDI  (1861).    To  the  point 

its   stock    wholly   untransferable   until  that  this  lien  is  one  exclusively  for  the 

the  par  amount  of  it   had   been  paid  benefit  of  the  corporation,  see  Bank  of 

up,  although   the  requisite  instalments  Utica  v.  Smalley,  2  Cow  en.  770  (1834), 

for  that  purpose  had  never  been  called  "Cross  v.   Phenix   Bank,    1    R  I.,  39 

in."  (1840).     But  see   Kuhns    r.    Westmore- 

'  Hall  r.  United  States  Ins.  Co.,  5  Gill  land    Bank.   2   Watts  (Pa.),  136  {1888), 

(Mil.),  484  (1847),     Cf.  In  re  Bachman,  where  it  is  said  that  "the  principle  that 

12  Nat.   Bank.   Reg.,  223  (1875);   Pitts-  a  surety  is  entitled  to  the  benefit  of  all 

burg-h,  etc.,  R  R  Co.  V.  Clarke,  29  Pa.  the  creditor's  securities  is  of  such  uni- 

St,  146  (1857'.  versal  application  that  it  would  require 

2  Reese  v.  Bank  of  Commerce,  14  Md.,  strong  evidence  of  legislative  intention 
271  (1859).  to  make  the  present  case  an  exception 

3  Cf  Z$  526,  538.  Where  the  legal  title  to  it"  Cf.  also  Klopp  v.  Lebanon  Bank, 
to  shares  can  only  be  acquired  by  a  46  Pa.  St.,  88  (1863);  Petersburg  Sav- 
transfer  made  in  a  prescribed  mode,  yet  iugs  Co.  v.  Lumsden,  75  Va,  327,  340 
a  complete  equitable  title  may  be  other-  (1881). 

694 


CH.  XXXI.] 


LIEN    OF   THE    CORPORATION    ON    STOCK. 


[§  530. 


apply  the  proceeds  of  the  sale  of  the  stock  in  such  a  way  as  best 
to  subserve  its  own  interest.1 

§  530.  Methods  of  enforcing  the  Ken.— When  a  corporation  has 
a  lien  upon  the  stock  of  those  of  its  shareholders  who  are  indebted 
to  it,  it  may  refuse  to  allow  a  transfer  of  the  stock  until  the  debt  is 
paid  or  secured  to  its  satisfaction.  This  is  the  usual  method  of 
enforcing  the  lien.2  And  the  corporation  may  insist  upon  its  lien 
and  hold  the  stock  even  against  a  bona  fide  purchaser.3  It  may, 
moreover,  hold  the  whole  amount  of  the  shareholder's  stock,  al- 
though the  amount  of  the  debt  be  less  than  the  value  of  the  shares. 
It  cannot  be  compelled  to  transfer  so  much  of  the  stock  as  is  in 
•excess  of  the  amount  of  the  debt.4  But  the  corporation  can  en- 
force its  lien  against  the  transferee  only  by  a  refusal  to  allow  the 
transfer  or  by  a  suit  to  foreclose.  It  cannot  elect  to  make  the 
transferee  personally  liable  for  the  debt. 

The  corporation  may,  however,  proceed  by  an  attachment  of  the 
stock.5  So,  also,  upon  non-payment  of  the  debt,  the  corporation 
may  make  an  application  to  a  court  of  chancery  and  have  the  shares 
sold  in  the  usual  way,  as  in  other  cases  of  property  held  under  a 
lien.6     A  decree  authorizing  the  sale  of  stock  for  the  payment  of 


i  Planters',  etc.,  Ins.  Co.  v.  Selma  Sav. 
Bank,  63  Ala.,  585  (1879);  Mt.  Holly 
Paper  Co.'s  Appeal,  99  Pa.  St,  513  (1882) ; 
Anglo-Cal.  Bank  v.  Grangers'  Bank,  63 
Cat,  359  (1883);  Bishop  v.  Globe  Co., 
135  Mass.,  132  (1883). 

2  Reese  v.  Bank  of  Commerce,  14  Md., 
•271  (1859) ;  Brent  v.  Bank  of  Washing- 
ton, 10  Peters,  596  (1836) ;  First  National 
Bank  of  Hartford  v.  Hartford,  etc.,  Ins. 
Co.,  45  Conn.,  22  (1877);  Vansands  v. 
Middlesex  County  Bank,  26  Conn.,  144 
(1857);  Farmers'  Bank  of  Maryland  v. 
Iglehart,  6  Gill  (Md.),  50  (1847);  Mc- 
Cready  v.  Rumsey,  6  Duer,  574  (1857) ; 
Tuttle  v.  Walton,  1  Ga.,  43  (1846; ;  Sewall 
v.  Lancaster  Bank,  17  Serg.  &  R.,  285 
(1828) ;  Rogers  v.  Huntingdon  Bank,  12 
id.,  77  (1824);  Grant  v.  Mechanics'  Bank, 
15  id..  140  (1826).  Cf.  Sabin  v.  Bank 
of  Woodstock,  21  Vt.,  353  (1849) ;  West 
Branch  Bank  v.  Armstrong,  40  Pa,  St., 
278  (1861).  In  Bishop  v.  Globe  Co.,  135 
Mass.,  132  (1883),  the  rule  is  declared  that 
if  by  the  law  of  the  state  under  which 
a  corporation  is  organized  the  corpora- 
tion has  a  lien  on  the  stock  of  any  share- 
holder for  a  debt  due  from  him  to  the 


corporation  that  the  lien  is  a  good 
defense  to  an  action  in  another  state 
against  the  corporation  by  a  person  to 
whom  the  shareholder  has  transferred 
his  stock,  but  in  whose  name,  by  reason 
of  the  lien,  the  corporation  has  refused 
to  register  the  transfer. 

3  Newbury  v.  Detroit,  etc.,  R.  R.  Co., 
17  Mich.,  141  (1868) ;  Titcomb  v.  Union, 
etc.,  Ins.  Co.,  8  Mass.,  326  (1811);  Rogers 
v.  Huntingdon  Bank,  12  Serg.  &  R., 
77  (1824) ;  Grant  v.  Mechanics'  Bank,  15 
id.,  140  (1826);  Sewall  v.  Lancaster 
Bank,  17  id.,  285  (1828);  West  Branch 
Bank  v.  Armstrong,  40  Pa.  St.,  278 
(1861);  Mechanics'  Bank  v.  Merchants' 
Bank,  45  Mo.,  513  (1870);  St.  Louis  Per- 
petual Life  Ins.  Co.  v.  Goodfellow,  9  id., 
149  (1845);  Tuttle  v.  Walton,  1  Ga,  43 
(1846). 

4  Sewall  v.  Lancaster  Bank,  17  Serg. 
&  R.,  285  (1828);  Pierson  v.  Bank  of 
Washington,  3  Cranch  C.  C,  363  (1828). 

5  Sabin  v.  Bank  of  Woodstock,  21  Vt, 
353  (1849). 

6  In  re  Morrison,  10  Nat'l  Bank.  Reg., 
105  (1874) ;  Farmers'  Bank  of  Maryland's 
Case,  2  Bland's  Chan.  (Md.),  394  (1830) ; 


695 


§  531.] 


LIEN    OF   THE    CORPORATION    ON    STOCK. 


[cn.  XXXI. 


the  debt  need  not  give  the  shareholder  the  right  of  redemption. 
An  absolute  and  valid  title  may  pass  to  the  purchaser  immediately 
upon  the  sale.1  A  valid  lien  in  favor  of  a  bank  upon  shares  of 
stock  in  the  bank  belonging  to  the  estate  of  a  deceased  person  will 
not  yield  to  a  prior  claim  against  the  estate  in  favor  of  the  govern- 
ment.2 But  an  unwarranted  claim  of  lien  by  a  corporation,  and  a 
consequent  refusal  to  register  a  transfer  until  the  debt  as  to  which 
the  lien  is  asserted  is  paid,  is  a  conversion  of  the  shares,  and  the 
transferrer  may  have  his  action  against  the  corporation  therefor.5 
In  order,  however,  to  put  the  corporation  in  the  wrong  for  a  re- 
fusal to  transfer  where  it  claims  more  than  is  due,  the  shareholder 
must  tender  what  he  admits  to  be  due.4  A  corporation  is  liable  in 
damages  for  selling  the  stock  of  a  stockholder  for  non-payment  of 
dues  where  such  sale  was  irregular  and  illegal.5 

§  531.  The  corporation  may  waive  its  Urn. —  A  corporation  which 
has  a  lien  upon  its  stockholders'  stock  for  debts  due  to  it  from  them 
need  not  necessarily  depend  upon  or  insist  upon  its  lien  for  the  col- 
lection of  the  debt.  It  has  two  remedies  —  one  to  enforce  the  lien, 
the  other  to  collect  the  debt  as  though  there  was  no  lien.6     Hence 


Brent  r.  Bank  of  Washington,  10  Peters, 
596  (1836).  Under  the  California  code  a 
corporation  may  by  suit  foreclose  a  lien 
which  it  has  on  its  stock.  Mechanics', 
etc.,  Assoc,  v.  King,  23  Pac,  Rep.,  376 
(Cat,  1890). 

1  Reese  v.  Bank  of  Commerce.  11  Md., 
271,284  (1859).  In  one  case  the  lien  was 
held  to  be  equivalent  to  a  pledge;  and 
it  was  held  that,  after  giving  due  notice 
to  the  delinquent  shareholder,  the  cor- 
poration might  sell  at  public  auction 
without  filing  a  bill  to  foreclose.  Farm- 
ers' Bank  of  Maryland's  Case,  supra.  In 
this  case  it  is  also  held  that,  where  the 
corporation  neglects  or  refuses  to  sell  the 
stock  of  a  deceased  shareholder  who  is 
in  arrears,  the  administrator  may  file  a 
bill  and  obtain  an  order  of  sale  directed 
to  the  corporation. 

'-'Brent  v.  Bank  of  Washington,  10 
Peters,  596  (1836). 

3  Bank  of  America  r.  McNeil,  10  Bush, 
54  (1873).  Cf.  Dickinson  v.  Central  Na- 
tional Bank.  129  Mass..  279  (1880);  Case 
v.  Bank,  100  U.  S.,  446  (1879);  Skinner 
v.  City  of  London  Co.,  53  L.  T..  191  (1885), 
holding,  also,  that  only  nominal  dam- 


ages could  be  recovered  where  the  terms 
of  the  transfer  were  secret 

4  Pierson  v.  Bank  of  Washington,  3 
Cranch  C.  C,  363  (1828).  In  German 
Security  Bank  v.  Jefferson,  10  Bush,  326 
(1874),  it  was  held  that,  where  the  stock 
sold  under  the  lien  realized  a  sum  in- 
sufficient to  satisfy  the  corporate  debt, 
the  unpaid  balance  of  the  claim  of  tho 
corporation  could  not  be  paid  until  there 
had  been  a  proportionate  payment  of 
the  claims  of  other  creditors  of  the 
shareholder  out  of  his  general  assets. 
Cf.  In  re  Peebles,  2  Hughes,  394  (1875). 

5  The  sale  here  was  contrary  to  the 
requirements  of  the  by-laws.  The  cor- 
poration bought  the  stock  itself  at  such 
sale.  The  fact  that  a  surplus  realized 
at  the  sale  was  sent  to  the  stockholder 
by  check,  and  was  received  by  him,  did 
not  l>ar  his  remedy,  he  being  in  igno- 
rance of  the  illegality.  Allen  v.  Amer- 
ican Building,  etc.,  Ass'n  et  ah,  52  N. 
W  Rep.,  144  (Minn.,  1892). 

6  A  subscriber  for  stock  cannot  avoid 
liability  to  the  corporation  by  setting  up 
that  the  corporation  has  a  lien  on  the 
stock    therefor    and    may    enforce    it 


696 


CH.  XXXI.]  LIEN    OF   THE    COEPOEATION    ON    STOCK.  [§  531. 

it  is  that  the  lien  of  a  corporation  on  stock  may  be  asserted  and 
enforced,  or  in  the  discretion  of  the  corporation  it  may  be  waived.1 

Where  the  corporation  has  other  security  it  is  not  obliged  to  re- 
sort to  the  lien.2  Cases  may  arise  where  the  intervening  rights  of 
other  creditors  of  the  shareholder  render  it  inequitable  for  the  cor- 
poration to  waive  its  lien  on  the  stock,3  but  in  general  the  right  of 
the  corporation  to  waive  the  lien  at  its  option  is  absolute. 

Accordingly,  where  a  note  discounted  for  a  shareholder  was  pro- 
tested for  non-payment,  it  was  held  that  the  bank  might  waive  its 
lien  on  the  stockholder's  shares  in  the  bank  and  proceed  directly 
against  the  indorser.4  And  the  corporation,  by  waiving  the  lien, 
does  not  discharge  a  surety  unless  the  surety  has  given  the  corpo- 
ration express  notice  not  to  waive  the  lien.5  The  corporation  will 
not  be  held  to  have  waived  its  lien  upon  the  stock  of  its  debtor 
merely  because  it  has  taken  other  or  additional  security  for  the 
debts;6  nor  because  it  assents  to  a  general  assignment  by  the  share- 
holder for  the  benefit  of  creditors.7  And  the  corporation  may 
allow  the  transfer  of  a  portion  of  a  shareholder's  stock  without 
waivino-  its  lien  on  the  rest.8  But  a  waiver  of  the  lien  for  a  limited 
time  is  fatal,  provided  the  stock  is  transferred  during  that  time.9 

A  waiver  which  will  bind  the  corporation  may,  in  the  absence  of 
something  to  qualify  the  power,  be  made  by  the  cashier  of  a  bank, 
acting  by  virtue  of  an  express  or  implied  authority,  for  the  board 

Lankershim,  etc.,  Co.  v.  Herberger,  23  s  In  re  Bach  man,  12  Nat.  Bank.  Reg., 

Pac.  Rep.,  134  (Cat,  1890).  223  (1875). 

1  National  Bank  r.  Watson  town  Bank,  4  Cross  v.  Phenix  Bank,  1  R.  I.,  39 
105  U.   S.,  217(1881);   S.  C,  sub  nom.  (1840). 

Cecil   National    Bank   v.    Watsontown  5  Perrine  v.  Fireman's  Ins.  Co.,  22  Ala., 

Bank,    21  Am.    Law    Reg.  (N.   S.),  545  575  (1853). 

Hodges  v.  Planters'  Bank,  7  Gill  &  J.,  6  Union  Bank  of  Georgetown  v.  Laird, 

306  (1835) ;   Hall  v.   United  States  Ins.  2  Wheat,  390  (1817). 

Co.,  5  Gill  (Md.),  484  (1847) ;  In  re  Hoy  "  Dobbins  v.  Walton,  37  Ga..  614  (1868). 

Lake  R'y  Co.,  K  R.,  9  Chan.,  257,  259  8  First  National  Bank  of  Hartford  v. 

(1874).     But  see  Conant  v.  Seneca  Co.  Hartford,  etc.,  Insurance  Co.,  45  Conn., 

Bank,  1  Ohio  St,  298,  301  (1853) ;  In  re  22  (1877).     But  cf.  Presbyterian  Congre- 

Bigelow,  1  Nat   Bank.  Reg.,  667  (1868).  gation  v.   Carlisle  Bank,  5  Pa.  St,  345 

A  waiver  is  the  intentional  relinquish-  (1847). 

ment  of  a  known  right     It  is  not  to  be  9  Thus,  if  within  such  time  the  stock 

inferred  and  imputed  to  a  corporation  is  pledged  for  a  debt,  the  right  of  the 

in  the  abseDce   of   proof   of   it,  and  a  corporation,  after  the  expiration  of  the 

mere  failure   to  assert  the  lien  is  not  time  to  acquire  its  charter  lien,  is  subor- 

equivalent  to  a  relinquishment  or  waiver  dinate  to  the  right  of  the  pledgee  until 

of  it.     First  National  Bank  of  Hartford  the  debt   is  paid  or    the    pledge    is  re- 

v.  Hartford,  etc.,  Ins.  Co.,  45  Conn.,  22,  leased.     Bank  of  America  v.  McNeil,  10 

44  (1877).  Bush  (Ky.),  54  (1873). 

2  Dunlop  v.  Dunlop,  L  R,  21  Ch.  D., 
583  (1882). 

697 


§  531.]  LIEN    OF   THE   CORPORATION    ON    STOCK.  [CH.  XXXI. 

of  directors;1  or  the  secretary  of  an  insurance  company;2  or  the 
general  manager  or  properly-qualified  general  agent  of  the  corpo- 
ration, especially  if  that  is  a  general  custom  of  the  company.3  Ac- 
cordingly, where  one  buys  shares  on  the  faith  of  a  representation 
of  the  corporate  officers  that  the  stock  is  unincumbered,  he  is  enti- 
tled to  the  shares  free  from  any  corporate  lien.4 

And  where  the  corporate  officers  allow  a  transfer  to  be  regis- 
tered and  a  new  certificate  to  be  issued,  there  is  a  waiver  of  the 
corporate  lien  as  to  the  debts  of  the  transferrer.5 

It  is  held  that  a  failure  to  recite  the  lien  on  the  face  of  the  cer- 
tificate is  not  a  waiver  of  the  lien,6  and  that  a  statement  in  the  cer- 
tificate that  the  holder  is  entitled  to  a  certain  number  of  shares, 
transferable  upon  presentation  and  surrender  thereof,  is  not  a 
waiver  of  the  lien,  though  there  be  no  assertion  of  the  lien,  but  is 
a  mere  indication  of  the  manner  in  which  the  shares  are  to  be 
transferred.7  When  the  lien  is  given  to  the  corporation  by  the 
charter  or  the  articles  of  association,  or  by  statute,  there  is  con- 
structive  notice  to  all  persons  dealing  with  the  corporation  that 
they  must  at  their  peril,  without  reference  to  what  the  certificate 
recites  or  fails  to  recite,  inform  themselves  as  to  any  debts  to  the 
corporation  that  may  affect  the  shares  they  propose  to  buy.  If 
there  is  a  lien  they  are  held  to  have  known  it,  whether  the  certifi- 
cate declares  it  or  not.  As  already  explained,  where  the  lien  is 
created  by  a  by-law  it  is  something  of  which  purchasers  of  the 
shares  cannot  be  held  to  have  had  constructive  notice.  In  such  a 
case,  if  the  certificate  does  not  disclose  the  lien,  and  actual  knowl- 
edge of  it  be  shown,  a  bona  fide  purchaser  would  be  protected. 
I'.ut  the  rule  is  otherwise  where  the  lien  is  created  by  statute  or 
the  charter  of  the  corporation.8 

i  National  Bank  v.  Watsontown  Bank,  R,  4  Exch.,  387  (1869);  In  re  Northern 

105  U.  S.,  217  (1881).     So,  also,   the  re-  Assam  Tea  Co.,  L.  R,  10  Eq.,  458  (1870). 

fusal  of  the  cashier  to  permit  a  transfer  So,  also,  a  by-law  requiring  the  consent 

is  the  act  of  the  bank,  for  which  it  may  of  the  board  of  directors  to  a  transfer 

be   charged.     Case  v.  Bank,  100  U.  S.,  by  one  indebted   to  the  corporation  is 

440  (1879).  held  to  be  repealed  where  a  custom  of 

'-'  Chambersburg  Ins.  Co.  v.  Smith,  11  disregarding  it  has  been  shown,  it  ap- 

Pa.  St..  120    (1849).     Cf.  Kenton  In.-?.  Co.  pearing  also  that  the  secretary  had  been 

v.   Bowman,   1   S.   W.   Rep.,   717  (Ky.,  allowed  to  exercise  his  own  discretion 

1886),  about  such  transfers  without  consulting 

» See  Bishop  v.  Globe  Company,  135  the  directors.  In  such  a  case  the  con- 
Mass.,  132  (1883);  Young  v.  Vough.  23  sent  of  the  secretary  to  the  transfer  is 
N.  J.  Eq.,  325  (1873).  a  waiver  of  the    lien.     Chambersburg 

*  Moore  v.   Bank    of  Commerce,     52  Ins.  Co.  r.  Smith,  11  Pa,  St,  120  (1849). 

Mo.,  377  (1873).  6  See  §523. 

8  Hill  v.  Paine  River  Bank,  45  N.  H.,  "See  §  523. 

300(1864);  Higgs  v.  Assam  Tea  Co.,  L.  8  Bank  of   Holly  Springs  v.  Pinson, 

698 


CH.  XXXI.] 


LIEN    OF    THE    CORPORATION    ON    STOCK. 


[§  532. 


§532.  The  lien  as  affected  hy  transfers  and  notice. —  Upon  a 
transfer  of  stock  the  title  thereto  passes  absolutely  as  between 
transferrer  and  transferee,  even  though  the  corporation,  in  the  as- 
sertion of  a  lien  upon  the  stock  for  the  indebtedness  of  the  trans- 
feree, refuses  to  register  the  transfer  until  a  certain  debt  is  paid  or 
secured.1  But  of  course  the  assignee  or  transferee,  or  whoever 
succeeds  to  the  rights  of  the  shareholder  in  the  stock,  takes  it  sub- 
ject to  the  lien  of  the  corporation.2  And  when  the  stock  is  sold 
by  the  corporation  to  pay  the  debts  of  the  transferrer,  the  trans- 
feree is  entitled  to  the  surplus,  if  any  there  be,  which  remains  after 
the  claim  of  the  corporation  is  satisfied.3 

The  corporation  cannot,  after  it  has  been  regularly  notified  of 
the  transfer,  assert  a  lien  upon  the  stock  to  secure  an  indebtedness 
of  the  transferrer  contracted  subsequently  to  the  notice.4  A  mere 
notice  to  the  bank  is,  in  such  a  case,  sufficient  to  protect  the  trans- 
feree. It  is  immaterial  that  the  transfer  was  not  registered.5  And 
in  a  case  where  the  transfer  was  registered  but  no  certificate  had 
been  issued,  it  was  held  that  a  pledgee  was  protected.6   But  where 


58  Miss.,  421  (1880);  Anglo-Calif ornian 
Bank  v.  Grangers'  Bank,  63  Cal.,  359 
(1883).     See  §  523. 

1  National  Bank  r.  Watsontown  Bank, 
105  U.  S„  217  (1881);  Johnson  v.  Laflin, 
103  id.,  800  (1880) ;  Fitzhugh  v.  Bank  of 
Shepherdsville,  3  Mon.  (Ky.).  126(1825); 
St.  Louis  Perpetual  Life  Ins.  Co.  v. 
Goodfellow,  9  Mo.,  149  (1845):  Commer- 
cial Bank  of  Buffalo  v.  Kortright,  22 
Wend.,  348  (1839);  S.  C,  sub  nom.  Kort- 
right v.  Buffalo  Commercial  Bank,  20 
id.,  91  (1838) ;  Bank  of  Utica  v.  Smalley, 
2  Cowen,  770  (1824);  McNeil  v.  Tenth 
National  Bank,  46  N.  Y.,  325  (1871); 
People  ex  rel.  Krohn  v.  Miller,  39  Hun, 
557,  563  (1886).  Cf.  Dunn  v.  Commercial 
Bank  of  Buffalo,  11  Barb.,  580;  Mer- 
chants' Bank  v.  Livingston,  74  N.  Y., 
223  (1878);  Pittsburgh,  etc.,  E.  R.  Co.  v. 
Clarke.  29  Pa.  St.,  146  (1857);  Sargent  v. 
Essex  Marine  R'y  Corp.,  26  Mass.,  202 
(1829);  Carroll  v.  Mullanphy  Savings 
Bank,  8  Mo.  App.,  249  (1880).  Corpora- 
tions having  a  statutory  lien  on  stock 
for  debts,  nevertheless  must  allow  trans- 
fer to  one  who  takes  subject  to  the  cor- 
porate lien  for  part  of  the  unpaid  sub- 
scription. Herdegen  v.  Cotzhausen,  36 
N.  W.  Rep.,  385  (Wis.,  1888).     The  lien 


attaches  when  a  call  is  made  and  not 
when  it  becomes  due.  Queen  v.  London- 
derry, etc.,  R'y,  13  Q.  B.,  998  (1849). 

-  Mobile  Mutual  Ins.  Co.  v.  Cullom, 
49  Ala.,  558  (1873):  New  Orleans  Na- 
tional Banking  Association  v.  Wiltz,  4 
Woods,  43  (1881);  S.  C,  10  Fed.  Rep., 
330. 

3  Weston  v.  Bear  River,  etc.,  Mining 
Co.,  5  Cal.,  186  (1855) ;  Tuttle  v.  Walton, 
1  Ga.  (1846);  Foster  v.  Potter,  37  Mo., 
325  (1866) ;  West  Branch  Bank  v.  Arm- 
strong, 40  Pa.  St.,  278  (1861). 

4  Conant  v.  Seneca  County  Bank,  1 
Ohio  St.,  298  (1853);  Nesmith  r.  Wash- 
ington Bank,  6  Pick.,  324  (1828).  The 
same  rule  applies  where  the  stock  is 
pledged.  Bradford,  etc.,  Co.  v.  Briggs, 
56  L.  T.  Rep.,  62  (1886).  But  where  the 
shareholder  transfers  his  stock,  and  sub- 
sequently, without  notifying  the  corpo- 
ration of  the  transfer,  borrows  money 
from  the  corporation  in  regular  course 
of  business,  the  corporation  may  refuse 
to  register  the  transfer  and  may  insist 
upon  the  lien.  Piatt  v.  Birmingham 
Axle  Co.,  41  Conn.,  255  (1874). 

5  Bank  of  America  v.  McNeil,  10  Bush, 
54(1*7:!:. 

6  Cecil  National  Bank  v.  Watsontown 


699 


§  532.] 


LIEN    OF    THE    CORPORATION    ON    STOCK. 


[CH.  XXXI. 


there  is  neither  a  register  of  the  transfer  nor  notice  of  it  served 
upon  the  corporation,  the  stock  may  properly  be  subjected  to  a  cor- 
porate lien  for  the  indebtedness  of  the  transferrer  incurred  subse- 
quently to  the  transfer.1  A  pledgee  who  is  duly  registered  on  the 
corporate  books  as  a  shareholder,  but  to  whom  no  certificate  has 
been  issued,  is  nevertheless  protected  against  liens  upon  his  shares 
for  the  indebtedness  of  the  pledgor.2  But  a  pledgee  who  neglects 
to  notify  the  corporation  that  he  holds  the  stock  m  pledge,  or  to 
take  the  proper  steps  to  secure  title  to  the  stock  in  his  own  name, 
will  not  be  protected  against  the  lien  of  the  corporation  upon  the 
stock  to  secure  the  payment  of  an  indebtedness  contracted  to  the 
bank  by  the  pledgor  in  the  meantime  and  subsequently  to  the 
pledge  of  the  shares.3  A  corporate  lien  will  not  attach  to  stock 
for  the  debts  of  a  legatee  unless  the  legatee  accept  the  shares.4 

AVhere  one  pays  a  debt  as  surety  for  ;i  shareholder,  he  is  entitled 
to  be  subrogated  to  the  rights  of  the  corporation  by  way  of  lien 
on  the  shareholder's  stock."'  And  where  the  transferee  pays  the 
transferrer's  debt  to  the  corporation  in  order  to  obtain  a  registry 
of  the  transfer,  he  of  course  may  have  his  action  to  recover  back 
from  his  transferrer  the  amount  so  paid.6 


Hank,  21  Am.  Law  Reg.  (N.  S.).  546 
(1881);  S.  C.,  sub  ),<„».  National  Bank 
v.  Watsontown  Bank.  105  U.  S.,  817. 

1  Piatt  v.  Birmingham  Axle  Co.,  41 
('..mi.,  855(1874).  In  England  the  rule 
lias  been  recently  settled,  after  much 
contest,  that  a  provision  in  the  articles 
of  association  creating  a  paramount  lien 
on  shares  in  favor  of  the  corporation 
gives  the  company  priority  over  a  mort- 
gagee of  the  shares,  or  over  one  whose 
claim  is  an  equitable  one,  of  whose 
charge  upon  the  shares  the  company 
had  notice  before  the  specific  liability 
of  the  shareholder  toward  the  company 
has  been  incurred.  Bradford  Banking 
Co.  v.  Briggs,  L.  R,  31  Chan.  Div.,  19 
(1885) ;  S.  C,  53  L.  T.  Rep.  (N.  S.).  846 ; 
reversing  S.  C,  L.  R,  29  Chan.  Div.,  149 
(1885).  See.  also.  Miles  v.  New  Zealand 
Alford  Estate  Company,  54  L.  J.,  Chan., 
1035  (1885);  S.  C,  Week.  Notes  (1885), 
page  142;  S.  C,  53  L.  T.  Rep.  (N.  S.), 
219;  Re  Dunlop,  48  L.  T.  Rep.  (N.  S.), 
89  (1883);  Societe  Generale  de  Paris  v. 
Tramways  Union  Co.,  L.  R,  14  Q.  B. 
Div.,  424  (1884);  New  London  &  Bra- 
zilian Bank   v.  Brocklebank,  L   R,  21 

700 


Chan.  Div..  302  (1882).  In  England, 
however,  unrecorded  transferees  of 
stock  have  few  if  any  rights  as  against 
the  corporation  ;  and  this  is  the  reason 
for  these  decisions.  Contra,  Pitot  v. 
Johnson.  33  La.  Ann.,  1286.  See  £  377, 
infra. 

-  National  Bank  v.  Watsontown  Bank, 
105  U.  S.,  207  (1881). 

'Piatt  v.  Birmingham  Axle  Co.,  14 
Conn..  255.  264  (1N74);  21  Pac.  Hop,  852 
(<al..  1889);  Gemmell  v.  Davis,  23  Atl. 
Rep.,  1032  (Md.,  1892). 

4  Farmers'  Bank  of  Maryland  v.  Igle- 
hart,  6  Gill  (Md.),  50(1847). 

5  Young  v.  Vough.  23  N.  J.  Eq.,  325 
(1873);  Hodges  v.  Planters'  Bank,  7  Gill 
&  J.,  306.  310  (1835) ;  West  Branch  Bank 
v.  Armstrong,  40  Pa.  St,  278  (1861); 
Klopp  v.  Lebanon  Bank,  46  id.,  88  (1863). 
Cf.  Higgs  v.  Assam  Tea  Co.,  L.  R,  4 
Exch.,  :^7  ( 1S69) ;  In  re  Northern  Assam 
Tea  Co.,  L.  R.  10  Eq.,  458  (1870);  Na- 
tional Exchange  Bank  v.  Silliman,  65 
N.  Y.,  475  (1875). 

6  Bates  v.  New  York  Ins.  Co.,  3  Johns. 
Cas.,  238  (1802>    See,  also,  §  262,  supra. 


<CU.  XXXI.] 


LIEN    OF    THE    CORPORATION    ON    STOCK. 


[§53 


Where  the  company  has  a  lien  upon  the  stock  of  a  shareholder, 
the  latter  may  compel  the  company  to  assign  their  lien  to  a  third 
person  who  will  advance  the  money,  and  to  whom  the  shares  are 
at  the  same  time  transferred.1 

§  533.  Liens  on  national  bank  stock. —  National  banks  were  for- 
merly held  to  have  power  to  enact  by-laws  creating  a  lien  on  stock 
in  the  bank  for  debts  owed  by  its  owner  to  the  bank.2  But  the 
supreme  court  of  the  United  States,  when  the  question  came  be- 
fore it,  refused  to  enforce  such  a  by-law,  and  decided  that  its 
enactment  was  not  within  the  spirit  of  those  provisions  of  the 
National  Banking  Act  of  1864  which  confer  power  upon  the  man- 
agement of  a  national  bank  to  regulate  the  business  of  the  bank 
and  to  conduct  its  affairs.3  In  the  present  state  of  the  law,  there- 
fore, no  national  bank  can,  by  any  by-law,  create  any  lien  upon 
shares  of  stock  in  the  bank  to  secure  the  payment  of  any  indebt- 
edness which  the  owner  of  the  shares  may  contract  to  the  bank.4 
This  conclusion  is  in  accord  with  the  well  settled  policy  of  the  fed- 
eral courts  to  protect  purchasers  of  certificates  of  stock  against  all 


secret  dangers. 

1  Everitt  v.  The  Automatic,  etc.,  Co., 
67  L.  T.  Rep.,  349  (1892). 

2  The  leading  case  was  Knight  v.  The 
Old  National  Bank,  3  Clifford,  429(1871), 
upholding  the  lien.  To  the  same  effect 
see  Lockwood  v.  Mechanics'  National 
Bank,  9  R  I.,  308  (1869) ;  In  re  Dunker- 
son,  4  Biss.,  227  (1868) ;  Young  v.  Vough, 
23  N.  J.  Eq.,  235  (1873). 

3  Bullard  v.  Bank,  18  Wall.,  589  (1873). 
See,  also,  Bank  v.  Lanier,  11  id.,  369 
(1870);  Case  v.  Bank,  100  U.  S.,  446 
(1879).  The  reason  for  denying  this 
power  to  national  banks  is  that  they 
are  prohibited  from  loaning  money  to 
stockholders  on  the  security  of  their 
stock.  The  decisions,  therefore,  do  not 
militate  against  the  general  doctrine  as 
above  set  forth. 

<  Delaware,  etc.,  R.  R.  Co.  v.  Oxford 
Iron  Co..  38  N.  J.  Eq.,  340  (1884);  Myers 
v.  Valley  National  Bank,  18  Nat.  Bank. 
Reg.,  34  (1878);  Hagar  v.  Union  Na- 
tional Bank,  63  Me.,  511  (1874);  New 
Orleans  National  Bank  v.  Wiltz,  10  Fed. 
Rep.,  330  (1881);  S.  C,  4  Woods,  43; 
Goodbar  v.  City  Nat'l  Bank,  14  S.   E. 


Rep.,  851  (Tex.,  1890);  Second  National 
Bank  of  Louisville  v.  National  State 
Bank  of  New  Jersey,  10  Bush,  367  (1874; ; 
Lee  v.  Citizens'  National  Bank,  2  Chi., 
298,  300;  Evansville  National  Bank  v. 
Metropolitan  National  Bank,  2  Biss.,  527 
(1871).  In  the  case  last  cited,  which 
upon  appeal  was  affirmed  by  the  su- 
preme court  of  the  United  States,  it  was 
held  that  such  a  by-law  was  in  its  opera- 
tion the  same  thing  as  though  a  loan 
were  made  by  the  bank  upon  the  security 
of  the  stock  —  a  transaction  forbidden 
by  the  thirty-fifth  section  of  the  National 
Banking  Act.  Conklin  v.  Second  Nat'l 
Bank,  45  N.  Y.,  655  (1871).  Cf.  National 
Bank  of  Xenia  v.  Stewart,  107  U.  S.,  676 
(1882);  Rosenbach  v.  Salt  Springs  Na- 
tional Bank,  53  Barb.,  495  (1868).  This 
accords  with  the  more  general  rule  in 
New  York,  which  holds  all  such  by-laws 
of  any  corporation  in  that  state  invalid. 
See  §§  522,  525.  A  bank,  however,  may 
attach  the  stock  of  one  of  its  stock- 
holders for  debts  due  from  him  to  it. 
Hagar  v.  Union  Nat'l  Bank,  supra. 


701 


CHAPTER  XXXII. 


DIVIDENDS. 


§  534.  Definition  of  a  dividend  and  the 
four  kinds  of  dividends. 

535.  Scrip   dividends,    property   divi- 

dends and  bond  dividends. 

536.  Stock  dividends. 

r>:>>7.  Interest-bearing  stock. 
533.  To  whom  the  corporation   is  to 
pav  the  dividend. 

539.  To  whom  the  dividend  belongs. 

540.  Dividends    must  be    equal    and 

without  preferences. 

541.  A  dividend  when   declared  is  a 

debt  due  absolutely  to  the 
shareholder. 

542-543.  It  is  a  debt  which  may  be 
collected  by  legal  proceedings. 

544.  Right  of  the  corporation  to  apply 
dividends  to  the  payment  of 
debts  due  to  it  by  the  share- 
holder. 


545.  The  courts  very  rarely  compel 

the  directors  to  declare  a  divi- 
dend. 

546.  Dividends  can  be  made  only  from 

profits  —  What  are  profits 
which  may  be  used  for  divi- 
dends. 

547.  A   stockholder    may  enjoin    an 

illegal  dividend. 

548.  Dividends  which  impair  the  capi- 

tal stock  are  illegal  aud  may 
be  recovered  back  from  the 
stockholders  —  Dividends  on 
dissolution. 
5 10.  Proceedings  to  recover  back  such 
a  dividend. 

550.  The  liability  herein  of  the  corpo- 

rate officers. 

551.  Guarantee  of  dividends  by  con- 

tract 


§  534.  Definition  of  a  dividi  nd  and  tin  four  kinds  of  dividends.— 

A  dividend  is  a  corporate  profit  set  aside,  declared  and  ordered  by 
the  proper  corporate  authorities  to  be  paid  to  the  stockholders  on 
demand  or  at  a  fixed  time.1  Until  the  dividend  is  declared  these 
corporate  profits  belong  to  the  corporation,  not  to  the  shareholders, 
and  are  liable  for  corporate  indebtedness.2 

A  corporation  may,  in  general,  make  four  different  kinds  of  divi- 
dends: namely,  a  dividend  payable  in  cash,  in  stock,  in  bonds  or 
scrip,  or  in  property. 

Dividends  are  declared  by  the  directors  and  not  by  the  stock- 
holders.3 A  division  of  profits  without  the  formality  of  declaring 
a  dividend  is  equivalent  to  a  dividend.4 

ILockhardt  v.  Van  Alstyne.  31  Mich.,  neither  tenants  in  common  nor  copart- 
76  (1875) ;  Chaffee  v.  Rutland  R  R  Co..     ners  of  corporate  property. 

55  Vt,  110,  129  (1882);  Hyatt  v.   Allen, 

56  N.  Y.,  553  (1874). 
2  Goodwin  r.  Hardy,  57  Me..  143,  145 

(1869);  Rand  v.  Hubbell.  115  Mass.,  461, 
474  (1874);  Minot  u  Paine,  99  id.,  101 
(1868);  Hyatt  v.  Allen,  supra;  Mickles  v. 
Rochester,  etc.,  Bank.  11  Paige,  118 
(1844),   holding    that    stockholders    are 


3  See  §  545,  infra. 

«Rorke  r.  Thomas.  56  N.  Y.,  559 
(1874) ;  Reading,  etc.,  Co.  r.  Reading,  etc., 
Works.  21  Atl.  Rep..  170  (Pa.,  1891); 
McKusick  v.  Seymour,  etc.,  Co.,  50  N. 
W.  Rep.,  1116  (Minn.,  1892).  Where  a 
fixed  per  cent,  is  paid  annually  to  stock- 
holders instead  of  dividends  and  charged 


702 


CII.  XXXII.] 


DIVIDENDS. 


[§  535. 


Numerous  cases  on  the  definition  of  the  word  "dividend  "  have 
arisen  in  connection  with  the  taxation  of  corporations.1 

§  535.  Scrip  dividends,  property  dividends  and  bond  dividends. — 
A  scrip  dividend  is  a  dividend  of  certificates  giving  the  holder  cer- 
tain rights  which  are  specified  in  the  certificate  itself.  These  divi- 
dends are  usually  declared  when  the  company  has  profits  which 
are  not  in  the  shape  of  money,  but  are  in  other  forms  of  property, 
and  the  company  wishes  to  anticipate  the  time  when  the  property 
may  be  sold  for  cash,  and  the  cash  distributed  by  a  money  divi- 
dend. The  certificate  sometimes  entitles  the  holder  to  a  sum  of 
money  payable  with  interest  at  a  certain  time  after  date,  or  at  the 
option  of  the  company,  or  when  the  company  shall  have  accumu- 
lated sufficient  surplus  to  pay  the  certificates  in  full.  Sometimes 
the  certificates  are  certificates  of  indebtedness  and  are  made  con- 
vertible at  the  option  of  the  holder  into  bonds  or  stocks;2  and 
sometimes  the  certificate  entitles  the  holder  to  exchange  the  cer- 


to  them  and  the  stock  held  in  pledge 
for  the  same,  such  a  payment  to  the 
life  tenant  does  not  create  a  valid  lien 
on  the  stock  as  against  the  remainder- 
man. Reading,  etc.,  Co.  v.  Reading,  etc., 
Works,  21  Atl.  Rep.,  169  (Pa.,  1891). 

1  A  tax  upon  the  receipts  of  a  railroad 
is  not  a  tax  upon  dividends.  Comm'rs, 
etc.,  v.  Buckner,  48  Fed.  Rep.,  533  (1891). 
Profits  applied  to  betterments  are  not 
"  dividends  earned  "  within  the  meaning 
of  a  statute  imposing  taxation.  State  v. 
Comptroller,  23  Atl. "  Rep.,  122  (N.  J., 
1891).  Where  all  the  shares  are  reduced 
in  par  value  from  $50  to  $38  and  the  $12 
difference  is  paid  to  the  stockholders  in 
cash,  this  is  a  reduction  of  capital  stock 
and  not  a  dividend  and  cannot  be  taxed 
as  a  dividend.  Commonwealth  v.  Cen- 
tral T.  Co.,  22  Atl.  Rep.,  209  (Pa.,  1891). 
Where  a  tax  is  levied  on  dividends  the 
officers  cannot  defend  on  the  ground 
that  the  dividend  was  illegal.  Central 
Nat'l  Bank  v.  United  States,  137  U.  S., 
355  (1890).  In  Commonwealth  v.  Pitts- 
burg, etc.,  R'y,  74 Pa.  St.,  83  (1873),  a  lessor 
company  having  twelve  per  cent,  divi- 
dends guarantied  on  its  stock  declared  a 
stock  dividend  so  that  the  guarantee 
should  be  seven  per  cent,  on  the  stock 
thus  increased.  The  court  held  that 
such  a  dividend  did  not  subject  the  com- 


pany to  a  tax  based  on  dividends.  In 
Louisiana  taxes  are  assessed  on  fran- 
chises, the  value  of  which  is  ascertained 
from  the  earning  capacity  of  the  corpora- 
tion. Crescent  City  R.  Co.  v.  City  of  New 
Orleans  et  al,  11  S.  Rep.,  681  (La.,  1892); 
New  Orleans,  etc.,  Co.  v.  City  of  New 
Orleans  et  al,  11  id.,  687  (La.,  1892); 
New  Orleans  City,  etc.,  Co.  v.  City  of 
New  Orleans  et  al,  11  id.,  820  (La., 
1892). 

2  Chaffee  v.  Rutland  R.  R.  Co.,  55  Vt, 
110  (1882) ;  State  v.  Baltimore,  etc.,  Co., 
6  Gill  (Md.),  363  (1848).  In  the  case 
of  Rogers  v.  New  York,  etc..  Land  Co., 
134  N.  Y.,  197  (1892),  land  had  been  sold 
to  the  company  for  a  certain  amount  of 
preferred  stock  and  also  a  certain 
amount  of  "  land  scrip,"  such  scrip  en- 
titling the  holder  to  exchange  them  for 
land  so  conveyed  at  a  price  to  be  there- 
after determined.  The  company  had 
the  right  to  pay  off  the  scrip  and  retire 
it.  The  company  sold  part  of  the  land, 
and  then  proceeded  to  make  a  scrip 
dividend  of  the  scrip  so  taken  up  by  it 
A  dissenting  scripholder  brought  suit  to 
undo  the  transaction  on  the  ground 
that  the  scrip  taken  up  by  the  company 
should  be  canceled.  The  court  sustained 
his  action,  and  held  that  from  the  orig- 
inal contract  it  was  clear  that  the  land 


703 


§  535.] 


DIVIDENDS. 


[cu. 


XXXII. 


tificate  for  lands  of  the  corporation  to  an  amount  equivalent  in 
value  to  the  face  value  of  the  certificate ;  or  to  receive  from  the 
corporation  any  other  benefit  or  advantage  which  the  corporation 
may  lawfully  confer.  Sometimes  the  certificate  so  far  partakes 
of  the  character  of  a  certificate  of  stock  as  to  entitle  the  holder  to 
dividends.1     Where  the  corporation,  having  a  large  surplus,  issues 


was  received  as  a  trust  fund  to  ulti- 
mately pay  off  the  scrip.  See,  also, 
Rogers  v.  Phelps,  9  N.  Y.  Supp.,  886. 

In  the  case  of  Brown  v.  Lehigh,  etc., 
Co.,  49  Pa.  St,  270  (1865),  a  dividend  of 
scrip  had  been  declared,  the  scrip  being 
as  follows : 
«No. .  scrip.  Shares. 


"This  is  to  certify  that 


heirs  or   assigns,  will  be  entitled,  upon 

the  surrender  of  this  certificate,  to 

shares  in  the  capital  stock  of  the  Lehigh 
Coal  and  Navigation  Company  as  soon 
as  the  present  funded  debt  of  the  com- 
pany has  been  paid  off,  or  adequate 
provision  made  for  its  discharge  when 
due  and  payment  demanded ;  and  will 
also  be  entitled  to  a  pro  rata  share 
of  any  future  distribution  of  scrip;  but 
not  to  any  cash  dividend  until  this  cer- 
tificate has  been  converted  into  stock,  as 
above  provided. 

"  Or,  this  certificate  may,  at  any  time, 
at  the  option  of  the  holder  thereof,  be 
converted  into  stock  upon  payment  by 
said  holder,  either  in  cash  or  in  the  six 
p  r  cent,  loans  of  the  company,  of  the 
par  value  of  said  stock,  and  the  sur- 
render of  this  certificate. 

-  This  certificate  is  transferable  only 
at  the  office  of  the  company. 
"  Witness,  etc." 

Several  years  after  the  issue,  the  mort- 
gage being  paid  off,  the  scripholders 
claimed  that  they  were  entitled  to  back 
dividends  equal  to  past  dividends  paid 
on  the  stock.  The  court  held,  however, 
that  the  terms  of  the  contract  did  not 
give  any  such  right,  and  that  dividends 
commenced  only  from  the  time  the  scrip 
was  converted  into  stock. 

The  holder  of  a  certificate  of  indebt- 
edness   convertible    into   stock   cannot 


claim  an   interest  in  a  stock  dividend 
until  he  has  converted  the  scrip    into 
stock.     Miller  v.   111.  Central  R   R,  24 
Barb.,  312  (1857);  Brundage  i\  Brundage, 
63  Barb.,  397  (1873);  affirmed,  60  N.  Y., 
544  (1875),  holding  that  assignable  "  in- 
terest certificates"  representing  earnings 
spent  for  improvements,  and    payable 
out  of  future  earnings  with  dividends,  or 
convertible  into  stock  at  the  company's 
option,  did  not  pass  with  a  bequest  of 
a  life  interest  in  certain  shares  of  the 
stock.     See,  also,  Butler  V.  Glen  Cove, 
etc.  Co.,  18  Hun,  47  (1879).    See  §  283. 
Cf.  Bailey  r.  Citizens'  Gas  Light  Co.,  27 
N.  J.  Eq.,  196  (1876).    The  court  in  this 
case,  speaking  of  a  dividend  of  interest- 
1m  aring  securities,  said  :  "That  the  com- 
pany bad  no  lawful  authority  for  issu- 
ing the  certificates  cannot  be  doubted." 
i  Bailey  r.  Railroad  Co.,  22  Wall.,  604 
(1874).     Cf.   Brundage  r.  Brundage,  60 
N.  Y..  544  (1875} 

The  character  of  the  scrip  in  this  case 
is  shown  by  the  resolution  authorizing 
it,  as  follows : 

"  Whereas,  this  company  has  hitherto 
expended  of  its  earnings  for  the  purpose 
of  constructing  and  equipping  its  road, 
and  in  the  purchase  of  real  estate  and 
other  properties  with  a  view  to  an  in- 
crease of  its  traffic,  moneys  equal  in 
amount  to  eighty  per  cent  of  the  cap- 
ital stock  of  the  company ;  and  whereas, 
the  several  stockholders  of  the  company 
are  entitled  to  evidence  of  such  expend- 
iture, and  to  reimbursement  of  the  same 
at  some  convenient  future  period  : 

"  Now,  therefore,  resolved,  that  a  cer- 
tificate signed  by  the  president  and 
treasurer  of  this  company  be  issued  to 
the  stockholders  severally,  declaring 
that    such    stockholder    is    entitled   to 


704 


CH.  XXXII.] 


DIVIDENDS. 


[§  535. 


such  certificates,  they  are  held  not  to  transfer  the  title  to  that  sur- 
plus from  the  corporation  to  the  holders  of  the  certificates.1  In 
general  the  issue  of  scrip  dividends  may  be  entirely  lawful,  and 
they  are  upheld  by  the  courts;  but  when  they  are  declared  in  fraud 
of  the  rights  of  third  parties  they  may  be  set  aside.2 

Scrip  is  practically  the  same  thing  as  shares  of  stock,  except  that 
it  has  no  voting  power.  It  is  issued  sometimes  because  the  com- 
pany cannot  issue  any  more  capital  stock,  the  whole  capital  stock 


eighty  per  cent,  of  the  capital  stock 
held  by  him,  payable  ratably  with  the 
other  certificates  issued  under  this  reso- 
lution, at  the  option  of  the  company,  out 
of  its  future  earnings,  with  dividends 
thereon  at  the  same  rates  and  times  as 
dividends  shall  be  paid  on  the  shares  of 
the  capital  stock  of  the  company,  and 
that  such  certificates  may  be,  at  the  op- 
tion of  the  company,  convertible  into 
stock  of  the  company,  whenever  the 
company  shall  be  authorized  to  increase 
its  capital  stock  to  an  amount  sufficient 
for  such  conversion."  This  was  the 
famous  scrip  dividend  made  by  the  New 
York  Central  R.  R.  Co.  under  the  man- 
agement of  Commodore  Vanderbilt. 

The  form  of  the  certificate  was  as  fol- 
lows : 
'the   new  york   central  railroad 

Company. 
"No. .     Interest  Certificate. 

"Under  a  resolution  of  the  board  of 
directors  of  this  company,  passed  De- 
cember 19th,  1868,  of  which  the  above  is 
a  copy,  the  New  York  Central  Railroad 
Company   hereby  certifies  that  A.   B., 

being  the  holder  of shares  of  the 

capital  stock  of  said  company,  is  entitled 

to dollars,  payable  ratably  with  the 

ether  certificates  issued  under  said  reso- 
lution, at  the  pleasure  of  the  company, 
out  of  its  future  earnings,  with  divi- 
dends thereon,  at  the  same  rates  and 
times  as  dividends  shall  be  paid  upon  the 
shares  of  the  capital  stock  of  said  com- 
pany. 

"  This  certificate  may  be  transferred 
on  the  books  of  the  company  on  the  sur- 
render of  this  certificate. 

"In   witness  whereof,  the  said  com- 


pany has  caused  this  certificate  to  be 
signed  by  its  president  and  treasurer, 
this  19th  day  of  December,  1868. 


" ,  President 

Treasurer." 

At  the  foot  of  each  certificate  there 
was  a  form  of  transfer  in  blank  : 

"  For  a  valuable  consideration  I,  A.  B., 
do  hereby  sell,  assign  and  transfer  all 
interest  in  the  above  certificate  to  C.  D., 
and  do  hereby  irrevocably  appoint  E.  F. 
attorney,  to  execute  a  transfer  thereof 
on  the  books  of  the  railroad  company 
therein  mentioned." 

See  Bailey  v.  Railroad,  22  WalL,  608. 
This  dividend  was  declared  although  the 
company  by  its  charter  was  limited  to 
ten  per  cent,  dividends. 

A  dividend  of  sci-ip —  i.  e.,  a  paper  en- 
titling the  holder  to  dividends  equal  to 
dividends  thereafter  declared  on  the  cap- 
ital stock  —  is  practically  a  stock  divi- 
dend, except  that  the  scrip  cannot  vote 
and  provision  is  generally  made  for  tak- 
ing it  up  in  some  manner.  Such  a  div- 
idend was  involved  in  Gordon's  Ex'rs  v. 
Richmond,  etc.,'R.  R.,  78  Va.,  501  (1884). 

1  People  v.  Board  of  Assessors,  76  N.  Y, 
202  (1879);  affirming  S.  C,  16  Hun,  196. 
In  this  case  it  was  held  that  the  issue  of 
these  certificates  could  not  operate  to 
relieve  the  corporation  from  their  obli- 
gations to  pay  their  tax  upon  the  sur- 
plus, because  the  surplus  remained  in 
the  hands  of  the  company,  and  as  such 
was  liable  to  assessment  and  taxation. 
See,  also,  Bailey  v.  Railroad  Co.,  22 
Wall..  604  (1874). 

2  While  negotiations  were  pending  be- 
tween two  gas  companies  for  their  con- 


(45) 


705 


§  530.]  DIVIDENDS.  [CH.  XXXII. 

being  already  out;  sometimes  to  avoid  taxes,  and  sometimes  to  in- 
crease the  transferable  shares  without  giving  to  the  new  shares  a 
voting  power.  If  the  interest  or  dividends  are  payable  only  from 
the  profits,  the  issue  of  the  scrip  is  legal  whenever  a  stock  dividend 
would  be  legal,  that  is,  whenever  the  property  of  the  company  is 
equal  in  value  to  the  capital  stock  plus  the  scrip  dividend. 

A  property  dividend  is  where  property  is  divided  instead  of  that 
property  being  sold  for  cash  and  the  cash  then  used  to  pay  a  divi- 
dend. A  property  dividend  occurs  where  a  corporation  sells  all  its 
property  to  another  corporation  and  takes  in  payment  thereof  the 
stock  and  the  bonds  of  the  purchasing  corporation  and  then  makes 
a  distribution  of  the  same  among  its  stockholders.  Any  one  of  its 
stockholders  may  object  and  insist  on  payment  of  his  shares  in 
cash.1  This,  however,  is  practically  a  dissolution  of  the  company 
and  a  distribution  of  its  assets,  a  subject  which  is  considered  else- 
where.2 

A  dividend  or  distribution  of  the  company's  bonds  among  its 
stockholders  is  legal,  if  the  capital  stock  is  not  thereby  impaired 
and  if  corporate  creditors  existing  at  that  time  do  not  object.3 

In  the  absence  of  a  special  provision  to  the  contrary,  dividends 
will  be  presumed  to  be  payable  in  cash,  and  in  lawful  or  current 
money.4  Bat  where  the  dividend  is  paid  in  depreciated  currency, 
a  stockholder  cannot  insist  that  he  shall  be  paid  any  more  than 
what  the  depreciated  currency  is  vrorth  in  regular  currency.5 

§  536.  Stock  dividends. —  A  stock  dividend,  as  the  name  imports, 
is  a  dividend  of  the  stock  of  the  corporation.  Such  a  dividend  is 
lawful  when  an  amount  of  money  or  property  equivalent  in  value 

solidation  by  oue  company  buying  the  cated  ;  but  where  the  dividends  to  other 
stock  of  the  other,  upon  a  certain  basis  stockholders  were  paid  in  Confederate 
of  capital  and  indebtedness,  one  of  them  currency,  the  back  dividends  paid  after 
without   the   knowledge  of    the    other  the  war  to  a  northern  stockholder  are  a 
passed  a  resolution    declaring  a   scrip  sum  equal  iu  value  to  the  Confederate 
dividend  of  ten  per  cent,  on   its  capital  currency  when   the  dividends  were  de- 
stock,  thus  increasing  its  indebtedness  clared.     Keppel's   Adm'r  i\  Petersburg 
by  that  amount.  The  certificates  were  ac-  R.  R.  Chase's  Dec,  167  (1868);   Scott  v. 
cordingly  issued ;  but  after  the  consoli-  Central   Railway,  etc..  Co.,  of  Georgia, 
dation,  upon   a  bill  filed  for  that  pur-  52  Barb,,  45  (1868).     In  this  case  two  of 
pose,  the  scrip  was  declared  void.   Bailey  the  three  judges  held  that  though  the 
v.  Citizens'  Gas  Light  Co.,  27  N.  J.  Eq.,  dividends  were  declared  without  speci- 
196  (1876).  fying   how    they    should    be  paid,   yet 
1  See  §  667,  infra.  where  they  were   paid  as  a  matter  of 
2 See  S  548,  infra.  fact    in   depreciated    Confederate    cur- 
3 See  ch.  XL VI,  infra.  reney.   a    northern    stockholder    could 
4  Ehle  v.  Chittenango  Bank.  34  N.  Y.,  not.  after  the  war,  claim  the  same  divi- 
548(1862).  dends  payable    in  United   States  cur- 

•  Back  dividends  may  be  recovered  on  rency. 
stock  which   has   been  illegally  confis- 

706 


;h.  XXXII.] 


DIVIDENDS. 


13  537. 


to  the  full  par  value  of  the  stock  distributed  as  a  dividend  has  been 
accumulated  and  is  permanently  added  to  the  capital  stock  of  the 
corporation.  Corporations  frequently  make  a  dividend  of  this 
character  when  improvements  of  the  corporate  property  or  exten- 
sions of  the  business  have  been  made  out  of  the  profits  earned.  It 
is  also  made  when  the  corporate  plant  has  increased  in  value  and 
it  seems  better  to  issue  new  stock  to  represent  the  excess  of  value 
than  to  sell  the  increase  and  declare  a  cash  dividend.  In  this  coun- 
try these  dividends  are  frequently  made  and  are  constantly  sus- 
tained by  the  courts.1  The  shareholders,  having  voted  to  declare 
such  a  dividend,  may,  at  any  time  before  the  certificates  are  issued, 
reconsider  the  matter  and  revoke  the  dividend.2  Preferred  stock- 
holders are  entitled  to  share  in  the  distribution  of  stock  by  a  stock 
dividend  according  to  the  terms  of  their  preferred  stock.3  In  some 
of  the  states  a  stock  dividend  is  prohibited  by  statute  or  constitu- 
tional provision.4 

§537.  Interest-hearing  stock. —  It  has  already  been  shown  that 
a  corporation  may  issue  stock  and  make  a  contract  with  the  sub- 
scriber that  the  company  will  pay  interest  upon  the  sums  paid 
in  by  the  subscriber.5     Such  a  contract  is  legal,  however,  only 


1  AVilliams  v.  Western  Union  Tele- 
graph Co..  93  N.  Y.,  162,  188  et  seq. 
(1883);  City  of  Ohio  v.  Cleveland,  etc., 
R  R  Co..  6  Ohio  St,  489  (1856);  Howell 
v.  Chicago,  etc.,  R  R  Co.,  51  Barb.,  378 
(1868);  Clarkson  v.  Clarkson,  18  id..  646 
(1855);  Simpson  v.  Moore,  30  id.,  637 
(1859) ;  Gordon's  Executor  v.  Richmond, 
etc.,  R  R.  Co.,  78  Va.,  501,  521  (1884) ; 
Minot  v.  Paine,  99  Mass.,  101  (1868); 
Boston,  etc.,  R  R.  Co.  v.  Commonwealth, 

100  id.,  399  (1868);  Deland  v.  Williams, 

101  id.,  571  (1869);  Rand  v.  Hubbell,  115 
id.,  401,  474  (1874);  Gibbons  r.  Mahon,  4 
Mackey,  130  (1885);  Jones  v.  Morrison. 
31  Minn.,  140(1883);  Earp's  Appeal,  28 
Pa.  St.,  368  (1857);  Wiltbank's  Appeal, 
64  id.,  256  (1870);  Commonwealth  v. 
Pittsburgh,  etc.,  R  R,  Co.,  74  id.,  83 
(1873) ;  Brown  r.  Lehigh  Coal  &  Nav.  Co., 
49  Pa.  St,  270  (1865);  Commonwealth  v. 
Cleveland,  etc.,  R.  R.,  29  id.,  370  (1857) ; 
Parker  v.  Mason,  8  R  I.,  427  (1867); 
State  v.  Baltimore,  etc..  R  R  Co.,  6  Gill 
(Md.),  363  (1847).  See  Harris  v.  San 
Francisco,  etc.,  41  Cal,  393  (1871),  hold- 
ing that  one  who  is  entitled  to  and  re- 
ceives a  stock   dividend   cannot  claim 


also  a  part  of  the  cash  profits  which  are 
used  for  improvements,  even  though  a 
contract  calls  for  cash.  See,  also,  §  51, 
supra,  and  ch.  XXXIII,  infra.  In 
England  a  stock  dividend  has  been  de- 
clared to  be  ultra  vires  so  far  as  dissent- 
ing stockholders  are  concerned.  It 
cannot  be  forced  upon  a  stockholder. 
Hoole  v.  Great  Western  R'y,  L.  R,  3 
Ch.,  262  (1867).  In  the  case  Re  The 
Eastern,  etc.,  Co.,  68  L.  T.  Rep.,  321 
(1893),  a  stock  dividend  was  involved, 
but  its  legality  was  not  passed  upon. 
It  is  discretionary  with  the  directors  as 
to  whether  they  will  declare  a  stock  or 
a  cash  dividend.  Howell  v.  Chicago, 
etc.,  R'y,  51  Barb.  378  (1868). 

2  Terry  v.  Eagle  Lock  Co.,  supra. 
After  cancellation  there  is  no  statutory 
liability  on  such  stock.  Hollingshead 
v.  Woodward,  35  Hun,  410  (1885). 

3  Gordon's  Executors  v.  Richmond, 
etc.,  R  R.  Co.,  78  Va„  501  (1884).  See, 
also.  Phillips  v.  Eastern  R.  R  Co.,  138 
Mass.,  122  (1884).     See,  also,  ch.  XVI. 

4  See  g§  51,  287,  supra. 

5  See  ch.  XVI,  supra. 


707 


§  53.8.] 


DIVIDENDS. 


[oh.  XXXIT. 


•when  the  interest  is  to  be  paid  from  the  net  profits  of  the  enter- 
prise, and  not  from  the  capital  stock.  Unless  net  profits  have 
been  earned  the  stipulated  interest  cannot  legally  be  paid.  Con- 
sequently there  is  little  difference  between  interest-bearing  stock 
and  preferred  stock. 

§538.  To  whom  the  corporation  is  to  pay  the  dividend. —  The 
question  as  to  whom  a  dividend  shall  be  paid  after  it  has  been  reg- 
ularly declared  is  one  which  sometimes  involves  the  corporation  in 
considerable  difficulty.  It  is  not  always  easy  to  decide  which  one 
of  two  or  more  claimants  is  entitled  to  the  dividend. 

The  general  rule  is  that  the  corporation  may  pay  the  dividend  to 
the  person  in  whose  name  the  stock  stands  registered  upon  the 
corporate  stock  book  at  the  time  the  dividend  is  declared.1  It 
may  do  so  without  inquiring  whether  he  has  transferred  the  stork. 
and  without  requiring  the  production  of  the  certificate.2  More- 
over, it  is  a  well-settled  rule  that  the  corporation  is  protected  in 
paying  dividends  to  a  recorded  shareholder,  although  he  may  have 
transferred  his  shares,  no  notice  of  the  transfer  having  been  given 
to  the  company.3  lint  after  notice  of  a  transfer  the  corporation 
may  pay  the  dividend  to  the  transferee,  although  no  registry  has 
been  made.4     And  between   two  claimants  of  the  dividend,  one 


1  Brisbane  v.  Delaware,  etc.,  R.  R,  Ca, 
94  N.  Y..  204  (1883);  affirming  25  Hun, 

438  (1881);  Jones  v.   Terre  Baute,  etc.. 
R.  R.  I  V.  '.".I  Barb..  858(1869);  affirmed, 
57  X.  Y..  196;  Northrup  v.  N<  wton,  etc., 
Turnpike  Co..  3  Conn.,  644  (1821X    Cf. 
Manning  v.  Quicksilver  Mining  Co.,  24 
Hun.  "CO  (1881),  in  regard  to  the  assign- 
ment of  dividends.    The  guaranty  ac- 
cumulations of  an  insurance  company 
conducted  l>oth  on  the  mutual  and  stock 
principle  belong  to  the  stockholders  and 
not  to  the  policy-holders.    Traders',  etc., 
Ins.  Co.  v.  Brown,  142  Mass.,  403(1886). 
As  to  dividends  on  a  tontine  insurance 
policy,  see  Pierce  v.  Equitable  Life  As- 
surance Co..  14.1  id.,  5(5  (1887).     As  to  a 
dividend  by  way  of  redeeming  stoi'k  in 
a  building,  association,   see   Appeal   of 
Mechanics*,  etc.,  Ass'n,  7  Atl.  Rep..  728 
(Pa..  iss;>. 

2  Brisbane  v.  Delaware,  etc..  R.  R.  Co., 
94  N.  Y.,  204  (1883),  affirming  25  Hun, 
438 ;  Cleveland,  etc.  R.  R.  Co.  v.  Robbins, 
35  Ohio  St,  483  (1880). 

3  Bank  of  Commerce's  Appeal,  73  Pa. 


St..  50  (1878),  where  a  distribution  of 
assets  was  made;  Bell  v.  LalTerty.  1 
Pa.  Sup.  Court.  T.l  (1881),  where  the 
assignee  of  a  dividend  without  a  certifi- 
cate obtained  payment,  and  the  court 
held  the  company  not  liable  to  an  unre- 
corded pledgee :  Bank  of  Utica  v.  Smal- 
ley,  2  Cowen,  770(1824);  Smith  &  Amer- 
ican Coal  Co..  7  Lan&,  317  (1873);  Jones 
&  Cleveland,  etc.,  R,  R,  Co.  r.  Robbins, 
35  Ohio  St,  483  (1S80),  the  corporation 
not  having  heen  notified. 

4  Id.  The  corporation  is  liable  to  a 
transferee  for  dividends  declared  after 
a  registry  has  been  requested  and  im- 
properly refused.  Robinson  v.  National 
Bank.  05  N.  Y.,  687.  In  (  entral  Neb.,  etc., 
Bank  v.  Wilder.  40  N.  W.  Rep.,  369 
(Neb.,  1801),  it  was  held  that  not  only 
was  the  pledgee  entitled  to  the  divi- 
dends, but  was  entitled  to  them  al- 
though the  stock  stood  on  the  corporate 
books  in  the  name  of  the  pledgor,  where 
the  officers  knew  all  about  the  pledge 
The  corporation  is  liable  to  a  pledgee  to 
whom  the  stock  has  been  transferred  on 
'08 


CH.  XXXII.] 


DIVIDENDS. 


[§  538. 


being  the  cestui  que  trust  and  the  other  a  bona  fide  transferee,  the 
corporation  may  interplead.1 

The  right  to  dividends  does  not,  however,  depend  upon  the  issue 
of  the  certificate,  and  the  owner  of  shares  may  claim  his  dividends 
though  no  certificate  has  ever  been  issued  by  the  corporation.2 
The  corporation  is  protected  if  it  pay  dividends  to  the  administra- 
tor without  notice  of  a  transfer  by  him.3 

With  respect  to  the  dividends  on  the  stock  of  a  married  woman, 
the  corporation  must  pay  them  to  the  husband  or  not,  according 
to  the  law  of  the  domicile  of  the  corporation,  and  not  according  to 
the  law  of  the  domicile  of  the  married  woman.4  The  husband  by 
collecting  dividends  on  his  wife's  shares  does  not  thereby  reduce 
the  stock  to  possession.5 

Even  though  the  corporation  closes  its  transfer-book  several  clays 
before  a  dividend  is  declared,  nevertheless  those  are  entitled  to 
the  dividend  who  apply  for  registry  on  or  before  the  day  of  the 
declaration  of  the  dividend.6 

If  the  holder  of  a  certificate  of  stock  has  applied  for  transfer  and 
been  refused,  he  may  sue  for  the  dividend  before  bringing  a  suit  in 
equity  to  obtain  a  transfer  of  his  stock.7 


the  books  for  dividends  paid  to  the 
pledgor.  The  acceptance  of  part  pay- 
ment, etc.,  by  the  pledgee  from  the 
pledgor  does  not  waive  his  cause  of 
action  against  the  company.  Boyd  v. 
Conshohocken  Worsted  Mills,  24  Atl. 
Rep..  287  (Pa.,  1892). 

1  Salisbury  Mill  v.  Townsend,  109 
Mass.,  115(1871);  Cross  v.  Eureka,  etc., 
Co.,  73  Cal.,  302  (1887),  a  case  between 
pledgor  and  pledgee.  See,  also,  §  387. 
Cf.  Stowe  v.  Reed,  25  N.  E.  Rep.,  49 
(Mass.,  1890),  where  a  corporate  creditor 
sued  the  treasurer  for  distributing  prop- 
erty among  the  stockholders.  A  corpo- 
ration cannot  interplead  as  between 
stockholders  for  the  purpose  of  deter- 
mining the  ownership  of  stock,  there 
having  been  no  claim  made  upon  it  in 
regard  to  registry  or  in  regard  to  divi- 
dends. It  must  be  shown  also  that  the 
company  has  not  acted  in  a  partisan 
manner  as  between  the  different  claim- 
ants. Hinkley  v.  Pfister,  63  N.  W.  Rep., 
21  (Wis..  1892). 

2  Ellis  v.  Proprietors  of  Essex  Merri- 
mack Bridge,  19  Mass.,  243  (1824). 

3  Brisbane  v.  Delaware,  etc.,  R  R  Co., 


94  N.  Y.,  204  (1883).  The  heirs  of  a 
stockholder  must,  in  order  to  entitle 
themselves  to  dividends,  procure  a  trans- 
fer of  their  ancestor's  shares  into  their 
own  names  on  the  corporate  books 
where  the  certificates  have  been  pledged 
and  the  company  notified.  State  v. 
New  Orleans,  etc.,  R.  R.  Co.,  30  La.  Ann., 
308  (1878). 

4  Graham  v.  First  Nat'l  Bank  of  Nor- 
folk, 84  N.  Y„  393  (1881) ;  affirming  S.  C, 
20  Hun.  325.  As  to  the  rule  in  Califor- 
nia, see  Dow  v.  Gould  &  Curry  Silver 
Mining  Co.,  31  Cal.,  629  (1867). 

5  Burr  v.  Sherwood,  3  Bradf.  (N.  Y. 
Surrogate),  85  (1854).  Cf.  Harcum  v. 
Hudnall,  14  Graft,  369,  882  (1858); 
Searing  v.  Searing,  9  Paige,  283  (1841). 
A  receipt  of  dividends  by  the  husband 
only  reduces  the  dividends  into  posses- 
sion and  not  the  stock.     See  §  319. 

6  Jones  v.  Terre  Haute,  etc.,  R  R  Co., 
57  N.  Y,  196,  205  (1874);  Robinson  v. 
National  Bank,  supra.  Frequently,  how- 
ever, the  charter  or  statutes  provide 
otherwise. 

"  Hill  v.  Atoka,  etc.,  Co.,  21  S.  W.  Rep. 
508  (Mo.,  1893). 


709 


§  539.] 


DIVIDENDS. 


[CH.   XXXII. 


§  539.  To  whom  the  dividend  belongs.—  As  between  the  vendor 
and  vendee  of  shares  of  stock,  it  is  a  settled  rule  that  the  vendee  is 
entitled  to  all  the  dividends  on  the  stock  which  are  declared  after 
the  sale  of  the  stock.  Even  though  the  transfer  has  not  been  re- 
corded the  transferee  has  a  right  to  the  dividends  as  against  the 
transferrer.  The  law,  moreover,  refuses  to  investigate  the  question 
when  the  dividend  was  earned.  In  contemplation  of  law  the  net 
profits  are  earned  at  the  instant  the  dividend  is  declared.  This 
rule  is  just,  inasmuch  as  the  accrued  profits  and  expected  dividends 
enter  into  the  value  and  price  at  which  the  stock  is  sold.1 

A  transfer  of  stock  passes,  of  course,  all  dividends  declared  sub- 
sequently to  the  transfer,  although  the  dividend  was  earned  before 
the  transfer  was  made.2 


ijermain  tt  Lake  Shore,  etc..  RR 
Co..  91  N.  Y.,483;  March  tt  Railroad  Co., 
4::  N.  II..  515,  VMM  1862);  Ryan  r.  Leaven- 
worth, .t-..  R  R  Co.,  31  Kan..  866,  408 
(1879):  Foot  v.  Worthington,  89  M  .--.. 
299  (1839);  Jones  v.  Terre  Haute,  eta, 
R.  R  Co..  57  N.  V..  196  (1874);  Carrie tt 
White,  45  id.,  822  (1871);  Brundaj 
Brundage,  65  Barb.,  397,  W8  fi  :  af- 
firmed, 60  N.  V..  544;  Goodwin  tt  Hardy, 
57  Me.,  148  (1869):  Hill  r  Newicha- 
wanick  Co..  8  Hun,  iv.i  (1876  i  affirmed, 
71  N.  Y..  598  (1877);  Bates  ft  McKinley, 
31  L.J.,  Chan.,  889  (1862);  Kin-  u  I  I 
let,  :<  Vt..  385  |  is:',!  I;  Abercrombie  tt 
Riddle,  B  Md  Ch.,  820  (1850).  Bee,  also, 
eh.   XXXIII    Of.   Kane  a  Bl If 


dend.  a  stockholder  who  sold  part  of 
his  stock  in  the  interim  is  entitled  to 
the  dividend  on  only  such  stock  as  he 
owned  when  the  dividend  was  declared 
Coleman  tt  Columbia  <  Ml  Co,  51  Pa  St, 
74(1866>  "Where  defendant  pure! 
stork  for  the  plaintiff  and  accounted 
therefor,  but  refused  to  account  for  divi- 
dend- i  :eived  while  be  held  the  stock, 
tlir  defendant  is  guilty  of  conversion. 
Shanghn<  id  a,  1  State  Rep 
Although  the  purchaser  of  stock  is  en- 
titled to  a  dividend  declared  after  Cm 
contract  of  sale  i-,  made,  even  though 
the  contract  has  not  yet  been  carried 
nut.  yet  the  purchasers  cannot  insist  on 
the  vendor's  giving  an  order  on  the  cor- 


7  Johns.  Ch.,  90  (1828).     a   person  who    poration  for  such  dividends.  The  vendee 
guaranties  to  another  a  dividend  and  is     should  collect  without  such  order.     He 


obliged  to  pay  it  himself  cannot  claim  a 
subsequent  dividend  by  way  of  reim- 
bursement Parks  tt  Automatic,  etc., 
Co.  (Super.  CD.  N.  Y.  Daily  Reg.,  May 
12,  1888.  A  dividend  declared  alter  the 
certificates  have  been  sold  belongs  to 
the  transferee  as  against  the  transferrer. 
Gemmell  tt  Davis.  23  Atl.  Rep..  1032 
(Md..  1892),  approving  the  text  herein. 
"Where  stock  is  sold  at  auction  on  Au- 
gust 1  and  a  deposit  paid,  the  balance  to 
be  paid  August  29.  a  dividend  declared 
on  August  24  belongs  to  the  purchaser. 
Black  tt  Homersham,  L.  R..  4  Ex.  D..  24 
(IsTS'.  Where  a  company  purchases 
shares  of  its  own  stock  and  subse- 
quently uses  it  to  declare  a  stock  divi- 


rescinds  the  sale  by  insisting  on  such 
order.  Phiutey  tt  Murray.  10  S.  E.  Rep., 
858  Ga.,  1889).  An  alleged  vendee's 
suit  for  a  dividend  is  res  judicata  a-  to 
a  suit  to  the  stock.  Bhepard  tt  stock- 
ham.  25  Pac.  Rep-   559   Kan..  1891). 

-  Kane  R  Bloodgood.  7  Johns,  Ch.,  90 
(1828),  by  Chancellor  Kent;  Goodwin  r. 
Hardy.  "  Me..  113  (1869);  March  v. 
Eastern  R  R  Co..  43  X.  BL,  615  (1862); 
Phelps  tt  Farmers'  &  Mechanics'  Bank, 
26  ( 'onn..  269  (1857);  Brundage  v.  Brun- 
.  1  Thomp.  &  Q,  82 :  afTd,  60  N.  Y., 
544  (1875);  Jones  v.  Terre  Haute,  etc., 
R.  R.  Co..  67  N.  Y..  li)i;  (1874);  Currie  v. 
White.  4.-)  id..  822  (1871).  And  a  pur- 
chaser of  stock  at  a  tax  sale,  if  the  pro- 


710 


CH.  XXXII.] 


DIVIDENDS. 


[§  539. 


"When  a  dividend  is  made  payable  on  a  day  subsequent  to  the 
day  on  which  it  is  formally  declared,  it  belongs  to  the  stockholder 
who  owns  the  shares  on  the  day  the  dividend  is  declared,  and  not 
to  the  owner  at  the  time  it  is  payable.1 

Where  stock  is  bought  deliverable  at  the  seller's  option,  the  divi- 
dends declared  between  the  day  of  the  purchase  and  the  delivery 
belong  to  the  purchaser.2  But  a  contract  to  sell  on  demand  entitles 
the  vendor  to  dividends  declared  before  the  demand  is  made.3 
But  of  course  any  agreement  between  vendor  and  vendee,  modify- 
ing  or  changing  this  rule,  will  be  upheld.  It  is  a  proper  subject 
for  a  contract,  and  a  valid  contract  may  be  made  in  reference 
to  it.4 

A  legatee  of  shares  takes  the  stock  as  it  was  at  the  time  of  the 
testator's  death.  All  dividends  declared  previous  to  that  event  go 
to  the  administrator.5 


ceedings  are  legal  and  regular,  is  enti- 
tled to  a  certificate  and  to  dividends 
subsequently  declared.  Smith  v.  North- 
ampton Bank,  58  Mass.,  1  (1849). 

i  Wheeler  v.  Northwestern  S.  Co.,  39 
Fed.  Rep..  347  (1889) ;  Wright  v.  Tuckett. 
1  Johns.  &  H,  266  (1860) ;  De  Gendre  v. 
Kent,  L  R.,  4  Eq.,  283  (1867) ;  Hill  v. 
Newiehawanick  Co.,  71  N.  Y.,  593  (1877) ; 
affirming  S.  C,  8  Hun,  459 ;  48  How. 
Prac.  427  (1874) ;  Spear  t\  Hart,  3  Rob- 
ertson, 420  (1865);  Bright  v.  Lord,  51 
Ind.,  272  (1875),  where  an  option  had 
been  given.  Cf.  Hopper  v.  Sage,  112  N. 
Y.,  530  (1889) ;  Manning  v.  Quicksilver 
Mining  Co.,  24  Hun,  360  (1881);  Board- 
man  v.  Lake  Shore,  etc..  R.  R,  Co.,  84 
N.  Y,  157,  178  (1881):  Be.  Kernochan, 
104  N.  Y,  618  (1887) ;  Clive  v.  Clive,  Kay 
(Eng.  Chan.),  600  (1854).  Contra.  Bur- 
roughs v.  North  Carolina  R.  R.  Co.,  67 
N.  C,  376  (1872).  The  transfer  of  stock 
does  not  transfer  past  stock  dividends 
which  have  been  declared,  even  though 
the  stock  dividend  has  not  been  actually 
delivered.  City  of  Ohio  v.  Cleveland, 
etc.,  R  R.,  6  Ohio  St.,  489  (1856).  See, 
also,  eh.  XVI.  Where  a  pledge  of  stock  is 
renewed  and  a  new  note  given,  dividends 
accruing  before  the  renewal  go  to  the 
pledgor.  Fairbank  v.  Merchants',  etc., 
Bank,  22  N.  E.  Rep.,  524  (111.,  1889). 

2Currie  v.  White,  45  N.  Y,  822  (1871); 

71 


Black  v.  Homersham,  L.  R,  4  Ex.  D.. 
24  (1878).  Under  a  contract  of  a  person 
to  buy  certain  stock  within  a  certain 
time  if  the  other  party  desired  to  sell 
(a  "put'"),  the  first  person  reserving  all 
dividends  "declared  during  the  time." 
a  dividend  declared  before  but  payable 
during  the  time  of  the  option  belongs  to 
the  seller.  Hopper  v.  Sage,  112  N.  Y.. 
530  (1889).  Contra,  Harris  v.  Stevens,  7 
N.  H..  454  (1835). 

3  Bright  v.  Lord,  51  Ind.,  272  (1875). 

4  Brewster  v.  Lathrop,  15  Gal.,  21 
(1860);  Hyatt  v.  Allen,  56  N.  Y,  553 
(1874);  Union  Screw  Co.  v.  Amer.,  etc.. 
Co.,  11  R.  I.,  569  (1877);  affirmed.  13  R 
I.,  673  (1880),  in  which  it  was  held  that 
where  a  contract  between  two  corpora- 
tions for  the  purchase  of  the  stock  of 
one  of  them  on  a  certain  day  was  by 
agreement  postponed  to  a  later  day,  a 
dividend  declared  in  the  interval  be- 
longed to  the  purchaser.  Where  the 
vendor  of  stock  reserves  "one-half  of 
whatever  price  the  same  should  be  sold 
for,  when  sold,  over  and  above  that 
sum,"  he  is  not  entitled  to  an  account 
of  dividends,  or  other  income  received 
by  the  vendee  from  or  on  account  of 
the  stock.  Jones  v.  Kent,  80  N.  Y.,  585 
(1880). 

5  Brundage  v.  Brundage,  60  N.  Y.,  544 
(1875);  Re  Kernochan,  104  N.  Y.,  618 
1 


§  340.] 


DIVIDENDS. 


[CH.  XXXII. 


The  question  of  whether  a. dividend  is  apportionable  is  consid- 
ered elsewhere.1 

A  person  who  claims  to  be  the  owner  of  stock  cannot  establish 
his  rights  in  a  court  by  suing  the  party  in  possession  of  the  stock 
for  the  dividends  declared  and  paid.8 

§540.  Dividends  must  he  equal  and  without  preferences. —  Divi- 
dends among  stockholders  of  the  same  must  be  always  pro 
rata,  equal  and  without  preference.  If  the  company  has  issued 
preferred  stock,  the  holders  thereof  constitute  a  class  for  them- 
selves, and  shareholders  of  that  class  will  be  entitled,  as  a  class,  to 
dividends  in  preference  to  holders  of  the  common  stock.  But  as 
between  shareholders  of  the  same  class  there  can  be  no  discrimina- 
tion, and  profits  set  aside  for  dividends  must  be  evenly  divided 
among  the  stockholders  according  t<»  the  amount  of  stock  each  one 
owns.3  Accordingly  there  can  be  no  lawful  discrimination  in  the 
division  of  dividends,  although  the  subscription  price  of  part  of  the 


(1887),  where  it  was  payable  after  the 
testator's  death.     Qf.  .Johnson  o.  Bridge- 
water  Iron  Mfg.  Co.,  14  Graj 
§  301.    The  profits  and  surplus  fun 
a  corporation  whenever  they  may  have 
accrued  air.   until  separated  from  the 
capital  by  the  declaring  of  a  dividend, 
B   part  of  the  Stock  itself,  and  will  pass 
under  that  name  in  a   transfer  "r  be- 
quest     Phelpstt  Farmers' &  Mechanics' 
Bank.  20   Conn..  269  (1857)      Cf.   Clapp 
v.  Astor,  2   Edw.  Chan..  :;?'.>  (1834)l      In 
i       .id  to  the  rights  of   a  lite  tenant  of 
sto  k  as  against  a  remainder-man,  see 
chapter  XXX II I. 

i  Sec  .-;  558,  infra. 

sPeckham  >:  Van  Wagenen,  88  N.  Y.. 
40  (1880),  Conv(  rsion  li'-s  for  an  unau- 
thorized sale  of  stock  and  also  for  divi- 
dends received  thereon.  Sbaughneeey 
v.  Chase,  7  State   Rep.,  3upr.  Ct 

1887>. 

'Luling  r.  Atlantic  Mutual  Ins.  Co., 
45  Barb.,  510  (1865),  where  part  were 
paid  in  gold  ;  Jones  a  Terre  Haute,  etc., 
R  R  Co..  57  N.  Y..  196(1874);  affirming 
29  Barb.,  353  (1859  ;  Morgan  >:  Great 
Eastern  R'y.  l  Bern.  &  M..  560  (1863); 
Ryder  v.  Alton,  etc.,  R  R  Co.,  13  III., 
516  (1851).  a  case  of  preferred  stock; 
State  v.  Baltimore,  etc.,  R  R  Co..  6  Gill, 
363   (1847),   where  some   were   paid    in 


;i  and  others  wore  offered  part  cash 

and  pari  stock  ;  Atlantic, etc.,  iph 

Co.  o.  Commonwealth,  8  Brewster  (Pa.), 

where  a   tax  was  levied  on 

the  assumption  of  an  equal  dividend  to 

all;    Hale  r.  Republican  River  Bridge 

Co..  8  Kan.,  ¥i      where  by  mistake 

a  stockholder  got  more  land  scrip  than 

was   his   shai  kaon's    Adrn'ra   v. 

Newark  Plank-n  81   N.  J.  Law, 

(  v".  <  lhase  >:  Vanderbilt,  69 

N.    Y..   807  (1875       Bolder  of   receipt 

under  i  nisation,  entitling  him  to 

preferred  stock  in  the  new  company,  is 

entitled  to  dividends  declared  before  he 

obtains    the   certificates.       Ellsworth   v. 

New  York,  etc.,  R  R,  88  Hun.  7:  afTM, 

98  N.  Y..  648    See,  alt  a.  Belfast. 

etc..  R'y   Co  (Irish  Rep  L,    112 

(1866);    Barriaon   v.   Mexican   R'yCo., 

L.  R,  19  Eq.,  5),  preferred  Btook 

cases.  As  to  preferred  stock,  see  ch.  XVI. 

Although  dividends  are  guarantied  to  a 

certain  date,  and  are  paid,  the  stock  is 

entitled  to  participate  in  all  subsequent 

dividends.     Parks    v.    Automatic,   etc., 

r^..  14  N.  Y.  St.  Rep.,  710  (1888).    If  a 

stockholder  by   accepting  the  benefits 

assents  to  a  change  in   the  privilegi  a 

which  pertain   to   his  stock,  he  cannot 

afterwards  object  thereto.    Compton  R 

Chelsea,  13  N.  Y.  Supp.,  722  (1891). 


712 


CH.  XXXII.] 


DIVIDENDS. 


[§  541. 


stock  is  due  and  unpaid;1  or  because  the  contract  work  has  not 
been  done ; 2  nor  can  there  be  a  discrimination  between  the  large 
and  small  stockholders  of  a  company  as  to  the  manner  of  payment 
of  dividends.3  After  paving  a  dividend  to  a  part  of  the  share- 
holders the  corporation  cannot  refuse  to  pay  the  rest  upon  the 
ground  that  by  so  doing  the  capital  stock  will  be  impaired,4  or 
that  all  the  surplus  earnings  have  been  either  paid  out  as  dividends 
or  invested  in  permanent  improvements.5 

A  bill  in  equity  may  be  maintained  by  a  stockholder  to  prevent 
an  unequal  or  unfair  distribution  of  the  profits  of  the  company,8 
and  for  an  injunction  to  restrain  a  dividend  when  stock  has  been 
fraudulently  overissued,  until  a  true  list  of  the  holders  of  genuine 
stock  can  be  obtained.7 

§  541.  A  dividend  when  declared  is  a  debt  due  absolutely  to  the 
shareholder. —  When  a  dividend  out  of  the  earnings  of  the  company 
has  been  regularly  declared  and  is  due  it  becomes  immediately  the 
individual  property  of  the  shareholder.     There  is,  eo  instanti,  a 


lOakbank  Oil  Co.  v.  Crum.  L.  R.,  8 
App.,  65  (1882).  Where  a  subscription 
for  stock  is  paid  up,  the  stockholder  is 
entitled  to  his  stock  and  past  dividends, 
even  though  for  thirty  years  he  has 
slept  upon  his  rights.  Kobogurn  v. 
Jackson  Iron  Co..  43  N.  W.  Rep.,  602 
(Mich.,  1889);  Bedford  County  v.  Nash- 
ville, etc.,  R  R.,  14  Lea  (Tenia.),  525 
(1884). 

2  Although  stock  is  issued  to  contract- 
ors before  they  are  entitled  to  it,  yet 
they  are  entitled  to  the  dividends  on 
such  stock  unless  there  was  some  agree- 
ment to  the  contrary.  Central  R.  R., 
etc.,  v.  Papot,  59  Ga.,  342  (1877);  S.  C, 
sub  nom.  Southwestern  R  R  v.  Papot, 
67  Ga.,  675.  690  (1881). 

3  Accordingly,  where  a  dividend  was 
declared,  viz.,  to  all  stockholders  own- 
ing less  than  fifty  shares,  cash,  but  to 
all  of  fifty  shares  and  over,  part  cash 
and  part  in  interest-bearing  bonds  of 
the  corporation,  the  discrimination  was 
held  invalid  and  unlawful.  State  V. 
Baltimore,  etc..  R  R.  Co.,  6  Gill,  363 
(1848) ;  Jones  v.  Terre  Haute,  etc.,  R  R 
Co.,  57  N.  Y.,  196  (1874).  So,  also,  where 
a  part  of  the  authorized  capital  stock 
remained  untaken,  and  a  resolution  of 
the  directors  was  carried  into  effect,  by 


which  the  untaken  portion  of  the  stock 
was  issued  to  those  shareholders  not  in 
arrears  upon  shares  previously  taken, 
to  the  exclusion,  as  to  the  new  shares, 
of  those  in  arrears  upon  the  original 
issue,  it  was  held  an  invalid  discrimina- 
tion and  an  unlawful  imposition  of  a 
penalty  upon  those  in  arrears.  Reese  v. 
Bank  of  Montgomery  County,  31  Pa.  St., 
78  (1855). 

4  Stoddard  v.  Shetucket  Foundry  Co., 
34  Conn.,  542  (1868).  The  validity  of  a 
dividend  cannot  be  called  into  question 
by  a  bank  in  a  suit  to  collect  taxes  on 
such  dividend.  Central  Nat'l  Bank  v. 
United  States,  137  U.  S.,  355  (1890). 

5  Beers  v.  Bridgeport  Spring  Co.,  42 
Conn.,  17  (1875). 

fiLuling  v.  Atlantic  Mutual  Ins.  Co., 
45  Barb.,  510  (1865).  The  minority  may 
bring  the  officers  to  an  accounting  for 
an  unfair  distribution  of  the  bonds,  etc., 
owned  by  a  construction  company. 
Meyers  v.  Scott,  2  N.  Y.  Supp.,  753 
(1888).  Or  the  stockholder  may  sue  at 
law  for  an  equal  dividend.     See  §  542. 

7  Underwood  v.  New  York,  etc..  R  R 
Co.,  17  How.  Prac,  537  (1859),  a  case 
growing  out  of  the  Schuyler  frauds  in 
New  York. 


ri3 


§  541.] 


DIVIDENDS. 


[CH.  XXXII. 


severance,  for  the  use  and  benefit  of  the  members  of  the  corpora- 
tion, of  so  much  of  the  accumulated  earnings  as  are  declared;  and 
the  dividend  thereafter  exists  as  a  separate  fund,  distinct  from  the 
capital  stock  or  surplus  profits.  It  then  becomes  the  absolute  prop- 
erty of  the  stockholders.1 

Accord inirlv,  whenever  a  dividend  is  regularlv  declared  and 
credited  to  a  depositor  it  becomes  his  property,  to  which  he  is  en- 
titled in  preference  to  the  creditors  of  the  corporation.2  If  the 
funds  to  pay  a  dividend  are  placed  by  the  corporation  on  deposit 
at  a  bank  or  elsewhere,  the  deposit  is  made  and  remains  at  the  risk 
of  the  corporation  and  not  of  the  shareholders,  until  a  reasonable 
time  after  actual  notice  is  given  to  the  latter.3  But  it  cannot  be 
withdrawn  and  reclaimed  either  by  the  corporation  or  a  receiver  of 
the  corporation,  since  the  shareholders  acquire,  by  virtue  of  the 
declaration  of  the  dividend,  a  lien  in  equity  upon  the  deposit.4 
And  the  shareholders'  right  to  a  dividend  regularly  declared,  and 
to  the  fund  set  apart  by  the  corporation  to  pay  the  dividend,  is 
not  affected  by  the  subsequent  insolvency  of  the  corporation.'1  But 
where  no  specific  fund  has  been  set  aside,  a  shareholder  not  having 
claimed  or  received  his  dividend  has,  upon  the  insolvency  of  the 
corporation,  merely  a  claim  of  debt  against  the  corporation,  and 
must  come  in  and  fare  as  the  other  creditors  do.6     A  dividend  is 


•Van  Dyck  v.  McQuade,  86  X.  V..  88 
(1881);  Jermain  v.  Lake  Shore,  etc., 
R.  R  Co..  91  id.,  4S3  (1888);  Eeppul'a 
Adm'r  v.  Petersburg  R.  R  <  '<>..  <  '\> 
Dec,  167(1868);  Kin-  v.  Paterson,  etc., 
R  R  Co.,  29  X.  J.  Law,  82,  504  (1860); 
Hill  r.  Newichawanick  Co..  71  New 
York  Rep.,  598  (1877),  affirming  S.  ('..  8 
Hun,  459  (1876);  Brundage  r.  Brun- 
dage, GO  N.  Y.,  541  (1875),  affirming  S. 
C,  65  Barb.,  397  (1873);  Spear  r.  Hart. 
3  Robertson.  420  (1865);  Manning  v. 
Quicksilver  Co.,  24  Hun.  360;  Blood- 
good  v.  Kain,  7  Johns.  Ch.,  90;  Beers  a, 
Bridgeport  Spring  Co.,  12  Conn.,  17 
(1875);  Fawcett  r.  Laurie,  1  Drew.  & 
Sm..  192  (1860);  Matter  of  Le  Blanc,  14 
Hun,  8  (1878).  Upon  the  latter  point 
compare  People  r.  Merchants'  and  Me- 
chanics' Bank.  78  X.  Y.,  269  (1879). 
Dividends  on  life  insurance  policies 
when  once  declared  cannot  be  varied  by 
the  company  subsequently.  Heusser  v. 
Continental,  etc.,  Ins.  Co.,  20  Fed.  Rep., 
222    (1884).      Execution     or    garnishee 


process  cannot  be  levied  on  stock  held 
by  an  individual  as  trn~t'  •.  where  the 
debl  is  his  individual  debt  Nor  can  it 
be  levied  on  the  dividend  from  Bucta 
stock.  So  held  where  stock  was  owned 
by  a  city  in  trust  for  the  citizens.  Hitch* 
cock  v.  Galveston  W.  Co.,  50  Fed.  Rep., 
2t;::  i^i. 

-  Van  Dyck  v.  McQuade,  86  N.  Y.,  38 
(1881);  Peckham  v.  Van  Wegener,  88 
X.  V..  10.  A  dividend  declared  and 
ordered  deposited  to  the  order  of  the 
stockholders  and  so  held  until  the 
further  order  of  the  court  is  legal  and 
the  amount  cannot  be  taxed  as  belong- 
ing to  the  bank.  Pollard  v.  First  Xat'l 
Bank.  28  Pac.  Rep.,  202  (Kan.,  1881  . 

3  King  r.  Paterson.  etc.,  R  R  Co..  29 
X.  J.  Law,  82.  504(1860). 

*  Matter  of  Le  Blanc,  14  Hun,  8  (1878); 
aff'd,  75  N.  Y,  598 ;  Beers  v.  Bridgeport 
Spring  Co.,  42  Conn.,  17  (1875). 

5Le  Roy  v.  Globe  Insurance  Co.,  2 
Edw.  Chan.,  657  (1836). 

6  Lowue  v.  American  Fire  Insurance 


714 


CII.  XXXII. j 


DIVIDENDS. 


[§  542. 


something  distinct  and  separable  from  the  fund  upon  which  it  is 
declared,  and  it  may  be  the  subject  of  assignment  by  a  share- 
holder before  it  is  received  from  or  declared  by  the  corporation.1 
So  it  is  held  that  a  dividend  must  be  made  payable  within  a  reason- 
able time  after  it  is  declared,  and  when  once  declared  cannot  be 
be  revoked.2  But  where  the  fact  that  a  dividend  has  been  voted 
by  directors  is  not  made  public,  or  communicated  to  the  stockhold- 
ers, and  no  fund  is  set  apart  for  payment,  the  vote  may  be  re- 
scinded.3 Not  only  must  the  time  of  payment  be  reasonable,  but 
a  reasonable  place  of  payment  must  be  designated,  and  the  entire 
transaction  must  be  in  good  faith.4 

§  542.  It  is  a  debt  which  may  be  collected  by  legal  proceedings. — 
The  debt  which  the  corporation  owes  its  shareholders,  when  a  divi- 
dend is  declared  and  the  day  of  payment  arrives,  is  one  which  may 
be  collected  by  the  usual  action  at  law.  A  suit  to  enforce  the 
declaration  of  a  dividend  must  be  inequity;  but  when  the  divi- 
dend is  not  paid  after  it  has  been  regularly  declared,  the  share- 
holder's action  is  at  law,  and  he  may  sue  in  assumpsit  for  the 
amount  due  him  by  the  resolution  declaring  the  dividend,5  or  he 


Co.,  6  Paige,  482  (1837);  Curry  v.  Wood- 
ward, 44  Ala.,  305  (1870). 

i  Marten  v.  Gibbon,  33  L.  T.  Rep., 
(N.  S.),  561  (1875).  Cf.  Jermaiu  v.  Lake 
Shore,  etc.,  R.  R.  Co.,  91  N.  Y.,  483 
(1883).  Bargains  in  prospective  divi- 
dends are  transactions  which,  by  rule 
61  of  the  stock  exchange,  the  committee 
will  not  recognize  or  enforce.  The  con- 
tract is,  however,  one  which  is  not  con- 
trary to  law.  and  it  is  good  between  the 
parties.     Marten  v.  Gibbon,  supra. 

2  Beers  v.  Bridgeport  Spring  Co.,  42 
Conn.,  17  (1875), 

3  Ford  v.  Easthampton,  etc.,  Co.,  32  N. 
*E.  Rep.,  1036  (Mass.,  1893). 

4  King  v.  Paterson,  etc.,  R  R.  Co.,  29 
N.  J.  Law,  82  (1860). 

5  Jackson's  Adm'rs  v.  Newark  Plank- 
road  Co.,  31  N.  J.  Law,  277  (1865); 
West  Chester,  etc.,  R  R.  Co.  v.  Jack- 
son, 77  Pa.  St.,  321  (1875);  Coey  v.  Bel- 
fast, etc.,  R'y  Co.,  Irish  Rep.,  2  C.  L., 
112  (1866);  King  v.  Paterson,  etc.,  R. 
R  Co.,  29  N.  J.  Law,  504  (1860);  Stod- 
dard v.  Shetucket  Foundry  Co..  34  Conn., 
542  (1868);  Hall  v.  Rose  Hill,  etc.,  Co.,  70 
III,  673  (1873);  City  of  Ohio  v.  Cleve- 


land, etc.,  R.  R  Co.,  6  Ohio  St.,  489  (1856) ; 
Marine  Bank  of  Baltimore  v.  Biays,  4 
Har.  &  J.,  338  (181S) :  State  v.  Baltimore, 
etc.,  R.  R.  Co.,  6  Gill,  363  (1847) ;  Kane 
v.  Bloodgood,  7  Johns.  Chan.,  90.  132 
(1823);  Jones  v.  Terre  Haute,  etc.,  R.  R. 
Co..  57  N.  Y..  196  (1874);  Fawcett  v.  Lau- 
rie, 1  Drew.  &  Sm.,  192,  202  (1860) ;  Dal- 
ton  v.  Midland  Counties  R'y  Co.,  13  C. 
B.,  474  (1853);  Scott  v.  Central  Railroad, 
etc.,  Co.  of  Georgia,  52  Barb.,  45  (1868). 
See  Beers  v.  Bridgeport  Spring  Co.,  42 
Conn.,  17  (1875),  sustaining  a  remedy  in 
equity.  But  if  a  shareholder  is  not  en- 
titled to  share  in  the  dividend  according 
to  the  terms  of  the  resolution  declaring 
it,  he  cannot  have  his  action  of  assump- 
sit. State  v.  Baltimore,  etc.,  R.  R.  Co.,  6 
Gill,  363  (1848).  In  suing  for  a  dividend 
the  plaintiff  must  allege  that  the  divi- 
dend has  been  declared.  Hdl  v.  Atoka, 
etc.,  Co.,  21  S.  W.  Rep.,  508  (Mo.,  1893). 
Where  a  dividend  has  been  paid  to  all 
stockholders  except  one,  he  may  collect 
his  by  a  suit.  Southwestern,  etc.,  R'y 
v.  Martin,  21  a  W.  Rep.,  465  (Ark., 
1893). 


715 


§  543.] 


DIVIDENDS. 


[CH.  XXXII. 


may  file  a  bill  in  equity  for  an  accounting.1  But  mandamus  is  not 
a  proper  remedy  in  such  a  case.2 

§  543.  A  contract  of  directors  to  pay  a  dividend  as  a  debt  at 
fixed  intervals,  being  in  reality  a  preferred  dividend,  cannot  be 
enforced  either  at  law  or  in  equity,  except  out  of  net  profits  lil  e 
other  dividends.3  A  demand  is  necessary  before  the  action  at  law 
by  the  shareholder  can  be  maintained.4 

It  has  been  held,  however,  that  the  commencement  of  the  suit 
constitutes  in  itself  a  sufficient  demand."  Under  ordinary  circum- 
stances interest  is  not  recoverable  upon  dividends  which  have  been 
declared,  but  which  the  shareholder  has  not  claimed.  The  right 
to  interest  arises  only  apon  a  demand  and  a  refusal  to  pay.6  The 
statute  of  limitations  begins  to  run  only  after  demand.7 


iKeppel'a  Adm'rs  ft  Petersburg  R.  R 
Co.,  Chase's  Dec.  167(1868  This  is  the 
usual  remedy  where  preferred  stock- 
holders sue  to  have  a  dividend  d<  clan  d 
See  ch.  XVI. 

2  Van  Norman  ft  G  otral  (ar,  1 to, 
Co.,  41  Mich..  166  (1870).  Bui  -  e  dicta 
in  King  ft  Paterson,  etc.,  EL  R,  89  N.  J. 
L.,  504  (1861),  and  Le  Roy  tt  Globe  Ina 
Co.,  2  Edw.  (  li..  667. 

sPainesville.  etc.,  R  R  Co  ft  King  17 
OhioSt,  684  dso,  ch,  XVI, 

supra. 

*Hagar  n  Union  National  Bank,  68 
Ma,  509  (1874);  Scott  ft  C<  otral  R  R  & 
Banking  Co.  of  Ga,  52  Barb.,  46(16 
Stat.'  ft  Baltimore,  i  tc.,  R  R  I  'a,  6  Gill, 
363(1847);  King  n  Paterson,  etc.,  R  R 
Co.,  29  N.  .1.  Law,  604  (1861  .  A  mere 
letter  of  inquiry  has  been  held  under  this 
rule  an  insufficient  demand  Scott  tt 
Central  R  R  &  Banking  Co.  of  Ga., 
supra.  A  demand  while  the  Bharee  are 
under  and  subject  t<>  an  attachment  by 
the  corporation  is  not  such  a  demand  as 
this  rule  contemplates.  Bagaru  Union 
National  Bank,  supra. 

8  Robinson  ft  National  Bank  of  New 
Berne,  95  N.  Y..  687  (1884  ;  Kennel's 
Adm'rn  Petersburg  R  R  Co.,  CI 
Dec,,  167  (1868).  Tins  accords  with  the 
settled  theory  of  the  law  as  to  demand 
in  similar  casea  See  East  New  York, 
etc.,  R  R  Co.  tt  Ehnoi.,  5  Hun,  214 
(1875);  Delamater  tt  Miller  1  Cowen,  75 


(1828  :   Ev<  ret!  ft  Coffin,  6  Wend.,  693 
1881);    Walradt   r  Maynard,  3  Rub.. 
684  (184         •    trroll  tt  Cone,  40   Barb.. 
220  (1862);  Ayer  ft  Aver.  16  Pick..  I 
(181 

•  KeppePs  Adm'r  r.  Petersburg  l:.  1L 

< '. ...  supra;  Boardman   ft  Lake  Shore, 

eta,  RR  Co,  84  N.  Y..  167,  187  (1881); 

Baltimore,  eta,  R  R  <  '■■..  fl  I  iill, 

3      I  ri.il..  etc.,  R  i:   Co.  ft 

Cowell,  28   Pa  ink  of 

nisville   n  day.  9  s.  W!   Rep.,   168 

iKy..  Ism; i.     As  l<>  interest  on  pn  ferred 

dividends,  see  ch.  XVI. 

7  The  statute  of  limitations  begins  to 
run  against  a  stockholder's  suit  to  colli 
dividends  only  after  a  demand  and  re- 
fusal, or  notice  to  a  shareholder  that  bis 
right  to  dividends  is  denied.    Phil.,  i  I 
R  R  n  Cowell,  28  Pa  St..  I  1  ; 

Bank  of  Louisville  ft  Gray,  84  Kv..  666 
(1886).  The  BtatUte  Of  limitations  does 
not  begin  to  run  against  the  collection' 
of  a  dividend  until  it  is  demanded.  A 
charter  provision  of  a  new  charter  Into 
which  the  old  company  is  merged,  ap- 
plying a  three-year  Btatuteof  limitations 
to  dividends,  does  notaifect  dividends  on 
old  stock  which  has  not  come  into  the 
rganization.  Armant  r.  New  Orleans, 
.  R  R,  7  S.  Rep..  35  (La.,  Ib89j; 
Kobogum  tt  Jackson  Iron  Ct>..  supra; 
Bedford  Co,  ft  Nashville,  etc.,  R  R, 
si  i  pro. 


716 


OH.  XXXII.]  DIVIDENDS.  [§  544. 

The  action  at  law  for  the  payment  of  a  dividend  which  has 
been  declared  should  be  against  the  corporation,  and  not  against 
the  corporate  officers.1  But  where  the  treasurer  of  an  incorpo- 
rated company  withheld  a  dividend  belonging  to  one  of  the  stock- 
holders on  the  ground  that  he  himself  owned  the  stock,  an  action 
of  assumpsit  against  him  individually  was  sustained.2  And  in  a 
case  where  a  stockholder  had  been  unjustly  deprived  of  his  stock- 
it  was  held  that  he  could  not  sue  an  individual  shareholder  to  re- 
cover a  dividend  which  should  have  been  paid  to  him,  but  that  his 
action  was  properly  against  the  corporation.3  In  actions  on  the 
part  of  shareholders  to  enforce  the  payment  of  dividends  the  valid- 
ity or  legality  of  the  dividend  cannot  be  questioned  by  the  cor- 
poration.4 But  when  a  corporation  is  sued  for  a  dividend  by  two 
claimants  therefor  it  may  support  a  bill  of  interpleader  between 
them.8 

§  544.  Right  of  the  corporation  to  apply  dividends  to  tlie  payment 
of  debts  due  to  it  by  the  shareholder.—  It  is  well  settled  that  if,  at 
the  time  a  dividend  becomes  payable,  the  stockholder  owes  the 
corporation  any  debt,  the  dividend  due  that  shareholder  may  be 
applied  in  liquidation  of  the  indebtedness;  and  if  the  corporation 
is  sued  for  the  dividend  it  may  set  up  the  debt  by  way  of  set-off  or 
counter-claim.6     This,  however,  amounts  to  a  corporate  lien  on  the 

1  French  v.  Fuller,  40  Mass..  108  (1839) ;  Me.,  509  (1874) ;  Phil.,  etc.,  R.  R.  v.  Cow- 
Smith  v.  Poor,  40  Me.,  415  (1855);  S.  C,  ell,  28  Pa.  St,  329  (1857) ;  King  v.  Pater- 
3  Ware.  148  (1858).  son,  etc.,  R'y  Co..  29  N.  J.  Law,  504  (1860) ; 

2  Williams  v.  Fullerton,  20  Vt,  346  Sargent  v.  Franklin  Ins.  Co.,  25  Mass.,  90 
(1848).  (1829) ;  Bates  v.   New  York  Ins.  Co.,  3 

sPeckham  v.  Van  Wagenen,  83  N.  Y.,  Johns.  Cas.,  238  (1802).     See,  also,  §  526, 

40  (1880).  supra.     But  a  contrary  rule  prevails  as 

4  Stoddard  v.  Slietucket  Foundry  Co.,  to  a  deceased  stockholder,  upon  a  wind- 
34  Conn.,  542  (1868).  ing  up  of  the  company  and  a  distribu- 

5  Salisbury  Mills  v.  Townsend,  109  tion  of  its  assets.  See  Merchants'  Bank, 
Mass.,  115  (1871).  See,  also.  §  387.  In  etc.,  v.  Shouse,  102  Pa.  St.,  488  (1883); 
England  the  rule  was  formerly  other-  Brent  v.  Bank  of  Washington,  2  Cranch 
wise.  Dalton  v.  Midland  R'y  Co.,  12  C.  C,  517  (1824).  See,  also,  contra,  in 
C.  B.,  458  (1852).  Where  a  corporation  general,  Ex  parte  Winsor,  3  Story  C.  C, 
is  sued  by  a  stockholder  for  a  dividend  411  (1844).  By  agreement  a  dividend 
declared  by  the  directors,  and  all  the  may  be  applied  to  an  unpaid  call.  Ken- 
other  stockholders  have  received  their  ton,  etc.,  Co.  v.  McAlpin,  5  Fed.  Rep., 
dividends  and  retained  them,  the  com-  737  (1880).  For  a  contract  of  a  corpora- 
pany  cannot  be  allowed  to  set  up  its  de-  tion  to  sell  to  its  superintendent  shares 
fense  to  the  suit  that  the  dividend  has  of  its  stock  at  his  option,  and  to  allow 
not  been  earned,  and  that  its  payment  him  to  pay  for  the  stock  by  the  divi- 
would  withdraw  a  part  of  the  capital  of  dends,  see  Appeal  of  Goodwin,  etc.,  Co., 
the  company.  Stoddard  v.  Shetucket  12  Atl.  Rep,  736  (Pa.,  1888).  The  only 
Foundry  Co.,  supra.  right  that  a  corporation  has  to  retain  a 

6Hagar  v.  Union  National  Bank,  63    dividend  from  a  stockholder  who  owea 

717 


§  545.] 


DIVIDENDS. 


[CH.  XXXII. 


stock  so  far  as  dividends  are  concerned;  and  it  is  not  upheld  where 
the  registered  stockholder  has  sold  and  transferred  his  certificate 
of  stock  before  the  dividend  is  declared. 

§  545.  The  courts  very  rarely  compel  the  directors  to  declare  a 
dividend. —  It  is  for  the  directors,  and  not  the  shareholders,  to  de- 
termine whether  or  not  a  dividend  is  to  be  declared.1 

When,  therefore,  the  directors  have  exercised  this  discretion  and 
refused  to  declare  a  dividend,  there  will  be  no  interference  by  the 
courts  with  their  decision,  unless  they  are  guilty  of  a  wilful  abuse 
of  their  discretionary  powers  or  of  bad  faith  or  of  a  neglect  of 
duty.  It  requires  a  very  strong  case  to  induce  a  court  of  equity 
to  order  the  directors  to  declare  a  dividend,  inasmuch  as  equity 
has  no  jurisdiction  unless  fraud  or  a  breach  of  trust  is  involved. 
There  have  been  many  attempts  to  sustain  such  a  suit,  yet,  although 
the  court  did  not  disclaim  jurisdiction,  it  has  quite  uniformly  re- 
fused to  interfere.2 


it  money  is  based  on  set-off.  Oemmell 
v.  Davis,  23  At!.  Rep.,   1032  (Md.,  1892) 

This  Bet-off  is  doI  g 1  "ii  a  debl  against 

the  transferrer  where  the  certificates 
were  sold,  although  not  transferred  on 
the  books,  before  the  dividend  was  de- 
clared. Id.  A  pledgee  of  Btock,  even 
though  not  recorded  as  a  stockholder, 
is  ent  tl  ■  1  to  dividends  declared  after 
the  i  ledge  was  made,  as  against  a  claim 
of  the  corporation  against  the  pledgor 
as  an  offset.     Id. 

i  "The  directors  of  a  corporation,  and 
they  alone,  have  the  power  to  declare  a 
dividend  of  the  earnings  of  the  corpo- 
ration and  to  determine  its  amount." 
Hunter  v.  Roberta,  etc.,  Co.,  IT  X.  W. 
Rep.,  131  (Mich.,  1890).  See,  also,  the 
various  cases  in  this  and  succeeding 
sections. 

1  New  York.  etc..  R.  R.  r.  Xickalls.  119 
U.  S.,  296  (1886);  rev'g  15  Fed  Rep., 
.">:."">:  Ely  r.  Sprague,  Clarke's  Chan.  (N. 
Y.),  351  (1840);  Williams  v.  Western 
Union  Telegraph  Co.,  9*3  N.  Y.,  162  (1888) : 
Park  r.  Grant  Locomotive  Works, 
N.  J.  Eq.,  114  (1885);  Barnard  u  Ver- 
mont, etc.,  R  R  Co.,  7  Allen,  512  (1863); 
Chaffee  v.  Rutland  R  R  Co..  55  Yt.. 
110,  133  (1880);  Smith  v.  Prattville 
Manufg  Co.,  29  Ala.,  503  (1857);  Barry 
v.   Merchants'   Exchange  Co.,  1  Saudf. 


Chan..  280(1844);  The  King  v.  Bank  of 
England,  2  Barn  &  Aid.,  620  (1819), 
where  the  court  refused  to  grant  a 
mandamus  for  an  examination  of  the 

accounts  with  a  view  to  compelling  a 
dividend  The  direct  rs  are  bound  to 
distribute  as  profits  only  bucIi  part  of 
the  net  inc., me  as  they  think  proper; 
and  their  judgment  of  what  is  proper 
is  conclusive  upon  the  stockholders. 
te  r.  Baltimore,  etc.,  R  R  Co.,  fi 
Gill,  363  (1848).  Cf.  Dent  a  London, 
etc.,  Co.,  L.  R.,  16  Ch.  D.,  344  In  Park 
r.  Grant  Locomotive  Works,  -I'1  N.  J. 
Eq.,  114  (1885), the  court  said:  "In  ca 
where  the  power  ofthedir  t  a 

corporation  is  without  limitation  and 
free  from  restraint,  they  are  at  liberty 
to  exercise  a  very  liberal  discretion  as  to 
what  disposition  shall  be  made  of  the 
gains  of  the  business  of  the  corpora- 
tion. Their  power  over  them  is  abso- 
lute  so  long  as  they  act  in  the  exercise 
of  an  honest  judgment  They  may  re- 
serve of  them  whatever  their  judgment 
approves  as  necessary  or  judicious  for 
repairs  and  improvements,  and  to  meet 
contingencies,  both  present  and  pro- 
spective." In  the  above  case,  however, 
a  contract  that  all  the  net  profits  should 
be  divided  annually  varied  these  rules. 
The  court  refused  to  order  a  dividend. 
18 


OH.   XXXII.] 


DIVIDENDS. 


[§  545. 


Accordingly  the  directors  may,  in  the  fair  exercise  of  their  dis- 
cretion, invest  profits  to  extend  and  develop  the  business,  and  a 
reasonable  use  of  the  profits  to  provide  additional  facilities  for  the 


In  State  of  Louisiana  v.  Bank  of  Louis- 
iana, 6  La.,  745  (1834).  the  court  refused 
to  order  a  bank  to  declare  a  dividend 
although  it  had  profits  on  hand  of  about 
one-tenth  of  its  capital.  The  court  said  : 
"If  the  board  honestly  err  in  these  mat- 
ters, we  are  not  ready  to  say  the  courts 
possess  the  power  to  rectify  its  mis- 
takes." The  remedy  is  in  the  elections. 
Courts  will  not  order  a  dividend  to  be 
declared  unless  the  directors  "refuse  to 
declare  a  dividend  when  the  corpora- 
tion has  a  surplus  of  net  profits  which 
it  can,  without  detriment  to  its  business, 
divide  among  its  stock  holders,  and  when 
a  refusal  to  do  so  would  amount  to  such 
an  abuse  of  discretion  as  would  consti- 
tute a  fraud  or  breach  of  that  good 
faith  which  they  are  bound  to  exercise 
towards  the  stockholders."  A  dividend 
will  not  be  ordered  when  the  profits 
are  invested  in  the  plant  and  in  long- 
time notes.  Hunter  v.  Roberts,  etc.,  Co., 
47  N.  W.  Rep,  131  (Mich.,  1890).  In  the 
case  of  Smith  v.  Prattville,  etc.,  Co.,  29 
Ala.,  503  (1857).  the  court  refused  to  or- 
der a  dividend  inasmuch  as  the  charter 
expressly  vested  discretion  as  to  that 
matter  in  the  board  of  directors. 

Where  large  dividends  are  made  by 
a  manufacturing  company  it  is  entirely 
within  the  fair  and  honest  discretion 
of  the  directors  whether  the  remain- 
ing profits  shall  be  passed  to  surplus 
or  used  for  dividends.  McNab  v.  Mc- 
Nab,  etc.,  Co.,  62  Hun,  18  (1891).  The 
fact  that  a  manufacturing  company 
extended  its  business  so  as  to  include 
iron  pipe  as  well  as  brass,  and  loaned 
money,  which  loans,  however,  the  pres- 
ident was  willing  to  take  up,  and  had 
owned  government  bonds,  is  not  suffi- 
cient to  entitle  a  stockholder  who  has 
acquiesced  therein  to  demand  that  all 
profits  be  paid  out  in  dividends.  Id. 
Although  the  road  was  leased  and  the 
floating  debt  was  only  $1,000  and  the 


bonded  debt,  §70,000,  was  due  in  seven- 
teen years,  and  the  other  expenses  only 
$6,000,  while  the  company  had  $36,000 
on  hand  aud  the  regular  rental  for  its 
road  coming  in,  yet  the  court  refused 
to  order  a  dividend  in  Karnes  v.  Roches- 
ter, etc.,  R.  R.,  4  Abb.  Pr.  (TJ.  S.),  107 
(1867),  the  court  holding  also  that  a  de- 
mand must  first  be  made  and  that  the  di- 
rectors, instead  of  the  company,  are  the 
proper  parties  defendant.  See  ch.  XVI. 
In  the  case  of  Barnard  v.  Vermont,  etc., 
R.  R,  89  Mass.,  512  (1863),  there  was  a 
contract  to  pay  dividends,  and  it  was 
upon  this  contract  that  the  court 
based  its  right  to  pass  upon  the  ability 
of  the  company  to  declare  a  dividend. 
The  court  refused  to  order  a  dividend. 
In  Richardson  v.  Vermont,  etc.,  R,  R.,44 
Vt.,  613  (1S72),  the  court  decreed  the 
payment  of  what  was  substantially  a 
dividend  to  the  stockholders,  but  stated 
that  an  accounting  must  first  be  had  to 
ascertain  whether  there  was  available 
for  that  purpose  "  a  fund  adequate,  not 
only  for  the  payment  of  the  claims  of 
the  plaintiffs  in  the  cause,  but  for  the 
payment  of  all  stockholders  having  like 
claims;  and  there  must  be  a  surplus 
fund  over  and  above  what  is  requisite 
for  the  payment  of  the  current  expenses 
of  the  business,  for  discharging  its 
duties  to  creditors,  and  over  and  above 
what  reasonable  prudence  would  re- 
quire to  be  kept  in  the  treasury  to  meet 
the  accidents,  risks  and  contingencies 
incident  to  the  business  of  operating  the 
railroad."  In  the  case  of  Dent  v.  London 
Tramways  Co.,  L.  R,  16  Ch.  D.,  344 
(1880),  the  court  compelled  the  company 
to  pay  a  dividend  on  the  preferred 
stock,  where  there  were  profits  avail- 
able, but  the  common  stockholders  pro- 
posed to  use  all  the  profits  for  long 
neglected  repairs,  the  real  reason  being 
that  there  were  profits  sufficient  for  a 
dividend  on   the  preferred  but  not  on 


719 


§  515.] 


DIVIDENDS. 


[CH.  XXXII. 


business  cannot  be  objected  to  or  enjoined  by  a  minority  of  the 
stockholders.1 

Profits  may  also  be  set  aside  for  the  payment  of  indebtedness, 
though  it  is  not  yet  due.2  The  free  exercise  of  the  directors'  di  - 
cretion  cannot  be  interfered  with  by  the  contracts  of  promoters 
or  original  incorporators  as  to  the  disposition  of  corporate  profil 

Nevertheless  the  discretion  of  the  directors  in  the  matter  of  de- 
claring or  refusing  to  declare  a  dividend  is  not  absolute;  and  where 
there  is  a  clear  abuse  of  power  in  refusing  to  declare  the  dividend,  a 
court  of  equity  will,  at  the  instance  of  any  shareholder,  compel  tin- 
proper  authorities  to  declare  and  pay  the  dividend.4    Laches  on  the 

both  the  common  and  preferred    The  jects    contemplated   by  the  articles  «.f 

court  said  that  profits  meant  the  «« ear-  association,  and  the  expenditure  isnot 

plus  in  receipts,  after  paying  expenses  um  bleinrei  itotheamount 

and  restoring  the  capital  to  the  position  of  their  capital,  a  court  of  equity  ought 

it  was  in  on  the  first  of  January  in  thai  verj  »  Idom  to  interfere  with  them.*' 
year."    Where  a  bill  in  equity,  filed  f<>r        >  Karnes  u  I  B.  R-  Co.. 

the  purpose  of  obtaining  an  ai unting  4Abb.Prac.    N.  8.), 

and    the    declaration    of    a    dividend,  it  of  the  promoters  and 

does  not  clearly  make  out  theexistei  eliminary  subscribers  to  the  stock  of 

of  a  surplus  which  the  directors  ought  the  pi  panyaa  t..  the  divia- 

to  distribute,  the  suit  will  fail.     A  dis-  ion    and  disposition  of  the  nel  profits 

t  covery  will  not  b  I  where  there  does  not  bind  the  company  unless  it  has 

is  no  allegation  that  information?*  re-  expi       •  to    such    agreement 

fused  or  that  the  party  cannot  examine  Coyol  Co.  v.  Ruble,  B  OregM  984 

thel kg,  or  that  a  mandamus  was  in-  dvv-"      But  ii  -ly  ratified  by  the 

adequate.    Wolf  ei  al   n   Dhderwi  mpany  it   is  binding.    Richardson  o. 

et  aJL,  11  a  Bep.,  844  (Ala.,  188  Vermont,  eta,  R.  B.,  44  Vt,  818    181 

i  Where  a  corporation  having  a  large  where  an  agreement  to  pay  annual  in- 
surplus  proposed,  with  the  concurrence  h  n  st  to  the  stockholders  out  of  the  net 
of  a  majority  of  tli"  shareholders,  to  profits  was  considered 
employ   the   surplus  En  extending  the        *  Where  for  seven  j  stockholder 
business,  although  Buch  extension  was  who  owned  a  majority  of  the  stock 
opposed  by  a  minority  of  the  Bharehold-  elected  himself  and  two  of  hisdumn 
era,  it  appearing  that  the  proposed  en-  as  din                        mpany,  and  caused 
largement  of  the  corporate  enterprise  the  board  to  vote  a  large  salary  to  him- 
was clearly  infra  vires,  it  was  held,  on  s.it  be  pr  -  dent  and  manager,  and  I 
a  bill  brought  by  the  dissenting  minor-  leased  to  the  company  his  1 1   !  erty  at  a 
ity  for  an   injunction  against  the  pro-  large  rental,  the  salary  and  rental 
posed  use  of  the  surplus,  and  praying  a  illegal  and  void.    Where  the  compt 
distribution  of  it  anion.;  the  Bharehold-  had  failed  to  pay  it-  dividends  by  n 
ers,  that  the  facts  wore  not  such  as  to  son  of  Buch  acts,  a  court  of  equity,  u|  on 
require  the  interposition  of  the  court  the  suit  of  another  stockholder,  order   1 
on    behalf  of  the    minority.    Pratt  «  the  president  to  account,  and  appointed 
Pratt,  33  Conn..  446  (1866),  the  court  a  receiver  of  the  company  and  direct  d 
saying:    "On  a  question  of  this  sort  that  its  affairs  bewound  up.    Miner tt 
much   must  necessarily  be  left  to  the  Belle  Isle  Ice  Co.,  68   N.  W.  Rep.,  218 
discretion  of  the   managing  directors;  (Mich.,  1899).    Where  a  town  lot  corpo- 
and  so  long  as  they  keep  within  the  ob-  ration  consisted  of  but  three  stockhold- 

720 


OH.  XXXII.] 


DIVIDENDS. 


[§  546. 


part  of  the  shareholders  in  failing  to  commence  their  suit  to  com- 
pel the  payment  of  a  dividend  until  the  corporation  becomes 
insolvent  is  fatal.1  And  the  court  will  also  consider  that  the  ag- 
grieved shareholders  may,  if  a  majority,  refuse  to  re-elect  the 
directors  at  the  next  election,  or  may  sell  their  shares.2 

§546.  Dividends  can  he  made  only  from  profits — What  are 
-profits  which  may  he  used  for  dividends. —  A  dividend  can  law- 
fully be  made  only  out  of  profits.  The  payment  of  it  must  leave 
the  capital  stock  of  the  company  intact  and  unimpaired,  or  the 
dividend  itself  will  be  held  fraudulent  and  void.3 

In  view  of  the  rule  that  dividends  can  be  made  only  from  profits, 
it  becomes  important  to  ascertain  what  part  of  the  income  of  a 
corporation  constitutes  "profits"  which  maybe  used  for  a  divi- 
dend. This  question  has  caused  the  courts  considerable  difficulty. 
There  have  been  various  definitions,  explanations  and  different 
states  of  facts  involved  in  the  cases  which  have  come  before  the 
courts.  A  general  idea  of  what  constitutes  profits  available  for 
dividends  can  be  obtained  only  by  a  study  of  the  cases  themselves.4 


ers,  and  two  of  them  control  the  com- 
pany and  refuse  to  declare  dividends 
although  there  is  a  large  surplus  in 
the  treasury,  and  although  the  corpo- 
ration is  free  from  debts,  and  further 
sales  are  being  made,  and  cash  being 
paid  in  on  account  of  them,  the  court 
ordered  a  dividend  to  be  declared  paid 
of  all  the  cash  on  hand,  and  even  inti- 
mated that  a  division  of  the  property 
itself  might  be  ordered  by  way  of  a 
dividend,  the  two  stockholders  in  con- 
trol having  been  guilty  of  fraud  in  the 
management.  Fougeray  v.  Cord  et  ah, 
24  Atl.  Rep.,  499  (N.  J.,  1892).  In  this 
case  the  directors  had  voted  to  them- 
selves large  salaries  and  had  restored 
the  same  upon  the  order  of  the  court 
The  court  ordered  a  distribution  of  the 
money  by  way  of  dividends.  Brown  v. 
Buffalo,  etc.,  R  R  Co.,  27  Hun,  342  (1882). 
See,  also,  Park  v.  Grant  Locomotive 
Works,  40  N.  J.  Eq.,  114  (1885).  In  this 
case  there  was  a  contract  that  the  net 
profits  should  be  divided  annually. 
Scott  v.  Eagle  Fire  Ins.  Co.,  7  Paige,  198 
(1838);  Pratt  v.  Pratt,  33  Conn.,  446 
(1866);  Beers  v.  Bridgeport  Spring  Co., 
42  id.,  17  (1875).  Upon  a  sale  of  all  the 
property  of  the  corporation  the  direct- 


ors may  be  compelled  to  declare  a  divi- 
dend. Cramer  v.  Bird,  6  Eq.,  143  (1868). 
A  stockholder  cannot  sue  for  profits 
until  a  dividend  is  declared.  Bevcridge 
v.  New  York,  etc.,  R  R  Co.,  112  N.  Y., 
1  (1889). 

1  Scott  v.  Eagle  Fire  Ins.  Co.,  supra. 

2  Barry  v.  Merchants'  Exchange  Co., 
1  Sandf.  Chan.,  280  (1844). 

3  Lockhardt  v.  Van  Alstyne,  31  Mich., 
76  (1875) ;  Hughes  v.  Vermont  Copper 
Mining  Co.,  72  N.  Y,  207,  210  (1878). 
See,  also,  ch.  XVI,  and  cases  in  notes 
to  this  section.  See,  also,  as  to  what 
constitutes  a  payment  of  dividends  out 
of  capital,  3  R'y  &  Corp.  L.  J.,  409,  re- 
viewing recent  English  decisions.  For 
a  valuable  note  on  this  subject  by 
Judge  Thompson,  see  36  Cent  L.  J.,  455. 

4  "Net  earnings  are,  properly,  the 
gross  receipts,  less  the  expenses  of  oper- 
ating the  road  to  earn  such  receipts. 
Interest  on  debts  is  paid  out  of  what 
thus  remains ;  that  is,  out  of  net  earn- 
ings. Many  other  liabilities  are  paid 
out  of  the  net  earnings.  When  all  lia- 
bilities are  paid,  either  out  of  the  gross 
receipts  or  out  of  net  earnings,  the  re- 
mainder is  the  profit  of  the  sharehold- 
ers, to  go  towards  dividends,  which  in 


(46) 


721 


§  546.] 


DIVIDENDS. 


[CH.  XXXIL 


There  are  some  general  principles  connected  with  this  subject 
which  have  been  established  by  the  adjudications.  It  is  not  neces- 
sarv  for  a  railroad  or  other  corporation  to  use  its  profits  to  pay  its 
funded  or  bonded  debt  instead  of  using  those  profits  for  a  divi- 
dend.    Such  bonded  debt  is  practically  though  not  theoretically 


that  way  are  paid  out  of  the  net  earn- 
ings." St  John  v.  Erie  R'  yCo.,  10  Blatch., 
271,  279  (1872);  S.  C,  aff'd,  22  Wall., 
136  (1874);  Warren  v.  King,  108  U.  S.. 
389  (1882);  Van  Dyck  b  McQuade,  86 
N.  Y.,  38,  47  (1881).  "Popularly  speak- 
ing, the  net  receipts  of  a  business  are 
its  profits."  Eyster  v.  Centennial  Board 
of  Finance,  54  U.  S.,  Ml  ( 1  ^T<- '.  -Sur- 
plus earnings"  are  said  to  be  the  moneys 
available  for  dividends.  William-  R 
Western  Union  Telegraph  Co.,  98  N.  Y., 
162,  191  (1883).  "Net  earnings "  is  a 
term  synonymous  with  "net  income," 
and  also  "net  income"  as  nsed  in  the 
statute  under  consideration,  Phillips  ?•. 
Eastern  R.  R  Co..  188  Mass..  182  (1884> 
In  Belfast,  etr.,  R  R  Co.  r.  Belfast.  77 
Me.,  -1 15  (1*83),  it  is  said  that  the  term 
"  net  earnings"  does  not  imply  that  the 
company  is  wholly  out  of  debt  The 
profits  mean  "the  clear  pains  of  any 
business  venture,  after  deducting  tbe 
capital  invested  in  the  business,  the  ex- 
penses incurred  in  its  conduct,  and  the 
a  sustained  in  its  prosecution." 
Bills  receivable  are  counted  as  part  of 
the  assets  or  net  profits,  but  are  not  to 
be  considered  as  the  basis  of  a  dividend 
unless  they  can  be  sold  without  mate- 
rial loss.  Park  v.  Grant  Locomotive 
Works,  40  N.  J.  Eq.,  114  (1885).  In  the 
following  cases  the  term  "net  profits," 
or  an  equivalent  phrase,  is  defined  :  Colt- 
ness  Iron  Co.  v.  Black.  51  L.  J.  (Q.  B. 
Div.),  626  (1881);  New  York,  etc,  R  R 
Co.  v.  Nickols.  119  U.  S.,  296  (1886).  In 
Richardson  v.  Buhl.  43  N.  W.  Rep.,  1102, 
hut  iMich.,  1889),  the  court  approved  of 
the  following  statement:  "That  the 
first  thing  to  be  done  by  any  manufact- 
urer, who  would  ascertain  his  net  earn- 
ings during  the  preceding  year,  is  to 
take  a  careful  inventory  of  what  he  has 
left  including  his  plant  aud  machinery. 


and  then  make  just  and  full  allowances 
for  all  losses  and  shrinkages  of  every 
kind  that  he  has  suffered  in  his  prop- 
erty during  the  year,  and  for  all  ex- 
penses of  every  kind,  ordinary  or  ex- 
traordinary, that  have  occurred  during 
the  year:  and.  having  made  6uch  inven- 
tory, and  deducted  such  losses  and 
shrinkage  of  every  kind,  his  net  earn- 
ings will  be  the  difference  between  all 
his  investments  in  his  business  aud  all 
his  ex;  f  every  kind  on  the  other 

hand,  and  this  new  inventory,  with  the 

iuctions  properly  made,  and  all  that 
lie  has  received  of  every  kind  on  the 
Other  hand;  and  if  Ids  books  are  prop- 
erly kept  and  proper  deductions  made, 
these  ii.  t  earnings  will  finally  appear  on 
the  balance  sheet  to  the  credit  of  the 
profit   and   loss  account."     Tn   Grata  B 

Id,  4  B  Men..  11  1848),  it  is  held 

that  capital  paid  in  on  stock  which  is 
afterwards  forfeited  does  not  thereby 
become  profits  and  liable  to  be  distrib- 
uted as  a  dividend.  Money  paid  in  as 
capital  must  remain  and  be  treated  and 
expended  as  capital,  whether  the  st 
that  represents  it  is  forfeited  or  npt  To 
distribute  such  money  as  profits  is  to 
squander  and  dissipate  the  capital  stock. 
"Gross  earnings''  include  earnings  of 
the  railroad  through  a  transfer  com- 
pany operated  by  it  Dardanelle,  etc, 
R'y  n  Shinn.  12  S.  W,  Rep,  183  (Ark., 
"The  assets,  resources  and  funds 
of  the  corporation  must  consist  of  cash 
on  hand  and  other  property,  and,  if  such 
assets  exceed  the  liabilities,  a  dividend 
can  be  lawfully  declared;  in  other 
words,  a  profit  exists."  Hubbard  B 
Weare,  44  N.  W.  Rep,  914  (Iowa.  1890): 
Miller  B  Bradish,  69  Iowa,  278.  See. 
also,  McDougall  r.  Jersey,  etc..  Co..  2 
Hem.  ft  1£,  528  (1864);  Phillips  B  Past 
ern  R  R,  138  Mass..  122  (1884). 


CH.  XXXII.] 


DIVIDENDS. 


[§  546. 


a  part  of  the  capital  of  the  company.1  But  it  is  necessary  to  pay 
the  interest  on  such  bonded  debt  before  any  dividend  is  declared.3 
The  floating  debt  should  be  paid  or  funded  before  a  dividend  is 
declared.3  But  outstanding  and  disputed  claims  need  not  be  first 
paid.4 


'A  company  has  power  to  and  does 
raise  its  capital  both  by  stock  and  by 
borrowing.  "  They  expend  that  money 
in  executing  the  works,  and  the  works 
having  been  executed,  the  capital  of  the 
company  remains  in  the  shape  of  the 
station  houses,  the  permanent  way,  the 
warehouses  and  everything  else  which 
requires  expenditure  of  capital.  The 
shareholders  .  .  .  are  not  to  be  told 
that  all  those  things  are  to  be  paid  for 
before  they  are  to  have  any  dividend 
out  of  the  income."  Mills  v.  Northern 
R'y,  L.  R,  5  Ch.,  621  (1870).  For  a 
learned  and  very  satisfactory  discussion 
of  when  net  earnings  are  to  be  retained 
for  the  purpose  of  accumulating  a  fund 
to  pay  a  corporate  debt  not  yet  due,  see 
Hazeltine  v.  Belfast,  etc.,  R  R  Co.,  10 
Atl.  Rep.,  328  (Me.,  1887).  All  interest 
must  be  paid  out  of  profits  and  should 
not  be  charged  to  construction  account. 
The  court  said  also  that  a  sinking  fund, 
should  also  be  provided  and  an  annual 
contribution  made  to  it  out  of  the  prof- 
its. Gratz  v.  Redd,  4  B.  Monroe,  178, 
188  (Ky.,  1843). 

2  Gratz  v.  Redd,  supra.  A  dividend 
cannot  properly  be  based  on  a  statement 
which  includes  accrued  interest  with  no 
allowance  for  interest  on  liabilities ;  out- 
standing accounts  with  no  allowance 
for  bad  debts ;  and  expense  for  perfect- 
ing a  machine,  it  not  being  a  success. 
Hubbard  v.  Weare,  44  N.  W.  Rep.,  914 
(Iowa,  1890).  Whether  the  interest  on 
debentures  can  be  legally  charged  upon 
the  capital  account  of  the  company,  the 
revenue  available  for  dividend  being 
thereby  increased,  was  not  decided  in 
Bloxam  v.  Metropolitan  R'y  Co.,  3  Ch.,  337, 
344,  350  (1868).  but  a  preliminary  injunc- 
tion against  the  dividend  was  granted. 

3  The  funded  debt  need  not  be  paid 
before  dividends  are  declared,  but  "any 


debts  which  have  been  incurred  and 
which  are  due  from  the  directors  or  the 
company,  either  for  steam-engines,  for 
rails,  for  completing  stations,  or  the  like, 
which  ought  to  have  been  and  would 
have  been  paid  at  the  time,  had  the  de- 
fendants possessed  the  necessary  funds 
for  that  purpose,  those  are  so  many  de- 
ductions from  the  profits,  which,  in  my 
opinion,  are  not  ascertained  till  the 
whole  of  them  are  paid."  Corry  v.  Lon- 
donderry, etc.,  R'y,  29  Beav.,  263,  273 
(1860).  However  in  the  case  of  StevenB 
V.  South  Devon  R'y,  9  Hare,  313  (1851), 
a  stockholder  failed  in  his  suit  to  enjoin 
dividends  until  the  floating  debt  was 
paid.  The  court  said:  "  I  am  of  opinion 
that  the  court  ought  not,  upon  this 
ground,  to  interfere  by  injunction.  .  .  . 
I  think,  also,  that  the  question  upon 
this  third  point  is  one  of  internal  man- 
agement, with  which  the  court  cannot 
interfere."  Net  earnings  are  the  gross 
receipts  less  the  expenses  of  operating 
the  road  to  earn  such  receipts;  also  less 
the  interest  on  the  bonded,  funded,  per- 
manent or  standing  debt ;  also  floating 
debts  "  which  it  is  not  wise  and  prudent 
to  place  in  the  form  of  a  funded  debt  or 
to  postpone  for  later  payment;"  also 
an  annual  contribution  to  a  sinking 
fund  to  pay  the  funded  debt  when  the 
condition  of  the  company  renders  it 
expedient,  as  where  the  company  will 
at  some  future  time  earn  only  its  oper- 
ating expenses.  As  to  whether  the 
floating  debt  should  be  paid  and  a  con- 
tribution be  made  to  a  sinking  fund 
"  depends  upon  the  financial  resources 
and  abilities  of  the  corporation  and  the 
prospects  of  its  road."  The  cost  of  con- 
struction may  be  charged  to  the  capital 
stock  account  Belfast,  etc.,  R  R  v. 
Belfast,  77  Me.,  445  (1885). 
4  The  court  will  not  enjoin  a  dividend 


723 


§  546.] 


DIVIDENDS. 


[CH.  XXXII. 


A  proper  sum  must  first  be  expended  or  set  aside  for  repairs  and 
reconstruction  to  replace  depreciation  due  to  wear  and  tear.1  But 
in  the  case  of  a  mining  company  or  a  company  whose  produce 
when  once  used  can  never  be  replaced,  it  is  not  necessary  to  set 
aside  funds  for  the  purpose  of  purchasing  a  new  mine.2 


where  the  company  shows  that  it  has 
the  necessary  profits,  even  though  there 
are  outstanding  claims  on  illegally 
issued  stock.  Carpenter  v.  N.  Y.  &  N. 
H.  R  R,  5  Ahb.  Pr.,  277  (1857).  Where 
the  company  denies  that  the  complain- 
ant is  a  stockholder,  a  preliminary  in- 
junction falls.  Blatchford  v.  Id.,  id., 
376.  Directors  are  not  liable  to  replace 
dividends  declared  (by  reason  of  a  stat- 
ute makiug  them  so  liable  if  the  divi- 
dends are  not  "from  the  surplus  profits"), 
although  dividends  were  declared  while 
the  company,  being  engaged  in  mining, 
assumed  a  mortgage  debt  in  buying  ad- 
ditional property,  a  sinking  fund  being 
begun  to  meet  that  liability  gradually, 
and  although  the  money  to  pay  the  divi- 
dend was  borrowed,  money  to  that 
amount  having  been  put  into  improve- 
ments, and  although  losses  due  to  an 
injunction  against  using  a  stream  of 
water  were  not  at  once  charged  up  to 
operating  expense.  Excelsior,  etc.,  Co, 
v.  Pierce,  27  Pac,  Rep.,  44  (Cat,  18911 

1  In  the  case  Davison  v.  Gillies,  L.  R. 
16  Ch.  D,  347,  note  (1879),  the  court,  at 
the  instance  of  a  stockholder,  enjoined 
the  declaration  of  a  dividend  on  the 
ground  that  the  street  railway  tracks  of 
the  company  had  become  woru  out, 
and  needed  very  expensive  repairs,  for 
which  no  provision  had  been  made  by 
the  company,  and  that  this  capital  so 
used  up  must  be  restored  before  a  divi- 
dend was  declared.  The  by-laws  pro- 
hibited dividends  except  from  the  cap- 
ital stock.  The  court  said:  "A  tramway 
company  lay  down  a  new  tramway. 
Of  course  the  ordinary  wear  and  bear 
of  the  rails  and  sleepers,  and  so  on, 
causes  a  sum  of  money  to  be  required 
from  year  to  year  in  repairs.  It  may  or 
may  not  be  desirable  to  do  the  repairs 
all  at  once ;  but  if  at  the  end  of  the  first 


year  the  line  of  tramway  is  still  in  so 
good  a  state  of  repair  that  it  requires 
nothing  to  be  laid  out  on  it  for  repairs 
in  that  year,  still,  before  you  can  ascer- 
tain the  net  profits  a  sum  of  money 
ought  to  be  set  aside,  as  representing 
the  amount  in  which  the  wear  and  tear 
of  the  line  has,  I  may  say,  so  far  de- 
preciated it  in  value  as  that  sum  will 
be  required  for  the  next  year  or  next 
two  years.  ...  I  should  think  no 
commercial  man  would  doubt  that  this 
is  the  right  course  —  that  he  must  not 
calculate  net  profits  until  he  has  pro- 
vided for  all  the  ordinary  repairs  and 
wear  and  tear  occasioned  by  his  busi- 
ness. .  .  .  That  being  so,  it  appears 
to  me  that  you  can  have  no  net  profits 
unless  this  sum  has  been  set  aside. 
When  you  come  to  the  next  year,  or 
the  third  or  fourth  year,  what  happens 
is  this  :  as  the  line  gets  older  the  amount 
required  for  repairs  increases.  If  you 
had  done  what  you  ought  to  have  done, 
that  is,  set  aside  every  year  the  sum 
necessary  to  make  good  the  wear  and 
tear  in  that  year,  then  in  the  following 
years  you  would  have  a  fund  sufficient 
to  meet  the  extra  cost."  See,  also,  as 
to  construction  account.  Mackintosh  v. 
Flint,  etc.,  R  R,  34  Fed.  Rep.,  583. 

-  A  company  owning  a  mine,  lease  or 
patent  may  declare  dividends  out  of  its 
net  proceeds,  although  the  necessary 
result  is  that  that  much  is  permanently 
taken  away  from  the  substance  of  the 
estate.  Excelsior,  etc.,  Co.  v.  Pierce,  27 
Pac  Sep.,  44  (Gal,  18M).  In  the  case 
Lambert  r.  Neuchatel  Asphalte  Co.,  51 
L.  J.  (Ch.),  882  (1882),  a  stockholder 
sought  to  enjoin  a  dividend  on  the 
ground  that  the  beds  of  asphalte  belong- 
ing to  the  company  were  being  con- 
sumed by  the  company,  and  that  funds 
sufficient  to  replace  this  consumption 
724 


CH.  XXXII.] 


DIVIDENDS. 


[§  540. 


In  estimating  the  profits  for  a  year  for  the  purpose  of  declaring 
a  dividend,  it  is  not  correct  to  take  into  account  the  increase  or 
decrease  in  the  value  of  the  assets  of  the  company  prior  to  that 
year.     The  fact  that  in  a  year  prior  to  the  declaration  of  the  divi- 

should  be  set  aside  before  any  dividend    said  that  the  company  must  come  to  a 


was  declared.  Otherwise  the  capital 
would  gradually  be  entirely  used  up. 
The  court  refused  the  injunction,  inas- 
much as  the  by-laws  of  the  company 
gave  absolute  discretion  to  the  stock- 
holders to  determine  the  net  profits. 
No  creditors'  rights  were  involved  in 
the  case. 

A  very  full  and  careful  discussion  of 
the  right  to  declare  dividends  out  of  a 
mining  property  is  to  be  found  in  Lee 
v.  Neuchatel  Asphalte  Company,  61  L. 
T.  Rep.,  11  (18S9).  In  that  case,  how- 
ever, the  mines  were  at  the  time  of  the 
litigation  more  valuable  than  at  the 
time  when  the  company  was  formed, 
and  it  is  to  be  noticed  that  the  rules  laid 
down  expressly  assumed  that  enough 
property  existed  to  pay  all  creditors 
after  declaring  the  dividend.  The  court 
said,  per  Lindley,  J. : 

"  It  is  obvious  with  respect  to  such 
property,  as  with  respect  to  various 
other  properties  of  a  like  kind,  mines 
and  quarries,  and  so  on,  every  ton  of 
stuff  which  you  get  out  of  that  which 
you  have  bought  with  your  capital  may, 
from  one  point  of  view,  be  considered 
as  embodying  and  containing  a  small 
portion  of  your  capital,  and  that  if  you 
sell  it  and  divide  the  proceeds  you  di- 
vide some  portion  of  that  which  you 
have  spent  your  capital  in  acquiring. 
It  may  be  represented  that  this  is  a  re- 
turn of  capital.  All  I  can  say  is,  if  that 
is  a  return  of  capital  it  appears  to  me 
not  to  be  such  a  return  of  capital  as  is 
prohibited  by  law.     .    .     . 

"As  I  pointed  out  in  the  course  of  the 
argument,  and  I  repeat  now,  suppose  a 
company  is  formed  to  start  a  daily 
newspaper ;  supposing  it  sinks  £250,000 
befoi-e  the  receipts  from  sales  and  ad- 
vertisements equal  the  current  expenses, 
and  supposing  it  then  goes  on,  is  it  to  be 


stop,  or  that  ir.  cannot  divide  profits  un- 
til it  has  replaced  its  £250,000,  which 
has  been  sunk  in  building  up  a  prop- 
erty which,  if  put  up  for  sale,  would, 
perhaps,  not  yield  £10,000?  That  is  a 
business  matter  left  to  business  men. 
If  they  think  their  prospects  of  success 
are  considerable,  so  long  as  they  pay 
their  creditors  there  }s  no  reason  why 
they  should  not  go  on  and  divide  profits, 
so  far  as  I  can  see,  although  ever  shil- 
ling of  the  capital  may  be  lost.  It  may 
be  a  perfectly  flourishing  concern,  and 
the  contrary  view  I  think  is  to  be  traced 
to  this,  that  there  is  a  sort  of  notion  that 
the  company  is  debtor  to  capital.  In  an 
accountant's  point  of  view  it  is  quite 
right,  in  order  to  see  how  you  stand,  to 
put  down  company  debtor  to  capital. 
But  the  company  do  not  owe  the  capi- 
tal. "What  it  means  is  simply  this: 
that  if  you  want  to  find  out  how  you 
stand,  whether  you  have  lost  your 
money  or  not,  you  must  bring  your 
capital  into  account  somehow  or  an- 
other.    .    .    . 

"  If  a  company  is  formed  to  acquire 
and  work  a  property  of  a  wasting  nat- 
ure, for  example,  a  mine,  a  quarry  or  a 
patent,  the  capital  expended  in  acquir- 
ing the  property  may  be  regarded  as 
sunk  and  gone,  and  if  the  company  re- 
tains assets  sufficient  to  pay  its  debts,  it 
appears  to  me  that  there  is  nothing 
whatever  in  the  act  to  prevent  any  ex- 
cess of  money  obtained  by  working  the 
property  over  the  cost  of  working  it 
from  being  divided  amongst  the  share- 
holders; and  this,  in  my  opinion,  is  true, 
although  some  portion  of  the  property 
itself  is  sold,  and  in  some  sense  the  capi- 
tal is  thereby  diminished.     .    .     . 

"  But  it  is,  I  think,  a  misapprehension 
to  say  that  dividing  the  surplus  after 
payment  of  expenses  of  the  produce  of 


725 


§  546.] 


DIVIDENDS. 


[CH.  XXXII. 


dend  some  portion  of  the  capital  of  an  incorporated  company  has 
been  lost  and  not  made  good  affords  no  ground  for  restraining  the 
payment  of  a  dividend  out  of  profits  subsequently  earned.1  A  div- 
idend may  be  declared  although  the  company  has  not  yet  completed 
its  works.-  In  the  case  of  railroads  the  cost  of  additional  rolling 
stock  and  improvements  may  be  charged  to  capital  account  and  need 
not  be  paid  before  a  dividend  is  declared.3 

Insurance  companies  cannot  declare  dividends  out  of  unearned 
premiums.3  Banks  cannot  declare  dividends  out  of  interest  not 
yet  received.4     The  question  of  what  constitutes  profits  applica- 


your  wasting  properly  is  a  return  of 
capital  in  any  such  sense  as  to  be  for- 
bidden by  the  act" 

The  court  held  consequently  that  the 
stockholder's  suit  to  enjoin  the  dividend 
must  faiL 

i  Hence  where  in  1882  f350,Onn  was 
charged  off  for  bad  debts,  but  this  was 
offset  by  credit  for  $:;.-)0,000  for  increase 
in  the  value  of  land  owned  by  the  com- 
pany, ibis  transaction  was  not  to  be 
considered  in  1885  in  ascertaining  the 
profits  of  1885.  It  is  immaterial  whether 
the  alleged  increase  in  the  value  of  the 
land  was  correct  or  not.  Bolton  v.  The 
Natal  Land,  etc.,  Co.,  85  L  T.  Rep.,  786 
(1891).  Though  the  capital  stock  has 
been  impaired  in  time  past,  it  has  been 

held  that  dividends  may  be  declared  out 

of  profits  subsequently  earned  without 
Betting  them  aside  to  restore  the  lost 
capital.      Healey    on    Companies    Law 

and  Practice,  183.  See,  also,  cases  in 
last  note.  Where  a  bank  sells  its  busi- 
ness for  a  certain  sum,  and  subsequently 
buys  back  a  portion  of  it  for  another 
sum,  it  may  declare  the  dividend  of  the 
surplus  that  remains  after  deducting 
from  the  first-mentiond  sum  the  second- 
mentioned  sum,  and  also  the  capital 
stock.  Lubbock  tx  British  Bank,  etc., 
67  LT,  Rep.,  74(1892). 

2  In  Browne  v.  Monmouthshire  R'y, 
18  Bea v.,  82  (1851),  the  court  refused  to 
enjoin  a  company  from  declaring  a 
dividend,  the  only  ground  of  complaint 
being  that  the  company  had  not  yet 
completed  its  works. 

8  Rolling  stock  may  be  carried  to  cap- 


ital account  instead  of  being  charged  to 
operating  expense.  Mills  v.  Northern 
K'y.  L  R,  5  Ch.  App..  821  (1870).  For  a 
definition  of  "net  earnings"  as  used  in 
the  federal  Btatutes  in  regard  to  the 
government's  claims  on  the  Pacific 
Railroads,  see  Union  Pacific  R.  R  n 
United  states.  99  U.  S„  402  (1878); 
United  Btai  entral  Pac  R.  EL,  id, 

149;  United  States  tx  Kansas  Pac  ELR, 
id,  466;  United  States  tx  Sioux  City  <v 
Pac.  R  R,  id., 491.  Although  ordinarily 
from  the  gross  earnings  there  should 
be  deducted  "a  reasonable  amount  for 
betterments  and  improvements,  ren- 
dered necessary  i>y  the  gradual  inoreasa 
of  traffic,  the  better  discharge  of  busi- 
ness, and  the  public  accommodation," 
in  arriving  at  the  net  earnings,  un- 
der the  Thurman  act,  relative  to  the 
Pacilic  railroads,  no  such  deductions  are 
to  be  made.  United  States  tx  Central 
Pac.  K.  R,  138  U.S.,  84(1891). 

'Unearned  premiums  received  by  an 
insurance  company,  on  which  the  risks 
are  still  running,  are  not  surplus  profits 
out  of  which  dividends  can  legally  be 
made,  there  not  being  a  sufficient  sur- 
plus on  hand  in  excess  of  the  capital 
stock  to  meet  the  probable  losses  on 
risks  not  yet  terminated.  Do  Peyster 
r.  American  Fire  Ins.  Co.,  6  Paige,  486 
(18137).  See,  also,  Scott  tx  Eagle  Fire 
Ins.  Co.,  7  id.,  198  (1838);  Lexington, 
etc.,  Ius.  Co.  tx  Page,  17  B.  Mon.,  412 
(1856).     • 

1  •' Money  earned  as  interest,  however 
well  secured,  or  certain  to  be  eventually 
paid,  cannot  in  fact  be  distributed  as 
26 


OH.  XXXII.] 


DIVIDENDS. 


[§  546. 


ble  to  dividends  arises  often  in  connection  with  preferred  stock.1 
Profits  earned  and  invested  in  times  of  prosperity  may  properly 
be  paid  out  as  dividends  subsequently  and  at  a  time  when  no  divi- 
dends have  been  earned.2  When  the  company  has  used  profits  for 
improvements,  it  may  lawfully  borrow  an  equivalent  sum  of  money 
for  the  purpose  of  a  dividend.3  And  it  may  properly  borrow  money 
to  pay  a  dividend  if,  upon  a  fair  estimate  of  its  assets  and  liabilities, 
it  has  assets  in  excess  of  its  liabilities  and  capital  stock  equal  to 
the  amount  of  the  proposed  dividend.4  The  subsequent  insolvency 
of  the  corporation  does  not  invalidate  a  dividend  declared  when 
there  were  net  profits.5  And  even  though  the  business  is  a  hazard- 
ous one,  money  need  not  be  set  aside  for  possible  disasters.6 

Upon  a  reduction  of  the  capital  stock  the  surplus  funds  over  and 
above  the  full  amount  of  the  capital  stock  as  reduced  may  be  di- 
vided among  the  stockholders,  the  only  restriction  being  that  such 
a  distribution  must  leave  the  reduced  capital  stock  entire  and  unim- 
paired.   A  stockholder  may  insist  upon  a  division  of  such  a  surplus.7 


dividends  to  stockholders,  and  does  not 
constitute  surplus  profits."  People  v. 
San  Francisco  Sav.  Union,  72  Cal.,  199 
(1887).  In  Iowa  it  has  been  held  that 
where  a  bank  with  a  capital  of  $106,860 ; 
assets  of  $156,904;  liabilities  of  $56,065, 
declares  and  pays  a  dividend  of  ten  per 
cent,  i.  e.,  $10,686,  the  corporate  cred- 
itors could  not  compel  the  stockholders 
to  return  the  dividend.  Miller  v.  Brad- 
ish,  69  Iowa,  278  (1886). 
i  See  ch.  XVI. 

2  Mills  v.  Northern  Railway  of  Buenos 
Ayres  Co.,  L.  R,  5  Ch.,  621  (1870) ;  Hoole 
v.  Great  Western  R'y  Co.,  L.  R,  3  Ch., 
262  (1807) ;  Beers  v.  Bridgeport  Spring 
Co.,  42  Conn.,  17  (1875);  In  re  Mercan- 
tile Trading  Co.,  L.  R,  4  Ch.,  475  (1869). 

3  Mills  v.  Northern  Railway  of  Buenos 
Ayres  Co.,  L.  R,  5  Chan.,  621  (1870); 
Stringer's  Case,  L.  R,  4  Ch.,  475,  492 
(1869). 

*  Stringer's  Case,  I*  R,  4  Ch.,  475 
(1869).  See,  also,  §  539,  supra,  "  A  com- 
pany is  quite  as  competent  to  declare 
dividends  out  of  property  which  is  in- 
vested for  the  time  being  in  buildings, 
or  anything  else,  as  it  is  out  of  cash  in 
hand,  and  it  is  not  at  all  necessary  that 
a  company,  any  more  than  an  individual, 
should  have  cash  at  the  bank  on  which 


he  can  draw  in  order  to  declare  divi- 
dends." Municipal,  etc.,  Co.,  Limited,  v. 
Pollingtoh,  63  L.  T.  Rep.,  238  (1890). 

s  Reid  v.  Eaton  Iron  Mfg.  Co.,  40  Ga., 
98  (1869) ;  Le  Roy  v.  Globe  Ins.  Co.,  2 
Edw.  Cb.,  657  (1836).  In  deciding 
whether  a  dividend  was  rightfully  made 
the  transaction  must  be  viewed  from 
the  stand-point  of  that  time  and  not  in 
the  light  of  subsequent  events.  Notes 
or  overdrafts  by  persons  then  consid- 
ered abundantly  good,  included  among 
the  corporate  assets  when  the  dividend 
was  declared  and  paid,  should  not  be 
regarded  as  losses  sustained  by  the 
corporation  because  they  afterwards 
proved  to  be  unavailable.  Main  v.  Mills, 
6  Biss.,  98  (1874).  Cf.  Flitcroft's  Case, 
L.  R,  21  Ch.  D.,  519  (1882),  where  the 
directors  figured  in  what  they  knew 
were  bad  debts. 

6  A  balance  sheet  sustaining  a  divi- 
dend is  upheld  where  the  business  is 
extra  hazardous,  such  as  blockade  run- 
ning, and  such  dividend  need  not  be  re- 
funded even  though  the  blockade  run- 
nel's are  lost  and  other  assets  turn  out 
to  be  worthless.  In  re  Mercantile  Co., 
Ld.,  4  Ch.  App.,  475  (1869). 

"  Seeley  v.  New  York  National  Ex- 
change Bank,  8  Daly,  400(1877);  S.  C, 


727 


§  517.] 


DIVIDENDS. 


[cn. 


XXXII. 


The  question  of  dividends  where  one  road  is  consolidated  with  an- 
other is  considered  elsewhere.1 

§547.  A  stockholder  may  enjoin  an  illegal  dividend.—  A  court 
of  equity  will,  upon  the  application  of  a  stockholder,  enjoin  an  at- 
tempt to  distribute  in  dividends  any  part  of  the  capital  stock.2  But 
the  courts  will  not  lightly  review  the  decision  of  the  board  of  di- 
rectors in  regard  to  whether  the  necessary  profits  actually  exist.3 
If  the  dividend  has  been  declared  but  not  paid,  all  the  stock- 
holders must  be  joined  as  parties.4  The  court  will  not  interfere, 
however,  if  neither  the  stockholders  nor  the  corporate  creditors 
can  be  injured  by  the  dividend.8  The  courts  of  one  state  will  not 
enjoin  a  corporation  created  by  another  state  from  declaring  a  div- 
idend unless  a  fraud  is  being  perpetrated  on  citizens  of  the  first- 
mentioned  state.6  A  corporate  creditor  has  no  standing  in  court 
to  enjoin  a  dividend,  even  though  it  will  impair  the   capital  stock.7 

Thompson  Nat'l  Bank  Caa,  804;  afFd,     holders  as  parties  lie  cannot  enjoin  the 


78  N.  Y..  GO  Strong  >:  Brooklyn 

town  R  R  Co.,  93  N.  V..  426,  486 
(1883);  Parker  v.   Mason,  8  R.   I..  427 
ism       -  548;  Eyster  o.  Cen- 

tennial, eta,  84  U.  S.,  500. 
i Seech.  XVI. 

*  Macdougall  r.  Jersey  Imperial  11 
Co..  2   Bern.  &   M..  528  (1864);  Bloxam 
v.   Metropolitan  K'y  Co..  L,   R..  3  Ch., 

Salisbury  ?\  Metropolitan  K'y 
Co.,  38  I..  J.,  Ch.,  'J I'.'  (1869);  «'arlisle  v. 
Southeastern  K'y  Co.,  l  Macn.  ft  Q.,  689 
(1850);  War-1  r.  Sittingbourne,  etc..  K'y 
Co..  L,  R..  9  Chan.,  488  (1874);  Davison 
r.  Cillies.  L.  K..  16  Oh.  U.  847,  n.  (1870) 
See,  also,  cases  in  preceding  section. 

*  Where  the  directors  declare  a  divi- 
dend after  a  proper  investigation  of  the 
financial  position  of  the  company,  the 
court  will  not  lightly  interfere  with  the 
payment  thereof;  but  where  they  de- 
clare it  without  proper  investigation  or 
professional  assistance  and  it  is  called 
in  question,  the  burden  of  proof  is  upon 
them  to  show  that  it  is  to  bo  fairly  paid 
out  of  net  profits.  In  re  County  M.  Ins. 
Co,  L  K..  <">  Ch..  104  (1870);  Hoole  v. 
Great  Western  B'y  Co..  L.  B.,  B  Ch.,  262. 

4  A  stockholder  may  file  a  hill  in  be- 
half of  himself  and  other  stockholders 
to  enjoin  the  declaration  of  dividends 
where  there  are  no  net  profits,  hut 
where  he  has  not  joined  all  the  stock- 


payment  of  a  dividend  already  declared, 

n  though  the  time  of  payment  has 
not  yet  arrived.  Ffewcett  R  Laurie,  1 
Dr.  &  sm„  192  (I860).  To  same  effect, 
Carlisle  v.  Southeastern  K'y.  1  Macn.  & 
See  Browne  v.  Mon- 
mouthshire K'y  ft  Canal  Co.,  13  Beav, 

1861  |  Coatee  *  Nottingham  Wa« 
works  Co.,  66  id.,  B6  (18! 

» "Equity  would  not  interfere  with  a 
dividend  unless  it  appeared  that  some- 
body in  particular  was  hurt  or  liable  to 
be  injured.  It  would  not  interfere 
after  all  danger  had  passed,  and  for  the 
sake  of  vindicating  general  principli 
In  the  case  of  Chaffee  r.  Rutland  R.  R., 
66  Vt..  110.  188  (1882)  the  court  stated 
and  acted  upon  the  principle  of  law 
stated  above. 

«  Howell  v.  Chicago,  etc..  R.  R  Co.,  51 
Barb.,  378  (1868).  In  Massachusetts  no 
equitable  relief  can  be  granted  against 
a  foreign  corporation,  winch  has  neither 
officers  nor  place  of  business  in  that 
state,  to  compel  the  company  to  declare 
and  pay  dividends  according  to  the 
stipulations  of  their  certificates  of  pre- 
ferred stock.  Williston  v.  Michigan 
-  uthern,  etc..  R.  R.  Co.,  95  Mass.,  400 
(1866);  Berford  v.  X.  Y..  etc.  Co.,  4 
N.  V.  Supp,  836 (Super.  Ct,  1889). 

"Mills  v.  Northern  B'y,  L.  R,  5  Ch., 
621  (1H70).     See,  also.  ch.  XLV. 


728 


CII. 


XXXII.] 


DIVIDENDS. 


[§  548. 


§  548.  Dividends  which  impair  the  capital  stock  are  illegal,  and 
may  be  recovered  back  from  the  stockholders  —  Dividends  on  dissolu- 
tion.—  As  already  shown,  a  dividend  can  be  lawfully  declared  only 
when  sufficient  net  profits  have  been  earned  to  pay  that  dividend. 
Accordingly,  a  dividend  paid  wholly  or  partly  from  the  capital 
stock  is  illegal,  and  subjects  the  corporation  and  the  shareholders 
who  are  parties  to  it  to  serious  liability.  It  is  the  well-determined 
doctrine  of  the  courts  of  this  country  that  the  capital  stock  is  a 
trust  fund  to  be  preserved  for  the  benefit  of  corporate  creditors.1 
Hence  the  rule  has  been  firmlv  established  that,  where  dividends 
are  paid  in  whole  or  in  part  out  of  the  capital  stock,  corporate 
creditors,  being  such  when  the  dividend  was  declared,  or  becoming 
such  at  any  subsequent  time,  may,  to  the  extent  of  their  claims, 
compel  the  shareholders  to  whom  the  dividend  has  been  paid  to  re- 
fund whatever  portion  of  the  dividend  was  taken  out  of  the  capital 
stock.2  In  this  country  shareholders  are  bound  to  take  notice  of 
the  true  character  and  condition  of  the  capital  stock,  and  they  can- 
not escape  liability  by  reason  of  their  ignorance. 


1  See  §  199,  supra;  Goodwin  v.  Mc- 
Gehee,  15  Ala.,  232,  247,  holding  that  a 
corporation  cannot  give  away  its  effec:s 
to  the  prejudice  of  creditors ;  and  any 
arrangement  made  by  it  with  its  stock- 
holders to  defeat  the  claims  of  creditors 
will  be  held  void  both  in  law  and  in 
equity,  and  that  a  stockholder  cannot 
buy  up  claims  against  the  company  as 
an  offset  to  his  subscription. 

2  Curran  v.  State  of  Arkansas,  15  How., 
304  (1853);  Kailroad  Company  v.  How- 
ard, 7  Wall.,  392  (1868) ;  Osgood  v.  Lay- 
tin,  48  Barb.,  463  (1867);  affirmed,  3 
Keyes,  521 ;  Johnson  u  Laflin,  5  Dill., 
65,  86,  note  (1878) ;  Hastings  v.  Drew,  76 
N.  Y.,  919  (1879) ;  Sagory  v.  Dubois.  3 
Sand.  Ch.,  466  (1846);  Wood  v.  Dum- 
mer,  3  Mason,  308  (1824) ;  Gratz  v.  Redd, 
4  B.  Mon.,  178  (1843) ;  Bank  of  St.  Marys 
v.  St  John,  25  Ala.,  566  (1854);  Bartlett 
v.  Drew,  57  N.  Y.,  587  (1874);  Heman  v. 
Britton,  88  Mo.,  549  (1886);  Story's 
Equity  Juris.  (13th  ed.,  1886),  §  1252.  A 
stockholder  who  receives  an  illegal  divi- 
dend is  liable  for  it  even  though  he  has 
paid  it  over  to  another  person  to  whom 
the  stock  belonged.  Finn  v.  Brown.  142 
U.S.,  56 (1891).  Where  the  stockholders 
distribute  the  assets  among  themselves 


a  creditor  may  follow  the  assets.  Pan- 
handle, etc,  Bank  v.  Stevenson,  16  S.  W. 
Rep.,  23  (Tex.,  1890).  The  shareholders 
of  a  corporation  have,  in  Louisiana,  no 
right  to  appropriate  any  part  of  its 
assets  to  pay  large  salaries  to  themselves 
as  officers  of  the  company,  until  all 
creditors  who  are  not  stockholders  have 
been  paid.  Cochran  v.  Ocean  Dry  Dock 
Co.,  30  La.  Ann.,  1365  (1878).  In  Lexing- 
ton Life,  etc.,  Ins.  Co.  v.  Page,  17  B. 
Mon.,  412  (1856),  it  is  held  that  the  action 
to  recover  the  dividend  in  such  a  case 
may  be  maintained  by  the  company  or 
its  assigns  where  the  dividend  had  been 
paid  by  mistake.  See,  also,  in  general, 
Skrainka  v.  Allen,  7  Mo.  App.,  434  (1879) ; 
Ward  v.  Sittingbourne,  etc.,  R.  R.  Co., 
L.  R,  9  Ch.,  488  (1874) ;  Clapp  v.  Peter- 
son, 104  111.,  26,  holding  that  the  prop- 
erty so  withdrawn  was  liable  for  the 
creditor's  whole  debt  and  not  merely  for 
a  pro  rata  share  thereof.  If  a  fixed  per 
cent,  is  drawn  out  by  stockholders  in- 
stead of  a  dividend  and  this  per  cent, 
exceeds  the  profits,  a  stockholder,  upon 
the  insolvency  of  the  corporation,  must 
pay  back  the  excess  received  by  him. 
Reading,  etc..  Co.  v.  Reading,  etc.. 
Works,    21    Atl.    Rep.,   170  (Pa.,   1891). 


729 


§  548.] 


DIVIDENDS. 


[CH.  XXXII. 


If  a  dividend  has  been  paid  out  of  the  capital  stock  the  stock- 
holders are  conclusively  presumed  to  have  known  it,  and  are  liable 
to  an  action  for  a  repayment.  They  cannot  claim  to  hold  the  posi- 
tion of  innocent  or  bona  fide  holders.1 

A  stockholder  may  by  bill  in  equity  compel  a  return  of  the  divi- 
dend paid  out  of  the  capital  stock.2  A  stockholder  who  receives 
dividends  wrongfully  declared  cannot  then,  as  a  corporate  creditor, 
hold  other  stockholders  liable  on  a  statutory  liability  for  wrong- 
fully declaring  dividends.3  In  Massachusetts  at  an  early  day  it 
was  held  that  an  action  at  law  would  not  lie  to  reach  dividends 
paid  out  of  the  capital  stock.4 

A  corporate  creditor  may  compel  stockholders  to  refund  the 
amount  received  by  them  on  a  distribution  of  the  corporate  assets 
upon  dissolution  or  a  sale  of  all  the  assets  of  the  company,  to  the 
extent  that  his  claim  has  not  been  paid  after  he  has  exhausted  his 
remedy  against  the  corporation  itself.5  But  aside  from  this  it  is 
leo-al  for  the  stockholders  to  dhpose  of  the  assets.6 


Creditors  may  reach  shares  of  stock 
that  the  corporation  which  becomes 
insolvent  lias  distributed  without  a  divi- 
dend. McKusick  v.  Seymour,  etc.,  Co., 
50  N.  W.  Rep.,  L116(Minn.,  1892). 

i  A  stockholder  must  turn  back  illegal 
dividends,  although  be  knew  nothing  of 
the  illegality.  Finn  v.  Brown,  1 12  I  -  . 
r>6  (1891);  In  re  Denham  &  Co.,  L.  R.,  25 
Ch.  D..  752(1883) 

-Holmes  v.  Newcastle,  etc.,  Co.,  US 
L  J.,  Ch.,  888(1875). 

'J  Thompson  v.  Bemis,  etc.,  Co.,  127 
Mass.,  595(1879). 

<Vose   r.   Grant,    15    Mass.,   505,   517 
(1819) ;  Spear  v.  Gran*  16  id.,  9,  15  (1819) ; 
Paschall  v.  Whitsett,  11  Ala.,  472  (1847). 
&  Seech.  XL. 

6  See  ch.  XL.  Where  three  persons 
have  formed  a  corporation  and  trans- 
ferred a  patent  to  it  for  all  its  capital 
stock  and  are  the  sole  stockholders, 
there  being  no  creditors,  they  may  pur- 
chase the  patent  back  and  give  the  cor- 
poration their  note  for  the  par  value  of 
the  whole  capital  stock.  Although  the 
corporation  subsequently  becomes  in- 
solvent the  transaction  cannot  be  im- 
peached. Skinner  v.  Smith,  56  Hun, 
437  (1890).  A  debt  of  a  stockholder  to 
be  paid  from  "  dividends"  must  be  paid 


from  the  dividends  of  assets,  if  the  com- 
pany dissolves.     Cozad  n  McKee,   18 
Atl.  Rep.,  618  (Pa.,  1889).     Distribution 
of   funds  of    incorporated    association. 
.\ston  v.  Dashaway,  83  Pac  Rept,  660 ; 
afFd  in  88  id.,  1091  (1890).    It  is  legal  for 
a  coal  corporation  with  the  assent  of  all 
its  stockholders  to  sell  all  its  property  to 
its  president,  and  for  him  to  pay  there- 
for in  cash  and  by  a  mortgage  on  the 
property  so  purchased,  he  also  agreeing 
to   pay  all  the  debts  of  the  company. 
Payment    was    made    directly    to    the 
stockholders  and  they  transferred  their 
stock  to  him  in  addition  to  the  transfer 
of  the  property.     A  subsequent  creditor 
of  the  company  who  knew   all  of  the 
facts  cannot  complain.     Parke,  etc.,  Co. 
v.   Terre.    etc.,  Co.,  26  N.  E.  Rep.,  884 
(Ind.,  1891).     Where  all  the  property  of 
a  telegraph   company  is  sold   and   the 
proceeds  distributed  among  the  stock- 
holders, a  creditor  of  the  company  may 
by  a   bill    in   equity  compel  the  stock- 
holders to  pay  the  claim  against  the  cor- 
poration, the  proceeds  being  a  trust  fund. 
Baltimore,  etc.,  Co.  v.  Interstate,  etc.,  Co.. 
54  Fed.  Rep..  50  (1893).    After  dissolution 
has  been  decreed  it  is  too  late  for  a  corpo- 
rate creditor  to  bring  an  action  to  hold 
the  directors  liable  for  declaring  divi- 


730 


CH.  XXXII.] 


DIVIDENDS. 


[§  549. 


The  distribution  of  the  assets  among  the  stockholders  upon  dis- 
solution is  made  upon  equitable  principles.1 

§549.  Proceedings  to  recover  hack  such  a  dividend. —  It  is  in 
general  the  practice,  where  dividends  have  been  paid  out  of  the 
capital  stock  in  prejudice  of  the  rights  of  corporate  creditors,  for  a 
judgment  creditor,  upon  the  return  of  his  common-law  execution 
against  the  corporation  wholly  or  partly  unsatisfied,  to  commence 
an  action  in  equity  on  behalf  of  himself  and  all  other  creditors  who 
may  come  in,  in  the  nature  of  a  creditors'  bill,  against  the  stock- 
holders to  whom  the  dividend  was  unlawfully  paid,  to  recover 
back  so  much  thereof  as  was  paid  out  of  the  capital  stock.3 

It  is  a  necessary  condition  precedent  to  the  right  to  bring  this 
action  that  a  valid  judgment  shall  have  been  obtained  against  the 
corporation,  and  that  execution  thereon  shall  have  been  returned 
wholly  or  partly  unsatisfied,  and  this  judgment  is  conclusive  as  to 
the  merits  of  the  creditor's  claim.3     If  the  treasurer  is  sued  hecan- 


dends  out  of  the  capital  stock,  no  fraud 
in  obtaining  the  dissolution  being  alleged. 
Coxon  v.  Gorst,  64  L.  T.  Rep.,  444(1891). 

1  Where  the  original  stock  is  paid  for 
in  cash  at  par  and  then  increased  stock 
is  paid  for  at  the  rate  of  $3  on  $10,  and 
upon  the  winding  up  of  the  company  a 
large  surplus  exists  for  distribution,  the 
court  ordered  that  the  original  stock 
should  first  receive  $7  on  each  $10,  and 
then  that  the  remaining  assets  should 
be  distributed  pro  rata  on  all  the  stock. 
Re  Weymouth,  etc.,  Co.,  63  L.  T.  Rep., 
445  (1890);  aff'd,  id.,  686  (1891).  On  a 
dissolution  and  winding  up,  where  part 
of  the  stock  is  paid  up  and  part  not, 
each  class  of  stockholders  is  repaid  the 
amount  paid  upon  that  class  of  stock, 
and  then  the  surplus  is  divided  propor- 
tionately. Re  Wakefield,  etc.,  Co.,  67 
L.  T.  Rep.,  83  (1892).  On  a  winding  up 
if  it  turns  out  that  the  profits  had  been 
systematically  overestimated  for  many 
years,  thereby  depriving  common  stock- 
holders of  the  dividends,  an  account 
would  be  taken  and  such  dividends 
would  be  then  paid.  Re  Bridgwater, 
etc.,  Co.,  64  L.  T.  Rep..  576  (1891). 

2  Hastings  v.  Drew,  76  N.  Y.,  9  (1879) ; 
Bartlett  v.  Drew,  57  N.  Y.,  587  (1874) ; 
McLean  v.  Eastman,  21  Hun,  312  (1880); 
Gratz  v.   Redd,  4  B.  Mon.,  178  (1843); 


Curran  v.  State  of  Arkansas,  15  How., 
304  (1853).  See,  also,  United  States  v, 
Globe  Works,  7  Fed.  Rep.,  530  (1881); 
Brewer  v.  Michigan  Salt  Association,  58 
Mich.,  351  (1885).  See,  also,  §  548.  And 
see  Vose  v.  Grant,  15  Mass.,  505  (1819). 
where  it  was  held  that  an  action  as  for 
tort  could  not  be  maintained  by  a  cred- 
itor against  an  individual  stockholder 
who  had  received  dividends.  Spear  v. 
Grant,  16  Mass.,  9,  15  (1819),  holding 
that  an  action  at  law  will  not  lie.  An 
action  on  the  case  for  fraud  lies  for  a 
conspiracjr,  the  stock  having  been  sold 
back  to  the  corporation  bank  and  the 
bank  then  closed.  Bartholomew  v.  Bent- 
ley,  15  Ohio,  659  (1846). 

3  Sturgis  v.  Vanderbilt,  73  N.  Y,  384 
(1878).  In  this  case  there  was  no  recov- 
ery against  a  director  who  had  sold  his 
stock  and  ceased  to  participate  in  the 
company's  affairs  five  years  before  the 
dissolution.  Dudley  v.  Price's  Adm'r, 
10  B.  Monroe.  84  (Ky.,  1849) ;  Andrew  v. 
Vanderbilt,  37  Hun,  468  (1885);  Has- 
tings v.  Drew,  76  N.  Y,  9  (1879),  where 
this  liability  was  enforced  against  one 
who  had  become  a  purchaser  of  stock 
after  the  cause  of  action  arose  upon 
which  the  judgment  was  secured,  the 
shares  being  by  the  terms  of  the  trans- 
fer subject  to  all  claims  against  it     In 


731 


§  549.] 


DIVIDENDS. 


[CH.  XXXII, 


not  interplead.1  A  receiver  may  institute  the  suit.2  He  represents 
the  creditors  as  well  as  the  corporation  and  stockholders.  As  an 
officer  of  the  court  he  may  sue  and  is  not  estopped  by  the  acts  of 
the  corporation. 

In  the  creditor's  suit  all  the  stockholders  who  can  be  reached 
should  be  made  parties  defendant,  and  as  to  those  unknown  or  in- 
solvent or  beyond  the  jurisdiction  there  should  be  a  proper  aver- 
ment in  the  bill.3  The  corporation  also  should  be  made  a  party 
defendant  to  the  bill.4 

The  shareholder  who  is  compelled  to  pay  more  than  his  equitable 
proportion  of  any  unpaid  corporate  debt  may,  in  a  proper  proceed- 
ing, resort  to  his  associates  for  contribution.5  A  transferee  of  stock 
asrainst  which  creditors  have  this  claim  at  the  time  of  transfer  is 
not  liable  to  respond  in  a  creditor's  suit  therefor.6     The  statute  of 

New  York  the  receiver  of  an  insolvent    denda     A  sale  of  the  assets    by    the 


corporation  may  maintain  an  action  for 
the  benefit  of  the  creditors  against  the 
shareholders  to  recover  the  sums  re- 

I  l>y  thorn  as  dividends  at  the  time 
the  company  was  insolvent;  ami  in 
such  an  action  the  creditors  of  the  cor- 
poration are  proper  parties  defendant 
for  the  purpose  of  restraining  them 
from  proceeding  individually  against 
the  shareholders  separately  to  recover 
the  unlaw  ful  dividends.  Osgood  v.  Lay- 
tin,  S  Keyes,  521  (1867).  See,  also,  Lex- 
ington Life,  etc.,  Ins.  Co.  v.  1  'a ;j;e,  17 
B.  Mon.,  812  (1866),  holding  that  an 
assignee  of  the  coin]  any  for  the  benefit 
of  the  company  might  sue.  But  a  re- 
ceiver's suit  cannot  in  such  a  case  be 
brought  for  the  benefit  of  the  stock- 
holders. Butterworth  r.  O'Brien.  89 
Barb.,  10'.}  (1863).  Cf.  McLean  V.  East- 
man, 21  Hun.  812  (1880). 

1  A  treasurer  cannot  interplead  be- 
tween the  stockholders  ami  a  corporate 
creditor  who  is  seeking  to  reach  bonds 
received  by  the  corporation  in  payment 
for  its  property.  Stone  v.  Reed,  25  X. 
K.  Rep.,  1!)  (Mass..  1890). 

2  A  receiver  of  the  corporation  is  the 
proper  party  to  sue  to  recover  back  any 
dividends  which  were  paid  from  the 
capital  stock.  Corporate  creditors  can- 
not sue  for  these  after  the  receiver  goes 
in.  It  is  doubtful  whether  the  corpora- 
tion itself  could   complain  of  such  divi- 


receiver  does  not  carry  this  cause  of 
action.  Minnesota,  etc,  Co.  r.  Langdon, 
If,  X.  W.  Rep.,  810  (Minn..  lsOO). 

IWood  r.  Dummer,  3  Mason.  808 
(1824);  Bartlett  v.  Drew,  67  X.  Y..  887 
(1874).  In  the  case  last  cited  —  a  lead- 
ing authority  in  New  York  —  it  is  held 
that  the  creditor  is  not  required  to  bring 
his  suit  on  behalf  of  other  creditors  who 
may  choose  to  come  in,  but  may  sue 
alone  and  for  his  own  benefit  exclu- 
sively, and  that  he  need  not  make  all 
the  stockholders  parties,  hut  may  pur- 
sue one,  any  or  all  as  he  may  elect, 
upon  the  theory  that  with  the  equities 
between  the  stockholders  themselves  he 
has  nothing  to  do  unle>s  he  choose  to 
intervene  to  settle  them.  Brewer  r. 
Michigan  Salt.  etc..  Jis  Mich..  351  (is*.-,. 
See.  also,  Pacific  R.  R.  Co.  v.  Cutting. 
Jr.,  27  Fed.  Rep..  638  (188G);  Williams 
v.  Boice,  88  N.  J.  Eq.,  864  (1884). 

*  First  National  Bank  of  Hannibal  »\ 
Smith.  6  Fed.  Rep..  215  (1879),  followed 
in  Dormitzer  r.  Illinois,  etc., Bridge  Co., 
(iFed.  Rep..  217  (1881),  Where  all  the 
assets  have  been  distributed,  an  action 
against  the  stock  holders  to  recover  back 
damages  for  a  tort  committed  by  the 
corporation  must  include  the  corpora- 
tion as  a  co-defendant  Swan,  etc.,  Co. 
r.  Frank,  39  Fed.  Rep.,  456  (1889). 

5  Bartlett  r.  Drew,  supra, 

6  Hurl  but  r.  Tayler.62  Wis..  607  (1885). 


732 


Oil.  XXXII.] 


DIVIDENDS. 


[§  550. 


limitations  runs  in  favor  of  shareholders  who  receive  such  divi- 
dends in  good  faith  and  without  actual  notice  from  the  time  they 
are  declared  as  against  the  corporation  and  its  creditors.1 

§  550.  The  liability  herein  of  the  corporate  officers. —  The  liability 
of  the  corporate  officers  as  to  dividends  paid  out  of  the  capital 
stock  is  not  definitely  determined.  That  they  are  liable  for  the 
amount  of  any  such  dividend  that  they  themselves  receive  as  share- 
holders cannot,  however,  be  questioned.2 

Some  cases  go  to  the  full  extent  of  holding  the  directors  liable 
absolutely  for  all  dividends  paid  out  of  capital  stock.  But  the  bet- 
ter rule  is  that  when  the  directors  declare  a  dividend  in  good  faith 
and  without  negligence,  thev  are  not  to  be  held  liable  merely  be- 
caue  the  dividend  turns  out  to  have  impaired  the  capital  stock.5 


1  Lexington  Life,  etc.,  Ins.  Co.  v.  Page, 
17  B.  Mon.,  412, 446  (1856).  See,  also,  Mam- 
moth Copperapolis,  etc.,  Co.,  50  L.  J. 
(Ch.),  11  (1880) ;  Dudley  v.  Price's  Adm'r, 
10  B.  Monroe,  84  (Ky.,  1849). 

2  Main  v.  Mills,  6  Biss.,  98,  and  the  note 
(1874),  where  a  dividend  paid  to  the  presi- 
dent, but  not  legitimately  earned,  was 
recovered  from  the  president  of  a  bank 
by  the  assigneejn  bankruptcy ;  Ranee's 
Case,  L  R,  6  Ch.,  104  (1870),  which  was 
the  case  of  a  marine  insurance  company, 
where  the  directors  declared  a  bonus  on 
the  shares  of  stock  without  making  out 
a  profit  and  loss  account,  and  it  was  held 
that  a  director  who  had  received  such 
bonus  on  a  balance  sheet  thus  carelessly 
drawn  up  should,  in  consequence  of  his 
neglect  of  duty,  repay  the  amount  to 
the  liquidator.  It  was  the  gross  neglect 
of  the  directors  which  militated  so 
strongly  against  them,  and  both  the 
lord  justices  declared  the  court  would 
not  have  so  held  had  there  been  bona 
fides  and  regularity  in  the  declaration 
of  the  bonus.  In  re  Denham  &  Co., 
L.  R.,  25  Ch.  D.,  752  (1883).  Here  it  was 
held  that  an  innocent  director  was  not 
personally  responsible  for  the  fraudu- 
lent reports  and  balance  sheets  and  the 
dividends  paid  under  them,  and  that  — 
having  regard  to  the  extraordinary  pow- 
ers vested  by  the  articles  in  the  chair- 
man, and  to  the  fact  that  the  books  had 
been  kept  and  audited  by  duly  author- 
ized officers,  and  that  the  director  sought 


to  be  charged  had  no  reason  to  suspect 
any  misconduct  —  he  was  not  liable  to 
repay  any  of  the  dividends  so  received 
by  him,  although  they  were  in  fact  paid 
out  of  the  capital. 

3  Excelsior  Petroleum  Co.  v.  Lacey,  63 
N.  Y.,  422  (1875).  In  Stringer's  Case, 
L.  R,  4  Ch.,  475  (1869),  it  was  held,  in 
accordance  with  this  view,  that  where 
the  action  of  a  board  of  directors  in 
making  a  dividend  was  bona  fide,  they 
are  not  liable  for  errors  of  judgment  in 
preparing  a  balance  sheet  showing  the 
assets  of  the  concern.  In  this  case  it 
appears  that  the  directors  included 
among  the  corporate  assets  a  debt  due 
the  company  by  the  government  of  the 
Confederate  States ;  some  cotton  owned 
by  the  company  but  stored  within  the 
limits  of  tbe  Confederacy ;  and  certain 
merchant  ships  engaged  in  running  the 
blockade,  all  which  were  estimated  at 
their  full  value.  These  assets  being 
subsequently  destroyed  and  lost  to  the 
company,  its  bankruptcy  followed.  Os- 
good v.  Laytin,  3  Keyes  (N.  Y.),  521,  was 
an  action  by  a  receiver  to  recover  divi- 
dends improperly  declared.  The  court 
said :  "  Ignorance  of  facts  that  it  was 
the  duty  of  the  managers  to  know  — 
not  to  know  which  was  gross  igno- 
rance—  cannot  excuse  the  managers 
and  impart  any  virtue  or  validity  to 
acts  otherwise  clearly  illegal,  and  which 
were  a  palpable  fraud  upon  the  cred- 
itors."     But   the   directors   of    a   bank 


733 


§  550.] 


DIVIDENDS. 


[CH.  XXXII. 


Where  the  directors  negligently  or  wilfully  and  knowingly  declare 
and  pay  a  dividend  out  of  the  capital  stock,  they  are  personally 
liable  to  refund  that  dividend.1     Frequently  also,  when  a  dividend 


are  not  liable  for  dividends  declared  in 
good  faith,  even  though  it  subsequently 
turns  out  that  debts  to  the  bank  which 
they  considered  good  were  found  to  be 
bad.  Witters  v.  Sowles,  31  Fed.  Rep.,  1 
0887).  However,  the  court  in  Re  Ox- 
ford, etc.,  Society,  55  L.  T.  Rep..  598 
(188C),  say  it  is  settled  that  "directors 
who  improperly  pay  dividends  out  of 
capital  are  liable  to  repay  such  divi- 
dends personally  upon  the  company 
being  wound  up ; "  that  the  company  or 
a  creditor  or  a  liquidator  may  enforce 
it;  that  the  acquiescence  of  the  stock- 
holders does  not  affect  creditors ;  that 
the  statute  of  limitations  does  not  apply  ; 
and  that  the  innocent  intent  of  the  di- 
rectors is  no  defense. 

1  In  order  to  ascertain  profits  the  di- 
rectors should  have  a  revaluation.  If 
they  employ  persons  whom  they  reason- 
ably believe  to  be  competent  and  adopt 
their  conclusions  they  are  not  liable  for 
mistakes.  Where,  however,  the  direct- 
ors take  no  active,  intelligent,  guiding 
part  in  the  affairs  of  the  company,  and 
really  did  nothing  except  as  BUggi 
by  the  secretary,  and  do  not  examine 
the  accounts  at  all,  and  cause  the  stock- 
holders to  declare  dividends  on  a  state- 
ment which  omits  large  liabilities  so 
that  dividends  are  really  paid  out  of  the 
capital  stock,  such  directors  are  person- 
ally liable  to  corporate  creditors  for  such 
dividends.  The  secretary  also  is  liable, 
he  being  the  active  manager  of  the  com- 
pany. The  six-years  statute  of  limita- 
tions, however,  applies,  and  only  those 
dividends  which  have  been  declared 
within  six  years  must  be  repaid.  Inter- 
est, however,  will  be  allowed.  Munici- 
pal, etc..  Co.,  Limited,  v.  Pollington,  68 
L  T.  Rep.,  238  (1890);  In  re  National 
Funds,  eta,  Co.,  L.  R.,  10  Ch.  D.,  lis 
(1878);  Gratz  v.  Redd,  4  B.  Mou.,  178. 
194  (1843);  Hill  tt  Frazier,  33  Pa.  St,  820 
(1868);  In  re  Alexander  Palace  Co.,  1.  R, 


21  Chan.  Div.,   149  (1882);  Salisbury  v. 
Metropolitan  R'y  Co.,  23  L.  T.  (N.  S.), 
839  (1870),  where  the  suit  was  by  a  non- 
participating    stockholder ;     Flitcroft's 
Case,  L.  R,  21  Ch.  D.,  519  (18S2);  Evans 
r.  Coventry,  8  De  G.,  M.  &  G,  835  (1867  : 
Tarquand  v.   Marshall,  L.  R,  4  Chan.. 
376  (18G9),  denying  this  remedy  to  the 
stockholders  as  a  body.      In  Burnes  r. 
Pennell.  2  House  of   Lords  Cases,  497, 
581  (1849),  Lord  Brougham  said  :  "lb 
to   be  understood  as  going  with  those 
who  view  with  the  greatest  severity  the 
conduct  of  railway  directors  in  declar- 
ing dividends   which  can  only  be  paid 
out  of  capital,   because  I  consider  that 
that    is    of    itself    a   most   vicious   and 
fraudulent   course   of    conduct      It    is 
telling  the  world   that  their  profits  are 
large  when  it  may  be  that  their  profit- 
are  nil,  or  that   their   losses   are   lai 
with  no  profits.     It  is  a  false  aid  fraud- 
ulent representation   by  act  and  deed. 
much  to  be  reprobated  ;  and  1  go  to  the 
full     length    of    what     my    noble    and 
learned    friend    has    laid    down,   that  it 
would  be  a  jusl   ground,  if  a  course  of 
conduct    of    this    sort    were    pur.-ued, 
coupled    with    such    circumstances    as 
clearly  to  show  a  fraudulent  intent,  for 
proceedings  of  a  graver  nature  again-t 
these  parties, '    The  payment  of  a  divi- 
dend out  of   the  capital  stock   is  ultra 
rircs.  and  incapable  of   ratification  by 
the   shareholders.     Accordingly,  where 
the  directors  mislead  the  shareholders 
by  representing  in  the  reports  and  bal- 
ance sheets  as  good  debts  which   tin  y 
know   to  be  bad.   and   thus  knowingly 
pay  dividends  which  in  fact  impair  the 
capital   stock,  it   is   not  a  defense  that 
the  shareholders,  relying  in  good  faith 
upon  the  representations  and  reports  of 
the  directors,  pass  resolutions  declaring 
the  dividends  at  regular  meet'ngs  of  the 
corporation;  and  an  action  will  lie  on 
behalf  <>f  creditors  to  compel  the  direct 
84 


CH-  XXXII.] 


DIVIDENDS. 


[§  550. 


is  paid  out  of  the  capital  stock,  the  directors  are  made  liable  there- 
for by  statute  without  reference  to  any  fraud  or  fraudulent  intent 
on  their  part.1 

Under  certain  circumstances,  in  the  absence  of  actual  fraud,  the 
directors  who  have  been  compelled  to  pay  the  claims  of  corporate 
creditors  may  in  turn  recover  what  they  have  paid  in  an  action 
against  the  shareholders.2  But  a  director  from  whom  a  recovery  is 
had  under  the  Pennsylvania  statute,3  as  a  wrong-doer,  has  no  right 
of  subrogation  as  against  the  corporation.4  And  claims  against 
directors  who  are  made  liable  by  statute  in  these  cases  may,  in  the 
absence  of  actual  fraud  on  their  part,  be  barred  by  laches.5 


ors  to  refund.  In  such  an  action  the 
directors  cannot  set  off  any  money  due 
from  the  company  to  them,  nor  have 
they  recourse  to  the  shareholders  who 
took  the  dividends  bona  fide.  In  re 
Exchange  Banking  Co.,  L.  R,  21  Chan. 
Div.,  519  (1882);  In  re  County  Marine 
Ins.  Co.,  L.  R,  6  Chan.,  104  (1870).  See, 
also,  Scott  v.  Eagle  Fire  Ins.  Co.,  7 
Paige,  198  (1838).  In  Kentucky  it  is 
doubted  whether  directors  are  liable  to 
creditors,  the  courts  of  that  state  seem- 
ing to  incline  to  hold  them  liable  only 
to  the  corporation  or  the  stockholders. 
Lexington,  etc.,  R  R  Co.  v.  Bridges,  7 
B.  Mon.,  556,  559  (1847). 

1  In  Massachusetts  officers  of  a  cor- 
poration can  be  charged,  under  the  stat- 
ute in  force  upon  the  subject  in  that 
state  (Stat  1862,  ch.  218,  §  3 ;  Stat.  1870, 
ch.  224,  §§  40,  42),  with  corporate  debts 
after  a  judgment  against  the  corpora- 
tion, and  after  a  demand  and  return 
upon  the  execution.  Chamberlin  v. 
Huguenot  Manufacturing  Co.,  118  Mass., 
532,  536  (1875);  Priest  v.  Essex  Manu- 
facturing Co.,  115  id.,  380  (1874).  So, 
in  New  Jersey,  directors  are  similarly 
liable  by  statute.  Rev.  of  N.  J.  (1877), 
p.  178;  Williams  r.  Boice,  38  N.  J.  Eq., 
364  (1885).  And  in  New  York.  1  Rev. 
Stat,  ch.  XVIII,  tit  2,  art.  1,  §§  1,  10. 
Dividing  the  property  is  equivalent  to 
declarations  of  dividend  so  far  as  the 
directors  are  concerned.  Rorke  v. 
Thomas,  56  N.  Y.,  559  (1874).  In  Mas- 
sachusetts the  liability  of  the  directors 
has  been  held  to  be  enforceable  by  cor- 


porate creditors  onty.  Smith  v.  Hurd, 
12  Mete,  371  (1847),  and  the  cases  supra. 

2  Salisbury  v.  Metropolitan  R'y  Co., 
22  L.  T.  (N.  S.),  839  (1870);  In  re  Alex- 
andra Palace  Co.,  L.  R.,  21  Chan.  Div., 
149  ( 1 882).  Cf.  §  548,  supra.  A  director 
who  with  knowledge  of  the  insolvency 
of  the  company  loans  money  to  the  cor- 
poration for  the  purpose  of  declaring  a 
dividend  is  not  entitled,  upon  an  assign- 
ment of  the  corporate  effects,  to  repay- 
ment of  any  part  of  the  loan  so  made 
until  the  claims  of  stockholders  are  satis- 
fied. Kisterbock's  Appeal,  51  Pa,  St, 
483. 

s  Act  of  7th  April,  1849,  §9. 

*  Hill  v.  Frazier,  22  Pa.  St.,  320  (1853). 
In  this  case  it  was  held  that,  in  the 
creditor's  suit  against  the  director,  the 
corporation  itself  is  not  a  necessary  co- 
defendant 

5  In  re  Mammoth  Copperopolis  of 
Utah,  50  L.  J.,  Chan..  11  (1880).  The 
acquiescence  of  stockholders  does  not 
bind  creditors,  and  the  statute  of  limita- 
tions does  not  apply.  Re  Oxford,  etc., 
Society,  supra.  That  the  statute  of  lim- 
itations does  not  apply,  see,  also,  Flit- 
eroft's  Case,  L.  R,  21  Ch.  D,  519  (1882). 
The  statute  of  limitations  does  not  com- 
mence to  run  against  an  officer  of  the 
corporation  who  has  paid  dividends  to 
himself  out  of  the  capital  stock,  until 
the  fraud  is  discovered.  Main  v.  Mills. 
6  Biss.,  98  (1874),  Where  the  directors 
paid  out  dividends  from  the  organiza- 
tion of  the  company  in  1868  until  1878, 
and  were  then  stopped  at  the  instance 


735 


§  551.]  DIVIDENDS.  [CH.  XXXII. 

§  551.  Guaranty  of  dividends  uy  contract — A  guaranty  of  divi- 
dends is  often  made  by  the  corporation  itself  that  issues  the  stock. 
The  stock  is  then  called  guarantied  or  preferred  stock.  This  class 
of  stock  is  fully  considered  elsewhere.1 

A  guaranty  of  dividends  frequently  is  made  by  a  third  person. 
Such  a  guaranty  is  often  made  when  one  person  sells  stock  to  an- 
other and  guaranties  that  the  corporation  will  pay  certain  divi- 
dends thereon.  It  often  arises  also  where  one  company  buys  out 
another  or  leases  the  property  of  another  corporation  and  guaran- 
ties dividends  on  the  stock  or  the  interest  on  the  bonds  of  the  lat- 
ter.    This  subject,  also,  is  considered  elsewhere.2 

of  the  board  of  trade,  and  the  company  udiced  by  the  delay.     Masonic,  etc.,  Co. 

was  wound  up  in  1886,  and  in  1890  the  v.  Sharpe,  65  L.  T.  Rep.,  76  (1891);  af- 

receiver   brought  suit   to  hold   the  di-  firmed,  65  id.,  806. 
rectors  liable,  it  was  held  that  there  was        l  See  ch.  XVL 
not  such  delay  as  to  bar  the  remedy,        2  See  ch.  XLVL 
since  the  defendants  had  not  been  prej- 

736 


CHAPTER  XXXIII. 


LIFE   ESTATES   AND   REMAINDERS  IN  SHARES  OF   STOCK. 


§  552.  The  subject. 

553.  The  three  rules  in  regard  to  stock 

or     extraordinary     cash    divi- 
dends. 

554.  The  American  or  Pennsylvania 

rule. 

555.  The  Massachusetts  rule. 


§  556-57.  The  English  rule. 

558.  The  apportionment  of  dividends. 

559.  The  right  to  subscribe  for  new 

shares  as  between  life  tenant 
and  remainder-man. 

560.  Miscellaneous  questions  herein. 


§  552.  The  subject. —  Where  shares  of  stock  are  held  by  an 
estate  and  the  income  of  the  estate  is  to  go  to  a  life  tenant  for  life 
and  the  remainder  to  another  party,  the  question  of  whether  the 
life  tenant  or  the  remainder-man  is  entitled  to  a  stock  dividend  or 
extraordinary  cash  dividend  is  a  perplexing  one.  The  stock  divi- 
dend or  extraordinary  cash  dividend  may  represent  profits  which 
were  earned  or  accumulated  before  the  life  tenancy  began.  Im 
that  case  it  is  clear  that  in  justice  the  remainder-man  should 
receive  it.  If,  however,  it  was  earned  after  the  life  tenancy  began, 
it  is  clear  that  the  life  tenant  should  have  it.  If  it  was  earned 
partly  before  and  partly  after  the  life  tenancy  began,  then  it  is 
apparent  that  in  justice  some  apportionment  should  be  made  if 
possible. 

The  courts,  however,  differ  widely  in  laying  down  rules  on  this 
subject.     These  differences  form  the  subject  of  this  chapter. 

§  553.  The  three  rules  in  regard  to  stock  or  extraordinary 
cash  dividends. — When  a  stock  or  extraordinary  cash  dividend  is 
declared  upon  shares  held  in  trust,  or  owned  in  such  a  way  that 
one  person  has  an  estate  therein  for  life  and  another  person  the 
remainder  over,  there  at  once  arises  a  contest  between  life  tenant 
and  remainder-man.  Their  interests  necessarily  conflict,  because, 
if  such  dividend  is  held  to  be  income,  it  belongs  to  the  tenant  for 
life ;  whereas  if  it  is  held  to  be  a  part  of  the  corpus,  or  principal,  it 
inures  to  the  benefit  of  the  remainder-man's  estate.  There  are 
three  well-defined  rules  upon  this  subject,  which  may  be  denomi- 
nated respectively  the  American  or  Pennsylvania,  the  Massachu- 
setts, and  the  English  rule.  They  lead  to  essentially  contrary  con- 
clusions and  will  be  considered  in  order. 

§554.  The  American   or  Pennsylvania  rule. —  This  rule,  inas- 
much as  it  obtains  in  nearly  every  state  in  the  Union,  may  well  be 
called  the  American  rule.     It  proceeds  upon  the  theory  that,  the 
(47)  737 


§  555.] 


LIFE    ESTATES    AND    REMAINDERS    IN    STOCK. 


[CH. 


XXXIII. 


court,  in  disposing  of  stock  or  property  dividends,  as  between  life 
tenant  and  remainder -man,  may  properly  inquire  as  to  the  time 
when  the  fund  out  of  which  the  extraordinary  dividend  is  to  be 
paid  was  earned  or  accumulated.  If  it  is  found  to  have  accrued 
or  been  earned  before  the  life  estate  arose,  it  is  held  to  be  princi- 
pal, and,  without  reference  to  the  time  when  it  is  declared  or  made 
payable,  to  belong  to  the  corpus  of  the  estate,  and  not  to  go  to  the 
life  tenant.  But  when  it  is  found  that  the  fund  out  of  which  the 
dividend  is  paid  accrued  or  was  earned,  not  before  but  after  the 
life  estate  arose,  then  it  is  held  that  the  dividend  is  income,  and 
belongs  to  the  tenant  for  life.1  This  salutary  rule  prevails  not  only 
in  Pennsylvania,  where  it  seems  to  have  first  been  clearly  declared, 
but  also  in  many  other  jurisdictions.2 

§555.  The,  Massachusetts  rule. —  This  rule,  which  prevails  in 
Massachusetts,  Georgia  and  Rhode  Island,  is  sometimes  called  "the 
rule  in  Minot's  Case."  It  regards  cash  dividends,  whether  large 
or  small,  as   income,  and   stock  dividends,  whenever  earned   and 


i  Earp's  Appeal,  28  Pa.  St,  368  (1857) : 
Wiltbank's  Appeal,  64  Pa,  St..  256  (1870). 
See,  also,  the  following  later  Pennsylva- 
nia cases  in  point:  Moss'  Appeal,  83  Pa. 
St.,  264  (1877);  Biddle's  Appeal,  90  id., 
278  (1882);  S.  C.  3  Am.  Prob.  Rep., 
442;  Vinton's  Appeal,  99  Pa.  St..  484 
(1882):  S.  C,  8  Am.  Prob.  Rep.,  281; 
In  re  Thompson's  Estate,  11  Week 
Notes  Cas..  482  (1882>  Cf.  Roberts'  Ap- 
peal, 92  Pa.  St,  407  (1880);  Thompson's 
Appeal,  89  id..  36  (1879).  A  scrip  divi- 
dend converted  into  stock  belongs  to 
the  life  tenant  Philadelphia,  eta.  Co.'s 
Appeal,  16  Atl.  Rep.,  734  (Pa.,  1889).  A 
large  dividend  in  cash,  owing  to  a  sale 
of  part  of  the  property  of  an  unincor- 
porated association  is  income,  and  goes 
to  the  life  tenant  Appeal  of  Merchants' 
Fund  Assoc.  20  Atl.  Rep,  527  (Pa..  1890). 
Money  received  by  the  corporation  from 
new  stock  issued  to  obtain  funds  to  re- 
place profits  which  had  been  used  for 
improvements  is  capital  and  not  in- 
come, and, does  not  go  to  the  life  tenant. 
Smith's  Appeal.  21  Atl.  Rep,  438  (Pa., 
1891).  Where  the  company  in  which 
the  trustee  holds  stock  gives  to  its  stock- 
holders the  option  to  subscribe  to  the 
stock  of  another  company,  the  premium 
at  which  the  trustee  sells  this  option   is 


principal  and  not  income.  7h  re  Thomp- 
son's Estate,  20  Atl.  Rep, 653  (Pa.,  1893). 

-Connecticut:  A  stock  dividend  based 
upon  the  profits  actually  invested  in  the 
business  is  not  income  or  dividends  such 
as  pass  to  the  life  tenant.  Spooner  v. 
Phillips  et  al,2i  Atl.  Rep.,  524  (Conn.. 
1892).  In  Connecticut  it  is  held  that 
where  an  estate  is  merged  into  a  corpo- 
ration, the  life  tenant  of  the  real  estate 
cannot  claim  that  a  part  of  the  capital 
stock  represents  past  increase  of  valup 
and  that  she  is  entitled  absolutely  to  that 
part  of  the  stock.  Hotchkiae  r.  Brain- 
erd,  etc.,  Co..  19  Atl.  Rep.,  521  (Conn.. 
1889). 

Kentucky:  As  between  a  life  benefi- 
ciary in  corporate  stock  and  the  remain- 
der-man, a  stock  dividend  will  he 
treated  as  income  if  it  in  fact  represents 
a  profit  A  privilege  given  by  a  corpo- 
ration to  its  stockholders  to  take  addi- 
tional stock  at  par  is  appurtenant  to  the 
old  stock,  and  does  not  belong  to  the  life 
beneficiary.  Aire  r.  Hite,  20  S.  W.  Rep. 
878  (Ky..  1892);  S.  C.  below,  2  R'y  & 
Corp.  L.  J.,  568. 

Alaine:    For  the  rule  in   Maine,   see 

Richardson   v.   Richardson,  75  Me.,  570 

(1884).     A  stock  dividend  of  a  company 

purchased  by  au  issue  of  its  bonds  be- 

38 


CH.  XXXIII.]        LIFE    ESTATES    AND    REMAINDERS    IN    STOCK. 


[§  555. 


however  declared,  as  capital;  and  the  rule,  accordingly,  is  a  simple 
one.  Cash  dividends  belong  to  the  tenant  for  life  and  stock  divi- 
dends to  the  corpus}  There  is  little  doubt,  however,  that  this  rule 
works  great  hardship  and  injustice  in  many  cases. 

The  court  in  deciding  whether  the  distribution  is  a  stock  or  a 
cash  dividend  may  consider  the  actual  and  substantial  character  of 
the  transaction,  and  not  its  nominal  character  merelv.2 


longs  not  to  the  life  estate  but  to  the 
body  of  the  estate.  Gilkey  v.  Paine,  14 
Atl.  Rep.,  205  (Me.,  1888). 

New  Hampshire:  Lord  v.  Brooks,  52 
N.  H.,  72  (1872);  Wheeler  v.  Perry,  18  N. 
H.,  307  (1846);  Pierce  v.  Burroughs,  58 
N.  H.,  302  (1878). 

New  Jersey:  Van  Doren  v.  Olden,  19 
N.  J.  Eq.,  176  (1868) ;  Ashurst  v.  Field's 
Adm'r,  26  id,  1  (1875). 

New  York:  Riggs  v.  Cragg,  89  N.  Y., 
479  (1882);  In  re  Kernochan,  104  N.  Y., 
618  (1887) ;  Riggs  v.  Cragg,  26  Hun,  89 
(1881);  Clarkson  v.  Clarkson,  18  Barb., 
646  (1855) ;  Simpson  v.  Moore,  30  Barb., 
637  (1859) ;  Estate  of  Woodruff,  1  Tucker 
(New  York  Surrogate  Ct),  58  (1865),  and 
Goldsmith  v.  Swift,  25  Hun,  201  (1881). 
Cf.  Cragg  v.  Riggs,  5  Redf.,  82  (1880); 
Scovil  v.  Roosevelt.  5  id.,  121  (1881). 
Profits  upon  the  sale  of  stock  are  princi- 
pal and  not  income  in  New  York.  Whit- 
ney v.  Phcenix,  4  Redf.,  180  (1880).  In 
Hyatt  v.  Allen,  56  N.  Y,  553,  557  (1874), 
the  court  of  appeals  intimated  plainly 
its  disapproval  of  the  rule  prevailing  in 
England  upon  this  subject  Farwell  v. 
TweddJe,  10  Abb.  N.  C,  94 ;  Estate  of 
Prime,  N.  Y.  L.  J.,  March  6,  1891,  re- 
viewing the  authorities.  A  dividend 
arising  from  the  sale  of  part  of  the  as- 
sets of  the  company  belong  to  the  re- 
mainder-man. In  re  Curtis,  N.  Y.  L.  J., 
January  24,  1890.  Money  received  from 
stock  upon  the  winding  up  of  the  corpo- 
ration belongs  to  the  remainder-man. 
In  re  Skillman's  Estate,  9  N.  Y.  Supp., 
469  (1890).  Where  the  capital  is  reduced 
and  returned  to  the  stockholders  with  a 
surplus,  the  surplus  goes  to  the  life  ten- 
ant. In  re  Warren's  Estate,  11  N.  Y. 
Supp.,  787  (1890). 


South  Carolina:  Profits  and  income 
existing  when  the  trust  is  created  are 
corpus,  but  subsequent  profits  and  in- 
come are  income.  Cobb  v.  Fant,  14  S. 
E.  Rep.,  959  (S.  C,  1892).  For  articles 
on  "Right  to  dividends  as  between  life 
tenant  and  remainder-man,"  American 
Law  Review,  February,  1S92,  and  24 
Am.  Rep.,  169.  Concerning  the  ques- 
tion as  to  the  rights  of  the  life  tenant 
and  remainder-man  where  trustees  buy 
securities  at  a  premium  or  sell  them  at 
a  premium,  see  Scovil  v.  Roosevelt,  5 
Redf.,  121 ;  Townsend  v.  U.  S.  Trust  Co.. 
3  id.,  220;  Ducios  v.  Benner,  5  N.  Y. 
Supp.,  73d;  Farwell  v.  Tweddle,  10  Abb. 
N.  C,  94;  Whittemore  v.  Peekman,  2 
Dem.,  275;  Appeal  of  Hele,  19  Atl.  Rep.. 
362.     See  note  in  18  Abb.  N.  C,  185. 

1  Minot  v.  Paine,  99  Mass.,  101  (186S). 
In  this  case  the  principle  is  thus  stated ; 
"  A  simple  rule  is  to  regard  cash  divi- 
dends, however  large,  as  income,  and 
stock  dividends,  however  made,  as  capi- 
tal." In  subsequent  cases  this  rule  has 
been  affirmed  and  elaborated.  Daland 
v.  Williams,  101  Mass.,  571  (1869) ;  Le- 
land  v.  Hayden,  102  id.,  542  (1869); 
Heard  v.  Eldridge,  109  id..  258  (1872): 
Rand  v.  Hubbell,  115  id..  461  (1874); 
Gifford  v.  Thompson,  115  id.,  478  (1874); 
Hemeuway  v.  Hemenway,  134  id.,  446 
(1883) ;  New  England  Trust  Co.  v.  Eaton, 
140  Mass.,  532  (1886).  See,  also,  Har- 
vard College  v.  Amory,  9  Pick.,  446 
(1830);  Balch  v.  Hallet,  10  Gray,  402 
(1858) ;  Atkins  v.  Albree,  94  Mass.,  359 
(1866). 

2  Thus,  in  Daland  v.  Williams,  101 
Mass.,  571  (1869),  where  the  directors, 
having  voted  to  increase  the  capital 
stock  by  three  thousand  shares,  declared 


739 


§  555.] 


LIFE    ESTATES    AND    REMAINDERS    IN    STOCK.        [CH.   XXXIII. 


The  supreme  court  of  the  United  States  has  held  that  a  life  ten- 
ant of  stock  does  not  take  a  stock  dividend  declared  during  the 

life  tenancy.1 

In  Ehode  Island  the  courts  have  adopted  a  rule  somewhat  like 
"the  rule  in  Minot's  Case,"  without  the  modification  ingrafted  upon 
it  by  the  subsequent  decisions  of  the  Massachusetts  courts.  It  is  a 
rule  which  in  general  prefers  the  remainder-man  to  the  life  tenant.2 


a  rash  dividend  of  forty  per  cent,  and 
authorized  the  treasurer  to  receive  that 
dividend  in  payment  for  two  thousand 
eight  hundred  of  the  shares,  the  remain- 
ing two  hundred  shares  to  be  sold,  the 
court  held  that  the  transaction  was  virt- 
ually a  stock  dividend,  and  that  the 
shares  must  go  to  the  remainder-man's 
fund.  Of.  Rand  r.  Hubbell.  115  Mass., 
461  (1874).  In  Leland  v.  Hay  den,  102 
Mass,  643  (1869),  where  it  appeared  that 
the  company  had  invested  its  surplus 
earnings  in  its  own  stock,  and  subse- 
quently declared  a  dividend  of  that 
stock,  the  life  tenant  was  held  abso- 
lutely entitled  to  it  The  life  tenant 
takes  the  dividend  where  it  is  in  cash, 
although  the  cash  is  derived  from  in- 
creased sturk  which  is  offered  to  the  old 
stockholders  for  subscription,  the  profits 
having  boon  used  for  improvements, 
This  is  not  a  stock  dividend.  Davis  a 
Jackson,  35  N.  K.  Rep,  31  (Mam,  1890) 
also,  Balch  n  Ballett,  10  Gray,  403 
(1858);  Reed  >:  Head, 8  AJlen,  174 (18 
Harvard  College  V.  Amory.  9  Pick..  1  Hi 
(1880);  Gifford  v.  Thompson,  115  Mass., 
478  (1874):  Hemenway  n  Hemenway, 
184  Mass.,  446  (1888)  In  New  England 
Trust  Co.  v.  Eaton,  140  Mass  1886) 

it  was  held,  in  an  elaborate  opinion  by 
1 1  vens,  J.,  that  the  gain  or  loss  arising 
from  the  sale  of  stock  held  in  trust  is  the 
gaiu  or  loss  of  the  cor]»is.  and  that  the 
sum  received  constitutes  a  new  principal. 
Accordingly,  a  trustee  who  has  invested 
in  honds  at  a  premium  may  retain  annu- 
ally from  the  income  payable  to  the  life 
tenant  such  sums  as  will  restore  to  the 
fund  at  its  maturity  what  was  taken 
therefrom  at  the  time  of  the  invest- 
ment    See.  also,  the  dissenting  opinion 


of  Mr.  Justice  Holmes  in  this  case;  and 
cf.  Bowker  v.  Pierce,  130  Mass..  262 
;  Dodd  r.  Winship,  133  id..  359 
(1882);  Wright  v.  White.  136  id.,  470 
(1884);  Parsons  v.  Winslow,  16  id.,  361 
(1830);  Lovell  r.  Minot,  20  Pick.,  116 
(1838).  The  court  will  take  into  consid- 
eration, in  determining  the  question  as 
between  life  tenant  and  remainder-man, 
the  whole  character  of  the  transaction, 
and  the  nature  and  source  of  the  prop- 
erty distributed,  with  due  regard  to  all 
the  facts  preceding,  attending  and  re- 
sulting from  the  declaration  of  the  divi- 
dend. In  Heard  r.  Eldridge,  109  v 
258  (1879)  it  is  said:  '-The  suggestion 
that  the  intention  of  the  directors  shall 
determine  the  question  whether  the  divi- 
dend is  capital  or  income  cannot  be  cor- 
rect .  .  .  It  is  more  Bafe  to  look  at 
the  character  of  the  property  and  the 
transaction. "  See  three  interesting  and 
valuable  littls  pamphlets,  by  a  layman, 
wherein  the  merits  of  the  question  are 
fully  and  learnedly  discussed,  published 
by  Q.  P.  Putnam's  Sons,  New  York,  and 
entitled  respectively  "Common  Sense 
versus  Judicial  Legislation,"  "Stock 
Dividends,  the  Rule  in  Minot's  Case 
Restated,  with  Variations  by  the  Su- 
preme Judicial  Court  of  Massachu- 
-.*'  and  "  A  Third  Chapter  on  the 
Rule  in  Minot's  Case."  See  6  Am.  Law 
Rev.,  720  (July,  1871);  Perry  on  Trusts 
(3d  ed.),  gj  544,  545,  and  the  notes.  In 
Georgia  the  code  is  construed  so  as  to 
follow  the  Massachusetts  rule.  Millan 
v.  Guerrard,  67  Ga.,  284  (1881);  Code  of 
Georgia,  g  v 

'(Ubbons   R    Mahon,    132   U.    &,   549 
(1890). 

2  Parker  v.  Mason,  8  R  L,  427  (1867): 


740 


CII.   XXXIII. J       LIFE    ESTATES    AND    REMAINDERS    IN    STOCK.       [§§  556,557. 


§§  556-557.  The  English  rule. —  In  England  an  ordinary,  regu- 
lar, usual  cash  dividend  or  stock  or  property  dividend  belongs  to 
the  life  tenant,  while  an  extraordinary  cash  or  stock  or  property 
dividend  belongs  to  the  corpus  of  the  trust.1     This  rule  was  estab- 


lished in  1799  in  England.2 

Busbee  v.  Freeman,  11  R.  I.,  149(1875); 
Petition  of  Brown,  14  R.  I.,  371  (1884). 
A  stock  dividend  is  capital  and  not  in- 
come. Greene  v.  Smith,  19  Atl.  Rep., 
1081  (R.  I.,  1890). 

1  The  courts,  perhaps  uniformly,  in- 
sist upon  this  distinction.  Extraordi- 
nary dividends  may  be  either  of  cash 
or  stock,  and  appear  under  a  variety  of 
names,  such  as  "  participations,"  "  dis- 
tributions," or,  more  commonly,  '•  bo- 
nuses." See  Witts  v.  Steere,  13  Vesej", 
363  (1807) ;  Norris  v.  Harrison,  2  Madd., 
268(1817);  Hooper  v.  Rossiter,  McClel- 
and,  527  (1824) ;  Bates  v.  MacKinley,  31 
Beav.,  280  (1862).  To  the  point  that 
regular  dividends,  though  increased  in 
amount,  go  as  income  to  the  owner  of 
the  life  estate,  see  Barclay  v.  Waine- 
wright,  14  Vesey,  66  (1807);  Price  v. 
Anderson,  15  Sim.,  473  (1847).  To  the 
point  that  "  extra "  or  unusual  divi- 
dends, whether  of  cash  or  shares,  go  to 
augment  the  principal  of  the  trust  fund, 
see  Irving  v.  Houstoun,  4  Paton's  H.  of 
L.  Cases,  521,  1803  (a  stock  dividend); 
Hooper  v.  Rossiter,  McCleland.  527,  1824 
(a  stock  dividend) ;  In  re  Barton's  Trust, 
L.  R.,  5  Eq.,  238, 1868  (a  stock  dividend); 
Paris  v.  Paris,  10  Vesey,  185,  1804  (a 
cash  dividend) ;  Clayton  v.  Gresham,  10 
Vesey,  288,  1804  (a  cash  dividend); 
Witts  v.  Steere,  13  Vesey,  363,  1807  (a 
cash  dividend) ;  Price  v.  Anderson,  15 
Sim.,  473,  1847  (a  cash  dividend);  Bates 
v.  MacKinley,  31  Beav.,  280..  1862  (a  cash 
dividend).  Cf.  Gill  v.  Burley,  22  Beav., 
619  (1856) ;  Straker  v.  Wilson,  L.  R.,  6 
Chan.,  503  (1871). 

2  Brander  v.  Brander,  4  Vesey,  800 
(1799);  Paris  V.  Paris,  10  Vesey,  185 
(1804);  Irving  v.  Houstoun,  4  Paton's 
H.  of  L.,  521  (1803);  Preston  v.  Milville, 
16  Sim.,  163  (1848);  Barclay  v.  Waine- 
wright,  14  Vesey,  66  (1807) ;  Murray  v. 


Glassee,  17  Jur.,  816  (1852) ;  Johnson  v. 
Johnson,  15  Jur.,  714  (1850);  Witts  v. 
Steere,  13  Vesey,  363  (1807);  In  re  Bar- 
ton's Trust,  L.  R.,  5  Eq.,  238  (1868); 
Plumbe  v.  Neild,  6  Jur.  (N.  S.).  529 
(1860);  Hollis  v.  Allen,  12  Jur.  (N.  S.), 
638  (1866) ;  Hooper  v.  Rossiter,  13  Price, 
774  (1824) ;  Bates  v.  MacKinley,  31  Beav., 
280  (1862).  See,  also,  In  re  Hopkin's 
Trust,  L  R,  18  Eq.,  696  (1874);  Schole- 
field  v.  Red  fern,  32  L.  J.,  Chan.,  627 
(1863):  Hartley  v.  Allen,  4  Jur.  (N.  S.), 
500;  Lock  v.  Venables,  27  Beav.,  598 
(1859),  holding  to  the  effect  that  a  spe- 
cific bequest  of  "  the  dividends,  interest 
and  proceeds  "  of  shares  will  not  pass  a 
bonus  on  the  shares.  In  Alcock  v. 
Sloper,  2  Mylne  &  K.,  699  (1833),  the 
"income  of  the  testator's  long  annui- 
ties" was  given  to  the  life  tenant. 
Wilday  v.  Sandys,  L.  R.,  7  Eq..  455 
(1869).  In  Lane  v.  Lough  ran,  7  Vict. 
L.  R.,  Eq.,  19  (1881%  it  was  held  that  the 
premium  on  a  lease  of  part  of  a  trust 
estate  belonged  to  the  tenant  for  life 
and  not  to  the  corpus.  An  executor 
may  plainly  transfer  the  stock  to  pay 
the  decedent's  debts,  although  it  is  be- 
queathed for  life  with  remainder  over. 
Franklin  v.  Bank  of  England.  1  Russ., 
575  (1826).  In  Clive  v.  Clive,  Kay  (Eng. 
Chan.),  600  (1854),  by  the  terms  of  the 
deed  of  settlement  the  net  profits  of  the 
concern  were  to  be  divided  ratably  to 
such  an  amount  as  should  be  declared 
at  the  semi-annual  meetings,  and  were 
to  be  paid  within  twenty-one  days 
thereafter ;  and  it  was  provided  that  a 
shareholder  was  not  to  receive  any  divi- 
dend after  the  period  at  which  he  ceased 
to  be  a  proprietor  of  shares,  but  the 
dividends  on  such  shares  were  to  con- 
tinue in  suspense  until  some  other  per- 
son should  become  proprietor  of  them. 
When   a    shareholder    died    sixty-nine 


741 


§  557.] 


LIFE    ESTATES    AND    REMAINDERS    IN    STOCK.         [CH.  XXXIII. 


There  are,  however,  recent  cases  in  England  to  the  effect  that 
extraordinary  cash  dividends  may  be  decreed  to  belong  to  the  life 
tenant.1  There,  of  course,  is  no  question  that  ordinary  cash  divi- 
dends belong  to  the  life  tenant.2  This  rule  applies  even  though  it 
may  be  shown  that  the  dividend  in  question  was  earned,  wholly  or 
in  part,  before  the  commencement  of  the  life  estate.3 

AVhere  it  is  shown  that  dividends  have  been  fraudulently  re- 
tained in  prejudice  of  the  rights  of  the  life  tenant,  and  subsequently 
a  bonus  is  paid  upon  the  shares,  it  belongs,  as  income  deferred,  to 
the  tenant  for  life,  even  though  it  be  called  a  bonus.4 

days    after    a    half-yearly   meeting    at  an  J  belonged  to  the  life  tenant,  although 

which  a   dividend   had   been  declared,  it  was  used  by  the  trustee  to  pay  up  the 

but  before  notice  had  been  given  that  stock  in  full,  and  also  to  purchase  new 

such  dividend  was  payable,  having  by  Bharee  which  be. immediately  sold,  but 

his  will  bequeathed  the  interest  and  an-  the  excess  for  which  he  sold  the  stock 

nual  income  arising  from  all  his  shares  ataprofitbelongBtotheremainder-maa 

to  one  f«>r  life,  and  then  in  remainder  '    cash   dividend  of  profits  which 

to  others,  it  was  held  that  this  dividend  have  been  earned  since  the  last  pr<  ced- 

belon  i  l   to  the  legatee  for  lif<\   and  ing  dividend,  such  last  preceding  divi- 

nott,,,l(                                    iteofthe  dend  having  been  made  in  a  regular 


tor.     Sse,  also,  Title  to  Dividends, 
19  \m.  Law  Rev..  571  (1886);  Bo 
,-.    Blakeney,    S     Brown's    Chan., 
(1788  i    /.'    Willoughby,  68  Law  Times 
Rep.,  I    Perry  on   Trusts, 

544,  545.     Mr.  Moak's  note,  81 
Rep.,  828,  888;  Browne  >:  Collins,  L  R., 
12  Eq.,  588  (1871),  is  to  the  effect  that 


and  reasonable  time  previously,  belongs 
to  a  life  tenant  <  .  and  not  to  the 

remainder-man.      Barclay    a    Waine- 
btj    it   V(  -..  86   (1807);    Norris  v. 
Harrison,  2  Madd.,  208  (1817);  Clivo  r. 
Clive,  Kay, 600  (1854);  Murray  H.G1 
17  Jur.,  Ml  ;  l'i  ston  d  Melville, 

16  sim..  163  (1848);  Cuming  n,  Boawell, 


profits  of  a   partnership   accrued  and    2  Jur.    tf.  &),  1006  (1866>    Of.  Wa 


earned  before,   bul   nol  ride  </</<i 

profits  until  after  th<>  death  <>f  the  I 
tator,  belong  to  the  porpns  of  the  eel  tte, 
and  thai  profits  accruing  afteT  his  death 

i  to  the  tenant  for  life  as  income.  8 
also  the  recenl  and  impoi  tanl  rei  iew 
of    the    whole   robjed    in    Bouche    a. 
Sproule,  57  T,  T..  845  (II.  of  L.,  188 
reversing   the  court   below,  Bouche  t". 
Sproule,  29  Ch,  a,  685   188 

'  in  the  case  of  Bugden  v.  Alsbur 
L.  T.  Rep.,  576  1 1890),  the  court  held 
that  the  life  tenant  was  entitled  to  an 
extraordinary  dividend  payable  in. cash. 
The  divid. mkI  was  called  a  bonus,  but 
was  nothing  more  nor  less  than  a  lai 
dividend,  being  a  division  of  accumu- 
lated profits.  In  the  case  of  Ellis  r.  Bar- 
Beld,  64  L  T.  Rep.,  626  (1891),  the  court 
held  that  B  large  dividend  was  income 


indium,  11  Leigh  (Va.),  595  (1841  ; 
u  Anderson,  15  sim..  -17:)  (11 
Witt  r.  Ste»  re,  18  id.,  A- will 

after,  in  England  a  diff< 
rule  prevails  if  the  cash  dividend  isn 
from  long-accumulated  pro! 

r.   MacKinley,  81    Beav.,  280 
:   Jones  V.   Ogle,  L.  R,   8  Chan., 
192    187S 

'Maclaren   v.  Stainton,  I-.  R>,  11  Eq., 
882;  8.  I  «;..  F.  A  J.,  202  (1S01); 

reversing  s.   G,   27   Beav.,  460  (18 
Edmondson  '-.  Crosthwaite,  84  Beav.,  80 
(1864);  Dale   a  Hayes,   10  L.  J..  Chan.. 
24  1  .  T.  (N.  s..  12;  10 
\Y.  R.,  299,     Cf.  Lean  v.  1  ■  L  T. 

(N.  s.  .  305;  S.C.,  28  W.  R.,  184;  Lam- 
bert   v.  Lambert,  2!)  L.  T. 
(1874      3.1    ,22W.R*859;  In  re  Tink- 
ler, 45  L.  J.  (Chan.  Div.),  185. 


742 


CH.  XXXIII.]        LIFE    ESTATES    AND    EEMAINDEKS    IN    STOCK. 


[§  558. 


In  all  cases,  however,  the  intent  of  the  grantor  or  testator  is  the 
pole-star,  and  will  be  carried  out  by  the  courts.1 

§  558.  The  apportionment  of  dividends. —  When  a  life  tenant  dies 
before  the  date  at  which  a  dividend  is  declared,  the  question  arises 
whether  the  dividend  declared  next  after  his  death  ought  or  ought 
not  to  be  apportioned  between  the  reversioner  or  remainder-man 
and  the  estate  of  the  life  tenant  for  the  period  of  time  partially 
covered  by  the  life  estate.  It  is,  in  general,  the  rule  in  such  a  case 
that  the  dividend  is  not  apportionable,  but  belongs  entirely  to  the 
corpus  of  the  trust  fund.2  But  where  a  tenant  for  life  dies  after 
the  dividend  is  declared,  but  before  the  dividend  becomes  due,  his 
estate  will  be  entitled  to  the  whole  of  that  dividend.3  In  England, 
however,  under  the  statute  known  as  the  Apportionment  Act  of 
1870,  dividends  are  apportionable  in  these  cases  between  the  estate 
of  the  life  tenant  and  the  corpus;  *  and  in  this  country  at  common 


i/n  re  Bouch,  L.  R„  29  Chan.  Div., 
635  (1885);  In  re  Hopkin's  Trusts,  L.  R, 
18  Eq.,  696  (1874) ;  Joues  v.  Ogle,  L.  R., 
14  Eq.,  419  (1872);  Re  Box's  Trusts,  9 
L.  T.  (N.  S.),  372  (1863).  Cf.  Read  v. 
Head,  6  Allen,  174  (1863);  Clarkson  v. 
Clarkson.  18  Barb.,  646  (1855) ;  Millen  v. 
Guerrard,  67  Ga.,  284  (1881);  Thomson's 
Appeal,  89  Pa.  St..  36  (1879). 

2  Pearly  v.  Smith,  3  Atk.,  260  (1745); 
Sherrard  v.  Sherrard,  id.,  502  (1747): 
Wilson  v.  Harman,  2  Vesey,  Sen.,  672 
(1755);  Hartley  v.  Allen,  4  Jur.  (N.  S.), 
500  (1858);  In  re  Maxwell's  Trusts,  1 
Hem.  &  M.,  610  (1863);  Scholefield  v. 
Redfern,  2  Drew.  &  Sm.,  173  (1863); 
Foote,  Appellant,  22  Pick.,  299  (1839); 
Granger  v.  Bassett,  98  Mass.,  462  (1868^; 
Clapp  v.  Astor,  2  Edw.  Chan.,  379 
(1834).  Of.  Hyatt  v.  Allen,  56  N.  Y.,  553 
(1874);  Brundage  v.  Brundage,  60  id.. 
544,  551  (1875) ;  Perry  on  Trusts,  §  556 ; 
1  Williams  on  Executors,  §  836,  note  m. 
But  in  Massachusetts  it  has  been  held 
that  sometimes  dividends  declared  after 
the  life  tenant's  death  will,  neverthe- 
less, go  to  his  estate.  Thus,  a  life  ten- 
ancy in  stock  for  the  support  of  the  tes- 
tator's widow  and  children  was  held  to 
entitle  the  widow's  estate  to  a  dividend 
declared  after  her  death,  but  for  a 
period  which  expired  before  that  event. 


Gray,  274  (1859).  See,  also,  Ellis  v.  Pro- 
prietors of  Essex  Merrimack  Bridge,  2 
Pick.,  243  (1824):  Gifford  v.  Thompson, 
115  Mass.,  478  (1874).  Cf.  King  v.  Follett, 
3  Vt,  385  (1831),  in  which  the  residuary 
legatee  claimed  from  the  legatee  of  cer- 
tain stock  the  share  of  dividends  earned 
in  the  life-time  of  his  testator,  but  de- 
clared after  his  death ;  the  court  hold- 
ing that  a  sale  or  gift  of  stock  carries 
with  it  all  dividends  declared  after  it 
takes  effect,  whether  earned  before  or 
not. 

» Wright  v.  Tuckett,  1  J.  &  H,  266 
(1860);  Paton  v.  Sheppard,  10  Sim.,  186 
(1839). 

«  33  and  34  Vict.,  ch.  35.  §  2 ;  Pollock 
r.  Pollock,  L.  R.,  18  Eq.,  329  (1874), 
qualifying  or  explaining  Whitehead  v. 
Whitehead,  L.  R,  16  Eq.,  528  (1873); 
Beavan  v.  Beavan,  53  L.  T.  Rep.,  245 
(1885).  Cf.  Capron  v.  Capron,  L.  R,  17 
Eq„  288  (1874);  and  see  Banner  v.  Lowe. 
13  Ves.,  135  (1806);  Hay  v.  Palmer, 
2  P.  Wins.,  501  (1727).  The  statute  ap- 
plies only  to  dividends  upon  the  stock 
of  corporations,  strictly  speaking,  and 
not  to  those  upon  the  shares  in  private 
trading  corporations.  Jones  v.  Ogle,  L. 
R..  8  Chan.,  192  (1872).  And  does  not 
apply  to  stock  dividends.  Hartley  v. 
Allen,  4  Jur.  (N.  S.),  500  (1858). 


Johnson   v.    Bridgewater  Mfg.    Co.,  14 


743 


§§  559,  560.]       LIFE    ESTATES    AND    liEMAINDEES    IN    STOCK.      [CII.   XXXIII. 


law,  in  one  or  two  jurisdictions,  there  is  a  tendency  to  hold  that 
dividends  are  apportionable.1 

§  559.  The  right  to  subscribe  for  new  shares  as  between  life  tenant 
and  remainderman. —  The  right  to  subscribe  for  new  shares  at  par 
upon  an  increase  of  the  capital  stock,  which  is  an  incident  of  the  own- 
ership of  the  stock,  does  not  belon-  as  a  privilege  to  the  life  tenant, 
but  such  an  increment  must  be  treated  as  capital,  and  be  added  to  the 
trust  fund  for  the  benefit  of  the  remainder-man.  This  is  equally  the 
rule  whether  the  trustee  subscribes  for  the  new  stock  for  the  benefit 
of  the  trust  or  sells  the  right  to  subscribe  for  a  valuable  consideration. 
In  either  event  the  increase  goes  to  the  corpus.2  The  subsequent  in- 
come, however,  of  such  increase  belongs,  during  the  continuance  of 
the  life  tenancy,  to  the  life  tenant  as  income;  the  new  shares  are 
part  of  the  corpus,  and  the  life  tenant,  being  entitled  to  the  income 
from  the  corpus,  takes  the  income  from  the  accretions  thereto.1' 

§  560.  Miscellaneous  (jiostions  In  rein.-  -  The  life  tenant  must  pas- 
calls  which  are  made'  and  taxes  levied 


'In  Ex  parte  Rutledge,  1  Harp 
Eq.  (S.  ('.).  65(1824);  S.  G,  14  Am.  I'  . 
696,  a  dividend  was  apportioned  be- 
tween life  tenant  ami  remainder-man. 
This  is  regarded  a  leading  case  in  favor 
of  apportionment  In  P<  nnsylvania  the 
interest  on  municipal  bonds  ami  on 
the  bonds  of  private  corporations  is 
apportionable;  but  guer<  whether  or 
nut  the  interest  on  government  bonds 
would  be.  Wilson's  Appeal,  108  Pa  St.. 
344  (1885),  overruling  Earp's  Will.  1  Par- 
son's Eq.  Caa,  •'>">•;.  But  in  Massachu- 
setts the  statute  of  apportionment  is 
held  not  to  apply  t->  dn  idends  upon  the 
stock  of  corporations  Granger  v.  Bas- 
s  i  t.  98  Mass.,  862,  460  (1868),  construing 
(Jen.  StatofMasa,  ch.  97,  §24,  In  New 
York  an  apportionment  is  provided  for 
by  Laws  of  1875,  ch.  542.  Bee  Gold- 
smith  v.  Swift,  X.'.")  Hun.  -Jul  |  lss]  (. 

-'  \tkins  r.  Albree,  hi  Masai 859  1866); 
Brinley  v.  Grou,  50  Conn..  66(1882);  Bid- 
die's  Appeal,  mi  Pa  Si.,  278  1 1882);  Moss1 
Appeal,  83  Pa  St,  264  (1877);  Vinton's 
Appeal,  99  Pa.  St  .1  ;  Goldsmith 

v.  Swift,  25  Hun,- 201  (1881):  Sanders  u. 


during  the  continuance  of 


Bromley.  55  P.  T.  .  N.  s.i.  Chan.  Div,  145 
iivs»'".  Profit  upon  the  sale  of  stock  is 
corpus,  and  not  income  for  the  life  ten- 
ant Whitney  v.  Phoenix,  1  Redf.  (N.  V. 
sur.  .  180  L880>  Of.  Leitb  a.  Wells.  48 
N.  IST.,  58'  ;  Ei  inenuav  r.  llemen- 

way,  L84  Blasa,  446  (1883);  New  Eng- 
land Trust  Co.  v.  Eaton,  140  ftlasa,  582 
(1886  :  S  I  '..  I  Am.  Prob.  Rep..  368. 
Sometimi  s  certificates  of  new  stock  are 
not  stock  dividends  Chicago,  etc.,  R 
P.  I  a  >:  Page,  I  Bisa,  461  (1864>  In 
Londesborough  v.  Somerville,  19  Beav., 
395  1854),  where  consols  were  sold  just 
before  a  dividend  day  and  the  proceeds 
-led  in  realty,  a  tenant  for  life  was 
held  entitled  to  be  jaid.  as  income  on 
the  consols,  the  diiference  between  the 
price  obtained  and  the  value  exclusive 
of  the  next  dividend.  See,  also,  in  gen- 
era!        5   .  supra. 

*M08S'  Appeal,  88  Pa  St.,  264  (1877); 
Biddle's  Appeal.  99  Pa.  St.,  278  (1882). 
and  the  cases  generally  cited  in  the  pre- 
ceding note;  In  re  Bromley,  55  L.  T. 
(N.  s.i.  Chan.  Div.,  145(1886). 

'  Re  Box's  Trusts,  9  L.  T.  (N.  S.),  372 


5  Webb  v.  Town  of  Burlington,  88  Vt, 

188(1856);  Citizens"   .Mutual  Ins.   Co.  r. 
Lott,  45  Ala.,  185  (1871).     Of.    Nat  Al- 


bany    Exchange    Bank 
Blatch.,  478(1880). 


v.    Wells,    18 


741 


CH.  XXXIII.]        LIFE    ESTATES    AND    REMAINDERS    IN    STOCK. 


[§  ;Jr»°- 


his  estate  upon  shares  held  in  trust  for  his  benefit.  And  where 
stock  to  produce  a  fixed  income  is  bequeathed  for  life,  a  subsequent 
increase  in  the  earnings  from  that  stock  inures  to  the  benefit  of  the 
life  tenant.1  But  the  enhanced  price  for  which  stock  sells  by  reason 
of  dividends  earned  but  not  declared  belongs  entirely  to  the  re- 
mainder.2 A  life  tenant  is  not  entitled  to  have  the  stock  transferred 
to  him  on  the  corporate  books.3  But  the  corporation,  if  it  had  no- 
tice of  the  trust,  may  be  held  liable  for  transferring  shares  in  preju- 
dice of  the  rights  of  the  life  tenant.4  And  an  administrator  who 
permits  an  irregular  transfer  in  fraud  of  the  life  tenant's  rights 
makes  himself  personally  liable.5  A  dividend  declared  before  but 
payable  after  the  testator's  death  belongs  to  the  estate.6  A  claim 
of  the  company  against  the  life  tenant  for  dividends  paid  cannot 
be  enforced  against  the  remainder-man's  interest.7 


(1863) ;  Day  v.  Day,  1  Dr.  &  Sni.,  261. 
la  case  of  a  life  estate,  followed  by  a 
life  estate,  followed  by  a  remainder  to 
the  nominees  of  the  first  life  tenant,  the 
estate  of  the  first  life  tenant  is  liable  for 
calls  made  after  the  remainder  com- 
mences. Hobbs  v.  Wayet,  57  L.  T.  Rep., 
225  (1887).  If  a  call  becomes  due  the 
day  after  the  testator  dies  it  is  the  duty 
of  the  executor  to  pay  it  from  the  gen- 
eral fund.  Emery  v.  Wason,  107  Mass., 
507  (1871). 

i  Russell  v.  Loring,  3  Allen,  121  (1861). 
But  when  a  fixed  income  is  bequeathed 
and  the  income  fails  or  falls  short,  the 
principal  must  be  resorted  to.  Bonham 
v.  Bonham,  33  N.  J.  Eq.,  476 ;  Haydel 
v.  Hurck,  72  Mo.,  253.  The  opposite 
rule,  however,  prevails  in  New  York. 
Delaney  v.  Van  Aulen,  84  N.  Y.,  16  (1881) ; 
reversing  S.  C,  21  Hun,  274.  Cf.  Craw- 
ford v.  Dox,  5  Hun,  507  (1875).  See,  also, 
§304. 

2  Scholefield  v.  Redfern,  32  L.  J.,  Chan., 
627  (1863) ;  Abercrombie  v.  Riddle,  3  Md. 
Chan.,  320(1850) ;  Van  Blarcom  v.  Daget, 
31  N.  J.  Eq.,  783  (1879).  Cf.  Londes- 
borough  v.  Somerville,  19  Beav.,  295 
(1854; ;  Matter  of  Stutzer,  26  Hun,  481 
(1882) ;  Re  Accounting  of  Gerry,  103  N. 
Y,  445. 

3  Collier  v.  Collier,  3  Ohio  St.,  369 
(1854).     Cf.  State  v.  Robinson.  57  Md, 


4S6  (1881).  If  the  corporation  transfer 
the  stock  to  the  life  tenant,  even  by 
orders  of  the  court,  but  issues  a  certifi- 
cate not  stating  the  facts  of  life  ten- 
ancy, and  tells  a  purchaser  of  the  cer- 
tificate that  it  is  all  right,  the  corpora- 
tion is  liable  to  the  remainder-man. 
Caulkins  v.  Memphis,  etc.,  Co.,  4  S.  W. 
Rep.,  287  (Tenn.,  1887).  See,  also,  Lind- 
ley  on  Partnership,  p.  1079,  etc. 

4  Stewart  v.  Fireman's  Ins.  Co.,  53 
Md.,  564  (1S80). 

s  Keeney  v.  Globe  Mill  Co.,  39  Conn., 
145  (1872).  See,  also,  Ames  v.  William- 
son, 17  West  Va.,  673  (1881). 

6  De  Gendre  v.  Kent,  L.  R,  4  Eq.,  283 
(1867).  Cf.  Browne  v.  Collins,  L.  R..  12 
Eq.,  586,  594;  Locke  v.  Venables.  27 
Beav.,  598  (1859).  See,  also,  Cogswell 
v.  Cogswell,  2  Edw.  Chan.,  231  (1834); 
Abercrombie  v.  Riddle,  3  Md.  Chan., 
320  (1850) ;  Wright  v.  Tuckett.  1  Johns. 
&  Hem.,  266  (1860);  Furley  v.  Hydes,  42 
L.  J.,  Ch.,  626. 

7  Where  a  fixed  per  cent,  is  paid  an- 
nually to  stockholders  instead  of  divi- 
dends and  charged  to  them  and  the 
stock  held  in  pledge  for  the  same,  such 
a  payment  to  the  life  tenant  does  not 
create  a  valid  lien  on  the  stock  as  against 
the  remainder-man.  Reading,  etc.,  Co. 
v.  Reading,  etc.,  Works.  21  Atl.  Rep.,  169 
(Pa.,  1891). 


745 


CHAPTER  XXXIV. 


TAXATION  OF  SHARES  OF  STOCK  AND  OF  CORPORATIONS. 


§  561.  The  four  methods  of  taxing  cor- 
porate interests. 

A.   TAXATION  OF  SHARES  OF  STOCK. 

562.  Relation   of  stockholders  to  the 

first  three  methods  of  taxation. 

563.  Tax    on   shares  of  stock  as  dis- 

tinguished     from     the     other 
methods. 
C64.  Tax  on  stockholders  residing  in 
the  state  creating  the  corpora- 
tion. 

565.  Tax  on  resident  stockholders  in 

a  non-resident  or  foreign  cor- 
poration. 

566.  Tax  on  Don-resident  stockhol 

in  resident  or  domestic  corpo- 
ration —  Mode  of  collecting. 

567.  Double  taxation. 

568.  Exemptions  from  taxation  as  af- 

fecting tax  on  shares  of  stock. 


B.    TAXATION  OF  NATIONAL  BANK  STOCK 


589. 

571. 


57a 


General  ml 

Place  in  which  shares  in  national 
bank  stuck  may  be  taxed. 

The  tax  must  not  he  greater  than 
that  imposed  on  other  "mon- 
eyed capital." 

The  baid;  may  bring  suit  to  re- 
strain illegal  tax  on  its  stock- 
holders. 


C   OTHER  METHODS    OF    TAXING    CORPO- 

RA'I  !■ 

572a.  <  General  principles. 

1  semptions  from  taxation. 
572c   Taxation    of    foreign    corpora- 
tions. 

ition     must    not    interfere 
with  interstat  i  commerce. 


§561.  The  four  methods  of  taxing  corporate  interests. —  There 
are,  in  general,  four  methods  of  taxing  corporate  interests.  These 
arc.  first,  by  8  tax  on  the  franchise;  second,  on  the  capital  stock; 
third,  on  the  real  estate  and  personal  property  of  the  corporation; 
fourth,  by  a  tax  on  the  shares  of  stock  in  the  hands  of  the  stock- 
holders.1 There  is  another  mode  of  taxation  which  is  sometimes 
adopted  —  a  tax  on  corporate  dividends ;  but  since  this  is  generally 
construed  to  be  only  a  mot  hod  of  valuing  the  franchise  or  capital 
stock,  it  can  hardly  be  called  a  fifth  method  of  taxing  corporate 
interests.2 

It  is  entirely  within  the  discretion  of  the  legislature  to  say  which 
one  of  these  four  methods  of  taxation  shall  be  adopted,  where  the 
matter  is  not  regulated  by  the  state  constitution.  Not  only  this, 
hut  it  is  also  within  the  discretion  of  the  legislature  to  tax  the  cor- 
poration in  two  or  more  of  these  ways  —  to  levy  a  double  tax  on  the 
corporate  interests,  and  even  to  levy  a  treble  or  quadruple  tax 
thereon. 


1  Redfield  on  Railways  vol.  II  (3d  ed.), 
p.  453;  Ottawa  Glass  Co.  v.  McCal< 


III..  556  (1ST6);  Louisville,  etc.,  RRCo. 
B.  Stat".  6  Heisk.  CTenu.),  063,  793. 
2  See  g  572a. 


746 


CH.  XXXIV.]  TAXATION    OF    STOCK   AND    CORPORATIONS.        [§§  562,  563. 

A.    TAXATION   OF    SHARES    OF    STOCK. 

§  562.  Relation  of  stockholders  to  the  first  three  methods  of 
taxation. — The  stockholders  in  a  corporation  have  very  little  to  do 
directly  with  any  of  the  first  three  modes  of  taxing  corporate 
interests.  The  tax  is  levied  directly  against  the  corporation,  and 
is  paid  by  the  corporate  officers  out  of  the  treasury  of  the  corpo- 
ration. If  the  tax  is  unauthorized  or  illegal,  or  improperly  as- 
sessed, or  is  based  on  too  high  a  valuation,  it  is  ordinarily  the 
duty  of  the  corporate  officers  to  rectify  or  oppose  such  tax.  The 
stockholders  have  nothing  to  do  with  the  ordinary  transaction  of 
corporate  business,  of  which  this  forms  a  part.  Where,  however, 
the  corporate  officers  refuse,  upon  request  of  one  or  more  stock- 
holders, to  oppose  or  decline  to  pay  an  unauthorized  tax  levied  in 
any  one  of  the  three  methods  mentioned  above,  the  stockholder 
himself  may  bring  a  suit  in  a  court  of  equity,  in  behalf  of  and  for 
the  protection  of  the  corporate  interests,  to  enjoin  the  payment 
and  collection  of  such  unauthorized  tax.1 

§  563.  Tax  on  shares  of  stoclz  as  distinguished  from  the  other 
methods. — A  tax  on  shares  of  stock  is  clearly  different  from  a  tax 
upon  the  franchise,  the  corporate  property  or  the  capital  stock. 
Especially  is  it  important  to  distinguish  a  tax  on  shares  of  stock 
from  a  tax  on  the  capital  stock.2     The  latter  is  always  taxed  against 


1  Dodge  v.  Woolsey,  18  How..  331 
(1855);  State  Bank  of  Ohio  v.  Knoop,  16 
id.,  369(1853);  Wilmington  R  R.  Co.  v. 
Reed,  13  Wall.,  264  (1871);  Delaware  R. 
R.  Tax,  18  id.,  206  (1873;;  Greenwood  v. 
Freight  Co.,  105  U.  S.,  13  (1881) ;  Paine 
v.  Wright,  6  McClain,  395  (1855) ;  Foote 
v.  Linck,  5  McClain,  616  (1853),  holding 
also  that  the  corporation  is  a  necessary 
party,  and  that  if  the  complainant  is  a 
non-resident  he  may  bring  the  suit  in 
the  United  States  circuit  court ;  Daven- 
port v.  Dows,  18  Wall.,  626  (1873),  also 
holding  that  the  corporation  is  a  nec- 
essary party  defendant;  Bailey  v.  At- 
lantic, etc.,  R.  R  Co.,  5  Dill.,  22  (1874); 
Parmley  v.  Railroad  Cos.,  5  Dill.,  13,  25 
(1874).  But  the  stockholder  must  allege 
actual  tender  of  the  amount  of  tax  con- 
ceded to  be  due.  Allegation  of  readi- 
ness to  pay  is  insufficient.  Huntington 
v.  Palmer,  8  Fed.  Rep.,  449  (1881).  See, 
also.  Trask  v.  Maguire,  18  Wall.,  391 
(1873);  Wood  v.  Draper,   24  Barb.,  187 


(1857) ;  London  v.  City  of  Wilmington, 
78  N.  C,  190  (1878);  §  494.  The  case  of 
State  v.  Flavell,  24  N.  J.  L.,  370  (1854), 
denies  this  right.  A  stockholder's  in- 
junction against  a  tax  in  corporate  prop- 
erty falls  when  the  property  is  subse- 
quently sold  under  execution.  Secor  v. 
Singleton,  35  Fed.  Rep.,  376  (1888).  The 
general  character  of  such  a  suit  as  this 
comes  under  the  principles  of  law  set 
forth  in  Part  IV,  infra. 

2  In  the  case  of  Porter  v.  Rockford. 
R.  I,  etc..  R.  R.  Co.,  76  111.,  561  (1875), 
the  court  clearly  recognized  this  dis- 
tinction, and  said  :  "  The  legal  property 
of  the  shareholder  is  quite  distinct  from 
that  of  the  corporation,  although  the 
shares  of  stock  have  no  value  save  that 
which  they  derive  from  the  corporate 
property  and  franchise,  and  a  tax  levied 
upon  the  property  of  the  one  is  not,  in 
a  legal  sense,  levied  upon  the  property 
of  the  other."  See,  also,  Bradley  v. 
Bauder,  36  Ohio  St.,  28  (1880).    Cf.  Dela- 


747 


§  563.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [CH.  XXXIV. 


the  corporation,  is  paid  by  the  corporation,  and  is  based  on  a  val- 
uation which  does  not  necessarily  depend  on  the  value  of  the  shares 
of  stock.  A  tax  on  the  shares  of  stock  is  generally  levied  directly 
against  the  stockholders  themselves  at  their  place  of  residence,  is 
based  on  the  market  value  of  the  stock,  and  is  entirely  distinct 
from  the  location,  interests,  property  or  taxes  of  the  corporation 
itself.  There  are,  however,  some  instances  of  taxation  herein  which 
are  on  the  border-line  between  the  two.  Thus,  a  statute  expressly 
laying  a  tax  on  the  shares  of  stock,  but  requiring  the  corporation 
to  pay  that  tax  from  the  corporate  funds,  has  been  held  to  be  a 
tax  noc  on  the  shares  of  stock  but  on  the  capital  stock.  In  other 
jurisdictions  it  has  been  held  to  be  a  tax  on  the  shares  of  stock. 
Taxes  on  shares  of  stock  in  national  banks  are  frequently  so  levied 
and  collected  and  are  held  to  be  upon  the  shares  of  stock  and  not 
on  the  capital  stock.1    A  tax  laid  on  shares  owned  by  non-residents 

ware    R    R  Tax.   18    Wall.,  206,   830     value  of  the  capital  stock  is  estimated 


(1873);  Farrington  v.  Tennessee,  95  I  ,  S., 
079.  where  the  distinction  is  clearly 
drawn;  Quincy  Bridge  Co.  r.  Adams 
Co.,  88  111.,  615  (1878).  In  the  case  of 
NorthWard  National  Bank  r.  City  of 
Newark,  39  N.  J.  L.,  880  (1877),  the 
'•ourt  said  :  "The  moneyed  capital  of  a 
bank  is  an  entirely  different  thing  from 
apital  stork.  The  former  is  the 
property  of  the  corporation.  It  may 
consist  of  cash  or  bills  discounted,  or  be 
in  part  invested  in  real  cstad' or  in  the 
securities  of  federal  government  In 
whatever  form  it  is  invested,  it  is  owned 
by  the  bank  as  a  corporate  entity  and 
not  by  the  stockholders.  The  Btock  or 
shares  represent  the  interests  of  the 
shareholders,  which  entitle  them  to  par- 
ticipate in  the  net  profits  of  the  bank  in 
the  employment  of  its  capital,  and  is  a 
distinct  and  independent  interest  or 
property  in  the  shareholders,  held  by 
them  like  other  property."  The  case 
of  Porter  r.  Rockford,  etc..  R  R  Co.. 
supra,  holds  also  that  a  tax  on  the 
"capital  stock"  means  the  property  of 
the  corporation  and  not  the  aggregate 
of  the  shares  of  stock.  See,  also,  State 
v.  Hamilton,  5  Ind.,  310  (1854  .  where 
the  word  "stock"  was  construed  to 
mean  the  tangible  property  of  the  cor- 
poration. But  see  Trask  r.  Maguire,  18 
Wall.,  391  (1873).     And  even  though  the 


by  the  aggregate  value  of  the  shares,  it 
is  still  a  tax  on  the  capital  stock. 
New  ( >.,  etc.,  R  R  Co.  v.  Board  of  Assess- 
or-. 82  La.  Ann..  19  (1S80  .  See.  also, 
State  Bank  of  Va  v.  City  of  Richmond, 
79  Va.,  113.  So,  also,  where  the  fran- 
chise is  valued,  in  that  manner  f<>r  tax- 
ation. Commonwealth  v.  Hamilton 
Mfg.  Co.,  94    Ma-..  298  (1866);    Att'y- 

Cen.  /•.  Bay  State  Min.  CO.,  '.".I  Mass.. 
1868  Hamilton  Co.  V.  Massachu- 
.  ii  Wall.,  882  (1867),  holds  that  a 
t.i\  on  the  excess  of  the  market  value  of 
the  stock  over  the  value  of  the  corpo- 
rate realty  and  machinery  is  a  fran- 
chise  tax.  In  Indiana  it  is  held  that  a 
tax  on  the  shares  of  stock  is  the  proper 
mode  of  taxation  unless  the  statute 
provides  otherwise.  Whitney  v.  City 
of  Madison.  23  Ind.,  831  (1864),  Cf. 
Wright  r.  Stelz.  27  Ind.,  338  U8G6).  Tbe 
mere  tact  that  the  corporation  is  com- 
pelled to  pay  the  tax  does  not  prevent 
its  being  consider)  d  a  tax  on  the  shares. 
National  Bank  r.  Commonwealth,  9 
Wall.,  353,  360  (1SC9),  per  Miller,  J. 
Stockholders  are  liable  for  taxes  levied 
on  a  distillery  win  re  the  statute  lev  i<  s 
the  tax  on  "persons  interested  in  the 
use  of  the  distillery."  United  States  v. 
Walters.  46  Fed.  Rep.,  509  (1891). 
1  See  §  570,  infra. 


748 


err.  xxxiv.]        taxation  op  stock  and  corporations. 


[§  504. 


of  the  state  which  creates  the  corporation  and  which  levies  the  tax 
is  a  tax  on  the  shares  of  stock  and  not  on  the  capital  stock,  even 
though  the  corporation  is  required  to  pay  it  and  to  collect  the  same 
from  the  owners  of  those  shares. 

§  564.  Tax  on  stockholders  residing  in  the  state  creating  the 
corporation. —  The  right  of  the  state  to  tax  resident  stockholders 
of  a  resident  corporation  on  their  shares  of  stock  is  undoubted, 
and  has  been  unquestioned  except  where  double  taxation  would 
result  therefrom  and  is  prohibited;  or  where  a  constitutional  pro- 
vision restricts  this  mode  of  taxation.1  Generally  such  a  tax  on 
resident  stockholders  is  levied  on  them,  not  in  the  municipality 
where  the  corporation  is,  but  in  the  cities,  counties  or  towns  where 
the  stockholders  respectively  reside.  This  is  always  the  rule  if 
the  statute  is  silent,  and  is  the  rule  unless  the  statute  expressly 
provides  otherwise.2 

Controversies  sometimes  arise  as  to  the  power  of  a  municipality 
to  tax  stockholders  living  in  the  state,  but  not  in  the  municipality 
which  levies  a  tax  on  their  shares  of  stock,  the  corporation  itself 
being  located  within  that  municipality.  The  law  plainly  is  that 
such  a  tax  is  unauthorized,  illegal  and  not  collectible  unless  the 
municipality  is  authorized   by  statute  to  levy  the  tax.3      A  mere 


1  In  Illinois,  under  the  act  of  1872 
taxing  railroad  corporations,  resident 
stockholders  in  domestic  corporations 
are  not  taxed.  Porter  v.  Rockford,  etc., 
E.  R.  Co.,  76  111.,  561  (1875).  In  Iowa 
stock  is  taxed  under  section  813  of  the 
code.  See  Cook  v.  City  of  Burlington, 
59  Iowa,  251  (1882);  Henkle  v.  Town  of 
Keota,  27  N.  W.  Rep.,  250  (1886).  Cf. 
National  State  Bank  v.  Young,  25  Iowa, 
311.  In  Iowa,  where  deductions  for 
debts  are  allowed  to  persons  taxed  on 
their  "  credits,"  no  deduction  is  allowed 
from  the  tax  on  shares  of  stock.  They 
are  not  "  credits."  Bridgman  v.  City 
of  Keokuk,  33  N.  W.  Rep.,  355  (Iowa, 
1887).  As  to  the  valuation  of  the  shares 
of  stock,  see  St.  Charles,  etc.,  R.  R.  Co. 
v.  Assessors,  31  La.  Ann.,  852  (1879).  If 
the  corporation  owns  shares  of  its  own 
stock  it  is  taxable  the  same  as  (hough 
owned  by  another.  Richmond,  etc.",  R 
R  Co.  v.  Alamance  Co.,  84  N.  C,  504 
(1881). 

2  City  of  Evansville  v.  Hall,  14  Ind., 
27  (1859).     A  pledgor  is  the  proper  per- 


son to  be  assessed  on  stock  which  has 
been  pledged.  Tucker  v.  Aiken,  7  N.  H., 
113  (1834).  A  pledgee  of  stock  is  not 
subject  to  a  tax  levied  on  the  shares  of 
stock  held  by  him.  Waltham  Bank  v. 
Waltham,  51  Mass.,  334  (1845).  In  Mas- 
sachusetts shares  held  by  executors  or 
administrators  are  taxed  in  the  town  of 
which  the  deceased  was  an  inhabitant 
at  the  time  of  his  death,  and  shares 
held  by  trustees  are  taxed  in  the  towns 
in  which  the  cestuis  que  trust  respect- 
ively reside.  Revere  v.  Boston,  123 
Mass.,  375  (1877).  As  to  the  legal  rem- 
edy in  Massachusetts  for  an  unjust  val- 
uation of  stock  for  taxation,  see  Boston 
Mfg.  Co.  v.  Commonwealth,  12  N.  E. 
Rep.,  362  (Mass.,  1887).  As  to  taxation 
of  stock  under  the  Vermont  law,  see 
Willard  v.  Pike,  9  Atl.  Rep.,  907  (Vt, 
1887). 

3  Stetson  v.  City  of  Bangor,  56  Me.. 
274  (1868),  the  court  saying:  "Munici- 
palities can  tax  shares  of  stock  only 
when  authorized  so  to  do  by  some  law 
of  the  state.    They  are  the  creatures  of 


749 


§  565.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [CH.  XXXIV. 


general  authority  to  the  municipality  to  tax  all  property  within  its 
boundaries  will  authorize  a  tax  by  it  of  shares  of  stock  owned  by 
persons  living  within  it.1  But  such  authority  does  not  sustain  a 
tax  on  stockholders  residing  out  of  the  municipality,  although 
within  the  state.  The  location  of  such  shares  of  stock,  as  property 
for  purposes  of  taxation,  is  not  where  the  corporation  is  located, 
but  where  the  stockholder  lives.2  The  statutes  of  the  state  may 
change  this  situs  of  the  stock  so  as  to  render  it  taxable  where  the 
corporation  is;  but  unless  there  is  a  statute  to  that  effect  such  a 
tax  by  a  municipality  is  unauthorized  and  void. 

§565.  Tax  on  resident  stockholders  in  a  non-resident  or  foreign 
corporation. —  It  is  undoubtedly  within  the  constitutional  power  of 
the  legislature  of  a  state  to  enact  a  statute  that  persons  residing  in 
that  state,  who  are  stockholders  in  a  corporation  created  by  an- 
other state,  shall  be  taxed  on  their  shares  of  stock  at  their  resi- 
dence within  the  former  state.'  This  principle  of  law  is  based  on 
the  fact  that  shares  of  stock  are  personal  property;  that  they  are 
distinct  from  the  corporate  property,  franchises  and  capital  stock; 
that  they  follow  t lie  domicile  of  their  owner  like  other  personal 
property,  and  that  consequently  he  may  be  taxed  therefor  wherever 
he  may  reside.  It  accordingly  is  a  question  of  policy  and  expedi- 
encv  with  a  state  whether  or  not  it  will  tax  its  citiz  ins  who  are 


state  law,  and  derive  their  powers  in 
this  respect  solely  from  state  enact- 
ments." Griffith  n  Watson,  19  Kan., 
23  (1877) ;  City  of  Evansville  r.  Hall.  14 
Ind..  27  (1859);  Conwell  v.  Town  of  Con- 
nersville,  15  Ind..  150  (I860).  Such  a 
tax  may  be  levied  under  a  general 
power  of  the  municipality  to  tax  prop- 
erty. Gordon's  Ex'rs  r.  Mayor,  etc*,  5 
Gill  (Md.),  231  (1847).  Cf.  Richmond  t\ 
Daniels,  14  Graft,  385;  Augusta  n  Na- 
tional Bank,  37  Ga.,  620  (18GS\.  Markoe 
r.  Hartranft,  6  Am.  L.  l;  p  N.  8 
(1867),  holds  that  in  Pennsylvania  such 
a  tax  is  unconstitutional,  and  that  a  tax 
must  be  levied  where  the  stockholder 
resides.  See,  also,  Craft  v.  Tuttle,  27 
Ind.,  332  (1866). 

1  But  a  municipality  can  levy  a  tax 
only  when  specially  authorized  so  to  do, 
and  can  tax  only  such  property  as  the 
statute  permits  it  to  tax.  Cooley  on 
Taxation  (2d  ed.\  678.  Hence  power  to 
a  municipality  to  levy  a  tax  for  watch- 
men purposes  will  not  authorize  a  tax 


on  shares  of  stock     Bank  of  Georgia  v. 
Savaunah.  Dudley  (Ga.),  130  (18! 

g 

iWorthington  v.  Sebastian,  25  Ohio 
St,  1  (1874):  Bradley  v.  Bander, 86 Ohio 
St,  28  (1880X  holding  it  valid,  although 
the  corporation  is  taxed  in  the  Btate 
where  it  exisK  To  same  e(T>  <-t.  Seward 
r.  City  of  Rising  Sun,  79  Ind,  851  (1881); 
Dyer  r.  Oeborn,  11  R.  I..  821  (1876); 
McKeen  v.  County  of  Northampton,  49 
Pa.  St.  519  (1865);  Pwipht  r.  Boston, 
18  Allen,  816(1866);  Whiteeell «.  Same, 
id.,  526;  Great  Barrington  r.  County 
Com'xa,  88  Mass.,  572  (1835);  Worth  n 
Com'ra,  82  N.  <'..  420  S.  C,  90 

N.  C.  409  (1884).  In  Illinois,  also,  I 
dent  stockholders  in  foreign  corpora- 
tions are  taxed  on  their  shares  of  stork. 
Porter  n  Rockford.  etc..  R.  R.  Co..  70 
I1L,  561  ll875);  Cooley  on  Taxation 
(2d  ed.l  57.  221;  Holton  r.  Bangor.  23 
Me..  264;  Smith  n  Exeter,  37  N.  H.,  566 
(1859). 


rso 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  565. 


stockholders  in  foreign  corporations.  A  few  of  the  states 1  levy 
such  taxes.  But  New  York  pursues  the  more  broad  and  liberal 
policy  that  shares  of  stock  should  not  be  taxed  where  the  corpora- 
tion is  already  taxed;  that  the  state  which  furnishes  facilities  to  the 
corporation  for  the  earning  of  dividends  should  have  the  sole  ben- 
efit of  taxes  on  such  corporate  interests ;  that  a  tax  on  resident 
stockholders  in   non-resident  corporations  would  generally  result 


1  State  v.  Hannibal  &  St.  J.  R.  R.  Co., 
37  Mo.,  265  (18GG) ;  Ogden  v.  City  of  St. 
Joseph,  3  S.  W.  Rep.,  25  (Mo..  1887); 
Sturges  v.  Carter,  114  U.  S.,  511  (1884), 
upholding  such  a  tax  in  Ohio ;  Newark 
City  Bank  v.  Assessor,  30  N.  J.  L.,  1 
(1862).  See,  also,  Webb  v.  Burlington, 
28  Vfc,  188  (1856).  See  Pa.  Act  of 
April  29,  1844;  Lycoming  County  v. 
Gamble,  47  Pa.  St.,  106  (1864).  See,  also, 
In  re  Short's  Estate,  16  Pa.  St.,  63  (1851), 
where  a  decedent  who  died  a  resident  of 
Pennsylvania  left  a  fortune  in  stocks  of 
non-resident  corporations.  The  stocks 
were  held  subject  to  a  collateral  inher- 
itance tax.  In  1879,  however,  Pennsyl- 
vania adopted  in  large  part  the  system 
of  taxation  that  prevails  in  New  York 
for  the  taxation  of  corporations.  See 
Hunter's  Appeal,  10  Atl.  Rep.,  429  (Pa., 
1887).  By  the  still  later  statute  of  1885, 
manufacturing  corporations  are  spe- 
cially favored  in  the  way  of  taxation. 
MacKellar,  etc.,  Co.  v.  Commonwealth, 
10  Atl.  Rep.,  780  (Pa.,  18S7).  In  New 
Jersey  now  there  is  no  tax  on  shares  of 
stock  except  in  banks.  See  Newark  B. 
Co.  v.  Newark,  121  IT.  S.,  163  (1887). 
Shares  of  stock  owned  by  residents  in 
foreign  corporations  are  not  taxable  if 
a  tax  is  paid  by  the  corporation  itself. 
State  v.  Ramsey,  24  Atl.  Rep.,  415  (N.  J, 
1892).  In  Texas  shares  of  stock  are  not 
taxed  where  the  capital  or  property  of 
the  corporation  is  taxed.  Gillespie  v. 
Gaston,  4  S.  W.  Rep.,  248  (Tex.,  1887). 
California  made  a  wise  resolution  when, 
in  1881,  it  repealed  §  3640  of  its  political 
code  taxing  shares  of  etock,  and  added 
the  following  (§  3608)  to  the  code: 
"  Shares  of  stock  in  corporations  possess 
no  intrinsic  value  over  and  above  the 


actual  value  of  the  property  of  the  cor- 
poration which  they  stand  for  and  repre- 
sent, and  the  assessment  and  taxation  of 
such  shares  and  also  of  the  corporate 
property  would  be  double  taxation. 
Therefore  all  property  belonging  to  cor- 
porations shall  be  assessed  and  taxed : 
but  no  assessment  shall  be  made  of 
shares  of  stock,  nor  shall  any  holder 
thereof  be  taxed  therefor."  Sustained 
and  applied  in  Burke  v.  Badlam,  57  Cal., 
502 ;  Spring  Valley  W.  W.  v.  Schottler. 
62  Cal.,  69,  118  (1882).  But  the  tempta- 
tion to  tax  stockholders  in  non-resident 
corporations  was  yielded  to.  See  San 
Francisco  v.  Fry,  63  Cal.,  470  (1883); 
Same  v.  Flood,  64  Cal,  504  (1884).  As  to 
Ohio,  see  R.  S.  1886,  §§  2737,  2739,  2744. 
construed  in  Jones  v.  Davis,  35  Ohio  St., 
474  (1880).  See,  also,  Worth  v.  Com'rs 
of  Ashe  County,  90  N.  C,  409  (1884); 
Seward  v.  City  of  Rising  Sun,  79  Ind., 
351.  As  to  taxation  of  shares  of  stock 
in  foreign  corporations  under  the  Mich- 
igan statutes,  see  Graham  v.  St.  Josef  h, 
35  N.  W.  Rep.,  808  (1888).  Shares  cf 
stock  may  be  taxed  although  the  corpo- 
ration is  also  taxed.  The  corporation 
may  be  compelled  to  pay  the  tax  on  the 
shares  of  stock  by  deducting  it  from 
dividends.  South,  etc.,  R  R.  Co.  v.  Mor- 
row, 11  S.  W.  Rep.,  348(Tenn.,  1889).  In 
Ohio  resident  stockholders  in  foreign 
corporations  may  be  taxed  on  their 
stock.  Lee  v.  Sturges,  19  N.  E.  Rep., 
560  (Ohio,  1S89).  Under  the  Connecti- 
cut statutes  shares  of  stock  owned  by 
residents  in  foreign  express  companies 
are  taxed  even  though  such  companies 
are  not  incorporated.  Lockport  v. 
Weston,  23  Atl.  Rep.,  9  (Conn.,  1891). 


751 


g  566.] 


TAXATION    OF    STOCK    AND    CORPOEATIONS.  [CH.  XXXIV 


in  a  double  taxation  of  stockholders  not  residing  in  the  state  cre- 
atine the  corporation;  and  that  interstate  comity,  interests  and 
financial  investments  are  promoted  best  by  taxing  corporations 
directly,  and  not  levying  a  tax  on  either  resident  stockholders  in 
non-resident  corporations  or  resident  stockholders  in  resident  cor- 
porations where  the  corporation  itself  is  subject  to  taxation.1  The 
injustice  of  a  tax  on  resident  stockholders  in  foreign  corporations 
is  at  once  apparent  when  it  is  considered  that  the  state  creating 
the  corporation  nearly  always  taxes  the  corporation  itself  or  all  its 
stockholders,  resident  and  non-resident;  and  that  if  stockholders 
residing  elsewhere  are  taxed  again  where  they  reside,  they  are 
taxed  both  in  the  state  of  the  corporation,  directly  or  indirectly, 
and  also  directly  in  the  state  where  they  reside.  Xo  reduction  need 
be  allowed  in  the  latter  state  for  taxes  levied  upon  the  corporation 
in  another  state.2 

§566.  Tax  on  non-resident  stockholders  in  resident  or 'domestic 
corporation— Mode  of  collecting.— When  it  is  determined  by  a 
state  that  it  prefers  to  levy  a  tax  on  shares  of  stock  rather  than  on 
the  franchises,  capital  stock  or  tangible  property  of  the  corporation, 
or  to  levy  a  tax  on  both,  there  is  no  doubt  as  to  its  right  to  tax 
the  stockholders  residing  within  the  state.     Bat  more  difficulty 


il  R   S.  of  N.   Y.,  ch.   XIII.  title  1, 
§  7  (p.  982,  Ttli  od. \  provides  as  follows: 
"The  owner  or  holder  of  stock  in  any 
incorporated  company  liable  to  taxation 
on  it-  capital  shall   not  be  taxed  as  an 
individual  for  aunh  stock."    See,   also. 
People   '••    <om.  of   Taxes,  4   Hnn,  593 
(1875);  aim.  62  N.  Y..  880,  holding  that 
residents  of  this  Btate,  owning  shares  of 
stock    in   a   corporation  created    under 
and  by  the  laws  of  this  state  or  of  any 
foreign  state,  are  not  subject  to  be  per- 
sonally assessed  and  taxed  thereon  under 
the  laws  of  this  state.     Also  People  v. 
Com'rs,  5  Hun.  200  (1875);    In  re  Eus- 
ton's  Estate.  21  N.  E.  Rep.,  87  (X.  Y.,  1889V 
For   the  purpose,  however,  of   making 
the  taxation  of  moneyed  corporations 
correspond  to  taxation  of  shareholders 
in  national  banks,  and  for  the  purpose  of 
taxing  the  latter,  stockholders  in  banks 
incorporated   under   the   laws   of   New 
York  are  now  taxed  on  their  shares  of 
stock,    under    the    following    statutes: 
Laws  of   1866,  ch.  671;  Laws  of  1880, 
ch.  140 ;  Laws  of  18S0,  ch.  596 ;  Laws  of 


1881.   ch.  477:    Laws   of   1882,   ch.  410, 
.   B48.     The  tax  gem  rally  levied  on  cor- 
p  irations  in  New  York  is  held  to  be  a  tax 
on  their  franchises.    See  People  v.  Home 
Ins.  Co.,  92  N.  Y..  328  (1883):  Same  r. 
McLean,  80  N.  Y..  254  (1880);  Same  r. 
-uson,  38  N.  Y.  89  (1868);  Same  r. 
Williarasburgh  Gas  Light  Co.,  76  N.  Y.. 
209   (lv79);    Laws  of  1880,  ch.    542.   as 
am'd  by  Laws  of  1881,  ch.   361;   also 
Laws  of   1883,  ch.  859.     Bee  People  v. 
New  York,  etc.,  Co.,  92  N.  Y,  487  (1883); 
Same  v.  Davenport.  91  N.  Y,  574  (1883); 
Nassau,  etc.,  Co,  r.  City  of  Brooklyn,  89 
N.  Y..  409  (1882);  Oswego,  etc..  Factory 
u  Dolloway.  21  N.  Y..  449  (1860):  Peo- 
ple v.  Com'rs.  95  N.  Y.,554  (1884);  Valle 
r.  Ziegler,  84  Mo.,  211  (1884);  People  r. 
Bradley,  39  Iowa.  130  (1866).     Cf.  B  ink 
of  Republic  V.  County  of  Hamilton.  21 
111..  54  (1858>    See.  also.  Smith  r.  Exeter. 
87  N.  H..  556  (1859),  and  Jersey  City  Gas 
Light  Co.  v.  Jersey  City.  46  N.  J.  L,  194 
(1884). 
«  See  §§  566,  567. 


:52 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  500. 


occurs  as  to  the  right  of  the  state- to  tax  non-resident  stockholders 
in  corporations  created  by  the  state.  This  right  has  been  strenu- 
ously denied  on  the  ground  that  shares  of  stock  are  not  located  at 
the  domicile  of  the  corporation,  but  follow  the  domicile  of  the 
stockholder. 

It  is  the  well-established  rule,  however,  that  although  shares  of 
stock  have  at  common  law  no  situs  except  the  domicile  of  the 
shareholder,  yet  that  a  statute  enacted  by  the  state  creating  the 
corporation  may  give  to  the  shares  of  stock  a  situs  at  the  location 
of  the  corporation ;  that  such  a  statute  may  thus  determine  the  situs 
of  shares  of  non-resident  stockholders  without  chanpino;  the  situs 
of  shares  of  resident  stockholders;  and  that  consequently,  under  a 
statute  expressly  authorizing  such  a  tax,  non-resident  stockholders 
in  a  resident  corporation  may  be  taxed  thereon  in  the  place  where 
the  corporation  has  its  domicile.1     The  method  of  enforcing  the 


1  In  the  case  of  Ottawa  Glass  Co.  v. 
McCaleb,  81  111.,  556  (1876),  the  court 
said  that  the  legislature  might  "re- 
quire the  taxes  to  be  paid  by  the  corpo- 
ration, and  collected  by  them  of  the 
shareholder,  by  deducting  the  amount 
from  his  dividends  or  otherwise/'  State 
v.  Mayhew,  2  Gill  (Md.),  48?  (1845). 
where  the  corporation  was  to  pay  the 
tax  from  dividends  if  declared,  and 
from  profits  if  no  dividends  were  de- 
clared ;  St  Albans  v.  National  Car  Co., 
57  Vt,  68  (1884),  holding  that  the  stat- 
ute giving  shares  of  stock  a  situs  at  the 
location  of  the  corporation  may  be 
passed  after  the  incorporation,  and  that 
mandamus  lies  to  compel  the  corpora- 
tion to  pay  the  tax.  In  the  case  of  Tap- 
pan  v.  Merchants'  Nat'l  Bank,  19  Wall., 
490,  499  (1873),  the  court  said:  "Per- 
sonal property,  in  the  absence  of  any 
law  to  the  contrary,  follows  the  person 
of  the  owner,  and  has  its  situs  at  his 
domicile.  But,  for  the  purpose  of  tax- 
ation, it  may  be  separated  from  him, 
and  he  may  be  taxed  on  its  account  at 
the  place  where  it  is  actually  located. 
See,  also,  Whitney  i\  Ragsdale,  38  Ind., 
107  (1870);  Tallman  v.  Butler  Co.,  12 
Iowa,  531  (1861):  Faxton  v.  McCarter. 
id.,  527  (1861);  Mayor,  etc.,  of  Baltimore 
v.  Baltimore,  etc.,  R'y  Co.,  57  Md.,  31 
(1881).  The  last  case  holds  that  stock 
(48)  7 


in  street  railways  in  Maryland  may  be 
taxed,  although  by  statute  stock  in 
steam  railways  cannot  be.  Cf.  City  of 
Richmond  v.  Daniel,  14  Gratt.  (Va.),  3?5 
(185S);  also  the  case  of  Oliver  v.  Wash- 
ington Mills,  93  Mass.,  268  (1865),  which 
holds  such  a  tax  to  be  unconstitutional. 
The  common-law  rule  is  well  expressed 
in  Union  Bank  v.  State,  9  Yerg.  (Tenn.X 
490  (1836),  where  the  court  say:  "The 
power  to  tax  non-resident  stockholders 
is  denied,  and  we  think  correctly;  from 
its  very  nature  it  must  be  a  tax  in  per- 
sonam and  not  in  rem.  Stock  is  in  the 
nature  of  a  chose  in  action  and  can  have 
no  locality ;  it  must,  therefore,  of  neces- 
sity follow  the  person  of  the  owner. 
.  .  .  Bank  stock  is  not  a  thing  in  it- 
self capable  of  being  taxed  on  account 
of  its  locality,  and  any  tax  imposed 
upon  it  must  be  in  the  nature  of  a  tax 
upon  income,  and  of  necessity  confined 
to  the  person  of  the  owner;  and  if  he 
be  a  non-resident  he  is  beyond  the  ju- 
risdiction of  the  state,  and  not  subject 
to  her  laws."  See,  also,  Minot  i\  Rail- 
road Co.,  18  Wall..  276;  Davenport  v. 
Miss.,  etc.,  R.  R,  12  Iowa,  539  (1861); 
Howell  v.  Cassopolis,  35  Mich.,  471 
(1877).  In  Bradley  v.  Bauder,  36  Ohio 
St..  28  (1880),  the  court  said  "that  shares 
of  stock  may  be  separated  from  the  per- 
son of  the  owner  by  statute,  and  given 


53 


§  566.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [CH.  XXXIV. 


payment  of  this  tax  may  be  by  compelling  the  corporation  to  pay 
it  and  giving  it  a  lien  therefor  on  the  stock,  or  authorizing  it  to  de- 
duct  the  tax  from  the  non-resident  stockholders'  dividends;  or,  if 
the  statute  is  silent  as  to  the  mode  of  collection,  a  tax  warrant  or 
an  attachment  and  execution  therefor  may  be  levied  on  the  shares 
of  stock.1     In  New  York,  where  neither  resident  nor  non-resident 


a  situs  of  their  own,  was  held  in  Tap- 
pan  v.  Merchants"  Nat'l  Bank.  19  Wall, 
490.  But  when  not  60  separated,  that 
this  situs  follows  and  adheres  to  the 
domicile  of  the  owner,  is  supported  by 
a  great  weight  of  authority."  See  State 
Tax  on  Foreign-held  Bonds,  15  Wall., 
300  (1872).  See,  also,  Jenkins  o.  I  harles- 
ton.  5  S.  C,  898  (1874).  In  Nat'l  Com. 
Bank  7-.  Mobile.  62  Ala.,  284  (1878), 
the  court  well  say:  "It  maybe  made 
the  duty  of  a  bank  to  pay  for  it-  share- 
holders the  tax  legally  asa  ss«  1  against 
their  respective  shares,  whether  the 
stockholders  reside  in  the  state  of  Ala- 
bama or  not.  Contestations  upon  these 
points  have  been  made  tunc  and  again, 
s  imetiraes  by  th"  banks  and  sometimes 
by  the  shareholders  to  avoid  this  liabil- 
ity. But  it  is  established  by  repeated 
adjudications,  and  ought  to  be  consid- 
ered definitely  Bettled."  And  in  First 
Nat'l  Bank  v.  Smith,  85  [11.,  44  0872),  the 
court  say  :  "  The  separation  of  the  situs 
of  persona]  property  from  the  domicile 
of  tin- owner  tor  the  purposes  of  taxa- 
tion is  familiar  doctrine  of  the  courts  of 
this  country,  and   I 

by  this  court  in  various  cases.  .  .  . 
The  act  of  congress  itself  contemplates 
a  severance  of  the  situs  of  such  shares 
from  the  person  of  their  owner  by  pro- 
viding that  they  should  not  be  t 
except  in  the  state  where  the  hank  is 
established.  But,  apart  from  this,  it  is 
really  much  more  reasonable  to  lix  the 
Situs  of  shares  at  the  place  where  the 
hank  is  located,  and  where  it  must  con- 
tinue to  do  its  business  or  wind. up  its 
affairs,  than  to  separate  by  legislation 
tangible  personal  property  from  the 
person  of  its  owner."  In  the  case  of 
St  Louis  Nat'l  Bank  v.  Papin.  4  Dill.,  29 
(1876),  the   following  statute    was  sus- 


tained :  "  The  taxes  assessed  on  shares 
of  stock  embraced  in  such  list  shall  be 
paid  by  the  corporations  respectively, 
and  they  may  recover  from  the  owners 
of  such  shares  the  amount  so  paid  by 
them,  or  deduct  the  same  from  the  divi- 
dends accruing  on  such  shares;  and  the 
amount  so  paid  shall  be  a  lien  on  such 
shares  respectively,  and  shall  be  paid 
before  a  transfer  thereof  can  be  made.'' 
And  again,  in  American  Coal  Co.  v 
County  Comm'rs,  58  Md.  the 

court  say:  "The  state  may  Live  the 
shales  of  stock  held  by  individual  stock- 
holders a  special  or  particular  situs  for 
purposes  of  taxation,  and  may  provide 
special  modes  for  the  collection  of  the 
tax  levied  thereon."  But  where  the 
tllte  merely  made  the  hank  the  agent 
to  pay  the  tax  and  to  deduct  it  from  the 
dividends,  the  bank  is  not  liable  if  there 
have  been  no  dividends.  Hershire  n 
Firsl  Natl  Bank,  86  Iowa.  272.  Non- 
resident stockholders  in  Virginia  hanks 
are  taxed.  Stockholders  r.  Board  of 
Supervisors,  L3S  1'.  !:•  p., 407 (Va.f  1891). 
Concerning  the  situs  of  stock,  s 
a:i  article  in  45  All..  L.  J..  ! 

1  In  Farrington  r.  Tennessee.  95  I".  8., 
679.  687  1877),  the  court  say:  "The 
bank  may  be  required  to  pay  the  tax 
out  of  its  corporate  funds  or  be  author- 
ized to  deduct  the  amount  paid  for  each 
Stockholder  out  of  his  dividend."  And, 
in  general,  under  the  act  of  congress 
allowing  taxation  of  shares  of  stock  in 
national  hanks,  a  situs  is  given  by  stat- 
ute to  the  shares  so  as  to  locate  them 
where  the  hank  is  located,  even  though 
the  shareholders  be  non-resident  But 
collections  can-not  be  enforced  against 
the  corporation  unless  the  statute  spe- 
cially authorizes  it.  First  Nat'l  Bank  r. 
Fancher,  48  N.  Y.,  524  (1872).  Collec- 
54 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  507. 


stockholders  in  either  foreign  or  domestic  corporations,  excepting 
banking  corporations,  are  taxed  on  their  shares  of  stock,  these  inter- 
state complications,  hardships  and  jealousies  do  not  arise.1 

§  567.  Double  taxation.—  The  most  objectionable  feature  of  a  tax 
levied  on  shares  of  stock  is  that  almost  inevitably  it  operates  to 
impose  a  double  tax  on  a  part  or  all  the   stockholders.2     Such  a 


tion  by  execution,  see  Gordon's  Ex'rs  v. 
Mayor,  etc.,  5  Gill  (Mel.),  231  (1847) ;  Weld 
v.  City  of  Bangor,  59  Me.,  416.  But  a 
levy  of  execution  on  stock  can  only 
exist  when  the  statute  allows  stock  to 
be  so  taken.  Barnes  v.  Hall,  55  Vt., 
420  (1883).  Or  under  a  tax  warrant. 
McNeal  v.  Mechanics',  etc.,  Ass'n  (N.  J.. 
1885).  But  if  the  stockholder  pays  the 
tax,  even  under  protest,  he  cannot  re- 
cover back  the  money  paid.  Sowles  v. 
Soule,  7  Atl.  Rep.,  715  (Vt,  1887).  See, 
also,  g  480.  In  the  case  of  State  v. 
Thomas,  20  N.  J.  L.,  181  (1857).  the 
court  refused  to  compel  the  corpora- 
tion to  pay  the  tax  on  stock  of  non- 
residents, and  said :  "  It  has  been  de- 
cided by  this  court  that  the  bonds  and 
stocks  of  corporations  in  this  state  held 
by  non-residents  are  not  liable  to  taxa- 
tion, though  they  are  clearly  within  the 
letter  of  the  act."  A  state  may  collect 
a  non-resident  stockholder's  tax  from 
the  corporation  and  give  it  a  lien  there 
for  on  his  stock.  North  Ward  Nat'l 
Bank  v.  City  of  Newark,  39  N.  J.  L.,  380 
(1877);  but  see  Raleigh,  etc.,  R.  R.  Co. 
v.  Connor,  87  N.  C,  414.  A  tax  collector 
cannot  levy  on  and  sell  stock  under  the 
Jaw  relative  to  attachments.  Kennedy 
v.  Mary,  etc.,  R'y,  9  S.  Rep,  608  (Ala., 
1891).  The  statute  may  provide  for  the 
sale  of  stock  at  the  place  where  the  cor- 
poration exists,  in  case  the  taxes  upon 
such  stock  are  not  paid.  A  purchaser 
of  the  outstanding  certificates  after  the 
assessment  has  been  made  takes  subject 
to  the  tax  and  tax  seizure.  Parker  v. 
Sun  Ins.  Co.,  8  S.  Rep.,  618  (La..  1890). 
It  is  clear,  where  shares  of  stock  are 
sold  under  a  tax  warrant,  that  tiie  cor- 
poration is  not  obliged  to  oppose  the 
eale.  McNeal  v.  Mechanics'  Building, 
etc.,  Ass'n,  12  Am.  &  Eng.  Corp.  Cas., 


131  (N.  J.,  1885).  Cooley  on  Taxation 
(2d  ed.),  433,  clearly  upholds  the  rule 
that  the  state  may  levy  a  tax  on  shares 
of  stock  and  compel  the  corporation 
to  pay  it,  citing  Maltby  v.  Reading  R.  R 
Co.,  52  Pa.  St.,  140  (1866):  Haight  v. 
Railroad  Co.,  6  Wall..  15  (1867);  National 
Bank  v.  Commonwealth,  9  Wall  ,  353 
(1869);  United  States  v.  Railroad  Co..  17 
Wall.,  322  (1872);  Minot  v.  Railroad  Co.. 
18  Wall.,  206  (1873);  Ottawa,  etc..  v. 
McCaleb,81  111.,  556(1876):  New  Orleans 
v.  Saving,  etc.,  Co.,  31  La.  Ann.,  826 
(1879):  Baltimore  v.  City  Passenger  R. 
Co..  57  Md.,  31  (1881);  St.  Albans  v.  Na- 
tional Car  Co.,  57  Vt,  68  (1884):  Ameri- 
can Coal  Co.  v.  Allegany  County.  59  Md., 
185  (1882);  Barney  r.  State,  42  Md.,  480 
(1875);  McVeagh  r.  Chicago.  49  111..  31S- 
(18G8);  First  Nat'l  Bank  v.  Fancher.  48 
N.  Y..  524  (1872);  Leonberger  v.  Rowse, 
43  Mo.,  67  (1868);  Relfe  v.  Life  Ins.  Co., 
11  Mo.  App.,  374  (1882). 

1  See  §  565,  note. 

-  In  Ohio  such  double  taxation  is  ad- 
vocated and  recommended.  In  Frazer 
r.  Seibern.  16  Ohio  St.,  614  (1866).  the 
court  said  that  an  equitable  system  of 
taxation  "is  best  attained  in  case  of  a 
corporation  or  joint-stock  company  by 
taxing  the  stockholders,  the  persons 
who  own  the  property,  upon  the  full 
value  of  their  shares  therein,  including, 
of  course,  their  interest  in  the  franchise 
or  privilege,  and  in  all  tangible  prop- 
erty owned  by  the  company;  and  by 
taxing  the  corporation  also  upon  the 
value  of  such  tangible  property.  The 
stockholder  is  thus  taxed,  as  all  other 
individuals  who  own  tangible  and  in- 
tangible property  are  sometimes  una- 
voidably taxed,  once  upon  all  he  is 
worth,  and  a  second  time  upon  that 
part  of  his  property  which  is  tangible." 


r55 


§  567.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [CH.   XXXIV. 


double  tax  exists  where  either  the  corporate  realty  or  personalty 
or  franchise  or  capital  is  taxed,  and  a  tax  is  also  levied  on  the 
shares  of  stock  without  any  deduction  for  the  former  taxation.1 
There  has  been  some  controversy  as  to  the  right  of  a  state  to  levy 
a  double  tax  on  property.  Sometimes  the  state  constitution  pro- 
hibits such  taxation.2  But  aside  from  constitutional  restrictions  it 
unquestionably  is  within  the  power  of  the  state  to  levy,  not  only  a 
double  tax,  but  even  a  treble  or  quadruple  tax,  if  it  so  chooses.3 
The  injustice  of  such  taxation,  however,  generally  prevents  its  oc- 
currence. The  courts  also  do  their  utmost  to  prevent  double  tax- 
ation, and  will  construe  a  taxation  statute  so  as  to  avoid  such  a 
result,  and  sometimes  even  in  opposition  to  the  plain  words  of  the 
statute  itself.4 


1  This  is  practically  the  result.  In 
the  case  of  Farrington  v.  Tennessee,  95 
U.  S..  679,  6S7  (1877),  however,  the  court 

says  in  a  dictum:  "The  Capita)  Btock 
ami  the  shares  may  both  he  taxed,  and 
it  is  not  double  taxation."  See,  also, 
New  Orleans  tt  Houston,  ll'.i  V.  S..  865, 
L>77  (1886)  Cf.  Ryan  v.  Com'ro,  80  Kan., 
185(1883). 

-County  Com'rs  v.  Farmers'  Nat'l 
Bank, -is  Md.,  117  (1877),  the  constitu- 
tion saying  that  each  person  shall  pay  a 
tax  "according  to  his  actual  worth  in 
real  or  personal  property."  See,  also. 
City  of  San  Francisco  v.  Mackey,  01 
Fed.  Rep.,  589  (1884);  Burke  v.  Badlam, 
57  Cal..  594  (1881),  relative  to  the  Cali- 
fornia constitution,  art.  XII,  £  1,  that 
"all  property  shall  be  taxed  in  propor- 
tion to  its  value." 

'Salem  Iron,  etc..  Co.  v.  Danvers,  10 
Mass..  514  (1818),  where  corporate  realty 
was  tax>.l  although  the  shares  of  stock 
were  also  taxed.  See,  also.  Belo  v. 
Com'rs  of  Forsyth,  83  N.  C.  415  (1880)i 
In  the  remarkable  case  of  Toll  Bridge 
Co.  v.  Osborn,  33  Conn..  7  (1» 
b.vms  that  the  realty,  capital  stock  and 
shai-es  of  stock  of  a  corporation  were 
taxed,  and  that  the  chief  stockholder, 
a  railroad,  was  taxed  on  its  capital 
Btock  and  shares  of  stock,  making  four 
or  five  taxations  of  the  same  property. 
Evidently  corporations  were  not  popu- 
lar  in  Connecticut  iu   18G8,  except  for 


taxation  purposes.  Cf.  Jones,  etc.,  Co. 
v.  Commonwealth,  69  Pa,  St..  187.  S 
also,  Cook  r.  City  of  Burlington,  59 
Iowa,  351  (1883);  State  r.  Branin,  38 
N".  J.  I  .  IM  1 1 s.~,e> ;  Saineu  BentJey,  id.. 
583;  city  of  Memphis  v.  Ensley,  8  Bax. 
<Tenn>.  558  (1878);  Prov..  etc..  R  R.  I  '«•. 
r.  Wright.  2  R.  L.459,  464  (1858),  holding 
that  a  tax  on  the  stock  does  uot  raise 
a  presumption  that  a  municipality  is 
thereby  prevented  from  taxing  the  cor- 
porate realty.  See,  also,  Hannibal,  etc.. 
R  R  Co.  r.  Shacklett,  80  Ma,  550,  '^ 
(I860).  Although  by  the  charter  a  tax  is 
levied  on  the  capital  Btock,  a  tax  may 
also  be  levied  on  the  shares  of  stock. 
State  v.  Home  Ins.  Co.,  19  S.  W.  Rep., 
1043  (Tenn,,  1893)  A  tax  on  the  bonds 
which  arc  issued  by  a  corporation  does 
net  constitute  double  taxation  although 
there  is  also  a  tax  on  the  franchises  of 
the  corporation.  Commonwealth  v.  New 
York,  etc..  R  Co.  34  Atl.  Rep.,  609  (Pa, 
1893);  Where  the  stock  is  not  taxable 
if  the  tangible  property  is  taxed,  the 
stock  may  nevertheless  be  taxed  for 
such  part  of  its  value  as  the  capital  stock 
exceeds  iu  value  the  tangible  property. 
Hyland  ft  Central  Iron,  etc.,  Co.,  28  N.  R 
Rep..  308  (Ind.,  1891). 

*  Thus,  in  Illinois,  in  cases  where  the 
capital  stock  is  taxed  by  the  state,  the 
shares  of  stock  are  held  to  be  free  from 
taxation.  Republic  Life  Ins.  Co.  v.  Pol- 
lak,  75  111.,  393  (1874).    See,  also,  County 


736 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  56S. 


§  568.  Exemptions  from  taxation  as  affecting  tax  on  shares  of 
stock. —  An  exemption  of  shares  of  stock  is  a  contract  protected 
by  that  provision  of  the  constitution  of  the  United  States  which, 
prevents  a  state  from  passing  a  law  which  will  impair  the  validity 
of  contracts.1  This  provision  has  frequently  been  construed  and 
applied  in  cases  involving  the  taxation  of  the  corporate  franchises, 
capital  stock  or  tangible  property.  Aside  from  questions  of  this 
nature  there  are  two  classes  of  cases  of  exemptions  from  taxation 
which  affect  the  taxation  of  shares  of  stock.  The  first  class  in- 
volves the  question  whether  an  exemption  of  the  corporate  prop- 
erty, franchises  or  capital  stock  from  taxation  exempts  also  the 
shares  of  stock  from  any  tax;  the  second,  whether  an  exemption 
of  the  shares  of  stock  from  taxation  exempts  the  corporate  prop- 
erty, franchises  and  capital  stock.  As  regards  the  former  exemp- 
tion, the  effect  thereof  depends  largely  on  the  words  used  in  the 
statute  or  charter  granting  the  exemption.  The  question  has  given 
rise  to  a  difference  of  opinions.     In  the  federal  courts,  Kew  Jersey, 


of  Lackawanna  v.  First  Nat'l  Bank.  94 
Pa.  St.,  321  (1880),  holding  that  under 
the  act  of  March  31,  1870,  releasing  cor- 
porations from  all  other  taxes  if  they 
pay  a  one  per  cent,  tax  on  the  par  value 
of  the  stock,  the  corporate  realty  can- 
not be  taxed  after  such  one  per  cent 
has  been  paid.  State  v.  Hannibal  &  St. 
J.  R.  R.  Co.,  37  Mo.,  265  (1866) ;  Jersey 
City,  etc,,  Co.  v.  Jersey  City,  46  N.  J.  L., 
194  (1884);  Cheshire,  etc.,  Telephone  Co. 
?>.  State.  63  N.  H.,  167  (1884);  Valle  v. 
Zeigler,  84  Mo.,  214  (1884);  Tax  Cases,  12 
G.  &  J.  (Md.),  117  (1841) ;  Prov.  Inst,  for 
Sav.  r.  Gardiner,  4  R.  L,  484  (1857);  Me- 
chanics' Bank  v.  Thomas,  26  N.  J.  L, 
181  (1857) ;  American  Bank  v.  Mumford, 
id.,  478  (1857) ;  State  v.  Tunis,  23  N.  J.  L., 
546  (1852);  Smith  V.  Burley,  9  N.  H.,  423 
(1838);  Frazer  v.  Siebern,  16  Ohio  St., 
614(1866):  Savings  Bank  v.  Nashua,  46 
N.  H.,  389  (1866),  the  court  saying :  "  It 
is  a  fundamental  principle  in  taxation 
that  the  same  property  shall  not  be  sub- 
ject to  a  double  tax.  payable  by  the  same 
party,  either  directly  or  indirectly ;  and 
where  it  is  once  decided  that  any  kind 
or  class  of  property  is  liable  to  be  taxed 
under  one  provision  of  the  statutes,  it 
has  been  held  to  follow  as  a  legal  con- 
clusion that  the    legislature  could  not 


have  intended  the  same  property  would 
be  subject  to  another  tax,  though  there 
may  be  general  errors  in  the  law  which 
would  seem  to  imply  that  it  was  to  be 
taxed  a  second  time."  In  Michigan 
where  shares  of  stock  in  savings  banks 
are  taxed,  a  reduction  being  allowed  for 
realty,  which  is  taxed  separately,  the 
courts  held  that  no  other  tax  can  be. 
levied  against  the  corporation.  Lena- 
wee, etc.,  Bank  r.  City  of  Adrian,  33 
N.  W.  Rep,  304  (Mich.,  1887).  The  Ken- 
tucky tax  statutes  are  so  construed  that 
a  corporation  need  not  pay  a  tax  on  its 
property  in  addition  to  the  tax  on  the 
stock.  Louisville,  etc.,  Co.  v.  Barbour, 
9  S.  W.  Rep.,  516  (Ky.,  1888);  Com.  v. 
St.  Bernard  Coal  Co.,  id.,  709.  The  Penn- 
sylvania acts  are  construed  so  as  to  pre- 
vent double  taxation.  Penn.  Co.,  etc.,  v. 
Com.,  15  Atl.  Rep.,  456  (Pa.,  1888). 

Harrington  v.  Tennessee,  95  U.  S., 
679  (1877).  See,  also,  §  497.  An  ex- 
emption of  the  stock  of  a  railroad  com- 
pany does  not  exempt  stock  issued  for 
constructing  branch  roads  of  that  com- 
pany, such  construction  being  subse- 
quent to  a  constitutional  provision  pro- 
hibiting exemptions.  Chicago,  etc.,  R 
R  Co.  v.  Guffey,  120  U.  S.,  569. 


751 


;s.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [CIT.   XXXIV. 


Indiana  and  Kentucky,  it  has  been  decided  that  an  exemption  of 
the  corporation  from  taxation  on  one  or  more  of  the  first  three 
methods  of  taxation  exempts  by  implication  the  shares  of  stock.1 
But  in  Tennessee,  Xorth  Carolina  and  Maryland  a  contrary  rule 
prevails.2 

As  regards  the  second  class  of  exemptions,  it  seems  to  be  estab- 
lished by  the  great  weight  of  authority  that  an  exemption  of  the 
shares  of  stock  from  taxation  exempts  also,  by  implication,  the  cor- 
porate franchises,  capital  stock  and  tangible  property  from  any 


'State  r.  Branin,  23  N.  J.  L.,  484 
(1852);  Same  0.  Bentley,  id.,  532;  John- 
son v.  Commonwealth,  7  Dana  (K\.\ 
888(1838);  Kin-  v.  City  of  Madison,  17 
Ind.,  48  (1881),  holding  that  an  exemp- 
tion of  the  capital  stock  exempts  Bhares 
of  sto.k.  Gordon  '•.  Appeal  Tax  Court, 
3  How.,  133(4845),  held  that  an  exemp- 
tion prohibiting  any  "further  tax  or 
burden  upon  them,"  tin-  banks,  ex- 
empted the  Bhares  of  Btock  Again, 
where  tin-  charter  provided  that  "the 
capita!  stock  of  sai.l  company  Bhall  be 
forever  exempt  from  taxation,  the 
Bhares  of  stock  cannot  be  taxed  .  .  . 
Bach  share  is  a  part  of  the  whole,  ami, 
as  the  whole  is  exempl  from  taxation, 
it  fallows  that  each  part  0T  -hare  nm-t 
also     he     exempt."       Stale    of    Tenn.     0. 

Whitworth,  83  Fed.  Rep.,  7:.  (1884). 
And  the  purchaser  ami  successor  of  a 

railroad,  taking  by  statute  all  its  rights 
ami  privileges,  is  also  exempt  in  same 
manner,  hi.,  si  ;  aflPd,  117  I".  S  .  189 
1 1886).  An  exemption  .>f  the  corpora- 
tion exempts  it  from  a  tax  upon  the 
Bhares  of  shareholders,  which  the  com- 
pany is  required  t<>  pay  irrespective  of 
any  dividends  or  prolit.s  payable  to  the 
shareholder,  Bince  this  is  substantially 
a  tax  on  the  corporation  itself.  New 
Orleans  r.  Houston.  Ill*  1".  s.  365    1881) 

I  v.  United  States  v.  Railroad  Co..  17 
Wall.,  823.  An  exemption  of  Bhai 
stock  from  taxation  is  waived  by  the  ac- 
ceptance of  subsequent  statutes  impos- 
ing a  tax.  Hannibal  A:  St.  J.  R.  R.  Co. 
p.  Shacklett,  80  Mo.,  550  (1860) ;  Cooley 
on  Taxation  (3d  ed.).  212. 

-'Union  Bank  t\  State,  9  Yerg.  (Teuo.). 


490  (1836).  holding  that  an  exemption  of 
the  capital  stock  did  not  exempt  shares 
of  stock.  To  same  efh  <t.  (  Sty  of  Mem- 
phis ■.  Farrington,  8  Baxter  (Tenn.),  539 
the  court  savin-:  "The  capital 
ind  -hares  of  stock  are  two  dis- 
tinct properties,  and  an  exemption  of 
the  one  does  not  thereby  necessarily  ex- 
empt the  other,  nor  the  taxation  of  the 
latter  opei  <  tax  on  the  former.so 

as  t»»  interfere  with  it-  exemption  from 
Mich  burd  us."  Belo  u  Com'ra  of  For- 
ayth,  82  N.  C.,415  (1880).  holding  that 
an  ext  mption  of  the  coi  i  o  ilty 

apl  the  shares  of  Btock : 
Appeal   Tax    Court  r.  Rii  e.  50  Mel.  8 

Tax  Cases,  12  Q.  &  J.  (M<U  117 
(1841).  In  the  case  of  <  kmnty  I  lom'ra  a. 
Ann..],  lis,  et...   r  i;.  Co.,   IT  Ml.,  " 

.;  .  the  court  say:  "To  make  out  the 
claim  to  this  exemption  from  the  taxing 
power  of  the  state,  so  essential  to  the 
support  ot"  its  government,  it  i-  incum- 
bent upon  o  rporations  to  -how  that  the 
power  to  tax  has  been  clearly  relin- 
quished by  the  state  :  and  if  this  has  not 
been  done  in  char  and  explicit  terms,  or 
by  necessary  implication,  the  question 
whether  or  n<>t  the  exemption  has  been 
granted  must  he  resolved  in  favor  of  the 
state."  Citing  Prov.  Bank  a  Billings, 
I  Pet,  514(1830);  Wilmington  R  R  Ca 
r.  Reid,  18  Wall..  Oi'.l:  FhiLft  Wilming- 
ton R  RCo.  r.  State.  10  How.,  876(1850> 
But  a  clear  exemption  of  the  shares  of 
Stock  i-  a  contract  which  is  protected  by 
the  United  states  constitution.  State  v. 
Baltimore  &  O.  R  R  Co.,  48  Md.,  49 
(1877).  A  charter  provision,  howev.  r. 
that  a  certain  tax  shall  be  paid  by  the 


GH.   XXXIV. J  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  569. 


tax.1  Exemptions,  however,  have  no  effect  and  are  of  no  avail  be- 
yond the  boundaries  of  the  state  granting  them;  and  accordingly 
a  non-resident  stockholder,  who  is  taxed  on  his  stock  in  the  state 
where  he  resides,  cannot  defeat  that  tax  by  reason  of  exemptions 
enjoyed  within  the  state  creating  the  corporation.2 


B.    TAXATION    OF    NATIONAL    BANK    STOCK. 

§569.  General  rules. —  It  is  one  of  the  established  principles 
of  constitutional  law  in  this  country  that  the  instruments  of  o-ov- 
eminent  by  the  United  States  shall  not  be  taxed  by  anv  state, 
and  also  that  those  of  a  state  shall  not  be  taxed  by  the  United 
States.  Accordingly,  the  bonds  issued  by  the  United  States  gov- 
ernment cannot  be  taxed  by  any  state.3  So,  also,  when  the  old 
United  States  bank  was  in  existence,  it  was  held  that  neither  the 
bank  nor  its  capital  stock  could  be  taxed  by  a  state.     But  it  was 


corporation  does  not  prevent  a  subse- 
quent change  in  that  tax.  Delaware 
Railroad  Tax,  18  Wall.,  206  (1873).  And 
an  exemption  by  the  state  has  been  held 
not  to  exempt  the  shares  from  taxation 
by  a  municipality.  Gordon's  Ex'rs  v. 
Mayor,  etc.,  5  Gill  (Md.),  231  (1847). 

1  In  the  case  of  Tennessee  v.  Bank  of 
Com.,  53  Fed.  Rep..  735  (1892),  it  is  held 
that  a  provision  imposing  a  tax  on  each 
share  of  stock  "  which  shall  be  in  lieu  of 
all  other  taxes"  exempts  the  property 
of  the  company  as  well  as  the  stock 
from  further  taxation.  Scotland  Co. 
v.  Mo.,  Iowa,  etc.,  Ry  Co.,  65  Mo.,  123 
(1877),  the  court  saying:  "It  is  clear 
that  a  tax  on  the  property  represented 
by  the  stock  is  substantially  a  tax  on 
the  stock.''  See,  also,  County  Com'rs 
v.  Annapolis,  etc.,  R.  R.  Co..  47  Md.,  592 
(1877),  where  the  court  say  :  "  It  is  set- 
tled by  repeated  decisions  of  this  court, 
which  we  are  not  disposed  to  disturb, 
that  the  exemption  of  the  shares  of  the 
capital  stock  operates  as  an  exemption 
of  the  property  of  the  corporation,  or  so 
much  of  it  as  the  corporation  is  fairly 
authorized  to  hold  for  the  proper  exer- 
cise of  its  franchises :  and  this  upon  the 
principle  I  hat  the  shares  of  the  stock  in 
the  hands  of  the  shareholders  represent 
the  property  held  by  the  corporation  ;  " 


Bank  of  Cape  Fear  v.  Edwards,  5  Ired. 
Law  (N.  C),  516  (1845),  where  the  char- 
ter said  :  "The  said  bank  shall  not  be 
liable  to  any  further  tax  ;  "  Mayor,  etc., 
of  Baltimore  v.  Baltimore  &  O.  R.  R 
Co.,  6  Gill  (Md.),  288  (1848);  Tax  Cases, 
12  G.  &  J.  (Md.),  117  (1841);  Gordon's 
Ex'rs  v.  Mayor,  etc.,  of  Baltimore,  5  Gill 
(Md.),  231  (1847).  In  the  case,  however, 
of  Wilmington  &  W.  R,  R.  Co.  v.  Reid, 
64  N.  C.  226  (1870),  it  was  held  that  an 
exemption  of  shares  of  stock  does  not 
exempt  the  corporate  franchise  from 
taxation.  Raleigh,  etc.,  R.  R  v.  Reid, 
id..  155  (1870).  And  in  State  v.  Petvvay, 
2  Jones'  Eq.  (N.  C),  396  (1856),  it  was 
held  that  a  charter  provision  that  the 
shares  of  stock  should  be  taxed  a  cer- 
tain amount  did  not  prevent  a  tax  on 
dividends. 

2  Appeal  Tax  Court  v.  Patterson,  50 
Md.,  354  (1878);  Same  v.  Gill,  id.,  377. 
See,  also,  Railroad  Co.  v.  Pennsylvania, 
15  Wall.,  300  (1872). 

3Cooley  on  Taxation  (2d  ed.),  84.  85. 
Formerly  government  bonds  were  called 
stock  both  in  England  and  in  this  coun- 
try. The  use  of  the  term,  however,  has 
become  practically  obsolete.  See  Bank 
of  Commerce  v.  New  York,  2  Black,  620 
(1862):  Weston  v.  City,  eta,  of  Charles- 
ton, 2  Peters,  449  (1829), 


759 


569.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [CH.  XXXIV. 


also  held  that,  inasmuch  as  the  interest  of  the  stockholders  in  tho 
bank  was  different  from  the  franchises,  property,  capital  stock  and 
the  United  States  bonds  held  by  the  bank,  such  interest  of  the 
shareholder  could  be  taxed  by  a  state,  and  that  such  taxation 
would  be  constitutional  and  legal.1  The  same  rules  apply  to  the 
present  national  banks.  A  state  tax  on  the  capital  stock  of  the 
bank  is  illegal  and  void.2  But  a  tax  on  its  real  estate  or  on  its  shares 
of  stock  is  upheld  as  legal  and  enforceable.3  This  is  the  law,  al- 
though a  large  part  or  all  of  the  bank's  capital  stock  is  invested  in 


1  McCulIoch  v.  State  of  Maryland,  4 
Wheat,  316,  436  (1819);  Bulow  v.  City 
of  Charleston,  1  Nott  &  McCord  (S.  C.\ 
527  (1819).  See.  also,  Berne}'  v.  Tax 
Collector,  2  Bailey  (S.  C).  654  1831  ;  Na- 
tional Bank  v.  Commonwealth,  9  Wall., 
853(18H9),  per  Miller,  J. 

2  Bank  of  Omaha  v.  Douglas  County. 
3  Dill.,  29S  (1873);  Collins  v.  Chica 
Biss.,  472;  Salt  Lake,  etc.,  Bank  v.  Gold- 
ing,  2  Utah,  1  (187»;,;  Mayor,  etc.  of 
Macon  v.  First  Nat'l  Bank,  .v.i  Ga.,  648 
(1877);  Bradley  r.  Illinois,  6  Ara.  I.. 
Reg.  (N.  S.),  400 ;  Bank  of  Commerce  v. 
N.  Y.  City,  2  Black,  620,  reversing  Peo- 
ple v.  Com'rs  of  Assessments,  23  X.  Y., 
192;  S.  C,  32  Barb.,  509,  and  declaring 
unconstitutional  the  New  Fork  Btatutes 
under  which  the  national  hanks  were 
taxed.  New  York  has  been  i  xceedingly 
unfortunate  in  its  efforts  to  tax  national 
hanks.  After  the  decision  in  Bank  of 
Commerce  v.  X.  V.  City,  supra,  came 
Bank  Tax  Case,  l'  Wall.,  200  (1864),  de- 
claring unconstitutional  the  New  York 
statute  of  29th  April.  1868,  for  the  taxa- 
tion of  national  hanks,  the  tax  still  be- 
ing on  the  capital  stock.  Xext  came 
Van  Allen  V.  The  Assessors,  3  Wall., 
573  (1865)  (reversin-  City  of  Utica  r. 
Churchill,  33  N.  Y.,  101.  See,  also,  First 
National  Bank  v.  Fancher,  48  N.  Y.,  524 
1872\  declaring  unconstitutional  the 
New  York  statute  of  9th  March.  18G5. 
taxing  the  shareholders  in  national 
hanks,  because  the  act  did  not  prescribe 
expressly  that  the  tax  should  be  no 
greater  than  the  tax  on  other  shares  of 
stock,  and  because  taxes  in  New  York 


on  other  corporations  were  not  on  shares 
of  stock  but  on  the  capital  stock.  New 
York  then  passed  the  act  of  23d  April, . 
1866,  which  was  sustained  in  People  v. 
Com'rs.  4  Wall.,  214  (1866).  Still  later 
came  the  case  of  People  v.  Weaver.  100 
U.  S..  539  (1879  .  reversing  67  N.  Y.,  516, 
overruling  People  r.  Dolan,  36  N.  Y., 
59,  and  declaring  void  the  New  York 
tax  <>f  national  hank  stock,  for  the  rea- 
son that  the  New  York  court  of  appeals 
construed  the  New  York  taxation  stat- 
ute to  allow  persons  taxed  on  ordinary 
uritii  s  a  deduction  lor  debts,  while  a 
similar  deduction  was  not  allowed  to 
Stockholders  in  hanks  Btate  or  national. 
Supervisors  o.  Stanley.  105  U.  S.,  305 
(1881)  [see  People  n  Dolan,  36  N.  y..  .v.i. 
1867],  practically  modified  the  preced- 
ing case,  however,  by  holding  that  a 
stockholder  who  owed  no  debts  could 
not  complain,  and  that  those  who  did 
owe  debts  were  entitled  not  to  a  re- 
lease from  the  tax  alto-ether,  hut  only 
to  the  extent  of  what  the  state  ought  to 
have  allowed  as  a  deduction.  The  last 
case  in  New  York  was  decided  by  Judge 
Wallace  in  November,  1886.  states  can- 
not tax  national  bank  currency.  Qorno 
«■  Creene,  52  Miss.,  450.  Cf.  Ruflin  r. 
Board  of  Com'rs,  69  X.  C,  498;  Lily  v. 
Com'rs,  69  N.  C.  300;  Board  of  Com'rs 
v.  Elston,  32  IncL,  27(1869. 

3  Austin  a.  Boston,  96  Mass.,  359 0 867); 
First  Nat'l  Bank  v.  Douglas  County,  5 
Dill..  330  (1871),  upholding  the  Nebraska 
statute  herein  of  27th  of  February,  1873; 
Stetson  v.  City  of  Bangor,  56  Me.,  274 
(18GS). 


760 


OH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  570. 


United  States  bonds.1  The  authority  of  a  state  to  tax  shares  of 
stock  in  national  banks  is  expressly  conferred  by  the  statutes  of 
the  United  States  which  create  and  regulate  these  banks.2  The 
only  questions  of  importance  that  are  still  unsettled  turn  upon  the 
meaning  and  application  of  that  statute;  and,  accordingly,  the  law- 
is  stated  most  clearly  when  it  is  connected  with  the  various  pro- 
visions of  these  statutes. 

§  570.  Place  in  which  shares  of  national  hank  stock  may  he 
taxed. —  The  Revised  Statutes  of  the  United  States  expressly  declare 
that  non-resident  stockholders  in  a  national  bank  are  to  be  taxed 
at  the  place  where  the  bank  is  located.3  Under  this  statute  a  non- 
resident of  the  state  within  which  the  bank  is  situated  can  be  taxed 
on  his  stock  only  where  the  bank  is  located.4  The  state  where  he 
resides  cannot  also  tax  him  on  such  stock.  As  regards  residents  of 
the  state  within  which  the  bank  is  located,  the  state  itself  deter- 
mines where  the  tax  is  to  be  levied.5     If  the  state  statute  requires 


1  Van  Allen  v.  Assessors,  3  Wall.,  573 
(1865) ;  People  v.  Com'rs,  4  Wall.,  244 
(18G6).  See,  also,  Home  Ins.  Co.  v.  New 
York,  119  U.  S.,  129  (1886V  In  taxing 
the  stock  no  reduction  is  allowed  for 
bonds  held  by  the  corporation.  Home 
Ins.  Co.  v.  Board,  etc.,  8  S.  Rep.,  481  (La., 
1890);  Parker  v.  Sun  Ins.  Co.,  id.,  618. 

2  R.  S.  U.  S.,  §  5219  (taken  from  act 
of  3d  June,  1864,  as  amended  by  act  of 
February  10,  1868).  The  case  of  People 
v.  Weaver,  100  U.  S.,  539,  543  (1879), 
says  that  the  effect  of  the  act  of  con- 
gress, as  regards  the  taxation  of  na- 
tional banks,  is  that  congress  says  to 
the  states :  "  You  may  tax  the  real  es- 
tate of  the  banks  as  other  real  estate  is 
taxed,  and  you  may  tax  the  shares  of 
the  bank  as  the  personal  property  of  the 
owner  to  the  same  extent  you  tax  other 
moneyed  capital  invested  in  your  state. 
It  was  conceived  that  by  this  qualifica- 
tion of  the  power  of  taxation  equality 
would  be  secured  and  injustice  pre- 
vented." Wasson  v.  First  Nat'l  Bank,  8 
N.  E.  Rep.,  97  (Ind.,  1886).  New  shares 
cannot  be  taxed  until  the  increase  has 
been  approved  by  the  comptroller  of 
the  currency.  Charleston  v.  People's 
Nat'l  Bank,  5  S.  C,  103. 

3  Such  was  the  effect  of  the  amend- 
ment of  1866.      Previous  to  that  time 


there  was  controversy  herein  as  to  the 
meaning  of  the  act  of  1863.  See  Aus- 
tin v.  Boston,  96  Mass.,  359  (1867). 

4  See  Mclver  v.  Robinson,  53  Ala.,  456 ; 
Weaver  v.  Weaver,  75  N.  Y,  30 ;  Kyle 
v.  Fayetteville,  75  N.  C,  445:  National 
Bank  v.  Commonwealth,  9  Wall.,  353; 
Lionberger  v.  Rowse,  9  Wall.,  468. 

5  Austin  v.  Aldermen,  7  Wall.,  694 
(1886).  The  tax  may  be  levied  on  resi- 
dent stockholders  in  the  city,  county  or 
town  where  they  reside.  Austin  v.  Bos- 
ton, 96  Mass.,  359  (1867).  And  the  cash- 
ier of  the  bank  may  be  required  by  stat- 
ute to  send  to  the  clerks  of  the  various 
towns  the  names  of  such  stockholders 
as  reside  in  those  towns.  Waite  v.  Dow- 
ley,  94  U.  S.,  527  (1876).  As  to  the  tax- 
ation of  national  bank  stock  in  Iowa,  see 
First  Nat'l  Bank  of  Albia  et  ah  v.  City 
Council  of  Albia,  52  N.  W.  Rep.,  334 
(la.,  1892).  As  to  the  assessment  of  bank 
stock  in  West  Virginia,  see  Bank  of 
Bramwell  v.  County  Court  of  Mercer 
County,  15  S.  E.  Rep.,  78  (W.  Va.,  1892). 
Concerning  the  taxation  of  natioual 
bank  stock  in  Nevada,  see  First  Nat'l 
Bank,  etc.,  v.  Kreig,  32  Pac.  Rep.,  641 
(Nev.,  1893).  National  bank  stock  in 
Delaware  may  be  taxed  by  the  state. 
First  Nat'l  Bank  v.  Herbert,  44  Fed. 
Rep.,  158  (1890). 


761 


§  571.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [ell.  XXXIV. 


that  the  whole  tax  shall  be  paid  in  the  city,  county  or  town  where 
the  bank  is  located,  even  though  some  of  the  stockholders  reside 
in  other  counties  or  cities,  the  statute  must  be  obeyed.1  Generally, 
however,  the  statute  requires  that  stockholders  residing  in  the  state 
shall  be  taxed  at  their  place  of  residence  on  stock  owned  by  them 
in  a  national  bank  within  that  state.2  If  the  statute  is  silent  herein, 
then  the  state  statutes  regulating  the  taxation  of  stockholders  in 
other  corporations  are  to  apply  to  stockholders  in  national  banks 
situated  within  the  state.  The  statute  may  require  the  bank  to  re- 
tain from  dividends  the  tax  on  the  shares  of  stock,  such  tax  being 
determined  by  the  amount  of  dividends.3  The  collection  of  a  tax 
on  national  bank  stock  may  be  enforced  by  the  same  procedure 
through  which  taxes  on  other  personal  property  are  collected.4 

£ .  r>71.  The  tax  must  not  be  greater  than  that  imposed  on  other 
'-moneyed  capital." — The  most  difficult,  unsettled  and  litigated 
questions  connected  with  the  taxation  of  shares  of  stock  in  national 
banks  arise  from  the  meaning  and  application  of  that  provision  of 
the  statutes  of  the  United  States  requiring  that  the  taxation  of  na- 
tional bank  shares  of  stock  shall  not  be  at  a  higher  rate  than  the 


i  National  Bank  v.  Commonwealth,  9 
Wall.,  853(1869);  Tappan  r.  Merchants' 
Nafl  Bank,  19  Wall.,  490  (1878);  Pror. 
Inst  v.  City  of  Boston,  101  Mass.,  575 
(1869);  McLaughlin  u.Chadwell,  7  Brisk. 

(TcinA    889    (1872).     Craft    V.  TutH.'.   27 

Ind.,  882  (1866),  holds  that  if  a  munici- 
pality l>as  no  power  to  tax  Shares  in 
state  banks,  it  cannot  tax  national  bank 
shares. 

-  (  lapp  r.  City  of  Burlington,  42  Vt, 
579  (1870).  See  Trustees  of  Eminence 
v.  Deposil  Bank,  12  Bush,  588  [If 
Farmers'  Nat'lBank  u.  Cook,  32  N.  J.  L., 
847  (1867>  Cf.  State  v.  Hart.  81  N.  J. 
L.,  434  (1S66);  State  r.  Height,  31  N.  J. 
L.,  899  (1866)— objectionable  and  un- 
fortunate decisions  in  all  respects.  The 
decision  in  Tenth  Ward  Nafl  Hank  r. 
City  of  Newark.  89  N.  J.  I...  880  (1877), 
however,  placed  New  Jersey  among  the 
st.it.'s  which  levy  the  tax  in  the  most 
approved  manner,  residents  being  taxed 
where  they  reside,  non-residents  being 
taxed  at  the  domicile  of  the  corporation. 
See,  also,  Kyle  v.  Mayor,  etc.,  75  N.  C, 
445(1870);  Buell  r  Com'rs  of  Fayette- 
ville,  79  N.  C.  007  (1878);  Austin  r.  City 
of  Boston,   96    Mass.,   339    (18U7);   First 


Nafl  Hank  /•.  Smith.  65  111..  It  (1872  : 
Baker  v.  Firs!  Nat'l  Bank,  67  111..  297 
i  is:;',);  Clapp  <\  (  iiy  of  Burlington,  -10 
\"t..  '■;'.»  11870);  Howdl  r.  Caasopolk 
Mich.,  171(187"  I  f.  Mintzer  r.  County 
of  Montgomi  ry,  M  Pa,  St..  189  (1 
For  taxation  <>t  national  hank  Btock 
under  the  Alabama  act,  ■  e  Maguire  n 
rd  of  Revenue,  71  Ala..  401  (1882), 

» Central  Nat'l  Bank  v.  United  states, 
r.   s.  855  (1890).    Cf.   First  Nafl 
Bank  v.  Richmond,  89  Fed   Rep.,  309: 
id.,    S77.     The    taxation   of   the   capital 
stock  <>f  ;i    national    bank    against    the 
hank  in  solido  is  invalid.  It  may  l>e  col- 
d    from    the    hank    hut   should    be 
..I   against  the  stockholders.    De- 
ductions should  also  be  allowed  when 
allowed  on  other  similar  property.  First 
Nafl  Bank  r.  Fisher,  26  Pac,  Rep.,  482 
(Kan..  1891), 

*  Palmer  v.  McMahon.  188  C.  S.,  660 
(1890).  A  tax  on  national  hank  stock  to 
be  collected  in  the  first  instance  from 
the  hank  cannot  be  collected  from  the 
receiver  of  the  hank,  the  hank  being  in- 
solvent City  of  Boston  v.  Beal,  51  Fed. 
Rep.,  306(1892). 


762 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  571. 


taxation  of  other  "  moneyed  capital "  within  the  state.  The  words 
';  moneyed  capital"  have  been  construed  to  mean  "  not  only  bonds, 
stocks  and  money  loaned,  but  all  credits  and  demands  of  every 
character  in  favor  of  the  tax-payer."  l  This  has  been  the  subject  of 
much  controversy,  however;  and  the  latest  decisions  go  very  far 
in  upholding  the  tax,  if  substantial  justice  has  been  done.2 

The  method  of  taxing  shares  of  stock  need  not  correspond  to 
that  followed  in  taxing  other  corporations  in  the  state.3     The  ma- 


.1  Wasson  v.  First  Nat'l  Bank,  8  N.  E. 
Rep.,  87  ^Ind.,  1886);  Boyer  v.  Boyer, 
113  U.  S.,  689  (1884).  Shares  of  stock  in 
banks  are  other  moneyed  capital,  but 
shares  of  stock  in  other  corporations 
are  not  necessarily  so.  "  Moneyed  capi- 
tal "  means  money  put  out  by  way  of 
loan,  discount,  etc.,  or  invested  in 
stocks  of  banks,  etc.,  which  put  out 
money  by  way  of  loan,  discount,  etc. 
Trust  companies  ai-e  different  from  banks 
herein.  Mercantile  Bank  v.  New  York,  121 
IT.  S.,  138  (1887),  affirming  28  Fed.  Rep., 
776.  A  tax  on  national  bank  stock  is 
legal  although  stock  in  state  and  sav- 
ings banks  is  not  taxed  directly,  but  the 
corporation  itself  is  taxed  in  another 
way.  Richards  v.  Town,  etc.,  31  Fed. 
Rep.,  505  (1887).  See,  also,  Hepburn  v. 
School  Directors,  23  Wall.,  480  (1874). 
Other  moneyed  capital  means  capital 
employed  in  banking  or  loaning,  and 
not  in  business.  Talbott  v.  Silver  Bow 
Co.,  139  U.  S,  438  (1891). 

2  People  v.  Commissioners,  4  Wall.,  256 ; 
Adams  v.  Nashville,  95  U.  S.,  19  (1877). 
A  recent  case  in  New  York  —  In  re 
McMahon,  102  N  Y.,  176  (1886)  —  holds 
that  shares  of  stock  in  railroads,  man- 
ufacturing and  other  corporations  are 
not  "  moneyed  capital  "  in  the  sense  in 
which  these  terms  are  used  in  the  act 
of  congress.  See,  also.  First  National 
Bank  v.  Waters,  19  Blatch.,  242.  Prov. 
Inst.  v.  City  of  Boston,  101  Mass.,  575 
(1869),  holds  that  the  comparison  is  to  be 
made  with  other  moneyed  capital  in  the 
same  town  or  city  where  the  tax  is 
levied.  See,  also,  People  v.  Moore, 
Idaho,  504  (1873).  Subject  to  this  rule 
the  shares  of  national  banks  may  be  as- 


sessed at  their  value  even  above  par-. 
Hepburn  v.  School  Directors,  supra 
(1874) ;  People  v.  Commissioners,  etc.,  94 
U.  S.,  415  (1876);  S.  C,  67  N.  Y,  516 
(1876);  affirming  8  Hun,  536;  St.  Louis 
Nat'l  Bank  v.  Papin,  4  Dill.,  29  (1876), 
the  court  saying,  also,  that  the  assessors 
may  ascertain  that  value  by  including 
"  all  reserve  funds,  profits,  earnings  and 
other  values  "  when  the  intent  of  the 
statute  is  to  base  the  tax  "  upon  an  in- 
quiry, inter  alia,  into  the  actual  value 
of  the  property  of  the  banks  so  far  as 
this  imparts  or  confers  a  value  upon 
the  shares."  Stockholder  cannot  en- 
join the  tax  unless  he  first  pays  such 
part  of  it  as  he  admits  is  legal.  Rosen- 
burg  v.  Weekes,  4  S.  W.  Rep.,  899 
(Texas,  1887).  The  stock  is  listed  against 
the  stockholder,  not  against  the  bank. 
Miller  v.  First,  etc.,  Bank,  21  N.  E.  Rep., 
860  (Ohio,  1889).  The  statute  may  au- 
thorize taxation  for  years  past.  State 
v.  Simmons,  12  S.  Rep.,  477  (Miss.,  1893). 
3  Davenport  Bank  v.  Davenport.  123 
U.  S.,  83  (1887).  "There  is  no  reason 
to  suppose  that  congress  cared  at  all 
about  the  mode  the  states  might  adopt 
for  the  collection  of  their  taxes.  A  tax 
imposed  on  the  capital  or  property  of  a 
corporation  falls  as  effectually  on  the 
capital  of  the  shareholder  represented 
by  his  shares  as  does  a  tax  upon  the 
shares  directly ;  and  although,  in  legal 
discrimination,  a  tax  upon  the  former 
is  not  a  tax  upon  the  latter,  practically 
and  substantially  taxation  of  the  capi- 
tal of  the  corporation  is  taxation  of  the 
capital  of  the  shareholder."  Tax  on 
national  bank  stock  upheld,  though  all 
other  stock  except  bank  stock  is  ex- 
63 


§  571.] 


TAXATION   OF    STOCK    AND   COEPORATIONS.  [CH.  XXXIV. 


terial  point  is  that  national  bank  stock  must  not,  as  a  result,  be 
taxed  higher  than  other  moneyed  investments.  If  this  rule  is 
observed,  it  is  of  little  consequence  whether  the  tax  on  national 
bank  stock  is  levied  and  assessed  in  the  same  way  as  other  corpo- 
rations are  taxed. 

If  the  state  laws  allow  a  deduction  to  a  person  taxed  on  bonds, 
notes  and  similar  property  for  debts  due  from  him  to  others,  a 
similar  deduction  must  be  allowed  to  stockholders  taxed  on  their 
shares  in  a  national  bank.1     If  the  statute  does  not  allow  the  same 


empt,  the  tax  being  on  capital  stock. 
Mercantile  Nat'l  Bank  tt  New  York,  28 
Fed.  Rep,  770-783  (1886),  Wallace,  J.; 
affirmed,  121  U.  S.,  138.  The  mode  of 
collection  need  not  be  the  same.  The 
state  may  compel  the  bank  to  pay  the 
tax.  National  l'.;mk  r.  Commonwealth, 
9  Wall.,  853,  363  (1869),  per  Miller,  J. 
But  if  the  assessment  is  illegal,  in  that 
no  notice  and  opportunity  is  given  to 
the  shareholder  to  appear  and  resist  the 
tax,  it  cannot  be  enforced.  Albany  ( Sty 
Nat'l  Bank  v.  Maher,  20  Blatcb.,  841 
(1882).  In  general  cf.  Van  Allen  tt 
Assessors,  3  Wall.,  578;  Bradley  v.-  Peo- 
ple, 4  Wall.,  459  (1S66);  Hubbard  tt 
Johnson  County.  2:!  Iowa,  bin  (1 
People  v.  Assessors,  29  How.  Pi. 
(1865);  Wright  tt  Stelz,  27  Ind.,  338 
(1866),  overruling  Whitney  tt  Madison, 
23  Ind.,  231,  on  certain  points;  Cooley 
on  Taxation  (2d  ed.),  390.  Contra,  Peo- 
ple v.  Bradley.  89  111.,  180  (1866)i  See, 
also,  Frazier  tt  Siebern,  16  Ohio  St..  614; 
Smith  tt  First  Nat'l  Bank.  17  Mich.,  479; 
Van  Slyke  r.  State.  2:;  Wis.,  656;  Boy- 
noil  tt  State.  25  Wis..  112.  Where  a 
state  and  also  a  local  tax  are  levied  on 
shares  of  stock  in  a  state  bank,  and  the 
local  tax  is  declared  illegal,  the  same 
local  tax  is  illegal  as  regards  shares  in 
national  banks.  City  Nat'l  Bank  v. 
Paducah,  2  Flippin,  61  (187?  . 

»  EvansvilleBank  tt  Britton.  105  U.  S., 
322  (1881),  affirming  8  Fed.  Rep.,  867. 
But  a  deduction  to  individuals  for 
United  States  bonds  held  by  them  will 
not  invalidate  a  tax  on  the  national 
bank  stock  without  a  deduction  for 
bonds  held    by   the   bank.     Bressler  tt 


Wayne  County,  41  N.  W.  Rep..  356 
(Neb.,  1889);  People  tt  Commissioners,  4 
Wall.,  244  (1866).  In  the  recent  case  of 
Waason  tt  First  Nat'l  Bank,  8  N.  E. 
Pep..  97  i  Ind.,  1886),  the  court  held  that 
the  deduction  allowed  to  others  is  fatal 
to  a  tax  on  national  bank  shares  with- 
out that  deduction  only  when  it  is  "  ma- 
terial and  serious;"  and  that  that  de- 
pends on  the  proportion  of  mom 
capital  which  is  allowed  the  deduction 
to  that  moneyed  capital  which  is  not 
allowed  it.  If  material,  the  national 
bank  share  tax  is  to  be  allowed  a  simi- 
lar deduction.  National  bank  stock  can- 
not be  taxed  at  a  higher  valuation  on 
its  actual  value  than  other  moneyed 
property  is  valued  at.  Deductions  al- 
lowed to  other  moneyed  capital  must 
also  be  allowed  on  national  bank  Btock. 
Whitbeck  v.  Mercantile,  etc.,  Bank,  127 
B.,  193  (1888). 

Where  a  tax  on  stock  is  not  illegal 
except  in  that  the  as  essors  have  pro- 
ceeded in  a  wrong  manner,  the  court 
will  not  enjoin  its  collection  unless  the 
plaintiff  stockholders  pay  in  such  a  tax 
as  would  have  been  legal.  Frazer  tt 
Seibern,  16  Ohio  St.  614  (1866);  Cum- 
mings  tt  Merchants'  Nat'l  Bank,  101  U. 
S.,  153  (1879);  Supervisors  v.  Stanley, 
105  U.  S.,  305  (1881);  S.  C,  sub  nom. 
Stanley  tt  Supervisors,  121  U.  S.,  535 
(1887),  holding  that  the  stockholder  can- 
not recover  back  the  excess  of  tax 
where  he  has  not  attempted  to  have  the 
tax  remedied  ;  Hills  tt  Exchange  Bank. 
105  TJ.  S.,  319  (1881);  reversing  National 
Albany  Excnan.ee  Bank  v.  Wells,  18 
Blatcb.,  478  (1880) ;  5  Fed.  Rep,  24a     In 


764 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  571. 


to  the  latter,  and  the  courts  of  the  state  refuse  to  allow  the  deduc- 
tion, then  the  tax  is  illegal.  Such  was  the  result  of  a  tax  in  New 
York  on  national  bank  stock.1 


consequence  of  this  escape  of  the  stock- 
holders from  taxation,  a  special  statute 
was  passed  levying  a  back  tax.  See  N. 
Y.  Laws,  1883,  ch.  341.  Such  a  statute 
is  constitutional.  See  McVeigh  v. 
Loomis,  49  111.,  318  (1868).  The  legisla- 
ture may  cure  any  defects  in  the  levy  of 
taxes  in  past  years,  provided  such  defects 
could  have  been  so  modified  before  the 
levy  was  made.  Williams  v.  Supervi- 
sors of  Albany,  122  U.  S.,  154  (1887),  sus- 
taining ch.  345.  Laws  of  1883.  Cf.  City 
Nat'l  Bank  v.  Paducah,  2  Flippin,  61 
(1877).  And  a  deduction  to  other  mon- 
eyed corporations  for  their  real  estate 
must  be  allowed  in  taxing  national  bank 
shares.  Pollard  v.  State,  65  Ala.,  528 
(1880);  overruling  Mclver  v.  Robinson, 
53  Ala.,  456,  and  Sumbre  County  v.  Na- 
tional Bank,  62  Ala.,  464.  In  general 
see,  also,  Ruggles  v.  City  of  Fond  du 
Lac,  53  Wis.,  436  (1881);  Miller  v.  Heil- 
bron,  58  Cal.,  133  (1881);  St.  Louis 
Nat'l  Bank  v.  Papin,  4  Dill.,  29  (1876) ; 
Covington,  etc.,  Bank  v.  Covington,  21 
Fed.  Rep.,  484  (1884).  Deduction  for 
debts,  if  allowed  to  persons  taxed,  gen- 
erally must  be  allowed  national  bank 
stockholders  who  are  taxed  on  their 
stock.  McAden  v.  Commisioners,  etc., 
2  S.  E.  Rep.,  670  (N.  C,  1887).  Deduc- 
tions are  to  be  allowed  the  national 
bank  stockholder  for  debts  due  from 
him  to  others  where  the  state  statute 
permits  its  citizens  to  deduct  their  debts 
from  the  valuation  of  their  personal 
property.  Richards  v.  Town,  etc..  31 
Fed.  Rep,  505  (1887) ;  Peavey  v.  Town, 
etc.,  9  Atl.  Rep.,  722  (N.  H.,  1887).  As 
regards  deductions  for  surplus  funds 
which  are  already  taxed,  see  Strafford 
Nat'l  Bank  v.  Dover,  58  N.  H.,  316  (1S78). 
Cf.  North  Ward,  etc.,  Bank  v.  City  of 
Newark,  39  N.  J.  L.,  380  (1877);  First 
Nat'l  Bank  v.  Peterborough,  56  N.  H.,  38 
(1875).  As  regards  its  realty,  see  Com'rs 
of  Rice  County  v.  Citizens'  Nat'l  Bank, 


23  Minn.,  280  (1877).  In  Indiana  the 
national  bank  stockholder  may  recover 
back  such  part  of  the  tax  as  should  have 
been  deducted  by  reason  of  his  indebted- 
ness. City  of  Indianapolis  v.  Vajen,  12 
N.  E.  Rep.,  311  (Ind.,  1887);  Exchange 
Nat'l  Bank  v.  Miller,  19  Fed.  Rep.,  372 
(1884). 

i  People  r.  Weaver,  100  U.  S.,  539 
(1879).  The  New  York  court  held  that 
"  the  effect  of  the  state  law  is  to  permit 
a  citizen  of  New  York,  who  has  mon- 
eyed capital  invested  otherwise  than  in 
banks,  to  deduct  from  that  capital  the 
sum  of  all  his  debts,  leaving  the  re- 
mainder alone  subject  to  taxation,  while 
he  whose  money  is  invested  in  shares 
of  bank  stock  can  make  no  such  deduc- 
tion." The  supreme  court  of  the  United 
States  declared  the  tax  on  the  national 
bank  shares  to  be  invalid.  But  the  case 
of  Supervisors  v.  Stanley,  105  U.  S., 
305,  315  (1881),  holds  that  the  tax  is  not 
void  absolutely.  Deduction  allowed  to 
individuals  for  national  and  state  secu- 
rities, but  not  allowed  on  national  bank 
stock,  invalidates  a  tax  on  the  latter. 
Whitney  Nat'l  Bank  v.  Parker,  41  Fed. 
Rep,  402  (1890).  If  the  stockholder 
owed  no  debts  he  is  not  injured;  and 
even  if  he  owes  debts  he  cannot  defeat 
the  tax  altogether,  but  is  allowed  a  sim- 
ilar deduction.  No  discrimination,  al- 
though the  state  taxes  banks  and  nothing 
else.  Gorge's  Appeal,  79  Pa.  St.,  149 
(1875).  No  discrimination,  though  a  de- 
duction for  debts  is  allowed  to  those 
whose  property  consists  of  debts  due 
them  ;  but  no  deduction  otherwise.  First 
Nat'l  Bank  v.  St  Joseph,  46  Mich.,  526 
(1881).  The  exemption  of  all  capital 
which  is  wholly  invested  in  mining  is 
not  a  discrimination.  Board  of  Com'rs 
v.  Davis,  12  Pac.  Rep.,  688  (Mont,  1887). 
Exemption  of  savings  banks,  municipal 
bonds  and  shares  of  stock  in  all  foreign 
and   domestic  corporations  other  than 


765 


§  571.] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [ciI.  XXXIV. 


A  refusal  to  allow  a  deduction  to  stockholders  in  national  banks 
similar  to  a  deduction  allowed  on  a  tax  levied  on  other  "moneyed 
capital "  was  held  to  be  a  discrimination  in  contravention  of  the 
statute.  Special  exemptions,  however,  of  certain  stocks  or  other 
forms  of  "moneyed  capital"  do  not  require  that  a  similar  exemp- 
tion should  be  made  on  national  bank  stock.1 

Again,  the  national  bank  act  cannot  be  evaded  by  an  unfair  as- 
sessment of  the  shares  in  national  banks  as  compared  with  the 
assessment  of  other  monej'ed  capital.  It  is  a  well-known  fact  and 
an  understood  matter  in  nearly  all  localities  that  no  kinds  of  prop- 
erty are  valued  at  their  actual  selling  worth  in  making  the  valua- 
tion for  taxation  purposes.  Consequently,  if  other  moneyed  cap- 
ital is  valued  in  the  assessment  rolls  at  a  certain  proportion  of  the 
actual  value,  and  national  bank  stock  at  a  higher  proportion,  the 
tax  is  illegal  and  cannot  be  collected.2 


banks  from  taxation  does  not  invalidate 
tax  on  shares  of  stock  in  natioml  banks. 
Mercantile  Bank  v.  New  York,  121  U.  S., 
138(1887);  Newark,  etc..  Co.  r.  Newark, 
121  U.  S.,  163(1887);  Bank  of  Redemp- 
tion v.  Boston.  125  id.,  60  No  dis- 
crimination exists  in  taxation  of  national 
bank  stock  in  territory  where  the  shares 
of  stock  incorporations  paying  tax 
their  property  or  capital  stock  are 
ernpted  from  taxation.  Comity  of  Silver 
Bow  17.  Davis.  12  Par.  Rep.,  688  (Mont., 
1887).  In  Nebraska  the  owner  of  na- 
tional bank  stock,  in  listing  his  shares 
for  taxation,  is  not  entitled  to  deduct 
his  bona  fide  indel  te<lness  from  the 
value  of  such  shares  of  stock.  The  de- 
cision on  the  former  hearing  of  the  case, 
reported  in  25  Neb.,  468,  \\  N.  \\\  Rep., 
856,  is  overruled.  Bressler  V.  Wayne 
County,  49  N.  W.  Rep..  7^7  (Neb.,  1891). 
National  bank  shares  in  Massachusetts 
are  taxed  at  their  actual  value,  and  the 
bank  may  petition  for  a  reduction  of 
the  tax.  Nat'l  Bank  of  Com.  v.  New 
Bedford.  29  N.  E.  Rep.,  532  (Mass..  1892), 
1  Thus,  a  special  contract  exemption 
of  a  few  state  bouds  from  taxation  will 
not  exempt  the  national  bonds.  Lion- 
berger  v.  Rowse,  9  Wall..  468  (1869); 
Hepburn  r.  School  Directors.  23  Wall.. 
480  (1874\  where  an  exemption  of  mort- 
gages, judgments  and  contracts  to  sell 


land  were  immaterial  herein.  See,  also, 
Adams  r.  Nashville.  95  IT.  S.,  19  (1877); 
Supervisors  v.  Stanley,  105  U.  S,  305, 
317(1881);  In  re  McMahon,  102  N.  Y., 
176  (1880);  McLoughlin  r.  Chadwell,  7 
Heisk.  (Tenn.),  389  (1872):  Boyer  v. 
Boyer.  113  I".  S.,  689;  Everitt's  Appeal. 
77  Pa.  St,  216;  Albany,  etc.,  Bank  >: 
Maher,  19  Blatch.,  17.".  1 1882).  See,  also. 
City  of  Richmond  V.  Scott.  48  Ind.,  568 
(1874  :  Mercantile  Nat'l  Bank  r.  City  of 
New  York,  28  Fed.  Rep..  770.  785(11 

-'Pelton  v.  National  Bank,  101  U.  S., 
143  (1879),  the  court  saying  that  "any 
system  of  assessment  of  taxes  which 
exacts  from  the  owner  of  the  shares  of 
a  national  bank  a  larger  sum  in  propor- 
tion to  their  actual  value  than  it  does 
from  the  owner  of  other  moneyed  cap- 
ital valued  in  like  manner  does  tax 
them  at  a  greater  rate  within  the  mean- 
ing of  the  act  of  congress."  Where, 
however,  the  assessors  assess  ordinary 
securities  at  three-fifths  of  their  actual 
value,  and  assess  bank  stock  at  its  full 
actual  value,  and  such  method  of  un- 
equal assessments  is  contrary  to  the 
constitution  of  the  state,  the  court  will 
relieve  the  stockholders  only  upon  pay- 
ment by  them  of  such  a  tax  as  would 
have  been  legal.  Cumminga  v.  Mer- 
chants" National  Bank  of  Toledo,  101  U. 
S.,    153  (1879  ;   Supervisors  v.  Stanley. 


766 


CH.  XXXIV.]  TAXATION    OB'    STOCK    AND    CORPORATIONS. 


[§  S72. 


§  572.  The  hank  may  Iring  suit  to  restrain  illegal  tax  on  its 
stockholders.— -There  has  been  some  doubt  as  to  whether  a  national 
bank  could  bring  suit  to  restrain  an  illegal  tax  on  its  stockholders. 
Ordinarily  a  corporation  cannot  do  so.  Each  stockholder  must 
protect  his  own  interests.  But  where,  as  in  the  case  of  national 
banks,  the  tax  is  paid  by  the  bank  itself  and  collected  by  it  from 
its  stockholders,  if  the  latter  refuse  to  pay  the  bank  or  recognize 
its  payment  as  legal,  many  suits  would  result.  Accordingly,  in 
order  to  avoid  a  multiplicity  of  suits,  it  is  now  well  established 
that  the  bank  itself  may  file  a  bill  in  equity  to  prevent  and  enjoin 
the  collection  of  an  illegal  tax  on  its  stockholders.1 


105  U.   S.,   305   (1881).     When   the  na- 
tional hank  stock  is  assessed  too  low, 
the  fact  that  another  bank  is  assessed 
still  lower  will   not  invalidate  the  tax 
against  the  former.     People  v.  Assess- 
ors, etc.,  2  Hun,  583  (1874).     In  the  re- 
cent  case   of   First   National   Bank    of 
Toledo  v.  Treasurer,  25  Fed.  Eep.,  749 
(1885).  where  ordinary  moneyed  capital 
was  assessed  at  six-tenths  of  its  actual 
value,    while   shares  in  national  banks 
were  assessed  at  a  higher  proportion  of 
the   real    value,    the   collection   thei-eof 
was  enjoined    upon    the    complainant 
paying  the  tax  admitted  to  be  due.     As 
to  the  pleadings,  see  National  Bank  v. 
Kimball,  103  U.   S.,  732  (1880).     Lower 
valuation  of  other    property   has  been 
held  to   be  immaterial.      Wagoner    v. 
Loomis.  37  Ohio  St..  571  (1881).     As  re- 
gards taxation  of  national  banks,  a  cus- 
tom of  assessing  property  at  fifty  per 
cent,  of  its  value  is  not  proved  by  a  few 
example?.     Engelke  v.  Schlender,  12  S. 
W.  Rep..  999  (Tex.,  1890).     If,  as  a  mat- 
ter of  fact,  personal  property  and  capi- 
tal of  individuals  escape  taxation  and 
little  effort  is  made  to  tax  such  capital, 
then  a  tax  on  national  bank  stock  can- 
not be  enforced.      If  such  stock  is  as- 
sessed at  two-thirds  of  its  actual  value, 
and  other  personal  property  at  one-half 
their   value,   the   assessment   is   illegal. 
First   Nat'l   Bank  r.  Lindsay,   45   Fed. 
Rep,  G19  (1891). 

i  City  Nat'l  Bank  v.  City  of  Paducah,  2 
Flippin,  61  (1877),  where  the  court  say : 
"  The  bank  is  so  far  the  trustee  of  the 


stockholders   and  the  custodian  of  the 
dividends,  that  it  is  entitled  to  maintain 
the  bill.     It  might  be  subjected  to  great 
annoyance  by  stockholders  who  denied 
the   legality  of  the  tax,   and  gave  the 
bank   notice  that  it  would  pay  at  the 
peril  of  being  sued  by  them.     It  is  cer- 
tainly no  hardship  to  permit  the  whole 
question  to  be  litigated  in  a  single  ac- 
tion."    This  case  holds  also  that  an  in- 
junction against  the   collection   of  the 
illegal  tax  will  be  granted.     In  general 
see,   also,    Albany   City   Nat"!    Bank   v. 
Maher.    20    Blatch.,    341    (1882):  North 
Ward  Nat"  1  Bank  v.  Newark,  40  N.  J.  L, 
558  (1878).    Cf.  Dows  v.  City  of  Chicago, 
11    Wall.,    108  (1870);   Tappan   v.  Mer- 
chants' Nat'l  Bank,  19  Wall.,  490  (1873); 
Pelton  v.  National  Bank,  101  U.  S..  143 
(1879);  Cummingsr.  National  Bank,  101 
U.  S.,  153.     Contra,  First  Nat'l  Bank  of 
Hannibal  v.  Meredith,  44  Mo.,  500  (1879). 
See,  also,  Union  Nat'l  Bank  v.  Chicago,  3 
Biss.,  82  (1871).     As  to  the  rule  in  New 
York,  see  People  v.  Wall  Street  Bank, 
39   Hun,   525 ;    People    v.    Coleman,   41 
Hun,  344.     The  same  rule  does  not  ap- 
ply to   a  corporation  which   brings  suit 
to  prevent  the  levy  upon  and  sale  of  a 
non-resident    stockholder's    stocks    for 
non-payment  of  his  tax.     Waseca  Co. 
Bank  v.  McKenna,  32  Minn..  4C8  (1884). 
The   case   of    Farmers'    Nat'l    Bank  v. 
Cook,  32  N.  J.  L.  347  (18G7),  denies  the 
right  of  the  bank  to  bring  the  action, 
and  says:  "The  corporation  is  not  the 
agent  of  the  stockholders  for  any  such 
purpose."     A  national  bank  may  file  a 


767 


§  572a,] 


TAXATION    OF    STOCK    AND    CORPORATIONS.  [cH.  XXXIV. 


C.    OTHER   METHODS    OF   TAXING   CORPORATIONS. 

§  572a.  General  principles.— A  state  may  tax  corporations.  The 
rate  of  taxation  may  be  greater  or  less  than  or  equal  to  the  rate 
at  which  individuals  are  taxed.1  The  method  of  assessing  taxes 
upon  corporations  varies  in  the  different  states.2 

Where  a  company  is  really  located  in  a  city  and  docs  all  its  busi- 
ness there,  but  its  articles  of  incorporation  state  its  principal  place 
of  business  as  being  in  an  adjacent  town,  the  sole  object  being  to 
evade  taxation,  the  court  will  hold  that  for  taxation  purposes  its 
principal  place  of  business  is  in  such  city.3  Where  the  capital  stock 
is  invested  in  patent  rights  it  cannot  be  taxed  by  the  state.4  A 
state  may  compel  corporations  to  pay  taxes  for  years  past.5 

bill  to  restrain  the  imposition   of  a  tax  located,   see   also    Matter    of    McLean; 

on  stock,  the  hank   having   to   pay  the  Lough    v.    Outerbridge,    G6    Him.    139 

tax.    Whitney  Nat'l  Bank  v.  Parker,  41  (1892)    It  must  be  the  principal  place 

Fed.  Rep.,  402  (1890).     But  the  injunc-  or  places  of  business  f or  the  purposes  of 

tion    against    collection  of    the  tax  is  taxation  and  service  of  process ;  ami  in 

granted  only  as  to  tJ xcess  of  tax.  Id  New    York    under    Bomewhat    similar 


The  bank  cannot  ftlea  bill  in  th  ■  federal 
court  unless  the  tax  involved  is  ovdt 
$2,000.  Sioux  Fall-  Xat'l  Bank  0.  Swcii- 
soli,  48  Fed.  Rep.,  621  (189S 

i  It  is  constitutional  to  tax  corpora- 
tions without  taxing  individuals  Singi  r 
Manuf.  Co.  v.  Wright,  :'■::  Fed.  Rep.,  121 
(1887);  State  R  R  Tax  Cases,  92  U.  S., 


statutes  it  is  held  that  the  certificate  is 
conclusive  a-  to  thia  Western  Trans- 
tion  I  ■•.  '•.  Schea,  19  N.  Y..  W8,  A 
domestic  corporation  will  not  be  al- 
lowed to  deny  that  it  has  a  pla< 
business  in  the  state.  Chapman  n 
Doray,  26  Pac,  Rep.,  605(081.,  18 
*<■  Commonwealth  tx  Westinghouse, 


o7.->.    Cf.  The  Railroad  Tax  Cases,    13  Co., 24  AtL  Rep.,  1107  (Pa.,  1892).    Where 

Fed.  Rep.,  722(1882);  Santa  Clara  Co.  u  the  Btock  is  issued  in  payment  for  the 

Railroad,  is  i,i..  885;  &  < '..  11s  U.  S..  390  exclusive  right  to  use  certain  patented 

(1885).    Concerning  the  general  problem  articles  within  certain  territory,  it  is  not 

of  how  corporations  should  be  taxed,  invested  in  patent  rights  so  astobt 

see  Cook  on  The  Corporation  Problem,  empt  from  taxation  by  reason  of  the  acts 

pp.  102-105.  of  con   i  Commonwealth  v.  Central, 

-see  r.u t  Vll.  infra.  eta,  Tel    Co.,  22    At  I.  hep..  841   (Pa., 

» Milwaukee,  eta,  Ca  v.  City  of  Mil-  1891);  Id.  r.  Brush,  etc.,  Co,  id.,  844 

waukee,  58  N.  W  Rep.,  B89  (Wis.,  189S  sAn  attempt  of  the  Btal  i  to  make  a 

Where  the  actual  place  of  business  of  a  railroad  corporation  pay  $1,250,000  back 

corporation  is  at  one  place,  but  its  nom-  taxes  not  levied   under  an  alleged  mi.  - 

inal  place  of  business  is  fixed  elsewhere  taken  view  of  the  law  by  former  state 

in  order  to  evade  taxation,  the  actual  officials,    failed    in    Commonwealth    v. 

place  of  business  is  the  place  where  the  Penn.  I  0.,  28   All.   Rep.,  549  (Pa.,  i 

company  will  be  taxed  under  the  Mich-  Where  the  charter  provides  for  "a  tax 

igan  statutes.   Detroit,  etc.,  Co,  '•-  Foard  not  exceeding  twenty-live  cents  per  an- 

of  Assessors,  51   N.  W.  Rep.,  i>TS  (Mich.,  num  per  share  on  each  share  of  the  cap- 

1892),    distinguishing    the    New    York  ital   stock   whenever  the  annual  profits 

cases.     In  regard  to  a  corporation  being  thereof  shall  exceed  six  per  cent,"  the 

taxed  in  another  place  in  the  state  from  legislature  may  compel  the  company  to 

the  place   where  its  principal  office   is  pay  such  tax  and  to  pay  it  for  twenty-five 

763 


•CH.  XXXIV.]  TAXATION    OF    STOCK   AND   CORPORATIONS. 


[§ 


572a. 


A  tax  on  the  capital  stock  based  upon  the  amount  of  dividend 
declared  cannot  be  evaded  by  distributing  profits  without  declar- 
ing a  dividend.  But  a  stock  dividend  does  not  come  within  the 
tax  statute.1  A  corporation  claiming  that  it  is  taxed  too  much 
cannot  enjoin  collection  unless  it  offers  to  pay  the  amount  it  ad- 
mits to  be  due.2  "Where  taxes  are  based  on  the  aggregate  value  of 
all  the  shares  of  stock,  unissued  stock  should  not  be  considered 
even  though  ten  per  cent,  has  been  paid  thereon.3 

In  ascertaining  the  actual  value  of  capital  stock  for  taxation  the 
price  at  which  the  stock  is  selling  is  not  taken  as  the  actual  value, 
where  the  market  value  is  due  to  speculation  and  market  influ- 
ences.4    Bonds  of  domestic  corporations  held  by  non-residents  are 


years  past,  during  which  time  the  com- 
pany had  evaded  payment.  State  v. 
Seaboard,  etc.,  R.  R,  52  Fed.  Rep.,  450 
(1892).  See,  also,  §  572.  A  tax  on  a  gas 
company  on  gross  receipts  and  on  divi- 
dends by  way  of  license  for  the  right  to 
act  as  a  corporation  is  not  a  tax  upon 
the  property  or  corporate  franchises, 
but  is  a  license  fee.  Jersey  City  G.  L. 
Co.  v.  United  G.,  etc.,  Co.,  46  Fed.  Rep., 
264  (1891).  Generally,  the  statutes  pre- 
scribe that  a  corporation  shall  be  taxed 
where  its  principal  office  or  place  of 
business  is  located.  People  v.  McLean, 
17  Hun,  204  (1879) ;  Pelton  v.  Northern 
Trans.  Co.,  37  Ohio  St.,  450  (1882) ;  Balti- 
more v.  Baltimore  City  Pass.  R'y  Co., 
57  Md.,  31  (1881);  Western  Transporta- 
tion Co.  v.  Stevens,  19  N.  Y.,  408  (1859); 
Glaize  v.  South  Carolina  R.  R.,  1  Strobh., 
70  (1846),  holding  that  a  corporation 
may  have  a  special  or  constructive  res- 
idence extending  to  the  territorial  limits 
of  the  jurisdiction  which  granted  its 
charter  for  purposes  of  taxation. 

1  Lehigh,  etc.,  Co.  v.  Commonwealth, 
55  Pa.  St.,  448  (1867) ;  Commonwealth  v. 
Pittsburg,  etc.,  R'y,  74  Pa.  St.,  83  (1873). 
See  State  of  Ohio  v.  Franklin  Bank,  10 
Ohio,  91  (1840) ;  People  v.  Home  Ins.  Co., 
92  N.  Y.,  328  (1883).  Where  the  divi- 
dends declared  during  the  year  were 
partly  earned  during  prior  years,  the 
latter  portion  are  not  taxable  under  the 
Pennsylvania  statute  taxing  the  capital 
stock  according  to  the  dividends.  Com- 
monwealth v.  Brush,  etc.,  Co.,  22  Atl.  Rep., 


844  (Pa.,  1891).  Where  all  the  shares  are 
reduced  in  par  value  from  $50  to  $38  and 
the  $12  difference  is  paid  to  the  stockhold- 
ers in  cash,  this  is  a  reduction  of  capital 
stock  and  not  a  dividend,  and  cannot  be 
taxed  as  a  dividend.  Commonwealth  v. 
Central  T.  Co.,  22  Atl.  Rep.,  209  (Pa.,  1891). 
A  tax  upon  the  receipts  of  a  railroad  is 
not  a  tax  upon  dividends.  Com'rs,  etc., 
v.  Buckner,  48  Fed.  Rep.,  533  (1891).  A 
dividend  declared  and  ordered  depos- 
ited to  the  order  of  the  stockholders 
and  so  held  until  the  further  order  of 
the  court  is  legal,  and  the  amount  can- 
not be  taxed  as  belonging  to  the  bank. 
Pollard  v.  First  National  Bank,  28  Pac. 
Rep.,  202  (Kan.,  1891).  Profits  applied 
to  betterments  are  not  "dividends 
earned"  within  the  meaning  of  a  stat- 
ute imposing  taxation.  State  v.  Comp- 
troller, 23  Atl.  Rep,  122  (N.  J.,  1891). 

2  Smith  v.  Rude,  etc.,  Co.,  30  N.  E. 
Rep,  947  (Ind.,  1892).     See,  also,  §  572. 

3  Boston,  etc.,  Co.  v.  Commonwealth, 
31  N.  E.  Rep.,  696  (Mass.,  1892).  The 
whole  capital  stock  may  be  taxed  under 
a  city  charter,  although  only  a  part  of 
it  has  been  paid  in.  Shelby,  etc.,  Co. 
v.  Board,  etc.,  16  S.  W.  Rep.,  460  (Ky., 
1891). 

4  Commonwealth  v.  Phil.,  etc.,  R.  R, 
22  Atl.  Rep.,  235  (Pa.,  1891).  In  Louisi- 
ana the  corporation  may  sue  to  reduce 
or  annul  taxation  of  the  shares  of  stock. 
The  value  of  the  stock  may  be  ascer- 
tained from  various  sources,  including 
that  of  the  stock  for  which  it  has  been 


(49) 


769 


572&.] 


TAXATION   OF   STOCK   AND    CORPORATIONS.  [CH.  XXXIV. 


not  taxable  by  the  states  creating  the  corporations.1  A  rail- 
road cannot  be  taxed  to  aid  in  paying  a  municipal  subscription 
to  its  construction.2  The  franchise  to  build  and  operate  a  street 
railway  is  subject  to  taxation.  A  license  fee  may  be  imposed  on 
the  railway,  although,  under  its  franchise,  it  is  also  bound  to  pay 
other  taxes  annually.3  The  taxation  of  unincorporated  associations 
is  considered  elsewhere.4  Where  a  railroad  company  of  one  state 
is  consolidated  with  companies  of  other  states  the  consolidated 
company  is  considered,  for  the  purposes  of  taxation,  to  be  a  corpo- 
ration of  each  state  to  the  extent  that  its  property  is  in  that  state. 
It  is  taxed  in  the  state  on  the  capital  stock  of  the  company  which 
it  absorbed.5 

§  5725.  Exemptions  from  taxation,—  A  state,  if  not  restricted  by 
its  constitution,  may  exempt  the  property  of  a  corporation  from 

exchanged.    Planters',   etc.,   Co.  tt  As- 
sessor, 6  S.  Rep.,  809  (La.,  1889). 

1  Railroad  Co.  tt  Jackson,  7  Wall.,  202 
(1868);  State  tax  on  Foreign-held  Bonds, 
15  Wall.,  300  (1872) ;  Davenport  v.  Mis- 
sissippi &  Missouri  R  R  Co.,  12  Iowa, 
539  (1861);    Commonwealth    tt   Chesa- 
peake &  Ohio  R  R  Co.,  27  Gratt,  344 
(1876) ;  People  v.  Eastman,  25  Cal,  603 
(1864),  where  the  same  principle   was 
applied  between  counties  in  the  same 
state.     Contra,   Multby    v.   Reading  & 
Columbia  R    R    Co.,   52    Pa.   St.,    140 
(1866).    As  to  the  rule  where  part  of  the 
capital  stock  is  used  out  of  the  state,  see 
Commonwealth  v.  Standard  Oil  Co.,  101 
Pa.  St.,  119  (1882);   State  Treasurer  tt 
Auditor-General,  46  Mich.,  224  (1881); 
People  tt  Equitable,  etc.,  Co.,  96  0*.  S, 
387  (1884).    A  statute  making  the  corpo- 
ration liable  for  taxes  on  bonds  which 
it  neglects  to  withhold,  and  the  interest 
is  paid  on  such  bonds,  is  constitutional. 
Commonwealth  tt  Delaware,  etc.,  Canal 
Co.,  24   Atl.  Rep.,  599  (Pa.,  1892).     The 
Pennsylvania  system  of  taxing  against 
corporations  all  bonds  issued  by  them 
and  owned  by  citizens  of  the  state,  and 
compelling  the  corporation  to  pay  the 
tax  and  deduct  it  from  the  interest  on 
the  bonds,  is  constitutional.     Bell's  Gap 
R  R.  tt   Pennsylvania,  134  U.  S.,  232 
(1890). 

2  Louisville,   etc.,   R  R  tt  Common- 
wealth, 12  S.  W.  Rep..  1064  (Ky.,  1890). 

770 


3  New  Orleans,  etc.,  Co.  tt  New  Orleans, 
143  U.  S.,  192  (1892). 

*  See  ch.  XXIX. 

» Ohio    &    Mississippi    R.    R.    Co.   tt 
Weber,  96  111.,  443  (1880);  Chicago  & 
N.  W.  R'y  Co.  tt   Auditor-General,  53 
Mich.,  79  (1884);  Railroad  Co.  tt  Vance, 
96  U.  S.,  450  (1877).     In  this  case  a  rail- 
road corporation  of  Indiana  which  had 
been  recognized  by  an  act  of  the  Illinois 
legislature  as  a  corporation  of  that  state 
was  held  for  taxes  upon  the  capital  and 
franchises  of  a  road  leased  by  it  in  Illi- 
nois and  assessed  to  the  lessor  company, 
but  charged  to  the  lessee  company  and 
to  be  collected  from  it    Quincy  R.  R. 
Bridge  Co.  v.  County  of  Adams,  88  111., 
615  (1878),  where  a  bridge  company  orig- 
inally incorporated  by  two  states  and 
consolidated  by  articles  which  were  con- 
firmed by  the  legislature  of  one  of  them 
(Illinois)  was  held  to  be  a  corporation 
of  that  state  for  purposes  of  taxation. 
Qucere,   whether  the   formation  of  an 
interstate  railroad    corporation  by  the 
consolidation  of  separate  corporations 
in  two  states  creates  a  new  corporation. 
An  incorporating  fee  cannot  be  imposed 
on  the  whole  consolidated  capital.    Peo- 
ple tt  New  York,  etc.,  R  R,  129  N.  Y., 
474  (1892).     The  state  may  constitution- 
ally charge  a  large  fee  as  a  condition  of 
granting  a  charter.    Edwards  tt  Denver, 
eta,  R  R,  21  Pac.  Rep.,  1011  (Colo.,  1889). 


CH.  XXXIV.]  TAXATION   OF   STOCK    AND   CORPORATIONS. 


[§  5725. 


taxation.  Such  an  exemption  constitutes  a  contract  between  the 
state  and  the  corporation,  which  cannot  be  repealed  or  changed  by 
subsequent  legislation,  unless  the  right  to  alter  or  repeal  it  has  been 
reserved  by  the  state.1 


1  An  exemption  from  state  taxation  is 
a  contract  between  the  state  and  the 
corporation  which  cannot  be  impaired 
by  a  subsequent  legislative  enactment. 
Such  exemption,  however,  will  not  be 
extended  to  branch  lines  thereafter  con- 
structed. Wilmington,  etc.,  R.  R.  v.  Als- 
brook,  146  U.  8.,  279  (1892);  Tomlinson 
v.  Branch,  15  Wall.,  460  (1872);  Home 
of  the  Friendless  v.  Rowse,  8  Wall.,  430 
(I860);  Wilmington  R.  R  v.  Reid,  13 
Wall.,  264(1871);  Mobile  &  Ohio  R,  R. 
Co.  v.  Moseley,  52  Miss.,  127  (1876) ;  Jef- 
ferson Bank  v.  Skelley,  1  Black,  436 
(1861),  where  the  charter  provided  for 
the  payment  of  six  per  cent,  of  the 
bank's  profits  in  lieu  of  taxes;  Living- 
ston Co.  v.  Hannibal  &  St.  J.  R.  R.  Co., 
60  Mo.,  516  (1875),  where,  however,  an 
exemption  from  county  taxes  was  held 
not  to  include  a  school  tax  which  origi- 
nated after  the  charter  was  granted ; 
Hannibal  &  St  Joseph  R.  R.  Co.  v.  St 
Joseph,  39  Mo.,  476  (1867),  holding  that 
an  exemption  from  county  taxation 
will  not  prevent  taxation  by  a  city.  A 
contract  between  the  state  and  a  rail- 
road, that  the  latter  shall  pay  a  certain 
tax  and  no  more,  is  not  repealable  by 
the  state.  State  v.  Morris,  etc.,  R.  R., 
7  Atl.  Rep.,  872  (N.  J,  1886).  Though 
a  charter  may  be  repealable,  yet  an 
amendment  giving  an  exemption  from 
taxation  may  be  irrepealable,  since  the 
latter  may  be  a  contract  and  not  a  fran- 
chise. Ibid.  A  bonus  to  the  state  on 
increase  of  capital  stock  cannot  apply  to 
previous  charters  having  charter  right 
to  increase.  Commonwealth  v.  Erie, 
etc.,  Co.,  107  Pa.  St.,  112  (1884);  Rail- 
road Companies  v.  Gaines,  97  TJ.  S.,  698 
(1878).  holding  that  a  new  corporation 
invested  with  the  powers  and  privileges 
of,  and  subject  to  the  obligations  of  the 
charter  of,  another  corporation,  does  not 
take  an  exemption  from  taxation.     To 


same  effect,  Railroad  Co.  v.  Commis- 
sioners, 103  U.  S.,  1  (1880);  Dauphin  & 
Lafayette  R'y  Co.  v.  Kennedy,  74  Ala., 
583  (1883).  But  see  East  Tennessee,  V. 
&  G.  R.  Co.  v.  Pickerd,  24  Fed.  Rep., 
614  (1885);  The  Delaware  Railroad  Tax, 
18  Wall.,  206  (1873) ;  Dartmouth  College 
v.  Woodward,  4  Wheat.,  518  (1819); 
Providence  Bank  v.  Billings,  4  Pet.,  514 
(1830);  The  Binghamton  Bridge,  3 
Wall.,  51  (1865);  Humphreys  v.  Pegues, 
16  Wall.,  244  (1872);  Pacific  R.  R.  v. 
Maguire,  20  Wall.,  36  (1873) ;  North  Mo. 
R.  R.  Co.  v.  Maguire,  20  Wall.,  46  (1873); 
People  v.  Soldiers'  Home,  etc.,  95  111., 
561  (1880);  University  v.  People,  99  U. 
S,  309  (1878),  holding  void  a  statute 
limiting  a  general  exemption  previously 
conferred  to  property  in  immediate  use 
by  a  corporation;  Farrington  v.  Ten- 
nessee, 95  U.  S,  679  (1877) ;  Railway  Co. 
v.  Philadelphia,  101  TJ.  S.,  528  (1879) ; 
Hoge  v.  Railway  Co.,  99  U.  S.,  348 
(1878) ;  Dodge  v.  Woolsey,  18  How.,  331 
(1855),  holding  that  the  adoption  of  a 
new  constitution  declaring  that  corpo- 
rate property  shall  be  taxed  will  not  be 
allowed  to  impair  the  contract ;  Mobile 
&  Spring  Hill  R.  R.  Co.  v.  Kennerly,  74 
Ala.,  566  (1883) ;  City  of  Richmond  v. 
Richmond  &  Danville  R.  R.  Co.,  21 
Gratt.,  604  (1872),  holding,  also,  that  an 
exemption  of  corporate  property  in  a 
city  from  taxation,  which  conflicts  with 
the  charter  of  the  city  previously 
granted,  is  not  unconstitutional  if  the 
city  has  remaining  ample  means  of  tax- 
ation to  meet  its  needs  ;  Commonwealth 
v.  Fayette  R  R.  Co.,  55  Pa.  St,  452 
(1867).  holding  that,  where  power  to 
alter  or  repeal  the  exemption  is  re- 
served, the  exercise  of  the  power  is  no 
impairment  of  the  contract;  State  v. 
Miller,  30  N.  J.  L,  368  (1863),  holding 
that  the  repeal  may  be  made  by  a  gen- 
eral law ;    State    v.   Commissioners    of 


771 


§  5725.] 


TAXATION   OF    STOCK    AND    CORPORATIONS.  [CH.  XXXIV. 


Where  a  corporation  whose  property  is  exempt  from  taxation  is 
merged  into  or  consolidated  with  another,  the  question  of  whether 
the  exemption  from  taxation  passes  with  its  property  to  the  lessee, 


Taxation,  37  N.  J.  L„  240  (1874),  hold- 
ing that,  where   a  general  exemption 
from  taxation  is  granted  to  a  corpora- 
tion  without  reserving  the    power  to 
alter  or  repeal  it,  and  there  is  a  provis- 
ion for  a  special  mode  of  assessing  its 
property,   it  may   consent   to    another 
mode  of  assessment  without  surrender- 
ing or  altering  its  exemption  from  gen- 
eral taxation ;  East  Tennessee,  V.  &  G. 
R    Co.   v.   Pickerd,   24  Fed.   Rep,   614 
(1885);      Temple    Grove    Seminary    v. 
Cramer,   98  N.  Y.,  121    (1885),    holding 
that  an  incorporated  academy  does  not 
waive  or  forfeit  its  exemption  from  tax- 
ation  by   reason   of   having   leased   its 
building  for  a  boarding-house  during 
vacations;    ElizabethtowD   &   P.  R  R 
v.   Elizabethtown,   12    Bush   (Ky.),   233 
(1876),  holding    that  an    exemption  of 
railroad  property   from    taxation    pre- 
cludes any  imposition  of  taxes  by  the 
state,  whether   for  state  or  local  pur- 
poses.    In  Mott  v.  Penn.  R  R  Co.,  30 
Pa.  St,  9  (1858),  a  sale  of  a  railroad  and 
canal  by  the  state  on  terms  exempting 
the  vendee  from  future  taxes  was  en- 
joined.    The  exemption  was  held  to  be 
unconstitutional.      County     Com'rs    v. 
Woodstock  Iron  Co.,  82  Ala.,  151  (1886), 
holding  that  an  exemption  of  private 
corporations  from  taxation  made  by  a 
general  law  was  not  a  contract,  but  only 
a  legislative  bounty,  subject  to  be  re- 
pealed. 

The  act  by  which  the  exemption  from 
taxation  is  made  must  be  clear  and  un- 
equivocal ;  the  intent  to  confer  the  im- 
munity must  be  beyond  reasonable 
doubt.  Ohio,  etc.,  Trust  Co.  r.  Debolt, 
16  How.,  416  (1853);  The  Delaware  Kail- 
road  Tax,  18  Wall.,  206  (1873);  North 
Missouri  R.  R  Co.  v.  Maguire,  20  Wall., 
46  (1873);  Mobile  &  Spring  Hill  R  R 
Co.  v.  Kennedy,  74  Ala.,  566  (1883),  hold- 
ing that  a  reasonable  doubt  is  to  be  con- 
strued against  the  exemption  ;  Dauphin 


&  Lafayette  R'y  Co.   v.   Kennedy,   74 
Ala,  583  (1883);  City   of  Richmond  v. 
Richmond    &    Danville    R   R   Co.,   21 
Gratt,  604  (1872).     An  exemption  of  a 
corporation   from   taxation    upon   pay- 
ment of  a  fixed  annual-  tax  on  the  cap- 
ital stock  is  not  voidable.     State  v.  But- 
ler, 8  &  W.  Rep.,  586  (Tenn.,  1888).     A 
particular   mode   of    taxation   may  be 
changed   under   the    reserved  right  to 
amend  the  charter.     Detroit  St  R'ys  v. 
Guthard,  51  Mich.,  180  (1883).     See,  also, 
Bank  of  Republic  v.  County  of  Hamil- 
ton, 21    111.,    53   (1858);    Mayor,   etc.,    v. 
Twenty,  etc.,  R  R.  Co.,   113  N.  Y.,  311 
(18*'.» .     A  specific  rate  of  taxation  pre- 
scribed in  the  charter  raises  no  implica- 
tion of  a  legislative  contract  to  impose 
no  further  burdens  by  way  of  taxation. 
Iron  City  Bank  v.  City  of  Pittsburgh,  37 
Pa  St,  340  (I860).     A  constitutional  pro- 
hibition as  to  exemptions  from  taxation 
does  not  apply  to  railroad  corporations, 
they  being  guast-publia      Yazoo,  etc., 
R  R  v.  Board,  etc.,  37   Fed.  Rep.,  24 
(1888).     A   charter  exemption  from  all 
taxation  upon  payment  of  a  certain  tax 
is  legaL    Franklin,  etc..  v.  Deposit  Bank, 
9  S.  W.  Rep.,  212  (Ky.,  1888).     An  ex- 
emption  from  taxation   which  is  a  gift 
may  be  repealed.     Philadelphia  v.  Con- 
tributors, etc.,    19    Atl.    Rep.,   490  (Pa., 
1890).      An  exemption    from    taxation 
may   be   repealed   under    the    reserved 
right  to  amend,  etc.     Wagner,  etc.,  In- 
stitute  Appeal,   19   Atl.  Rep.,  297  (Pa., 
1890).      An   exemption  from   all  other 
taxation  is  an  exemption  from  local  as 
well  as  state  taxation.     People  v.  Cole- 
man. 101  N.  Y,  542  (1890).     A  railroad 
may  give  up  its  exemption  from  state 
taxation  and  still  retain  its  exemption 
from  county  taxation.     State  v.  Hanni- 
bal, etc.,  R"R.  11  S.  W.  Rep.,  746  (Ma, 
1889).     A  railroad  that  is  divided  by  the 
legislature    with    the    consent    of    the 
stockholders  does  not  lose  its  exemp- 


772 


CH.  XXXIV.]  TAXATION    OF   STOCK   AND    CORPORATIONS. 


[§  5725. 


vendee  or  consolidated  company  is  a  question  whic'i  turns  largely 
on  the  words  granting  the  exemption.1 

Where  a  consolidation  is  effected  after  the  adoption  of  constitu- 
tional provisions  prohibiting  the  legislature  from  exempting  the 

tions.   Louisville,  etc.,  R.  R.  v.  Common-    tion  Problem,  pp.  105-107.     A  company 


wealth,  12  S.  W.  Rep.,  1064  (Ky.,  1890). 
An  exemption  from  taxation  is  not  a 
franchise.  Hence  quo  tcarranto  does 
not  lie  to  oust  the  corporation  from 
such  exemption.  International,  etc., 
R'y  v.  State,  12  S.  W.  Rep,  685  (Tex., 
1889). 

The  decision  of  the  state  court  that  an 
exemption  does  not  apply   to    certain 
property  is  not  an  impairment  of  a  con- 
tract.    St.  Paul,  etc.,  Ry.  v.  Todd  County, 
142  U.  S.,  282  (1892).     Where  a  contract 
of  exemption  from  taxation  between  a 
state  and  a  water-works  company  is  de- 
clared unconstitutional  by  the  highest 
court  of  the  state,  there  is  no  impair- 
ment of  the  contract  by  subsequent  leg- 
islation which  assumes  the  old  contract 
to  have  been  invalid.     New  Orleans  v. 
N.  O.,  etc.,  Works,  142  U.  S.,  79  (1891). 
In  the  case  of  Citizens'  Bank  v.  Board 
of  Assessors,  54  Fed.  Rep.,  73  (1893),  an 
exemption  from  taxation  was  held  to 
apply  to  extensions  of  the  original  char- 
ter.   Although  tbe  charter  provides  that 
the  real  and  personal  property  of  the 
company  shall  be  taxed  the  same  as 
that  of  individuals  this  does  not  exempt 
the  capital  stock  from  taxation.     State 
v.  Simmons,  12  S.  Rep,  477  (Miss.,  1893). 
An  exemption  from  taxation  does  not 
pass  to  a  company  that  buys   out  the 
company  which  is  exempt.     Common- 
wealth v.  Nashville,  etc.,  Co.,  20  S.  W. 
Rep,   383  (Ky.,    1892).     An   exemption 
from  local  taxation  is  not  an  exemption 
from  state  taxation.     Wilkesbarre,  etc., 
Bank  v.  Wilkesbarre,  24  Atl.  Rep.,  Ill 
(Pa.,  1892).   An  exemption  from  taxation 
does  not  apply  to  assessments   for  im- 
provements.    Illinois  Cent.  R.  R  v.  Mat- 
toon,  30  N.  E.  Rep.  773  (111.,  1892).    Con- 
cerning exemptions  from  taxation  and 
the  Dartmouth  College  case  in  connec- 
tion therewith,  see  Cook  on  the  Corpora- 


te generate  and  sell  electric  power  is  not 
a   manufacturing  company   as  regards 
taxation.     Commonwealth  v.  Northern, 
etc.,  Co.,  22  Atl.  Rep.,  839  (Pa.,  1891); 
Commonwealth  v.  Brush,  etc.,  Co.,  id., 
844.     Exemption  of  manufacturing  cor- 
porations from   taxation    construed  to 
exempt  merely  such  of  their  property 
as  was  invested  in  manufacturing.     Ap- 
peal of   Commonwealth,  18   Atl.  Rep, 
133  (Pa.,  1889) ;  Commonwealth  v.  Ma- 
honing,    etc.,     Co.,    id.,     135.      Where 
subsequently   to    the   incorporation    of 
a  company  a  general    act   reserves  to 
the  legislature  the  right  to  amend  or 
repeal  any  and  all  charters,  the  legisla- 
ture may  repeal  any  amendments  to  the 
charter,  so  far  as  such  amendments  are 
passed  after  the  general  act,  where  the 
amendments  do  not  expressly  waive  the 
legislative  right  of  amendment  or  re- 
peal.    Amendment    should   be  worded 
"  saving,  whenever  that  power  was  ex- 
erted, all  rights  previously  nested."    An 
exemption   from  taxation   may  be  re- 
pealed under  the  reserved  power.     (Ap- 
proving Tomlinson  v.  Jessup,  15  Wall., 
454,  and  Railroad  v.  Maine,  96  U.  S.,  499.) 
Creditors  stand  upon  the  same  footing 
in  this  respect.     Louisville  Water  Co.  v. 
Clark,  143  U.  S.,  1  (1892). 

1  An  exemption  from  taxation  per- 
tains to  the  franchise  as  a  corporation, 
and  does  not  pass  with  the  sale  of  the 
franchise  to  operate  the  road.  Chesa- 
peake &  Ohio  R'y  Co.  v.  Miller,  114 
U.  S.,  176  (1885);  Memphis  R  R  Co.  v. 
Com'rs,  112  U.  S.,  609  (1884);  Tomlin- 
son v.  Branch,  15  Wall.,  460  (1872); 
Branch  v.  Charleston,  92  U.  S.,  677 
(1875);  Central  R  R.  Co.  v.  Georgia,  92 
U.  S.,  665  (1875),  reversing  S.  C,  54  Ga., 
401 ;  Chesapeake  &  O.  R.  R  Co.  v.  Vir- 
ginia, 94  U.  S.,  718  (1876);  The  Delaware 
Railroad  Tax,  18  Wall.,  206  (1873).     See, 


773 


§  5726.] 


TAXATION    OF    STOCK    AN'D    COEPOEA.TI021S.  [cii.  XXXIY. 


property  of  corporations  from  taxation,  the  consolidated  company 
is  looked  upon  as  a  new  corporation,  which  is  not  entitled  to  ex- 
emptions from  taxation  possessed  by , the  companies  of  which  it  is 
composed.1 

If  the  franchises  and  property  of  a  corporation  be  transferred  by 
a  sale  in  foreclosure,  an  exemption  from  taxation  does  not  accom- 
pany the  transfer.  The  exemption  is  a  personal  privilege  and  not 
a  franchise.2  A  statute  exempting  the  property  of  a  corporation 
from  being  taxed  does  not  prevent  the  taxation  of  land  held  by  it 
merely  for  convenience  and  not  necessary  to  its  operation.3     In 


also,  cases  in  preceding  note.  Where 
by  statute  "all  rights"  of  a  railway  are 
to  pass  to  another,  an  exemption  from 
taxation  passes.  Atlantic,  etc.,  R.  R  v. 
Allen,  IB  Fla.,  637  (1876>  It  certainly 
will  not  be  extended  to  the  property  of 
other  corporations  consolidated  with  it. 
Philadelphia,  W.  &  B.  R  R  Co.  r.  Main- 
land, 10  How.,  376  (1850);  Chesapeake 
&  O.  R  R  Co.  r.  Virginia,  94  IT.  S.,  718 
(1876);  The  Delaware  Railroad  Tax,  18 
Wall.,  206  (1873).  See,  also.  Wait  on  In- 
solvent Corporations,  381.  An  exemption 
of  a  corporation  may  not  exempt  ;ilso  its 
timber  lands.  County  of  Todd  v.  St  Paul, 
etc.,  R'y,  36  N.  W.  Rep,  109  (Minn.,  1888). 
An  exemption  of  railroad  lauds  from 
taxation  may  pass  to  the  grantee  rail- 
roads thereof  and  of  the  franchisee.  In 
re  County  of  Stevens,  81  N.  W.  Rep..  942 
(Minn.,  1887).  Consolidation  in  Missouri 
destroys  exemption  from  taxation.  Keo- 
kuk, etc.,  K.  II.  v.  County  Court,  etc..  41 
Fed.  Rep.,  305  (1890).  A  consolidated 
company  under  the  Missouri  statutes 
relative  to  railroads  meeting  at  the 
state  line  is  a  now  corporation,  and  the 
old  one  is  dissolved.  An  exemption 
from  taxation  of  the  old  corporation  is 
thereby  lo>t.  State  v.  Keokuk,  etc., 
R  R,  12  S.  W.  Rep,  290  (Mo.,  1889).  Al- 
though an  exemption  from  taxation  is 
to  pass  to  a  consolidated  company,  yet 
this  is  a  gratuity  to  the  new  company 
and  may  be  repealed.  Wilmington,  etc., 
R  R  r.  Alsbrook,  14  S.  E.  Rep,  653 
(N.  C,  1892). 

i  Memphis  &  Little  Rock  R  R  Co.  v. 
Berry,  112  U.  S.,  609  (1834);  St  Louis. 


Iron  Mt  &  S.  R  R  Co.  v.  Berry.  113 
U.  S.,  46")  (1885);  Chesapeake  &  Ohio 
R  R  Co.  v.  Miller,  114  U.  S,  176  (1885). 
Where  the  legislature  ceded  to  a  com- 
pany to  be  formed  "all  the  right,  interest 
and  privileges  of  whatever  kind  "  of  a 
defunct  railroad  company,  it  was  held 
that  an  exemption  from  taxation  con- 
ferred on  the  old  company  was  not 
vested  in  the  new  one.  Railroad  Co.  v. 
Georgia,  98  U.  EL,  359  (1878).  In  this 
case  the  restriction  upon  granting  ex- 
emptions was  in  a  statute  instead  of  a 
constitutional  nrovision. 

2  Morgan  v.  Louisiana,  93  TJ.  S,  217 
(1876);  Louisville  &  N.  R.  R  Co.  v.  Pal- 
mer, 109  U.  S..  224  (1883):  Wilson  t\ 
Gaines,  108  U.  S.,  417  (lssin,  where  the 
transfer  was  under  proceedings  to  en- 
force a  statutory  lien  of  a  state;  Ar- 
kansas Midland  R  R  Co.  v.  Berry.  14 
Ark.,  17  (1884).  See.  also.  180  U.  S.  687, 
and  cases  supra.  Where  the  exemp- 
tion isastoall  the  property  of  a  railroad 
its  franchise  is  included.  Wflmingt  in 
R  R  v.  Reid,  13  Wall.,  364  (1871  > 

;!  state  v.  Commissioners,  etc,   88  N. 

J.  Law,  510  (1852);  State  V.  Collectors. 
eta,  85  N.  J.  Law,  315  (1855).  In  these 
cases  lands  owned  by  a  railroad  and 
occupied  by  dwellings  for  employees, 
car  and  locomotive  works,  coal  mines, 
etc.,  were  held  to  be  subject  to  taxa- 
tion. See,  also,  Toll-bridge  Co.  v.  Os- 
born,  35  Conn.,  7  ( ISCiSi,  where  lands 
held  for  wharves  by  a  bridge  company 
by  authority  of  law  were  held  taxable 
as  real  estate  —  a  provision  in  its  char- 
ter that  all  its  property  should  be  consid- 


771 


GH.  XXXIV.]  TAXATION    OF    STOCK    AND    CORPORATIONS. 


[§  572c. 


general,  an  exemption  from  taxation  by  the  state  is  not  an  exemp- 
tion also  from  municipal  taxation  for  local  purposes,1  nor  from 
assessments  for  improvements.2 

§  572c.  Taxation  of  foreign  corporations. —  Any  state  may  tax 
foreign  corporations  doing  business  within  its  borders.3 


ered  personal  property  and  be  divided 
into  shares  being  construed  to  relate  to 
the  property  of  the  stockholders  as  rep- 
resented by  the  shares ;  In  re  Swigert, 
119  111.,  83  (1S86),  holding  that  a  railroad 
exemption  did  not  exempt  its  elevator. 
i  Elizabethtown  &  P.  R.  R.  v.  Eliza- 
bethtown,  12  Bush  (Ky.),  233  (1876); 
Roosevelt  Hospital  i\  Mayor  of  New- 
York,  84  N.  Y.,  108  (1881),  where  real  es- 
tate exempted  from  state  taxation  was 
held  to  be  subject  to  assessment  by  a 
city  for  the  construction  of  a  sewer. 
Cf.  Applegate  v.  Ernst,  3  Bush  (Ky), 
•648  (1868),  where  a  tax  by  a  county  upon 
a  railroad  to  obtain  money  to  pay  a 
county  subscription  for  the  purpose  of 
completing  the  road  was  held  to  be  un- 
lawful.   See,  also,  p.  771,  n.  1,  supra. 

2  New  Jersey,    etc.,   R   R.   v.   Jersey 
City,  42  N.  J.  L.,  97  (1880). 

3  Liverpool  Ins.  Co.  v.  Massachusetts, 
10  Wall.,  66  (1870) ;  S.  C,  Oliver  v.  Liv- 
erpool, etc.,  Co.,  100  Mass.,  531  (1868). 
Goods  in  New  York  for  sale ;  also  many 
on  deposit  in  New  York ;  also  other 
property  in  the  state,  form  the  proper 
basis  for  taxation  of  such  part  of  the 
capital  stock  of  foreign  corporations  as 
is  employed  in  the  state.  Taxation  for 
such  part  of  the  capital  stock  as  sales 
in  New  York  bear  to  all  the  sales  is  un- 
just ;  since  many  sales  may  be  by  sample. 
People  v.  Wemple,  133  N.  Y,  323  (1892). 
A  tax  on  foreign  manufacturing  corpo- 
rations to  the  extent  of  the  business 
which  they  do  in  the  state  is  constitu- 
tional and  enforceable.  People  ex  rel. 
S.  Cotton  Oil  Co.  v.  Wemple,  131  N.  Y, 
64  (1892).  The  New  York  statute  taxing 
foreign  corporations  doing  business  in 
the  state  on  the  same  basis  as  domestic 
corporations  is  constitutional.  Horn 
Silver,  etc.,  Co.  v.  New  York,  143  U.  S., 
305  (1892).     The  New  York  tax  upon  the 


business   of   all   foreign   and   domestic 
corporations  doing  business  in  the  state 
is  a  tax  on  the  right  to  be  a  corporation 
and   to   do  business,  and  is   not  a  tax 
upon  the  franchise,  even   though  the 
tax  is  measured  by  the  dividends  de- 
clared.    The  tax  is  legal  although  the 
corporation  owns  United  States  bonds. 
Home  Ins.  Co.  v.  New  York,  134  U.  S., 
594  (1890).     Where  foreign  corporations 
are  required  to  report  stock,  bonds,  etc , 
owned  by  residents  for  taxation,  it  need 
report  only  such  as  its  books  disclose 
and  is  not  to  be  held  liable   further. 
Commonwealth  v.  N.  Y,  etc.,  R.  R,  22 
Atl.  Rep.,  236  (Pa.,  1891).     Cf.  Common- 
wealth v.  American  B.  T.  Co.,   18  Atl. 
Rep.,  122  (1889).     Foreign  corporations 
doing  business  in  New  Jersey  are  sub- 
ject to  taxation.     State  v.  Berry,  19  Atl. 
Rep.,  665  (N.  J,  1890).     Where  a  parent 
corporation  of  Massachusetts  owns  stock 
in  a   branch  corporation    of  New  York 
and  collects  royalties,  etc.,  from  the  lat- 
ter, the  parent  corporation  is  not  sub- 
ject to  taxation  in  New  York.     People 
v.  American  Bell  T.  Co.,  117  N.  Y,  241 
(1889).     Debts  due  to  a  foreign  corpo- 
ration from  residents  cannot  be  taxed 
in  Louisiana.     Barber,  etc.,  Co.  v.  New 
Orleans,  6  S.  Rep.,  794  (La.,  1889).     The 
New  York  statute  levying  a  tax  on  for- 
eign corporations  doing  business  in  the 
state,  the  tax  being  upon  "the  amount 
of  capital  stock    employed  within   the 
state,"  is  legal,  and  a  New  Jersey  corpo- 
ration is  liable  to  taxation  for  maintain- 
ing a  sales  agency  and  office  and  bank 
account  in  New  York  city,  even  though 
its  factories,  books  of  account,  etc.,  are 
in   other  states.     Southern   Cotton   Oil 
Co.  v.  Wemple,  44  Fed.  Rep.,  24  (1890). 
The  Pennsylvania  statute  imposing  a 
quarter  of  a  mill  license  tax  on  the  capi- 
tal stock  of  foreign  corporations  having 


775 


§  572c] 


TAXATION    OF   STOCK    AND    CORPORATIONS.  [cH.  XXXIV. 


A  state  may  impose  on  foreign  insurance  companies  a  tax  equal 
to  the  tax  levied  by  the  state  creating  the  foreign  corporation  on 
corporations  foreign  to  the  latter  state.1  Where  a  railroad  corpo- 
ration is  incorporated  by  the  United  States,  a  state  cannot  tax  its 
franchises ;  it  may  tax  the  tangible  property,  but  not  the  franchise.2 
Where  an  assessment  of  taxes  against  a  railroad  company  has  been 
affirmed  by  the  supreme  court,  mandamus  may  be  used  "to  compel 
payment  of  them  if  there  is  no  other  adequate  remedy.3     The  tax 


an  office  in  the  state,  and  prohibiting 
such  offices  unless  the  tax  is  paid,  the 
act  applying  to  all  foreign  corporations 
except  insurance  companies,  is  constitu- 
tional.    A  state  may  exclude  or  impose 
conditions    upon   foreign    corporations 
unless  they  are  engaged  in  interstate  or 
foreign  commerce,  or  are  employed  by 
the  government     Pembina  Min.  Co.  v. 
Pennsylvania,    125    U.    S.,    181    (1888); 
Blackstone  Manuf.  Co.  v.  Blackstone,  13 
Gray,  488  (1859);  State  v.   Lathrop,   10 
La  Ann.,  402  (1855);  State  v.  Fosdick,  21 
La.  Ann.,  434(1869);  Tatem  r.  Wright, 
23  N.  J.  L,  429  (1852);  State  v.  Western 
Union  Tel.  Co.,  73  Me.,  518  (1882);  Com- 
monwealth v.  Western  Union  Tel.  Co., 
98  Pa.  St.,  105  (1881);  Norfolk,  etc.,R  R 
V.   Commonwealth.  114   id.,   256  (1886); 
Commonwealth  v.  Milton,  12  B.  M..  312, 
218  (1851);  Boston  Loan  Co.  v.  Boston, 
137  Mass.,  332  (1884);  Singer  Manuf.  Co. 
u  County  Comm'rs,  189 Mass.,  266 (1885); 
Att'y-Geu.   v.    Hay   State,    etc.,   Co.,   99 
Mass.,    148    (1868);    Commonwealth    v. 
Texas  &  Pac.  R.   R  Co.,  98  Pa.  St,  90 
(1881),  holding,  however,  that   a"  corpo- 
ration created  by  the  United  States  con- 
gress   is    not    a    foreign     corporation 
within  the  revenue  act  of  Pennsylvania  ; 
Commonwealth     ?•.     Gloucester,    etc., 
Ferry  Co.,  98  id..  105  (1881);  People  v. 
Equitable  Trust  Co.,  96  N.  Y,  387  (1884  >. 
holding  that  a   tax    may   be    imposed 
upon   the  business  done  by  a  foreign 
corporation  in  New  York,  but  not  upon 
its  property  in  other  states,  nor  upon  its 
franchise.     For  the  New  York  act  which 
applies  to  foreign  corporations,  s.?e  Par- 
ker   Mills    v.    Commissioners,    etc..    28 
N.  Y.,  242  (1861);  People  v.  Horn,  etc, 

77 


Co.,  105  id.,  76  (1887).  They  are  to  be 
taxed  where  their  principal  offices  in 
the  state  are  situated.  People,  etc.,  v. 
McLean,  17  Hun,  204  (1879).  A  corpo- 
ration chartered  by  the  federal  govern- 
ment is  not  such  a  foreign  corporation 
as  is  obliged  to  pay  a  license  fee  under 
the  Pennsylvania  statutes.  Common- 
wealth «.  Texas,  etc.,  R  R  Co.,  98  Pa. 
St.,  90  (1881).  Unless  a  statute  other- 
wise provides,  a  lien  upon  corporate 
property  for  state  taxes  attaches  in 
preference  to  pre-existing  judgment  - 
or  decrees:  it  has  been  held  that  a  sale 
under  a  judgment  or  decree  will  not 
avoid  such  a  lien.  Osterburg  v.  Union 
Trust  Co.,  93  U.  S..  424  (1876).  In  New 
York  it  is  held  that  the  rolling  stock  of 
a  railroad  is  subject  to  seizure  and  Bale 
for  taxes.  Randall  r.  Elwell,  52  N.  Y.. 
521  (1873).  But  not  so  in  Kentucky. 
Eliaabetbtown  &  P.  R  R  v.  Elizabeth- 
town.  12  Bush,  233  (1876). 

'Home  Ins.  Co.  r.  Swigert,  104  111., 
653  (1882);  Phila.  Fire  Ass'n  v.  New 
York,  119  U.  S..  11"  (1886). 

2  California  v.  Pacific  R.  R  Co.,  127 
U.  S.,  1,  40  (1888).  A  county  ordinance 
requiring  a  railroad  chartered  by  the 
United  States  to  take  out  a  license  is 
void.  San  Benito,  etc.,  v.  Southern  P. 
R  R  Co.,  19  Pac.  Rep,  —  (Cal.,  1888). 

3  Person  v.  Warren  R  R  Co.,  32  N.  J. 
L,  441  (1868);  Silverthorn  u  Warren 
R  R  Co.,  33  N.  J.  L,  173  (1868).  And 
the  party  making  return  to  an  alterna- 
tive 7nct7idamus  must  show  that  he  has 
complied  with  the  order  to  the  extent 
of  his  ability:  want  of  funds  is  not  a 
sufficient  return  where  it  is  the  result  of 
the  voluntary  act  of  the  party. 

6 


CH.  XXXIV.]  TAXATION    OF    STOCK    AND   CORPORATIONS.  [§  572d. 

lien  on  a  railroad  may  by  delay  be  rendered  subordinate  to  a  mort- 
gage.1 

§  572c?.  Taxation  must  not  interfere  with  interstate  commerce. — ■ 
A  state  cannot  tax  corporations  so  as  to  interfere  with  interstate 
commerce.  The  Pennsylvania  license  fee  which  all  foreign  corpo- 
rations keeping  an  office  in  the  state  are  required  to  pay,  with  a 
few  exceptions,  is  unconstitutional  as  regards  a  foreign  railroad 
corporation  which  owns  a  railroad  in  the  state,  such  railroad  being 
part  of  an  interstate  system  of  railroads.2  But  a  state  may  levy  a 
tax  on  the  capital  stock  of  a  foreign  sleeping-car  company  which 
runs  its  cars  through  the  state,  the  tax  being  on  such  part  of  the 
capital  stock  as  the  number  of  miles  over  which  its  cars  run  in  the 
state  bears  to  the  whole  number  of  miles  over  which  its  cars  run 
in  all  the  states.3 

A  tax  on  interstate  telegraph  messages  is  unconstitutional.4  A 
state  cannot  prohibit  the  agents  of  foreign  express  companies  from 
doing  business  in  the  state  except  upon  obtaining  a  license.  Such 
a  law  is  an  interference  with  interstate  commerce.5  A  tax  may  be 
levied  based  on  the  gross  receipts,  and  if  the  road  is  but  partly  in 
the  state  on  a  proportion  of  the  gross  receipts  determined  by  a 
mode  prescribed  by  statute.6  A  state  may  tax  a  railroad  on  busi- 
ness that  passes  out  of  the  state  into  another  state  and  back  into 
the  first  state  again.7  Various  other  decisions  on  taxation  in  its 
bearings  upon  interstate  commerce  are  given  in  the  notes  below.8 

i  Cooper  v.  Corbin,  105  111.,  224  (1883);  6  Maine  v.  Grand  Trunk,  etc.,  R'y,  142 

Parsons  v.  East,  etc.,  Co.,  108  111.,   380  U.  S.,  217  (1891). 

(1884).  7  Lehigh  Val.  R  R  v.  Penn,  145  U.  S.,. 

1  2  Norfolk,  etc.,  R  R.  v.  Penn,  136  U.  S.,  192  (1892). 

114  (1890).  8  A  tax  on  sleeping-car  companies  may 

3  Pullman's  Car  Co.  v.  Penn,  141  U.  S.,  be  illegal  as  interfering  with  interstate 
18  (1891),  the  court  holding  that  a  tax  commerce.  State  v.  Woodruff,  etc.,  Co., 
on  the  capital  stock  on  account  of  the  15  N.  E.  Rep.,  514  (Ind.,  1888).  A  state 
property  owned  is  a  tax  on  the  property  tax  on  interstate  railroad  earnings  i» 
itself.  A  similar  decision  was  made  unconstitutional.  Fargo  v.  Michigan, 
concerning  a  tax  on  the  capital  stock  of  121  U.  S.,  230  (1887) ;  Phila.,  etc.,  Co.  v. 
a  foreign  telegraph  company,  the  cap-  Pennsylvania,  122  U.  S.,  326  (1887) ;  Dela- 
ital  stock  being  valued  at  the  aggregate  ware,  etc.,  Co.  v.  Commonwealth,  17  Ath 
value  of  all  its  shares  of  stock,  and  the  Rep.,  175  (Pa.,  1888) ;  Northern,  etc.,  R'y 
proportion  of  its  lines  within  the  state  Co.  v.  Raymond,  40  N.  W.  Rep.,  538 
to  those  outside  of  it  being  the  basis  of  (Dak.,  1888).  A  state  may  tax  a  foreign 
taxation.  Massachusetts  v.  Western  U.  telegraph  company  on  such  a  propor- 
Tel.  Co.,  141  U.  S.,  40  (1890).  tion  of  its  capital  stock  as  its  lines  in 

4  Western  U.  T.  Co.  v.  Alabama,  132  the  state  bear  to  all  of  its  lines ;  but  the 
U.  S.,  472  (1889).  state  cannot  enjoin  the  operation  of  the 

5  Crutcher  v.  Kentucky,  141  U.  S.,  47  telegraph  until  the  tax  is  paid.  Western, 
(1891).  etc.,  Tel.  Co.  v.  Massachusetts,  125  U.  S., 

777 


§  572^.] 


TAXATION    OF    STOCK   AND   CORPORATIONS. 


[CH. 


XXXIV. 


There  has  been  a  large  number  of  decisions  by  the  supreme  court 
of  the  United  States  on  this  subject,  and  the  efforts  of  various  states 
to  tax  interstate  commerce  directly  or  indirectly  are  being  con- 
stantly overthrown  by  that  court. 


530  (1888);  Erie  R'y  Co.  v.  New  Jersey, 
31  N.  J.  L.,  531  (1864),  holding  that  a 
state  tax  upon  foreign  corporations 
transporting  passengers  and  freight 
through  the  state  graduated  by  the 
number  of  passengers  and  weight  of  the 
goods  is  in  violation  of  that  clause  of 
the  United  States  constitution  giving 
congress  the  right  to  regulate  commerce 
between  the  states ;  Indiana  v.  Ameri- 
can Express  Co.,  7  Biss.,  227  (1876), 
where  a  tax  upon  transportation 
through  a  state  was  held  to  be  an  inter- 
ference with  interstate  commerce  and 
unconstitutional.  So  held,  also,  of  a 
tax  upon  locomotives,  cars,  etc.,  of "  a 
foreign  railroad  company  in  Minot  v. 
Philadelphia,   Wilmington  &  B.  R  R 


Co.,  2  Abb.  (U.  S.  C.  C.\  323  (1870).  As 
to  an  interstate  bridge,  see  Anderson  v. 
C.  B.,  etc.,  R  R,  117  111.,  26  (1886).  Pull- 
man cars  operated  wholly  within  the 
state  may  be  taxed  as  a  privilege.  Gib- 
son County  v.  Pullman,  etc.,  Co.,  42  Fed. 
Rep.,  572  (1890).  A  foreign  corporation's 
rolling  stock  used  in  interstate  com- 
merce is  not  taxable  by  the  state.  Bain 
v.  Richmond,  etc.,  R  R,  11  S.  E.  Rep., 
311  (N.  C,  1890).  Interstate  express  com- 
panies may  be  taxed  on  the  business 
which  they  do  within  the  state.  Pacific 
Ex.  Co.  «  Seibert,  44  Fed.  Rep.,  810 
(1890).  As  to  telegraph  companies,  see, 
also,  Western  Union  Tel.  Co.  v.  Lieb,  76 
III..  172  (1875);  Western  Union  TeL  Co. 
v.  Mayer,  28  Ohio  St,  521  (1876). 


778 


CHAPTER  XXXV. 


FORMS  OF  ACTIONS  AND  MEASURE   OF  DAMAGES  WHERE  A  STOCK- 
HOLDER HAS  BEEN  DEPRIVED  OF  HIS  STOCK 


§  573, 


Pleading  and  practice  in  actions 

relative  to  stock, 
Assumpsit. 
Trespass  on  the  case. 

576.  Trover. 

577.  Detinue  and  replevin. 

578.  Money  had  and  received. 
Bill  in  equity. 
Pleading  under  the  codes. 

581.  Measure  of  damages,      (a)   The 
first  rule. 


574, 
575, 


579, 

580, 


§  582, 
583, 


585. 


(b)  The  second  rule. 

(c)  The  third  rule. 

584.  Interest,    dividends    and    accre- 
tions. 
Nominal  damages. 

586.  Damages  for  failure  to  complete 

a  purchase  of  stock  or  for 
fraud  inducing  a  purchase  of 
stock. 

587.  In  actions  between  stock-brokers 

and  their  customers. 


§  573.  Pleading  and  practice  in  actions  relative  to  stock. —  When 
an  owner  of  stock  who  is  out  of  possession  brings  an  action  for  its 
recovery,  or  for  the  recovery  of  the  certificate,  or  for  damages  for 
the  detention  or  conversion  of  either  the  stock  or  the  certificate,  it 
is  important  to  determine  what  action  will  lie,  in  what  court  the 
action  is  to  be  prosecuted,  and  what  is  the  measure  of  damages. 
Similar  questions  arise  when  suits  are  brought  for  breach  of  con- 
tract to  subscribe  for  stock,  or  of  contracts  to  sell  and  convey 
stock.  There  are  certain  well-settled  rules  as  to  the  form  of  the 
action  in  these  cases  which  are  deduced  from  the  older  common- 
law  pleading  and  practice.  These  rules,  even  in  the  code  states, 
where  forms  of  action  are  little  regarded,  and  where  the  old  actions 
have  been  abolished  in  name,  are  still  at  least  partially  applicable. 
Some  knowledge,  therefore,  of  the  procedure  at  common  law  in 
stock  cases  is  necessary. 

§574.  Assuntysit.  —  An  action  of  assumpsit,  or  indebitatus  as- 
sumpsit at  common  law,  lies  against  a  corporation  for  unjustly  re- 
fusing to  register  a  transfer,  or  for  refusing  to  issue  a  certificate 
to  one  entitled  to  it.1     So,  also,  assumpsit  lies  for  breach  of  contract 


1  The  King  v.  Bank  of  England,  Doug., 
534  (1780);  Kortnght  v.  Buffalo  Com- 
mercial Bank,  20  Wend.,  90  (1838);  Ar- 
nold v.  Suffolk  Bank,  27  Barb.,  424 
(1857);  Wyman  v.  American  Powder 
Co.,  8  Cush.,  168  (1851);  Sargent  v. 
Franklin  Ins.  Co.,  8  Pick.,  90  (1829); 
Hayden  v.  Middlesex  Turnpike  Co.,  10 
Mass.,  397  (1813);  Pinkertou  v.  Man- 
chester, etc.,  R   R.  Co.,  42  N.  H.,  424 


(1861);  Hill  v.  Pine  River  Bank,  45  id., 
300  (1864).  Cf.  Foster  v.  Essex  Bank, 
17  Mass.,  479.(1821);  Eastern  R.  R.  Co. 
v.  Benedict,  10  Gray,  212  (1857).  As- 
sumpsit does  not  lie  against  a  corpora- 
tion for  refusal  to  register  a  transfer 
of  stock.  Action  on  the  case  is  the 
remedy.  Telford,  etc.,  Co.  v.  Gerhab,  13 
Atl.  Rep.,  90  (Pa,  1888). 


779 


§§  575,  576.]        actions  and  measure  of  damages. 


[CH.  XXXV. 


to  return  borrowed  bank  stock  on  demand.1  But  mandamus  is  not 
a  proper  remedy  in  these  cases,  and  it  will  not  lie  to  compel  a  cor- 
poration to  transfer.2  The  form  of  a  complaint  or  declaration  in 
an  action  by  a  pledgor  against  a  pledgee  for  the  conversion  of  the 
stock  held  in  pledge  may  be  in  tort  or  in  assumpsit,  but  not  in 
both.3  A  corporation  may  sue  in  assumpsit  its  treasurer  who  has 
illegally  issued  excessive  stock  and  converted  the  proceeds  to  his 
own  use.4 

§  575.  Trespass  on  the  case. —  An  action  of  trespass,  or  an  action 
of  trespass  on  the  case,  may  also  be  brought  against  the  corpora- 
tion for  a  denial  to  a  stockholder  of  a  certificate  of  stock,5  and  an 
action  on  the  case  lies  for  a  conversion  of  shares  of  stock.6 

§  576.  Trover. —  It  is  a  very  generally-accepted  rule  that  trover 
will  lie  for  the  conversion  of  shares  of  stock.7     This  is  the  favorite 


1  McKenney    v.    Haines,   63    Me.,   74 
(1873). 
2See§390. 

3  Stevens  v.  Hurlbut  Bank,  31  Conn., 
146  (1862  . 

4  Rutland  R.  R  v.  Haven,  19  Atl.  Rep. 
?*;<»  (Vt.,  1890). 

■'• Hank  of  Ireland  v.  Trustee  of  Evans' 
Charities,  5  H  of  L  Cas.,  389  (1855); 
The  King  v.  Bank  o§  England,  Doug., 
534  (1780) ;  Davis  v.  Bank  of  England,  2 
Bing.,  393  (1824);  Coles  v.  Bank  of  Eng- 
land. 10  Ad.  &  Ellis.  437  (1839);  Gray  r. 
Portland  Bank,  3  Mass.,  864,  381  (1807); 
North  American  Building  Association 
r.  Sutton.  35  Pa.  St,  463  (1860);  Web- 
ster v.  Grand  Trunk  R'y  Co.,  3  Lower 
Can.  Jur.,  148  (1859);  S.  C,  2  id..  891 
(construing  the  judicature  act,  12  Vict, 
eta.  38,  §  87);  Protection  Life  Ins.  Co. 
v.  Osgood.  93  111.,  69  (1879);  Baker  v. 
Wasson,  53  Texas,  150  (1880);  Smith  v. 
Poor,  40  Me.,  415  (1855);  Catchpole  t\ 
Amhergate,  etc.,  R'y  Co.,  1  Ellis  &  B., 
Ill  (1852);  Daly  v.  Thompson,  Sec'y, 
etc.,  of  the  Anti-Dry -Rot  Co.,  10  Mees. 
&  W.,  309  (1842).  C/.  Swan  v.  North 
British  Australasian  Co.,  7  Hurl.  &  N., 
603  (1862);  Kortright  v.  Buffalo  Com- 
mercial Bank,  20  Wend.,  90  (1838). 
Tort  with  a  count  in  contract  for  re- 
fusal to  transfer.  Bond  v.  Mount  Hope 
Iron  Co.,  99  Mass.,  505  (1868). 

e  Daggett  v.  Davis,  53  Mich.,  35  (1884) ; 


Ayres  v.  French.  41  Conn.,  142  (1874); 
Bank  of  America  v.  McNeil,  10  Bush. 
64;  Parsons  i\  Martin,  11  Gray.  Ill 
(1858  :  Boylan  v.  Iluguet  8  Nev..  345 
(1873);  Nabring  v.  Bank  of  Mobile,  58 
Ala.,  204  (1877).  A  complaint  which, 
after  statiug  that  shares  of  stock  had 
been  pledged  to  defendant  avers  that 
"defendant,  in  consideration  of  the 
premises,  then  and  there  undertook 
and  promised  plaintiff"  to  hold  the 
stock  only  as  pledgee,  but  that  in  viola- 
tion of  its  promise,  defendant  sold  and 
converted  the  stock  to  its  own  use, 
without  giving  plaintiff  notice  of  the 
sale,  and  in  which  plaintiff  seeks  to  re- 
cover as  damages  the  full  value  of  the 
shares  alleged  to  have  been  converted, 
though  informal,  is  good  as  a  complaint 
in  case.  Sharpe  v.  National  Bank,  7 
S.  Rep.,  106  (Ala.,  1888).  This  case  dis- 
cussed also  the  difference  between  as- 
sumpsit and  in  case  in  such  an  action. 
t  Payne  v.  Elliot  54  Cat,  339  (1880) ; 
Kuhn  v.  McAllister.  1  Utah.  273  (1875); 
S.  C,  96  U.  S,  87  (1877) ;  Bank  of  Amer- 
ica v.  McNeil,  10  Bush,  54;  Boylan  v. 
Huguet  8  Nev.,  345  (1873);  Nabring  v. 
Bank  of  Mobile,  58  Ala.  204  (1877);  Mor- 
ton v.  Preston,  18  Mich.,  60  (1869); 
Jarvis  v.  Rogers,  15  Mass.,  389  (1810) — 
a  case  where  trover  was  held  to  lie  for 
the  value  of  Mississippi  scrip,  represent- 
ing one  hundred    and    fifty   thousand 


780 


<3H.  XXXV.] 


ACTIONS    AND    MEASURE    OF    DAMAGES. 


[§  576. 


remedy  when  the  shareholder  has  been  unjustly  deprived  of  his 
stock;  and  it  is  nowhere  denied,  except  in  Pennsylvania,1  that  this 
form  of  action  is  proper.  But  even  there,  for  the  conversion  of  a 
certificate  of  stock,  trover  will  lie.'-'  For  the  maintenance  of  the  ac- 
tion of  trover  there  must  be  title  in  the  plaintiff  to  the  subject  of 
the  action,  and  an  actual  conversion  by  the  defendant.  If  either 
of  these  elements  is  wanting  the  action  will  not  lie.  Thus,  trover 
will  not  lie  for  the  conversion  of  a  certificate  where  the  title  to  the 
shares  is  divested.3 


acres  of  land;  Anderson  v.  Nicholas,  28 
N.  Y..  600  (1864) ;  Freeman  v.  Harwood, 
49  Me.,  195  (1859);  Ayres  v.  French,  41 
•Conn.,  142  (1874);  Connor  v.  Hillier,  11 
Rich.  Law,  193  (1857) ;  Sturges  v.  Keith, 
57  111.,  451  (1870);  Budd  v.  Multnomah 
Street  R.  R.  Co.,  12  Oregon,  271  (1885) ; 
S.  C,  22  Am.  &  Eng.  R.  R  Cas.,  27 
<1885).  Of.  Atkins  v.  Gamble,  42  Cal, 
86,  100  (1871);  Maryland  Fire  Ins.  Co. 
v.  Dalrymple,  25  Md.,  242,  267  (1866). 
Trover  and  arrest  lie  for  conversion  of 
certificates  of  stock.  Barry  v.  Calder, 
48  Hun,  449  (1888).  The  action  for  con- 
version lies,  even  though  the  plaintiff 
uses  the  term  "shares  of  stock"  and 
"  certificates  of  stock  "  interchangeably. 
•Godfrey  v.  Pell,  49  N.  Y.  Sup.  Ct.,  226 
{1883).  A  party  whose  stock  has  been 
•converted  may  sue  for  damages  instead 
of  following  the  stock.  Moore  v.  Baker, 
30  N.  E.  Rep.,  629  (Ind.,  1892).  For  the 
allegations  in  an  action  for  the  con- 
version of  a  bond,  see  Saratoga,  etc.,  Co. 
v.  Hazard,  55  Hun,  251  (1889) ;  aff'd,  121 
N.  Y.,  677.  Where  defendant  purchased 
stock  for  the  plaintiff  and  accounted 
therefor,  but  refused  to  account  for  div- 
idends received  while  he  held  the  stock, 
the  defendant  is  guilty  of  conversion. 
Shaughnessy  v.  Chase,  7  N.  Y.  State 
Rep.,  293.  There  are  many  cases  in  the 
lower  courts  of  New  York  on  this  sub- 
ject. As  to  refusal  to  return  pledge 
after  payment  is  a  conversion,  see  Rob- 
erts v.  Berdell,  52  N.  Y.,  644 ;  S.  C,  15 
Abb.  Pr.  (N.  S.).  177.  As  to  arrest  for 
conversion,  replevin  thereby  being 
waived,  see  Chappel  v.  Skinner,  6  How. 
Pr.,  338 ;  Person  v.  Civer,  29  How.  Pr., 


432 ;  rev'g  28  id.,  139 ;  Niver  v.  Niver,  43 
Barb,  411;  19  Abb.  Pr.,  14;  29  How. 
Pr.,  6 ;  Dubois  v.  Thompson,  1  Daly,  309 ; 
25  How.  Pr.,  417 ;  Causland  v.  Davis,  4 
Bosw.,  619;  Schoeppel  v.  Corning,  6 
N.  Y.,  107.  Conversion  of  railway  shares 
in  a  foreign  country.  Northern  R'y  v. 
Carpentier,  13  How.  Pr.  Rep.,  222.  In 
the  case  Butts  v.  Burnett,  6  Abb.  Pr. 
(N.  S.),  302  (1869),  involving  the  arrest  of 
a  broker  who  had  sold  the  pledge  before 
the  note  was  due,  the  court  said :  "  It  is 
very  questionable,  I  think,  whether  a 
demand  after  default  in  payment  of  the 
debt  for  which  property  is  pledged  as 
security  will  render  a  refusal  to  deliver 
the  pledged  property  a  tortious  conver- 
sion of  it.  No  doubt  the  pledgor  can  re- 
deem upon  a  tender  of  the  debt,  or  he 
may  recover  the  difference  between  the 
value  of  the  pledge  and  the  debt.  But 
to  lay  the  foundation  for  an  action  for 
conversion,  I  am  of  opinion  that  an 
offer  and  demand  must  be  made  on  the 
day,  and  is  not  sufficient  if  made  after 
the  day  on  which  the  debt  has  become 
payable." 

1  Sewall  v.  Lancaster  Bank,  17  Serg. 
&  R,  285  (1828);  Neiler  v.  Kelley,  69 
Pa.  St.,  403  (1871). 

2Biddle  v.  Bayard,  13  Pa.  St.,  150 
(1850).  Cf.  Aull  v.  Colket,  2  Week. 
Notes  Cas.,  322  (1875).  So  in  Michi- 
gan. Daggett  v.  Davis,  53  Mich.,  35 
(1884). 

3  Broadbent  v.  Farley,  12  C.  B.  (N.  S.), 
214  (1862).  Trover  does  not  lie  against 
a  person  to  whom  stock  is  given  to  sell 
and  use  the  proceeds  to  start  in  busi- 
ness.    Borland  v.  Stokes,   14  Atl.  Rep., 


781 


§  576.] 


ACTIONS    AND    MEASURE    OF   DAMAGES.  [CH.  XXXV. 


And,  upon  the  other  hand,  withholding  possession  of  a  certificate 
of  stock  cannot  amount  to  a  conversion  of  the  stock  itself  so  long 
as  the  certificate  is  not  indorsed ;  but  it  may  amount  to  a  technical 
conversion  of  the  certificate.1  It  is  well  established  that  a  refusal 
of  a  corporation  to  register  a  transfer  in  the  name  of  one  entitled 
to  the  stock  is  a  conversion  of  the  shares.2  And  likewise  a  failure 
or  refusal  by  the  corporation  to  issue  a  certificate  to  an  original 
subscriber  when  by  the  terms  of  the  contract  of  subscription  it 
ous'ht  to  be  issued  mav  be  treated  as  a  conversion.3  So,  also,  a  fail- 
ure  to  deliver  stock  according  to  a  contract  for  delivery,4  or  to  re- 
turn borrowed  stock  on  demand,  or  at  the  time  when  by  agree- 
ment it  ought  to  be  returned  ; 5  and  an  unauthorized  sale  of  stock 
by  a  pledgee  in  violation  of  the  terms  of  the  contract  of  bailment,6 


61  (Pa.,  1888).  Where  several  sharehold- 
ers mutually  agree  to  contribute  a  num- 
ber of  shares  each,  to  be  sold  for  the 
benefit  of  the  corporation,  one  of  them 
cannot,  after  the  rest  have  contributed 
their  proportion,  refuse  to  allow  his 
shares  to  be  sold  as  agreed  ;  and  if  the 
corporation  takes  them  under  the  agree- 
ment and  sells  them  he  cannot  have  an 
action  of  trover.  Conrad  v.  La  Rue,  52 
Mich.,  83  (1883).  In  trover  for  a  certifi- 
cate of  stock,  the  acceptance  by  the 
plaintiff  of  the  certificate  ends  the  suit 
and  nothing  further  can  be  recovered. 
Collins  tt  Lowry,  47  N.  W.  Rep.,  612 
(Wis.,  1890). 

1  Daggett  v.  Davis,  53  Mich.,  35  (1884). 
Cf.  Morton  tt  Preston,  18  id.,  60  (1869). 
Where  an  administrator  sells  stock 
pledged  to  the  deceased  in  his  life-time 
as  security  for  a  loan  of  money  and  re- 
ceives the  proceeds  and  properly  ac- 
counts to  the  estate,  this  is  not  a  con- 
version of  the  shares,  and  the  pledgor 
cannot  have  an  action  of  trover.  If  any 
action  lies  it  is  for  money  had  and  re- 
ceived. Von  Schmidt  r.  Bourn,  50  Cal., 
016  (1875).  For  an  example  of  an  insuf- 
ficient complaint  in  trover  for  shares,  in 
that  there  was  no  sufficient  averment 
of  a  conversion  or  of  facts  from  which 
a  conversion  might  be  inferred,  see  Ed- 
wards tt  Sonoma  Valley  Bank,  59  Cal., 
136  (1881);  and  see,  also,  Cumnock  tt 
Inst  for  Sav.,  7  N.  E.  Rep.,  869  (Mass., 
1886). 


2  Allen  n  American  Building,  etc., 
Ass'n,  et  al,  52  N.  W.  Rep.,  144  (Minn., 
1892);  North  America  Building  Assoc. 
tt  Sutton,  35  Pa.  St.,  463  (1860) ;  West 
Branch,  etc.,  Canal  Co.'s  Appeal,  81* 
Pa.  St..  19  (1870);  Baltimore  City,  etc., 
R'y  Co.  n  Sewell,  35  Md.,  238  (1871); 
McMurrich  tt  Boud  Head  Harbour  Co., 
9  Upp.  Can.  (Q.  B.),  333  (1858), 

•(  See  §  60. 

4  Huntington,  etc.,  Coal  Co.  v.  Eng- 
lish. 86  Pa.  St,  247  (1878) ;  North  v.  Phil- 
lips. 89  id..  250  (1879);  Noonan  v.  Usley, 
IT  Wis.,  314  (1863);  Pinkerton  r.  Man- 
chester, etc.,  R  R.  Co.,  42  N.  H.,  424 
(1861). 

■  McKenney  tt  Haines,  63  Me.,  74 
(1873);  Fosdick  v.  Greene  27  Ohio  St., 
484  (1875);  Forrest  tt  ElweB,  4  Ves.,  492 
(1799).  Whore  a  person  loans  stock  to 
another  to  borrow  money  upon,  conver- 
sion does  not  lie  for  a  failure  to  return 
tli>'  stock.  Barrowcliffe  tt  Cummins,  66 
Hun,  1  (1892).  Where  bonds  are  loaned 
to  use  temporarily  upon  an  agreement 
to  return  them  when  called  for,  and  the 
member  of  the  firm  to  whom  they  are 
delivered  uses  them  for  his  own  pur- 
poses, he  converts  them.  Birdsall  tt 
Davenport,  43  Hun,  552  (1887). 

'Maryland  Fire  Ins.  Co.  tt  Dalrym- 
ple,  25  Md..  242,  267  (1866);  Freeman  r. 
Harwood,  49  Me.,  195  (1859) ;  Fisher  v. 
Brown.  104  Mass.,  259  (1870).  For  re- 
fusal of  pledgee  to  return  property,  the 
action  of  pledgor  may  be  in  tort  or  cou- 


782 


CH.  XXXV.]  ACTIONS    AND   MEASURE    OF   DAMAGES.  [§§  577,  578. 

or  by  a  broker  in  violation  of  his  contract,1  are  examples  of  con- 
version of  stock.  In  a  late  case  in  Oregon  it  is  said  that  any  inter- 
ference subversive  of  the  right  of  the  owner  of  stock  to  enjoy  and 
control  it  is  a  conversion.2  In  Xew  York  a  transferee  may  try  his 
right  to  registr}'  in  an  action  for  dividends,3  but  not  after  com- 
mencing an  action  for  conversion.4  Where  there  are  conflicting 
interests  in  and  contending  claimants  for  the  same  stock,  the  cor- 
poration is  not  liable  for  conversion  at  the  suit  of  one  of  them  in 
tort,  because  it  may  refuse  to  transfer,  pending  the  contest  between 
the  claimants.5  Trover  will  not  lie  by  a  trustee  on  stock  which 
stands  in  the  name  of  the  cestui  que  trust  against  a  person  taking 
title  from  a  co-trustee.     A  suit  in  equity  is  the  proper  remedy.6 

§  577.  Detinue  and  replevin. —  The  common-law  action  of  detinue 
will  lie  for  the  recovery  of  a  certificate  of  stock  unlawfully  de- 
tained.7 In  this  action  the  judgment  is  conditional,  either  to  re- 
store the  thing  detained,  or  pay  the  value  and  damages  for  the 
detention.  The  more  modern  action  of  replevin  or  its  equivalent 
will  doubtless  lie  for  the  recovery  of  a  certificate,  as  for  any  other 
tangible  personal  property. 

§  578.  Money  had  and  received. —  A  pledgor  whose  stock  has 
been  wrongfully  sold  by  the  pledgee,  in  violation  of  the  contract 
of  bailment,  may  have  an  action  against  the  pledgee  for  money  had 
and  received.8 

tract     International  Bank  v.  Monteath,  6  Onondaga,  eta,  Co.  v.  Price,  87  N.  Y., 

39  N.  Y.,  297.     Conversion  lies  for  an  542  (1882) ;  S.  C,  in  a  court  of  equity,  as 

unauthorized  sale  of  stock  and  also  for  White  v.  Price,  39  Hun,  395  (1886) ;  108 

dividends  received  thereon.      Shaugh-  N.  Y.,  661  (1888). 

nessy  v.  Chase,  7  N.  Y.  State  Rep.,  293  "  Williams  v.  Peel,  etc.,  Co.,  55  L.  T. 

(Supr.  Ct,  1887).  Rep.,  689  (1886) ;  Williams  v.  Archer,  5 

iSee  cb,  XXV,  supra;  Sadler  v.  Lee,  C.   B.,   318  (1847);  S.  C,  5  Railway  & 

6  Beav.,  324  (1843).  Canal  Cas.,  289,  where  it  was  held  that 

2  Budd  v.  Multnomah  St  R'y  Co.,  12  detinue  lay  to  recover  two  hundred  and 
Oregon,  271  (1885).  fifty  scrip  certificates ;  Peters  v.   Hey- 

3  Robinson  v.  National  Bank  of  New  wood,  Cro.  Jac,  682  (21  Jac.  1,  1624), 
Berne,  95  N.  Y,  637  (1884).  where  detinue  was  allowed  for  a  bond 

4  Hughes  v.  Vermont  Copper  Mining  detained.  As  to  replevin  in  cepit  for 
Co.,  72  N.  Y.,  207  (1878).  bonds  wrongfully  received    in    pledge 

5  National  Bank  of  New  London  v.  from  a  pledgee,  see  Thompson  v.  St 
Lake  Shore,  etc.,  R.  R  Co.,  21  Ohio  St,  Nicholas  Nat'l  Bank,  113  N.  Y,  325. 
221,232  (1871).  See,  also,  §  387,  supra.  8  Von  Schmidt  v.  Bourn,  50  Cal..  616 
In  trover  the  goods  ought  to  be  set  out  (1875) ;  Marsh  v.  Keating,  1  Bing.  N.  C, 
with  some  degree  of  certainty  of  de-  198  (1834).  Cf.  Jones  v.  Brinley,  1  East, 
scription;  but  the  same  certainty  is  not  1(1800);  The  King  r.  Churchwardens, 
required  as  in  detinue  and  replevin,  etc.,  of  the  Parish  of  St.  John  Madder- 
damages  being  recovered  in  trover,  the  market,  6  id.,  182  (1805).  In  an  old  case 
very  articles  in  detinue  and  replevin,  a  contrary  rule  is  laid  down.  Nightin- 
Neiler  v.  Kelley,  69  Pa.  St,  403  (1871).  gal    v.   Devisme,   5  Burr.,   2589    (1770). 

783 


§§  579,  580.]         ACTIONS  AND   measure  of  damages.  [ch.  xxxv. 


§  579.  Bill  in  equity. —  A  bill  in  equity  may  be  maintained  by  a 
bona  fide  purchaser  of  stock  against  the  corporation  to  compel  a 
transfer  of  the  stock  upon  the  corporate  books.1  A  bill  in.  equity 
may  be  filed  also  to  relieve  a  stockholder  from  an  unauthorized 
forfeiture;2  to  rescind  a  subscription  obtained  by  fraud;3  to  com- 
pel a  specific  performance  of  an  agreement  to  sell  stock;4  to  rem- 
edy a  purchase,  sale  or  transfer  of  stock  induced  by  fraud  ;s  and  to 
redeem  stock  held  in  pledge."  A  preliminary  injunction  against 
transferring  stock  is  also  frequently  granted.7  A  bill  in  equity  is 
the  proper  remedy  to  obtain  possession  of  shares  of  stock.8 

§580.  Pleading  under  the  codes. —  In  general,  a  pleading  under 
the  code  is  not  a  safe  pleading,  unless  it  conforms  substantially  to 
the  rules  of  pleading  at  common  law.  Some  verbiage  may  be 
omitted,  but  the  relief  granted  by  the  various  common-law  actions 
cannot  be  obtained  even  under  the  codo  without  the  necessary 
averments  entitling  the  plaintiff  to  that  relief. 

The  crucial  test  under  the  oode  is  whether  the  facts  alleged  are 
sufficient  to  entitle  the  plaintiff  to  relief.  It  is  the  allegation  of 
the  facts,  and  not  the  method  of  alleging  them,  that  constitutes  a 
sufficient  pleading  under  the  cod, 

In  a  suit  for  profits  received  by  defend- 
ant  as  agent  for  plaintiff  in  buying  and 
selling  Btock,  the  value  of  the  stock  need 


not  he  alleged  with  any  particular  defi- 
niteness.  Herrlich  v.  McDonald,  33  Pac 
Rep.,  398  '  !aL,  1890),  Where  ■  corpora- 
tion repudiates  a  pledge  of  stock  made  by 
its  treasurer,  it  cannot  Bue  the  pledgee  for 
the  money  received  by  the  pledgee  upon 
a  sale  of  the  Btock  by  the  latter.  Holden 
v.  Metropolitan,  etc.,  Hank.  33  N.  El  Rep., 
Mass.,  1890). 

i  See  §  891,  supra. 

*See  §  184,  supra. 

•  ">,  156,  supra. 

•  See  §  388,  supra, 

366,  supra.  *- 

1  See  §  176,  supra.   ■* 

*Heck  r.  Bulkley,  1  S.  W.  Rep.,  613 
O'1  nil..  1886),  holding,  also,  that  a  viola- 
tion of  the  injunction  is  a  bar  to  dam- 
ages upon  a  dissolution  of  it  The  pre- 
liminary injunction,  being  an  equitable 
remedy,  is  not  granted  if  only  legal  re- 
lief is  sought  by  the  action.  See  Mo- 
Benry  v.  Jewetl  90  X.  V..  68  (1888>  A 
principal  who  is  suing  an  agent  to  ob- 
tain  shares  of   stock    may   enjoin   the 


agent  from  transferring  the  same  pen- 
dente  lite.  I  bedworth  v.  Edwards,  8 
Where  a  proposed  con- 
solidation i-,  attacked  by  a  stockholder, 
a  preliminary  injunction,  granted  so  as 
not  to  render  useless  the  whole  suit  in 
it  i-  successful,  will  not  be  dis- 
turbed l>\  t lie  court  of  appeals.  Young 
r.  Rondout,  etc,  Co.,  139  N.  Y.,  67  (1891} 

8  This  rule  of  law  has  frequently  been 
applied  in  actions  by  a  pledgor  to  ob- 
tain from  a  pledgee  the  stock  which 
has  been  pledged.  The  rule  itself  is 
well  established.  White  v.  Price,  39 
Hun,  394  :  Ins  .\.  Y,  661 ;  Hasbrouck  r. 
Vandevoort,  4  Band.  Rep,  74;  Bryson 
n  Raynor,  ?•">  Md.  434;  Conynghara's 
Appeal.  ~u  Pa.  St..  471;  Koous  >\  First 
Nafl  Bank,  89  Ind, 

'Brisbane  v.  Delaware,  etc.,  R  R  I 
94  N.  Y.,  204  (1888);  Purrall  v.  Bush- 
wick  R  R  Co.,  75  id.,  311  (1878).  Cf. 
Tackerson  ex  Chapin,  63  X.  Y.  Super. 
Ct,  16  L885)  In  Nevada  there  is  a 
statutory  action  of  claim  and  delivery. 
Bercich  v.  Marye,  9  Nev.,  313  (1874). 
See  Webster  v.  Grand  Trunk  R'y  of 
Canada,  S  Lower  Can.  Jur.,  148  (18 


781 


(MI.    XXXV.] 


ACTIONS    AND    MEASURE    OF    DAMAGES. 


[§581. 


§  581.  The  measure  of  damages  —  (a)  The  first  rule. —  Great  dif- 
ficulty has  been  experienced  in  determining  what  shall  be  the 
measure  of  damages  for  the  conversion  of  stock.  As  the  manner 
and  conditions  of  the  conversion  vary,  so  also  will  the  measure  of 
damages  vary  from  nominal  damages  to  the  highest  value  of  the 
stock  with  dividends  and  interest,  and  also  any  special  dam- 
ages which  the  plaintiff  can  establish.  In  general,  the  courts 
incline  to  the  rule  that  the  true  measure  of  damages  is  the  value 
of  the  stock  at  the  time  of  the  conversion,1  or  a  reasonable  time 


S.  C,  2  id.,  291,  for  a  construction  of 
that  provision  of  the  judicature  act  [12 
Vict,  ch.  38,  §  87]  which  governs  ac- 
tions of  this  nature  in  the  Canadian 
provinces.  In  Kuhn  v.  McAllister,  1 
Utah,  275  (1875),  it  is  held  that  the 
language  used  in  the  pleadings  in  these 
actions  is  not  material,  or  that  the  lan- 
guage is  that  of  one  form  of  action  or 
another  or  of  no  form,  but  that  the 
question  is  whether  the  facts  entitle  the 
plaintiff  to  recover.  A  declaration  in 
an  action  for  the  wrongful  conversion 
of  the  shares  of  the  capital  stock  of  a 
corporation  is  sufficient  for  the  pur- 
poses of  pleading  if  it  states  the  ulti- 
mate facts  to  be  proven.  The  circum- 
stances which  tend  to  prove  those  facts 
may  be  used  for  the  purpose  of  evi- 
dence, but  they  have  no  place  in  the 
pleadings.  McAllister  v.  Kuhn,  96  U.  S.. 
87  (1877);  affirming  Kuhn  v.  McAllis- 
ter, 1  Utah,  275  (1875).  As  to  a  mis- 
joinder of  causes  of  action  under  the 
California  code,  where  the  plaintiff  sues 
to  recover  certain  stock,  see  Johnson  v. 
Kirby,  65  Cat,  482  (1884).  Upon  the 
question  of  what  is,  in  New  York,  a 
sufficient  pleading  in  an  action  to  com- 
pel deliver  of  stock,  see  Burrall  v.  Bush- 
wick  R.  R  Co.,  75  N.  Y.,  211  (1878). 
See,  also,  Chitty  on  Pleadings,  vol.  2, 
p.  618;  Lowell  on  Transfers,  §  11. 

1  In  re  Bahia  &  San  Francisco  R'y  Co.. 
3  Q.  B.,  584  (1868) ;  Williams  r.  Archer, 
5  Rail.  &  Canal  Cas.,  289  (1847) ;  S.  G. 
5  C.  B.,  318;  17  L.  J.  (C.  P.),  82;  Tem- 
pest v.  Kilner,  3  C.  B.,  249  (184S) ;  Shaw 
v.  Holland,  15  Mees.  &  W.,  136  (1846) ; 
Pott  v.  Flather,  5  Rail.  &  Canal  Cas., 


(50) 


85  (1847);    Davidson  v.  Tulloch,  6  Jur. 
(N.  S.>,  543  (1860);  Wells  v.  Abernethy. 
5  Conn.,  222  (1824);   O'Meara  v.  North : 
American  Mining  Co.,  2  Nev.,  112  (1866) ; 
Baker  v.   Drake,  53  N.  Y.  211   (1873); 
S.    C,   66    N.   Y,   518    (1876);    Colt    v. 
Owens,  90  N.  Y,  368  (1882);  Gruman  v. 
Smith,  81  id.,  25  (1880) ;  Ormsby  v.  Ver- 
mont  Copper   Mining  Co.,   56   id.,  623 
(1874);    Pinkerton   v.   Manchester,   etc., 
R.  R   Co.,  42  N.  H.,  424  (1861);  McKen- 
ney  v.  Haines,  63  Me.,  74  (1873) ;  Sturges 
v.  Keith,  57  III,  451  (1870);  Noonan  v. 
Usley,  17  Wis.,  314  (1863) ;  Bull  v.  Doug- 
las, 4  Munf.  (Va.),  303  (1814);  Enders  v. 
Board   of  Public  Works,    1  Graft.  364 
(1845);   White  v.  Salisbury.  33  Mo.,  150 
(1862);  Connor  v.  Hillier,  11  Rich.  Law, 
193  (1857):  Nabring  v.  Bank  of  Mobile,. 
58  Ala.,  204  (1877);  Eastern  R.  R  Co.  v. 
Benedict,  10   Gray,  212  (1857);   Boylan 
v.  Huguet,  8  Nev.,  345  (1873);.  Bercich. 
v.  Marye,  9  id.,  312  (1874);    Sargent  v.. 
Franklin    Ins.  Co.,   8    Pick.,  90   (1829) ,: 
Fisher  v.  Brown,  104  Mass.,  259  (1870); 
Wyman    v.    American   Powder   Co.,    8 
Cush.,  168  (1857);  North  v.  Phillips,  89 
Pa.    St.,   250   (1879);    Huntington,   etc.. 
Coal  Co.  v.  English,  86  id.,  247  (1878); 
Neiler  v.  Kelley,  69  id.,  403  (1871) ;  Ran- 
dall v.  Albany  City  National  Bank,    1 
N.  Y.  State  Rep.,  592  (Sept.,  1886) ;  Doug- 
las v.  Merceles,  25  N.  J.  Eq.,  144  (1874). 
See,  also,  Eicholz  v.   Fox.  12  Phila.,  382 
(1878);  Larrabee  v.  Badger,  45  111.,  440 
(1867);   Barned  v.  Hamilton,  2  Rail.  & 
Canal  Cas.,  624  (1841);  Blyth  v.  Carpen- 
ter, L.  R,  2  Eq.,  501  (1866).     Cf.  Moody 
v.    Caulk,    14   Fla,   50   (1872);    Kent   r. 
Ginter,  23  Ind.,  1  (1864);  Orange,  etc., 


785 


§  5S1.J 


ACTIONS    AND    MEASURE    OF    P  AM  AGES. 


[cn.  XXXV 


after.1  By  the  term  the  value  of  the  stock  is  usually  to  be  under- 
stood the  market  value.2  The  fact  that  the  shares  of  stock  have 
no  known  market  value  will  not  prevent  recovery  wThere  the  actual 
value  is  ascertainable  in  an  action  to  recover  damages.  The  value 
may  be  shown  by  showing  the  value  of  the  property  and  business 
of  the  corporation.3     The  question  of  what  was  the  market  value 

R.   R   Co.    t.    Fulvey,    17    Gratt,   366    capacity,  the  good-will,  etc.,  etc.,  is  the 


(1867) ;  Jefferson  v.  Hale,  31  Ark.,  286 
(1876) ;  Third  National  Bank  v.  Boyd,  44 
Md.,  47  (1875);  Thomas  V.  Sternheimer, 
29  id.,  268  (1868). 

i  Colt  v.  Owens,  90  N.  Y.,  368  (1882) ; 
Douglas  v.  Merceles,  25  N.  J.  Eq.,  144 
(1874) ;  Brewster  v.  Van  Liew,  8  N.  E. 
Rep.,  842  (111.,  1886);  Budd  v.  Mult- 
nomah St.  R'y  Co.,  15  Pac.  Rep.,  65 
(Oreg.,  1887).  Upon  what  is  reasonable 
time  herein  in  transactions  on  the  stock 
exchanges,  see  Stewart  v.  Cauty,  8  Mees. 
&  W.,  160  (1841) ;  Field  v.  Leleau,  6  Hurl. 
&  N.,  617. 

2  By  the  "  market  value  of  stock  ''  is 
meant  the  actual  price  at  which  it  is 
commonly  sold.  That  price  may  be 
fixed  by  sales  of  the  stock  in  market  at 
or  about  a  given  time.  If  no  sales  can 
be  shown  on  the  precise  day,  recourse 
may  be  bad  to  sales  before  or  after  the 
day,  and  for  that  inquiry  a  reasonable 
range  in  point  of  time  is  allowable. 
Douglas  v.  Merceles,  25  N.  J.  Eq.,  114 
(1874).  Cf.  Stewart  v.  Cauty,  8  Mees. 
&  W.,  160  (1841);  Sturges  v.  Keith,  57 
III.,  451  (1870);  Seymour  v.  Ives,  46 
Conn.,  109  (1878).  The  measure  of  dam- 
ages for  non-delivery  of  stock  at  a  cer- 
tain date  is  presumptively  the  par  value. 
The  defendant  is  obliged  to  prove  differ- 
ently if  this  price  is  incorrect  Appeal 
of  Harris,  12  Atl.  Rep.,  748  (Pa.,  1888). 
If  there  is  no  market  value  of  stock, 
proof  of  a  few  sales  is  competent 
Brown  v.  Lawton,  6  N.  Y.  Supp.,  137 
(1889). 

3  "  In  actions  for  conversion  of  per- 
sonal property,  such  as  these  shares  are, 
the  damages  are  not  limited  to  the  mar- 
ket value  of  the  stock.  Its  actual  value 
to  be  determined  under  all  the  circum- 
stances, such   as  the  dividend-making 


measure  of  damages."  Freon  v.  Car- 
riage Co..  42  Ohio  St,  30,  38  (1884).  In 
Hitchcock  v.  McElrath,  14  Pac.  Rep.. 
305  (Cal.,  1887),  the  court  allowed  evi- 
dence to  be  given  showing  the  market 
value  of  all  the  property  of  the  corpora- 
tion, there  being  no  other  method  of 
ascertaining  the  value  of  the  stock. 
See,  also,  McGuffey  v.  Humes,  1  S.  W. 
Rep.,  506  (Tenn.,  1886).  The  value  of 
stock  may  be  shown  by  showing  the 
value  of  the  property  of  the  corpora- 
tion, the  amount  of  capital  stock  and 
the  amount  of  debts.  It  may  be  shown, 
also,  by  proving  how  much  could  be 
borrowed  on  the  stock  at  the  place 
where  the  company's  headquarters  were. 
Smith  v.  Traders'  Nat'l  Bank,  17  S.  W. 
Rep.,  779  (Tex.,  1891).  In  the  case  of 
Riker  v.  Campbell  (U.  S.  C.  C,  S.  D.  of 
N.  Y.  ;  see  Mss.),  Judge  Wallace  held 
that  the  value  of  stock  might  be  shown 
by  proving  the  value  of  the  corporate 
property.  See,  also,  Simkius  v.  Law,  4 
N.  Y.,  179.  "Where  a  vendor  of  stock 
in  a  corporation  which  has  a  franchise. 
but  nothing  else,  is  entitled  to  two  thou- 
sand shares  of  full-paid  stock  at  a  later 
date,  according  to  the  contract  of  sale, 
his  measure  of  damages  for  failure  of 
the  vendee  to  deliver  the  two  thousand 
shares  i9  nominal  damages  where  there 
was  no  market  or  actual  value  for  the 
stock.  Barnes  v.  Brown,  130  N.  Y,  372 
(1892).  The  value  of  stock  may  be  shown 
by  the  value  of  its  assets  where  there  is 
no  known  market  value.  Redding  r. 
Godwin,  46  N.  W.  Rep.,  563  (Minn., 
1890).  The  president  and  managing 
agent  renders  his  corporation  liable  for 
a  bonus  of  stock  in  another  corporation 
which  he  gives  secretly  and  corruptly  to 
the  agent  of  the  latter  corporation   in 


786 


CH.  XXXV.] 


ACTIONS    AND   MEASURE    OF   DAMAGES. 


[§  581. 


at  the  time  of  the  conversion  is  generally  a  question  for  the  jury;1 
and  it  may  be  shown  by  tables  of  prices  current  published  in  the 
newspapers  or  otherwise  at  the  time  of  the  conversion,  and  these 
may  be  read  in  evidence.2 

A  conversion  arises  at  the  time  when  the  stockholder,  being  en- 
titled  to  the  immediate  possession  or  delivery  of  the  stock  or  the 
certificate,  makes  a  demand  for  it  which  is  refused.  Accordingly 
in  this  class  of  cases  the  measure  of  damages  is  the  value  of  stock 
on  the  day  of  the  demand  and  refusal.3 


order  to  get  a  contract  for  the  former 
corporation.  Grand  Rapids,  etc.,  Co.  v. 
Cincinnati,  etc.,  Co.,  45  Fed.  Rep.,  671 
(1891),  holding  the  former  corporation 
liable  for  the  par  value  of  the  stock, 
inasmuch  as  it  was  the  original  issue  of 
that  stock.  Not  the  nominal  but  the 
true  value  of  the  shares  is  what  the 
plaintiff  is  entitled  to  recover.  Bull  v. 
Douglas,  4  Munf.  (Va.),  303  (1814);  En- 
ders  v.  Board  of  Public  Works,  1  Gratt, 
364  (1845).  Where  a  railroad  is  sold  to 
be  paid  for  in  bonds,  a  failure  to  deliver 
the  bonds  enables  the  vendor  to  recover 
their  par  value  from  the  vendee.  Texas, 
etc.,  R'y  v.  Gentry,  8  S.  W.  Rep.,  98 
(Tex.,  1888). 

1 1  Sedgwick  on  Damages  (7th  ed.), 
585,  and  cases  cited ;  Dos  Passos  on 
Stock-brokers.  801.  See  Cameron  v. 
Durkheim,  55  N.  Y.,  425  (1874) ;  Fowler 
v.  New  York  Gold  Exchange  Bank,  67 
id.,  138  (1876) ;  Harris  v.  Tumbridge,  83 
id.,  92  (1880),  and  notes  supra.  Where 
there  is  no  evidence  that  the  stock  is 
worthless,  the  question  of  value  should 
be  submitted  to  the  jury ;  the  rule  of 
damages  in  a  case  for  fraud  as  to  repre- 
sentations as  to  the  value  of  the  stock 
being  the  difference  between  the  par 
value  of  the  stock  as  represented,  and 
what  it  was  in  fact  worth.  Maxted  v. 
Fowler,  53  N.  W.  Rep.,  921  (Mich.,  1892). 

2Cliquot's  Champagne,  3  Wall..  114 
(1865) :  S.  P.,  Whelan  v.  Lynch,  60  N.  Y, 
469  (1875).  A  price  current  or  market 
report  is  admissible  in  certain  cases  to 
prove  the  fluctuations  and  value  of 
stock.  Seligman  v.  Rogers,  21  S.  W. 
Rep.,  94  (Mo.,  1893). 


3  So  when  stock  held  as  collateral  is 
improperly  sold  by  the  pledgee,  the 
value  on  the  day  when  the  pledgor  pays 
his  debt  and  demands  his  stock  is  to  be 
taken.  Fisher  v.  Brown,  104  Mass.,  259 
(1870).  In  Freeman  v.  Harwood,  49  Me., 
195  (1859),  shares  of  stock  standing  in 
the  name  of  the  defendant  as  collateral 
security  for  a  debt  which  had  been  paid 
were  sold  for  non-payment  of  an  assess- 
ment and  bought  by  defendant.  It  was 
held  that  the  defendant  was  liable  in 
trover  for  the  value  of  the  shares  at  the 
time  of  the  sale,  with  interest,  and  all 
dividends  received  thereon,  deducting; 
the  amount  of  the  assessment  and  the 
expenses  of  the  sale.  In  Sturges  v. 
Keith,  57  111.,  451  (1870).  it  is  held  that 
where  the  demand  and  refusal  consti- 
tute the  conversion,  or  afford  presump- 
tive evidence  of  it,  the  date  of  such  de- 
mand and  refusal  is  the  proper  time  for 
estimating  the  value.  Again,  where  the 
corporation  wrongfully  refuses  to  regis- 
ter a  transfer  and  to  issue  a  certificate 
the  measure  of  damages  is  the  value  of 
the  stock  on  the  day  when  the  transfer 
was  demanded  and  refused.  Wyman 
v.  American  Powder  Co.,  8  Cush.,  168 
(1851);  Eastern  R.  R.  Co.  v.  Benedict, 
10  Gray,  212  (1857);  West  Branch,  etc.. 
Canal  Company's  Appeal,  81*  Pa.  St., 
19  (1870);  Baltimore  City,  etc.,  R.  R  Co. 
v.  Sewell,  35  Md.,  238  (1871);  McMur- 
rich  v.  Bond  Head  Harbour  Co.,  9  Up. 
Can.  (Q.  B.),  333  (1852),  where  it  is  said 
that  while  the  rule  as  announced  above 
is  the  proper  one,  yet,  when  the  jury 
allows  a  larger  sum,  the  question  of  the 
measure  of  damages  not  having  been 


787 


§  582.] 


ACTIONS    AND    MEASURE    OF    DAMAGES. 


[CH.  XXXV. 


"Where  the  pledgee  of  stock  wrongfully  sells  it  the  injured  party- 
may  recover  the  highest  market  price  between  the  time  of  notice 
of  sale  and  a  reasonable  time  within  which  he  might  have  bought 
the  stock  elsewhere.1 

The  Xew  York  court  of  appeals  after  many  variations  has  set- 
tled on  the  rule  that  "in  the  absence  of  special  circumstances  in 
an  action  for  conversion  of  personal  property  as  well  as  one  for 
failure  to  deliver  it  in  performance  of  a  contract  where  considera- 
tion has  been  received,  the  value  of  the  property  at  the  time  of 
such  conversion  or  default,  with  interest,  is  the  measure  of  com- 
pensation." 2 

§582.  (6)  The  second  rule. —  In  another  line  of  cases  the  true 
measure  of  damages  in  these  actions  is  said  to  be  the  value  of  the 
stock  on  the  day  of  the  trial.3     In  an  English  case  it  is  said  that 


pressed  at  the  argument,  the  court  will 
not  reduce  the  verdict  So,  also,  where 
there  is  a  failure  to  return  borrowed 
stock  on  demand,  or  according  to  the 
terms  of  the  bailment,  the  value  on  the 
day  of  demand,  or  on  the  day  when  the 
6tock  ought  by  contract  to  have  been 
returned,  is  the  measure  of  damages. 
McKenney  v.  Haines,  63  Me.,  74(1873); 
Fosdickr.  Greene,  27  Ohio  St,  484  (1875)  j 
S.  C,  22  Am.  Rep..  328;  McArthur  v. 
Seaforth,  2  Taunt..  257;  Day  v.  Per- 
kins, 2  Sandf.  Chan.,  359.  Of.  Cortel- 
you  v.  Lansing,  2  ( laines'  Caa  in  Error, 
200(1805) :  West  v.  Wentworth,  3  ( Jowen, 
82;  Clark  v.  Pinney,  ",  id..  681 ;  Wilson 
v.  Matthews,  24  Barb.,  295;  2  Sedgwick 
on  Damages  (7th  ed.),  141,  365,  n.  In 
an  old  case  where  borrowed  stock  was 
not  returned  the  plaintiff  was  allowed 
to  recover  the  value  at  the  time  of  the 
transfer  to  the  borrower,  no  account 
beiug  taken  of  an  increase  in  value. 
Forrest  v.  Elwes,  4  Ves..  492  (1799).  See, 
also,  McKenney  v.  Haines,  63  Me.,  74 
(1873).  Upon  a  failure  to  deliver  stock 
according  to  contract  or  on  demand,  the 
value  at  the  time  of  the  demand  is  the 
value  to  be  taken.  Noonan  v.  Ilsley,  17 
Wis.,  314  (1863);  Pinkerton  v.  Manches- 
ter, etc.,  R  R  Co.,  42  N.  H.,  424  (1861) ; 
North  v.  Phillips,  89  Pa.  St.,  250  (1879); 
Huntington,  etc.,  Coal  Co.  v.  English, 
86  id.,  247  (1878).     Cf.   Pott  v.  Flather, 


5  Rail.  &  Canal  Cas.,  85  (1847);  Barne.l 
v.  Hamilton,  2  id.,  624  (1841);  Shaw 
v.  Holland,  4  id.,  150  (1846);  S.  C,  15 
Mees.  &  W.,  136;  Tempest  ?;.  Kilner,  2 
C.  B.,  300;  S.  C,  3  id.,  249;  Gainsford  v. 
Carroll,  2  I3arn.  &  C,  624.  Williams  v. 
Peel,  etc.,  Co.,  55  L.  T.  Rep.  689  (1886), 
holds  that  suit  for  damages  for  wrongful 
detention  lies  against  a  party  who  has 
wrongfully  obtained  possession  of  stock, 
and  that  the  measure  of  damages,  where 
the  defendant  afterwards  abandons  his 
claim,  is  the  intervening  fall  in  the  value 
of  the  stock.  Bankers  of  trustees  wrong- 
fully sold  out  stock,  and  applied  the 
proceeds  to  their  own  purposes.  The 
measure  of  their  liability  is  the  amount 
paid  in  replacing  the  stock.  Sadler  v. 
Lee,  6  Beav.,  324  (1843).  As  to  damages 
in  cases  of  trust,  see  Story's  Eq.  (13th 
ed.),  §3  1263,  1264. 

1  Wright  v.  Bank  of  Metropolis,  110 
N.  Y.,  237  (1888);  Galigher  v.  Jones,  129 
U.  S.,  193  (1889),  the  court  saying  in  the 
latter  decision  that  the  measure  of  dam- 
ages is  "the  highest  intermediate  value 
of  the  stock  between  the  time  of  its 
conversion  and  a  reasonable  time  after 
the  owner  has  received  notice  of  it  to 
enable  him  to  replace  the  stock." 

2  Barnes  v.  Brown,  130  N.  Y.,  372 
(1892). 

3  Owen  v.  Routh,  It  C.  B.,  327(1854); 
Shepherd  v.  Johnson,  2  East,  211;  Ber- 


788 


CH.  XXXV.] 


ACTIONS    AND   MEASDRE    OF    DAMAGES. 


[§  583. 


this  is  a  sound  rule  in  the  ordinary  cases  of  conversion  of  stock, 
but  that  in  cases  of  failure  to  deliver  stock  the  true  measure  of 
damages  is  the  value  when  the  demand  is  made  and  refused.1  This 
second  rule  has  found  little  favor,  and  there  is  believed  to  be  no 
sound  reason  for  its  adoption. 

§  583.  (c)  The  third  rule. —  It  has  been  held  in  still  another 
class  of  decisions  that  the  measure  of  damages  for  the  conversion 
of  stock  is  the  highest  market  value  of  the  stock  between  the  date 
of  the  conversion  and  the  day  of  the  trial.  This  is  the  rule  in  Cali- 
fornia in  some  cases.2  So,  also,  in  South  Carolina,3  Georgia ; 4  and 
it  was  formerly  the  rule  in  New  York 5  and  Pennsylvania.6     The 


cich  v.  Marye,  9  Nev.,  312  (1874).  Cf. 
Williams  v.  Archer,  5  C.  B.,  318  (1847): 
S.  Q,  5  Rail.  &  Canal  Cas.,  289 ;  17  L.  J. 
(C.  P.),  82 ;  and  see  Wilson  v.  Little,  2 
N.  Y.,  443,  450  (1849),  wherein  there  is  a 
quere  as  to  whether  this  may  not  be  the 
better  rule.  In  Fowle  v.  Ward,  113 
Mass.,  548;  S.  C,  18  Am.  Rep.,  534 
(1873),  it  is  held  that  the  measure  of 
damages  is  the  value  of  the  stock  upon 
the  day  when  the  bill  in  equity  is  filed, 
it  being  an  equitable  action  by  a  pledgor 
against  a  pledgee.  The  measure  of 
damages  in  England  is  the  price  at 
which  the  defendant  sold  the  securities 
if  already  sold,  and  if  not  sold  then  the 
amount  of  depreciation  in  value  since 
plaintiff  demanded  them,  together  with 
intervening  dividends.  Simmons  v. 
Joint,  etc.,  Co.,  62  L.  T.  Rep.,  427  (1890). 

iShaw  v.  Holland,  15  Mees.  &  W., 
136,  145  (1846) ;  S.  C,  4  Rail.  &  Canal 
Cas.,  150 ;  15  L.  J.,  Exch.,  87. 

2  Code  of  California,  §  3336,  is  as  fol- 
lows: "The  detriment  caused  by  the 
wrongful  conversion  of  personal  prop- 
erty is  presumed  to  be :  1.  The  value  of 
the  property  at  the  time  of  the  conver- 
sion, with  interest  from  that  time ;  or, 
where  the  action  has  been  prosecuted 
with  reasonable  diligence,  the  highest 
market  value  of  the  property  at  any 
time  between  the  conversion  and  the 
verdict,  without  interest,  at  the  option 
of  the  injured  party."  This  is  held  to 
apply  to  the  conversion  of  the  shares  of 
stock.  Fro  mm  v.  Sierra  Nevada  Silver 
Mining  Co.,  61  Cal.,  629  (1882) ;  Dent  v. 


Holbrook,  54  id.,  145  (1880).  Cf.  Thomp- 
son v.  Toland,  48  Cal.,  99  (1874).  The 
courts  have  held  that  this  section  of 
the  code  applies  to  the  conversion  of 
shares  of  -stock,  but  they  have  not 
worked  out  a  very  consistent  rule  on 
the  subject.  In  Douglass  v.  Craft,  9 
Cal.,  562  (1867),  the  "highest  value" 
rule  is  adopted,  but  in  later  cases  the 
court  seems  to  incline  toward  the  mod- 
ern New  York  rule.  Harner  v.  Hatha- 
way, 33  Cal.,  117;  Page  v.  Fowler,  39 
id.,  412 ;  Dent  v.  Holbrook,  54  id.,  145 
(1880);  Tully  v.  Tranor,  53  id.,  274; 
Thompson  v.  Toland,  48  id.,  99  (1874); 
Fromm  v.  Sierra  Nevada  Silver  Mining 
Co.,  61  Cal,  629(1882). 

3  Kid  v.  Mitchell,  1  Nott  &  McCord, 
334  (1818). 

4  Central  R.  R.  &  Banking  Co.  v.  At- 
lantic, etc.,  R.  R  Co.,  50  Ga.,  444  (1873). 

5Markham  v.  Jaudon,  41  N.  Y,  235 
(1869);  Romaine  v.  Van  Allen,  26  id., 
309  (1863).  In  an  action  to  recover 
damages  for  the  unlawful  conversion  of 
a  quantity  of  grain  the  rule  in  New 
York  was  held  to  be  the  highest  price 
up  to  the  time  of  the  trial  is  the  proper 
measure  of  damages.  Lordell  v.  Stoweli, 
51  N.  Y,  70  (1872).  To  same  effect, 
Kent  v.  Ginter,  23  Ind.,  1  (1864).  See  1 
Sedgwick  on  Damages  (7th  ed.),  578,  and 
note  (a).  Cf.  Burt  v.  Dutcher,  34  N.  Y, 
493  (1866) ;  Scott  v.  Rogers,  31  id.,  676 
(1864) ;  Devlin  v.  Pike.  5  Daly  (N.  Y),  C. 
P.,  85.  For  the  modern  rule  in  New 
York  see  §  581,  supra. 

6  Bank   of   Montgomery  v.  Reese,  26 


789 


§  534.] 


ACTIONS    AND    MEASURE    OF   DAMAC3S. 


[CH.  XXXV. 


courts  of  the  two  latter  states  have,  however,  in  later  cases  wholly 
receded  from  this  position ;  and  in  both  the  rule  is  now  established 
in  such  actions  that  the  measure  of  damages  is  not  the  highest  price 
of  the  stock,  but  the  value  at  the  date  of  the  conversion.1 

§584.  Interests,  dividends  and  special  damages. —  It  is  settled 
law  that,  in  addition  to  the  value  of  the  stock  at  the  date  of  con- 
version, the  plaintiff  may  recover  legal  interest  upon  such  valua- 
tion from  the  date  of  the  conversion  to  the  day  of  the  trial.  It 
follows  as  of  course  that,  if  the  plaintiff  has  been  damaged  in  an 
ascertained  sum,  he  may,  in  an  action  for  damages,  recover  not  only 
that  sum,  but  interest  thereon  for  the  time  during  which  he  has 
been  wrongfully  deprived  of  his  stock.2     In  addition  to  interest 


Pa.  St,  143  (1856);  Musgrave  tt  Becken- 
dorff,  53  id.,  310  (1866);  Reitenbaugh  tt 
Ludwick,  31  id..  131,  141  (1858).  In 
Pennsylvania  where  one  was  account- 
able for  stock  as  trustee,  and  converted 
it,  lie  was  held  chargeable  with  the  high- 
est market  value.  Reitenbaugh  tt  Lud- 
wick, 31  Pa.  St.,  131  (1858);  North  v. 
Phillips,  89  Pa.  St.,  250  (1879).  Cf. 
Bates  v.  Wiles,  1  Handy  (Ohio),  532 
(1855).  It  is  now  held  in  Pennsylvania 
that  where  a  corporation,  through  inno- 
cent mistake,  permits  a  transfer  on  its 
books  of  shares  of  stock  under  a  forged 
power  of  attorney,  the  owner's  measure 
of  damages  is  the  value  of  the  stock  at 
the  time  of  the  transfer,  with  interest 
from  the  date  of  the  verdict,  and  not 
the  highest  price  reached  by  the  stock 
between  the  date  of  the  conversion  and 
the  time  of  bringing  suit,  with  the  divi- 
dends since  declare •<!.  Pennsylvania  Co., 
etc.,  i\  Philadelphia,  etc.,  R  Co..  25  At). 
Rep.,  1043  (Pa.,  1893).  But  where  upon 
a  re-organization  an  old  stockholder  is 
wrongfully  refused  his  stock  in  the  new, 
he  may  recover  the  highest  market  price 
of  the  same  up  to  the  time  of  the  in- 
solvency of  the  corporation.  Reading, 
etc.,  Co.  tt  Reading,  etc.,  Works,  21  Atl. 
Rep.,  169  (Pa.,  lS'Ji). 

1  North  v.  Phillips,  89  Pa.  St,  250 
(1879);  Huntington,  etc.,  Coal  Co.  v. 
English,  86  id..  217  (1878);  Work  v.  Ben- 
nett, 70  id.,  484  (1872);  Neiler  tt  Kelley, 
69  id.,  403  (1871).  Cf.  Wilson  tt  Whit- 
taker,  49  id.,  114  (1865).    So,  also,  in  the 


later  New  York  cases.  Baker  tt  Drake, 
53  N.  Y.,  211  (1873);  S.  G,  66  N.  Y.,  518 
(1876);  White  v.  Smith,  54  id.,  522 
(1874);  Harris  v.  Tumbridge,  83  id.,  92 
(1880);  Colt  v.  Owens,  90  id.,  368  (1882); 
Randall  tt  Albany  City  Nat'l  Bank,  1 
N.  Y.  State  Rep ,  592  (Sept,  1886).  Cf. 
Suydam  v.  Jenkins,  3  Sandf.  Super. 
Ct,  614  (1850);  Matthews  tt  Coe,  49  N. 
Y.,  57  (1872);  Bryan  v.  Baldwin,  52  id., 
236  (1873).  See,  also,  Seymour  v.  Ives, 
46  Conn.,  109  (1878);  McGuffey  tt 
Humes,  1  S.  W.  Rep.,  506. 

*0*Meara  V.  North  American  Mining 
Co.,  2  Nev.,  112  (1866);  Boylan  tt, 
Huguet,  8  id.,  345  (1873);  Fisher  v. 
Brown,  104  Mass.,  259  (1870);  Sargent 
tt  Franklin  Ins.  Co..  8  Pick.,  90(1829); 
Seymour  r.  Ives,  46  Conn.,  109  (1878); 
McKenney  tt  Haines,  68  Me.,  74  (1873); 
Freeman  tt  Harwood,  49  id.,  195  (1859); 
Ormsby  r.  Vermont  Copper  Mining 
Co..  56  N.  Y.,  623  (1874);  White  v. 
Smith,  54  id..  522  (1874);  Sturges  v. 
Keith,  57  111.,  451  (1870);  Baltimore 
City,  etc.,  R*y  Co.  r.  Sewell,  35  McL, 
238,  257  (1871);  Pinkerton  tt  Manches- 
ter, etc.,  R  R.  Co.,  42  N.  H.,  424  (1861); 
North  v.  Phillips,  89  Pa.  St,  250  (1878); 
Huntington,  etc.,  Coal  Co.  v.  English, 
86  id.,  247  (1878);  North  American 
Building  Ass'n  tt  Sutton,  35  id.,  463 
(1860);  Noonan  tt  Illsley,  17  Wis.,  314 
(1^;::i;  Forrest  r.  Elwes.  4  Ves.,  492 
(1799);  In  re  Bahia  &  San  Francisco 
R'y  Co.,  3  Q.  B.,  584  (1868);  Blyth  tt 
Carpenter,    L.    R,    2    Eq.,   501    (1866); 


790 


OU.  XXXV.]  ACTIONS    AND    MEASURE    OF    DAMAGES. 


[§  585. 


the  plaintiff  may  recover  also  all  accretions  to  the  property  made 
during  the  time  when  he  was  deprived  of  it.  He  is,  therefore,  en- 
titled to  judgment  for  all  dividends  paid  upon  the  stock  between 
the  date  of  the  conversion  and  the  day  of  the  trial.1  The  reason 
why  the  plaintiff  recovers  dividends  in  addition  to  the  value  of  the 
stock  and  interest  is  that  often  the  dividends  involved  were  earned, 
wholly  or  in  part,  before  the  conversion,  but  that  such  net  earn- 
ings were  distributed  by  dividends  declared  after  the  conversion, 
and  that  the  market  value  does  not  always  represent  fully  the  un- 
distributed profits.  The  plaintiff  may  also  recover  any  special 
damages  which  legitimatelv  arise  out  of  matters  in  existence  at 
the  date  of  conversion,  and  which  he  has  sustained  by  reason  of 
the  detention  of  his  stock.2 

§  585.  Nominal  damages. —  In  certain  cases,  where  the  plaintiff 
has  been  guilty  of  laches,  or  where  the  stock  is  of  no  actual  value, 
or  where  the  stock  could,  for  a  reasonable  time  after  the  conver- 
sion, have  been  purchased  in  the  market  for  the  same  or  a  lower 
price,  or  in  any  other  case  where  the  plaintiff  has  suffered  only  a 
technical  conversion  without  any  actual  pecuniary  loss,  only  nomi- 
nal damages  can  be  recovered.3     Thus,  the  measure  of  damages  for 


McMurrich  v.  Bond  Head  Harbour  Co., 
9  Upp.  Can.  (Q.  B.),  333  (1852).  In  the 
civil  code  of  California,  §  3336,  interest 
in  these  cases  is  expressly  provided  for. 
Frornm  v.  Sierra  Nevada  Silver  Mining 
Co.,  61  Cal.,  629  (1882);  2  Sedgwick  on 
Damages  (7th  ed.),  391. 

i  Bull  v.  Douglas,  4  Munf.  (Va.),  303 
(1814):  Baltimore  City,  etc.,  R'y  Co.  v. 
Sewell,  35  Md.,  238  (1871) ;  Bercich  v. 
Marye,  9  Nev.,  312  (1874) ;  Bank  of  Mont- 
gomery v.  Reese,  26  Pa.  St,  143 
(1856).  Cf.  Boston,  etc.,  R  R.  Co.  v. 
Richardson,  135  Mass.,  473,  477  (1883). 
Where  a  broker,  a  gratuitous  bailee  of 
corporate  stock,  delivers  the  same  to  the 
company  without  authority,  and  the 
stock  is  converted  to  the  use  of  the 
company,  the  bailee  is  liable  for  its 
value,  irrespective  of  what  his  inten- 
tions were  in  the  premises.  In  such 
case  the  bailor  may  recover  the  value 
of  the  stock  at  the  time  of  conversion, 
with  all  dividends  paid  from  the  time 
of  delivery,  together  with  interest  on 
the  value  of  the  stock  from  date  of  con- 


version, and  on  the  dividends  from  date 
of  respective  payments.  Hubbell  v. 
Blandy,  49  N.  W.  Rep.,  502  (Mich.,  1891). 

2  Boylan  v.  Huguet,  8  Nev.,  345  (1873) ; 
2  Sedgwick  on  Damages  (7th  ed.),  391 ; 
Bodley  v.  Reynolds,  8  Ad.  &  El.  (N.  S.\ 
779  (1846) ;  Davis  v.  Oswell,  7  Car.  &  P., 
804  (1837).  Cf.  Seymour  v.  Ives,  46 
Conn.,  109  (1878). 

3  Thus,  where  a  oorrower  of  shares 
fails  to  return  them  until  after  the  cor- 
poration is  dissolved,  the  lender  having 
made  no  demand  during  the  existence 
of  the  company,  the  measure  of  dam- 
ages in  an  action  to  recover  the  shares 
will  be  the  market  value  of  them  at  the 
time  the  cause  of  action  accrued;  that 
is,  at  the  time  of  demand.  And  if  at 
that  time  the  stock  is  worthless,  only 
nominal  damages  are  recoverable.  Fos- 
dick  v.  Greene,  27  Ohio  St,  484  (1875); 
S.  C,  22  Am.  Rep.,  328.  See  Cameron  v. 
Durkheim,  55  N.  Y.,  425  (1874);  Hope 
r.  Lawrence,  50  Barb.,  258  (1867).  In 
an  action  by  a  vendee  on  a  contract  for 
the  sale  of  specific  stock,  which,  with- 


.91 


§  5S6.] 


ACTION'S    AND    MEASURE    OF    DAMAGES. 


[CH.   XXXV. 


the  conversion  of  a  mere  certificate  of  stock  cannot  be  placed  at 
the  value  of  the  shares  themselves  which  the  certificate  represents 
if  the  ownership  of  the  shares  is  not  affected.1 

§  5S6.  Damages  for  failure  to  complete  a  purchase  of  stock  and 
for  fraud  inducing  a  purchase  of  stock. —  The  measure  of  damages 
for  the  failure  of  a  purchaser  of  stock  to  complete  his  contract  is 
considered  elsewhere.2  The  measure  of  damages  for  fraud  induc- 
ing the  purchase  of  stock  "is  the  difference  between  the  value  of 
the  stock  at  the  time  it  was  purchased  and  the  price  paid  for  it.'*  ' 


out  the  knowledge  of  the  vendor,  had 
already  been  sold  to  another  by  his 
agent,  the  plaintiff  can  recover  only 
nominal  damages.  Wilson  v.  Whita- 
ker,  49  Pa.  St.,  114  (1805);  Skinner  v. 
City  of  Loudon,  etc.,  Ins.  Corporation, 
I*  R,  14  Q.  B.  Div.,  882  (1885>  See 
Fowler  v.  New  York  Gold  Exchange 
Bank,  67  N.  Y.,  138(1878 

1  Daggett  v.  Da  vies,  53  Mich..  35  (1884), 
by  Cooky,  <  .  J. 

-  See  cli.  XX.  supl 

'Redding  v.  Godwin.  46  N.  W.  Rep., 
563  (Minn.,  is9(k  In  an  action  for  dam- 
ages for  fraud  inducing  the  plaintiff  to 
purchase  stock,  the  measure  of  dam 
is  "not  the  difference  between  the  con- 
tract price  and  the  reasonable  market 
value  if  the  property  had  been  worth 
the  price  paid  for  it:  nor  if  the  stock 
were  worthless,  could  the  plaintiff  have 
recovered  the  value  it  would  have  had 
if  the  property  had  been  equal  to  .the 
representations.  What  the  plaintiff 
might  have  gained  is  not  the  question. 
but  what  he  had  lost  by  being  deceived 
into  the  purchase."  The  defendant  "was 
bound  to  make  good  the  loss  sustained, 
such  as  the  moneys  plaintiff  had  paid 
out  and  interest,  and  any  other  outlay 
legitimately  attributable  to  defendant's 
fraudulent  conduct :  but  this  liability 
did  not  include  the  expected  fruits  of  an 
unrealized  speculation."  Smith  v.  Bol- 
les,  132  U.  S.,  125  (1889).  The  measure 
of  damages  in  an  action  by  a  vendee  for 
fraud  in  the  sale  of  stock  is  the  differ- 
ence between  the  selling  price  and  the 
real   value  at  the    time    of    the    sale. 


i  v.  Berret,  23  Atl.  Rep,  1004  (Pa.. 
1892),  In  an  action  for  damages  for  de- 
ceit inducing  the  plaintiff  to  purchase 
stock  the  measure  of  damages  is  "a 
sum  of  money  equal  to  the  difference  be- 

D  th"  value  of  the  property  as  it 
was  in  fact  and  the  value  as  it  would 
have  been  it  the  representations  had 
been  true."  In  this  kind  of  action  no 
tender  of  the  stock  is  necessary  or 
proper.  Testimony  as  to  the  value  of 
the  property  of  the  corporation  and  of 
a  sale  of  Btock  by  a  witness  is  admissible. 
Yad  r.  Reynolds,  118  X.  V..  297  (II 
As  to  the  measure  of  damages  where 
worthless  stock  is  sold  for  land  and  fraud- 
ulent misrepresentations  are  made  and 
the  company  fails,  see  Titus  v.  Poole.  1  1 
N.  Y.  Sup;,..  678  391>  Where  one  has 
been  induced  by    fraudulent  misrepre- 

ttions  to  buy  or  subscribe  for  shares 
of  stock,  the  measure  of  damages  in  an 
action  against  the  vendor  is  the  differ- 
ence between  ihe  value  of  the  stock  as 
represented  and  the  actual  value  Miller 
r.  Barber,  or,  x.  Y.,  558, 568  (1878);  Hub- 
bell  r.  Meigs.  50  id.,  480,  -491  (1872)  The 
measure  of  damages  in  an  action  for  de- 
ceit against  directors  who  issued  a  false 
prospectus  inducing  subscription  is  the 
difference  between  the  subscription  price 
and  the  real  value  of  the  stock  ;  and  evi- 
dence that  the  stock  subsequently 
proved  to  be  worthless  is  admissible. 
Peek  v.  Deny,  59  L.  T.  Rep.,  78  (1888). 
And  where  one  with  intent  to  cheat 
and  defraud  induces  another,  by  false 
and  fraudulent  representations,  to  pur- 
chase shares  for  value  which  he  knows 


792 


I 


CH.  XXXV.]  ACTIONS    AND    MEASURE    OF    DAMAGES.  [§  587. 

§  587.  Damages  in  actions  between  stocli-brolcers  and  their  cus- 
tomers.—  Tliis  subject  is  considered  elsewhere.1 

to  be  worthless,  he  is  liable  for  the  dam-    his  instance.     Hubbell  v.  Meigs,  supra. 
ages  sustained,  whether  the  purchase        ■  See  §§  460,  461,  supra. 
was  made  from  him  or  from  another  at 

793 


CHAPTER  XXXVI. 


STOCKHOLDERS'  MEETINGS  -  CALLS,  TIME  PLACE  AND  CLASSES  OF 

MEETINGS. 


§  588.  Introductory. 

589.  The  place  of  meeting  of  stock- 
holders must  be  within  the 
state  creating  the  corporation. 

590-591.  First  meeting  under  a  special 
charter. 

592.  Meetings  of  directors  —  Place  — 

Notice  —  Action  without  meet- 
ing —  Quorum. 

593.  By  whom    and   when    meetings 

are  to  be  called  —  Mandam  us— 
Fraud  in  the  call. 

594.  When  the  stock  holders  are  en- 

titled  to  notice  of    corporate 
meetings. 


§  595. 


596, 
597, 


The  essential  elements  of  a  notice 
of  a  meeting  are  time,  place 
and  business. 

Service  of  the  notice. 

Notice  must  be  served  a  reason- 
able time  before  the  meeting. 

The  division  of  meetings  into 
ordinary  and  extraordinary. 

Waiver  of  notice. 

Notice  is  presumed  to  have  been 
regularly  t;iven. 
601.  Adjourned  meetings. 


598. 

599. 
800. 


§  583.  Introductory.  —The  stockholders  of  a  corporation  consti- 
tute the  origin,  existence  and  continuance  of  the  corporation  it- 
self. They  elect  its  officers,  control  its  general  policy,  and  within 
the  charter  limits  may  prolong  or  dissolve  its  existence  at  their 
pleasure.  All  these  vital  powers  of  the  stockholders  can  be  exer- 
cised by  them  only  in  corporate  meetings,  duly  convened  and  prop- 
erly organized  for  the  transaction  of  business.  Accordingly,  the 
method  of  calling  together  a  corporate  meeting,  the  time  and  place 
of  that  meeting,  the  notice  to  be  given  to  the  stockholders  and  the 
various  incidents  relative  to  a  proper  convening  of  the  members  of 
the  corporation,  are  of  great  importance.  They  constitute  the  sub- 
ject of  this  chapter. 

§  589.  The  place  of  meeting  of  stockholders  must  be  within  tin 
state  creating  the  corporation. —  The  first  and  most  general  rule  as 
to  the  place  where  stockholders  may  hold  corporate  meetings  is 
that  the  place  of  meeting  should  be  within  the  boundaries  of  the 
state  which  created  the  corporation.  Through  its  agents,  of  course, 
the  corporation  may  make  contracts,  carry  on  business,  sue  and  be 
sued  and  buy  and  sell  property  in  another  state.1 

But  there  is  a  difference  of  opinion  as  to  the  effect  of  business 
transacted  at  a  stockholders'  meeting  held  beyond  the  borders  of 
the  state  creating  the  corporation.  Upon  the  one  hand,  it  is  held 
that  all  the  acts  and  proceedings  of  such  a  meeting  are  wholly  in 


i  See  chs.  13  and  41. 
794 


CH.  XXXVI.] 


STOCKHOLDERS     MEETINGS  —  CALLS. 


[§  589. 


valid  and  void ;  that  the  corporation  is  not  bound  thereby,  and  that 
the  meeting  is  as  though  it  had  never  been.1 

But  it  is  the  sounder  view  to  regard  the  votes  and  proceedings 
at  such  a  meeting  as  voidable  rather  than  void.  The  corporation 
itself  cannot  allege  that  such  proceedings  are  void.  It  is  estopped 
from  so  doing.2  So,  also,  are  the  stockholders  who  participate  in 
the  meeting.3     As  to  the  creditors  of  the  corporation  the  author- 


1  Directors  elected  at  a  stockholders' 
meeting  held  out  of  the  state  and  to 
which  all  did  not  agree  are  not  directors. 
The  old  board  holds  over.  Hodgson  v. 
Duluth,  etc.,  R  R,  49  N.  W.  Rep.,  197 
(Minn.,  1891);  Miller  v.  Ewer,  27  Me., 
509  (1847),  where  a  mortgage  executed 
by  the  authority  of  directors  who  were 
elected  at  the  organization  meeting  of 
corporators  held  outside  of  the  state 
which  granted  the  charter  was  declared 
void.  Cited  and  followed  in  Freeman  v. 
Machias  Water,  etc.,  38  Me.,  343  (1854). 
where  a  forfeiture  of  stock  was  declared 
illegal ;  Ormsby  v.  Vermont  Copper,  etc., 
56  N.  Y.,  623  (1874),  where  it  was  held 
that  a  forfeiture  of  stock  by  authority 
of  a  by-law  adopted  by  stockholders  of 
a  Vermont  corporation  at  a  meeting 
held  in  New  York  was  not  valid. 
Mitchell  v.  Vt.  Copper  Co.,  40  N.  Y. 
Super.  Ct.,  406  (1876);  aff'd,  67  N.  Y, 
280 ;  Smith  v.  Silver  Valley  Mining  Co., 
64  Md.,  85  (1885),  the  organization  being 
held  out  of  the  state ;  Camp  v.  Byrne,  41 
Mo.,  525  (1867),  to  the  same  effect; 
Mitchell  v.  Same,  40  Super.  Ct.,  406 
(1876).  In  the  case  Copp  v.  Lamb,  12 
Me.,  312  (1835),  thirty  years'  user  was 
held  to  have  cured  any  defect.  A  Vir- 
ginia corporation  cannot  be  organized 
by  an  organization  meeting  in  New  York, 
Nor  can  the  charter  be  assigned  by  a 
blank  assignment  after  an  organization 
in  Virginia.  The  assignment  must  be 
of  the  stock.  The  corporation  is  neither 
de  facto  nor  de  jure.  Suits  against  it 
fail.  Welch  v.  Old  Dominion,  etc.,  Ry., 
NT.  Y  L.  J.,  June  12,  1890. 

2  Heath  v.  Silverthorn  Lead  Mining, 
etc.,  Co.,  39  Wis..  146  (1875),  holding  that 
the  corporation  may  be  estopped  to  deny 


the  validity  of  acts  done  outside  the 
state  when  the  rights  of  third  parties  in- 
tervene, even  though  that  meeting  was 

"the  organization  meeting.  The  legisla- 
ture may  validate  the  acts  passed  at  such 
a  meeting.  Graham  v.  Boston,  Hart- 
ford &  Erie  R  R  Co.,  118  U.  S.,  161,  178 
(1886) ;  affirming  S.  C,  14  Fed.  Rep.,  753 
(1883).  Cf.  Grenada  Co.  v.  Brogden,  112 
U.  S.,  261  (1884),  and  the  various  cases 
of  municipal  subscriptions,  ch.  VI, 
§  94,  n. 

3  A  bona  fide  holder  of  a  note  given 
by  a  stockholder  in  payment  of  his  sub- 
scription may  enforce  it  even  though 
the  organization  and  all  other  meetings 
of  the  company  were  held  out  of  the 
state.  Camp  v.  Byrne,  41  Mo.,  525  (1867). 
In  the  case  of  Ohio  &  M.  R.  R  v.  Mc- 
Pherson,  35  Mo..  13  (1864),  the  charter 
declared  the  directors  to  be  the  corpora- 
tion. They  met  out  of  the  state  and  or- 
ganized and  made  a  call  on  subscrip- 
tions. The  court  upheld  the  call.  But 
the  mere  neglect  on  the  part  of  a  share- 
holder who  did  not  attend  a  meeting  of 
this  kind,  or  a  mere  failure  to  take  af- 
firmative action  for  a  period  of  time 
short  of  that  prescribed  by  the  statute 
of  limitations,  will  not  deprive  that 
shareholder  of  his  right  to  attack  the 
proceedings  as  irregular  and  in  fraud  of 
his  rights.  Ormsby  v.  Vermont  Copper 
Mining  Co.,  56  N.  Y,  623  (1874).  Direct- 
ors elected  at  a  stockholders'  meeting 
held  out  of  the  state  and  to  which  all 
did  not  agree  are  not  directors.  The 
old  board  holds  over.  Hodgson  v.  Du- 
luth, etc.,  R  R.,  49  N.  W.  Rep.,  197 
(Minn.,  1891).  By-laws  enacted  by  a 
board  of  directors  of  a  Texan  corpora- 
tion at  a  meeting  of  stockholders  held 

95 


§§  590-592.]  stockholders'  meetings  —  calls. 


[CH.  XXXVI. 


ities  differ.1  If  the  corporation  has  been  incorporated  in  two  or 
more  states,  it  is  lawful  to  hold  meetings  of  the  stockholders  in 
either  state.2  And  proceedings  at  a  meeting  in  an}7  one  of  the 
states  are  valid  in  respect  to  the  property  of  the  corporation  in  all 
of  them  without  the  necessity  of  the  repetition  of  the  meeting  in 
any  other  of  those  states.3 

§§590-591.  First  meeting  under  a  special  charter. —  Where  an 
act  incorporates  three  specified  persons  and  their  "associates," 
those  three  alone  organize  the  company  and  are  entitled  to  sub- 
scribe the  capital  stock  or  to  allow  others  to  subscribe.4 

Statutory  provisions  as  to  notice  of  the  first  meeting  are  direct- 
ory.    They  need  not  be  observed  if  the  stockholders  acquiesce.' 

AVhere  several  persons,  their  associates  and  successors,  are  de- 
clared to  be  a  corporation,  one  of  them  with  new  parties  may  meet, 
organize,  adopt  by-laws,  etc.,  without  the  capital  being  first  sub- 
scribed and  without  the  others  if  they  do  not  object.6  As  to  an 
over-subscription  for  stock  the  rules  that  govern  the  subject  are 
considered  elsewhere.7 

§  592.  Directors'  meetings. —  The  various  questions  connected 
with  directors'   meetings,  the  place  where  such  meetings  may  be 

in  Paris  are  void  and  a  stockholder  may  in  a  foreign  jurisdiction,  provided  all 
disregard  them,  although  lie  was  repre-  the  shareholders  give  their  consent  to 
sented  by  proxy  at  the  meeting    The    such  meeting  or  ratify  its  action."    Id., 


directors  are  not  even  defacto.   Franco- 
Texas  Land  Co.  v.  Laigle,  69  Texas,  339 

(1S83).  A  special  chart,  r  must  be  ac- 
cepted before  the  corporation  exists,  and 
such  acceptance  cannot  be  at  a  meeting 
held  out  of  the  state.  Bence  a  bill  by  a 
stockholder  to  Bet  aside  a  forfeiture  of 
hi.-  stock  was  dismissed  by  the  court. 
Smith  v.  Silver,  etc..  Co.,  20  AtL  Rep, 
1032  (Md.,  1883).  A  stockholders'  meet- 
ingout  of  the  state  is  "  irregular  if  not 
void."  Mack  r.  De  Bardelaben,  etc.,  Co., 
8  S.  Rep.,  150  (Ala.,  1890).  A  stockhold- 
ers' meeting  held  outside  of  the  state 
cannot  be  attacked  by  those  who  par- 
ticipate in  it  or  receive  the  benefits  of 
it.  A  statute  against  holding  elections 
out  of  the  state  does  not  prevent  stock- 
holders' meetings  for  other  purp 
Handley  v.  Stutz,  139  U.  S.,  417  (1891). 
An  increase  of  capital  stock  which  is 
voted  at  a  stockholders'  meeting  held 
out  of  the  state  is  valid  if  all  the  stock- 
holders assent  "  No  valid  objection  can 
be  made  to  a  stockholders'  meeting  held 


■11  Fed  Rep,  531  (1890). 

1  Where  a  meeting  of  stockholders 
Other  than  the  first  organization  meet- 
ing is  held  out  of  the  state  and  directors 
are  elected,  the  acts  of  those  directors 
cannot  lie  attacked  by  corporate  credit- 
ors "ii  tii"  ground  that  the  election  was 
.1.  Wright  r.  Lee.  51  N.  W.  Rep., 
706  (S.  I)..  1892>  For  cases  to  the  con- 
trary see  notes  supra. 

*  Graham  tt  Boston,  Hartford  &  Erie 
!:.  K.  I  ....  11-  V.  S.,  161  (1886):  Coving- 
ton, etc.,  Bridge  Co.  o.  Mayer,  31  Ohio 
si..  817  L877>  See,  also,  Ohio,  etc.,  R'y 
v.  People.  1 28  III.,  467  (1888);  and  eh.  53, 
infra. 

3  Same  cas 

4  Lech  mere  Bank  v.  Boynton,  65  Mass., 

1853)     See.  also.  p.  313,  note:  also; 
p  797,  note  6. 

5  Braintree,  etc.,  v.  Braiutree,  16  N.  E. 
Rep,  420  [Mass.,  1881> 

BMcGinty  r.  Athol,  etc.,  Co.,  29  N.  E 
Rep..  510  (Mass.,  18 
'•  See  g?;  57,  58,  supra. 


T'.h; 


CH.  XXXVI.] 


STOCKHOLDERS     MEETINGS  —  CALLS. 


[§  593. 


held,  the  notice  that  is  required,  the  question  of  whether  the  di- 
rectors may  act  without  meeting,  and  the  requirements  as  to  a 
quorum,  are  discussed  elsewhere.1 

§  593.  By  whom  meetings  are  to  be  called — Mandam  us  —  Fraud  in 
the  call. —  Where  the  time  and  place  of  a  meeting  and  the  business 
to  be  transacted  at  that  meeting  are  not  fixed  by  charter  or  other- 
wise, so  that  the  stockholders  are  bound  to  take  notice  of  them,  it 
is  necessary  that  the  meeting  be  called  by  a  properly-authorized 
corporate  authority.2 

In  the  absence  of  any  special  authority  to  any  particular  person 

to  call  meetings,  it  has  been  held  that  the  general  agent  of  the  cor- 
es  '  O  3 

poration  may  make  the  call,3  but  that  the  secretary  cannot.4  The 
board  of  directors  may  always  call  a  meeting  of  the  stockholders.3 
Statutory  provisions  as  to  who  shall  call  the  meeting,  whether  it 
be  the  first  and  organization  meeting,  or  a  subsequent  one,  may  be 
waived  by  unanimous  consent  of  the  incorporators  or  stockholders.6 


1  See  §  713a.  infra. 

2  Evans  v.  Osgood,  18  Me.,  213  (1841), 
holding  that,  where  a  proprietors'  meet- 
ing could  be  called  "  by  a  petition 
signed  by  twelve  of  them  at  least,"  it 
was  not  a  legal  call  if  eleven  signed,  al- 
though they  owned  twelve  shares ;  Con- 
gregational Soc.  of  Bethany  v.  Sperry, 
10  Conn.,  200  (1834) ;  State  of  Nevada  v. 
Pettineli,  10  Nev.,  141  (1875),  where  the 
by-laws  of  a  corporation  provided  that 
meetings  of  the  stockholders  should  be 
called  by  the  trustees,  and  it  was  held 
that  any  other  mode  of  calling,  such 
as  by  the  president,  was  insufficient. 
Angell  &  Ames  on  Corp.,  §  491,  to  effect 
that  "want  of  authority  may  be  waived 
by  the  presence  and  consent  of  all  who 
have  a  right  to  vote."  Johnston  v. 
Jones,  23  R  J.  Eq..  216  (1872).  Here 
the  charter  provided  for  annual  elec- 
tions, but  no  by-laws  had  been  made 
fixing  the  time.  The  authority  to  call 
an  election  being  in  the  directors,  it  was 
held  not  sufficient  for  a  majority  of" 
these  to  sign  the  notice  without  stating 
that  it  was  given  by  order  of  the  board, 
and  without  designating  themselves  as 
directors.  See,  also,  Stevens  v.  Eden 
Meeting-house  Soc,  12  Vt,  688  (1839), 
holding  that  notices  of  meetings  could 
not  be  proved  by  parol  where  there  was 


a  by-law  requiring  the    clerk  to   post 
written  notice. 

sStebbins  v.  Merritt,  64  Mass.,  27 
(1852). 

4  The  secretary  and  a  person  holding 
proxies  on  stock  owned  by  the  state 
cannot  call  a  meeting  to  elect  officers  ; 
nor  can  a  statute  order  an  election  in  a 
brief  time.  Cassell  i:  Lexington,  etc., 
Co.,  9  S.  W.  Rep.,  503  (Ky.,  1888);  id., 
701. 

5  Cassell  v.  Lexington,  etc.,  Co.,  supra. 
The  board  of  directors  may  fix  the  time 
if  tbe  charter  or  by-laws  do  not.  Com- 
monwealth v.  Smith,  45  Pa.  St.,  59  (1S63). 

6  See  §  234.  notes,  supra,  also  §  599, 
infra.  Although  the  charter  prescribes 
that  the  commissioners  who  receive  the 
subscriptions  shall  call  the  first  meeting 
by  publishing  a  notice,  yet  this  call  may 
be  waived  and  the  stockholders  may 
meet  and  organize  without  a  call,  if  all 
assent.  Judah  v.  American,  etc.,  Ins. 
Co.,  4  Ind.,  333  (1853);  Chamberlain  v. 
Painesville,  etc.,  R  R  Co.,  15  Ohio  St., 
225  (1864).  where  the  statute  provided 
that,  as  soon  as  ten  p?r  ceutum  on  the 
capital  stock  should  be  subscribed,  the 
persons  named  in  the  certificate  of  in- 
corporation, or  any  three  of  them, 
might  give  notice  of  an  election  of  di- 
rectors.    It  was  held  simply  directory, 


797 


§  593.] 


STOCKHOLDERS.    MEETINGS 


CALLS. 


[CH.  XXXVI. 


If,  upon  the  organization  of  a  corporation,  a  majority  of  the  sub- 
scribers refuse  to  proceed  in  calling  a  meeting,  the  minority  may 
call  it,  and  bind  the  corporation.1 

Where  the  statute  requires  due  notice  to  be  given,  it  need  not 
be  given  by  any  particular  person  nor  in  any  particular  form.2  A 
charter  provision  or  by-law  authorizing  the  calling  of  a  meeting  in 
a  certain  way  does  not  necessarily  prevent  the  meeting  being  called 
in  a  different  way,  but  unless  waived  the  rule  is  otherwise  where 
the  charter  or  by-law  is  peremptory.3 

Although  the  time  of  a  meeting  is  fixed  by  charter,  nevertheless 
the  meeting  may  be  held  at  a  subsequent  time  and  be  valid.4  The 
officers  or  agents  of  a  corporation  whose  duty  it  is  to  call  meetings 
may,  in  case  they  neglect  or  refuse  to  issue  the  call,  be  compelled 


and  not  indispensable  to  an  election, 
that  the  notice  be  so  given.  In  New- 
comb  v.  Reed,  94  Mass.,  362  (1866),  the 
court  declared  the  purpose  of  such  stat- 
utes to  be  to  avoid  such  difficulty  as 
would  arise  where  two  parties  should 
attempt  to  organize  separately  under 
the  same  charter.  It  was  there  held 
that  persons  elected  officers  at  a  meet- 
ing held  in  variance  with  such  statu- 
tory direction  were  directors  neverthe- 
less, and  were  subject  to  the  statute 
liability  for  corporate  debts.  Where 
three  persons  are  appointed  to  make  a 
call,  and  one  of  them  calls  the  meeting 
of  incorporation,  the  other  two  making 
no  objection,  the  organization  of  the 
company  at  the  meeting  so  called  is 
valid.  Walworth  v.  Brackett,  9*  Mas-... 
98  (1867);  Hardeuburgh  v.  Farmers', 
etc..  3  N.  J.  Eq.,  68.  holding  that  if  the 
call  for  the  meeting  to  elect  the  first 
directors  be  signed  by  the  commission- 
ers authorized  to  make  the  call  individ- 
ually, and  not  by  virtue  of  a  formal 
order  of  the  commissioners,  or  if  their 
names  be  signed  to  such  a  call  by  the 
secretary  without  objection  by  them, 
these  irregularities  will  not  affect  the 
validity  of  the  proceedings  at  the  meet- 
ing. Although  the  charter  runs  to  cer- 
tain persons  and  associates  and  assigns, 
they  need  not  have  associates  or  assigns. 
Hughes  «,  Parker,  20  N.  H..  58  (1849). 
1  Busey  v.  Hooper,  35  Md.,  15  (187 IX 


2  West,  etc.,  Cong.  r.  Ottesen,  49  N.  W. 
Rep.,  24  (Wis.,  1891). 

3  Where  a  by-law  provides  that  special 
meetings  may  be  called  by  the  presi- 
dent, or  in  his  absence  by  the  secretary, 
on  application  made  by  ten  members  in 
writing,  the  directors  may  call  a  special 
meeting  without  such  an  application. 
Citizens1  Mutual  Fire  Ins.  Co.  i\  Sort- 
well,  90  Mass.,  817  (1864>  But  where  a 
by-law  authorizes  the  trustees  to  call  a 
meeting,  a  meeting  called  by  the  presi- 
dent is  irregular.  State  of  Nevada  u 
Pettineli,  10  N.v..  Ill  (1875>  When  the 
by-laws  require  a  call  to  bo  posted  in 
writing,  a  call  by  parol  is  insufficient. 
Stevens  v.  Eden  Meeting-house  Society, 
1 9  Vt.,  688  (1839).  The  manner  of  mak- 
ing the  call  may  be  prescribed  by  by- 
law ;  and  when  so  prescribed,  provided 
the  by-law  is  reasonable,  calls  made  in 
that  way  are  valid,  even  though  the 
charter  said  that  three  stockholders 
might  call  a  meeting.  Taylor  v.  Gris- 
wold.  14  N.  J.  L..  222  (1834* 

*  People  v.  CummingB,  72  N.  Y.,  433 
(1878) ;  Hughes  v.  Parker,  20  N.  H.,  58. 
Failure  to  hold  an  election  at  the  pre- 
scribed statutory  time  does  not  prevent 
an  election  at  any  later  time.  Beardsley 
f.  Johnson.  1  N.  Y.  Supp.,  608  (1888). 
Elections  need  not  be  held  on  the  day 
fixed  by  the  by-laws.  They  may  be 
held  at  any  subsequent  tima  Beards- 
ley  v.  Johnson,  121  N.  Y,  224  (1890). 


798 


CH.  XXXVI.] 


STOCKHOLDERS'    MEETINGS  —  CALLS. 


[§  593. 


by  mandamus  to  call  a  meeting  at  the  instance  of  a  shareholder 
who  is  injured  by  reason  of  their  failure.1  Courts  have  no  power 
to  call  corporate  meetings  except  by  mandamus? 

If  there  is  any  fraud  in  the  calling  of  the  meeting,  the  proceed- 
ings of  the  meeting  may  be  attacked  in  the  courts.  The  fraud 
may  consist  in  concealing  the  notice,3  or  in  changing  the  time  of 
the  meeting,4  or  in  the  unreasonable  time  in  which  it  is  called,5  or 


in  misstating  the  business.6 


1  People  v.  Cummings,  72  N.  Y.,  433 
(1878);  State  of  Nevada  v.  Wright,  10 
Nev.,  167  (1875);  People  v.  Board  of 
Governors  of  Albany  Hospital,  61  Barb., 
397(1871);  McNeely  v.  Woodruff,  13  N. 
J.  Law,  352  (1833) ;  Regina  v.  Aldman, 
etc.,  Insurance  Society,  6  Eng."  L.  &  Eq., 
365  (1851).  The  court  will  not  order  the 
directors  to  call  a  meeting  for  business 
other  than  an  election  when  they  or  a 
certain  proportion  of  the  stockholders 
may  call  it  MacDougall  v.  Gardiner, 
L.  R,  10  Ch.  App.,  606  (1875).  In  Gould- 
ing  v.  Clark,  34  N.  H.,  148  (1856),  it  is 
held  that,  where  there  is  no  officer  com- 
petent to  call  a  meeting,  there  is  no  way 
of  convening  except  by  a  reorganization 
of  the  company  or  a  published  notice 
given  under  the  statutes.  All  the  stock- 
holders of  course  could  convene  and 
thereby  waive  notice.  See  §  599.  The 
proper  officer  may  be  commanded  by 
mandamus  to  send  out  notices  of  the 
annual  election.  People  v.  Hart.  UN. 
Y.  Supp.,  671  (1890) ;  id.,  673.  Mandam us 
lies  to  compel  a  meeting.of  vestrymen. 
People  v.  Winans,  9  N.  Y.  Supp.,  249 
(1890).  Where  those  who  have  the  right 
to  call  a  meeting  of  the  shareholders 
refuse  to  exercise  that  right,  for  the  ex- 
press purpose  of  preventing  the  share- 
holders from  duly  assembling,  the  court 
will,  if  necessary,  interfere  to  protect 
the  shareholders  against  an  abuse  of 
power  on  the  part  of  those  intrusted 
with  the  management  of  the  affairs  of 
the  company.  Foss  v.  Harbottle,  2  Ha., 
461 ;  Isle  of  Wight  Rail.  Co.  v.  Tahour- 
din,  25  Ch.  D.,  320.  Mandamus  lies  to 
compel  annual  election  of  entire  body 
of  directors  or  trustees.     Com.  v.  Keim, 


38  Leg.  Int.,  32 :  The  People  v.  Town  of 
Fairbury,  51  111.,  149.  Dictum  that  man- 
damus lies  to  compel  election.  In  re 
Union  Ins.  Co.,  22  Wend,  591  (1840). 

2  The  fact  that  foreclosure  proceed- 
ings are  pending  and  a  receiver  is  in 
possession  does  not  give  the  court  juris- 
diction to  call  a  stockholders'  meeting 
to  hold  an  election.  Taylor  v.  Phil.,  etc., 
R  R,  7  Fed.  Rep.,  381  (1881). 

3  See  §  596,  infra. 

4  In  a  stockholder's  suit  to  enjoin  a 
consolidation  the  court  will  consider  the 
legality  of  an  election,  the  time  of  hold- 
ing which  was  illegally  changed  by  the 
board  of  directors.  Nathan  v.  Tomp- 
kins, 82  Ala.,  437  (1886). 

5  Where  directors  give  notice  that  a 
meeting  will  be  held  on  a  day  when 
they  know  that  a  large  number  of  share- 
holders will  not  be  in  a  position  to  vote, 
the  court  will  interfere  and  restrain 
such  an  abuse  of  power./  Cannon  v. 
Trask,  20  Eq.,  669. 

6  If  directors  convene  a  meeting  to 
pass  resolutions  favorable  to  themselves 
on  questions  in  which  the  interests  of 
the  directors  are  opposed  to  those  of  the 
shareholders,  by  a  circular  which  is 
misleading,  and  which  contains  state- 
ments calculated  to  obtain  proxies  in 
their  favor  without  giving  the  share- 
holders the  information  necessary  to 
enable  them  to  form  a  just  judgment  as 
to  who  are  the  proper  persons  to  whom 
to  intrust  their  votes,  the  court  will  grant 
an  injunction  to  restrain  the  holding 
of  the  meeting  or  to  restrain  the  direct- 
ors from  laying  such  resolutions  before 
the  meeting.  Jackson  v.  Munster  Bank, 
13  L  R,  Ir.,  118. 


799 


§  594.] 


STOCKHOLDERS     MEETINGS  —  CALLS. 


[CH. 


XXXVI. 


§  594.  When  the  stockholders  are  entitled  to  notice  of  corporate 
meetings.— If  the  time  and  place  at  which  a  corporate  meeting  is 
to  be  held  and  the  business  to  be  transacted  are  distinctly  fixed  in 
the  charter  or  by  a  by-law,  this  is  of  itself  sufficient  notice  to  all 
the  stockholders,  and  no  further  call  or  notice  of  that  meeting  is 
necessary  unless  the  by-laws  require  it,1  But  a  by-law  which  fixes 
the  day  of  meeting  without  also  fixing  the  hour  is  insufficient  as  a 
notice  of  the  meeting.2  It  is  a  general  and  settled  rule  of  law  that 
notice,  in  some  way  or  other,  must  be  given  to  every  person  enti- 
tled to  be  present  at  a  corporate  meeting.3  When,  therefore,  no 
sufficient  notice  is  given  by  charter  or  statute  or  by-law,  each 
stockholder  is  entitled  to  an  express  notice  of  every  corporate 
meeting.4  No  usage  can  operate  to  excuse  a  failure  to  give  such  a 
notice.*  These  rules  are  based  on  the  necessity  of  protecting  the 
rights  of  stockholders,  and  especially  of  the  minority. 


i  Warner  v.  Mower.  11  Vt,  385.  393 
(1839):  State  v.  Bonnell,  35  Ohio  St,  10, 
15(1878). 

*  The  fact  that  one  of  the  hy-laws  of 
the    corporation    fixes    the    day    upon 
which  the  annual  meeting  of  the  corpo- 
ration shall   be  held   is  not  of  itself  a 
sufficient  notice  of  the  hour  and  place 
at  which    the   meeting    is   to    be  held. 
There  must  be  an  express  notice  of  tie' 
hour  and  place  of  meeting.    <  Jtherwise, 
unless  all  the  stockholders  are  present 
and    consent,  either    in    person    or  by 
proxy,  the   meeting   cannot  legally  be 
held.    San  Buenaventura  Commercial, 
etc.,  Co.  r.  Vassault,  50  Cal.,  534  (1875> 
Though  the  by-laws  of  a  corporation  fix 
the  date  of  the  annual  meeting,  that  of 
itself  will  not  be  notice  of  the  meeting. 
Notice  must  be  given  of  the  place  of  the 
meeting;  and  a  provision  of  the  charter 
for  the  calling  of  all  meetings  is  a  man- 
datory  provision,    applicable    alike    to 
general  and  special  meetings.     United 
States   r.    MeKelder,  8  Rep.,  778  (Sup 
Ct.  Disk  of  Col.,  1879). 

3  "To  support  the  validity  of  corpo- 
rate acts,  each  member  must  be  actually 
summoned."  Angell  &  Ames  on  Corp., 
§  492.  A  member  who  is  expelled  at  a 
meeting  of  which  he  had  no  notice 
may  cause  the  proceedings  to  be  set 
aside.     Medical,  etc.,  Soc.  v.  Weatherly, 


75  Ala..  348  (1883).  "Due  notice  of  the 
time  and  place  of  a  corporate  meeting 
is  by  tlie  English  law,  essential  to  its 
validity,  or  its  power  to  do  any  act 
which  shall  bind  the  corporation." 
Dillon  on  Munic.  Corp,  §  200. 

•stow  r.  Wyse.  7  Conn.,  214  (1828). 
the  court  saying,  in  a  dictum:  "If  no 
particular  mode  of  notifying  the  stock- 
holders  bi  provid  d,  either  in  the  char- 
ted or  in  any  by-law,  yet  personal  notice 
might  be  given;  and  this,  in  such  case, 
would  be  indispensable."  Wiggiu  r. 
Freewill  Baptist  Church,  49  Mass.,  801 
(1844),  a  dictum;  Jackson  v.  Hampden. 
20  Me..  :J7  (1841);  Rex  v.  Langhorn.  4 
Ad.  &  El.,  538  (1830);  S.  C,  0  Nev.  &  M. 
203  i  Smyth  v.  Darley,  2  H.  of  L 

('as.,  788  (1849),  the  last  four  cases  being 
municipal  corporation  cases.  See,  also. 
Stebbins  v.  Merritt.  64  Mass.,  27  (!' 
where  a  meeting  called  by  a  general 
agent  in  the  absence  of  a  statute  or  by- 
law was  upheld  though  one  member 
was  mentally  incapable  of  receiving  no- 
tice. 

*Wiggin  a  Freewill  Baptist  Church. 
49  Mass.,  301  (1844);  The  King  V.  Hill. 
4  Barn.  &  C.  426  (1825),  where  an 
ancient  custom  of  calling  a  meeting 
for  an  election  of  burgesses  by  ringing 
a  bell  was  held  to  be  no  sufficient  no- 
tice. 


SIM) 


OH.  XXXVI.] 


STOCKHOLDERS     MEETINGS  —  CALLS. 


[§  595. 


§  595.  The  essential  elements  of  a  notice  of  a  meeting  are  time, 
place  and  business. —  The  contents  of  the  notice  depend  upon  the 
character  of  the  meeting.  There  are  three  matters  concerning 
every  corporate  meeting  of  which  the  members  are  entitled  to  no- 
tice, namely:  the  time,  the  place  and  the  business  proposed  to  be 
transacted.  Some  or  all  of  these  may  be  known  to  him  by  virtue 
of  a  charter  provision  or  a  by-law  or  a  statute.  But  if  any  one  of 
them  is  not  known  in  that  way,  the  stockholders  are  entitled  to  an 
actual  notice  thereof.  Accordingly,  it  is  the  rale  that,  in  the  ab- 
sence of  other  valid  notice,  the  call  must  specify  the  time  and 
place  of  meeting  and  the  business  to  be  considered.  The  precise 
hour  at  which  the  meeting  is  to  be  held  must  be  stated  in  the  no- 
tice.1 

In  general,  the  notice  need  not  specify  the  business  to  be  consid- 
ered where  the  meeting  is  one  prescribed  by  charter,  or  where  the 
business  is  prescribed  by  charter  or  statute  or  by-law ;  and  no  un- 
usual business  is  to  be  transacted.2  But  if  the  meeting  is  to  be 
held  at  a  time  not  provided  by  the  charter,  or  if  unusual  business  is 
to  be  transacted,  the  call  must  specify  particularly  the  time  and  it 
seems  also  the  unusual  business.3    Thus,  at  a  meeting  called  to 


1  San  Buenaventura  Commercial,  etc., 
Co.  v.  Vassault,  50  Cal.,  534  (1875).    , 

2  Notice  need  not  be  given  of  special 
business  to  be  transacted  at  the  regular 
annual  meeting  of  the  stockholders. 
Chicago,  etc.,  R'y  v.  Union  Pac.  R'y>  47 
Fed.  Rep.,  15  (1891);  Sampson  v.  Bow- 
doinham  Steam-mill  Co.,  36  Me.,  78 
(1854),  holding  that  the  notice  of  the 
annual  meeting  need  not  specify  that 
the  officers  are  to  be  elected,  even  though 
the  by-laws  require  the  notice  to  state 
the  business.  Warner  v.  Mower,  11  Vt, 
385  (1839),  where  a  provision  of  the  by- 
laws relating  to  notices  was  considered 
as  not  affecting  those  for  stated  meet- 
ings, and  holding  that  a  notice  of  a 
stated  annual  meeting  need  not  specify 
the  business  to  be  transacted,  there 
being  nothing  in  the  by-laws  limiting 
or  specifying  the  business.  It  is  be- 
lieved, however,  that  the  rights  of 
stockholders  will  be  best  preserved  by 
requiring  notice  to  be  given  of  any  ex- 
traordinary business  that  may  come 
•before  an  annual  meeting. 

3  In    re  Bridport    Old    Brewery  Co., 


L.  R,  2  Ch.,  191  (1866) ;  In  re  Silkstone 
Fall  Colliery  Co.,  L.  R,  1  Ch.  D.,  38 
(1875).  Cf.  Wright's  Case,  L.  R,  12  Eq., 
335,  n.,  345  n.  (1868) ;  Tuttle  v.  Michigan 
Air  Line,  etc.,  35  Mich.,  247  (1877),  hold- 
ing that  at  common  law  all  notices  of 
meetings  for  special  or  exceptional  pur- 
poses were  required  to  state  the  object 
of  the  call.  Citing  Ang.  &  A.,  §  492. 
A  meeting  to  organize  and  elect  direct- 
ors is  invalid  where  no  notice  of  the 
business  is  given.  In  re  London,  etc., 
Co.,  L.  R,  31  Ch.  D.,  223  (1885);  Shelby 
R.  R,  etc.,  v.  Louisville,  etc.,  R  R.,  12 
Bush  (Ky.),  62  (1876),  in  which  a  sale  of 
a  railroad  was  set  aside  because  au- 
thorized at  a  meeting  of  stockholders 
called  by  a  notice  not  sufficient  in  point 
of  time  and  defective  in  not  stating  the 
object  of  the  meeting.  Zabriskie  v. 
Cleveland,  etc.,  R  R  Co.,  23  How.,  381, 
400  (1859),  holding  that  though  the  no- 
tice was  insufficient,  yet  one  who  was 
represented  by  proxy  cannot  object,  es- 
pecially where  he  delayed  a  long  time 
in  complaining.  A  notice  of  a  meeting 
of  a  benevolent  society  called   to  dis- 


(51) 


801 


§  596.] 


STOCKHOLDERS     MEETINGS  —  CALLS. 


[CH. 


XXXVI. 


alter  the  by-laws  and  transact  other  business,  an  election  cannot 
lawfully  be  held.1  Nor  can  an  assessment  be  levied  at  a  special 
raeetino-  when  the  stockholders  were  not  dulv  notified  that  that 
matter  would  come  up  for  consideration.2  At  a  special  meeting 
which  has  been  called  for  a  particular  purpose,  only  the  business 
specified  in  the  call  can  lawfully  be  transacted.3  The  transaction, 
however,  of  business  other  than  that  for  which  the  meeting  was 
called  will  not  invalidate  the  entire  proceedings  at  that  meeting. 
There  is  only  an  invalidity  pro  tanto.* 

The  notice  of  the  business  to  be  transacted  must  "  be  a  fair  no- 
tice, intelligible  to  the  minds  of  ordinarv  men.  .  .  .  The  court 
does  not  scrutinize  these  notices  with  a  view  to  excessive  criticism 
to  find  out  defects,  but  it  looks  at  them  fairly." 5 

§596.  Service  of  the  notice.  —  If  the  particular  form  of  the  no- 
tice or  the  manner  in  which  it  shall  be  served  is  prescribed  by 
charter  or  by-law  or  by  statute,  the  notice  must  be  given  in  that 
manner,  unless  notice  is  waived  by  unanimous  consent;  otherwise, 
all  the  proceedings  of  the  meeting  are  invalid.6     In  the  absence  of 


solve  must  state  the  object  of  the  meet- 
ing. St  Mary's,  etc.,  Ass'n  v.  Lynch.  9 
Atl.  Rep.,  98  (N.  H.,  1887).  A  resolution 
passed  at  an  extraordinary  meeting, 
upon  a  matter  for  the  consideration  of 
which  it  was  not  avowedly  called,  or 
which  was  not  specified  in  the  notice 
convening  the  meeting,  is  altogether  in- 
operative. Imp.  Bank  of  China  v.  Bank 
of  Hindustan,  L  R,  6  Eq.,  91 ;  Anglo- 
California  Gold  Mining  Co.  v.  Lewis,  6 
H.  &  N.,  174;  Stearic  Acid  Co.,  9  Jur. 
(N.  S.),  1066.  Notice  of  a  meeting  to 
consider  the  giving  of  a  mortgage  is 
sufficient  to  enable  the  meeting  to  au- 
thorize a  mortgage.  Evans  v.  Boston, 
etc.,  Co.  et  al,  31  N.  E.  Rep.,  698  (Mass., 
1892).  One  and  the  same  meeting  may 
be  both  ordinary  and  extraordinary ; 
ordinary  for  the  purpose  of  transacting 
the  usual  business  of  the  company,  and 
extraordinary  for  the  transaction  of 
some  particular  business  of  which  spe- 
cial notice  may  have  been  given.  See 
Cutbill  v.  Kingdom,  1  Ex.,  494;  Gra- 
ham v.  Van  Diemen's  Land  Co.,  1  H.  & 
N.,  541. 

1  People's  Insurance  Co.  r.  Westcott, 
80  Mass..  440  (1860).  Nor  an  amotion 
made.     Rex   v.   Town  of    Liverpool,  2 


Burr.,  723  (1759) ;  Rex  v.  Doncaster,  id., 
738. 

2  Atlantic  Delaine  Co.  v.  Mason,  5 
R  I.,  463  (1858). 

3  Warner  r.  Mower,  11  Vt.  385  (1839). 
*  In  re  British  Sugar  Refining  Co.,  3 

Kay  &  J.,  408,  413  (1857) ;  In  re  Irriga- 
tion Co.  of  France.  L  R,  6  Ch.,  176 
(1871).  But  it  is  held  that  at  a  special 
meeting,  all  the  members  being  present 
and  consenting,  business  other  than  that 
specified  in  the  call  may  lawfully  be 
transacted.  The  King  v.  Theodorick,  8 
East.  543  (1807). 

8  Henderson  v.  Bank  of  Australasia, 
62  L  T.  Rep..  869  (1890);  South  School 
District  v.  Blakeslee,  13  Conn.,  227  (1839). 
A  notice  that  in  case  certain  things  hap- 
pen a  meeting  will  be  held  is  not  good. 
It  is  conditional  and  not  absolute.  Alex- 
ander «.  Simpson,  61  L  T.  Rep.,  708 
(1889). 

6  Shelby  R  R  Co.  V.  Louisville,  etc., 
R  R  Co.,  12  Bush,  62  (1876).  where 
there  was  no  such  publication  as  was 
required  by  statute  and  there  was  no 
waiver.  Tuttle  r.  Michigan  Air  Line, 
etc.  R  R,  35  Mich..  247  (1877),  where  a 
consolidated  company  sued  a  subscriber 
to  stock  in  one  of  the  old  companies  and 


802 


CII.  XXXVI.] 


STOCKHOLDERS     MEETINGS  —  CALLS. 


[§  596. 


an  express  provision  as  to  the  manner  of  making  a  call  it  is  the 
common-law  rule  that  each  member  of  the  corporation  is  entitled 
to  notice,  either  personal  or  by  writing,  which  he  receives.1  The 
physical  or  mental  incapacity  of  one  of  the  stockholders  will  not 
excuse  a  failure  to  give  him  notice  of  a  meeting,  but  it  is  very  clear 
that  the  meeting  may  lawfully  convene  and  transact  business,  al- 
though one  of  the  members  is  incapable,  by  reason  of  imbecility, 
of  receiving  the  notice.2  The  absence  of  a  stockholder  from  home 
does  not  excuse  a  failure  to  leave  the  notice.3  And  where  one  of 
the  stockholders  dies  after  notice  of  a  meeting  but  before  the  meet- 
ing convenes,  and  no  administrator  is  appointed  in  time  to  act  at 
that  meeting,  there  is  on  this  account  no  ground  to  impeach  the 
regularity  of  the  meeting.4  A  pledgee  of  shares  is  not  entitled  to 
a  notice  of  corporate  meetings  if  the  pledgor  receives  notice,5  since 
the  pledgor  is  entitled  to  vote  upon  the  stock  until  his  interest  has 
been  closed  out  bv  a  sale  or  foreclosure.6  Where  stock  is  owned 
by  a  firm,  notice  to  one  of  the  firm  is  sufficient.7  If  the  notice  is 
fraudulently  concealed  from  the  owner  of  a  majority  of  the  stock, 


he  defeated  the  action  by  showing  that 
the  statutory  notice  of  the  proposed 
consolidation  had  not  been  given.  Reilly 
v.  Oglebay,  25  W.  Va.,  36  (1884),  where  a 
notice  by  the  secretary,  when  the  stat- 
ute required  it  to  be  given  by  the  board 
of  directors  or  by  stockholders  holding 
one-tenth  of  the  capital,  was  held  in- 
sufficient although  it  was  shown  that  he 
had  the  authority  from  stockholders 
holding  the  required  amount  of  stock ; 
Stevens  v.  Eden  Meeting-house  Society, 
12  Vt,  688  (1839),  holding  that  where  a 
by-law  required  notice  to  be  posted, 
parol  proof  of  such  posting  was  incom- 
petent unless  the  written  notice  was 
shown  to  have  been  lost;  Swansea  Dock 
Co.  v.  Levien,  20  L.  J.,  Exch.,  447  (1851), 
where  a  notice  was  held  bad  because 
the  statute  declared  it  should  be  printed 
in  a  newspaper  circulating  in  the  dis- 
trict of  the  principal  place  of  business, 
while  in  this  case  there  was  no  proof 
that  the  paper  selected  ever  circulated 
there.  Hence  the  removal  of  directors 
at  such  a  meeting  was  illegal.  Id.  As 
to  waiver,  see  >;  599.  infra. 

1  Notice  to  non-residents  by  letter  was 
upheld  in  Stebbins  v.  Merritt  84  Mass., 
27  (1852).     For  dicta  to  the  effect  that 


the  notice  must  be  personal,  see  Tuttle 
v.  Michigan  Air  Line  R.  R.  Co.,  35  Mich., 
247  (1877);  Stow  v.  Wyse,  7  Conn., 
214  (1828).  See,  also,  §  592,  supra,  as  to 
the  kind  of  notice  required  of  directors' 
meetings.  See,  also,  §  594,  supra,  and 
notes. 

2  Stebbins  v.  Merritt,  64  Mass.,  27  (1852). 

3  Jackson  v.  Hampden,  20  Me.,  37 
(1841).  In  Porter  v.  Robinson,  30  Hun, 
209  (1883),  it  is  held  that  notice  need  not 
be  given  to  a  member  of  a  board  of 
school  trustees,  the  board  being  a  body 
corporate,  who  is  absent  from  the  state 
and  cannot  attend  the  meeting,  and 
that  a  failure  to  notify  such  a  member 
will  not  render  the  proceedings  at  the 
meeting  irregular  or  invalid.  Members 
of  English  joint-stock  companies  resid- 
ing abroad  are  not  entitled  to  any  notice 
of  corporate  meetings.  Ex  parte  Union 
Hill  Company,  22  L.  T.  Rep.,  400  (1870). 

*  Freeman's  National  Bank  v.  Smith, 
13  Blatch.,  220  (1875). 

5McDaniels  v.  Flower  Brook  Mfg  Co., 
22  Vt,  274  (1850). 

6  See  §§612,  468. 

"  Kenton,  etc..  Co.  v.  McAlpin,  5  Fed. 
Rep.,  737,  747  (1880). 


803 


§§  597-599.]  STOCKHOLDERS     MEETINGS  —  CALLS. 


[CH.  XXXVI. 


even  where  the  notice  is  published  in  accordance  with  the  statute, 
the  election  will  be  set  aside.1 

.^  597.  Notice  must  be  served  a  reasonable  time  before  the  meet- 
ing—  The  notice  must  be  served  upon  the  stockholders  a  reason- 
able or  customary  time  before  the  day  of  the  meeting.2  Where  by 
statute  it  is  provided  that  thirty  days'  notice  shall  be  given  of  cer- 
tain corporate  meetings,  that  length  of  time  applies  to  notices  of 
other  meetings  of  the  same  corporation.3 

§  598.  The  division  of  meetings  into  ordinary  and  extraordi- 
nary.—  Corporate  meetings  of  stockholders  are  frequently  divided, 
both  by  the  judges  and  the  text-writers,  into  two  classes  —  the  first 
being  special  or  extraordinary,  and  the  second  being  ordinary,  reg- 
ular, stated  or  general.  By  reason  of  this  attempt  at  clarification 
much  confusion  has  been  introduced  into  the  law  without  any  cor- 
responding advantage.  The  terms  employed  to  distinguish  the 
various  kinds  of  meetings  are  used  in  different  senses  by  different 
writers,  so  that  it  is  difficult  to  define  them  in  such  a  way  as  to 
avoid  confusion. 

§  599.  Waiver  of  notice. —  The  stockholder  may,  in  general, 
waive  his  right  to  have  a  notice  of  a  corporate  meeting  duly  served 
upon  him.4 


1  Where  in  addition  to  irregularities 

the  notice  of  the  election  at  a  def< 
day,  which  is  published  in  accordance 
with  the  charter,  is  concealed  from  the 
leading  stockholder,  the  court  will  Bet 
the  election  aside.  Johnston  v.  Jones, 
■■■;  X.  J.  Eq..  816(1872). 

2  In  the  Matter  of  the  Long  Island  R. 
R  Co,  19  Wend.,  37  (18:37).  Cf.  Covert 
v.  Rogers,  38  Midi.,  303,  where  a  similar 
rule  is  declared  as  to  notice  to  directors 
of  their  meetings.  The  legislature  can- 
not unreasonably  shorten  the  time  of 
the  next  inciting.  Cassell  v.  Lexingl  in, 
etc.,  Co.,  9  S.  W.  Rep.,  502  (Ky.,  1888); 
id.,  701.  A  reorganization  under  the 
English  statute  will  not  be  sustained  as 
against  American  stockholders,  where 
the  entire  business  of  the  English  com- 
pany is  to  own  and  work  American 
mines,  and  the  by-laws  of  the  company 
provide  for  a  longer  notice  than  is  spec- 
ified in  the  English  statute.  The  notice 
of  the  meeting  to  reorganize  not  having 
reached  the  American  stockholders  in 
time  to  attend  the  meeting,  the  Ameri- 


can courts  will  not  sustain  the  reorgani- 
zation. Brown  r.  Republican,  etc,  Mines, 
■  ■].  K. -p..  7  .Col.,  1893). 

'Shelby  k.  k.  Co.  ft  Louisville,  etc., 
k.  k.  Co,  12  Bush,  n  ■ 

4  The  acts  of  a  meeting  are  valid, 
though  held  without  notice,  if  all  are 
present  or  subsequently  ratify  aud  ap- 
prove of  the  action.  Stutz  i\  Handley, 
41  Eed.  Rep.,  531  (1890),  affirmed  as  to 
this  point,  but  reversed  as  to  others,  in 
Handley  ft  Stutz,  139  U.  S ,  417  (1891). 
A  party  accepting  the  benefit  of  a  con- 
tract for  a  long  time  cannot  repudiate  it 
on  the  ground  that  the  calls  for  the 
meetings  of  the  executive  committee  and 
of  the  stockholders  which  authorized 
the  contract  were  insufficient,  nor  can 
he  set  up  in  such  a  case  that  the  direct- 
or.-, had  not  authorized  the  contract 
Union  Pac.  R*y  v.  Chicago,  etc.,  R  y,  51 
Rep.,  809  (1892).  Objections  to  the 
regularity  of  the  notice  which  was  given 
are  waived  if  all  are  present  at  the  meet- 
ing and  do  not  object  to  such  irregular- 
ity.    Stebbins    ft   Merritt,   G4  Mass.,  27 


804 


en.  xxxvi.] 


STOCKHOLDERS     MEETINGS CALLS. 


[§  599. 


Greater  difficulty  has  been  encountered  where  by  statute  or  by 
charter  the  notice  must  be  published  or  must  be  given  a  specified 
length  of  time  before  the  meeting  is  held.  This  question  arises 
often  in  regard  to  the  first  and  organization  meeting  of  the  com- 
pany, or  in  regard  to  a  meeting  to  increase  the  capital  stock,  or  to 
issue  bonds,  or  to  give  a  mortgage,  or  to  effect  a  consolidation. 
The  rule,  however,  is  now  well  established  that  such  statutory 
notice  is  for  the  benefit  of  the  stockholders  themselves,  and  if 
they  are  willing  and  do  waive  it,  the  meeting  and  all  the  proceed- 
ings are  as  valid  as  they  would  be  had  the  full  statutory  notice 
been  given.1 

(1852);  Richardson  v.  Vermont,  etc.,  44 
Vt,  613  (1872),  holding  that  objections  to 
the  proceedings  of  a  meeting  called  J—  a 
notice  which  did  not  state  what  its  ob- 
ject was  had  been  waived  by  a  ratifica- 
tion at  a  later  meeting;  Jones  v.  Milton 
&  Rushville  Turnpike,  7  Ind.,  547  (1856), 
where  the  stockholders  not  notified  ap- 
peared and  voted  by  proxy ;  Kenton 
Furnace  v.  McAlpine,  5  Fed.  Rep.,  737 
(1880).  See,  also,  §  606,  infra.  Where 
several  persons,  their  associates  and  suc- 
cessors, are  declared  to  be  a  corporation, 
one  of  them  with  new  parties  may  meet, 
organize,  adopt  by-laws,  etc.,  without 
the  capital  being  first  subscribed  and 
without  the  others,  if  they  do  not  ob- 
ject. McGinty  v.  Athol.  etc.,  Co.,  29 
N.  E.  Rep.,  510  (Mass.,  1892).  Notice 
may  be  waived.  People  v.  Twaddell,  18 
Hun,  427  (1879). 

1  Although  the  statutes  of  Montana 
require  that  a  mortgage  may  be  given 
only  after  a  stockholders'  meeting  con- 
vened by  publication  of  notice,  etc.,  has 
voted  it,  yet  all  the  stockholders,  by  vot- 
ing therefor,  waive  the  required  notice 
and  no  one  can  complain.  The  mort- 
gage is  valid.  Campbell  v.  Argenta, 
etc.,  Co.,  51  Fed.  Rep.,  1  (1892).  Al- 
though the  constitution  provides  that 
there  shall  be  sixty  days'  notice  of  the 
meeting  to  authorize  the  issue  of  bonds, 
yet  where  all  the  stockholders  assemble 
and  authorize  the  issue  without  any 
notice  and  the  bonds  pass  into  bo7ia  fide 
hands  they  may  be  enforced.  The  ab- 
sence of  a  nominal  stockholder  whose 


stock  is  really  owned  by  one  of  those 
present  is  immaterial.  Wood  v.  Corry, 
etc.,  Co.,  44  Fed.  Rep.,  146  (1890).  A 
constitutional  provision  in  regard  to 
notice  being  given  of  a  meeting  for  in- 
creasing the  stock  or  bonds  of  a  corpo- 
ration is  for  the  benefit  of  the  stock- 
holders and  may  be  waived  by  them  or 
the  omission  of  it  may  be  ratified  by 
them.  Nelson  et  ah  v.  Hubbard,  11  S. 
Rep.,  428  (Ala.,  1892).  The  voluntary 
dissolution  of  a  company  under  the 
statute,  but  without  the  ten  days'  notice 
required  by  the  statute,  is  not  such  a 
dissolution  as  to  prevent  creditors  from 
attaching  the  property  of  the  company 
as  though  no  dissolution  had  been  had. 
Cleveland,  etc.,  Co.  v.  Taylor,  etc.,  Co., 
54  Fed.  Rep.,  82  (1893).  But  the  dissolu- 
tion cannot  be  enjoined  by  creditors  in 
the  absence  of  fraud.  Id.,  85.  To  same 
effect,  Appeal  of  Columbia  Nafl  Bank. 
16  Weekly  Notes  Cas.  (Pa.),  357 ;  Hard- 
ware Co.  v.  Phalen.  128  Pa.  St,  110; 
Kenton  Furnace  Co.  v.  McAlpine.  5  Fed. 
Rep.,  737  (1880).  where  no  notice  was 
given,  although  prescribed  by  the  char- 
ter and  by-laws.  It  was  held  to  have 
been  w;  ived  by  the  presence  of  all  the 
stockholders  at  the  meeting  and  their 
participation  in  its  action  ;  In  re  British 
Sugar  Ref.  Co.,  3  Kay  &  J..  408  (1857). 
where  it  was  adjudged  that  a  share- 
holder who  had  received  a  circular  no- 
tice of  the  meeting  and  was  present 
could  not  question  the  legality  of  the 
meeting  on  the  ground  that  the  charter 
required,   in   addition  to  the    circular, 


805 


599.] 


STOCKHOLDERS     MEETINGS  —CALLS. 


[CH.  XXXVI. 


Thus  participation  as  an  officer  in  issuing  the  call  is  a  waiver  by 
him  of  informalities  as  to  that  call;1  and  recognition  of  an  agent 
appointed  at  a  certain  meeting,  by  dealing  and  offering  to  deal 
with  him  as  the  agent  of  the  company,  is  a  waiver  of  the  right  to 
notice  of  that  meeting.2  One  stockholder  cannot  avail  himself  of 
the  neglect  of  the  corporate  officers  to  give  due  notice  to  another 
stockholder  who  does  not  himself  complain.3   But  the  waiver  of  all 


publication  in  a  newspaper,  which  was 
not  made.  A  person  who  takes  part  in 
a  meeting  cannot  object  that  it  was 
held  on  five  days'  notice  instead  of 
fourteen  as  required  by  the  charter. 
Bucksport,  etc.,  R.  R  ft  Buck,  68  Me.,  81 
(1878);  Chamberlain  r.  Painesville,  etc., 
R.  R,  15  Ohio  St.,  225.  A  failure  to 
give  the  statutory  notice  of  the  fust 
meeting  is  immaterial  where  all  but  one 
stockholder  was  present  and  lie  after- 
wards  ratified  all  that  was  done  Bab- 
bitt ft  East,  etc.,  Co.  (N.  .T..  1876),  Stew. 
Dig.,  p.  208,  §  13.  T<>  same  effect,  §  284, 
note,  supra,  and  §  598;  ale  $8,     A 

stockholder  who  knows  of  and  approves 
of  a  proposed  sale  of  a  railroad  by  a 
stockholders'  vote  as  allowed  by  statute 

cannot    have   the   sale   set    aside   on  the 

ground  that  he  was  not  notified  of  nor 
preseid  at  the  meeting  voting  sach  Bale, 

buthe  must  be  paid  the  value  of  his 
stock.  Young  ft  Toledo,  etc,  EL  EC,  18 
N.  W.  Rep,  632  (Mich,  1889).  The  con- 
stitutional provision  that  bonds  or  stock 
shall  not  be  increased  except  in  a  cer- 
tain way  does  not  apply  to  an  original 
issue  of  bonds.  Union,  eta,  <  !a  ft  South- 
ern, etc..  Co.,  51  Fed.  Etep.,  B40  (1892). 
Directors  elected  at  a  meeting  called  on 
thirteen  days'  notice  instead  of  fourteen 
as  required  by  statute  may  make  calls 
where  their  election  lias  been  confirmed 
by  a  subsequent  auuual  general  meet- 
ing. Briton,  etc.,  Ass'n  ft  Jones,  61 
L.  T.  Rep.,  384  (1889);  People  v.  Peck. 
11  Wend.,  604  (1884),  holding  that  a  fail- 
ure to  comply  with  a  statutory  require- 
ment regarding  notice  will  not  affect 
the  proceedings  of  a  meeting  of  a  re- 
ligious corporation  where  there  is  no 
claim  that  every  voter  was  not  present. 


or  that  evil  resulted  from  the  omission, 
and  no  fraud  was  involved.  If  all  par- 
ties attended,  they  thereby  admitted  no- 
tice. See,  also,  Stebbins  v.  Merritt,  84 
Mass..  '27  (1852);  The  King  v.  Chet- 
wynd,  7  Barn.  &  C,  695  (1828),  where 
the  election  of  a  burgess  at  a  meeting 
of  which  no  notice  was  given  was  held 
valid,  because  it  appeared  that  all  the 
members  of  the  electing  body  were 
present;  The  King  v.  Theodorick,  8 
East,  548  (1807).  Cf.  United  States  o 
MoKelden.  6  Rep.,  778  (1879),  where  it 
was  held  that,  although  the  date  for  the 
annual  meeting  is  fixed  by  a  by-law, 
the  notice  by  publication  provided  for 
by  the  charter  is  necessary.  See.  also. 
In  the  Matter  of  Long  Island  R.  R.  Co.. 
19  Wend.,  87  (1887),  in  which  it  was 
said  in  a  dictum  that  a  notice  regulated 
by  statute  "of  course  cannot  be  modi- 
fied or  dispensed  with." 

'Bucksport,   etc..   R  R  Co.   ft   Puck, 
68     Me.,    81     (1878);    Schenectady,     etc. 

Plank-road  Co.  ft  Thatcher,  n  N.  V., 
n  >0  (1854). 

Bryant    ft  Goodnow,  22   Mass.,   228 

1 1 82 

-  thenectady,  etc.,  Plank-road  Co.  r. 
Thatcher,  11  N.  Y„  102  (1854>  In  this 
case  the  court  said  :  " The  court  rejected 

the  offer  of  the  defendant  to  prove  that 
no  notice  had  been  given  of  the  first 
election  of  directors.  I  think  this  was 
properly  rejected,  on  the  ground  that 
the  defendant  could  not  avail  himself 
of  a  neglect  to  give  notice  to  any  other 
stockholder.  The  defendant  himself 
was  present  at  that  meeting  and  voted, 
and  was  elected  a  director.  He  has  not 
suffered  by  an  omission  to  serve  notice, 
ami  he  is  not  in  a  situation  to  object  as 


806 


•CH.  XXXVI.] 


stockholders'  meetings  —  calls.  [§§  600,  601. 


the  stockholders  is  essential  in  order  to  validate  an  election  held  at 
a  meeting  not  properly  called.1 

§  600.  Notice  is  presumed  to  have  been  regularly  given. —  It  is  a 
presumption  of  law  that  proper  and  valid  notice  of  a  corporate 
meeting  has  been  duly  given  to  every  stockholder,  and  that  the 
meeting  itself  was  regularly  and  lawfully  held.  The  burden  of 
proof  is  therefore  upon  him  who  alleges  want  of  notice  or  insuf- 
ficiency of  notice,  or  attacks  the  regularity  and  validity  of  the  pro- 
ceedings.2 

§  601.  Adjourned  meetings.—  An  adjourned  meeting  is  but  a  con- 
tinuation of  the  meeting  which  has  been  adjourned;  and  when  that 
meeting  was  regularly  called  and  convened  and  duly  adjourned, 
the  shareholders  may,  at  the  adjourned  meeting,  consider  and  de- 
termine any  corporate  business  that  might  lawfully  have  been 


transacted  at  the  original  meeting.3 


to  others."  A  stockholders'  meeting 
held  without  notice  or  call  cannot  be 
objected  to  by  those  who  participate  or 
receive  the  benefits  of  it.  Handley  v. 
Stutz,  139  U.  a,  417  (1891).  A  stock- 
holder who  takes  part  cannot  object 
that  another  stockholder  had  no  notice. 
Be  Union  Hill,  etc.,  Co.,  22  L.  T.  Rep., 
400  (1870) ;  In  re  British,  etc.,  Co.,  S  Kay 
&  J.,  408  (1857).  A  party  who  did  not 
attend  the  meeting  cannot  object  that 
the  inspectors  were  not  sworn.  In  the 
Matter  of  the  Election  of  Directors  of 
the  Mohawk  &  Hudson  R.  R.  Co.,  19 
Wend.,  135  (1835). 

1  State  of  Nevada  v.  Pettineli,  10  Nev., 
141  (1875). 

2  McDaniels  v.  Flower  Brook  Manuf. 
Co.,  22  Vt,  274  (1850) ;  Porter  v.  Robin- 
son, 30  Hun,  209  (1883);  Sargent  v. 
Webster,  54  Mass.,  497  (1847);  South 
School,  etc.,  v.  Blakeslie,  13  Conn.,  227, 
235  (1839) ;  Lane  v.  Brainerd,  30  Conn., 
565  (1862) ;  Pitts  v.  Temple,  2  Mass.,  538 
(1807) ;  Wells  v.  Rodgers,  27  N.  W.  Rep., 
671  (Mich.,  1886),  holding  that  notice  is 
presumed,  and  the  burden  of  proof  in 
attacking  the  legality  of  the  meeting  is 
on  the  plaintiff.  See,  also,  §  606,  infra. 
All  the  stockholders  are  presumed  to 
have  had  notice  of  a  meeting  that  has 
been  held.  Beardsley  v.  Johnson,  121 
N.  Y..  224  (1890).     Cf.  Wiggin  v.  Free- 


will, etc.,   Church,  49  Mass.,   301,  312 
(1844). 

3  Granger  v.  Grubb,  7  Phila.,  350  (1870) ; 
Farrar  v.  Perley,  7  Me.,  404(1831);  Scad- 
ding  v.  Lorans,  3  H.  of  L.  Cas.,  418  (1851). 
Cf.  People  v.  Batchelor,  22  N.  Y„  128 
(1860),  where  the  New  York  city  board 
of  aldermen  appointed  a  day  for  the 
election  of  a  city  officer.     At  a  subse- 
quent stated  meeting  this  resolution  was 
rescinded,    and    then  an    election   was 
thereupon  held.     Held,  that  the  election 
was  void,  as  some  members  were  absent 
from  the  former  meeting  and  had  no 
notice  of  the  election.   A  board  of  alder- 
men cannot  elect  an  assessor  and  then 
at  an  adjourned  meeting  reconsider  and 
elect  some  one  else.     State  v.  Phillips, 
10  Atl.  Rep.,  447  (Me.,  1887).     See,  also, 
Hardenburgh  v.  Farmers',  etc.,  Bank,  3 
N.  J.    Eq.,  68  (1834),  where  the  stock- 
holders at  the  first  meeting  proceeded 
to  an  election  in  spite  of  an  adjournment 
by  the  commissioners  and  the  election 
was  upheld.     A  meeting  adjourned  for 
want  of  a  quorum  may  at  the  adjourned 
meeting  proceed  to  business,  if  a  quorum 
is  present ;    and   no  notice  of  the  ad- 
journed meeting  is  necessary  where  the 
charter  or  by-laws  provided  for  such 
adjournment.     Smith  v.  Law,  21  N.  Y., 
296  (1860),  involving  a  meeting  of  the 
board  of  directors. 


807 


§  601.] 


STOCKHOLDERS     MEETINGS CALLS. 


[CH.  XXXVI. 


Bat  where  there  is  an  absence  of  good  faith,  and  an  adjourned 
meeting  is  held  in  such  a  way  as  to  prevent  certain  of  the  stock- 
holders from  knowing  of  it,  the  proceedings  are  invalid.1  Where 
the  original  meeting  was  duly  called  and  convened,  the  stockholders 
are  not  entitled  to  any  other  notice  of  the  adjourned  meeting  than 
that  which  is  implied  in  the  adjournment.2  But  nothing  can,  with- 
out notice,  be  transacted  at  an  adjourned  meeting  except  the  un- 
finished business  of  the  first  meeting.3 


1  State  v.  Bonnell,  35  Ohio  St,  10  (1878). 
Where  an  election  is  held,  after  many 
adjournments,  and  a  minority  are  pres- 
ent and  elect  directors,  who  repudiate  a 
contract  which  exists  with  the  holder 
of  a  majority  of  the  stock,  the  latter 
being  ignorant  of  the  intent  to  elect  of- 
ficers, equity  will  enjoin  the  repudiation 
of  the  contract  New  York,  eta,  Co.  v. 
Parrott  36  Fed.  Rep.,  462  (1888). 

2  Smith  v.    Law,   supra;    Warner  v. 


Mower,  11  Vt,  385  (1839).  Cf.  United 
States  v.  McKelden,  8  Rep,  778  (1879), 
where  it  was  held  that  the  proceedings 
of  an  original  meeting  being  invalid  by 
reason  of  insufficient  notice,  the  ad- 
journed meetings  were  invalid  also, 
they  being  merely  continuations  of  the 
original.  To  same  effect  Wiggin  v. 
Freewill,  etc.,  Church,  49  Mass.,  301 
(1844). 
3  R  v.  Grimshaw,  10  Q.  B.,  747. 


808 


CHAPTER  XXXVII. 


ELECTIONS  AND  OTHER  CORPORATE  MEETINGS. 


$  602.  Scope  of  the  subject. 

603.  Elections  are  to  be  by  the  stock- 

holders and  may  be  compelled 
by  mandamus. 

604.  The  meeting  must  be  held  at  the 

prescribed   hour,   which   must 
be  reasonable. 

605.  Inspectors  of  election  —  Conduct- 

ing and  closing  elections. 

606.  Conducting  and  closing  meetings 

generally  —  Irregularities    and 
informalities. 

607.  The  quorum  —  A  majority  of  the 

stockholders  attending  a  meet- 
ing may  transact  business. 

608.  The  majority  of  votes  cast  shall 

elect. 

609.  Is  every  share  of  stock  entitled 

to  oiie  vote? 
609a.  Cumulative  voting. 

610.  Proxies. 

611.  The  transfer  book  as  evidence  of 

a  right  to  vote. 

612.  The  right  of  trustees,  pledgees, 

administrators,  etc.,  to  vote. 

613.  The  corporation  cannot  vote  upon 

shares  of  its  own  stock. 

614.  Injunction  against  elections  and 

against  voting  particular  stock. 


§  615.  Issuing  stock  in  order  to  carry  an 
election. 

616.  Where  one  corporation  owns  a 

majority  of  the  stock  of  a  rival 
company  may  it  vote  the  stock 
and  control  the  latter  company? 

617.  Illegal  or  fraudulent  elections  — 

The  remedy  of  quo  warranto 
and  mandamus. 

618.  Illegal  or  fraudulent  elections — 

The  remedy  by  bill  in  equity 
and  injunction. 

619.  Illegal  or  fraudulent  elections  — 

Statutory  remedy  by  petition 
to  a  court  of  equity. 

620.  Who  may  complain  of  an  illegal 

election  —  A  new  election  is 
not  granted  if  the  result  will 
be  the  same. 

621.  Restrictions  on  the  right  to  vote. 

622.  Combinations  and  contracts  as  to 

elections  —  Voting  trusts  and 
pooling  agreements. 

623.  Who  may  be  a  director  or  corpo- 

rate officer? 

624.  Acceptance    and  resignation    of 

office  and  failure  to  elect  offi- 
cers —  Removal  of  directors. 
625-627.  Stockholders  can  act  only  at 
corporate  meetings. 


§  602.  Scope  of  the  subject— The  business  which  the  stockholders 
ofa  corporation  in  meeting  assembled  have  the  power  to  transact 
is  not  extensive,  but  it  is  of  great  importance.  It  elects  the  di- 
rectors, passes  upon  amendments  to  the  charter,  checks  any  ultra 
vires  acts,  determines  whether  any  increase  of  the  capital  stock 
shall  be  made,  makes  the  by-laws,  and  dissolves  or  continues  the 
corporation.  These  constitute  the  chief  functions  of  a  stockholders' 
meeting.  They  are  extraordinary  in  their  character,  and  although 
they  are  exercised  at  long  intervals  are  of  vital  importance.  This 
chapter  treats  of  the  business  which  may  be  transacted  at  stock- 
holders' meetings  and  of  the  methods  of  its  transaction. 

§  603.  Elections  are  to  be  by  the  stockholders  and  may  be  com- 
pelled by  mandamus. —  At  common  law  the  directors  of  a  corpora- 
tion are  to  be  elected  by  the  stockholders  in  corporate  meeting 

809 


004.] 


ELECTIONS  —  CORPORATE    MEETINGS. 


[CH.  XXXVII. 


assembled.1  Generally  this  is  declared  to  be  the  law  by  charter  or 
statutory  provisions.  The  president,  vice-president,  secretary,  treas- 
urer and  agents  of  the  corporation  are  usually  elected  or  appointed, 
not  by  the°stockholders,  but  by  the  directors.  All  these  matters, 
however,  are  generally  regulated  by  the  charter  or  a  statute. 

At  common  law  mandamus  lies  to  compel  an  election  of  corpo- 
rate officers.2 

All  corporations  for  profit  have  power  to  elect  a  board  of  di- 
rectors.3 

The  legislature  may  amend  the  charter  so  as  to  increase  the 
number  of  directors;4  but  it  cannot  deprive  the  members  of  the 
corporation  of  the  privilege  of  electing  its  directors.5 

Although  the  corporation  is  not  a  going  concern,  nevertheless  it 
may  have  an  election  of  directors.8 

§  604.  The  meeting  must  be  held  at  the  prescribed  hour,  which 
mitst  be  reasonable. —  The  particular  time  at  which  corporate  meet- 
ings shall  be  held  is  often  prescribed  in  the  charter  or  a  statute  or 

1  Stockholders  cannot  flu  vacancies  in  (1863);  Bank  v.  Richardson,  1  Me.,  79; 

the  board  of  directors  at  a  special  meet-  Greenville,  etc.,  R  R  Co.  i».  Johnson,  8 

ing,  when  elections  can  only  be  at  an-  Baxt.,  332 ;    Fall  River  Iron  Works  r. 

nual  meetings.    Moses  v.  Tompkins,  84  Old  Colony  R  R.  Co.,  5  Allen,  281 


Ala.,  618  (1888).  The  by-laws,  bowever, 
may  and  generally  do  give  thi^  power 
to  the  directors.  And  see  dictum  in 
In  re  Union  Ins.  Co..  22  Wend.,  591 
(1840). 

!  See  §  593,  supra 


5  The  legislature  cannot  arbitrarily 
name  and  appoint  trustees  <>f  an  educa- 
tional corporation,  the  charter  provid- 
ing that  vacancies  shall  be  filled  by  the 
remaining  trustees.  Sheriff  n  Lowndes, 
16   ML   857  (1860).     It  cannot  give  to 


A  hank  may  have  directors  though    the  city  of  Louisville  the  power  to  elect 


the  statute  does  not  provide  for  them 
All  private  corporations  may  have  di- 
rectors. Hurlbut  v.  Marshall,  62  Wis., 
590(1885).  "The  power  inheres  in  the 
corporation  to  hold  an  election,"  where 
the  charter  or  statutes  are  silent 
Wrighl  V.  Commonwealth,  109  Pa.  St.. 
560  (1885).  "The  power  of  electing  both 
officers  and  members  is  an  incident  to 


the  trustees  of  the  University  of  Louis- 
ville, an  educational  corporation.  City 
of  Louisville  v.  President  etc.,  15  B. 
Monr.,  642  (1855).  It  cannot  vest  the 
government  of  an  incorporated  acad- 
emy in  a  new  board  of  trustees.  Norris 
r.  Trustees,  etc.,  7  Gill  &  J.,  7  (1834). 
Under  the  reserved  power  to  amend  or 
repeal   a  charter,   the  legislature  may 


every  corporation.     It  is  not  necessary     amend  the   charter  of  an  agricultural 


that  such  a  power  should  be  expressly 
conferred  by  the  charter."'  Common- 
wealth v.  Gill,  3  Whart  (Pa.  >.   328,  JIT 

(1837). 

4  Mower  r.  Staples.  32  Minn..  284  (1884). 
See,  also,  Gray  r.  Coffin,  9  Cush.,  192 
(1852) ;  Child  v.  Coffin,  17  Mass.,  64  (1820) ; 
Langley  v.  Little,  26  Me.,  162  (1846); 
Payson  v.  Withers,  5  Biss.,  269  (1873); 
Joy  r.  Jackson,  etc.,  Co.,   11  Mich.,  155 


college  which  has  private  stockholders, 
but  to  which  the  state  contributes 
funds,  so  that  instead  of  the  state  hav- 
ing four  directors  out  of  eleven,  the 
state  shall  have  seven  out  of  twelve. 
Jackson  tt  Walsh,  23  Atl.  Rep.,  778 
(Md.,  1892). 

e  Beardsley  v.  Johnson,  121  N.  Y.,  224 
(1890). 


810 


CH.  XXXVII.]  ELECTIONS  —  CORPORATE    MEETINGS. 


[§  605. 


in  the  by-laws  of  the  corporation.  When  not  so  prescribed  it  is 
fixed  by  the  officers  who  call  together  the  corporate  meeting.  But, 
in  whatever  way  it  is  decided  upon,  the  meeting  must  be  convened 
at  the  time  decided  upon  or  within  a  reasonable  time  thereafter.1 
Accordingly,  if  the  meeting  is  convened  before  the  hour  at  which 
it  is  called  and  business  is  transacted,  the  proceedings  will  be  in- 
valid.- In  general,  a  court  of  equity  will  restrain  the  directors 
from  fixing  the  time  for  an  annual  meeting  at  a  date  when  many 
members  are  in  the  country,  the  purpose  being  to  prevent  them 
from  exercising  their  right  to  vote.3 

Frequently  the  particular  office  or  place  for  meeting  within  the 
state  is  specified  in  the  charter  or  by-laws  of  the  corporation.  In 
that  event  a  meeting  held  at  a  different  place  will  be  irregular,  and 
the  proceedings  at  such  a  meeting  void  and  ineffectual.4 

§  605.  Inspectors  of  election  —  Conducting  and  closing  elections. 
Ordinarily  a  chairman  and  inspectors  of  election  are  elected  or  ap- 
pointed by  the  stockholders.     The  presiding  officer  at  a  stockhold- 


1  Where  a  meeting  was  held  by  a  mi- 
nority of  the  stockholders  several  hours 
after  the  time  fixed  in  the  notice,  and 
an  adjournment  made  until  the  follow- 
ing day,  at  which  adjourned  meeting, 
without  the  knowledge  of  the  other 
members,  an  election  was  held,  the 
election  was  unfair  and  invalid.  State 
of  Ohio  v.  Bonnell,  35  Ohio  St.,  10  (1878). 
But  a  delay  of  an  hour  and  five  minutes 
after  the  time  specified  in  the  notice  is 
not,  as  a  matter  of  law,  an  unreasonable 
delay  which  will  vitiate  the  proceed- 
ings. South  School  District  v.  Blakes- 
lee,  13  Conn.,  227.  235  (1839). 

2  So,  where  a  meeting  was  called  for 
12  o'clock,  but  was  called  to  order  and 
organized  fifteen  minutes  before  12,  it 
was  held  to  be  a  surprise  and  a  fraud 
upon  such  of  the  stockholders  as  were 
not  actually  present  at  that  hour,  and 
that  in  consequence  the  proceedings 
were  irregular  and  void.  People  v. 
Albany,  etc.,  R.  R.  Co.,  55  Barb.,  344 
(1869).  Where  commissioners,  after 
calling  a  meeting  of  subscribers,  ordered 
the  election  postponed,  but  the  sub- 
scribers nevertheless  refused  to  postpone 
and  proceed  with  the  election,  the  elec- 
tion is  not  void,  unless,  in  the  opinion 
of  the  court,  a  postponement  was  clearly 


necessary.  Hardenburgh  v.  Farmers' 
&  Merchants'  Bank,  3  N.  J.  Eq.,  68 
(1834).  Quere,  in  this  case,  whether  the 
election  might  not  have  been  avoided 
if  any  considerable  number  of  the 
shareholders  were  deprived  of  their 
election  franchise  by  the  failure  to  post- 
pone.    See,  also,  §  605. 

3  Cannon  v.  Trask,  L.  R,  20  Eq.,  669 
(1875).  A  majority  of  the  board  of  di- 
rectors cannot  shorten  their  term  of  of- 
fice by  merely  changing  the  time  of  the 
annual  meeting  of  the  stockholders  in 
violation  of  the  stockholders'  by-laws. 
Nathan  v.  Tompkins,  82  Ala.,  437  (1886). 

4  Where  the  customary  place  of  meet- 
ing of  a  corporation  is  abandoned  and 
a  new  place  fixed  upon  in  a  regular  and 
lawful  manner,  a  meeting  at  the  old 
place  is  irregular,  and  the  proceedings 
at  such  a  meeting  are  invalid.  Miller 
v.  English,  21  N.  J.  Law,  317  (1848). 
The  meeting  must  be  held  at  the  usual 
place.  American  Primitive  Society  v. 
Pilling,  24  N.  J.  Law,  653  (1855).  Cf. 
McDaniels  v.  Flower  Brook  Manuf.  Co., 
22  Vfc,  274  (1850),  holding  that  a  meet- 
ing at  a  residence  is  good,  if  all  assent, 
even  though  the  statute  requires  the 
meetings  to  be  at  the  counting  room  of 
the  company. 


811 


§  606.] 


ELECTIONS  —  CORPORATE    MEETINGS.  [CH.  XXXVII. 


ers'  meeting  need  not  be  a  stockholder,1  and  he  need  not  be  elected 
with  any  particular  formality.2 

The  inspectors  of  election  need  not  be  stockholders.3  If  inspect- 
ors are  provided  for  by  the  charter,  and  they  do  not  act  or  are 
enjoined  from  acting,  the  stockholders  may  appoint  others  to  take 
their  place.4  The  duties  of  the  inspector  are  ministerial  and  not 
judicial.  Their  discretion  and  powers  of  investigation  are  very 
limited.5 

A  requirement  that  the  election  shall  be  by  ballot  does  not  in- 
validate an  election  by  show  of  hand  if  no  one  objects.6 

Where  no  time  is  specified  by  law  during  which  the  polls  must 
be  kept  open  it  rests  within  the  sound  discretion  of  the  inspectors 
to  say  when  the  polls  shall  close.7  So  also  it  is  held  that  holding 
the  polls  open  after  the  hour  specified  in  the  notice  for  them  to 
close  will  not,  where  the  inspectors  exercise  a  reasonable  discre- 
tion, invalidate  an  election.3  i 

§606.  Conducting  and  closing  meetings  generally — Irregulari- 
ties and  informalities. —  The  form  or  mode  of  conducting  an  elec- 
tion is  in  general  not  material,  provided  it  violates  no  positive 
provision  of  the  charter  or  of  a  statute  regulating  it,  is  orderly 
and  in  good  faith,  and  is  conducted  by  authorized  or  proper  per- 
sons.1'    And  as  a  general  rule  of  law,  where,  in  the  election  of  cor- 


1  stebbins  v.  Merritt,  64  Mass.,  27  (18 
-  Acquiescence  in  a  person's  assuming 

to  act  as  chairman  of  a  stockholders' 

meeting   validates   his   acting   as  such. 

In  re  Argus  Printing  Co.,  48  N.  W.  Rep., 

347  (N.  D.,  1891). 

3  People  v.  Albany,  etc.,  R  R,  55 
Barb.,  344,  373  (1869).  Although  an  in- 
spector is  required  by  by-law  to  be  a 
stockholder,  yet  the  election  of  one  who 
is  not  a  stockholder  is  voidable  and  not 
void.  Id.  An  inspector  may  be  a  can- 
didate for  directorship.  Ex  parte  Will- 
cocks,  7  Cowen,  402  (1827). 

4  People  v.  Albany,  etc.,  R  R  Co.,  55 
Barb.,  344,  357  (1869).  See,  also,  Matter 
of  Wheeler,  2  Abb.  Prac.  (N.  S),  361 
(1866).  The  failure  of  the  inspectors  so 
appointed  to  take  the  prescribed  oath 
will  not  invalidate  the  election.  Re  Mo- 
hawk, etc.,  R  R,  19  Wend.,  135  (1838); 
Re  Chenango,  etc..  Ins.  Co.,  id.,  635 
(1839).  Where  by  statute  an  election  is 
to  have  "inspectors"  one  inspector  is 
insufficient     Matter  of   Lighthall,  etc., 


Co.,  47  Hun.  258  (1888);  but  see  N.  Y. 
L  J.,  June  29,  1889. 

5  See  §  611.  infra;  Re  Mohawk,  etc., 
R  R.  supra.  The  office  of  the  inspect- 
ors is  ministerial  rather  than  judicial. 
Commonwealth  v.  Woelper,  3  Serg.  & 
R,  29  (Pa.,  1817).  Inspectors  at  elections 
having  once  accepted  a  vote  and  de- 
clared the  result  cannot  then  reject  it 
and  declare  a  different  result.  Hartt  r. 
Harvey,  32  Barb.,  55  (1860). 

6  Wardens  of  Christ  Church  v.  Pope, 
74  Mass.,  140  (1857). 

'  In  the  Matter  of  the  Chenango 
County  Ins.  Co.,  19  Wend.,  634  (1839). 

8  In  the  Matter,  etc.,  of  the  Mohawk  & 
Hudson  R.  R  Co.,  19  Wend.,  135  (1838). 
An  election  is  not  vitiated  by  the  fact 
that  the  polls  are  kept  open  after  the 
designated  hour  and  votes  received. 
Rudolph  v.  Southern,  etc.,  League,  23 
Abb.  N.  C,  199  (1889);  People  v.  Albany, 
etc.,  R  R.  55  Barb.,  344,  356,  360  (1869). 

9  Fox  ?\  Allensville,  etc.,  Turnpike 
Co.,  46  Ind,  31  (1874). 


812 


€H.  XXXVII.]  ELECTIONS CORPORATE    MEETINGS. 


[§  606. 


porate  officers,  no  particular  mode  of  proceeding  is  prescribed  by 
Jaw,  if  the  wishes  of  the  corporators  have  been  fairly  expressed, 
and  the  election  was  conducted  in  good  faith,  it  will  not  be  set 
aside  on  account  of  any  informality  in  the  manner  of  conducting  it.1 

It  is  a  general  rule  that,  in  the  transaction  of  the  ordinary  busi- 
ness of  a  corporation,  no  particular  formalities  are  necessarily  to 
be  observed.  The  motions,  however,  must  be  put  in  an  intelligible 
way  and  then  voted  upon.2 

The  parliamentary  usages  are  the  same  as  in  other  bodies,  and 
mere  irregularities  in  the  manner  of  conducting  the  business  are 
immaterial  if  the  sense  of  the  meeting  has  been  fairly  expressed.1 

After  the  meeting  is  organized  the  majority  cannot  withdraw 
and  organize  another  meeting.4 

Although  the  chairman  refuses  to  poll  the  vote,  but  declares  the 


;  Philips  v.  Wickham,  1  Paige,  590 
(1829). 

2  A  motion  must  be  plainly  and  clearly 
made,  separate  from  a  rambling  speech, 
before  the  chairman  can  b?  held  to  be 
wrong  in  rejecting  it  Henderson  v. 
Bank  of  Australasia,  62  L.  T.  Eep.,  869 
(1890).  A  general  understanding  or  as- 
sent or  want  of  dissent  is  not  equivalent 
to  a  question  being  put  and  voted  upon. 
The  statement  by  a  minister  of  what 
salary  he  wished  and  the  failure  of 
members  to  object  is  not  a  sufficient 
expression  of  the  meeting.  Landers  v. 
Frank,  etc.,  Church,  114  N.  Y„  626 
(1889). 

3  Philips  r.  Wickham,  1  Paige,  590 
(1829);  Matter  of  Wheeler,  2  Abb.  Pr. 
(N.  S.),  361  (1866);  Downing  v.  Potts,  23 
N.  J.  Law,  66  (1851),  in  which  it  was 
held  that  non-compliance  with  a  statute 
requiring  a  list  of  stockholders  entitled 
to  vote  to  be  made  out  ten  days  before 
an  election  will  not  of  itself  make  void 
an  election,  such  provision  being  only 
directory.  A  motion  may  be  put  by 
the  chairman,  although  it  has  neither 
been  made  nor  seconded.  In  re  Hor- 
bury,  etc.,  Co.,  L  R,  11  Ch.  D.,  109 
(1879).  Although  the  meeting  has  voted 
down  two  motions  to  make  calls  it  may 
then  pass  another  motion  for  a  larger 
one.  In  re  British,  etc.,  Co.,  3  Kay  & 
J.,  408  (1857).     In  England,  by  statute, 


any  five  stockholders  may  demand  a 
poll.  Phoenix,  etc.,  Co.,  48  L.  T.  Rep., 
260(1883);  Hurrell  &  Hyde  on  Direct- 
ors and  Officers,  78.  Even  if  on  a  poll 
demanded  by  five  members  each  share 
has  one  vote,  yet  until  such  poll  is  de- 
manded voting  is  by  show  of  hands. 
In  re  Horbury,  etc.,  Co.,  L  R,  11  Ch.  D„ 
109  (1879).  In  general,  see,  also,  Gorham 
v.  Campbell,  2  Cal.,  135  (1852);  Harden- 
burgh  v.  Farmers',  etc.,  Bank,  3  N.  J. 
Eq.,  68  (1834);  People  v.  Peck,  11  Wend., 
604  (1834).  See,  also,  §  605,  supra.  In 
State  of  Nevada  v.  Pettiueli.  10  Nev.,  141 
(1875),  the  court  held  that  an  election 
was  illegal  where  there  was  no  presid- 
ing officer  and  no  inspectors.  Although 
the  notice  of  a  special  stockholders' 
meeting  states  that  the  resolution  will 
be  presented  and  passed  upon,  to  give  to 
each  share  one  vote,  provided  such 
share  has  been  held  by  the  party  f  jr  six 
months  prior  to  an  election,  an  amend- 
ment proposed  at  the  meeting  striking 
out  the  latter  part  of  the  resolution 
must  be  considered  and  put  to  vote  by 
the  chairman.  Henderson  v.  Bank  of 
Australasia,  63  L.  T.  Rep.,  597  (1890). 

4  Their  acts  are  void  ;  but  if  the  statute 
requires  a  majority  in  interest  of  the 
stock  to  elect,  the  election  is  invalid. 
In  re  Argus,  etc..  Co.,  48  N.  W.  Rep., 
347  (N.  D.,  1891). 


813 


§  GOT.] 


ELECTIONS CORPORATE    MEETING. 


[CH. 


XXXVII. 


meeting  adjourned,  the  courts  will  not  necessarily  interfere.1  If 
any  fraud,  surprise  or  deceit  has  been  practiced  in  conducting  the 
meeting  a  different  rule  prevails.3  The  right  to  object  to  an  in- 
formality may  be  waived,  and  a  failure  upon  the  part  of  those  mem- 
bers not  present  to  protest  promptly,  upon  learning  of  the  infor- 
mality, is  a  waiver.3  The  presumption  is  that  all  proceedings  were 
regular  and  lawful.4 

§  607.  The  quorum — A  majority  of  the  stockholders  attending  a 
meeting  may  transact  business. —  The  right  of  the  majority  to  rule 
in  the  management  of  the  affairs  of  a  private  corporation  is  fully 
established.5     They  may  control  the  company's  business,  prescribe 


1  The  courts  will  not  interfere  al- 
though the  chairman  of  the  meeting 
refused  to  poll  the  vote  on  a  motion  to 
adjourn,  hut  declared  the  meeting  ad- 
journed on  a  viva  voce  vote  and  left 
In  regard  to  the  right  to  be  heard  the 
court  said  the  court  would  not  sustain 
a  hill  "for  the  purpose  of  enahling  oue 
particular  member  of  the  company  to 
have  an  opportunity  of  expressing  his 
opinions  viva  voce  at  a  meeting  of  the 
shareholders."  MaeDougall  r.  Gardiner, 
LR.  1  Ch.  D..  1 

*  Johnson  r  Jones,  28  N.J.  Eq..  816 
(1872);  People  >\  Albany,  etc..  R  R 
55  Barb  844 1 1669  :  State  of  Nevada  v. 
Pettineli,  lONev.,  141  (1875  ;  Common- 
wealth v.  Woelper,  3  Berg.  &  R.  89 
(1817  .  Bee,  also,  §§  804,  805,  supra,  and 
§  596. 

tte  o.  I.ehre.  7  Rich.  Law,  884  825 
1854);  In  re  Mohawk,  etc.,  R  R.  10 
Wend..  185  E  B  The  King  n  Tre- 
venen.  8  Barn,  it  Aid..  S89  (II 
Shareholders  who  receive  reports  of 
what  takes  place  at  meetings,  and  who 
do  not  object  to  what  is  heing  done, 
will  he  considered  as  acquiescing  therein 
if  what  i-  done  might  have  been  validly 
sanctioned  by  them  if  present :  but  not 
if  what  is  done  is  altogether  illegal,  and 
beyond  the  power  of  even  all  the  share- 
holders. See  Pho  nix  Life  Assur.  Co.'s 
Case,  2  J.  &  H..  441 :  Irvine  v.  Union 
Bank  of  Australia,  8  App  ('as..  866. 
Compare  Evans  v.  Smallcombe.  L.  R,  3 
H.  L..  249;  Spackman  v.  Evans,  id..  171  ; 
Houldswortb   v.  Evans,   id..  263;  Phos- 


phate of   Lime   Co.   r.  Greene,  L.  R.  7 
(.'.  P..  4:?. 

4  Blanchard  n  Dow.  32  Me..  551     M 
where  it  was  presumed  that  the  election 
by  ballot:    Ashtabula,  etc.,  R  R 
Co.    v.   Smith.  16    Ohio  St         -     1864 
where  it  was  presumed  that  the  requi- 
site amount  of  stock  was  sul>seril>ed  be- 
fore  the  election  took  plao      B      also, 
00,  supra.    The  corporate  min- 
gned  after  the  meeting 
has  lw?en  held,    afiles  a  Baugh,  8  Q.  B.. 
-     ithampton.  etc.,    Co,    <: 
Richards,  I  ftf.6  (Jr..  448     -        Lindley 
on  Partn.,  661.    Concerning  the  mode 
of  proving  the  corporate  minutes,  see 
?'  714.   infra.     A    ratification    by    the 
stockholders  of  directors'   acts   cannot 
be  made  by  a  general  resolution  ratify- 
ing "all  of  the  acts  of  the  officers." 
Farmers1  L  ft  T.  Co  v.  San  Diego,  etc., 
St  R'y  Co..  45  Fed  Rep,  518(1*- 

1  tarfee  a  <  >ld  Colony,  etc..  R  R  Co., 
^7  M  1862  :  City  of  Covington  ft 

c.vington.  eta,  Bridge  Co.,  10  Bus! 
76  (1878  :  Bast  Tennessee,  eta.  R.  B 
>:  Gammon,  6  Sneed  (Tenn>X  667  (1868); 
McBrile  v.  Porter,  17  Iowa.  808(1864   : 
Eaulds  v.  Yates,  67  01,416  (1870);  Leor. 
Union  Pacific  R  R  Co..  19  Eed.  Rep 

9.  c.   n  id..  278  Barnes 

r.  Brown.  80  N.  Y..  527  1880);  Clifford 
p.  N.  u  Ji  rsey  R  R  Co..  10  M  J.  Eq..  171 
:  Dudley  v.  Kentucky  High  School, 
9  Bush  (Ky.  .  576  1878)  See.  also.  Liv- 
ingstone  v.  Lynch.  4  Johns.  Ch.,  578 
■  1820  .  in  which  <  hancellor  Kent  clearly 
states  that  the  right  of  the  majority  to 


814 


CII.  XXXVII.]  ELECTIONS — CORPORATE    MEETINGS. 


[§607. 


its  general  policy,  make  themselves  its  agents,  and  take  reasonable 
compensation  for  their  services.1  The  minority,  however,  have  a 
right  to  be  heard ;  and  it  is  the  duty  of  the  majority  to  give  a  due 
consideration  to  their  arguments  and  wishes  concerning  the  man- 
agement of  the  corporate  business.2 

The  question  has  arisen  whether  a  meeting  can  be  held  and  busi- 
ness transacted  when  a  majority  in  interest  of  the  stockholders  are 
not  present.  But  the  law  is  clear  that  those  stockholders  who  at- 
tend a  duly-called  stockholders'  meeting  mav  transact  the  business 
of  that  meeting,  although  a  majority  in  interest  or  in  number  of 
the  stockholders  are  not  present.3 

<  »f  those  who  attend  the  stockholders'  meeting  a  maioritv  rule. 
Their  acts  are  as  valid  as  though  they  constituted  a  majority  of  all 


rule  is  one  of  the  chief  differences  be- 
tween a  corporation  and  a  partnership. 
The  majority  rule  at  common  law. 
Commonwealth  v.  Nickerson.  10  Phil., 
55  (1875);  New  Orleans,  etc..  R.  R  Co.  v. 
Harris.  27  Miss..  517,  537  (1854).  A  major- 
ity of  the  stockholders  control  the  policy 
of  the  corporation,  and  regulate  and  gov- 
ern the  lawful  exercise  of  its  franchise 
and  husiness,  even  though  the  manage- 
ment may  not  seem  to  be  wise.  The  ma- 
jority rule.  Wheeler  v.  Pullman,  etc.. 
Co..  32  N.  E.  Rep.,  420  (111.,  1892).  Where 
a  statute  requires  a  three-fourths  vote  in 
value  for  a  reorganization  of  a  company, 
the  stock  not  voted  is  not  counted  to 
make  up  the  three-fourths,  even  though 
the  trustees  who  represent  the  stock 
refuse  to  assent  or  dissent.  Re  The 
Neath,  etc..  Co.,  66  L.  T.  Rep..  40  (1€ 
Where  stockholders  in  an  apartment- 
house  corporation  are  entitled  to  rent 
apartments  at  a  rental  to  be  fixed  by  a 
majority  vote  of  the  stockholders,  an 
increased  rental  so  voted  is  legal.  The 
by-laws  providing  for  such  a  vote  over- 
ride a  general  statement  in  a  prospectus 
to  the  contrary,  the  stockholders  know- 
ing of  the  by-law.  Compton  v.  Chelsea. 
128  N.  Y..  537  -1891). 

1  Meeker  v.  Winthrop  Iroo  Co..  17  Fed. 
Rep..  48  (1883) :  S.  C.  sub  aom.  Winthrop 
Iron  Co.  v.  Meeker.  109  U.  S,  ISO  (1883). 
See.  also,  £  662.  infra. 

2  But  see  MacDougall  v.  Gardiner, 
supra. 


3  Granger  r.  Grubb,  7  Phil..  350  il870  . 
Craig  v.  First,  etc.,  Church,  88  Pa.  St.. 
42  1V7V  .  where  the  principle  is  eluci- 
dated that  this  is  the  rule  for  a  meeting 
composed  of  an  indefinite  number  of 
persons,  like  stockholders,  but  that 
where  a  definite  number  is  involved,  as 
in  a  board  of  directors,  then  a  majority 
must  be  present;  Brown  v.  Pacific  Mail. 
etc.,  5  Blatch.,  525  (1867);  Field  r.  Field. 

9  Wend.,  394  (1832);  Gowens  Appeal, 

10  Week.  Notes  of  Cas.,  85  (Pa.,  1880); 
Madison  Ave.,  etc.,  Church  v.  Baptist 
Ch.,  etc..  5  Rob.  (N.  Y.),  649  (1867);  Ev- 
erett v.  Smith,  22  Minn.,  53.  As  to  the 
rule  concerning  directors,  see  §  592. 
supra.  It  has  been  held  that  one  per- 
son cannot  constitute  a  quorum;  that 
at  least  two  members  are  necessary  to 
make  a  corporate  meeting.  Sharpe  v. 
Dawes,  46  L  J.  (Q.  BA  104  (1876).  In 
this  case  one  stockholder  ■'  met,"  did  all 
necessary  business,  and  then  voted  him- 
self a  vote  of  thanks.  In  the  case  of 
In  re  Sanitary,  etc.,  Co.,  W.  N.,  1877. 
p.  223,  where  one  stockholder  having 
also  proxies  of  the  remaining  three 
stockholders  held  a  meeting.  "  voted 
himself  into  the  chair,  proposed  a  reso- 
lution to  wind  up  voluntarily,  declared 
the  resolution  passed  and  appointed  a 
liquidator."  the  court  reluctantly  fol- 
lowed the  preceding  case  and  declared 
the  "  meeting  "  invalid. 


815 


§  608.]  ELECTIONS  —  CORPORATE    MEETINGS.  [CH.  XXXVII. 

the  stockholders,  or  constituted  a  majority  at  a  meeting  in  which  a 
majority  of  the  stockholders  were  present.1  The  presumption 
always  is  that  a  legal  majority  voted  for  any  act  or  proceeding 
that  appears  to  have  been  passed.2 

Two  important  limitations  and  exceptions  to  these  principles  are 
to  be  borne  carefully  in  mind. 

First,  the  majority  cannot  bind  the  minority  to  submit  to  an  act 
by  the  corporation  where  such  act  is  beyond  the  express  and  im- 
plied powers  of  the  corporation  as  given  to  it  by  its  charter.  Such 
an  act  is  ultra  vires.  A  large  amount  of  litigation  has  arisen  from 
the  attempt  of  the  majority  to  carry  out  ultra  vires  acts.  The 
minority  may  object,  and  even  a  single  stockholder  may  have  the 
ultra  vires  act  enjoined  or  set  aside.3 

The  second  exception  arises  where  the  legislature  amends  the 
charter  of  the  corporation,  and  the  majority  of  the  stockholders 
attempt  to  accept  that  amendment  and  act  upon  it.  In  such  a 
case,  if  the  amendment  materially  changes  the  scope  and  purpose 
of  the  enterprise,  the  minority  may  object  and  may  prevent  the 
acceptance  of  the  amendment.4 

The  question  of  how  far  the  majority  rule  when  that  majority 
are  interested  in  a  contract  which  the  corporation  has  made,  and 
which  is  being  passed  upon  by  a  stockholders'  meeting,  is  consid- 
ered elsewhere.5 

§  G08.  The  majority  of  votes  cast  shall  elect. —  It  is  the  well-settled 
rule  in  corporations  having  a  capital  stock  divided  into  shares  that 
a  majority  of  the  votes  cast  at  any  election  shall  elect.6  And  this 
majority,  moreover,  need  not  be  an  actual  numerical  majority  of 
all  the  votes  which  all  the  stockholders  have,  but  only  a  majority 
of  the  votes  cast.7  Accordingly,  a  majority  of  the  votes  cast  will 
elect,  even  though  a  majority  of  the  shares  of  stock  are  not  voted 
at  all,  and  even  though  the  owners  arc  present  at  the  meeting  and 
refuse  to  vote.8 

1  Columbia,  etc.,  Co.  v.  Meier,  39  Mo.,  7See  §  607,  supra;  Craig  v.  First  Pres. 
53  (I860),  and  same  cases  as  in  the  pre-  Church,  88  Pa.  St.,  42  (1878);  In  re  Union 
ceding  note  ;Gowen's  Appeal,  10  Weekly  Ins.  Co..  22  Wend.,  591  (1840),  holding 
Notes  Cas.,  85  (1881).  also  that  a  plurality  elects.    Atamuuic- 

2  Citizens'  Mutual,  etc.,  Ins.  Co.  v.  ipal  corporation  meeting  only  those 
Sortwell,  90  Mass.,  217  (1864).  who  vote  are  counted.    Persons  not  vot- 

3  This  subject  is  fully  treated  in  Part  ing  at  all  are  not  oounted.  Smith  r. 
IV,  infra.  Proctor,  130  N.  Y.,  319  (1891).     In  regard 

4  See  chapter  XXVIII,  supra.  to  voting  in  church  elections  in  New 
*  See  chapter  XXXIX,  infra,  York,  see  People  v.  Keese,  27  Hun,  483 
6  People  v.  Albany,  etc.,  R.  R  Co.,  55    (1882). 

Barb.,  344.  368  (1869);  State  v.  Fagan,  42  a  Appeal  of  Gowen,  10  Weekly  Notes 
Conn.,  32  (1875),  a  municipal  corporation  of  Cases,  84  (1881).  where  the  supreme 
case.    See,  also,  §  607,  supra.  court  held  that  "  those  who  voluntarily 

816 


CH.  XXXVII.] 


ELECTIONS  —  CORPORATE    MEKTIXGS. 


[§  609. 


Although  less  than  the  full  number  of  directors  to  be  elected 
receive  a  majority  or  plurality,  yet  those  receiving  such  majority 
or  plurality  are  elected,  and  another  ballot  or  election  may  be  had 
to  elect  the  remainder.1 

§  609.  Is  evert/  share  of  stock  entitled  to  one  vote?  —  At  common 
law,  in  public  or  municipal  corporations,  each  qualified  elector 
has  one  vote,  and  only  one.  This  was  a  natural  rule,  since  each 
duly-qualified  citizen  voted  as  a  citizen  and  not  as  the  holder  of 
stock.  But  the  same  rule  should  not  apply  to  private  corporations. 
Stockholders  are  interested  not  equally,  but  in  proportion  to  the 
number  of  shares  held  by  them.  Naturally  and  reasonably  each 
share  should  be  entitled  to  one  vote.  It  must  be  conceded,  how- 
ever, that  the  decisions  are  otherwise;  and  it  seems  that  at  common 


absent  themselves  from  a  meeting  duly 
called  for  an  election  must  recognize 
the  validity  of  the  election  regularly 
made  by  those  who  do  attend."  The 
question  was  whether  an  election  held 
by  a  meeting  of  railroad  stockholders 
at  which  a  majority  of  all  votes  was  not 
cast  could  be  considered  valid.  State 
v.  Green,  37  Ohio  St..  227  (18811.  This 
was  a  case  of  election  of  clerk  by  a  city 
council ;  and  it  was  held  that,  all  being 
present  and  engaged  in  holding  the 
election,  half  the  members  may  not  de- 
feat an  election  by  refusing  to  vote  and 
then  objecting  because  a  quorum  had 
not  voted.  Commonwealth  v.  Wicker- 
sham.  6G  Pa.  St.,  134  (1870),  was  the  elec- 
tion of  a  county  school  superintendent, 
which  %vas  required  to  be  "  viva  voce  I  y 
a  majority  of  the  whole  number  of  di- 
rectors present."  A  person  receiving 
exactly  half  that  number  could  not  be 
declared  elected  although  one  director 
refused  to  vote  on  the  last  ballot.  "  He 
remained,  and  being  present  was  entitled 
to  be  counted."  "The  legal  intendment 
[of  his  action]  was  that  he  voted  for 
neither  or  for  the  minority  candidate." 
But,  under  a  by-law  requiring  a  major- 
ity of  the  stock  to  be  present,  it  has  been 
held  that  the  majority  must  be  a  major- 
ity of  the  whole  stock,  and  not  merely 
of  the  stock  subscribed  for.  Ellsworth, 
etc.,  Co.  v.  Faunce,  79  Me.,  440  (1887). 
If  the  statute  requires  a  majority  of  the 


directors  to  elect  a  director  or  president, 
one  who  is  present  but  does  not  vote 
must  be  counted.  People  v.  Conklin,  7 
Hun,  188.  See,  also,  §  713a,  infra,  on  this 
point  Stockholders  may  vote  for  less 
than  the  whole  number  of  directors  to 
be  elected.  Vandenburgh  v.  Broadway 
R'y  Co.,  29  Hun,  349  (1883).  But  where 
a  meeting  was  called  to  elect  three  di- 
rectors and  a  majority  of  the  stockhold- 
ers voted  for  five  directors,  only  a  small 
minority  voting  for  three,  the  latter 
votes  were  held  the  only  valid  ones,  and: 
the  three  voted  for  were  declared  elected. 
State  v.  Thompson,  27  Mo.,  365.  369  (1858). 
Where  twenty-three  directors  ai'e  to  be 
elected,  a  vote  electing  twenty-two  is 
effectual  to  elect  those  twenty-two.  In 
re  Union  Ins.  Co.,  22  Wend.,  591  (1840). 
A  new  election  may  be  held  to  elect  the 
remaining  ore.  Id.  This  case  holds 
also  that  a  plurality  is  sufficient  to  elect. 
1  In  re  Union  Ins.  Co.,  supra.  Less 
than  the  full  board  may  be  elected. 
The  old  board  goes  out,  however,  and 
none  of  them  hold  over.  People  v. 
Fleming,  13  N.  Y.  Supp.,  715  (1891). 
Where  five  candidates  receive  a  plural- 
ity and  three  others  receive  a  less  num- 
ber, but  the  latter  are  a  tie,  the  board 
being  seven,  the  five  are  duly  elected 
and  may  act  as  a  board,  even  though  no 
second  ballot  is  taken  to  vote  off  the  tie. 
Wright  v.  Commonwealth,  109  Pa.  St, 
560  (1S85).    See,  also,  §  620. 


(52) 


817 


§  609a.]  ELECTIONS CORPORATE    MEETINGS.  [CH.  XXXVII. 

law  each  stockholder  had  but  one  vote,  irrespective  of  the  number 
of  shares  held  by  him.1  Where  the  statutes  are  silent  on  the  sub- 
ject, a  by-law  may  give  to  each  shareholder  one  vote  for  each  share 
up  to  ten,  and  may  fix  the  proportion  of  votes  which  he  may  cast 
in  excess  of  that  number.2 

Generally  the  charter  or  statutes  prescribe  that  each  share  of 
stock  shall  be  entitled  to  one  vote.3  And  a  statutory  or  charter 
provision  to  this  effect  applies  not  only  to  elections,  but  also  to  all 
other  questions  that  may  come  before  the  stockholders'  meetings.4 

§  609a.  Cumulative  voting.—  In  the  constitutions  of  several  of  the 
states  there  are  provisions  for  enabling  a  minority  in  interest  of  the 
stockholders  to  elect  a  minority  of  the  directors.  This  is  effected 
by  what  is  known  as  a  system  of  cumulative  voting.  By  it  each 
shareholder  is  entitled  to  as  many  votes  for  directors  as  equal  the 
number  of  shares  he  owns  multiplied  by  the  number  of  directors  to 
be  elected.  Thus,  if  there  are  six  directors  to  be  elected,  a  stock- 
holder who  owns  one  hundred  shares  may  poll  six  hundred  votes; 
and  these  votes  he  may  give  entirely  to  one  or  two  or  more  of  the 
six  candidates,  as  he  may  see  fit.  In  this  way  any  minority  of  the 
stockholders  exceeding  one-sixth  part,  acting  together,  may  elect 
one  member  of  a  board  of  six  directors,  and  thus  secure  a  repre- 
sentation in  that  body.  A  larger  minority  might  secure  the  elec- 
tion of  two  members  of  such  a  board,  the  possibility  of  increasing 
the  minority  representation  increasing  as  the  minority  increases, 
without  it  ever  becoming  possible  for  a  minority  upon  a  full  vote 
to  secure  more  than  its  equitable  proportion  of  the  representation. 
The  larger  the  number  of  directors  the  smaller  would  be  the  mi- 
nority which  would  be  able  to  elect  one  member  of  the  board;  and 

'Taylor  v.   Griswohl,    14   X.  J.  Law,  stock    in    excess    of  ten    shaves.     Det- 

222  (1834X  declaring  that  a  by-law  to  the  wiler   v.   Commonwealth.  18  Atl.  Rep., 

contrary  is  void.     At  common  law  stock-  990  (Pa.,  1890).     See  §  621,  infra. 

holders  voted  by  show  of  hands,  and  a  *Detwiler   v.  Commonwealth,  18  Pa. 

large  stockholder  had  no  greater   vote  St.,  990  (Pa..  1890). 

than  a  small  one.  In  re  Horbury,  etc.,  3Hays  v.  Commonwealth,  S2  Pa.  St.. 
Co.,  L.  R.  11  Ch.  D.,  109  (1879).  Stock-  518(1876).  Where  by  statute  two-thirds 
holders  each  have  one  vote;  not  even  a  of  the  stockholders  are  authorized  to  do 
special  provision  in  the  articles  filed  an  act,  this  is  construed  to  mean  two- 
under  a  general  act  can  change  this  thirds  of  the  stock  —  at  least  long  ac- 
rule.  Commonwealth  v.  Nickerson,  10  quiescence  therein  has  that  effect 
Phil.,  55  (1873).  For  an  interesting  Fredericks  v.  Pennsylvania  Canal  Co., 
statement  of  the  origin  of  the  practice  109  Pa.  St,  50  (1885). 
of  giving  each  stockholder  one  vote  4  Re  Rochester,  etc.,  Co.,  40  Hun,  172 
only,  and  of  the  gradual  changes  made  (1886),  construing  a  statute  which  is 
in  the  rule,  see  Harvard  Law  Review,  applicable  to  all  New  York  corpora- 
November,  1888,  p.  156.  A  by-law  may  tions. 
limit  the  votes   of  a  person  who  holds 

818 


OH.  XXXVII. J  ELECTIONS CORPORATE    MEETINGS. 


[§  609a. 


the  larger  the  minority  the  greater  the  representation  possible  to 
be  secured.'  Constitutional  or  statutory  provisions  which  are  de- 
signed to  secure  such  a  minority  representation  are  found  in  Cali- 
fornia, Pennsylvania.  Illinois,  West  Virginia,  Missouri,  Nebraska, 
Michigan  and  Kansas.'2  These  provisions,  if  designed  to  be  retro- 
active, have  been  held  unconstitutional  and  void.  They  can  onlv 
apply  to  corporations  chartered  after  their  enactment.  So  far  as 
they  concern  corporations  chartered  before  the  adoption  of  such  a 
constitutional  provision  they  impair  the  obligation  of  the  contract 
between  the  corporation,  the  stockholders  and  the  state,  and  in- 
fringe the  vested  rights  of  the  stockholders.3     It  is  a  serious  ques- 

1  Cumulative  voting  given  by  the  con- 
stitution is  an  absolute  right,  and  does 
not  require  notice  of  the  intent  to  so 
vote,  nor  any  by-laws  to  give  it  efficacy. 
By  this  provision,  "if  there  are  six  di- 
rectors to  be  elected,  the  single  share- 


v.    Baumgardner,    13   N.    E.    Rep..    279 


holder  has  six  votes ;  and.  contrary  to 
the  old  rule,  he  may  cast  these  six  votes 
for  a  single  one  of  the  candidates,  or  he 
may  distribute  them  to  two  or  more  of 
such  candidates  as  he  may  think  proper. 
He  may  cast  two  ballots  for  each  of 
three  of  the  proposed  directors  —  three 
for  two,  or  two  for  one,  and  one  each 
for  four  others ;  or  finally  he  may  cast 
one  vote  for  each  of  the  six  candidates." 
Pierce  v.  Commonwealth,  10-1  Pa  St, 
150  (1883). 

2  A  statutory  provision  to  the  same 
effect  prevails  in  Michigan.  The  Cali- 
fornia provision  is  construed  in  Wright 
v.  Central  Cal.,  etc.,  Co.,  67  CaL  532 
(1885),  holding  that  this  constitutional 
right  as  to  voting  could  not  be  changed 
by  a  resolution  of  the  directors.  The 
Pennsylvania  provision  is  construed  in 
Wright  v.  Commonwealth,  109  Pa.  St, 
560  (1885),  holding  that  part  of  the  di- 
rectors so  elected  by  a  plurality  and  de- 
clared elected  may  act  although  the 
remaining  directors  are  not  elected  by 
reason  of  the  vote  as  to  them  being  a  tie. 
See,  also,  Commonwealth  v.  Lintsman,  6 
Pitts.  L.  J.  (X.  S.t.  125.  The  Ohio  statute 
prescribing  that  "each  share  shall  en- 
title the  owner  to  as  many  votes  as 
there  are  directors  to  be  elected  "  does 
not  authorize  cumulative  voting.    State 


(Ohio.  1887  .  Where  cumulative  voting 
prevails  and  the  statutes  require  three 
directors  to  be  residents,  and  all  the 
votes  are  cumulated  on  non-residents 
excepting  thirty-two  which  are  cast  for 
three  residents,  the  three  residents  are 
elected  and  the  remaining  directors  are 
those  of  the  non-residents  who  received 
the  highest  number  of  votes.  Horton  v. 
Wilder,  29  Pac.  Rep.,  566  (Kan.,  1892) 
As  to  the  other  states  that  provide  for 
cumulative  voting,  see  Part  VII.  infra. 
In  Wrighfs  Case,  supra,  the  court  said 
that  this  provision  conferred  "upon  the 
individual  stockholder,  entitled  to  vote 
at  an  election,  the  right  to  cast  all  the 
votes  which  his  stock  represents,  multi- 
plied by  the  number  of  directors  to  be 
elected,  for  a  single  candidate,  should  he 
think  proper  so  to  do,  .  .  .  or  by  dis- 
tributing them,  upon  the  same  principle, 
among  as  many  candidates  for  directors 
as  he  shall  think  fit" 

3  State  v.   Greer.   78  Mo.,  188  (1883); 
Hays  v.  Commonwealth,  82  Pa.  St..  518 

:  Bakers  Appeal,  109  Pa.  St..  461 
(1885).  See,  also,  on  this  subject  ch. 
XXVIII.  supra.  Upon  the  question  of  the 
constitutionality  of  statutes  providing 
for  minority  representation  or  cumula- 
tive voting  in  the  election  of  public  offi- 
cers, a  matter  germane  to  the  present  sub- 
ject, see  People  v.  Kenney,  96  X.  Y.,  294 

:  People  v.  Crissey,  91  id.,  616 
(1883) ;  State  v.  Constantiue,  42  Ohio  St.. 
437.  In  Michigan  it  has  been  decided 
that  a  statute  providing  for  the  cumula- 


819 


610.] 


ELECTIONS  —  CORPORATE    MEETINGS.  [CH.  XXXVII. 


tion,  however,  whether  such  a  statute  or  constitutional  provision 
could  not  be  applied  to  existing  as  well  as  future  corporations, 
where  the  power  to  amend  the  charter  has  been  reserved  by  the 
legislature.1 

The  plan  of  cumulative  voting  is  growing  in  popularity,  and  is 
fitted  to  protect  the  minority  from  the  frauds  of  directors  who  are 
elected  wholly  by  the  majority.-' 

'dO.  Proxies. —  At  common  law  a  stockholder  has  no  right  to 
cast  his  vote  by  proxy.3     This  rule  was  evolved  from  the  analogous 


tive  plan  of  voting  in  public  elections  is 
unconstitutional.  Maynard  ft  Board, 
etc.,  47  N.  W.  Rep..  756  (Mich.,  1890). 

*See  §  501,  supra.  In  West  Virginia 
it  is  held  that  where  the  legislature  has 
the  right  to  amend  or  repeal  a  chart'  i . 
the  statute  giving  the  right  to  cumulate 
the  votes  applies  to  a  corporation  al- 
ready existing  as  well  as  later  corpora- 
tions.  Cross  ft  West  Va.,  etc.,  R'y.  12 
s.  EL  Rep..  1071  (W.  V.,..  1891) 

-Mr.  Simon  Sterns,  in  the  Cyclope- 
dia of  Political  Science,  Political  Econ- 
omy and  United  States  Hi  tory  (vol. 
III.  p.  526),  says:  "The  severest  blow, 
however,  which  could  be  dealt  to  cor- 
porate mismanagement  would  be  the 
rigorous  introduction  of  minority  repre- 
sentation in  boards  <>f  direction,  which 
would  make  secrecy  of  management  as 
against  the  interest  of  shareholders  sub- 
stantially impossible,  and  would  pre- 
vent the  possibility  of  the  recurrence  of 
some  of  the  worst  abusi  -  which  charac- 
terise their  administration.  Suppose 
twenty  directors  were  to  be  elected,  the 
reform  would  consist  in  allowing  each 
Bection  of  one-twentieth  of  the  stock- 
holding-in tercet  to  elect  one  director  by 
accumulating  their  votes  upon  a  single 
name,  or  by  distributing  their  votes  for 
one  or  more,  as  they  may  see  fit  This  is 
the  cumulative  plan.  Another  is  the 
preferential  or  list  plan,  in  allowing 
each  twentieth  part  of  the  constituency 
to  elect  one  director  by  preferences  indi- 
cated on  a  ballot  in  the  order  of  the 
names  as  printed.  When  the  first  name 
has  a  quota  sufficient  to  elect  him  —  i.  e., 
one-twentieth  of  the  votes  cast  — the  bal- 


lot is  counted  for  the  second  name,  and 
so  forth.  The  result  of  this  s\  stem  of 
minority  representation  would  be  to 
make  of  the  board  of  directors  a  re- 
duced photograph  of  the  whole  constit- 
uent body,  and  make  it  impossible  to 
capture  an  organization  like  a  railway 
from  the  actual  owners  thereof.  Any 
one  of  the  numerous  plans  suggested 
for  securing  minority  representation,  if 
applied  to  corporate  management,  would 
successfully  accomplish  that  result  The 
objection  which  has  been  urged  to  mi- 
nority repp  n  in  public  repre- 
tive  bodies  has  no  validity  to  eor- 
ite  elections,  as  in  corporations 
neither  localities  nor  persons  are  sup- 
posed to  be  represented,  but  pecuniary 
interests  only.  It  would  better  secure 
fair  representation  than  does  the  Eng- 
lish system  of  diminished  value  of  votes 
in  proportion  to  stockholders'  interest  — 
one  vote  for  every  share  up  to  ten, 
an  additional  vote  for  every  five  others 
beyond  the  first  ten,  and  one  vote  for 
every  ten  beyond  one  hundred  shares: 
or  the  classification  plan,  by  which  only 
B  few  directors  of  the  whole  retire  each 
year.  Minority  representation  would 
give  permanency  in  management,  and 
prevent  the  swamping  of  the  interest  of 
the  smaller  shareholders." 

» Taylor   r   Griswold,    14  N.   J.   Law, 
,  ;  Philips  ft  Wiekham,  1  Paige, 
590  (1829) ;  Brown  ft  Commonwealth,  :S 
Grant  (I  where  the  char- 

ter allowed  only  those  present  to  vote; 
Craig  r.  First  Presbyterian  Church,  88 
Pa.  St,  42  (1878);  Commonwealth  ft 
Bringhurst,  103  id.,   134  (1883);  People 


820 


OH.   XXXVII.]  ELECTIONS CORPORATE    MEETINGS. 


[§  610. 


rule  governing  municipal  corporations,  which  requires  all  votes  to 
be  given  in  person.  The  right  to  vote  by  proxy  is  often  given  by 
the  charter  itself.  Even  if  not  so  given  the  right  may  be  created 
by  by-law.1 

The  ordinary  proxy,  being  intended  to  be  for  an  election  merely, 
does  not  enable  the  proxy  to  vote  to  dissolve  the  corporation  or  to 
sell  the  entire  corporate  business  and  property,  or  to  vote  upon 
other  important  business,  unless  the  proxy  itself  in  general  or 
special  terms  gives  the  proxy  the  power  to  vote  on  such  questions. - 
The  sale  of  proxies  is  forbidden  by  statute  in  Xew  York.3 

Directors  may  be  enjoined  from  using  the  funds  of  the  company 
to  obtain  proxies  for  themselves  or  their  nominees.4 

"Where  a  will  directs  that  of  the  three  executors  two  shall  give 


v.  Twaddell,  18  Hun,  427,  430  (1879) ; 
Case  of  the  Dean  and  Chapter  of  Femes, 
Davies,  116,  129  (1608);  Attorney-Gen- 
eral v.  Scott,  1  Yesey,  413  (1749);  Har- 
ben  v.  Phillips,  L.  R.,  23  Ch.  D.,  14,  22. 
36  (1882).  Where  the  statute  allows  citi- 
zens to  vote  by  proxy,  an  alien  is  not 
within  its  terms,  and  cannot  do  so.  In 
re  Barker,  6  Wend.,  509  (1830). 

i  People  v.  Crossley,  69  111.,  195  (1873) ; 
Philips  v.  Wickham,  1  Paige,  590,  598 
(1829);  State  v.  Tudor,  5  Day  (Conn.), 
329  (1812);  2  Kent's  Commentaries,  294, 
295.  A  contrary  rule  is  laid  down  in 
New  Jersey.  Taylor  v.  Griswold,  14 
N.  J.  Law,  222  (1834).  Where  the  char- 
ter authorizes  voting  by  proxy  at  elec- 
tions for  directors  and  also  empowers 
directors  to  make  by-laws  not  incon- 
sistent with  the  laws  of  the  common- 
wealth, a  by-law  adopted  by  the  board 
of  directors  allowing  voting  by  proxy 
at  all  stock  elections  was  held  valid. 
Wilson  v.  Academy  of  Music,  43  Leg. 
Int.,  86.  A  by-law  may  allow  voting  by 
proxy.  Detwiler  v.  Commonwealth,  18 
Atl.  Rep.,  990  (Pa.,  1890).  Where  the 
statute  gives  a  right  to  vote  by  proxy,  a 
by-law  to  the  effect  that  only  a  stock- 
holder can  act  as  proxy  is  illegal  and 
void.  Matter  of  Lighthall,  etc.,  Co..  47 
Hun,  258  (1888).  A  corporation  as  a 
stockholder  may  of  course  give  a  proxy 
where  proxies  are  allowed.  In  re  In- 
diana, etc.,  Co.,  L.  R,  26 Ch.  D,  70(1884) 


2  Abbot  v.  American  Hard  Rubber  Co., 
33  Barb.,  578,  584  (1861);  Cumberland 
Coal  Co.  v.  Sherman,  30  Barb.,  553,  577 
(1859);  Matter  of  Wheeler,  2  Abb.  Pr. 
(X.  S.),  361  (1866),  where  the  proxy,  be- 
ing authorized  to  vote  for  increasing 
the  stock,  voted  also  to  issue  the  new 
stock  in  exchange  for  the  stock  of  an- 
other company.  Marie  V.  Garrison,  13 
Abb.  N.  C,  210,  235  (1883).  Where  di- 
rectors are  authorized  by  charter  to 
vote  by  proxy,  tho  proxy  cannot  author- 
ize a  borrowing  of  money  —  an  ultra 
vires  and  void  act  in  England.  Brown 
v.  Byers,  16  M.  &  W..  252  (1847).  A 
proxy  to  vote  is  not  a  proxy  to  demand 
a  poll.  In  re  Haven,  etc.,  Co.,  L.  R..  30 
Ch.  D.,  151  (1881);  Reg.  v.  Gov.  Stock 
Co.,  L.  R..  3  Q.  B.  D.,  442  (1878).  See, 
also,  Decatur,  etc..  Co.  v.  Xeal.  12  S.  Rep., 
780  (1893).  A  proxy  for  an  election 
does"  not  extend  to  an  election  four 
months  later,  the  first  election  not  hav- 
ing been  held,  the  proxy  being  by  a  di- 
rector, the  directors  being  authorized  to 
vote  by  proxy.  Howard  v.  Hull,  5  R'y 
&  Corp.  L.  J..  255  (Eng.,  18S8). 

3  See  Part  VII.  infra.  It  is  illegal  for 
a  stockholder  to  sell  his  right  to  vote. 
Hafer  v.  New  York,  etc.,  R.  R.,  14  Week. 
L.  Bui.,  68  (1885). 

4  Studdert  v.  Grosvenor,  55  L.  T.  Rep., 
171  (1^86). 


821 


§  610.] 


ELECTIONS  —  CORPORATE    MEETINGS.  [CH.  XXXVII. 


proxies  to  the  third  on  stock  owned  by  the  estate,  a  court  of  equity 
will  compel  the  two  to  give  the  proxies  although  the  third  intends 
to  use  the  proxy  to  continue  himself  as  president,  and  the  manage- 
ment of  the  company  is  alleged  to  be  fraudulent  and  ruinous.1 

A  proxy  should  be  in  writing,  but  it  need  not  be  in  any  particu- 
lar form;  it  need  not  be  acknowledged  or  proved,  but  it  must  be 
in  such  a  shape  as  reasonably  to  satisfy  the  inspectors  of  election 
of  its  genuineness  and  validity.2  And  to  this  end  the  corporate 
otficers  may  insist  upon  reasonable  evidence  of  the  regularity  and 
genuineness  of  the  proxy  before  allowing  it  to  be  voted.3 

Where  certificates  of  proxies  are  destroyed  after  use,  parol  evi- 
dence is  admissible  to  prove  their  former  existence  and  sufficiency/ 

A  member  who  signs  a  form  of  proxy  in  blank,  and  hands  it 
over  to  another  to  be  used  in  the  ordinary  way,  impliedly  author- 
izes that  other  to  fill  up  the  blank  with  his  own  name.5 

A  proxy  is  always  revocable.  Even  when  by  its  terms  it  is  made 
"irrevocable,"  the  law  allows  the  stockholder  to  revoke  it.  Fre- 
quently an  attempt  is  made  to  permanently  unite  the  voting 
power  of  several  stockholders  and  thus  control  the  corporation  by 
giving  irrevocable  proxies  to  specified  persons.  But  the  law  allows 
the  stockholder  to  revoke  the  proxy  at  any  time.6 


iTIiis  case  was  affirmed  on  an  even 
division  of  the  court  Lafferty  v.  Laf- 
ferty,  26  Ail.  Rep.,  388  (Pa.,  1898);  Tunis 
r.  Hustonville,  etc.,  R  R,  84  All.  Rep., 
88  (Pa.,  is'.'.. 


tained   in   Mouaseaux  V.  Urquhart,   19 
La,  Ann..  18S 

I  In  Matter  of  St  Lawrence,  etc.,  Co., 
gupra.  Bui  the  inspectors  have  no  right 
to  refuse  a  vote  bj  proxy  <>r  to  assume 


-In  the  Matter  of  Election  of  St  Law-  a  judicial  power  to  try  its  genuineness 

rence  Steamboal  Co.,  -11  N.J.  Law,  529  if  it  is  apparently  executed  by  the  stock- 

(1882);  In  re  [ndian,  etc.,  Co.,  L  R»,  26  holder  and  is  regular  in  form.    Blatter 

Ch.  D.,  70  (1884).    See  the  formofproxy  of  Cecil,  86  Bow.  Pr.,  177   1869}    Neither 

in   Marie   v.   Garrison,   18   A1>1>.    N.  ('.,  the  stockholder  nor  hi>  proxy  can  be 

210,234   (1883).      Proxies  ueed  Dot  be  compelled  by  a  by-law  to  take  an  oath 

acknowledged,    proved    or    witnessed,  that   the  former  is   the  owner  of  the 


Matt,  r  ol  Cecil,  86  Bow.  Pr.,  477  (1869). 
A  proxy  Deed  not  state  the  day  upon 
which  the  flection  is  to  be  held.  In  re 
Townsend,  18  N.  Y.  Supp.,  906  (1892)  \ 
proxy  is  good  although  the  date  when 
it  is  gn  en  is  left  blank  and  lias  not  been 
filled  in.  In  Matter  of  St  Lawn  uce, 
Co.,  supra.  Where  one  gave  a 
proxy  to  vote  at  an  annual  election,  it 
was  held  prima  facie  evidence  that  In* 
was  a  stockholder  just  l>efore  such  elec- 
tion. Barger  v.  McCul  lough,  2  Denio, 
119,  122  (is  Hi.  A  proxy  winch  had 
been  exercised  and  voted  upon  for 
many  years  without  renewal   was  sus- 


stock.  People  v.  Tibbits,  4  Coweu,  358 
(1*25);  People  r.  Kip,  4  Cowen,  382 
(1822).  The  by-laws  may  require  the 
proxies  to  be  witn<  ssed.  Barben  v.  Phil- 
lips, L  R,  28  Ch.  I)..  14  (188 

4  Hay  wood  A:  Pittsborough  Plank  road 
(\>.   r.  Bryan,    6    Jones'    L    (N.    C),  82 

■  parte  Dace,  L  R.  13  Ch.  D.,429; 
Ex  parte  Lancaster,  K  R,  5  Ch.  D.,  911. 
As  to  whether  a  blank  proxy  may  be 
filled  in  by  the  agent,  see  auoere  in  Re 
White  r.  N.  Y..  etc.,  Soc.  45  Hun,  580 
(1887),  citing  cases. 
*•  Woodruff  r.  Dubuque,  etc.,  R.  R  Co., 


822 


CH.  XXXVII.] 


ELECTIONS CORPORATE    MEETINGS. 


[§611. 


§  611.  The  transfer  look  as  evidence  of  a  right  to  vote. —  The 
question  who  is  entitled  to  vote  upon  a  particular  share  of  stock  is. 
as  a  general  rule,  answered  by  a  reference  to  the  corporate  transfer 
book.  He  who  is  there  registered  as  the  owner  of  the  stock  is  en- 
titled to  vote  upon  it.1  It  is  not  necessar}'  that  the  owner  of  stock 
produce  his  certificate  or  even  have  a  certificate  in  order  to  vote.2 


30  Fed.  Rep.,  01  (1887).     In  this  case  the 
stock   certificates  were  turned  over  to 
trustees  to  transfer  to  themselves,  with 
power  to   vote,  hold  or  sell  the  same. 
"Trust"  certificates  were  issued.    The 
court  held  that  at  any  time  previous  to 
an  actual  sale  by  the  trustees  a  certifi- 
cate-holder might  revoke  his  interest  in 
the  "  trust "  and  demand  back  his  part 
of  the  stock.     To  same  effect  and  on 
very  similar  facts,  see  Griffith  v.  Jewett, 
15  Weekly  Law  Bull.,  419;  Vanderbilt 
v.  Bennett.  2  R'y  &  Corp.  L.  J.,  409  (Pa., 
1887).     Such  irrevocable  proxies  are  not 
necessarily  void  as  against  public  policy. 
Brown  v.  Pacific  Mail  Steamship  Co.,  5 
Blatch.,  525  (1867).      It  simply  is  revo- 
cable.    A   proxy  given  for  a  valuable 
consideration   may  nevertheless   be  re- 
voked if  it  is  about  to  be  used  for  a 
fraudulent  purpose.     Reed  v.  Bank  of 
Newburgh,    6    Paige,   337    (1837).      An 
agreement  not  to  revoke  a  power  which 
from  its  nature  or  by  law  is  revocable 
is   not  binding.      People  v.    Nash.    Ill 
N.  Y.,  310,  315  (1888).     A  written  con- 
tract not  to  vote  by  proxy,  entered  into 
by  certain  shareholders    mutually   for 
the  purpose  of  preventing  the  board  of 
directors  from  consummating    a    pro- 
posed sale  of  the  franchises  of  the  cor- 
poration, has  been  held  a  pernicious  and 
unlawful  compact.     Fisher  v.  Bush.  35 
Hun,  641  (1885).     An  irrevocable  proxy 
is  prohibited  by  statute  in  New  York. 
It  may  be  revoked  even  though  coupled 
with  an  interest,  in  this  case  being  to  a 
pledgee.     Matter   of  Germicide   Co..  65 
Hun,  600  (1892).     A  proxy  for  five  years 
given  so  as   to  unite  enough  stock  to 
control   the   corporation,  the  holder  of 
the  proxy  agreeing  that  the  person  giv- 
ing the  proxy  shall   have  an  office  at  a 


salary  of  $2,500  a  year,  is  void.  At  the 
instance  of  the  latter  person  a  court  of 
equity  will  enjoin  voting  thereunder. 
Coue's  Ex'rs  v.  Russell,  21  Atl.  Rep,  847 
(N.  J.,  1891). 

1  ••  The  general  rule  is  that,  as  between 
the  corporation  and  the  person  offering 
to  vote,  the  right  follows  the  legal  title, 
of  which  the  certificates  and  stock  books 
are  the  prima  facie  evidence.     By-laws 
may  establish  a  different  rule,  and  there 
may  be  special  circumstances  to  change 
the  equities  as  to  individuals  or  even  as 
to  the  corporation."     Commonwealth  v. 
Dalzell,    25    Atl.    Rep.,   535    (Pa.);    Ex 
parte  Willcocks,  7  Cowen,  402   (1827), 
stating,  however,  that  in  certain  cases, 
like  that  of  stock  held  for  the  corpora- 
tion  itself,    a    different    rule    prevails; 
State  v.  Ferris,  42  Conn.,  560,  568  (1875), 
sustaining  a  vote  by  a  bankrupt,  the 
court  saying :  "  The  party  who  appears 
to  be  the  owner  by  the  books  of  the 
corporation  has  the  right  to  be  treated 
as  a  stockholder  and  to  vote  on  what- 
ever stock  stands  in  his  name : "  Hoppin 
v.  Buffum,  9  R.  I.,  513  (1870).  the  court 
saying :  "  In  a  case  of  a  dispute  as  to  a 
right  to  vote,  the  books  of  the  corpora- 
tion are  the  prima  facie  evidence :  at 
any  rate,  the  corporation   cannot  be  re- 
quired to  decide  a  disputed  right.    .    .    . 
Upon  any  other  rule  it  could  never  be 
known  who  were  entitled  to  vote  until 
the    courts  had   decided   the  dispute." 
Allen  v.  Hill.  16  Cat,  113  (1860);  In  re 
St.  Lawrence,  etc.,  Co.,  44  N.  J.  L,  529 
(1882).     See,  also,  next  section  for  vari- 
ous cases  on  the  conclusiveness  of  the 
transfer  book. 

2  Beckett    v.    Houston,    32    Ind.,    39:? 
(1869). 


823 


§  611.] 


ELECTIONS  —  CORPORATE    MEETINGS. 


[CH. 


XXXVII. 


Neither  will  indebtedness  for  the  subscription  price  prevent  the 
stockholder  from  voting.1  So,  also,  it  is  immaterial  that  the  person 
in  whose  name  the  stock  is  registered  is  merely  the  nominal  holder, 
and  that  another  person  really  owns  the  stock.2  A  subscriber  upon 
a  condition  not  yet  performed  may  vote  upon  the  question  whether 
that  condition  shall  or  shall  not  be  performed.3  And  stock  issued 
for  construction,  the  work  not  having  been  performed,  may  never- 
theless be  voted.4 

Persons  who  are  not  stockholders  on  the  day  an  election  is 
held  cannot  vote  though  they  were  stockholders  on  the  day  the 
election  should  have  been  held.5  The  corporation  may  be  com- 
pelled to  register  transfers  made  merely  for  the  purpose  of  increas- 
ing the  voting  power  of  the  stock,  there  being  a  limit  to  the  num- 
ber of  votes  one  stockholder  may  cast.8  The  holders  of  stock 
issued  by  a  stock  dividend  are  entitled  to  vote.7 

Where  the  corporation  keeps  a  stock  certificate  book  but  no 
transfer  book,  a  transfer  on  the  back  of  a  certificate,  which  is  then 
canceled  and  pasted  back  in  the  certificate  book,  and  a  new  certifi- 
cate issued  to  the  transferee,  is  a  sufficient  transfer  to  constitute  a 
transferee  a  stockholder.8     If  the  stock  book  is  lost  the  directors 


1  Birmingham,  etc.,  lfy  Co.  v.  Locke.  1 
Q.  B.,  256  (1841);  Savage  v.  Ball.  17 
N.  J.  Eq.,  142  (1864);  People  ,-.  Albany, 
etc.,  R  R.  55  Barb.,  -I  I.  386  (.1869): 
Downing  v.  Potts,  2:5  N.  J.  Law.  (in 
(1851).  So  held  iu  this  case,  even  though 
the  subscriber  had  paid  nothing  on  his 
stock. 

-'State  of  Nevada  v.  Leete,  16  Nev.,  242 
(1881),  where  a  man  put  stock  in  the 
name  of  his  son  in  order  to  qualify  him 
to  serve  as  a  director. 

■J  Greenville,  etc.,  R  R  Co.  r.  Cole- 
man, 5  Rich.  Law  (S.  C),  118,  135  (1851> 

•Savage  V.  Ball,  17  N.  J.  Eq..  142 
(1864).  Where  a  sale  of  bonds  having  a 
voting  power  is  made  subject  to  the 
ratification  of  another  party,  the  vendor 
has  the  right  to  vote  such  bonds  until 
the  sale  is  so  ratified.  State  d.  McDan- 
iel,  22  Ohio  St..  354  (1872).  The  regis- 
tered stockholder  may  vote  even  though 
he  has  transferred  his  certificates  to  an- 
other. In  re  Argus,  etc.,  Co.,  48  N.  W. 
Rep.,  347  (N.  D„  1891). 

5  Johnston  v.  Jones,  23  N.  J.  Eq.;  216, 
228  (1872). 


6 In  re  Stran ton  Iron  &  Steel  Co.,  L. 
R,  16  Eq.,  559  (1873  .  Moffatt  v.  Far- 
quhar,  L  R.,  7  Ch.  !>..  591  (1878).  See, 
ako,  ?'  HIS  But  where  valuable  privi- 
leges oilier  than  voting  attach  to  stock. 
a  nominal  transfer  to  obtain  these  privi- 
leges will  not  be  sustained  as  regards 
them.  Appeal  of  the  Academy  of  Music, 
108  Pa  St..  r.U)  (1885),  where  free  ad- 
mission to  a  theatre  was  given  to  stock- 
bolders. 

i  Bailej  v.  Railroad  Co.,  22  Wall..  604, 
i  8*3  4).  But  the  rule  is  otherwise  as 
regards  the  holders  of  a  scrip  dividend. 
hi.,  where  the  scrip  was  redeemable 
\>\  the  company  in  cash  or  convertible 
into  stock. 

Mli'  may  vote  at  elections,  and  an  as- 
signment by  the  corporation  on  the  di- 
rection of  officers  elected  by  such  a 
transferee  is  valid.  Such  a  transfer  is 
valid  also,  although  a  by-law  provided 
that  before  selling  his  stock  a  stock- 
holder must  offer  it  to  other  stockhold- 
ers for  purchase.  American  Nat'i  Bank 
v.  Oriental  Mills,  23  Atl.  Rep.,  795  (R  I., 
1891). 


824 


en.  xxxvu.J 


ELECTIONS  —  CORPORATE   MEETINGS. 


[§011. 


may  substitute  a  new  one,  filled  out  as  accurately  as  is  possible.1 
Where  the  transfer  book  differs  from  the  stock  ledger  the  former 
governs.2  A  by-law  authorizing  the  administration  of  an  oath  to 
examine  the  stockholders  as  to  their  title  is  illegal  and  void  where 
the  charter  regulates  the  right  to  vote.3 

There  are  some  exceptions,  however,  to  the  rule  that  the  trans- 
fer book  is  conclusive  on  the  question  of  who  is  entitled  to  vote. 
Thus,  the  inspectors  of  election  may  inquire  whether  the  stock 
which  is  about  to  be  voted  belongs  to  the  corporation,  and  if  it 
does  they  may  reject  the  vote.4  So,  also,  they  may  allow  an  ad- 
ministrator to  vote,  although  the  stock  stands  in  the  name  of  the 
deceased  person.5 

In  some  courts  this  rule  is  carried  still  further,  and  it  is  held  that 
the  inspectors  of  election  may  allow  the  pledgor  to  vote,  although 
the  stock  stands  in  the  name  of  the  pledgee  on  the  books  of  the 
company;6  and  it  has  also  been  held  that  the  purchaser  of  certifi- 
cates of  stock  may  vote  thereon,  although  the  stock  stands  on  the 
books  of  the  company  in  the  name  of  the  vendor.7 


i  Re  Schoharie,  etc.,  R  R,  12  Abb.  Pr. 
(N.  S.),  394 

2  Downing  v.  Potts,  23  N.  J.  L.,  66 
(1851). 

3  People  v.  Kip,  4  Cowen,  382,  note 
(1822). 

*See  §  613,  infra. 

5  See  §  612,  infra. 

»  See  §  612,  infra. 

7  In  the  case  Allen  v.  Hill,  16  Cal.,  113 
(1860),  the  court  said:  " It  would  seem, 
upon  principle,  that  the  real  owner  of 
stock  should  be  entitled  to  represent  it 
at  the  meetings  of  the  corporation,  and 
that  the  mere  fact  that  he  does  not  ap- 
pear as  owner  upon  the  books  of  the 
company  should  not  exclude  him  from 
the  privilege  of  doing  so."  In  Illinois 
it  is  held  that  the  corporation  must  al- 
low the  real  owner  of  the  stock  to  vote, 
whether  he  be  the  registered  owner  or 
not,  where  the  corporation  has  no  by- 
law requiring  a  registry  of  transfers, 
and  the  vendee  produces  his  certificate 
of  stock  duly  transferred  on  the  back. 
People  v.  Devin,  17  111.,  84  (1855).  In  a 
stockholder's  vote  ratifying  the  acts  of 
directors,  a  stockholder  has  no  right  to 
vote  stock  which  he  has  transferred  to 
others,  even  though  it  still  stands  in  his 


name  on  the  books.  Graves  v.  Mono, 
etc.,  Co.,  22  Pac.  Rep.,  665  (Cal.,  1889). 
Where,  however,  the  unregistered 
transferee  did  not  challenge  the  right 
of  his  transferrer  to  vote  and  did  not 
claim  the  right  to  vote,  but  attacked 
the  election  afterwards  by  quo  ic-arranto, 
his  suit  failed.  People  v.  Robinson,  64 
Cal,  373  (1883).  State  v.  Smith,  15  Ore., 
98,  118  (1887),  contains  a  dictum  that 
the  purchaser  of  a  certificate  of  stock 
cannot  vote  on  the  stock  until  it  has 
been  transferred  into  his  name.  Wliere 
both  the  legal  and  equitable  owners  of 
stock  agree  as  to  how  stock  shall  be 
voted,  other  stockholders  cannot  com- 
plain that  the  vote  was  not  cast  in  ac- 
cordance with  law.  State  V.  Ferris.  42 
Conn.,  560  (1875),  where  a  bankrupt 
voted  stock  still  standing  in  his  name. 
State  v.  Pettineli,  10  Nev.,  141  (1875). 
In  this  last  case  the  registered  holder 
had  transferred  the  certificate  but  ob- 
tained it  again  and  exhibited  it  at  the 
meeting.  If  a  vote  is  not  challenged  an 
objection  to  it  afterwards  may  not 
meet  with  much  favor.  In  the  Matter 
of  Long  Island  R.  R..  19  Wend.,  37.  44 
(1837).     See,  also,  §  620,  infra. 


825 


§  612.] 


ELECTIONS CORPORATE    MEETINGS.  [CH.  XXXVIL 


In  New  York,  by  statute,  the  corporate  transfer  book  is  made 
conclusive  upon  the  question  Avho  may  vote.1  There  are  various 
other  statutory  provisions  in  New  York  regulating  voting.2 

§  612.  The  rigid  of  trustees,  pledgees,  administrators,  etc.,  to 
V0(6t — it  is  the  general  rule  that  a  person  holding  stock  as  trustee 
is  entitled  to  vote  upon  the  stock,  not  only  where  he  is  duly  regis- 
tered as  a  stockholder  in  that  capacity,  but  also  where  he  is  regis- 
tered absolutely  as  a  stockholder  upon  the  books  of  the  corpora- 
tion.3 If  the  trustee,  however,  is  disqualified  from  being  trustee 
of  the  stock,  as  in  the  case  of  a  trust  company  tbat  represents  con- 
flicting interests,  the  courts  will  enjoin  it  from  voting.4 


1  Yandenburu'h  r.  Broadway  Railway 
Co.,  29  Hun.  848,  355  I L883  ;  In  the  Mat- 
ter of  the  Long  Island  R.  R.  Co..  19 
Wend.,  37  (1837);  In  the  Matter  of  the 
Mohawk  &  Hudson  R  R  Co..  id,  135 
(1838).  A  registered  stockholder  is  en- 
titled to  vote  although  he  has  assigned 
his  certificate  of  Btock,  Schoharie  Val- 
ley R  R  12  Abb.  Pr.  X.  M  394 
(1872). 

2  See  §  619.  infra.  Strong  v.  Smith,  15 
Bun,  ...  J78X  holding  that  the  trans- 
fer book  is  conclusive  upon  the  inspect- 
ors, but  that  the  court  has  power  to  go 
bark  of  the  entries  therein  and  inquire 
whither,  as  for  instance  in  this  case,  a 
transfer  of  share-  was  an  absolute  sale 
or  a  pledge,  and  thus  whether  the  trans- 
ferrer or  transferee  has  the  right  to  vote 
them,  citing  Ex  parte  Holmes,  5  Cow., 

Matter  of  Long  Island  R  R.  Co., 
supra;  and  Bee  N.  V.  L.  J.,  June  29. 
Although  only  stockholders  who  still 
own  their  stock  are  allowed  to  vote,  a 
person  who  has  given  an  option  on  his 
stock  is  nevertheless  entitled  to  vote  on 
it.  In  re  Newcombe,  Is  N.  V.  Supp.,  16 
(1891).  In  New  York,  when  for  any 
reason  the  corporation  fails  to  hold  an 
election  at  the  stated  time  as  provided 
in  the  charter  or  by-laws,  and  the  elec- 
tion is  held  subsequently,  only  those 
stockholders  are  entitled  to  vote  who 
were  qualified  electors  at  the  time  when 
the  election  ought  to  have  been  held 
Vandenburgh  V.  Broadway  R  R  Co., 
29  Hun.  348  (1883);  People  u.  Tibbets,  4 
Cowan,  358  (1825). 


3  Widow  Conant  v.  Millaudon,  5  La 
Ann.,  542  (1850);  Wilson  v.  Proprietors 
of  Central  Bridge,  9  R  I.,  590  (1870); 
Hoppin  v.  Buffum,  9  id..  513  (1870),  the 
court  sayiug  :  "  If  the  trust  was  of  such 
a  nature  that  the  trustee  has  the  con- 
trol and  management  of  the  property, 
and  is  to  exercise  his  discretion  con- 
cerning it,  he  is  the  proper  person  to 
represent  and  vote  upon  it  And  the 
corporation  cannot  be  required  to  ex- 
amine into  the  nature  of  the  trust  with 
a  ?iew  to  decide  as  to  the  right  to  vote." 
In  re  Barker,  6  Wend.,  509  (1831);  In 
the  Matter  of  the  Mohawk  &  Hudson 
R  R  Co.,  19  id..  135  (1838);  In  the  Mat- 
ter of  the  North   Bhore  States  Island 

3  Barb..  556  (1872).  holding, 
also,  that  the  administrator  of  the  trustee 
may  vote  the  stock;  Pender  n  Lush- 
ington,  L  R.,  G  Ch.  D.,  70  (1877).  If  the 
trustees  disagree  as  to  how  the  stock 
shall  be  voted  the  courts  have  power  to 
direct  them.  Wauneker  v.  Hitchcock, 
38  Fed  Rep.,  383(1889). 

4  A  trust  company  has  no  power  to 
hold  as  trustee  and  vote  the  majority  of 
the  stock  of  a  great  railroad  system, 
especially  where  it  is  also  the  trustee  in 
a  trust  deed  of  the  company.  Clarke  r. 
Central  R  R,  etc.,  60  Fed.  Rep.,  338 
(1892),  the  court  saying:  "There  are 
many  situations  in  which  stock  may  be 
so  placed  that  it  becomes  inequitable 
or  illegal  for  it  to  be  voted.  The  law 
places  the  voting  power  of  pledged  stock 
in  the  pledgor  or  mortgagor,  even  where 
there  is  no  express  stipulation  to  tint 


826 


CH.  XXXVII.] 


ELECTIONS  —  CORPORATE    MEETINGS. 


[§  612. 


In  California  the  real  owner  of  stock  may  vote  on  it,  although 
it  stands  on  the  books  of  the  company  in  the  name  of  a  "  dummy" 
as  "trustee."  x 

A  pledgor  of  stock  is  entitled  to  vote  upon  it  in  all  cases  where 
the  stock  continues  to  stand  on  the  books  of  the  company  in  the 
name  of  such  pledgor.2  And  even  where  the  pledgee  has  caused 
the  stock  to  be  transferred  into  his  own  name,  as  by  law  he  is  al- 
lowed to  do,3  it  has  been  held  that  the  pledgor  may  demand  the 
right  to  vote  at  elections,  and  that  upon  proof  of  the  facts,  the  in- 
spectors of  election  must  allow  the  pledgor  to  vote  the  stock.4 

It  must  be  conceded,  however,  that  the  established  rule  is  to  the 
contrary.5    Nevertheless  the  pledgor  may  control  the  vote  on  his 


effect  And  where  the  pledgor  or  mort- 
gagor is  disqualified  to  vote  the  stock 
the  disqualification  extends  as  well  to 
the  pledgee  or  trustee." 

1  Under  the  California  statute  stock 
placed  by  the  secretary  in  the  name  of 
a  "dummy,*'  as  trustee,  cannot  be  voted 
by  such  dummy,  the  real  owners  of  the 
stock  not  having  assented  thereto,  even 
though  for  business  reasons  they  did 
not  wish  to  have  the  stock  issued  to 
themselves.  Stewart  v.  Mahoney  Min. 
Co.,  54  Cal.,  149  (1880).  To  same  effect, 
Ex  parte  Holmes,  5  Cowen,  426  (1826). 
See,  also,  American  Nat'l  Bank  v.  Orien- 
tal Mills,  23  Atl.  Rep.,  795  (R.  I.,  1891), 
holding  that  the  beneficial  owners  are 
entitled  to  say  how  the  vote  shall  be 
cast  In  this  case  the  stock  had  been 
surrendered  and  new  certificates  issued, 
but  no  transfer  book  was  kept. 

"-In  re  Barker,  6  Wend.,  509  (1831); 
Ex  parte  Willcocks,  7  Cowen,  402  (1827) ; 
Matter  of  Cecil,  36  How.  Prac,  477 
(1869) ;  Schofield  r.  Union  Bank,  2  Cr. 
C.  C,  115  (1815):  Matter  of  Election  of 
St.  Lawrence,  etc.,  Co.,  44  N.  J.  L.,  529, 
540  (1882),  a  dictum.  Although  the 
pledgor  of  stock  votes  the  stock  in  favor 
of  a  lease  of  the  corporate  property  on 
such  terms  that  no  dividends  on  the 
stock  are  possible,  yet  in  the  absence  of 
fraud  the  pledgee  is  bound.  Gibson  v. 
Richmond,  etc.,  R  R,  37  Fed.  Ren.,  743 
(1889). 

-  See  §  466. 

4  In  Oregon  it  is  held  that  at  common 

827 


law  the  real  owner  of  stock  is  entitled 
to  vote  it  even  though  it  stands  on  the 
corporate  books  in  the  name  of  his 
pledgee.  It  is  denied  that  the  transfer 
book  is  binding  upon  the  inspectors  of 
election,  and  the  decisions  to  that  effect 
in  New  York  are  stated  to  be  based  on 
tlie  New  York  statutory  law.  State  v. 
Smith,  15  Oreg.,  98  (1887).  See,  also, 
Allen  v.  Hill,  16  Cal.,  119  (1860),  to  sub- 
stantially the  same  effect 

5  The  pledgor  and  pledgee  of  stock 
may  agree  between  themselves  as  to 
who  should  vote  the  stock.  If  there  is 
no  agreement,  the  right  to  vote  should 
follow  the  legal  title;  in  other  words, 
the  title  as  it  appears  on  the  corporate 
books.  Even  under  a  statute  authoriz- 
ing inspectors  of  election,  upon  a  chal- 
lenge, to  determine  whether  the  party 
who  appears  to  be  the  owner  is  really 
the  owner,  the  pledgee  is  entitled  to 
vote  the  stock  standing  in  his  name 
where  there  is  no  agreement  to  the  con- 
trary. Commonwealth  v.  Dalzell,  25 
Atl.  Rep.,  535  (Pa.).  A  pledgee  into 
whose  name  the  stock  has  been  trans- 
ferred may  vote  it.  He  is  a  "  boun  fide  " 
stockholder  as  required  by  the  statute. 
The  pledgor  cannot  appear  at  the  meet- 
ing and  vote  the  stock.  In  re  Argus 
Printing  Co.,  48  N.  W.  Rep..  347  (N.  D.. 
1891),  It  is  not  a  conversion  for  one 
who  holds  stock  as  pledgee  to  attend 
corporate  meetings  and  vote  upon  the 
stock.  Heath  r.  Silverthorn  Lead  Min- 
ing, etc.,  Co.,  39  Wis.,  146  (1S75). 


§  612.] 


ELECTIONS CORPORATE    MEETINGS. 


[CH.  XXXVII. 


stock  if  he  desires  so  to  do.  In  many  of  the  states  there  are  stat- 
utes which  give  to  the  pledgor  the  right  to  vote  the  stock.1  And 
even  where'  there  is  no  statute  to  protect  the  pledgor's  right  to 
vote  the  courts  will  intervene.2  By  a  bill  in  equity  the  pledgor 
may  compel  the  pledgee  to  give  him  a  proxy  to  vote  the  stock.3 
But  in  order  to  invoke  the  extraordinary  powers  of  a  court  of 
equity  in  this  respect,  the  pledgor  must  show  that  the  interests  of 
the  company  have  been  or  will  be  prejudiced,  or  that  the  value  of 
the  stock  has  been  or  will  be  impaired,  and  that  the  intervention 
of  the  court  is  necessary  to  protect  the  pledgor's  rights.4 

An  administrator  or  executor  may  vote  on  the  stock  of  the  de- 
ceased stockholder,  even  though  such  stock  has  not  been  trans- 
ferred to  the  executor  or  administrator  on  the  books  of  the  com- 
pany.5    A  partner  may  vote  upon  stock  belonging  to  the  firm  and 


'  So  in  New  York,  see  Part  VII,  infra. 
Also  Strong  v.  Smith,  15  Hun,  222  (18T8). 
Concerning  a  similar  statute  in  Rhode 
Island,  see  Sayles  V.  Brown,  40  Fed.  Rep., 
8  (1889).  Under  the  Colorado  statutes 
an  owner  who  has  pledged  his  stock 
may  represent  the  stock  at  all  meetings 
of  the  stockholders  and  vote  accord- 
ingly. Miller  et  <>/.  v.  .Murray,  30  Pac. 
Rep.,  46  (Col.,  1892). 

2Scholfield  v.  Union  Bank,  2  Cr.  C.  C, 
115(1815);  State  v.  Smith.  15  Oreg..  98 
(1887).  where  the  pledgor  obtained  an  in- 
junction against  the  pledgee  voting  the 
stock  and  the  pledgor  was  allowed  by 
the  inspectors  to  vote. 

3  Vowell  v.  Thompson,  3  Cranch,  C.  C, 
428  (1829) ;  Hoppin  v.  Buffura,  9  R  I., 
513  (18T0),  holding  that  although  the 
pledgor  may  by  a  bill  in  equity  compel 
the  pledgee,  in  whose  name  the  stock 
stands,  to  make  a  retransfer  or  to  give 
a  proxy  to  the  pledgor,  yet  where  the 
pledgor  for  many  years  allows  the 
pledgee  to  vote  the  stock  and  claims  the 
right  at  an  election  only  after  the  bal- 
lots are  cast  and  are  being  counted,  the 
court  will  not  set  the  election  aside. 

<MeHenry  v.  Jewett,  93  N.  Y.,  58 
(1882).  Where  the  owner  of  a  majority 
of  the  stock  has  been  fraudulently  de- 
prived of  her  stock  by  her  pledgee,  who 
has  thereby  deprived  her  of  the  control 
and  claims  the  stock  as  his  own,  the 


court  will  enjoin  him  from  voting  the 
stock  and  will  appoint  a  receiver  of 
such  stock  pendente  lite.  Ayer  r.  Sey- 
mour, 5  N.  Y.  Supp..  G50  (Com.  PI.,  1889). 
Where  a  person  pledges  his  stock  as  ad- 
ditional security  to  a  corporate  creditor 
who  has  bonds  of  the  company  in  pledge 
for  the  same  debt,  such  pledge  of  bonds, 
however,  being  illegal,  the  pledgor  of 
the  stock  cannot  compel  the  creditor  to 
resort  to  the  bonds  first ;  nor  although  a 
fictitious  sale  of  the  stock  is  alleged  can 
he  compel  the  transferee  of  the  stock 
to  return  the  stock  so  that  the  pledgor 
may  vote  it  unless  the  pledgor  pays  the 
amount  due.  Hinckley  v.  Pfister,  53  N. 
W.  Rep.,  21  (Wis..  1892 

'A  foreign  executor  may  vote  stock 
belonging  to  the  estate  even  though  the 
st<  >vk  stands  in  the  name  of  the  deceased 
stockholder.  In  re  Cape,  etc.,  Co.,  16 
Atl.  Rep.,  191  (N.  J.,  1888);  In  the  Mat- 
ter of  the  North  Shore  Staten  Island 
Ferry  Co.,  03  Barb.,  556  (1872).  holding 
that  an  administrator  may  vote  upon 
stock  standing  in  the  name  of  the  de- 
ceased person,  even  though  the  latter 
held  the  stock  as  trustee.  Stock  held 
jointly  by  three  executors  cannot  be 
voted  unless  they  all  agree  upon  the 
vote.  Tunis  v.  Hestonville,  etc.,  R  R, 
24  Atl.  Rep.,  88  (1892).  In  a  proceeding 
to  dissolve  a  corporation  the  adminis- 
trator  is   the   proper   representative  of 


828 


GH.  XXXVII.] 


ELECTIONS CORPORATE    MEETINGS. 


[§  012. 


registered  in  the  partnership  name.1  Where  stock  is  entered  in 
the  corporate  books  in  the  name  of  a  person  as  an  officer  of  an- 
other corporation,  the  successor  in  office  of  that  person  may  vote 
the  stock  without  a  transfer  on  the  corporate  books.2  Where  a 
corporation  is  authorized  to  hold  stock  in  another  corporation  it  is 
entitled  to  vote  such  stock.3  When  a  municipal  corporation  is  a 
stockholder  in  a  private  corporation  it  is  entitled  to  vote  upon  its 
stock  in  the  same  way  as  any  other  stockholder.4  The  fact  that 
the  government  or  a  single  person  owns  all  the  stock  of  a  company 
does  not  put  an  end  to 'the  corporate  existence.5  Where  joint 
owners  of  stock  disagree  as  to  its  vote,  the  vote  is  to  be  rejected.6 
A  corporation  as  a  stockholder  may  vote  its  stock  by  an  agent.7 

A  receiver  who  is  in  possession  of  shares  of  stock  generally  votes 
such  stock  without  his  right  to  do  so  being  questioned.  Some- 
times the  courts  upon  appointing  a  receiver  of  stock  expressly  au- 
thorize him  to  vote  the  stock  and  sometimes  direct  him  how  to 
vote  it.8 


stock  owned  by  the  estate.  Wolfe  v. 
Underwood,  12  S.  Rep.,  234  (Ala.,  1893). 
The  administrator  and  not  the  heirs  at 
law  have  the  right  to  vote.  Schoharie 
Valley  R.  R.  Case,  12  Abb.  Pr.  (N.  S.), 
394  (1872). 

1  Kenton  Furnace  Railroad  and  Mfg. 
Co.  v.  McAlpin,  5  Fed.  Rep.,  737  (1880). 
In  California  he  may  vote  such  stock 
where  the  stock  belongs  to  the  firm  but 
is  registered  in  the  name  of  the  other 
partner  who  is  dead.  Allen  v.  Hill,  16 
Cal.,  113  (1860). 

2  Farmers',  etc.,  Co.  v.  Chicago,  etc., 
R'y  Co.,  27  Fed.  Rep.,  146,  156  (1886); 
Mousseaux  v.  Urquhart,  19  La.  Ann., 
482  (1867).  Contra,  In  the  Matter  of  the 
Mohawk  &  Hudson  R.  R  Co.,  19  Wend., 
135,  146  (1838),  holding  that  the  word 
"cashier"  attached  to  a  stockholder's 
name  does  not  authorize  a  succeeding 
cashier  to  vote  the  stock. 

s  Davis  v.  U.  S.,  etc.,  Co.,  25  Atl.  Rep., 
982  (Md.,  1893).     Cf.  §  616. 

4  See  §  99,  supra.  Where  stock  in  a 
railroad  is  owned  by  a  part  of  a  county, 
that  part  becomes  a  municipality  for 
the  purpose  of  owning  and  voting  the 
stock.  Hancock  v,  Louisville,  etc.,  R.  R, 
145  U.  S.,  409  (1892). 


5  The  United  States  government, 
though  the  owner  of  all  the  stock  of  a 
canal  company,  may  continue  as  a 
stockholder  and  keep  up  the  corporate 
existence  by  allowing  the  directors  to 
retain  one  share  each  as  a  qualification 
share.  United  States  v.  Louisville,  etc.. 
Canal  Co.,  4  Dill.,  601  (1873).  See,  also, 
§  709,  infra. 

6  Re  Pioneer  Paper  Co.,  36  How.  Pr., 
Ill  (1865). 

'State  v.  Rohlffs,  19  Atl.  Rep.,  1099 
(N.  J.,  1890). 

8  A  court  may  appoint  a  receiver  to 
hold  an  election,  etc.,  where  the  entire 
interests  in  the  corporation,  including 
the  stock,  belong  to  parties  who  have 
been  defrauded.  King  v.  Barnes,  51 
Hun,  550  (1889);  aff'd,  113  N.  Y.,  655. 
See,  also,  dictum  in  Wanneker  v.  Hitch- 
cock, 38  Fed.  Rep.,  383  (1889),  where  the 
trustees  of  stock  disagreed  as  to  voting  ; 
People  v.  Albany,  etc..  R.  R..  55  Barb, 
344,  371  (1869),  where  a  receiver's  vote 
was  set  aside,  fraud  being  involved  and 
the  appointment  being  invalid  ;  Ameri- 
can Inv.  Co.  v.  Yost,  25  Abb.  N.  C,  274 
(1890).  where  a  receiver  of  stock  was  in- 
structed how  to  vote,  the  action  being 
to  enforce  an  agreement  to  place  stock 


829 


§§  613,  G14.]  ELECTIONS  —  CORPORATE    MEETINGS.  [CH.  XXXVII. 

§  613.  The  corporation  cannot  vote  upon  shares  of  its  own  stock. 
Shares  of  stock  owned  by  the  corporation  itself  cannot  be  voted 
either  directly  by  the  corporate  officers  or  indirectly  by  a  trustee 
of  the  corporation.  This  is  the  established  rule,  whether  the  stock 
is  registered  in  the  name  of  the  corporation  or  not.1 

Where  the  directors,  just  before  the  election,  issue  or  sell  stock 
owned  by  the  corporation,  the  purpose  of  such  issue  or  sale  being 
to  control  the  election,  the  courts  will  interfere  at  the  instance  of 
other  stockholders  where  an  actual  fraud  is  involved.-' 

§  614.  Injunction  against  elections  and  against  voting  particular 
stock.— A  court  of  equity  has  power  to  enjoin  the  holding  of  an 
election  by  a  corporation  during  the  pendency  of  a  suit.3 


in  the  hands  of  trustees  until  the  dehts 
of  the  company  and  chief  stockholder 
were  paid. 

1  Ex  parte  Holmes,    5    Cowen.   420 
(1826);  McNeely  v.  Woodruff,  13  N.  J. 
Law,    352   (1833);    American    Railway 
Frog  Co.  v.  Haven,  101  Mass.,  398  (1869); 
State  v.  Smith,  48  Vt.  266  (1876);  Mons- 
seaux  v.  Urquhart,    19  La.  Ann..   482 
(1867);    United     States    v.     Columbian 
Ins.   Co.,  2    Cranch,  C.  C,  266  (1821); 
New  England  Mutual,  etc.,   Ins.  Co.  v. 
Phillips,  141  Mass..  535  (1880),  where  in- 
come bonds  entitled  to  vote  were  held 
to  have  lost  that  right  when  they  were 
paid;  Brewster  v.  Hartley.  37  CaL,  15 
(1869),  where  the  company  had  pledged 
its  stock.     If  all  the  stockholders  con- 
sent the  stock  owned  by  the  corpora- 
tion may  be  voted.     Farwell  v.  Hough- 
ton, etc.,  Works,  8  Fed.  Rep.,  66  (1881). 
Where  a  mortgage  can  be  given  only 
upon  the  vote  of  the  stockholders,  stock 
owned   by   the  corporation   cannot   be 
voted,  but  the   pledgee  of  such   stock 
from   the  corporation   was   allowed  to 
vote.    Vail  v.  Hamilton,  85   N.  Y.,  453 
(1881).     Directors  elected  by  votes  upon 
stock  owned  by  the  corporation  are  ille- 
gally  elected.     Ex    parte    Desdoity,    1 
Wend.,  98  (1828). 
*See  §  615,  infra,  on  this  subject 
3  In  the  case  of  Walker  r.  Devereaux, 
4  Paige,  229,  247  (1883),  Chancellor  Wal- 
worth said :  "  This  court  unquestionably 
has  the  power  to  prevent  their  election 
by  an   injunction   operating   upon   the 


commissioners,  restraining  them  from 
acting  as  inspectors  of  the   election." 
In   Haight   v.    Day,  1  John.,  18  (1814), 
Chancellor  Kent  dissolved  the  injunc- 
tion but  did  not  question  the  power  of 
the  court  to  grant  it.     High  on  Injunc- 
tions, sec.  1230.  says :  "  While  the  pro- 
priety     of    equitable    interference    by 
injunction  with  the  election  of  officers 
of  private  corporations   has  been   fre- 
quently criticised,  and  with  no   incon- 
siderable show  of  injustice,  the  jurisdic- 
tion itself,  although  sparingly  exercised, 
is   too  firmly  established  to  be   readily 
shaken  without  the  intervention  of  leg- 
islative authority.     The  jurisdiction  is, 
however,  almost  entirely  of  American 
growth,  the  English  authorities  afford- 
ing few    instances  of  its   exercise."     A 
court  of  equity  has  jurisdiction  on  a  bill 
in  equity  to  enjoin  an  election,  although 
the  statute  provides  for  a  summary  rem- 
edy by  application  to  the  court  where 
the  relief  asked  for  by  the  bill  involves 
also   the  transfer  of  stock.     Archer  v. 
American,   etc.,   Co.,   24  Atl.    Rep.,  508 
(X.  J.,  1892>     The  court  may  enjoin  the 
company  from  receiving  any  votes  at 
an    election    unless  the    votes    of    the 
plaintiff  are  received.     Brown  r.  Pacific 
Mail,  etc.,  Co..  5  Blatch.,  525  (1867).     In 
the  latter  case  Judge  Blatchford  said : 
"As  to  the  character  of  the  injunction 
asked  for,  it  is  laid  down  in  Judge  Red- 
field's  Treatise  on  the  Law  of  Railways 
(vol.  2,  sec.  221),  that  'it  has  been  com- 
mon to  produce  a  positive  effect  through 


830 


CH.   XXXVII.] 


ELECTIONS  —  CORPORATE    MEETINGS. 


[§  614. 


-A  court  of  equity  may  also  enjoin  the  voting  of  particular  stock. 
In  order  to  obtain  such  an  injunction,  however,  the  complainant 
must  show  that  the  defendant  intends  to  vote  the  stock;  that  he 
has  no  equitable  right  to  do  so;  that  the  effect  of  the  vote  will  be 
to  control  the  election;  and  that  irreparable  and  permanent  injury 
will  come  to  the  corporation  or  to  the  stockholders  unless  the  in- 
junction is  granted.1 


an  injunction  out  of  chancery  by  means 
of  a  prohibitory  order,'  and  that  a  man- 
datory order  is.  in  courts  of  equity, 
seldom  denied  unless  the  remedy  at  law 
is  perfectly  adequate."  In  this  case 
Judge  Blatchford  enjoined  the  election 
inspectors  from  holding  any  election 
until  the  further  order  of  the  court,  un- 
less certain  persons  should  first  be  per- 
mitted to  vote  certain  stock ;  and  also 
enjoined  certain  persons  from  voting 
any  stock  until  after  certain  other  per- 
sons had  been  afforded  an  opportunity 
to  vote  their  stock.  In  the  case  of  Shel- 
merdine  v.  Welsh.  47  Legal  Intell.,  26 
(Phil.  Com.  PL,  January,  1890),  the  court 
did  not  deny  its  power  to  enjoin  the 
election,  but  said  :  "  The  case  is  not  suf- 
ficiently clear  to  warrant  a  preliminary 
injunction  that  would  prevent  an  elec- 
tion on  the  day  named  in  the  charter, 
and  might  cause  the  irreparable  injury 
which  such  remedies  are  given  to  pre- 
vent." If  the  election  is  held  in  viola- 
tion of  an  injunction,  this  fact  will  be 
considered  in  quo  warranto  proceedings. 
People  v.  Albany,  etc.,  R.  R,  55  Barb. 
344,  384  (1869).  The  injunction  generally 
runs  against  the  inspectors,  president, 
directors,  officers,  agents,  servants,  etc. 
Campbell  v.  Poultney,  6  Gill  &  J.  (Md.), 
44  (1834).  It  has  been  held  that  an  in- 
junction permanently  forbidding  the 
holding  of  any  election  whatever  is  an 
interference  with  the  management  of 
corporate  affairs,  to  which  the  courts 
will  decline  to  be  a  party;  and  such  an 
injunction  would,  if  granted,  be  void. 
People  v.  Albany,  etc.,  R  R  Co.,  55 
Barb.,  344  (1869),  holding  that  while  an 
injunction  forbidding  inspectors  to  hold 
an  election  at  all  or  to  receive  and  count 


the  votes  thereof  is  entirely  void,  since 
a  court  of  equity  has  no  power  to  re- 
strain permanently  an  officer  of  a  cor- 
poration from  performing  the  ordinary 
duties  of  his  office,  yet  they  may  be  en- 
joined from  holding  an  election  until 
the  further  order  of  the  court  or  from 
receiving  the  votes  of  certain  stock- 
holders until  the  votes  of  others  are  de- 
posited. But  an  injunction  may  be 
granted  staying  an  election.  Scholfield 
v.  Union  B.,  2  Cr.  (C.  C),  115  (1815), 
where  the  inspectors  denied  the  right  of 
pledgors  to  vote. 

1  Reed  v.  Jones.  6  "Wis.,  680  (1858),  hold- 
ing that  a  preliminary  injunction  against 
a  stockholder  voting  his  stock  cannot  be 
granted  on  the  ground  that  he  had  no 
title  to  the  land  which  he  conveyed  in 
payment  of  the  stock.  The  stock  liad 
not  been  canceled  by  the  company,  and 
no  action  was  pending  to  cancel  it 
McHenry  v.  Jewett,  90  N.  Y.,  58  (18S2), 
where  the  preliminary  injunction  was 
denied,  inasmuch  as  the  complaint 
showed  no  equitable  cause  of  action. 
Where  the  owner  of  a  majority  of  the 
stock  has  been  fraudulently  deprived 
of  her  stock  by  her  pledgee,  who  has 
thereby  deprived  her  of  the  control  and 
claims  the  stock  as  his  own,  the  court 
will  enjoin  him  from  voting  the  stock 
and  will  appoint  a  receiver  of  such  stock 
pendente  lite.  Aver  v.  Seymour.  5  N.  Y. 
Supp,  650  (Com.  PI.,  1889).  An  injunc- 
tion against  a  stockholders  voting  cer- 
tain stock  is  not  an  injunction  to  "sus- 
pend the  general  and  ordinary  business 
of  a  corporation."  Reed  v.  Jones.  6  Wis., 
608  (1858).  An  election  is  not  such  busi- 
ness.    Id. 


831 


§  614.]  ELECTIONS CORPORATE    MEETINGS.  [CH.  XXXVII. 

Thus  an  injunction  has  been  granted  where  there  was  a  conspir- 
acy to  obtain  on  the  eve  of  the  election  an  injunction  against  the 
complainants  from  voting  their  stock;1  also  where  the  directors 
propose  to  postpone  the  election  in  order  to  prolong  their  term  of 
office;2  also  where  a  stockholder  has  transferred  part  of  his  stock 
in  order  to  increase  the  voting  power  of  the  stock,  the  charter  lim- 
iting the  number  of  votes  one  stockholder  may  cast;3  also  where  a 
majority  of  stock  is  owned  by  a  competing  company  which  has  ac- 
quired control  for  the  purpose  of  diverting  business  to  itself; 4  also 
where  "  trustees,"  who  are  mere  agents,  refuse  to  transfer  the  stock 
to  their  principals  or  to  give  proxies.5 

Where  the  owner  of  a  majority  of  the  stock  sells  it,  the  purchase 
price  being  only  paid  in  part,  and  retains  the  stock  in  his  name 
until  the  full  price  is  paid,  he  cannot  be  compelled  to  deliver  the 
stock  or  to  refrain  from  ousting  the  vendee  from  the  presidency  of 
the  corporation  where  the  vendee  fails  to  meet  the  other  payments, 
even  though  the  vendee  has  proceeded  to  improve  the  property/' 

Equity  has  jurisdiction  to  compel  the  transfer  of  stock  as  be- 
tween parties.  Hence  where  stock  is  issued  in  payment  for  prop- 
erty, and  the  party  to  whom  the  certificate  is  issued  refuses  to  divide 
it  among  the  owners  of  the  property,  as  provided  by  contract,  a 
court  of  equity  may  compel  the  division  and  may  enjoin  any  elec- 
tion of  the  corporation  until  such  division  is  made.7 

The  general  rule  is  that  one  stockholder  has  nothing  to  do  with 
the  motive  of  another  stockholder.     The  injunction  must  be  based 

i  Brown  v.  Pacific  Mail,  etc.,  5  Blatch.,  which  comes  in  February,  but  which  the 

525  (1867',  in  which  the  allegation  was  directors   by  by-law  have  changed   to 

that    the      defendants      contemplated,  October,  thereby  endeavoring  to  extend 

through  improper  means,  to  obtain  an  their  term.     Elkins  V.  Camden,  etc.,  R 

injunction    preventing    plaintiffs,    who  R,  86  N.  J.  Eq.,  467  (1883).     See,  also, 

were  large  stockholders  in  a  corpora-  Camden,  etc.,  R  R.  v.  Elkins,  37  id.,  271 

tion,    from   voting  at  an   approaching  (1883). 

election,  and  that  defendants  were  im-  3  Webb  v.  Ridgely,  38  Md.,  364  (1873), 
properly  obtaining  proxies  from  other  where  stock  had  been  colorably  trans- 
stockholders  in  order  to  control  the  elec-  ferred  without  consideration  for  the 
tion    for  their   private    purposes.     The  purpose  of  controlling  an  election,  there 

complainant  alleged  that  defendants  in-  being  a  provision  in  the  charter  prohib- 

tended  to  obtain  control  for  the  benefit  iting  a  single  stockholder  from  voting 

of  rival  companies  and  intended  fraud-  on  more  than  twenty  shares.     See,  also, 

ulently    to    prevent    the    complainants  §  621. 

from  voting.     The  court  enjoined   de-  4  See  §616. 

fendants  from  participating  in  any  elec-  5  See  §  622. 

tion  unless  plaintiffs'  votes  were  received  6  Stockton  u.  Russell,  54  Fed.  Rep.,  224 

thereat,  and  from  restraining  plaintiffs  (.1892). 

in  their  right  to  vote.  7  Archer  v.  American,  etc.,  Co.,  24  AtL 

2  A  stockholder  may  enjoin  directors  Rep.,  508  (N.  J.,  1892> 

from    postnouiug    an    annual    election 

832 


OH.  XXXVII.]  ELECTIONS  —  CORPORATE    MEETINGS.  [§614. 

on  damage  reasonably  certain  to  ensue.1  Accordingly,  an  injunc- 
tion will  not  be  granted  upon  the  ground  that  the  stockholders 
against  whom  the  injunction  is  sought  are  likely  to  obtain  control 
of  the  affairs  of  the  company,  and  that  then  they  will  probably 
misuse  their  power.2  The  form  of  the  injunction  order  varies,  of 
•course,  with  the  circumstances  of  the  case.  The  federal  courts 
have  sanctioned  a  form,  which,  while  drastic  in  its  terms,  is  effect- 
ive in  reaching  the  desired  result,  and  is  none  too  severe  when  the 
difficulties  are  considered.3 

Where  a  party  is  enjoined  from  voting  the  court  will  enjoin  his 
'proxy  from  voting.4 

The  proxy  may  be  enjoined  although  his  principal  is  not  made  a 
party  and  is  not  served.5  But  stockholders  who  are  not  made 
parties  will  not  be  enjoined.6  The  injunction  against  certain  per- 
sons votiug  certain  stock  does  not  prevent  the  election  from  tak- 
ing place.  On  the  contrary,  the  election  goes  on  and  is  valid,  even 
though  it  happen  that  what  would  have  been  a  minority  of  the 
votes,  had  not  the  injunction  issued,  becomes,  by  reason  thereof,  a 
majority,  and  elects.7  Where  the  injunction  is  applied  for  at  a 
time  so  near  the  election  that  the  opposition  will  have  no  reason- 
able opportunity  to  be  heard,  the  court  may  refuse  the  application 
on  that  ground.8  The  practice  of  serving  an  injunction  after  the 
meeting  has  assembled  is  not  looked  upon  with  favor  by  the 
courts.9  Where  an  injunction  has  been  obtained  on  false  affida- 
vits and  bill  to  control  an  election,  and  the  proceedings  in  court 

1  Ryder  v.  Alton,  etc.,  R.  R.  Co.,  13  it  at  an  ensuing  election,  which  was  to 
III,  516  (1851),  where  a  suhscriber  failed  be  held  within  three  days  from  the 
in  his  defense  against  a  subscription  by  date  of  the  filing  of  the  bill,  the  court 
attacking  the  policy  of  the  majority  in  held  that  inasmuch  as  the  probable 
control.  effect   of    the    injunction   would  be  to 

2  Camden,  etc.,  R  R.  Co.  v.  Elkins,  37  change  the  result  of  the  election,  and 
N.  J.  Eq.,  273  (1883).  Cf.  Brown  v.  Pa-  the  consequent  control  of  the  affairs 
cific  Mail,  etc.,  Co.,  supra.  of  the  company,  without  allowing  the 

3  See  the  form  of  injunction  granted  shareholders  sought  to  be  restrained  to 
in  Brown  v.  Pacific,  etc.,  Co.,  5  Blatch.,  be  heard  in  their  own  defense,  the  in- 
525.  Approved  in  People  v.  Albany,  junction  ought  to  be  denied.  Hilles  v. 
etc.,  R.  R,  55  Barb.,  344,  383  (1869).  Parish,  14  N.  J.  Eq,  380  (1862).     It  ap- 

*  Clarke  v.  Central  R.  R,  etc.,  50  Fed.  pears,  however,  that  counsel  stipulated 

Rep.,  338  (1892).  for  a  new  election  in  case  the  complain- 

5  Brown  v.  Pacific  Mail,  etc.,  Co.,  5  ant  succeeded  and  the  court  so  ordered. 
Blatch.,  525  (1867).  9 "The  practice   of  procuring  an  in- 

6  id.  junction  and  serving  it,  after  the  meet- 

7  Brown  v.  Pacific  Mail  Steamship  Co.  ing  had  assembled,  is  not  to  be  com- 
(1867),  supra.  mended,  and  should  only  be  tolerated 

8  Where  a  bill  was  filed  to  restrain  in  cases  where  the  right  thereto  is 
certain  shareholders  from  selling  or  as-  clearly  established."  In  re  Rochester, 
signing  their  stock,  or  from  voting  upon  etc.,  Co.,  40  Hun,  172  (1886) 

3  (53)  833 


§§  615,  616.]  ELECTIONS CORPORATE    MEETINGS.  [CH.  XiXYIL 

are  discontinued  immediately  after  the  election,  the  court  will 
summarily  vacate  and  set  aside  the  election  by  reason  of  the  abuse 
of  the  process  of  the  court  and  the  fraud  on  the  rights  of  the 
stockholders.1  An  appeal  from  an  injunction  against  voting  cer- 
tain stock  will  be  dismissed  where  the  parties  may.  under  a  stat- 
ute, apply  to  the  court  to  review  the  election  on  affidavits.2 

§615.  Issuing  stock  in  order  to  carry  an  election. —  Where  the 
directors  cause  treasury  stock  to  be  sold  to  themselves  at  less  than 
its  real  value  and  for  the  purpose  of  carrying  an  election,  the  court 
will  set  the  transfer  aside  as  fraudulent.3  In  a  proper  case  the 
court  will  enjoin  the  issue  of  the  new  stock.4 

But  an  election  is  valid  although  it  is  carried  by  treasury  stock 
of  the  corporation,  which  is  sold  by  the  directors  just  before  the 
election  in  order  to  carry  the  election,  so  long  as  the  sale  is  not 
attacked  and  set  aside  for  fraud.5  "Where  the  stock  is  not  treas- 
ury stock,  but  is  new  increased  capital  stock,  all  the  existing  stock- 
holders have  a  right  to  subscribe  for  their  proportion  of  the  new 
stock,  and  may  protect  that  right  by  injunction. fi 

§  616.  Where  one  corporation  owns  a  majority  of  the  stock  of  a 
viral  company,  may  it  vote  the  stock  and  control  the  latter  company? 
It  has  been  decided  in  several  cases  that  where  one  corporation 
owns  a  majority  of  the  stock  of  a  rival  company,  the  temptation 
to  manage  the  latter  company  for  the  benefit  of  the  former  com- 
pany will  be  so  great  that  a  minority  stockholder  of  the  latter 
c  niipany  may  enjoin  the  former  company  from  voting  the  stock.7 

1  Putnam  r.  Sweet,  1  Chandler  (Wis.),  even  though  the  charge  was  made  that 

286,  334  (1849).  the  complainant  was  interested  in  rival 

'Where  an  injunction  against  post-  companies  and  was  exercising  control 
poning  an  election  is  granted,  and  the  in  their  behalf.  Fraser  v.  "VYhalley,  2 
election  is  held,  and  the  next  day  an  Hem.  &  M.,  10  (1864). 
appeal  is  taken  from  the  injunction  or-  8  State  r.  Smith.  4s*  \'t..  266  (1876*.  In 
der.  the  appeal  will  be  dismissed,  inas-  the  case  of  Taylor  r.  Miami,  etc.,  Co.,  6 
much  as  the  parties  have  the  remedy  Ohio,  176.  828  (1888),  a  hill  by  a  stock- 
under  the  statute  of  applying  to  the  holder  to  compel  a  person  to  take  back 
court  to  review  the  election.  Camden,  from  the  corporation  certain  stock 
etc.,  R  R  r.  Elkins,  37  N.  J.  Eq.,  273  which  he  had  purchased  of  it  just  be- 
(1883).  fore  the  election,  and  had  voted  at  the 

3Hilles  v.   Parish,  14  N.   J.    Eq.,  380  election    and    then    immediately    sold 

(1862).     See,  also,  p.  838,  note.  again   to   the  corporation,  failed.     The 

4  The  court  will  enjoin  the  board  of  vote  on  these  shares,  however,  did  not 

directors  from  issuing  new  stock  on  the  affect  the  result 

verge  of  an  election  and  for  the  sole  '§886,  supra. 

purpose  of  carrying  that  election  where  "In  Memphis,  etc..  R  R  n  "Woods,  88 

the  directors  really  represent  a  minority  Ala.,  630  (1889).  it  was  held  that  where 

of  the    stock    and   where    the    power  one  railroad  company  has  acquired  a 

to  issue   the  new  stock  is  very  doubt-  majority  of  the  stock  of  another  rail- 

ful.      Sucli  an  injunction  was  granted  road  company,  and  has  elected  the  board 

834 


CH.  XXXVII.]  ELECTIONS CORPORATE    MEETINGS. 


[§  616. 


The  same  principle  of  law  was  stated  and  applied  in  a  lower  court 
in  New  York.1  A  contrary  conclusion  was  reached  in  New  Jer- 
sey.2 A  federal  court  has  held  that  where  a  corporation  is  organ- 
ized to  own  and  vote  the  stock  of  two  competing  railroads,  the 
courts  will  enjoin  the  voting  of  the  stock,  the  combination  itself 
being  forbidden  by  law.3  It  has  been  held  in  Ohio  that  one  railroad 
corporation  has  no  power  to  acquire  the  bonds  of  another  railroad 


of  directors,  and  oppressed  and  de- 
frauded such  latter  company  by  buying 
unnecessary  rolling-stock,  making  un- 
necessary repairs  at  exorbitant  charges, 
unduly  apportioning  the  earnings  as 
between  the  two  roads,  and  in  other 
ways  increasing  its  own  profits  at  the 
expense  of  the  latter  company,  a  mi- 
nority stockholder  in  such  latter  com- 
pany may  enjoin  the  former  company 
from  voting  such  stock  at  an  election. 
A  request  to  the  company  to  bring  the 
action  was  first  made  by  the  stock- 
holder who  brought  the  suit.  A  trans- 
portation company  owning  a  majority 
of  the  stock  of  an  ice  company  may  be 
enjoined  from  voting  the  stock,  if  the 
former  company  intends  to  purchase  ice 
from  the  latter  company,  but  otherwise 
no  such  injunction  will  issue.  Ameri- 
can, etc.,  Co.  v.  Linn,  7  S.  Rep.,  191  (Ala.. 
1890).  A  stockholder  in  one  mining 
and  manufacturing  company  may  en- 
join another  rival  company  from  voting 
the  majority  of  stock  in  the  former 
company,  such  majority  being  owned 
by  the  latter  company.  Mack  v.  De 
Bardelaben,  etc.,  Co.,  8  S.  Rep.,  150  (Ala., 
1890).  Where  an  electric  light  com- 
pany purchases  a  majority  of  the  stock 
of  a  competing  electric  light  company 
in  the  same  city,  and  elects  the  board 
of  directors,  and  fraudulently  uses  its 
power  to  make  the  latter  subservient  to 
and  as  a  feeder  to  the  former,  and  in- 
tends to  destroy  the  latter,  the  court,  at 
the  instance  of  a  minority  stockholder  of 
the  latter,  will  appoint  a  receiver  of  the 
company ;  but  the  proof  of  such  intent 
must  be  clear.  The  fact  that  the  direct- 
ors so  elected  are  stockholders  in  the 


controlling  company  is  not  sufficient. 
Davis  v.  U.  S.,  etc.,  Co.  of  Baltimore 
City.  25  Atl.  Rep.,  982  (Md.,  1893).  It  is 
illegal  for  an  Ohio  corporation  to  pur- 
chase a  majority  of  the  stock  of  a  Ten- 
nessee corporation  for  the  purpose  of 
controlling  the  latter,  even  though  they 
are  engaged  in  a  similar  business,  the 
object  being  to  form  a  monopoly. 
Hence  the  purchasing  company  cannot 
enforce  the  contract  as  to  certain  things 
which  were  to  be  done  by  the  vendor  of 
the  stock.  Buckeye,  etc.,  Co.  v.  Harvey, 
20  S.  W.  Rep.,  427  (Tenn.,  1892).  See, 
also,  8  S.  E.  Rep.,  630  (Ga.,  1889). 

1  In  the  case  also  of  Milbank  v.  N.  Y.. 
etc.,  R,  R,  64  How.  Pr.,  20  (188*2),  the 
court,  at  the  instance  of  a  minority 
stockholder,  enjoined  another  railroad 
company  from  voting  a  majority  of  the 
stock  in  his  company,  although  fraud 
and  partiality  in  the  management  for 
the  benefit  of  the  majority  stockholder 
was  a  fear  of  the  future  instead  of  a 
fact  in  the  past.  The  court  said :  "  It 
is  against  public  policy  to  have  or  per- 
mit one  corporation  to  embarrass  and 
control  another  and  perhaps  competing 
corporation  in  the  management  of  its 
affairs,  as  may  be  done  if  it  is  permitted 
to  purchase  and  vote  upon  the  stock." 

2  A  stockholder  will  not  be  enjoined 
from  voting  on  the  ground  that  he  is 
not  a  bona  fide  stockholder  but  that  his 
stock  was  paid  for  by  rival  companies 
and  that  he  intends  to  control  the  com- 
pany for  the  advantage  of  those  com- 
panies. Camden,  etc.,  R  R  v.  Elkius, 
37  N.  J.  Eq.,  273  (1883). 

3  Clarke  v.  Central  R  R,  etc.,  50  Fed. 
Rep.,  338  (1892). 


835 


§  617.]  ELECTIONS  —  CORPORATE    MEETINGS.  [CH.  XXXVII. 

corporation  in  order  to  control  the  elections  of  the  latter,  such 
bonds  having  a  voting  power.1 

The  reasonable  rule  would  seem  to  be  that,  where  one  company 
having  no  power  to  purchase. the  stock  of  another  rival  company2 
illegally  purchases  a  controlling  interest  in  such  stock,  or  where 
one'  company  having  legally  purchased  the  majority  of  the  stock 
of  a  rival  company  has  managed  the  latter  company  fraudulently 
in  its  own  interest,  a  court  of  equity  will  enjoin  it  from  voting  the 
stock  at  the  next  election.  But  if  the  purchase  of  the  stock  was 
leeal  and  there  has  as  yet  been  no  fraud  in  the  management,  such 
an  injunction  will  not  be  granted. 

§  617.  Illegal  or  fraudulent  elections  —  The  remedy  of  quo  war- 
ranto and  mandamus.—  There  are  various  ways  in  which  an  illegal 
or  fraudulent  election  of  directors  or  managers  of  an  incorporated 
company  can  be  investigated  and  remedied.  The  natural  and 
proper  remedy  in  all  cases  is  the  old  remedy  of  quo  warranto  to 
test  the  title  to  office.  In  England  quo  warranto  does  not  lie  to 
test  the  legality  of  the  election  of  officers  of  a  private  corporation, 
but  in  this  country  a  contrary  rule  prevails.'  An  information  in 
the  nature  of  a  quo  warranto  is  not  allowed  of  course,  but  is  a  sub- 
ject for  the  exercise  of  a  sound  discretion.4  Mandamus,  instead  of 
quo  warranto,  lies  when  the  title  de  jure  has  been  adjudicated.5  In 
West  Virginia  mandamus  is  held  to  be  the  proper  remedy  to  place 
a  de  jure  director  in  the  place  of  the  de  facto  director,  and  service 
on  the  latter  may  be  by  publication,6  and  mandamus  lies  at  the 
instance  of  a  corporation  to  compel  illegally-elected  directors  to 
turn  over  the  books  to  the  legally-elected  directors.7 

«  State  v.  McDauiel,  22  Ohio  St,  354,  People   v.   Albany,   etc.,   R    R   Co.,  55 

3C8  (187-2).  Barb.,  844,  85 1  (1869).     For  a  clear  state- 

2  See  §S  315-317.  meat  of  the  nature  of  an  information 

8  Commonwealth  V.  Arrison,  15  S.  &  in  the  nature  of  a  quo  warranto  filed  by 

R,  127  (1827),  a  case  of  church  trustees  ;  a  claimant  for  an  office  in  the  name  of 

Commonwealth  v.  Graham,  64  Pa.  St.,  the  attorney-general,  see  State  v.  Mayor. 

339  (1870),  the  same;  People  v.  Tibbits,  etc.,  10  Atl.  Rep.,  377  (N.  J.,  1887).     See, 

4  Cow.,  358   (1825),  an  insurance  com-  also,  §  713,  infra,  concerning  de  facto 

pany  ;  State  v.  Ferris,  45  Mo.,  183  (1869),  officers. 

college  trustees ;  Creek  v.  State,  77  Ind.,        *  State  v.  Lehre,  7  Rich.  Law  (S.  C), 

180   (1881),    church    trustees;    State    v.  234(1811. 

Kupersforte,  44  Mo.,  154  (1869),  an  in-        5  State  v.  Mayor,  etc.,  19  Atl.  Rep.,  780 

Burance  company;    State  v.  McDauiel,  (N.  J.,  1890). 

22  Ohio  St.,  354  (1872),  directors  of  a        "Cross  v.  West  Va.,  etc.,  R'y,  12  S.  E. 

railroad;  Commonwealth    v.  Smith,  45  Rep,,  1071  (W.  Va.,  1891).   Compares.  C, 

Pa.  St.,  59  (1863) ;  High  on  Extraordi-  id.,  765,  and  People  v.  N.  Y.,  etc.,  Asy- 

nary  Remedies,  §  653,  etc.;  Sbortt  on  lum,  122  N.  Y.,  190(1890). 
Informations,    etc.,    129    (Eng.,    1887);        T  American  Railway  Frog  Co.  v.  Haven, 

Commonwealth  v.  Gill,  3  Whart.  (Pa.),  101  Mass.,  398  (1869).    ^  ,  a^   ft,   Lv  *i^"| 
228  (1837),  giving  the  pleadings  herein  ^  ^  .",''- 


CH.  XXXVII. J 


ELECTIONS 


CORPORATE    MEKTIXGS. 


[§  618. 


§618.  Illegal  or  fraudulent  elections  —  The  remedy  by  oill  in 
equity  and  injunction, —  A  court  of  equity  has  no  inherent  power 
or  jurisdiction  to  entertain  a  bill  for  the  purpose  of  reviewing  a 
corporate  election  and  ousting  the  parties  who  claim  to  have  been 
elected.1 

But  where  there  has  been  a  palpable  fraud  practiced  in  the  elec- 
tion and  usurpers  are  about  to  take  possession  of  the  property  in 
violation  of  all  justice,  a  court  of  equity  will  enjoin  them  from 


doing  so.2 


1  The  title  of  de  facto  officers  to  their 
office  cannot  be  tested  by  an  injunction 
or  bill  in  equity.  Quo  warranto  or  a 
proceeding  under  the  statute  is  neces- 
sary. People  v.  Albany,  etc.,  R.  R.  Co., 
57  N.  Y.,  161, 171.  No  injunction  against 
officers  acting  as  such  on  ground  of 
illegal  election.  Quo  warranto  lies. 
Hartt  v.  Harvey,  32  Barb.,  55  (1860). 
Equity  has  no  power  except  as  inci- 
dental to  other  relief  to  review  an  elec- 
tion. Perry  v.  Tuscaloosa,  etc.,  Co.,  9 
S.  Rep,  217  (Ala.,  1891);  Hullman  v. 
Honcomp,  5  Ohio  St.,  237  (1855) ;  New 
England,  etc.,  Co.  v.  Phillips,  141  Mass., 
535  (1886),  where  an  injunction  was 
sought  to  restrain  persons  from  acting 
as  directors  who  had  been  illegally 
elected.  Allen,  J. :  "This  course  is  open 
to  the  objection  that  suits  to  remove  or 
to  institute  corporation  officers  do  not 
belong  to  the  original  jurisdiction  of 
chancery;  and  that  the  right  to  be  such 
officer  cannot,  in  general,  and  in  the  ab- 
sence of  special  legislation  allowing  this 
remedy,  be  tested  by  means  of  an  in- 
junction." Pom.  Eq.,  I,  §171;  id.,  Ill, 
§  1345.  See,  also,  to  same  effect,  Owen 
v.  Whitaker,  20  N.  J.  Eq..  122  (1869), 
where  the  legality  of  the  first  election 
was  the  only  thing  involved ;  Hughes 
v.  Parker,  20  N.  H.,  58  (1849);  Johnston 
v.  Jones,  23  N.  J.  Eq.,  216  (1872) :  Mickles 
v.  Rochester  City  Bank,  11  Paige,  118 
(1844);  Mechanics'  National  Bank  of 
Newark  v.  Burnet  Mfg.  Co.,  32  N.  J.  Eq., 
236  (1880),  where  a  third  person  suing 
the  corporation  sought  to  have  its  an- 
swer stricken  out  because  the  officers 
were  not  duly  elected  ;  Fadness  v.  Braun- 


borg,  41  N.  W.  Rep,  84  (Wis.,  1889),  a 
religious  corporation  case ;  Wandsworth, 
etc..  Co.  v.  Wright,  18  W.  R,  728  (1870). 
where  fraud  was  charged  on  the  part  of 
the  inspectors ;  Davidson  v.  Grange,  4 
Grant's  Ch.  (Up.  Can.),  377  (1854),  where 
the  court  refused  an  injunction,  but 
said  in  a  dictum  that  the  election  might 
be  set  aside  on  account  of  fraudulent 
voting  of  shares  subscribed  for  by  "  dum- 
mies" to  get  control  of  the  election  on 
promise  that  subscriptions  would  after- 
wards be  canceled.  Where  by  reason 
of  an  injunction  against  voting  certain 
stock  the  meeting  is  not  held  at  the  time 
specified  in  the  notice,  but  later  in  the 
day  a  minority  meet  and  adjourn  to  the 
next  day  and  conceal  such  adjournment 
from  the  majority  and  elect  directors, 
the  court  will  oust  them  from  offica 
State  v.  Bonnell,  35  Ohio  St,  10  (1878). 
Self-constituted  directors  without  a  reg- 
ular organized  meeting  have  not  a  good 
title  to  their  office,  and  where  subse- 
quently the  incorporators  elected  other 
directors,  the  latter  may  cause  to  be 
stayed  an  action  brought  in  the  name 
of  the  company  by  the  self-constituted 
directors.  John  Morley,  etc.,  Co.  v.  Bar- 
ras.  64  L.  T.  Rep,  856(1891) 

2  Where  the  owners  of  the  whole  stock 
sell  it  and  part  of  them  resign  and  place 
the  representatives  of  the  vendee  in  pos- 
session, and  those  who  remain  in  the 
board  do  so  at  his  request,  but  transfer 
to  him  their  certificates  of  stock,  and 
thou  subsequently,  when  the  time  for 
the  annual  meeting  has  gone  by,  they 
publish  a  notice  of  a  meeting  and  con- 
ceal the  notice  from  him  and  elect  a 


837 


§  619.] 


ELECTIONS  —  COEPOEATE    MEETINGS. 


[CH.  XXXVII. 


The  de  facto  directors  may  enjoin  the  claimants  to  office  from 
attempting  to  take  forcible  possession  or  exercising  the  duties  of 
the  office.1  So  also  if  the  validity  of  a  corporate  election  arises  in- 
cidentally in  connection  with  a  suit  in  equity  the  court  will  pass 
upon  the  election.  This  may  occur  where  a  bill  is  filed  to  enjoin  a 
forfeiture  of  stock-  or  a  consolidation  of  corporations.3 

A  court  of  equity  may  appoint  a  master  to  hold  an  election  of  a 
corporation  when  by  reason  of  fraud,  violence  or  unlawful  conduct 
on  the  part  of  some  stockholder  a  fair  election  cannot  otherwise  be 
held.4 

119.  Illegal  or  fraudulent  i  h  ctions  —  Statutory  r<  medy  uy  peti- 
tion to  a  court  of  equity. —  In  consequence  of  the  delays  and  diffi- 
culties attending  the  remedy  of  q  ranto,  statutes  have  been 
enacted  in  many  of  the  states  which  give  courts  of  equitv  the 
power  to  review  corporate  elections  at  the  instance  of  the  parties 
aggrieved.5     Such  a  statute  is  found  in  Xew  York,  New  Jen 


I  and  attempt  to  take  possession,  a 
court  of  equity  will  enjoin  them.  John- 
ston r.  Jones,  23  N.  J.  Eq..  811  372 
Equity  is  not  obliged  "  to  leave  the  cor- 
poration and  its  lawful  directors  to  the 
remedy  at  law,  always  taking  at 
months,  and  in  the  meantime  suffer  the 

to  be  O]  and  perhaps  ruined 

by  the  depredatory  because  they  claim 

>  directors  de  facto  or  dejure"  Id. 
In  the  case  Clarke  R  Ceutral,  etc.,  Co. 

B  (Ga.,  : 
itap]  hat  the  board  of  directors 

having  been  illegally  elected,  "  the 
voting  power  or  k  was  enjoined, 

a  new  election  :.  and  the  i 

inted  n  not  for  the  purpose 

.  the  properties  to  the  claims 
of  cr  but  to  protect  and  to  pre- 

serve them  until  they  could  be  turned 
over  to  a  legally  elected  board  of  direct- 
ors, t  trustees,  who  would  have 
the  right  under  the  law  to  take  and 
operate  the  railroad  in  the  interest  of  all 

erned  The  court  further  directed 
that,  when  this  new  election  should  have 
taken  p!  I  new  board  of  directors 

might  apply  to  the  court  to  have  the 
property  returned  to  the  control  of  the 
properly  constituted  offici  rs  of  the  cor- 
poration.'*   Where  a  corporation  has  an 


authorized  capital   of  $5,000,  but  only 
are  directed  by  the  stockholders 
to  be  issued,  it  is  illegal  and  fraudulent 
to  issue  the  remaining  authorized  capital 
without  giving  the  existing  stockholders 
a  prior  right  to  subscribe  to  such   in- 
creased   capital    pro    rata.      Directors 
elected  by  reason  of  such  illegal 
would  be  enjoined  from  acting,  where 
are  about   to   change  the  whole 
policy  of  the  company.    Humboldt,  etc., 
ens  et  at.  59  N.  W.  Rep.,  568 
-    . 

Hun.  181  (18 
an  injunction  suit  brought  by  a 
stockholder  to  prevent  the  corporate 
officers  from  forfeiting  stock,  the  court 
will  pass  upon  the  legality  of  an  election 
of  directors,  but  of  course  will  not  and 
cannot  remove  them.  Moses  t\  Tomp- 
kins. ...  613 
Co.  ft  M  L.  R,  1  A  pp.,  39. 

Where   the  directors   are  about  to 
make  an    illegal    consolidation    and   a 
holder  files  a  bill  to  enjoin  it,  the 
court  will  pass  also  upon  the  legality  of 
the  election  of  the  de  facto  directors. 
Nathan  ft  Tompkins,  Bfi  Ala..  437  1 1 
4  Tunis   ft   Hestonville,  etc..  R.  1: 
At!.  Rep..  88  (Pa.,  1892}    See,  also,  §  612. 
«  See  Part  VIL 


838 


CH.  XXXVII.]  ELECTIONS — COEPOEATE    MEETINGS. 


[§  C19. 


California  and  other  states.1  By  these  statutes  the  court,  sitting 
as  a  court  of  chancery,  is  empowered  to  review  corporate  elections, 
and  to  grant  such  relief  as  the  particular  circumstances  and  justice 
of  the  case  seem  to  require.2 

Such  a  statute  has  proven  to  be  one  of  the  wisest  and  best  that 
a  legislature  ever  enacted  in  regard  to  corporations.  It  furnishes 
a  speedy,  simple,  just  and  effective  remedy  for  all  complaints,  and 
is  free  from  useless  technicalities  and  expense.  Various  decisions 
under  these  statutes  are  given  in  the  notes  below.3 


ild. 


Barb.,  344,  363  (1869).    Where  the  place 


2  Brewster    v.    Hartley,    37    Cal.,    15     of  an  election  is  rilled  by  one  party  with 


(1869);   "Wright    v.    Central    California 
Colony  Water  Co.,  67  Cal.,  532  (1885  ; 
In  the  Matter,  etc..   St.  Lawrence,  et    . 
Co.,  44  N.  J.  L..  529  (1882),  a  case  where 
proxies  were  illegally  rejected.     For  va- 
rious cases  in  New  York,  showing  the 
wide  powers  exercised  by  the  court  un- 
der this  statute,  see  Ex  parte  Holmes,  5 
Cowen,  426  (1826) ;  The  Schoharie  Valley 
R.  R   Case.  12  Abb.  Prac.   (N.  S.),  394 
(1872):  JJeDesdoity,  1  Wend.;  98;  V"an- 
denburgh   v.   Broadway  R   R   Co.,   29 
Hun,  348;  Strong  v.  Smith,  15  Hun,  222 
(1878);  Ex  parte  WOlcocfes,  7  Cow.,  402 
(1S27) :  Mickles  v.  Rochester  City  Bank, 
11    Paige.    US :    In   the   Matter   of  the 
Long  Island   R.    R.    Co..  19  Wend..  37. 
In  this  case  an  election  was  set  aside 
because  the  directors  had  illegally  de- 
clared certain  shares  forfeited  for  non- 
payment of  instalments,  and  refused  to 
record  an  assignment  thereof  so  as  to 
entitle    the    assignee    to  vote.     Lnder 
these  statutes   an    election  may  be  de- 
clared void  by  reason  of  the  conspiracy, 
frauds  or  trickery  of  a  part  of  the  stock- 
holders.    People  r.  Albany,  etc.,  R.  R. 
Co..  55  Barb..  344  (1869). 

3  The  statute  authorizing  a  court  of 
chancery  to  review  elections  and  order 
new  ones  does  not  authorize  the  courts 
to  issue  a  mandamus  to  the  inspectors 
of  election  in  regard  to  counting  votes 
by  proxy  and  amending  the  return. 
People  v.  Simonson,  61  Hun,  33S  (1891> 
'•Surprise  and  fraud  upon  part  of  the 
electors  is  ground  for  avoiding  an  elec- 
tion.*'    People   n  Albany,  etc..  R.  R,  55 


roughs   as   proxies    brought  there  for 
purposes  of  intimidation  and  for  voting 
on   viva  voce  votes  and  for   crowding 
out  the  regular  voters.     Id.,  p.  379.     In 
this  case  under  the  New  York  statute, 
in  an  equitable  suit  brought  by  the  state, 
the  court  appointed  a  receiver  and  issued 
an  injunction    pending   the   suit,   and 
finally   declared   elected    persons    who 
would  have  received  the  most  votes  of  all 
votes  that  had  been  legally  cast  although 
there  had  been  two  elections  held  at  the 
same  time  by  the  two  parties  at  differ- 
ent places  in  the  same  town.     Under 
the  New  York  statute  making  the  trans- 
fer book  conclusively  binding  upon  the 
inspectors  of    election,   the    inspectors 
cannot  exclude  the  vote  of  the  registered 
stockholder  although  he  holds  the  stock 
merely  as  pledgee ;  but  under  the  New 
York  statute    allowing  the    courts  to 
summarily    review    tue     election,    the 
court  has  power  to  go  back  of  the  trans- 
fer book  and  set  the  election  aside  where 
the  statute  gave  the  pledgor  the  right 
to  vote.     Strong  v.  Smith.  15  Hun,  222 
(1878).     "  Where  no  allegation  of  fraud 
or  deceit  is  made,  the  court  cannot  inter- 
fere under  the  power  vested  in  it  by  the 
Revised  Statutes  to  nullify  or  set  aside 
the  will  of  the  shareholders  as  expressed 
bv  their  votes."     In  rt  AVellman,  etc..  a 
Ciancimino,  etc.,  Co..  N.  Y.  L  J..  May, 
13,  1890,  per  Lawrence,  J.     The  statu- 
tory power  of  the  court  to  inquire  into 
the  legality  of  corporate  elections  does 
not  apply  to  the  ••appointment"'  of  a 
director  by  the  board  to  fill  a  vacancy 


839 


620.] 


ELECTIONS CORPORATE    MEETINGS. 


[CH.  XXXVII. 


§  620.  Who  may  complain  of  an  illegal  election  — A  new  election 
is  not  granted  if  the  result  will  he  the  same.— Only  a,  shareholder 
whose  rights  have  been  infringed  and  who  is  equitably  entitled 
to  complain  may  institute  the  proceedings.  Accordingly,  a  trans- 
feree of  one  of  the  shareholders  who  participated  in  the  fraud 
will  not  be  heard  to  impeach  the  result  of  that  fraud.1  And  in 
general  the  plaintiff,  a  relator  seeking  to  set  aside  a  corporate  elec- 
tion, is  barred  of  relief  if  he  himself  was  guilty  of  misconduct  or 
neglect,  or  if  it  appears  that  he  has  subsequently  acquiesced  -with 
knowledge  of  the  facts.2  It  is  a  principle  of  law  also  that  the 
legality  of  an  election  will  not  be  inquired  into  upon  the  ground 
that  illegal  votes  were  cast,  unless  those  votes  were  challenged  at 
the  election  at  the  time  when  they  were  cast.3 

An  election  will  not  be  set  aside  if  it  be  shown  that  after  throw- 
ing out  the  invalid  votes  the  officers  declared  elected  would  still 
have,  according  to  the  return,  a  valid  majority  of  the  votes  cast;4 


due  to  a  resignation.  Wickersham  v. 
Brittan,  28  Pac.  Hop.,  798  (Cal.,  1892). 
Nor  does  such  a  statute  enable  the  di- 
rector so  "  appointed  "  to  settle  the  ques- 
tion of  the  legality  of  the  election  by 
applying  to  the  court.  Wickeraham  v. 
Murphy,  28  Pac.  Rep.,  793  (Cal..  1892). 
Nor  does  it  apply  to  the  legality  of  an 
election  of  the  president  by  the  direct- 
ore.  In  re  Caguey,  N.  Y.  L.  J.,  Sept  16, 
1891.  Although  tlir  inspectors  admitted 
votes  on  insufficient  evidence,  yet  if  ad- 
ditional and  sufficient  evidence  is  pre- 
sented to  the  court  the  election  will 
stand.  Widow  Conant  v.  Millaudon,  5 
La.  Ann.,  512  (1850).  The  corporation 
itself  may  apply  under  the  statute  for 
an  order  to  the  effect  that  the  persons 
declared  elected  were  legally  elected. 
Matter  of  Pioneer  Paper  Co.,  36  How. 
Pr  ,  111  (1805).  In  attacking  the  valid- 
ity of  a  vote  the  burden  of  proof  is  on 
him  who  attacks  it.  In  re  Indian,  etc., 
Co.,  L.  R,  26  Ch.  D.,  70(1884). 

flatter  of  the  Application  of  the 
Syracuse,  etc.,  R  R  Co.,  91  N.  Y.,  1 
(1883). 

2Wiltz  v.  Peters,  4  La.  Ann..  339 
(18491,  where  a  commissioner  of  elec- 
tion attacked  the  legality  of  votes  which 
he  himself  had  admitted  as  commis- 
sioner. 


3  In  the  Matter  of  the  Chenango,  etc., 
Ins.  Co.,  19  Wend.,  685  (1839),  wherein 
the  court  said  :  -'It  is  quite  clear,  gen- 
erally speaking,  that  an  illegal  vote  not 
challenged  will  not  invalidate  an  elec- 
tion, nor  will  even  be  inquired  into." 
See,  also,  The  Schoharie  Valley  R  R. 
I  lase,  12  Ahh.  Prac.  (X.  S.),  394  (1872).  A 
stockholder  who  attends  the  election 
and  votes  and  does  not  object  to  others 
\<'ting.  although  he  knows  that  they 
are  doing  so  in  violation  of  a  by-law, 
cannot  himself  afterwards  object  to 
th^  legality  of  the  election.  State  v. 
Lehre,  7  Rich.  Law  (S.  C),  234  (1S54). 
See,  also,  People  r.  Robinson,  64  Cal., 
883);  In  re  Long  I.,  etc.,  R  R,  19 
Wend.,  :'>:,  41  ^837). 

*  People  v.  Tuthill,  31  N.  Y.,  550  (1864); 
Ex  }><t>-t<  Murphy,  7  Cowen,  153(1827); 
In  the  Matter  of  the  Chenango,  etc.,  Ins. 
Co.,  19  Wend.,  635  (1839) ;  State  v.  Lehre, 
7  Rich.  (Law),  234.  325(1854):  McNeeley 
r.  Woodruff,  13  N.  J.  Law,  352  (1833); 
First  Paiish  in  Sudbury  v.  Stearns,  38 
Mass..  148  (1838);  Trustees  of  the  School 
District  r.  Gibbs,  56  Mass.,  39  (1848); 
Wardens  of  Christ  Church  v.  Pope,  74 
Mass.,  140  (1857).  The  court  will  not 
consider  the  legality  or  illegality  of 
votes,  where  those  votes  will  not  change 
the  result  whatever  the  decision   might 


840 


CH.  XXXVII.]  ELECTIONS CORPORATE    MEETINGS. 


[§  620. 


and  a  new  election  will  not  be  ordered  if  after  rejecting  all  the 
illegal  votes,  and  after  admitting  the  legal  votes  which  were  re- 
jected, it  still  appears  that  the  directors  returned  as  elected  had  a 
majority  of  the  votes.1 

The  court  may,  in  the  exercise  of  its  equity  powers,  declare  a 
candidate  elected  who  received  only  a  minority  of  the  votes  act- 
ually cast,  when  such  candidate  plainly  received  a  majority  of  all 
votes  cast.2    Where  quo  warranto  proceedings  are  pur- 


the  legal 


be.  Widow  Conant  v.  Millaudon,  5  La. 
Ann.,  542  (1850).  Where  the  officers  de- 
clared elected  received  a  majority  of 
the  original  stock  as  well  as  a  majority 
of  the  alleged  illegal  increased  stock, 
they  will  not  be  ousted.  Byers  v.  Rol- 
lins, 13  Colo.,  22(1SS9).  Where  after  re- 
jecting all  votes  illegally  cast  by  proxy 
there  is  still  a  majority  for  the  persons 
who  were  declared  elected,  the  court 
will  not  disturb  the  election.  Craig  v. 
First  Pres.  Church,  88  Pa.  St.,  42  (1878). 
•  McNeeley  v.  Woodruff,  13  N.  J.  L., 
352  (1833);  Ex  parte  Desdoity,  1  Wend., 
98  (1828). 


change  the  result  of  the  election,  the 
election  would  not  be  set  aside.  Hence 
where  of  two  thousand  three  hundred 
and  ninety-two  votes  for  certain  candi- 
dates seven  hundred  and  ninety-nine 
were  illegal,  and  there  were  illegally  re- 
jected one  thousand  eight  bundled  and 
ninety-four  votes  for  the  defeated  can- 
didate, who  received  forty-six  votes,  the 
court  ordered  a  new  election.  In  the  case 
In  re  Long  I.  R.  R,  19  Wend.,  37,  where 
the  votes  illegally  rejected  would  have 
elected  other  persons,  the  court  set  the 
election  aside,  and  did  not  declare 
elected  those  who  would  have  been 
2  Where  the  whole  number  of  votes  is    elected  if  the  rejected  votes  had  been 


five  hundred  and  ninety -three,  and  there 
were  present  five  hundred  and  thirty- 
seven,  and  the  candidates  declared  not 
elected  received  three  hundred  votes, 
one  hundred   and  fifty  of  which  were 


counted,  there  being  one  thousand  seven 
hundred  votes  not  represented,  and 
eleven  thousand  that  were  disqualified 
under  the  statute.  The  court  may  de- 
clare   part    of    the    directors    illegally 


illegally  rejected  by  the  inspectors,  the    elected,  and  order  a  new  election  as  to 


court  under  the  New  Jersey  statute  de- 
clared those  candidates  elected  and  did 
not  order  a  new  election.  Matter  of 
Election  of  St.  Lawrence,  etc.,  Co.,  44 
N.  J.  L,  529  (1882) ;  Monsseaux  v.  TJrqu- 
hart,  19  La.  Ann.,  482  (1867);  Ex  parte 
Desdoity,  1  Wend.,  98  (1828);  Vanden- 
burgh  v.  Broadway  R'y  Co.,  29  Hun, 
348  (1883);  Downing  v.  Potts,  23  N.  J. 
Law,  66,  84  (1851),  where  an  election 
was  set  aside  and  a  new  one  ordered 
because  votes  were  illegally  rejected 
on  one  side  and  illegally  accepted  on 
the  other,  which  changed  the  result, 
but  two  directors  who  were  on  both 
tickets  and  received  all  the  votes  cast 
wei-e  held  elected.  The  court  said  that 
unless  the  legal  votes  rejected  and  the 
illegal  votes  received  were  sufficient  to 


them,  without  affecting  the  title  of  the 
others  to  their  offices.  People  v.  Flem- 
ing, 59  Hun,  518  (1891).  In  the  case 
Monsseaux  v.  Urquhart,  19  La.  Ann.. 
482  (1867).  the  court  ousted  a  director 
and  declared  elected  another  person  in 
his  stead.  Where  the  presiding  officer 
illegally  rejects  certain  votes,  declares 
certain  persons  elected  and  adjourns  the 
meeting,  and  the  dissatisfied  party  con- 
tinue the  meeting  and  hold  another 
election,  the  court  will  consider  merely 
the  question  as  to  who  received  a  ma- 
jority of  the  votes  which  were  legally 
offered  to  be  cast.  State  r.  Smith,  15 
Oreg.,  98  (1887).  A  court  will  not  force 
upon  the  company  directors  who  are 
technically  entitled  to  be  declared 
elected,  certain  proxies  being  irregularly 


841 


§  621.] 


ELECTIONS CORPORATE    MEETINGS. 


[CH.  XXXVII. 


sued,  the  court  can  only  oust  the  party  who  is  in  office.     It  cannot 
declare  another  person  elected.1 

§  621.  Restrictions  on  the  right  to  vote. —  It  is  legal  for  a  corpo- 
ration upon  issuing  preferred  stock  or  increased  capital  stock  to 
impose  a  condition  that  such  stock  shall  not  have  any  right  to  vote.2 
It  is  legal  also  for  the  corporation  with  the  assent  of  all  stockhold- 
ers to  give  to  bonds  a  voting  power.3  There  is  no  rule  of  public 
policy  which  forbids  a  corporation  and  its  stockholders  from  mak- 
ing any  contract  they  please  in  regard  to  restrictions  on  the  voting 
policj\  If  the  agreement  is  made  by  unanimous  consent  it  is  legal. 
Such  restrictions,  however,  generally  are  and  always  should  be 
printed  on  the  certificates  of  stock  so  that  a  purchaser  shall  take 
with  full  notice.  Thus,  a  by-law  passed  at  the  time  of  the  or- 
ganization of  the  company  may  limit  the  number  of  votes  which  a 
single  stockholder  may  cast.4  All  this  is  a  mere  matter  of  private 
contract.     , 

executed,  but  will  order  a  new  election.  Ohio  St..  :!."U  (1872),  the  bondholders  on 
Harben  v.  Phillips.  L.  R,  23  Ch.  D..  14. 
A  statute  repealing  the  statutory  rem- 
edy in  chancery  to  review  elections 
operates  retrospectively  as  well  as  pro- 
spectively, in  re  N.  Y.,  etc.,  Co.,  28 
Hun,  615  (1881).  A  late  case  holdH  that, 
if  the  illegally-rejected  votes  would 
have  given  the  defeated  candidate  a 
majority  of  all  the  stock,  the  court  will 
declare  him  elected,  and  will  oust  the 
one  that  was  declared  elected.  ///  re 
Cape,  etc.,  Co.,  16  Atl.  Rep,  191  (N.  J., 
1888). 

1  State  v.  McDaniel,  22  Ohio  St..  :;:>4 
(1872),  where  a  number  of  legal  votes 
were  rejected  which  would  have  sufficed 
to  elect  certain  directors  who  without 
such  votes  had  only  a  minority  of  the 
votes  cast.  The  court  held  that  persous 
cannot  be  declared  elected  and  inducted 
into  office  upon  a  quo  warranto  in- 
formation; People  v.  Phillips,  1  Deuio, 
3S8  (1845),  making  the  same  ruling  as  to 
a  church  corporation. 

2  It  is  legal  upon  the  issue  of  pre- 
ferred stock  to  provide  that  it  shall  not 
vote  at  corporate  elections.  Such  a  pro- 
vision will  be  upheld.  Miller  v.  Ratter- 
man,  24  N.  E.  Rep.,  496  (Ohio,  1890).  See, 
also,  ch.  XVI,  supr-a. 

3  In  the  case  of  State  v.  McDaniel,  22 


a  reorganization  were  given  by  con- 
tract the  power  to  vote,  and  the  court 
upheld  such  contract  right.  In  the  case 
of  Phillips  v.  Eastern  R.  EL,  138  Mass., 
**  I !.  the  court  passed  upon  a  stat- 
utory scheme  in  which  the  creditors  of 
a  railroad  company,  by  the  terms  of  a 
mortgage,  chose  two-thirds  of  the  di- 
rectors  and  the  stockholders  chose  one- 
third  until  the  debt  was  reduced  to  a  cer- 
tain figure. 

4  A  by-law  may  provide  that  stock- 
holders shall  have  one  vote  for  each 
share  held  by  them  up  to  ten  shares, 
and  may  tix  the  proportion  which  their 
votes  shall  bear  to  their  shares  above 
that  number.  Detwiler  i:  Common- 
wealth, 18  Atl.  Rep.,  990  (Pa.,  1890).  A 
by-law  restricting  the  right  of  members 
of  a  church  to  vote  as  authorized  by 
statute  is  void.  People  v.  Phillips,  1 
Denio,  388  (1845).  By-law  restricting 
the  right  of  electors  in  a  town  to  vote  is 
not  good.  Rex  v.  Spencer,  3  Burr.,  1827 
(1766);  Rex  v.  Head,  4  Burr.,  2515,  2521 
(1770).  See,  also,  §  700a,  infra;  People 
v.  Kip,  4  Cowen,  382,  note  (1822),  holding 
that  a  corporation  has  no  power,  by  a 
by-law,  to  demand  an  oath  of  a  stock- 
holder in  order  to  test  his  qualifications 
as  a  voter.     Where  the  charter  author- 


842 


en.  xxxvii.j 


ELECTIONS CORPORATE   MEETINGS. 


[§  622. 


Where  the  charter  limits  the  number  of  votes  which  one  stock- 
holder may  cast,  the  provision  cannot  be  evaded  by  transfers  to 
various  persons.     The  courts  will  enjoin  the  voting  of  the  stock.1 

A  statute  prohibiting-  a  stockholder  from  voting  "  whose  liability 
is  past  due  and  unpaid  "  refers  to  a  subscription  liability  and  not 
to  a  commercial  liability.2 

§  622.  Combinations  and  contracts  as  to  elections — Voting  trusts 
and  pooling  agreements. —  Stockholders  owning  a  majority  of  the 
stock  have  a  right  to  combine  and  secure  the  election  of  the  board 
of  directors.3  But  a  contract  in  regard  to  elections  in  private  cor- 
porations is  not  legal  if  it  provides  that  a  lucrative  corporate  posi- 
tion shall  be  given  to  one  or  more  of  the  parties  to  the  contract. 
Thus  an  agreement  of  a  large  stockholder  holding  a  majority  of 


azes  the  depositors  and  stockholders  to 
elect  new  members,  the  directors  can- 
not by  by-law  exclude  the  former  from 
elections  and  give  a  vote  to  stockhold- 
ers only.  Commonwealth  v.  Gill,  3 
Whart.  (Pa.),  228  (1837). 

1  Mack  v.  De  Bardelaben,  etc.,   Co.,  8 
S.  Rep.,  150  (Ala.,   1890).     Where  stock 
has  been  transferred  in  order  to  give  it 
a  vote,  the  transferrer  having  already 
all  the  stock  that  the  charter  allows  one 
stockholder  to  vote,  the  transfer  being 
merely  nominal  and    for  voting  pur- 
poses   only,    an    injunction   will    issue 
against  its   being  voted.     Campbell   v. 
Poultney,  6  G.  &  J.,  94  (1834) ;  Webb  v. 
Ridgely,  38  Md.,  364  (1873).     Although 
the  charter  limits  each  person  to  one 
hundred  votes,   yet  a  person  voting  a 
hundred  votes  in  his  own  name  may 
vote  another  hundred  as  proxy  for  his 
wife,  if  it  is  bona  fide  her    property. 
Widow  Conant  v.  MillaudoD,  5  La.  Ann., 
542  (1850).     In  England  a  contrary  rule 
prevails.     It  is  not  illegal  to  transfer  or 
procure  shares  before  a  meeting  so  as 
to  multiply  votes  at  it;  nor  can  votes  so 
obtained  be  disregarded.     They  may  be 
cast.     Pender  v.   Lushington,   L.  R,  6 
Ch.    D.,  70  (1877);    Stanton    Iron    and 
Steel  Co.,  L.  R,  10  Eq.,  559 ;  Cannon  v. 
Trask,  20  Eq.,  669 ;  Moffatt  v.  Farquhar. 
L.  R,  7  Ch.   D.,   591    (1878);    and    see 
Northwest  Transportation  Co.  v.  Beatty, 
L.  R,  12  App.  Cas.,  589.  A  statute  which 


confines  the  right  to  vote  to  stockhold- 
ers who  are  citizens  of  the  state  by 
which  the  corporation  is  chartered  can- 
not be  evaded  by  colorable  transfers  of 
shares  to  residents  of  the  state  merely 
for  the  purpose  of  having  them  voted 
upon.  State  v.  Hunton,  28  Vt.,  594 
(1856).  Such  a  statute  would  now,  how- 
ever, probably  be  held  to  be  unconstitu- 
tional. See  g  813,  relative  to  statutes 
prohibiting  citizens  of  other  states  from 
being  trustees. 

2  United  States  v.  Berry,  36  Fed  Rep., 
246  (1888). 

3  Havemeyer  v.  Havemeyer,  43  N.  Y. 
Super.  Ct.,  506,  513  (1878) ;  affirmed,  86 
N.  Y.,  618  (1881);  Faulds  v.  Yates,  57  111., 
416  (1870),  where  it  was  held  that  per- 
sons holding  the  majority  of  stock  in  a 
corporation  could  lawfully  agree  among 
themselves  to  vote  as  a  unit  to  control 
an  election ;  and  that  their  agreement 
that  their  votes  should  be  cast  as  should 
be  decided  by  the  majority  of  their  own 
votes  was  not  void  as  being  against 
public  policy.  "There  is.  if  I  may  say 
so,  no  obligation  on  a  shareholder  of  a 
company  to  give  his  vote  merely  with  a 
view  to  what  other  persons  may  con- 
sider the  interests  of  the  company  at 
large.  lie  has  a  right,  if  he  thinks  fit, 
to  give  his  vote  from  motives  or  prompt- 
ings of  what  he  considers  his  own  indi- 
vidual interest."  Pender  v.  Lushington, 
L.  R,  6  Ch.  D.,  70  (1877). 


843 


§  622.] 


ELECTIONS CORPORATE    MEETINGS. 


[CH.  XXXVII. 


the  stock  that  upon  the  purchase  and  absorption  of  plaintiff's  busi- 
ness by  the  corporation  the  plaintiff  should  be  engaged  for  a  term 
of  years  as  vice-president  and  general  manager  of  the  corporation 
at  a  specified  salary  is  contrary  to  public  policy  and  is  void.1 
A  sale  by  a  stockholder  of  his  vote  is  illegal.2     Closely  connected 


i  West  v.  Camden,  135  U.  S.,  507  (1890). 
A  contract  made  by  a  stockholder  for  a 
consideration  to  vote  for  a  particular 
person  for  manager  of  the  company, 
and  in  the  event  of  his  election  to  vote 
for  an  iucrease  of  the  salary  attaching 
t<>  that  position,  is  illegal  and  cannot  be 
enforced.  Woodruff  v.  Wentwortlv.  133 
An  agreement  of  per- 
sons holding  a  majority  of  the  stock, 
they  beiup  directors  also,  that  a  person 
purchasing  stock  from  them  shall  be 
general  manager  and  may  at  the  end 
of  two  years  sell  the  stock  back  to  them 
at  a  stated  price,  is  contrary  to  public 
policy  and  void.  The  vendors  need  not 
repurchase  The  arrangement  is  unfair 
to  the  corporation.  Wilbur  v.  Stoepel.  46 
N.  W.  Rep..  734  (Mich.,  1890).  A  proxy 
for  five  years  given  so  as  to  unite  enough 
stock  to  control  the  corporation,  the 
holder  of  the  proxy  agreeing  that  the 
n  giving  the  proxy  shall  have  an 
office  at  a  salary  of  $2,500  a  year,  is 
void.  At  the  instance  of  the  latter  per- 
son a  court  of  equity  will  enjoin  voting 
thereunder.  Cone's  Ex'rs  r.  Russell,  21 
Atl.  Rep..  847  (N.  J..  1891).  Where  a 
stockholder  in  a  railroad  company  is  in- 
duced to  take  part,  in  the  formation  of  a 
land  company,  and  is  to  receive  a  cer- 
tain sum  of  money  when  a  depot  is  lo- 
cated  on  such  land,  he  cannot  enforce 
the  agreement  It  is  practically  a  sale 
of  his  vote.     Fuller  v.  Dame.  35  M 

1836).  A  contract  of  the  vendor  of 
bank  stock  that  he  would  make  the 
vendee  the  cashier  is  illegal  and  void. 
Noel  v.  Drake.  28  Kan.,  265  (1882  .  An 
agreement  to  vote  in  a  particular  way. 
in  consideration  of  some  personal  bene- 
fit, is  illegal :  for  a  vote  ought  to  be  an 
impartial  and  honest  exercise  of  judg- 
ment.    Elliott  r.  Richardson,  L.  R,  5  C. 


P..  744.  See,  also,  Moffatt  v.  Farquhar- 
son.  2  Bro.  C.  C,  338 ;  Card  r.  Hope,  2 
B.  &  Cr..  661.  Compare  Bolton  v.  Mad- 
den, L.  R,  9  Q.  B.,  55,  where  an  agree- 
ment between  two  subscribers  to  a  char- 
ity to  vote  for  each  other's  nomiuees 
was  held  not  to  be  illegal.  Directors 
have  no  power  to  contract  with  an  out- 
sider that  he  shall,  upon  purchasing  cer- 
tain stock,  be  made  a  director  in  the 
company.  Seymour  v.  Detroit  Copper, 
etc..  Mills.  56  Mich..  117  (1885).  But  a 
sale  of  stock  with  an  agreement  that 
the  vendee  should  be  elected  superin- 
tendent may  be  rescinded  if  the  latter 
part  of  the  agreement  is  not  carried 
out.  Id.  Although  a  contract  of  cer- 
tain stockholders  to  vote  together  is 
legal,  yet  a  conspiracy  to  obtain  an 
il  injunction  against  others  voting 
will  not  be  countenanced  by  the  court 
People  v.  Albany,  etc.,  R  R  Co..  55 
Barb..  344,  368  (1869).  A  contract  by 
which  a  shareholder  in  a  corporation 
agrees  to  secure  to  the  purchaser  of  his 
stock  a  corporate  office  at  a  state.]  salary. 
and  in  case  of  his  removal  to  repurchase 
the  stock,  is  void  as  against  public  pol- 
icy and  as  a  fraud  on  other  stockhold- 
ers, unless  it  is  proved  that  the  transac- 
tion is  not  for  the  private  benefit  of  the 
vendor,  or  that  it  was  consented  to  by 
the  other  stockholders,  Guernsey  n 
Cook.  120  Mass.,  501  (1876);  Noyes  v. 
Marsh.  128  Mass.,  286  (1877),  Where 
the  agreement  was  to  keep  the  vendor 
in  a  professorship  the  court  will  not  aid 
the  parties.  The  agreement  is  against 
public  policy.  Jones  v.  Scudder,  2  Cin. 
Sup.  Ct,178  (1872  . 

-'  Ilafer  r.  X.  Y,  etc.,  R  R,  14  Week. 
Law  Bull.,  68.  See,  also,  Yale  Law- 
Journal,  vol.  1,  p.  7. 


844 


CH.  XXXVII.]  ELECTIONS CORPORATE    MEETINGS.  [§  'J22. 

with  this  principle  of  law  is  the  question  whether  a  director  or 
stockholder  may  vote  his  stock  in  favor  of  a  sale  to  or  a  purchase 
from  another  corporation  in  which  such  director  or  stockholder  is 
interested  as  a  stockholder.  The  general  rule  is  that  a  contract 
between  two  corporations  having  certain  stockholders  or  directors 
in  common  will  be  sustained  by  the  courts  if  the  contract  is  fair 
towards  the  minority  stockholders.  If  it  is  not  fair  the  courts  will  . 
set  it  aside  upon  the  complaint  of  the  minority  stockholders.1  A 
contract,  however,  by  which  the  directors  who  own  a  majority  of 
the  stock  sell  such  stock  and  agree  to  substitute  the  vendees  as 
directors  of  the  company,  is  legal.2  The  vendor  of  stock  may  of 
course  agree  to  vote  as  the  vendee  wishes.3 

Fie>trictions  on  the  right  to  vote  stock,  like  restrictions  on  the 
right  to  sell  stock,  are  not  favored  by  the  courts.  These  two  classes 
ofrestrictions  are  so  closely  allied  that  it  is  best  to  consider  them 
together.  They  both  are  due  generally  to  a  desire  to  so  tie  up  the 
stock  or  the  voting  power  that  the  control  will  be  permanently  ob- 
tained and  retained  thereby.  It  is  an  old  problem  in  corporation 
law  how  to  compel  parties  to  live  up  to  their  agreement  in  regard 
to  holding  their  stock  and  voting  with  other  parties  to  the  contract 
in  order  to  keep  the  control  of  the  corporation.  Various  devices 
have  been  tried,  the  object  being  to  place  the  stock  in  such  a  posi- 
tion that  no  one  of  the  parties  can  break  his  agreement  to  act  with 
the  others.  "Irrevocable"  proxies  to  vote  upon  the  stock  have 
been  given  by  all  the  parties  to  a  designated  person,  who  acted  as 
their  a^ent.  '  But  the  courts  decided  that  these  proxies  were  not 
irrevocable,  but  might  be  revoked  at  any  time.4 

Another  plan  was  to  place  the  stock  of  the  various  parties  in  the 
hands  of  trustees  with  power   to  transfer  the   stock  to  themselves, 

1  See  eh.  XXXIX,  the  court  stating  that  such  a  contract  is 

2  A  contract  to  sell  one's  stock  in  a  unfair  towards  the  minority  stockhold- 
corporation.  and  to  resign  a  directorship  ers.  See,  also,  contra,  Jacobs  v.  Miller, 
and  the  presidency,  and  having  done  so  15  Alb.  L.  J.,  188    >T7). 

to  endeavor  to  induce  other  directors  to        3  An  agreement  by  a  vendor  of  stock, 
resign,  in  order  that  the  purchasers  of  which  is  to  be  delivered   after  an  ei 
the  stock  may  come  in  and  take  their  tion.  that  he  will  vote  as  the  vendee  de- 
places  and  so  control  the  management  sires,  is  legal.     Mobley  v.  Morgan.  6  Atl. 
of  the  company,  there  being  no  evidence  Rep.,  694  (Pa.,  1886).     One  corporation 
of  fraud,  has  been  held  a  contract  not  contracting   with    another    may   agi 
void  as  against  public  policy.    Barnes  V.  that  the  latter  shall   hold  and  vote  the 
Brown,  80  N.  Y.,  527     1880  .      Specific  stock  of  and  in  the  former.    Tonawanda, 
performance  will  not  be  granted  of  an  etc.,  R  R.  Co.  v.  N.  Y.,  etc..  R  R  Co..  42 
agreement  of  the  vendors  of  stock  .that  Hun,  490  (1886).     This  is  but  a  mode  of 
they  will  resign  as  directors  and  substi-  issuing  the  stock, 
tute  the  vendee's  representatives  instead.  Si  c  §  010,  supra. 
Fremont  v.  Stone,  42  Barb..  169  (1864). 

845 


§  622.] 


ELECTIONS CORPORATE    MEETINGS. 


[CH. 


XXXVII. 


and  to  hold  and  vote  the  same.  Trustees'  certificates  were  then 
issued  by  the  trustees  to  the  various  parties,  specifying  the  amount 
of  stock  so  deposited  by  them  and  their  interest  in  the  pool.  But 
this  plan  failed.  The  courts  held  that  any  holder  of  a  trustee's 
certificate  might  at  any  time  demand  back  his  part  of  the  stock.' 
Toting-  trusts  of  this  kind  are  resorted  to  in  forming  "  trusts," 
the  combinations  in  trade.  All  the  stock  of  various  competing 
corporations  are  placed  in  the  hands  of  trustees,  who  issue  trustee 
certificates  therefor.  Such  voting  trusts  as  those  are  declared  ille- 
gal because  the  monopolistic  combination  that  is  sought  is  illegal. 

i  Woodruff  v.  Dubuque,  etc.,  R  R,  30    Co.  v.  Chicago,  etc.,  R'y,  27  Fed.   Rep., 


Fed.  Rep.,  91  (1887);  Hafer  v.  New 
York,  etc.,  R  R  Co.  (Ohio),  14  Week. 
Law  Bui.,  68  (Cincinnati  Sup.  Ct,  1885). 
See  Griffith  v.  Jewett  (Ohio),  15  Week. 
Law  Bui.,  419  (Cincinnati  Sup.  Ct,  1886) ; 
Vanderbilt  v.  Bennett, 2  Ry  &  Corp.  L  J., 
409  (Pa.,  1887);  Starbuck  r.  Mercantile, 
etc.,  Co.,  24  Atl.  Rep.,  32  (Conn.,  1891).  See, 
also,  an  excellent  article  and  careful  re- 
view of  the  cases  by  Professor  Baldwin 
in  1  Yale  Law  J.,  1  (1891).  A  trust  of 
stock  for  the  benefit  of  both  the  bond- 
holders and  the  stockholders  cannot  be 
broken  up  by  one  of  the  stockholders 
only.  Shelmerdine  r.  Welsh,  47  I 
Intell.,  26  (Phil.  Com.  PI.,  Jan.,  1890). 
Although  many  stockholders  transfer 
their  stock  to  a  trustee  to  hold  and  vote 
it  for  three  years,  and  agree  not  to  sell 
until  they  have  offered  to  sell  to  each 
other,  yet  any  one  may  sell  to  an  out- 
sider, and  the  latter  may  demand  back 
his  stock  from  the  trustee.  Moses  v. 
Scott,  4  S.  Rep,  742  (Ala.,  1888).  The 
trustees  are  not  purchasers  and  owners 
of  the  stock.  People  r.  North  River  S. 
Ref.  Co.,  121  N.  Y,  582  (1890).  An  out- 
side stockholder  cannot  object  to  other 
stockholders  uniting  their  interests  in  a 
"trust,"  and  thereby  obtaining  control 
of  the  corporation.  Zimmeimann  v. 
Jewett,  19  Abb.  N.  C,  459  (Ohio,  1886). 
But  he  can  object  when  the  purpose  of 
the  "  trust "  is  to  work  out  some  scheme 
which  is  illegal  in  itself.  Hafer  v.  New 
York,  etc.,  R  R  Co.,  14  Week.  Law 
Bull.,  68  (Ohio,  1886).  A  "trust"  of 
6tock  was  involved  in  Farmers'  L  &  T. 


146  (1886),  where  Hugh  J.  Jewett, 
president  of  the  Erie  railway,  held  as 
trustee  the  stock  of  the  Chicago  &  At- 
lantic Railroad,  the  western  connection 
of  the  former  company.  The  court  did 
not  pass  on  the  permanency  of  the 
trust.  An  agreement  of  the  holder  of  a 
majority  of  the  stock  that  he  will  re- 
tain control  is  no  defense  by  the  corpo- 
ration to  an  action  by  the  receiver  of 
such  stockholder  to  transfer  the  stock 
on  the  corporate  books.  Weller  v.  Pace 
Tobacco  Co..  35  N.  Y.  Week.  Dig.,  531 
A  contract  to  combine  to  con- 
trol the  majority  of  the  stock  of  a  rail- 
road company  may  be  violated  by  a 
party  to  it,  although  by  its  terms  it  is 
irrevocable.  Clarke  v.  Central  R  R,  etc., 
50  Fed.  Rep.,  338  (1892).  Where  stock 
is  placed'  in  a  trustee's  hands,  and  a 
trustee's  certificate  is  taken  therefor,  a 
pledge  of  the  trustee's  certificate  is  not 
a  pledge  of  the  stock  sufficient  to  cut 
olT  subsequent  attachments  of  the  stock. 
Bidstrup  t\  Thompson,  45  Fed.  Rep.,  4.")2 
(1891 ».  Where  stock  is  deposited  with  a 
trustee  for  purposes  of  reorganization, 
and  transferable  certificates  are  issued 
therefor  by  the  trustee,  a  claimant  of 
stock  which  another  person  has  depos- 
ited, and  for  which  such  other  person 
has  the  trustee's  certificate,  cannot  com- 
pel the  trustee  to  deliver  up  the  stock 
until  the  trustee's  certificate  is  returned,  ' 
even  though  the  party  holding  it  is  a 
party  defendant  Beau  v.  American  L 
&  T.  Co.,  122  N.  Y,  622  (1890). 


S46 


CH.  XXXVII.]  ELECTIONS  —  CORPOEATE   MEETINGS  [§  622. 

Hence  the  decisions  concerning  the  "trusts"  are  not  applicable  to 
the  questions  now  under  consideration.1 

Another  device  was  tried.  The  parties  contracted  together  not 
to  sell  their  stock  for  a  specified  time,  and  agreed  that  if  they  did 
they  would  sell  together  or  to  a  purchaser  who  would  be  agreeable 
to  the  old  stockholders.  But  this  plan  also  did  not  succeed.  If  it 
prohibited  any  sale  whatsoever,  and  did  not  limit  the  time  during 
which  the  agreement  was  to  last,  it  was  void  as  an  illegal  restraint 
of  trade.2  Moreover  it  constituted  no  check  on  the  parties.  At 
any  time  any  one  of  the  parties  might  sell  his  stock.  The  only 
remedy  of  the  other  parties  against  him  then  was  a  doubtful,  diffi- 
cult, protracted  and  expensive  suit  for  damages.3 

Another  plan  was  to  restrict  by  a  b}T-law  of  the  corporation  the 
right  to  transfer  stock.     But  such  by-laws  are  illegal.4 

Still  another  plan  was  tried.  An  unincorporated  joint-stock  as- 
sociation was  formed  to  carry  on  the  business.  A  provision  was 
inserted  in  the  articles  of  association  of  the  company  restricting 
the  right  of  a  shareholder  to  sell  his  stock.  This  provision  was 
upheld  by  the  courts.  The  purchaser  of  a  certificate  of  stock,  who 
sold  in  violation  of  the  agreement,  received  no  right  to  vote  or  par- 
ticipate in  the  company.  He  merely  was  entitled  to  the  dividends 
on  his  stock.5  But  this  device  is  not  open  to  corporations.  Their 
charters  are  generally  obtained  by  filing  a  certificate  in  accordance 
with  a  general  law.  A  special  provision  inserted  in  the  certificate, 
limiting  the  right  to  transfer  stock,  would  be  ineffectual  and  void. 
All  these  various  devices  have  proved  to  be  impracticable. 

It  is  legal,  however,  for  stockholders  to  agree  to  place  their 
stock  in  the  hands  of  a  trustee  for  a  reasonable  time,  or  until  the 
debts  of  the  company  and  of  one  of  the  parties  are  paid.6     Such  an 

i  See  ch.  XXIX,  concerning  "  Trusts."  4  See  §  332,  supra. 

2  Fisher  v.  Bush,  35  Hun  (N.  Y.),  641  5  Harper  r.  Raymond,  3  Bosw.  (N.  Y), 
(1885).  29    (1858).      See,    Kingman     v.    Spurr. 

3  In  the  case  Havemeyer  v.  Have-  7  Pick.,  234  (1828).  See,  also,  Taft  v. 
meyer,  43  N.  Y.  Super.  Ct,  506  (1878);  Harrison,  10  Hare,  489  (1853  .  as  to  lia- 
afFd,  86  N.  Y,  618,  it  was  held  that  an  bility  after  an  offer  to  sell  to  the  corn- 
agreement  of  several  stockholders  not  pany. 

to  sell  their  own  stock  except  in  con-  6An  agreement  by  which  various 
nection  with  that  of  the  other  parties  to  owners  of  stock  place  their  stock  in  the 
the  contract  was  not  in  restraint  of  hands  of  one  person  as  trustee  or  agent 
trade  and  was  not  contrary  to  public  to  hold  for  a  certain  period  of  time,  tin- 
policy,  as  restricting  the  right  of  aliena-  parties  agreeing  not  to  sell  their  stock 
tion,  but  the  measure  of  damages  for  without  having  first  offered  to  sell  it  to 
breach  of  such  a  contract  is  only  the  the  rest  of  their  associates  at  a  price  not 
actual  loss  suffered  by  a  decline  in  the  above  the  then  current  market  value, 
value  of  the  stock  by  reason  of  the  and  in  case  of  their  declining  to  take  it, 
breach.  without  next  offering  it  to  the  trustee. 

847 


22.] 


ELECTIONS  —  CORrOKATE    MEETINGS. 


[on.  n.wn. 


agreement  has  to  be  supported,  however,  by  something  more  than 
the  mere  agreement  of  the  parties.1  It  is  legal  for  parties  to 
agree  that  certain  persons  shall  be  directors  for  a  certain  length 
of  time.2 

It  is  legal  for  the  stockholders  to  deposit  their  stock  with  a 
depositary,  to  be  transferred  to  such  depositary  and  voted  by  him 
as  directed  by  a  committee  of  the  stockholders,  such  committee 
being  named,  the  object  of  the  deposit  being  to  effect  an  adjust- 
ment of  differences  between  the  common  and  preferred  stock- 
holdei 

Where,  in  order  to  prevent  the  foreclosure  and  sale  of  a  rail- 
road, a  r  lorganiz  ttion  agreement  is  entered  into  by  the  creditors 
and  stockholders,  whereby  the  claims  of  the  creditors  and  the  vot- 
ing power  of  tin-  stockholders  are  vested  in  trus  .  the  voting 
power  to   be  exercised  by  the  trustees  until  certain  debts  were 


hut  any  ouo  of  the  parties  to  be  at  lib- 
erty to  withdraw  at  any  time  on  those 
terms,  is  not  "contrary  to  public  policy, 
or  any  wise  open  to  objection.'1  Brown 
v.  Pacific  Mail  a  I  <•..  5  Blatch.,  " 
(1867).  See,  also,  Griffith  h.  Jewett,  16 
Week  I..  BnlL,  418.  \  contract 
whereby  stockholders  of  a  corporation 
to  deposit  their  certificates  of 
b  w  ith  a  trust  i  months,  f"r 

the  purpose  "f  preventing  any  disp 
tion  of  the  stock  during  that  time,  is  un- 
enforceable ana  Mini,  as  contrary  to  the 
statute  law  of  the  state  and  against  pub- 
lic policy.    Williams  r.  Hontgorn 
Hun,  11(1 

1  Fisher   r.    Bush,  85   Hun,  641  1 18811 
"There  is  no    consideration   wh 
between  the  trustees  and  the  subscribers ; 
none  is  claimed  <>r  mentioned  in  the 

reement  itself,  and  as  between  the 
subscribers  there  is  also  none.  The 
mere  fact  that  several  or  a  majority 
have  signed  does  not  furnish  a  support- 
ing consideration.  No  one  subscriber 
acquired  under  tl  sment  any  in- 

ter' -t  in  any  other  one  Btock,  or  any  un- 
divided interest  in  the  whole  of  the 
■k  represented  by  the  subscribera 
No  real  and  special  consideration  i-- 
claimed,  and  without  this  the  agreement 
cannot   be  supported.'1    Vanderbilt   >: 


Bennett,  2  B'y  ft  Corp.  L  J.,  409  (Pa., 

But  ■  receiver  will  not  he  appointed 
<>n  account  of  a  breach  <>f  the  contract 
Baumgarten  v.  Nichols,  N.  Y.  L.  J.,  May 
10,  1881.  An  agreement  to  elect  ■  cer- 
tain person  president  is  waived  if  be 
participates  in  electing  others.  Ameri- 
can, etc.  T.  Co.  r.  Toledo,  etc.,  R'y,  17 
i.i  Rep.,  B48  lsyo). 

3  Tie-  agreement  did  not  prevent  any 
stockholder  from  demanding  hack  bis 
stock  whenever  he  saw  fit.  The  court  held 

that  this  \\a>   not  B  u voting  trust,"  and 

that  it  was  men  a venient  method 

by  which  distant  and  widely-eepai 

sharehol  u mabled,  indin 

to  participate  in  the  control  an<l  man- 

;  of  the  OOmpany,  and  from 
which  each  could  recede  at  any  time 
and  demand  return  of  his  stock  without 

violating  any  term  of  the  agreement 
The  depositary  is  a  proxy  required  to 
vote  th<'  stock  as  directed  by  the  com- 
mitt  The    contract    of    deposit    is 

given  in  the  report  The  suit  arose  on 
warranto  proceedings  to  oust  the 
board  of  directors  who  were  elected  by 
the  vote  of  the  depositary,  hut  whose 
title  to  othe,.  was  denied  hy  the  com- 
pany, olno.  eta,  Co.  '•.  State,  88  N.  BL 
l;.  p..  888  (Ohio,  1809} 


Ms 


CH.  XXXVII.]  ELECTIONS  —  CORPORATE    MEETINGS.  [§  623. 

paid,  the  stockholders  cannot  withdraw  from  the  agreement  and 
claim  the  right  to  vote  upon  their  stock.1 

The  most  effective  way  in  which  a  majority  or  all  the  stock  of  a 
company  may  be  pooled  or  tied  up  seems  to  be  by  selling  and 
transferring  it  to  another  corporation  formed  for  that  purpose. 
Such  corporations  may  be  organized  under  the  laws  of  many  of  the 
states.  The  objection  to  this  plan  is  that  it  enables  the  directors 
of  the  second  corporation  to  sell  the  stock  at  any  time,  and  it  in- 
volves not  merely  a  temporary  pooling  of  the  stock  but  a  perma- 
nent parting  with  the  title  and  interest  in  it. 

§  623.  Who  may  be  a  director  or  corporate  officer. —  In  general, 
any  one  who  may  be  an  agent  may  be  elected  a  director  of  a  pri- 
vate corporation;  and  at  common  law  it  is  not  necessary  that  a 
director  be  a  stockholder.2  A  director  need  not  be  a  citizen  of  the 
state  by  which  the  corporation  is  created.3  The  constitutionality  of 
a  statute  which  prohibits  the  citizens  of  other  states  from  being  di- 
rectors in  a  corporation  may  well  be  doubted.4 

An  alien  may  be  a  stockholder  and  director  in  a  corporation  if  the 
statutes  do  not  prohibit  it.5  A  married  woman  is  not  at  common 
law  qualified  to  act  as  an  incorporator  nor  as  treasurer;6  but  under 
the  usual  statutes  conferring  rights  upon  her,  she  is  qualified  to 

i  Mobile,  etc.,  Co.  v.  Nicholas,  12  S.  Ga.,  23  (1852)  —  a  municipal  corporation 
Rep.,  723  (Ala.,  1893).  Not  even  the  case.  It  is  not  necessary  that  the  di- 
subsequent  change  in  the  agreement  so  rectors  should  be  either  subscribers  te- 
as to  issue  first-mortgage  bonds  to  take  the  stock  or  corporators.  Densmore  Oil 
up  some  of  the  debt  will  enable  the  Co.  v.  Densmore,  54  Pa.,  43;  fie  British 
stockholders  to  claim  the  right  to  vote  Provident  Life  Ass'n,  L.  R..  5  Ch.  Div. 
upon  their  stock  before  the  debts  speci-  306. 
fied  above  have  been  paid.     Id.  '  Kerchner  v.  Gettys,  18  S.  G,  521  (1 B 

2  State  v.   McDaniel,  22  Ohio  St.,  354,  A  citizen  of  one  state  may  be  a  stoefc- 

367  (1872);   McDowall  v.  Sheehan,    129  holder  and  director  in  a  corporation  in- 

N.  Y.,  210  (1891):  Wight  v.  Springfield,  corporated  in  another  state.     Detwiler 

etc.,  R,  R  Co.,  117  Mass.,  226  (1875);  In  v.  Commonwealth,  18  Atl.  Rep.,  990  Pa.. 

the  Matter  of  Election  of  St.  Lawrence  1890). 

Steamboat  Co.,  44  N.  J.  Law,  529  (1882) ;  *  See  §  813.  to  the  effect  that  s«h  a 

Hoyt  v.  Bridgewater,  etc.,  Co.,  6  N.  J.  statute  as  regards  trustees  in  a  mort- 

Eq*253  274(1847);  Ex  parte  Stock,  33  gagedeedof  trust  isuuconst.tutiomal  and 

LJ    Chan    731(1864).    The  charter  or  void.  A  constitutional  provision  reqmr- 

by-laws  may,  however,  provide  other-  ing  directors  to  be  stockholders  fees  not 

wise     Dispatch  Line  of  Packets  v.  Bell-  apply  to  a  consolidated  railroad  com- 

amy  Mfg.   Co.,   12  N.   H.,   205  (1841);  pany  existing  as  one  corporation  in  two 

amy   luig.    w,    *                »  Ohio  etc  RTy  Co.  t\  People.  123 

Bartholomew  v.  Bentley,  1  Ohio  St.,  37  states,     umo,  etc.,  n.y 

(1852);  People  v.  Northern  R  R  Co.,  42    DI,  467  (1888). 

N  Y    217(1870);  Cammeyer  v.  United,        *  Robinson    r.  Hemingway,     18  Atl. 

L    Churches.   2    Sand.  CI,,   186,  249    Rep..  992  (Pa.  ^ 

(1844);  Hurrell   &   Hyde  on   Directors        «9  R  y  &  Cov^  L  J.,  19,. 

and  Officers,  2 ;  State  v.  Swearingen,  12 

(54)  ^ 


§  623.] 


ELECTIONS CORPORATE    MEETINGS.  [CH.  XXXVII. 


act  as  a  director  or  officer.1  An  executor  may  be  a  director.2 
It'  the  charter  or  statutes  require  a  director  to  be  a  stockholder,  one 
who  holds  stock  transferred  to  him  in  trust  for  the  express  purpose 
of  qualifying  him  for  the  position  may  serve.3  And  where  a  person 
has  the  right  to  vote  on  stock  as  a  stockholder,  he  is  eligible  to 
any  corporate  office  to  which  any  stockholder  is  eligible,  and  ac- 
cordingly may  be  elected  a  director  even  though  an  assignee  in 
bankruptcy  has  been  appointed  of  his  estate.4  lie  may  obtain  stock 
in  any  way  and  become  thereby  qualified.5  Although  the  charter 
requires  the  directors  to  be  stockholders,  it  has  been  held  that  the 
transferee  and  holder  of  a  certificate  of  stock  is  qualified,  even 
though  the  stock  itself  stands  on  the  books  of  the  company  in  the 
name  of  his  transferrer.6  It  has  been  doubted  whether  the  by- 
laws of  a  company  may  require  directors  to  be  stockholders.7 

Votes  cast  for  a  person  not  eligible  to  the  office  cannot  elect 
him.  He  is  not  even  a  <h  facto  director,  and  he  may  be  ousted  In- 
legal  proceedings.8     Such  votes,  however,  are  not  to  be  ignored  so 

i  People  v.  Webster,  10  Wend.,   -",4  eta,  Co..  P   P..  0  Ch.  D..  610;  Pairi- 
ng bridge  r.  Smith,  60  L.T.  Rep.,  879  (1889). 

"In  re  Santa  Clara,  eta,  Ca,  N.Y.  tate  u  Smith,  15  Oreg.,  98  1887).  The 

Daily  Peg..  .Tune  19,  18  corporate  books  are  not  conclusive  as  t" 

i  Budd  v.  Monroe,  18  Hun.  B16  (1879).  the  qualification  of  a  person  t>-  act 

Contra.  Bartholemew  v.]             l  Ohio  director.    If  he  owns  stock  he  is  quali- 

st..  :i7  (1852  .  Bed,  even  though  he  does  not  appear  as  a 

'State  v.  Ferris,  12  Conn.,  560  (18"!  stockholder  on  the  corporate  books,  and 

» A  stockholder  may  have  purchased  viceversa.  The  inspectors  cannot  re- 
stock with  a  view  of  becoming  a  di-  ject  votes  on  the  ground  that  the  candi- 
rector,  or  have  obtained  it  by  gift,  or  he  date  is  not  qualified  Matter  of  Elec- 
may  hold  it  upon  a  trust,  and  bequali-  tion  of  St.  Lawn  nee,  etc..  Ca,  44  X.  J. 
Red  to  be  a  director.  He  Ls  qualified  P.  529  Under  the  statutes  of 
unless  the  "title  was  put  in  him  color-  North  Dakota  an  unregistered  holder  of 
ably,  with  a  vie  w  i..  qualify  him  to  he  a  stock  is  not  qualified  to  be  elected  a  di- 
director  for  some  dishonest  purpose,  in  rector.  In  re  Argus,  etc.,  Co.,  43  N.  W. 
furtherance  of  some  fraudulent  scheme  Rep.,  "-IT  (X.  P..  1891  . 
touching  the  organization  or  control  of  rPeople  a.  Albany,  etc.,  R.  R..  55 
the  company,  or  to  carry  into  effect  Barb,  844, 878  1869). 
some  fraudulent  arrangement  with  the  "The  election  of  a  person  not  quali- 
COmpany."  Matter  of  Kir,  tion  of  St.  Bed  does  not  make  him  even  a  de  facto 
Lawrence,  etc  Co.,  44  N.  PL,  529  (1882).  director.  Tfl  re  Newcombe,  18  N.  Y. 
A  person  is  qualified  who  buys  stock  in  Supp.,  16  (1891>  Where  cumulative 
his  own  name  with  his  wife's  money  voting  prevails, and  the  statutes  require 
and  transfers  the  certificate  to  her.  but  three  directors  to  be  residents,  and  all 
afterwards  and  before  registry  keeps  votes  cast  are  cumulated  on  non-resi- 
the  stock  for  himself.  Id.  If  the  di-  dents  excepting  thirty-two  which  are 
rector  has  sufficient  stock  registered  in  cast  for  three  residents,  the  three  resi- 
his  name,  it  is  immaterial  that  he  does  dents  are  elected,  and  tbe  remaining 
not  own   it      Pulbrook   v.   Richmond,  directors  are  those  of  the  non-residents 

830 


CH.  XXXVII.] 


ELECTIONS  —  CORPORATE    MEETINGS. 


[§  623. 


as  to  elect  a  candidate  who  receives  a  minority  of  all  the  votes 
cast.1 

Where  a  person  not  eligible  to  the  office  is  declared  elected  and 
no  stockholder  objects  or  takes  legal  proceedings  to  test  the  right 
to  the  office,  and  such  person  is  allowed  to  perform  the  duties' of 
his  office,  he  becomes  an  officer  de  facto.  As  such  his  acts  cannot 
be  objected  to  on  the  ground  that  he  was  not  a  legally  elected  di- 
rector. Neither  corporate  creditors,  nor  the  corporation,  nor  the 
stockholders,  nor  the  director  himself  are  allowed  to  raise  this  ob- 
jection in  that  manner.  The  remedy  is  to  oust  him  by  quo  war- 
ranto or  to  enjoin  him  as  a  usurper.     But  after  he  is  allowed  to 


who  received  the  highest  number   of 
votes.     Horton  v.  Wilder,  29  Pac.  Rep., 
566  (Kan.,  1892).     Where  directors  must 
be  stockholders  qualified  to  vote,  a  stock- 
holder not  qualified  to  vote  by  reason  of 
not  owning  his  stock  for  thirty  days 
before  the  election  is  not  qualified  to  be 
a  director.     His  election  does  not  make 
him  even  a  de  facto  director.     In  re 
Newcombe,  supra.   Where  an  election  is 
"  conceived  in  fraud  and  conducted  cou- 
trary  to  law,"  the  call  being  insufficient, 
the  notice    concealed,    the    instigators 
having  sold   and  transferred  their  cer- 
tificates of  stock,   the   purpose   of  the 
election  being  to  steal  the  control  from 
one  who  really  owned  all  the  stock,  and 
two  of  the   alleged   new  directors  not 
being  stockholders  as  required  by  law, 
there  are  no  directors  de  facto,  even 
though  they  take  possession  and  drive 
away  the  contractor  who  is  building  the 
road.     Johnston  v.  Jones,  23  N.  J.  Eq., 
216  (1872).     In  Barber's  Case,  L.  R,  5 
Ch.  D.,  963  (1877),  arising  under  similar 
facts,  the  court  said  :  "  Mr.  Barber  was 
not  qualified  to  be  elected  a  director, 
and  his  election  was  absolutely  null  and 
void.    .    '.     .     If  he  had  acted  as  a  di- 
rector, there  might  have  been  an  estop- 
pel."    The  board  of  directors  cannot, 
even  under  a  by-law  authorizing  them 
to  fill  vacancies,  oust  a  director  on  the 
ground   that  he    was    ineligible   when 
elected,   and   then    proceed   to    fill   his 
place.     Detwiler  v.  Commonwealth,  18 


Atl.    Rep.,   990   (Pa.,    1890).     A  director 
who  is  not  a  stockholder  cannot  Bign  a 
statutory  notice  of  a  meeting  to  increase 
the  capital  stock.     Matter  of  Wheeler,  2 
Abb.  Pr.  (N.  S.),  361  (1866).     It  formerlj 
was  held  in  England  that  the  election 
of  one  not  a  shareholder  as  a  director  in 
a  corporation  in  which    it  is  required 
that  the  directors  be  owners  of  a  cer- 
tain amount  of  stock  is  valid  ;  and  such 
a  person,  upon  acceptance  of  the  direct- 
orship, is  bound  to  take  and  pay  for  the 
required   number  of  shares.     But   the 
later  decisions  have  established  a  con- 
trary rule.    See  g  52.     The  election  of  a 
disqualified  person  as  director  is  void- 
able, not  void.     People  v.   Albany, 
R  R.  55  Barb.,  344,  373  (1869). 

'Where  the  person  declared  electa | 
received  a  minority  of  the  votes,  he  will 
be  ousted  even  though  the  other  candi- 
date was  not  qualified  to  act  as  a  di- 
rector. "Votes  cast  for  a  candidal.' 
who  is  disqualified  for  the  otfic  •  will  no! 
be  thrown  away,  so  as  to  make  tin-  elec- 
tion fall  on  a  candidate  having  a  mi- 
nority of  votes,  unless  the  electors 
casting  such  votes  had  knowledge  of 
the  fact  on  which  the  disqualification 
of  the  candidate  for  whom  they  voted 
rested,  and  also  knew  that  the  latter 
was,  for  that  reason,  disabled  by  law 
from  holding  the  office."  Matter  of 
Election  of  St.  Lawrence,  etc.,  Co.,  44 
N.J.  L,  529  (1883),  citing  casea  S 
also,  People  v.  Clute,  50  N.  Y.,  451. 


851 


§  623.] 


ELECTIONS 


CORPORATE    MEETINGS.  [CH.  XXXVII. 


become  a  de  facto  director  his  title  to  office  cannot  be  attacked  col- 
laterally nor  can  his  acts  be  repudiated  on  that  ground.1 

Where  the  charter  requires  the  director  to  be  a  stockholder  he 
must  continue  to  hold  stock  during  his  terra  of  office  If  he  sells 
all  his  stock  in  the  company  he  thereby  becomes  disqualified  and 
ceases,  ipso  facto,  to  be  a  director.2     He  may,  however,  remain  as 


i  Although  a  director  is  not  qualified 
according  to  the  by-laws,  yet  if  he  is 
elected  and  permitted  to  act,  his  elec- 
tion is  valid  so  far  as  his  acts  as  director 
affect  third   persons.      Despatch    Line, 
etc..  v.  Bellamy,  etc.,  Co.,  12  N.  H.,  205 
(1841).     See,  also.  §  713,  infra.     The  fact 
that  a  contract  of  a  Pennsylvania  com- 
pany is  made  by  its  president  and  man- 
agers, who   are  non-residents  and  nol 
residents  as   required   by  statute,  d 
not  enable  the  other  party  to  the  con- 
tract to  raise  that  objection.     Delaware, 
etc.,  Canal  Co.  v.  Penn.  Coal  Co.,  21  Pa 
St,  181  (1858).     The  eligibility  of  a  di- 
rector who  has  acted  with  the  consent 
of  all  cannot  be  questioned  on  an   ap- 
plication   to    have    the    company    dis- 
solved under  the  statute     In  n   Santa, 
etc.,  Co..  4  N.  V.  Supp,  178  (1889>     Al- 
though the  statutes  require  the  directors 
to  be  residents  of  the  state,  nevertheless 
even  though  the  directors  are  non-resi- 
dents the  incorporation  is  valid  and  In- 
corporation is  not  dissolved,  nor  arc  the 
stockholders  liable   as    partners.     Dem- 
arest  r.  Flack.    128    N.    Y..   205   (1891). 
The  qualification  of  a  director  cannot  be 
questioned  by  a  creditor  who  is  seeking 
to   enforce  a  statutory   liability  of  offi- 
cers.   Wallace  v.  Walsh.  125  N.  Y..  28 


(1890).  One  who  assumes  the  duties  of 
a  director  cannot  say  that  he  never  was 
a  director.  McDowall  r.  Sheehan,  129 
X.  Y..  200  (1891).  The  disqualified  di- 
rector is  bound  :  he  is  liable  as  a  director 
for  breach  of  trust.  Western  Bank  V. 
Baird.  11  Cas<  s  in  Ct  of  Sesa,  8d  seri 
96,  121;  Easterly  r.  Barber.  65  X.  Y.. 
252  (1875).  ('/.  Craw  r.  Easterly,  54 
N.  Y.,  679  (1873).  The  principle  of  law 
that  the  acts  of  an  ineligible  but  de 
facto  officer  may  bind  the  corporation 

85 


arises  often  in  municipal  corporation 
cases.  State  v.  Farrier,  47  N.  J.  L.,  38:5 
(1885) :  aff'd,  48  id.,  613.  Although  the 
directors  are  not  qualified,  nevertheless 
the  company  cannot  repudiate  stock  is- 
sued to  a  contractor  in  payment  for 
work,  where  such  work  has  been  re- 
ceived, such  contract  being  authorized 
by  the  disqualified  directors.  The  com- 
pany cannot  accept  the  subscription, 
and  at  the  same  time  repudiate  the  con 
tract  mode  of  payment  Re  The  Staf- 
fordshire, etc..  Co..  66  L.  T.  Rep.,  413 
(1892).  Directors  may  act  as  such  be- 
fore they  acquire  qualification  shares. 
Re  International,  etc.,  Co.,  66  L.  T.  Rep.. 
253  (181 

-  Where  the  statutes  require  the  di- 
rector to  be  a  stockholder  it   follows 
"that  as  soon  as  a  director  parts  with 
all    beneficial    interest    in.    and    control 
over,  the  Stock  which  he  is  required  to 
hold,  aud  causes  the  officers  of  the  cor- 
poration    to   have    knowledge   of   such 
fact  by  a  request  that  a   prop  r  trans!,  r 
be  made  on  the  books  of  th*  company. 
he  no  longer  possesses   the   qualifica- 
tions winch  the  Btatute  declares  to  be 
essential."   and    hence    he   ceases    ipso 
facto  to  be  a  director  and  is  no  longer 
liable  on  a  director's  statutory  liability. 
"The  Btatute  executing  itself  operated 
to   divest  him   of   title   to  the   office." 
( Jhemical  Xat'l  Bank  r.Colwell,  132  X.  Y.. 
250   (1892)     Contra,    Nathan    v.   Tomp- 
kins, 82   Ala..  437    (1887),  holding   that 
he   may    be    removed,  but    does    not 
cease  to  be  a  director  by  the  mere  act 
of  selling  his  stock.     To  same  effect, 
Atlas  Natl  Bank  r.  F.  B.  Gardner  Co., 
6  Biss.,  537  (1879).     Where  a  trustee  sells 
and  delivers  all  his  stock,  he  ceases  to 
be  an  officer  de  jure,  the  statute  requir- 


CII.  XXXVII. J  ELECTIONS  —  CORPORATE    MEETINGS. 


[§  624. 


a  de  facto  director  and  bind  the  company  by  his  acts,  if  allowed  to 
continue  in  his  position.1  The  director  does  not  become  disquali- 
fied by  reason  of  his  pledging  his  stock.2  The  secretary,  treasurer 
or  other  officer  of  a  corporation  need  not  be  a  resident  or  citizen 
unless  the  statute  requires  it.3 

A  corporation  may  pass  a  by-law  prescribing  the  qualifications 
of  its  directors,  and  may  prescribe  that  a  person  who  is  an  attor- 
ney against  it  in  a  suit  shall  not  be  a  director.4 

§  624.  Acceptance  and  resignation  of  office  and  failure  to  elect 
officers  —  Removal  of  directors. —  An  acceptance  of  the  office  by 
one  who  is  elected  director  is  necessary  to  constitute  him  a  di- 
rector.    Some  direct  and  positive  act  of  acceptance  is  necessary/' 

A  director  may  resign,  and  no  formal  acceptance  or  entry  thereof 
on  the  minute-book  of  the  corporation  is  necessary  to  effect  the 
resignation.6 


ing  him  to  be  a  stockholder ;  and  where 
the  whole  board  of  directors  have  sold 
their  stock  their  acts  as  a  board  of  di- 
rectors are  not  binding  on  the  corpora- 
tion. Orr,  etc.,  Co.  v.  Reno  Water  Co., 
30  Pac.  Rep.,  695  (Nev.,  1882).  "  Can  a 
director  part  with  his  qualification 
shares?"  See  on  this  subject,  8  R'y  & 
Corp.  L.  J.,  99.  A  person  may  purchase 
stock  although  such  stock  constitute 
the  qualification  shares  of  the  vendor  as 
a  director.  Kern  v.  Day,  12  S.  Rep.,  6 
(La.,  1893).  A  motion  declaring  the  of- 
fice vacant  and  electing  another  person 
before  the  director  has  really  sold  his 
stock  is  void.  Craw  v.  Easterly,  54  N. 
Y.,  679  (1873). 

1  A  director  who  sells  his  stock  ceases 
to  be  a  dejure  director.  If  he  continues 
to  and  is  permitted  to  act  he  is  a  di- 
rector de  facto.  Beardsley  v.  Johnson, 
121  N.  Y.,  224  (1890). 

scumming  v.  Prescott,  2  Y.  &  C, 
Exch.,  488  (1837).  This  was  held  in  a 
case  where  the  qualification  shares  were 
to  be  held  by  the  directors  in  their  own 
right.  Pulbrook  v.  Richmond  Consoli- 
dated Mining  Co.,  9  Ch.  D.,  610. 

3Kerchner  v.  Gettys,  18  S.  C,  521 
(1882);  McCall  v.  Byram  Manuf.  Co.,  6 
Conn.,  428  (1827).  But  in  Matthews  r. 
Trustees,  2  Brews.,  541  (1868),  the  court 
enjoined  the  company  from  compelling 


85 


its  resident  treasurer  to  turn  over  funds 
to  a  newly-elected  non-resident  treas- 
urer. 

4  Cross  v.  West  Virginia,  etc.,  Co.,  16 
S.  E.  Rep.,  587  (W.  Va.,  1892). 

5Oshorne,  etc..  Co.  v.  Croome,  14  Hun. 
164(1878):  affd,  77  N.  Y,  629;  Cameron 
v.  Seaman,  69  N.  Y,  396  (1877).  An 
"honorary  director"  who  sits  with  the 
hoard,  makes  up  a  quorum  aud  accepts 
pay  is  subject  to  the  disabilities  and  lia- 
bilities of  a  director  as  to  being  inter- 
ested in  contracts  with  the  company. 
There  is  no  sucli  thing  in  law  as  an 
"  honorary  director."  Ex  jxirte  Stears, 
29  L.  J.  (Ch.),  43  (1859).  Holding  over 
may  also  arise  from  acting  as  a  director. 
Sanborn  v.  Lefferts,  58  N.  V..  179  1 18 
It  is  a  question  for  the  jury  whether  a 
person  accepted  a  directorship.  The 
mere  fact  that  as  an  advisor  he  met 
with  the  directors  and  made  motion.-  is 
not  conclusive  if  he  declined  to  accept 
Blake  v.  Bayley,  82  Mass.,  531  11860*. 
Acceptance  is  presumed.  Lockwood  v. 
Mechanics',  etc.,  Bank,  9  R  I.,  308  1 1><09 
But  may  he  disproved  even  though  the 
person  attended  directors'  meeth 
Blake  v.  Bayley,  82  Mass.,  531  (1860  . 

"Movins    v.    Lee.    30    Fed.    Rep.,   :0l  : 
Smith  v.  Danzig,  64  How.  Pr.,  820  (18C 
Chandler   v.  Hoag,  2  Hun.  613  (1874  ; 
affd,  66  N.  Y.,  624 ;  Blake  v.  Wheeler     - 
3 


§  624.] 


ELECTIONS  —  CORPORATE    MEETINGS. 


[CH.  XXXVII. 


A  director  may  resign  by  an  oral  statement  to  that  effect,  and 
his  resignation  may  be  accepted  in  the  same  manner  by  the  presi- 
dent,1 °But  a  mere  statement  of  a  director  that  he  will  have  noth- 
ing more  to  do  with  the  office  is  not  a  sufficient  resignation.2 

A  resignation  may  be  effectual  even  though  it  is  not  accepted, 
but  it  has-been  doubted  whether  all  the  directors  can  resign,  thereby 
leaving  the  corporation   helpless.3 

A  director  whose  resignation  has  been  accepted  cannot  after- 
wards vote  at  a  meeting  as  a  director.4  The  fact  of  the  resigna- 
tion need  not  be  published  or  made  known  to  corporate  creditors.5 

The  resignation  of  a  director  must  be  presented  to  a  meeting  of 
the  stockholders  in  order  to  be  effective,  unless  the  by-laws  allow 
the  directors  to  accept  it.  It  is  not  sufficient  to  present  the  resig- 
nation to  a  meeting  of  the  board  of  directors.  Hence,  although  a 
resignation  is  sent  in  in  the  middle  of  the  year,  and  is  not  accepted 
until  the  stockholders'  meeting  later  in  the  year,  the  director  con- 
tinues to  be  such  until  such  acceptance.6  Such  is  the  law  as  laid 
down  in  England,  but  in  America  the  practice  is  different. 

The  insolvency  of  a  director  does  not  vacate  his  office.7  A  director 
dors  not  lose  his  seat  by  absence.9  But  the  by-laws  may  provide 
otherwise.9 


Hud,  496  (1879);  affd.  80  N.  Y„  128.      \ 
nation  to  take  effect  on  the  termi- 
natioo  of  the  term  for  which  a  director 
is  elected  is  effectual,  and  he  does  not 
hold  over  thoogh  do  successor  is  elected 
Van  Amburgh  v.   Baker,  81   N.  Y.,  40 
(1880).    A  resignation  releases  a  director 
if  laid  before  the  board  of  directors,  and 
it  is  effective  though  not  accepted,  where 
ii  has  been  duly  presented.     Maitland's 
Case,  1  l'e  C,  M.  &  G.,  769  (1833).    Even 
though  an  officer  resigns  for  the  purpose 
of  preventing  service  upon  the  company, 
yet  if  the  resignation  is  accepted,  service 
cannot  be  made  upon  him.    Sturgi9  v. 
Orescent,  etc.,  Co..  10  N.  Y.  Supp.,  470 
(1890).      A  director  may  resign  after  the 
company  and  officers  have  been  enjoined 
from  interfering  with  the  corporate  as- 
sets, and  may  then  pursue  his  remedies 
as  a  corporate  creditor.     Mexican,  eta, 
Co.  v.  Mexican,  etc.,  Co.     '7   Fed.   Rep., 
351  (1891). 

'Briggsv.  Spauldiug,   141  U.  s..  188, 
150  (1891). 

-  A  mere  statement  by  one  director  to 


another  that  he  would  have  no  more  to 
do  with  the  office  is  not  a  resignation. 
Kindberg  v.  Mudgett,  84  N.  Y.  Week. 
Kg.,  829  (1886}  A  statement  by  a  di- 
rector to  the  secretary  and  treasurer  at 
the  time  of  transferring  all  his  shares 
that  he  severed  all  connection  with  the 
company  is  not  a  resignation,  so  far  as 
corporate  creditors'  rights  are  concerned. 
Chemical  Nat'l  Bank  v.  Colwell,  '.)  N.  Y. 
Supp..  2s«j  iisyo):  Id..  2*8;  reversed  on 
other  grounds,  182  N.  Y..  85ft  Applica- 
tion to  sue  maybe  made  to  the  president 
though  he  claims  to  have  resigned. 
Aver  ill  v.  Barber,  6  N.  Y.  Supp..  255 (1889). 

8  Carnaghan  r.  Exporters',  etc.,  Co.,  11 
N.  Y.  Supp.,  172  (1890). 

*  Wickersham  n  Chittenden,  28  Pac. 
Rep..  788  (Cal.,  1892). 

s  Bruce  n  Piatt,  80  N.  Y.,  379  (1880). 

B Municipal,  etc.,  Co..  Limited,  v.  Pol- 
lington,  63  L.  T.  Rep.,  238  (1890). 

'  Atlas   National  Bank  v.  Gardner,  8 
Biss..  537  (1879). 

8  Phelps  v.  Lyle,  10  A.  &  E,  113  (1839). 

'•'  Wilson  v.  Wilson,  6  Scott,  540  (1838), 


854 


CH.  XXXVII.] 


ELECTIONS 


CORPORATE    MEETINGS. 


[§  024. 


A  director  continues  to  be  such  until  his  successor  is  elected, 
even  though  he  never  attends  meetings  and  is  never  consulted.1 

A  reduction  in  the  number  of  trustees  may  be  valid  although  the 
statutory  certificate  is  not  filed,  so  far  as  corporate  creditors  are 
concerned.2 

The  stockholders  have  no  power  to  remove  directors  before  the 
expiration  of  their  term  of  office  unless  the  charter  or  by-laws  ex- 
pressly give  that  power.3     Nor  can  they  remove  the  president.4 

A  failure  to  elect  officers  at  the  stated  time  does  not  work  a 
dissolution  of  the  corporation.  The  old  directors  continue  in  office 
until  their  successors  are  duly  elected.5  And  even  when  the  failure 
to  elect  has  extended  over  a  period  of  several  years,  and  there  are 
by  reason  thereof  no  directors  in  office,  the  old  directors  having 
wholly  abandoned  their  trust,  the  stockholders  may  at  any  time  in 
a  lawful  manner  proceed  to  the  election  of  a  new  board  of  direct- 
ors.8 But  if  the  majority  fail  or  refuse  to  hold  an  election  and  the 
corporate  property  is  thereby  endangered,  a  court  of  equity  may 
appoint  a  receiver  to  take  charge  of  it,7  and  will  in  a  proper  case 
authorize  a  winding  up.8 

A  director  is  an  "officer"  of  the  corporation  in  the  usual  mean- 
ing: of  that  term.9 


holding  that  an  absconding  director  be- 
comes "  unable  to  act "  within  the  mean- 
ing of  the  by-laws.  Sturges  v.  Vander- 
bilt,  73  N.  Y.,  884;  11  Hun,  136. 

1  First  National  Bank  v.  Lamon,  130 
N.  Y.,  366  (1891). 

*  Wallace  v.  Walsh,  125  N.  Y.,  26  (1890). 
3  See  §  711,   infra.     Concerning   the 

advisability  of  allowing  stockholders  to 
remove  directors  at  any  time,  see  Cook 
on  the  Corporation  Problem,  pp.  87,  88. 
A  director  cannot  be  excluded  from  his 
duties  as  such  nor  can  his  election  be 
declared  invalid  merely  because  of  what 
he  may  contemplate  doing  as  a  director. 
Ohio,  etc..  Co.  v.  State,  32  N.  E.  Rep.,  933 
(Ohio,  1892). 

*  Id.  A  contract  between  a  company 
and  a  person  that  he  shall  be  the  man- 
aging director  for  ten  years  does  not 
prevent  the  corporation  from  dismissing 
him.  Bainbridge  v.  Smith,  60  L.  T.  Rep., 
879  (1889). 

5  State  v.  Bonnell,  35  Ohio  St,  10,  17 
(1878),  in  which  an  election  of  directors 
being  held  invalid,  those  previously  in 
office  were  restored  to  office  as  being 


entitled  to  hold  until  their  successors 
were  qualified.  Huguenot  Bank  v. 
Studwell.  6  Daly,  13  (1875).  reversed  on 
other  grounds,  74  N.  Y.,  621 ;  and  see 
§  631.  Hold-over  directors  may  hold 
meetings,  fill  vacancies  in  the  board  and 
vote  to  sell  property  the  same  as  though 
regular  elections  had  been  held.  Kent 
County,  etc..  Soc.  v.  Houseman,  46  N.  W. 
Rep..  15  (Mich.,  1890). 

6  People  V.  Twaddell,  18  Hun.  427 
(1879).  In  Redly  v.  Oglebay.  25  West 
Va.,  36,  43  (1884),  it  is  held  that  where 
there  is  no  board  of  directors  the  share- 
holders themselves  may  lawfully  assume 
and  perform,  pending  a  regular  election. 
the  duties  which  ordinarily  belong  to  a 
board  of  directors.     See  ch.  XXXVI. 

'  Lawrence  v.  Greenwich  Fire  Ins.  Co., 
1  Paige,  587  (1829). 

8  Brown  V.  Union  Ins.  Co..  3  La  Ann.. 
177,  182  (1848),  in  which  the  neglect  for 
nearly  ten  years  to  appoint  officers  being 
to  the  injury  of  creditors,  the  court  ap- 
pointed a  manager  to  wind  up  the  affairs 
of  the  company. 

9  A  director  is  an  officer  under  a  stat- 


855 


§§625-027.]  ELECTIONS — CORPORATE   MEETINGS. 


[CH.  XXXVII. 


§§  625-627.  Stockholders  can  act  only  at  corporate  meetings. — 
Stockholders  can  hold  elections  and  transact  the  other  business 
which  they  as  a  body  are  qualified  to  transact  only  at  a  corporate 
meeting  duly  called  and  convened.  Consequently,  all  votes  taken 
elsewhere  than  at  such  a  meeting,  and  all  separate  consents,  either 
oral  or  in  writing,  whereby  the  stockholders  assume  to  bind  the 
company,  are  invalid  and  void.1 


ute  making  officers  liable  for  debts  in 
certain  cases.  Brand  v.  Godwin.  8  N.  Y. 
Supp.,  339  (1890).  The  president  and 
directors  are  "officers"  within  the 
meaning  of  a  criminal  statute.  Com- 
monwealth v.  "Wvni.m.  49  Mass.,  247 
(1844).  So,  also,  of  the  treasurer.  Com- 
monwealth v.  Tuckerman,  7f>  id.,  173 
(1857).  In  certain  cases  an  "-officer"  is 
construed  to  mean  merely  an  agent  and 
not  a  director.  So  held  in  regard  to  ap- 
pointing a  receiver  of  a  foreign  corpo- 
ration. Moral]  r.  Alvas,  etc.,  Co.  N.  V. 
Law  Jour..  1  tec  5,  1891. 

'  Commonwealth  v.  Cullen,  18  Pa.  St.. 
138  I  1850);  Finley  Shoe,  etc.,  <  '<>.  a. 
Kurtz,  ::i  Mich.,  89  (1876);  Peir 
New  Oilcans  Building  ('".,  !»  La.,  :'•'■'?. 
404  (1886);  Livingston  a.  Lynch,  4 
Johna  Ch.,  •".::!.  '.'.'7  (1890);  Torrey  n 
Baker,  B8  Mass.,  ]■:<>  (1881);  Ex  j>arte 
Johnson.  31   Eug.  L.  &   Eq.,  480  (1854  j 

B56 


Short  v.  Unan^st.  8  Watts  &  S.  (Pa.), 
45  (1S41).  Cf.  Graham  v.  Boston.  Hart- 
ford &  Erie  R.  R  Co.,  118  U.  S.,  161 
(1886);  Granger  r.  Grubb,  7  Phila.,  850 
For  the  rule  relative  to  direct- 
or-.' meetings  592,  supra.  A  lease 
authorized  upon  a  two-thirds  vote  of 
the  stockholders  '-,1111114  !><•  effected  by 
two-thirds  consenting  thereto  in  writ- 
ing without  a  meeting.  Reifl  r.  West- 
Co.,  49  N.  V.  Baper.  Ct, 
•in  (1888).  The  separate  assent  of  stock- 
holders to  an  act  is  not  valid.  Their 
;..  I-  must  l"'  iii  meeting  assembled. 
Duke  '•.  Markham,  10  S.  E.  1:  p.,  1017 
iN.  c.  1890)  An  actual  meeting  of  the 
stockholders  is  not  necessary  if  all  con- 
sent, even  though  the  Btatutes  require  a 
A  subsequent  creditor  cannot 
complain.  (  East,  etc.,  II  It,  52 
Fed  Rep.,  581  (1892) 


CHAPTER  XXXVIII. 


DISSOLUTION,  FORFEITURE  AND  IRREGULAR  INCORPORATION. 


628.  Methods  of  dissolution. 

629-30.  Dissolution  by  the  stockhold- 
ers—  A  court  of  equity  has  no 
power  to  dissolve  a  corpora- 
tion —  Statutory  dissolution. 

631.  Acts  which  do  not  constitute  dis- 

solution. 

632.  Only  the  attorney-general  can  in- 

stitute a  suit  to  forfeit  a  char- 
ter. 

633.  Forfeiture  for  misuser. 

634.  Forfeiture  for  non-user. 

635.  Forfeiture  for  ultra  vires  acts  and 

for  usurpation  of  franchises  — 
Quo  warranto  and  injunction 
at  the  instance  of  the  state. 


§  636.  State  may  waive  forfeiture. 

637.  Who  may  set  up  forfeiture,  dis- 

solution or  non-legal  incorpo- 
ration. 

638.  Lapse  of  charter  by  failure  to 

comply  with  conditions  —  Ef- 
fect of  failure  to  complete  road 
within  a  specified  time. 

639.  Repeals  of  charters  —  Right  of 

stockholders  to  object. 

640.  Acceptance  of  charter. 

641.  The  assets  upon  dissolution. 

642.  The  liabilities   upon   dissolution, 

consolidation  or  sale. 


§  628.  Methods  of  dissolution.—  The  dissolution  of  a  corporation 
may  be  brought  about  by  reason  of  (1)  the  forfeiture  of  its  fran- 
chises by  the  adjudication  of  a  court;1  (2)  the  loss  of  its  charter  by 
a  charter  provision  to  that  effect,  in  case  the  corporation  fails  to 
do  certain  things  within  a  certain  time; 2  (3)  the  repeal  of  its  char- 
ter under  the  reserved  power  of  the  state;3  (4)  the  voluntary  sur- 
render of  the  franchises  by  the  stockholders;  or  (5)  the  expiration 
of  the  time  limited  for  its  existence  in  the  charter.4     Upon  dissolu- 


i  See  §g  632-637,  infra. 

2  See  §  638,  infra. 

3  This  subject  is  considered  in  §  G39, 
infra. 

4  "The  dissolution  of  corporations  is  or 
may  be  effected  by  expirations  of  their 
charters,  by  failure  of  any  essential  part 
of  the  corporate  organizations  that  can- 
not be  restored,  by  dissolution  and  sur- 
render of  their  franchises  with  the  con- 
sent of  the  state,  by  legislative  enact- 


and  turnpikes  are  limited  by  the  consti- 
tution to  thirty  years.  "The  evident 
intent  of  this  section  was  to  prevent  the 
perpetuation  of  corporate  power  and 
corporate  wealth  so  as  to  place  it  prac- 
tically beyond  the  reach  of  the  people 
or  the  legislature."  It  does  not  apply  to 
a  county  fair  corporation.  Kent  County, 
etc.,  Soc.  v.  Houseman,  46  N.  W.  Rep., 
15  (Mich.,  1890).  Where  a  special  char- 
ter is  granted  and  nothing  is  prescribed 


ment  within  constitutional  authority,  by  as  to  the  duration  of  the  corporation, 

forfeiture  of  their  franchises  and  judg-  the  charter  is  perpetual.    State  v.  Ladies, 

ment  of  dissolution  declared  in  regular  etc.,  12  S.  W.  Rep.,  293  (Ma,   1889  .     A 

judicial  proceedings,  or  by  other  lawful  corporation  without  limit  of  time  in  its 

means."     Swan,  etc.,  Co.  v.  Frank,   148  charter    as    to    duration    is    perpetual 

U.  S.,  603,  611  (1893).     In  Michigan  all  Snell  v.  Chicago.  24  N.  E  Rep.,  582  <  111., 

charters  except  those  of  railroads,  canals  1890). 

857 


§  629.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


tion  by  any  one  of  these  methods  the  stockholders  have  certain 
rights  in  the  corporate  assets. 

§  629.  Dissolution  uy  the  stockholders  —  A  court  of  equity  has  no 
power  to  dissolve  a  corporation  —  Statutory  dissolution. —  It  is  an 
unquestioned  rule  that  all  the  stockholders,  by  unanimous  consent, 
may  effect  a  dissolution  of  the  corporation  by  the  surrender  of  the 
corporate  franchises.1 

Greater  difficulty  is  found  in  determining  whether  a  majority  of 
the  stockholders  may  dissolve  a  corporation.  It  has  been  held  that 
the  majority  in  interest  of  the  stockholders  of  a  corporation  may 
dissolve  it  by  a  voluntary  surrender  of  its  franchises,  even  though 
a  minority  of  the  stockholders  are  opposed  to  the  dissolution. - 

Such,  undoubtedly,  is  the  case  where  the  corporation  is  insolvent 
or  is  doing  a  failing  business,  and  is  manifestly  unable  to  accom- 
plish the  purposes  of  its  organization.  But  where  such  is  not  the 
case,  and  where  the  term  during  which  the  corporation  was  to 
exist  has  not  expired  ; 3  or  where  the  dissolution  is  desired  in  order 
to  obtain  a  new  charter  for  a  different  object ; '  or  where  the  disso- 
lution is  merely  a  device  to  effect  a  consolidation  which  otherwise 
would  be  ultra  vtres,5 — it  has  been  held  that  the  majority  cannot 

i  Mobile  &  Ohio  R  R  Co.  v.  State.  29    Y..  599,  606  (1880),  citing  cases,  and  in 


Ala.,  573,  586  (1857);  Savage  v.  Walshe, 
26  id..  610  (1855);  Attorney-General  r. 
Clergy  Society,  10  Rich.  Eq.,  604  (1* 
Chesapeake  &  Ohio  Canal  Co.  v.  Haiti- 
more  &  Ohio  R  R  Co.,  4  Gill  &  J.,  1. 
121  (18:52);  Mclntyre  Poor  School  v. 
Zanesville  Canal,  etc.,  Co.,  9  Ohio,  203 
(1839):  La  Grange,  etc.,  R  R  Co.  v. 
Rainey,  7  Coldw.  (Tenn.),  420  (1870); 
Slee  v.  Bloom.  19  Johns..  456  (18 
Webster  v.  Turner,  12  Hun,  264  (1871  ; 
Houston  v.  Jefferson  College,  63  Pa.  St., 
428  (1869);  Denike  v.  New  York,  etc., 
Co.,  80  N.  Y..  599,  606  (1880).  Although 
a  stockholder  has  sued  in  the  federal 
court  to  wind  up  a  Connecticut  corpo- 
ration, nevertheless  it  seems  that  such 
corporation  may  dissolve  voluntarily. 
Kessler  v.  Continental,  etc.,  Co.,  42  Fed. 
Rep.,  258  (1890). 

'Tread well  v.  Salisbury  Manuf.  Co..  7 
Gray,  393  (1756);  Hancock  v.  Holbrook, 
9  Fed.  Rep,  S58  (1881)  (reversed  on  an- 
other point,  112  U.  S,  229):  Wilson  v. 
Proprietors  of  Central  Bridge,  9  R.  I., 
590  (1*70).  Compare,  however,  dictum 
in  Denike  v.  New  York,  etc.,  Co.,  80  N. 


Mobile,  etc.,  Co.  r.  State,  29  Ala.,  573,  586 
(1857),  citing  New  Orleans,  etc.,  Co.  v. 

Harris.  27  .Mi-..  :>7  7  (1854);  Ward 
eiety,  eta,  28  Eng.  Ch.  (1  Collier).  370 
(1844);  Angell  &  Ames  on  Corp.,  ?  772; 
Barry  v.  Broach,  4  S.  Rep.,  117  (Mi—.. 
1888),  where  the  business  was  a  losing 
oin'.  That  tlic  majority  may  not  dis- 
solve, see  Zabriskie  v.  Hackensack,  i  fcc., 
R  R  Co.,  18  N.  J.  Eq.,  168  I  1867);  Mow- 
rey  t\  Indianapolis,  etc.,  R  R  C 
Biss.,  78  (1866);  Lauman  r.  Lebanon, 
etc,  30  Pa.  St.,  42  (ISoS),  and  cases  in 
following  n< 

3Kean  n  Johnson,  9  N.  J.  Eq.,  401 
(ls~>:i).  See,  also,  Van  Schmidt  v.  Hun- 
tington, 1  Cal.,  25  (1850).  Dissolution  of 
a  solvent  corporation  before  its  charter 
time  has  elapsed  cannot  be  had  except 
by  unanimous  consent  of  the  stockhold- 
ers. Barton  v.  Enterprise,  etc.,  Ass'u, 
16  N.  E.  Rep.,  486  (Ind,  1888). 

*  Ward  v.  Society  of  Attornies,  1  Coll., 
370  (1844). 

5  Black  v.  Delaware,  etc.,  Canal  Co., 
22  N.  J.  Eq.,  403  (1871).  See,  also.  B  667, 
infra. 


858 


CU.  XXXVIII.] 


DISSOLUTION,  FORFEITCKE,  ETC. 


[§  629. 


dissolve  the  corporation  in  opposition  to  the  wishes  of  the  minority.1 
Stockholders  owning  only  a  minority  of  the  stock  cannot,  at  com- 
mon law,  compel  a  dissolution  before  the  expiration  of  the  time 
limited  in  the  charter  for  the  existence  of  the  corporation.2  The 
directors  of  a  corporation  cannot  dissolve  it.3 

A  court  of  equity  has,  in  the  absence  of  statutory  power,  no 
jurisdiction  over  corporations  for  the  purpose  of  decreeing  their 
dissolution  and  the  distribution  of  their  assets  anions'  the  indi- 
vidual  corporators  at  the  suit  of  one  or  more  of  the  stockholders.4 


1  Polar  Star  Lodge  v.  Polar  Star 
Lodge,  16  La.  Ann.,  53  (1861);  Currien 
v.  Santini,  id.,  27.  See,  also,  dictum  in 
Mobile,  etc.,  R  R  Co.  v.  State,  29  Ala., 
573  (1857),  and  n.  1,  supra. 

2Denike  v.  New  York,  etc.,  Co.,  80 
N.  Y.,  599  (1880)  (citing  cases):  Folger 
v.  Columbian  Ins.  Co.,  99  Mass.,  267 
(1868);  Pratt  v.  Jewett,  9  Gray,  34  (1857) 
where  dissolution  was  denied,  although 
the  business  was  a  losing  one  and  the 
single  person  holding  a  majority  of  the 
stock  was  mismanaging  the  business; 
Croft  v.  Lumpkin,  etc.,  Min.  Co.,  61  Ga., 
465  (1878),  where  the  corporation  was 
solvent,  but  made  no  effort  to  transact 
business  or  proceed ;  Waterbury  v.  Mer- 
chants', etc.,  Co.,  50  Barb.,  157  (1867), 
holding  that  misconduct  of  the  corpo- 
rate officers  is  no  cause  for  dissolution 
at  the  suit  of  the  minority.  To  same 
effect,  Belmont  v.  Erie  R'y  Co.,  52  id., 
637  (1869).  A  stockholder  has  no  right 
to  bring  an  action  for  the  dissolution  of 
the  corporation.  Byrne  v.  New  York, 
etc.,  Co.,  16  Week.  Dig.,  139  (1882). 

3  Lake  Ontario,  etc.,  Bank  v.  Onon- 
daga  Bank,  7  Hun,  549  (1876);  Jones  v. 
Bank  of  Leadville,  17  Pac.  Rep.,  272 
(Col.,  1888);  Ward  v.  Sea  Insurance  Co., 
7  Paige,  294  (1838) ;  Abbot  v.  American 
Hard  Rubber  Co..  33  Barb.,  578  (1861). 
Cf.  Bank  of  Switzerland  v.  Bank  of 
Turkey,  5  L.  T.  (N.  S.),  549  (1862),  where 
the  directors  repaid  sums  advanced  to 
an  abortive  company. 

*  United  States  T.  Co.  v.  N.  Y.,  etc., 
R  R.,  101  N.  Y.,  478  (1886);  Verplanck 
v.  Mercantile,  etc.,  Co.,  1  Edw.  Ch.,  84 
(1831);  Hardon  v.  Newton,  14  Blatch., 


376  (1878) ;  Fountain  Ferry,  etc.,  Co.  v. 
Jewell,  8B.  Monr.,  140*  (1848);  Ferris  v. 
Strong.  3  Edw.  Ch.,  127  (1837).  See,  also, 
Strong  v.  McCagg,  55  Wis.,  624  (1882) ; 
Latimer  v.  Eddy,  46  Barb.,  61  (1864). 
But  the  court  will  appoint  a  receiver  to 
preserve  the  corporate  assets  where  the 
majority  do  not  elect  officers.  Law- 
rence v.  Greenwich  Fire  Ins.  Co.,  1 
Paige,  587  (1829).  Any  person  may  be 
appointed  receiver.  See  §  864,  infra. 
Where,  upon  voluntary  dissolution,  the 
stockholders  appoint  two  of  their  num- 
ber to  administer  the  assets,  the  court 
will  not  displace  them  and  appoint  a  re- 
ceiver. Follett  v.  Field,  30  La.  Ann., 
161  (1878).  A  single  stockholder  in  an 
insolvent  corporation  cannot  have  it 
dissolved  in  a  court  of  equity.  Merry- 
man  v.  Carroll,  etc.,  Co.,  4  R'y  &  Corp. 
L.  J.,  12  (1888).  A  corporation  cannot 
be  dissolved  except  by  judicial  sentence 
or  sovereign  power.  A  court  of  equity 
has  no  inherent  power  to  decree  dissolu- 
tion. A  member  cannot  sue  for  his 
part  of  the  assets  until  a  dissolution  is 
had.  Magee  v.  Genesea  Acad.,  17  N.  Y. 
St.  Rep.,  221  (1888).  A  stockholder  can- 
not have  the  corporation  wound  up  in 
equity.  Hinckley  v.  Pfister,  53  N.  W. 
Rep.,  21  (Wis..  1892).  Where  for  seven 
years  a  stockholder  who  owned  a  ma- 
jority of  the  stock  elected  himself  and 
two  of  his  dummies  as  directors  of  the 
company,  and  caused  the  board  to  vote 
a  large  salary  to  himself  as  president 
and  manager,  and  had  leased  to  the 
company  his  property  at  a  large  rental, 
the  salary  and  rental  are  illegal  and 
void.     Where  the  company  had  failed 


859 


§  629.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


In  manv  of  the  states  there  are  statutes  regulating  the  dissolu- 
tion of  a  corporation.  These  statutes  generally  specify  what  par- 
ties may  bring  suit  for  dissolution,  on  what  grounds  dissolution 
will  be  decreed,  and  what  proceedings  must  be  taken  to  obtain  the 
decree.  Such  a  statutory  dissolution  is  hardly  a  voluntary  dissolu- 
tion, and  yet  it  approaches  that  kind  of  dissolution  more  nearly 
than  anv  other.1 


to  pay  its  dividends  by  reason  of  such 
acts,  a  court  of  equity  upon  the  suit  of 
another  stockholder  ordered  the  presi- 
dent to  account,  and  appointed  a  re- 
ceiver of  the  company  and  directed  that 
its  affairs  be  wound  up.  Miner  ft  Belie 
Isle  Ice  Co.,  53  N.  W.  Rep.,  818  (Ifich,, 
1892).  "The  power  to  declare  a  for- 
feiture of  corporate  franchisee  was 
originally  in  England  vested  in  the 
courts  of  law,  and  was  exercised  in  a 
proceeding  brought  by  the  attorney- 
general  in  the  name  of  the  sovereign. 
The  court  of  chancery  never  assumed 
jurisdiction  in  such  cases  until  it  was 
conferred  by  act  <>f  parliament.  It  de- 
clined until  the  power  was  conferred  by 
6tatute  to  sequestrate  corporate  ]>r< »f>- 
orty  through  the  medium  of  a  receiver 
or  to  dissolve  corporate  bodies,  or  to  re- 
strain the  usurpation  of  corporate  pow- 
ers.'' Decker  ft  Gardner,  124  N.  Y..  334 
(1890).  In  the  absence  of  statutory  au- 
thority, a  court  of  equity  has  no  juris- 
diction to  dissolve  a  corporation. 
"Wheeler  v.  Pullman,  etc.,  Co..  32  N.  EL 
Rep.,  420  (111.,  18 

l  Thus,  in  New  York,  elaborate  provis- 
ion is  made.  The  majority  of  the  di- 
rectors may  apply  for  dissolution.  See 
g§  8419,  eta,  Code  of  C.  P.  As  also  may 
a  creditor  or  stockholder,  s';  17*4,  etc 
id.  Under  the  New  York  Btatute  the 
court  will  order  the  dissolution  of  a  cor- 
poration where  a  majority  of  the  di- 
rectors and  stockholders  wish  it,  where 
the  interests  are  discordant  and  a  disso- 
lution will  be  beneficial.  Matter  of  Im- 
porters', etc.,  Exchange.  132  N.  Y..  212 
(1892).  Under  the  old  statute,  part  of 
the  stockholders  might  compel  a  dissolu- 
tion where  there  had  been  a  failure  to 


elect  officers.  Ward  v.  Sea  Ins.  Co.,  7 
Paige,  294  (1838).  Where  a  majority  of 
the  directors  and  stockholders  apply  for 
dissolution  the  court  will  presume  that 
it  should  be  granted.  In  re  Niagara  Ins. 
Co..  1  Paige,  -  828>  In  general  see, 
also.  In  re  Pyrolusite,  etc..  Co.,  29  Hun, 
429  (1883);  In  re  Boynton,  etc.,  Co.,  34 
Hun,  369  (1884).  In  West  Virginia  one- 
third  in  interest  of  the  stockholders  may 
apply  to  the  court  for  a  dissolution.  Bee 
Hurst  ft  Coe,  3  S.  E.  Rep..  564  (1887* 
(  orp.  .rate  creditors  cannot  before  judg- 
ment, apply  for  dissolution  of  corpora- 
tion. Cole  n  Knickerbocker,  etc..  Ins. 
Co..  88  Hun  380);  affd,  91  N.  Y., 

641.  Where  the  statute  provides  that 
two-thirds  of  the  stockholders  may 
cause  the  corporation  to  be  wound  up, 
their  right  to  do  so  is  absolute  and  can- 
not be  controlled  by  the  court  Wat- 
kins  v.  National  Bank,  32  Pac.  Rep.,  914 
(Kan.,  1888).  The  voluntary  dissolution 
of  a  company  under  the  statute,  but 
without  ten  days'  notice  required  by  the 
statute,  is  not  such  a  dissolution  as  to 
prevent  creditors  from  attaching  the 
property  of  the  company  as  though  no 
dissolution  had  been  had.  Cleveland, 
etc,  Co.  n  Taylor,  etc..  Co.,  54  Fed.  Rep., 
82  (1*93).  But  the  dissolution  cannot 
be  enjoined  by  creditors  in  the  absence 
of  fraud.  Id..  85.  Statutes  usually  con- 
tain a  provision  that  the  corporate  exist- 
ence shall  be  continued  for  a  fixed  time, 
pending  the  proceedings  for  dissolution, 
so  that  suits  may  be  brought  by  and 
against  the  corporation  for  the  purpose 
of  closing  the  business  and  disposing  of 
the  assets.  Stetson  r.  City  Bank  of  New 
Orleans.  12  Ohio  St..  "T  [1861);  McGoon 
tt  Scales,  9  Wall.,  23  (1869);  Mariners' 


b60 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  629. 


The  courts  of  one  state  cannot  dissolve  a  corporation  created  by 
another  state,1  but  may  appoint  a  receiver  of  the  corporate  assets 
within  the  jurisdiction.2 


Bank  v.  Sewall,  50  Me.,  220  (1861); 
Muscatine  Turn  Verein  v.  Funck,  18 
Iowa,  469  (1865):  Thornton  v.  Marginal 
Freight  R'y  Co.,  123  Mass.,  32  (1877); 
Folger  v.  Chase,  18  Pick.,  63  (1836); 
Crease  v.  Babcock,  10  Mete.,  525,  567 
(1846);  Re  Independent  Ins.  Co.,  1 
Holmes,  103;  Franklin  Bank  v.  Cooper, 
36  Me.,  179  (1853);  Nevitt  v.  Bank  of 
Port  Gibson,  14  Miss.,  513  (1846).  The 
life  of  the  corporation  is  frequently  ex- 
tended by  these  statutes  for  three  years. 
Herron  v.  Vance,  17  Ind.  595  (1861); 
Foster  v.  Essex  Bank,  16  Mass.,  245 
(1819) ;  Blake  v.  Portsmouth,  etc.,  R  R 
Co.,  39  N.  H.,  435  (1859);  Van  Glahn  v. 
De  Rosset,  81  N.  C,  467  (1879) ;  Michi- 
gan State  Bank  v.  Gardner.  15  Gray.  362 
(1860).  Sometimes  five  years.  Tuska- 
loosa.  etc.,  Association  v.  Green,  48  Ala., 
346  (1872).  Cf.  Lincoln,  etc.,  Bank  v. 
Richardson,  1  Me.,  79  (1820).  Under 
statutes  in  some  of  the  states  an  in- 
formation in  the  nature  of  quo  icar- 
ranto  may  be  filed  at  the  relation  of  a 
shareholder  against  an  illegally-existing 
corporation  to  compel  a  dissolution. 
Albert  v.  State,  65  Ind..  413  (1879). 
Under  the  National  Banking  Act,  see 
Kennedy  v.  Gibson,  8  Wall..  498  (1869); 
Bank  of  Bethel  v.  Pahquique  Bank,  14 
Wall.,  383  (1870);  Bank  v.  Kennedy,  17 
Wall.,  19  (1872) ;  In  re  Piatt,  Receiver, 
1  Ben.,  534  (1867).  A  resolution  of  two- 
thirds  of  the  stockholders  in  a  national 
bank  to  go  into  liquidation  does  not 
dissolve  the  corporation.  Merchants' 
Natl  Bank  v.  Gaslin,  43  N.  W.  Rep.,  483 
(Minn.,  1889). 

Under  the  English  act  it  has  been 
held  that  the  majority  cannot  insist 
upon  dissolution,  though  the  business 
is  a  losing  one.  In  re  Suburban  Hotel 
Co.,  L.  R,  2  Ch.,   737  (1867).     But  the 


court  may  grant  it  under  such  circum- 
stances even  to  a  few  stockholders.  Re 
Factage  Parisien.  34  L.  J.,  Ch.,  140  (1865). 
In  determining  whether  to  order  a  wind- 
ing up  the  court  will  not  consider  pos- 
sible future  profits.  In  re  European, 
etc.,  Society,  L.  R,  9  Eq.,  122  (1869). 
For  an  application  to  have  a  winding 
up  because  business  had  not  been  com- 
menced within  a  year,  see  In  re  Tumac- 
acori,  L,  R,  17  Eq.,  534  (1874).  If  the 
corporation  has  sold  its  property  and 
ceased  business  the  court  will  order  a 
distribution  of  the  assets.  Cramer  v. 
Bird,  L.  R,  6  Eq.,  143  (1868).  The  mere 
fact  that  the  company  is  losing  money 
is  not  sufficient  to  have  a  winding  up. 
In  re  Joint-stock  Coal  Co.,  L  R,  8  Eq.. 
146  (1869).  The  court  has  a  judicial  dis- 
cretion, and  will  not  ordinarily  order  a 
winding  up  at  the  instance  of  one  stock- 
holder in  opposition  to  all  the  others. 
In  re  London  Suburban  Bank,  L  R,  6 
Ch..  6il  (1871).  But  if  the  company  is 
insolvent  or  is  doing  a  ruinous  business 
with  no  prospect  of  a  change  the  court 
will  order  a  winding  up  on  the  petition 
of  a  minority.  Re  Great  Northern,  etc., 
Min.  Co..  17  W.  R.,  462  (1869).  A  court 
has  no  jurisdiction  to  wind  up  a  corpo- 
ration where  a  company  was  never  in- 
corporated, one  of  the  requisite  incorpo- 
rators not  having  signed  the  articles  of 
incorporation.  Re  National,  etc.,  Co..  64 
L  T.  Rep..  512  (1891) ;  aff'g  id..  229.  See, 
also,  in  general,  under  this  winding-up 
act,  Re  Factage  Parisien,  34  L  J.,  Ch.. 
140(1865);  In  re  Exmouth  Dorks  Co.. 
L  R,  17  Eq.,  181  (1873':  In  re  Sander- 
son's Patents  Association.  L  R.  12  Eq.. 
188(1871);  In  re  Bradford  Navigation 
Co.,  L.  R,  10  Eq.,  331  (1870) ;  Princess 
of  Reuss  v.  Bos,  L.  R.,  5  H.  of  L.,  176 
(1871);  In  re  Commercial  Bank  of  India, 


i  Baker 
(1863). 


v.  Backus,    32    111.,   79.    110       zgeech.  LL 


861 


§  630.] 


DISSOLUTION,  FOBFEirUREj  KTC. 


[CH.  XXXVIII. 


Where  a  dissolution  is  being  obtained  or  has  been  obtained  by 
fraud  and  an  inequitable  overbearing  of  the  rights  of  an  innocent 
stockholder,1  a  court  of  equity  will,  at  the  instance  of  the  latter, 
enjoin  or  set  aside  the  dissolution.2 

§  630.  There  has  been  some  doubt  whether  a  voluntary  dissolu- 
tion by  all  or  a  majority  of  the  stockholders  is  completed  by  a 
mere  vote  of  the  stockholders,  or  whether  a  decree  of  a  court  is 
needed  and  is  sufficient;  or  whether  a  legislative  acceptance  and 
confirmation  of  the  dissolution  is  essential.  The  better  opinion  is 
that  ili«'  resolution  of  the  stockholders  to  dissolve  will  effect  a  dis- 
solution only  after  the  legislature  has  accepted  it  and  ordained  it, 
or  a  court  duly  authorized  by  sUtute  to  accept  a  voluntary  disso- 
lution has  entered  a  decree  to  that  effect.3 

L  R,  6  Eq.,  ~>17  (1868);  Tit   re  London  up   and  when   not  under   the  Engli>li 
India  Rubber  Co,  I.  R,  1  Chan.,  itute,  see  Healey's  Companies  Law 
(I860);  In  re  Pen-y-Van  Colliery  Co.,  and  Practice,  pp.  448,  etc. 
L  R,  6  Chan.   Div.,   177  (1877);  /»  re  >  People   P.  Hektograph  Co.,  10  Abh. 
United  Service  Co.,    L    l:..   7   Eq.,   76  N.  C.    N.  Y.),358(18 
(1868);  Re  German   Date  Cor.,  Ltd,  46  *In   re  Beaujoktis  Wine  Co.,  L  R.  B 
I,  T.  Rep    V  8     827  Ct  of  A.pp,  1882),  Chan.,  15(1876);  1»  re  London  &  Mer- 
holding  that  where  a  company  was  or-  cantile  Discount  Co.,  L  R.  l  Eq.,  277 
ganized  and    chartered   to  •  865).     to  8tupart v.  Arrowsmith,  8 8m. 
manufacture  and  sale  of  g Is  under  a  a  G.,  176              i  bUl  filed  by  a  share- 
certain  patent,  when  in  fact  there  was  bolderon  behalf  of  himself  and  others 
no  patentBUch  as  was  referred  to,  and  to  Bel   aside  a  dissolution,  after  tin 
an  application  for  Buch  a  patent  was  re-  years'  acquiescence,  no  fraud  or  imposi- 
fused,  held,  that  the  Bubstratum   upon  tion  being  alleged,  was  dismissed  with 
which  the  company  was  based  or  main  costa    C/.Kenl  a.  Jackson,  2  De G„  M. 
objecl  tor  which  it  was  formed  not  be-  &  «...  19    1852  ;  Bailey's  appeal,  98  Pa. 
ing  in  existence,  the  company  must  be  St,                  '•    where   certain    Btock- 
di^s.-iv.-d  ,,n  petition  of  a  shareholder,  holders  procured  the  dissolution  of  a  cor- 
notwithstanding  it  was  profitably  en-  poration  by  fraud    They  were  held  to 
gagedinthe  manufacture  and  sale  of  be  trust          t mcUeficio  for  the  bona  fide 
the  commodity  without  any  patent,  and  stockholders,  and  as  such  liable  to  ac- 
notwithstanding  a  very  large  majority  count  to  them  for  the  assets  of  the  com- 
of  the  company  desired  to  have  the  pany. 

company    continue    in    businesa     To  'Portland    Dry    Dock,    etc..    Co.    u. 

same   effect,    under  Bomewhat   similar  Trustees    of    Portland,  12    B.  Mon.,  77 

circumstances,    Z&    The    Havana  Gold  (1851   .    La  Grange   &  Memphis  R  R 

Mining  Co.,  4G  L  T.  Rep.,  322  (Ct.  of  Co.    r.    Rainey,  7    Coldw.  iTeuu.),   420 

App..  1882).    Lender  of  money  to  ben-  (1870) ;  Harris  v.  Muskingum  Mfg.  Co.,  4 

efit  building  society  cannot  petition  to  Blackf.  (Ind.),  267  (1836);  Town  v.  Bank, 

wind  it  up.     Ex  parte  Williamson,  L,  etc,  Raisin.  2  Doug.  (Mich.),  580  (1847); 

R,  5  Cli.,  809  (1869)     Mortgage  bond-  Currier nSantim,  16  La.  Ann., 37 (1861); 

holders    cannot    institute     winding-up  Norris  V.  Mayor  of  Smith ville,  1  Swan 

proceedings  under  the  English  act.     In  (Tenn.).  164  (1851 1 :  Bradt  v.  Benedict.  17 

re  Uruguay,  etc.,  R'j  Co.,  L  R.  11   Ch.  N.  Y..  93,  99  (1858):  Boston  Class  Co.  v. 

D.,  372  (1879).     For  many  cases  relative  Langdon.  24  Pick.,  49  (1884);   Wilson  r. 

to  where  a  court  will  order  a  winding  Proprietors  of   Central    Bridge,  9  R  1., 

862 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  631. 


§631.  Acts  which  do  not  constitute  dissolution. —  There  are  cer- 
tain acts  and  facts  which  do  not  in  themselves  constitute  a  disso- 
lution. A  dissolution  is  not  effected  by  a  failure  to  elect  officers; l 
nor  by  a  sale  or  assignment  of  all  the  corporate  property ; 2  nor  by 

590  (1870); 


Penobscot  Boom  Corp.  v. 
Lamson,  16  Me.,  224  (1839) ;  Enfield  Toll 
Bridge  Co.  v.  Conn.  River  Co.,  7  Conn., 
28,  45  (1828);  Mamma  v.  Potomac,  etc., 
8  Peters,  281.  287.  A  mere  resolution 
of  the  stockholders  is  ineffectual.  New 
York,  etc.,  Works  v.  Smith,  4  Duer,  362 
(1855) ;  Powell  v.  Oregonian  R'y  Co..  38 
Fed.  Rep.,  187  (1889).  A  notice  of  the 
resolution  sent  to  the  governor  is  inef- 
fectual. Merchants'  Bank  v.  Heard,  37 
Ga.,  401  (1867);  Revere  v.  Boston,  etc., 
Co.,  15  Pick.,  351  (1834).  By  a  statute 
the  acceptance  may  be  made  by  a  proc- 
lamation. Campbell  v.  Miss.  Union 
Bank,  7  Miss..  625,  681  (1842).  The  judg- 
ment of  a  court  of  law  in  such  a  case  is 
ineffectual.  Chesapeake,  etc.,  Co.  v. 
Baltimore,  etc.,  R.  R  Co.,  4  Gill  &  J.,  1, 
107  (1832).  In  England  the  surrender 
at  common  law  was  to  the  king,  and 
had  to  be  accepted  by  him  in  order  to 
work  a  dissolution.  The  King  v.  Amery, 
2  Term  Rep,  515,  531  (1788);  The  King 
v.  Gray,  8  Mod.  Rep.,  358  (1825).  Cf. 
Bruce  v.  Piatt,  80  N.  Y.,  379  (1880).  Vol- 
untary dissolution  need  not  be  accepted 
by  the  state.  Merchants',  etc.,  Line  v. 
Wagoner,  71  Ala..  581  (1882).  The  case 
of  Webster  v.  Turner,  12  Hun,  264(1877), 
can  be  upheld  only  in  connection  with 
§  631,  infra.  See,  also,  cases  in  notes 
supra,  to  effect  that  a  court  cannot  de- 
cree a  dissolution  at  the  instance  of 
stockholders.  Many  states  now  have 
statutes  expressly  giving  to  courts  such 
authority. 

i  Rose  v.  Turnpike  Co.,  3  Watts  (Penn.), 
46(1834);  Lehigh  Bridge  Co.  v.  Lehigh 
Coal  &  Navigation  Co.,  4  Rawle  (Penn.), 
8,  23  (1832);  Commonwealth  v.  Cullen, 
13  Pa.  St.,  133  (1850);  Hoboken  Build- 
ing, etc.,  Association  v.  Martin,  13  N.  J. 
Eq.,  427  (1861);  Evarts  v.  Killingworth 
Mfg.  Co.,  20  Conn.,  447  (1850);  Nashville 


Bank  v.  Petway,  3  Humph.  (Tenn.),  522 
(1842);  Boston  Glass  Mfg-  Co.  v.  Lang- 
don,  24  Pick.,  40  (1834  ;  Russell  v.  Mc- 
Lellan,  14  id..  63  (1833);  Cahill  v.  Kala- 
mazoo, etc.,  Ins.  Co.,  2  Doug.  (Mich.), 
124,  140  (1845);  Harris  v.  Mississippi 
Valley,  etc.,  R.  R.  Co.,  51  Mich.,  602 
(1875);  People  v.  Runkle,  9  Johns.,  147 
(1812);  Philips  v.  Wickbam,  1  Paige,  590 
(1829);  Slee  v.  Bloom.  5  Johns.  Chan., 
366  (1821);  S.  C,  19  Johns.,  456  (1822); 
St.  Louis,  etc.,  Loan  Association  v.  Au- 
gustin,  2  Mo.  App.,  123(1876):  Knowlton 
V.  Ackley,  8  Cush.,  93  (1851);  President 
&  Trustees,  etc.,  v.  Thompson,  20  id.,  197 
(1858);  People  v.  Wren,  5  111.,  269  (1843) 
Nor  will  a  resignation  of  all  the  officers 
dissolve  the  corporation.  Muscatine 
Turn  Verein  v.  Funck,  18  Iowa,  4C9 
(1865);  Evarts  r.  Killingworth  Mfg.  Co.. 
20  Conn.,  447  (1850).  The  corporate 
rights  and  franchises  are,  in  such  a  case, 
merely  dormant  until  other  officers  are 
elected.  Philips  r.  Wickham,  1  Paige, 
590  (1829).  Cf.  Lea  v.  American  At- 
lantic, etc.,  Caual  Co.,  3  Abb.  Prae, 
(N.  S.),  1  (1867). 

2 Barclay  v.  Talniau.  4  Ed\y.  Chan..  123 
(1842);  De  Camp  v.  Aylward,  52  ind., 
46S  (1876);  Bichwalri  v.  Commercial 
Hotel  Co.,  100  111.,  439  (1883);  Rollins  v. 
Clay.  3:3  Me.,  132  (1851):  Kansas  City 
Hotel  v.  Sauer,  65  Ma,  -  0;  Troy, 

etc.,  R.  R  Co.  v.  Kerr.  17  Barb.,  581 
(1854),  where  a  railroad  corporation  had 
leased  the  entire  property  to  another 
corporation;  State  v.  Merchant,  37  Ohio 
St.. 251  (1881);Smith  y. Gower, 2  Duvall, 
17  (1805).  To  same  effect.  Stat  >  V.  B 
5  [red.  Law  (N.  C).  297  Bruffett 

v.  civat  Western  R  h\  Co.,  25  III..  353 
(1861).  The  statutes  may  cause  dissolu- 
tion by  the  company's  .^<>iu-_c  out  <>f  busi- 
ness and  sellingall  the  property.  People 
v.  De  Grauw,  62  Hun,  221  (1891> 


863 


§  031.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


the  fact  that  one  person  owns  all  the  shares  of  stock; '  nor  by  a 
cessation  of  all  corporate  business  and  acts;2  nor  by  the  death  of 
its  stockholders;3  nor  by  insolvency;4  nor.  in  all  cases,  bv  a  con- 
solidation  with  another  corporation  under  statutory  authority.8 
"Nor  is  it  dissolved  by  the  appointment  of  a  receiver,6  or  the  fore- 
closure of  a  mortgage,7  nor  by  failure  to  file  reports.8  The  fact  that 
there  are  less  stockholders  than  the  charter  requires  does  not  in- 
validate the  acts  of  the  corporation.9  For  certain  purposes,  how- 
ever, such  as  rendering  stockholders  liable  on  their  statutory 
liability,10  or  relieving  directors  from  a  penal  liability,11  dissolution 
is  held  to  arise  by  some  of  these  acts. 


1  See  g  709. 

2  Attorney-General  v.  Bank  of  Niag- 
ara, Hopkins'  Chan.  (N.  V.  .   103  (182 

Baptist  Meeting-] se  v.  Webb,  66  Me., 

39*  (1877);  Rollins  <\  <  Hay,  88  Ma,  182 
(1851);  Harris  r.  NYsl.ir.  84  Ala.,  398 
(1854);  Kansas  city  Botel  Co.  v.  Saner, 
65  Ma,  879,  888  (1877);  Nimmons  r. 
Tappan,  2  Sweeney  (N.  Y  .  652  (1870); 
Mickles    n   Rochester    City    Bank,    11 

•  Paige,  lis  (1844);  State  >:  Barron 
N.  ll..  870  (1878);  Be  Jackson  Marine 
Ins.  Co.,  l  Sandf.  Chan.  (N.  Y.),  659 
(1847);  Weal  n  Carolina,  el  •.  «',,..  81 
Ark.,  178  1878  ;  Bach..  >-.  Horticultural 
Soc,  10  Lea  T<  im.i  186  (1882  .  Bran- 
don Iron  Co.  v.  Gleason,  84  Vt, 
(1832);  Atlanta  r.  Cat'',  eta,  Co..  71 
Ga,,  106  (iss;{).  Dissolution  may  exist 
by  cessation,  etc.,  so  far  as  the  rever- 
sion of  property  given  to  the  corpora- 
tion is  concerned.  Stone  V.  Framing- 
ton,  109  Mass..  80S  (1872).  A  cessation 
of  business  with  the  understanding  that 
the  company  is  dissolved,  the  property 
having  I □  transferred  to  the  stock- 
holders, does  not  work  a  dissolution. 
Suits  may  be  instituted  against  the 
company.  Carnaghan  r.  Exporters*,  eta, 
Co.,  11  N.  Y.  Supp..  172  (1890>  A  fore- 
closure sale  of  all  the  property  and 
frauehises  of  a  corporation  will  close 
out  and  foreclose  the  whole  interest  of 
the  stockholders  therein.  Va table  v. 
New  York,  etc.  R  R  Co..  96  N.  Y,  49 
(1884);  Thornton  v.  Wabash  R'y  Co..  81 


id,  462,  187  (1880>  See,  also,  Sullivan 
'•.  Portland  &  Kennebec  R  U.  Co..  m 
i  .  8.,  800  (1876)  As  to  reorganizations, 
see  ch.  LI  I.  infra. 

Bo  I  n  Class  Mfg.  Co.  r.  Langdon, 
84  Pick.,  (9,  58(1834  :  Russell  a  McL  I- 
lan.  It  Pick.,  89      I 

:  Mosebyu  Burrow,  52  Tex.,  896  (1880) ; 
Valley  Bank  &  Savings  Institution  >•. 
Sewing  Society,  88  Kan..  42:; 
Such  is  the  case  though  a  receiver  has 
appointed.  State  >:  Merchant,  :i7 
Ohio  St..  851  (1881);  National  H.nk  v. 
Insurance  Co..  104  U.  S.  :>i  (1881);  Kin- 
caid  r.  Dwinelle,  59  X.  V.,  :.i^  (1875) 

5Se-.  ch.  I.HI,  infra. 

•The  appointment  <»f  a  receiver  does 
lissolve  a  corporation.  Nothing  but 
the  expiration  of  the  charter  or  the 
judgment  of  a  court  can  do  that  Bar- 
selman  v.  Japanese,  eta,  Ca,  27  N.  E. 
Rep,  B18  ilml..  1891) 

'  Smith  r.  Glower,  'J  Duv.  (Ky.>.  17 
(1865);  Whit.-.  ,tc..  i.\  u.  ,-.  White,  eta, 
R  R,  50  N.  II..  .-.'i    L870) 

6  Failure  to  file  a  report  does  not  work 
a  forfeiture  of  charter,  star  n.  Browns- 
town,  etc.,  Cv..  S2  N.  E,  Rep.,  31G  dud.. 
1881 

■  Welch  v.  Importers',  etc.,  Bank.  122 
N.  Y.  177  ( 1890). 

>o See  Slee   a    Bloom,    19  Johns..   £56 
.".  and  g  819,  supra     (  /'.   Bradt  r. 
Benedict,  17  N.  Y..  98  <\s:,$). 

^Losee  v.  Bullard,  79  N.  Y.,  404  (1880). 


864 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§§  632,  G33. 


§  632.  Only  the  attorney-general  can.  institute  a  suit  to  forfeit  a 
corporate  charter. —  Such  unquestionably  is  the  law.  It  is  for  the 
state  alone  to  withdraw  the  charter  which  the  state  has  given.  A 
stockholder  cannot  institute  the  suit ; l  nor  a  corporate  creditor  ;2  nor 
can  the  municipal  authorities  by  reason  of  a  change  of  route  by  a 
railroad ; 3  nor  can  a  person  who  is  overcharged  on  a  turnpike  bring 
suit  to  forfeit  the  company's  charter.4  The  state  cannot  even  au- 
thorize the  secretary  of  state  to  forfeit  a  charter.5  The  corpora- 
tion is  entitled  to  its  day  in  court. 

§  633.  Forfeiture  for  misuser  —  Acts  which  constitute  a  misuser. 
The  law  is  clear  that,  if  a  corporation  misuses  its  powers,  the  state 
may  by  a  suit  withdraw  the  charter  which  it  has  given.  Great 
difficulty,  however,  arises  in  determining  what  constitutes  a  mis- 
user. A  clear  idea  can  be  obtained  only  by  a  study  of  the  cases 
themselves.6 


i  North  v.  State,  8  N.  E.  Eep.,  159 
<Ind.,  1886);  Baker  v.  Backus,  33  111., 
79  (1863) ;  Commonwealth  v.  Union  Ins. 
Co.,  5  Mass.,  230  (1809);  State  v.  Pater- 
son  &  T.  Co.,  21  N.  J.  L.,  9  (1847);  Mur- 
phy v.  Farmers'  Bank,  etc.,  20  Pa.  St., 
415  (1853) ;  Rice  v.  National  Bank,  etc., 
126  Mass.,  300  (1879);  Folger  v.  Colum- 
bian, etc.,  Ins.  Co.,  99  Mass.,  267  (1868), 
where  the  court  refused  to  recognize  a 
dissolution  decreed  by  a  New  York  court 
at  the  instance  of  a  stockholder;  Rais- 
beck  v.  Oesterricher,  4  Abb.  N.  C,  444 
{Com.  PI.,  1878),  where  the  plaintiff 
claimed  that  the  incorporation  was  ir- 
regular. 

2  Gaylord  v.  Fort  Wayne,  etc.,  R.  R 
Co.,  6  Biss.,  286  (1875).  A  judgment 
forfeiting  the  charter  of  a  private  cor- 
poration, where  the  state  is  not  a  party 
to  the  suit,  is  a  nullity.  Pickett  v.  Ab- 
uey.  19  S.  W.  Rep,  859  (Tex.,  1892). 

3  Moore  v.  Brooklyn,  etc.,  R.  R,  108 
N.  Y.,  98  (1888). 

4  Commonwealth  v.  Allegheny  Bridge 
Co.,  20  Pa.  St.,  185  (1852);  State  v. 
White's,  etc.,  Co.,  3  Tenn.  Ch.,  164  (1876), 


etc.,  Co..  50  Pa.  St,  91  (1865).  The  stat- 
utes of  a  state,  however,  sometimes 
change  these  rules  of  law. 

5  The  statute  of  West  Virginia  author- 
izing the  secretary  of  state  to  declare 
corporate  charters  forfeited  if  its  taxes 
are  not  paid  is  ineffectual  for  that  pur- 
pose. Forfeiture  can  be  made  only  after 
a  suit  by  the  state  brought  for  that  pur- 
pose. Greenbrier,  etc.,  Co.  i:  Ward,  3 
S.  E.  Rep.,  227  (W.  Va.,  1887). 

6  The  state  will,  at  the  instance  of  the 
attorney-general,  forfeit  the  charter  of 
the  corporation,  whose  stockholders 
have  entered  into  a  "  trust "  with  the 
stockholders  of  competing  corpora- 
tions, for  the  purpose  of  forming  a 
monopoly  in  and  raising  the  price  of 
sugar.  The  "trust"  is  not  a  joint-stock 
association.  It  is  of  the  character  of  a 
trust  estate.  People  v.  North  R  S.  Ref. 
Co.,  121  N.  Y,  582  (1890).  The  state  may 
forfeit  a  charter  for  a  failure  of  the  offi- 
cers to  file  the  annual  report  and  of  the 
stockholders  to  pay  in  the  capital  stock 
as  required  by  statute.  It  is  immaterial 
that  the  state's  action  was  induced  by 


where  the  bill  purported  to  be  in  the    parties  who  were  themselves  responsi 


attorney-general's  name.  A  shipper  of 
freight  cannot  by  bill  in  equity  compel 
a  canal  company  to  repair  and  render 
its  canal  navigable.  Only  the  state  can 
complain.  Buck,  etc.,  Co.  v. 
(55) 


ble  for  the  failure  t«>  comply  with  the 
.statute.  People  r.  Buffalo,  etc.  Co.,  131 
N.  Y.,  140(1892)  It  has  been  held  to  be 
a  misuser  to  tile  a  false  certificate  that 
the  capital   stock    lias    been   paid    up. 


865 


§  634.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


§  634.  Non-user  as  a  cause  for  forfeiture. —  Non-user  of  its  fran- 
chise is  a  cause  for  forfeiture  where  a  corporation  is  possessed  not 


Eastern,  etc.,  Co.  v.  Regina,  22  Eng.  L. 
&  Eq.,  328  (1853);  or  to  establish  a 
branch  bank  where  the  cbarter  author- 
izes only  a  principal  banking  place, 
People  v.  Oakland  Co.  Bank,  1  Doug. 
(Mich.),  282  (1844) ;  or  to  keep  its  books 
and  place  of  business  out  of  the  state, 
State  v.  Milwaukee,  etc.,  R'y  Co.,  45 
Wis..  590  (1878);  or  for  an  insurance 
company  to  take  risks  which  it  cannot 
pay  if  required,  Ward  v.  Farwell,  07  III.. 
593  (1881);  or  for  taking  "  grave-yard  " 
insurance,  State  v.  Central,  etc..  Assoc, 
29  Ohio  St..  399  (1876),  the  person  receiv- 
ing the  insurance  having  no  insurable 
interest  in  the  person  insured;  or  for 
not  keeping  tracks  in  a  condition  re- 
quired by  the  charter,  State  v.  Madison, 
etc.,  R'y  Co.,  40  N.  W.  Rep.,  1-7  .Wis., 
1888);  or  for  a  canal  company  to  allow 
the  canal  to  become  out  of  repair.  state 
v.  Penn..  etc.,  '-'::  Ohio  St..  121  (1872 
for  a  ferry  company  to  be  guilty  of  the 
same  neglect,  state  r.  Council  BlutTs. 
etc..  Co.,  11  Neb.,  854  (1881);  or  for  til- 
ing false  and  fraudulent  articles  of  as- 
sociation. State  V.  Bailey.  16  Ind..  46 
(1861).  holding,  also,  that  mere  insolv- 
ency \g  n, i  cause  for  forfeiture;  or  for 
accepting  subscriptions'  by  persons  who 
are  notoriously  insolvent,  Holman  v. 
State,  105  Ind..  569  1885  ;  Jersey  City 
Qaa  < '".  v.  Dwight,  89  N.  J.  Bq.,  848 
(1878);  or  for  a  failure  of  a  river  im- 
provement company  to  make  an  im- 
provement as  commanded  by  a  statute. 
People  '".  Improvement  Co.,  103  111..  491 
(1882);  or  for  a  hank  to  loan  to  its  <li- 
rectors  in  violation  of  a  statute.  Bank 
Com'rs  v.  Bank  of  Buffalo,  6  Paige.  497 
<  1837) :  or  for  a  charitable  corporation  to 
divide  with  a  lobbyist  an  appropriation 
obtained  from  the  legislature.  People  r. 
Dispensary,  etc.,  Soc.  7  I.ans..  :<"(  1 1  - 
or  for  an  insurance  company  to  insure 
in  a  manner  contrary  to  statute  and  to 
delay  payments  of  losses.  State  i:  Stand- 
ard, etc.,  Assoc,  38  Ohio  St,  281  (1-  . 


for  a  bank  to  contract  debts  beyond  the 
charter  limits,  and  to  make  dividends 
before  resuming  specie  payments.  State 
Bank  r.  State.  1  Blackf.  (Ind.),  267(1823); 
or  for  persistently  taking  usurious  in- 
terest, Commonwealth  v.  Commercial 
Bank,  28  Pa.  St.,  383  (1857);  State  v. 
Same.  33  Mis-..  474  (1857);  or  for  a  mut- 
ual relief  association  to  be  run  for  the 
benefit  of  its  officers  only.  State  ?\  Peo- 
ple's, etc..  A ..  4-2  Ohio  St,  579  (1885); 

or  for  a  bank  to  suspend  specie  pay- 
ment-. State  r.  Bank  of  S.  C,  1  Spears, 
133 (1841);  Com.  Bank  v.  State. 
6  8m.  &  M.  (Miss.),  599  (1840);  bu1 
State  r.  New  Orleans,  etc..  Co..  2  Rob. 
(La. i.  529  1842);  or  for  a  turnpike  com- 
pany t'>  allow  its  road  to  be  out  of  re- 
pair. Washington,  eta,  T.  Co.  v.  State. 
19  Bid.,  889  (1862);  Coon  b.  Plymouth, 
etc.,  <  <>..  82  Mich.,  21*  .  1875);  Darnell  r. 
State,  8  &  W.  Rep.,  865  (Ark.,  1887  ; 
r.  Bawtucket,  etc.,  Corp'n,  8  R.  I.. 

;  865),  where  the  company  neglected 
a  part  of  it-  read  which  it  had  si  .Id  to  a 
municipality.  Not  every  neglect  is  fatal. 
The  question  is  for  the  jury.     People  v. 

Istock  T.  Co..  11  \'t..  481  (1889)i  It 
is  cause  for  forfeiture  of  its  charier  if  a 
railroad  company  does  not  keep  tracks 
in  a  condition  required  by  its  charter. 
State  r.  Madison  K"y  Co.,  10  N.  \Y.  Rep., 

Wis..  1888>  And  it  is  no  defense 
to  forfeiture  for  neglect  that  the  road 
has  been  sold  on  an  execution  sale.  Com- 
monwealth >:  Tenth,  etc  I  M  iss . 
509  (1850).  Nm-  is  it  a  defense  that  the 
Btat  ■  has  authorised  a  competing  line. 
Turnpike  Co  0.  State.  3  Wall.,  819  1 1 

In  the  case  of  State  r,  l.-sex  Bank.  8 
Vt,  489  1 1886),  the  court  refused  to  de- 
cree a  forfeiture,  since  the  public  were 
not  injured,  though  the  corporation  was 
clearly  guilty  of  misuser.  If  a  pas  com- 
pany is  ordered  by  a  municipality  under 
a  statutory  power  to  reduce  the  price  of 
,u;as.  it  may  defend  against  forfeiture  for 
non-compliance  by  asserting   that   the 


see, 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  634. 


only  of  its  franchise  to  be  a  corporation,  buu  also  other  franchises, 
such  as  a  right  of  way,  which  the  public  are  interested  in  having 
kept  in  active  use.1 


municipality  was  fraudulently  induced 
to  act.  State  v.  Cincinnati,  etc.,  Co.,  18 
Ohio  St.,  262  (1868).  If  a  company  has 
incorporated  under  a  general  act,  but 
for  a  purpose  not  authorized  by  it,  a 
suit  for  forfeiture  lies.  State  v.  Beck, 
81  Ind.,  501  (1882),  where  a  turnpike 
company  incorporated  to  purchase  turn- 
pikes, a  purpose  not  authorized  by  the 
statute.  The  state  may  create  causes 
for  the  forfeiture  of  insurance  compa- 
nies' charters.  Chicago,  etc.,  Ins.  Co. 
v.  Needles,  113  U.  S.,  574  (1885).  Where 
the  state  sues  to  forfeit  the  charter  of  a 
railroad  company  which  has  leased  its 
road,  the  latter  cannot  institute  a  suit  to 


test  the  validity  of  that  lease.  Ogdens- 
burgh,  etc.,  R.  R.  Co.  v.  Vermont,  etc., 
R.  R.  Co.,  4  Hun,  712  (1875).  If  quo 
warranto  is  brought  for  not  making  re- 
ports the  corporation  may  offer  to  make 
the  reports.  State  v.  Barron,  57  N.  H., 
498  (1876).  By  statute,  forfeiture  may 
be  decreed  where  the  court  decides  that 
a  continuance  of  business  by  an  insur- 
ance company  will  be  hazardous  to  the 
community.  Ward  v.  Farwell,  97  111., 
593  (1881).  The  legislature  cannot  amend 
a  charter  by  forfeiting  the  charter  if 
specie  payments  are  not  made  within  a 
specilied  time.  State  v.  Tombeckbee 
Bank,  2  Stew.  (Ala.),  30  (1829).     It  can- 


1  Non-user  is  good  ground  for  the  for- 
feiture of  franchises.  People  v.  Broad- 
way R.  R.,  126  N.  Y.,  29  (1891).  A  suit 
for  forfeiture  lies  where  a  railroad  com- 
pany takes  up  part  of  its  track.  State 
v.  West,  etc.,  R'y  Co.,  34  Wis.,  197 
(1879) ;  S.  C,  36  id.,  166  (1874).  Or  where 
a  railroad  company  constructs  but  part 
of  its  road,  has  no  station  or  freight- 
houses  and  no  passenger  coaches,  but 
engages  only  in  getting  out  coal  from 
beds  owned  by  those  interested  in  the 
company.  State  v.  Railway  Co.,  40  Ohio 
St,  504  (1884).  But  the  suit  does  not  lie 
on  the  ground  that  the  company  does 
not  intend  to  complete  its  road.  State 
v.  Kingan,  51  Ind.,  142  (1875) ;  State  v. 
Beck,  81  id.,  501  (1882).  No  forfeiture  is 
decreed  because  a  railroad  company 
discontinues  passenger  trains  over  a 
branch  line  which  is  run  at  a  loss  by 
reason  of  horse-car  competition.  Com- 
monwealth v.  Fitchburg  R  R  Co..  7^ 
Mass.,  180  (1858).  The  lessee  of  a  rail- 
road is  a  proper  party  to  a  suit  to 
forfeit  franchises  for  non-user.  Peo- 
ple v.  Albany,  etc.,  R  R.  Co..  77 
N.  Y.,  232  (1879);  State  v.  Minn.,  etc., 
Ry  Co.,  30  N.  W.  Rep.,  810  (Minn., 
1886).    An  assignment  of  all  corporate 


assets  to  others,  thereby  rendering  the 
corporation    incapable    of    continuing 
business,  is  cause  for  forfeiture.     State 
v.  Real  Estate  Bank,  5  Ark,  595    1843). 
A  bank  which  ceases  to  do  business  and 
to  file  statements,  and  which  makes  im- 
proper loans  to  its  directors,  is  liable  to 
forfeiture  of  charter.     State  v.  Seneca 
Co.  Bank.  5  Ohio  St,   171  (1856)     It   i- 
not  a  non-user  for  a  county  fair  corpora- 
tion to  rent  its  grounds.     Kent  County, 
etc.,  Soc.  v.  Houseman,  46  X.  W.  Rep.,  15 
(Mich.,   1890).     Where   the  statute  pre- 
scribes that  non-user  for  a  year  shall  lie 
cause  for  forfeiture,   a  non-user  for  a 
few  days  is  insufficient.     People  '•.  At- 
lantic, etc.,  R  R,  125  X.  Y.,  513  (1891  . 
A  railroad  which   is  leased   to  another 
company  without  statutory  provisions 
to  do  so  is  subject  to  forfeiture  at  the  in- 
stance of  the  state.    State  '■.  Atchu 
eta,  RR  Co.,  38  X.  W.  Rep.,  43  (Neb,, 
1888).    As  to  a  failure  of  a  railroad  cor- 
poration to  complete  it>  road,  .- 
iiifni.    The  abandonment  of  the  right 
of  way  by  the  railroad  is  no  ground  for 
an  action  of    trespass  by   the  former 
owner  to  recover  it.    Logan  u  Vernon, 
etc.,  R  R,  9"  End.,  "  '.). 


867 


§  634.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


But  a  more  difficult  question  arises  where  a  corporation,  exercis- 
ing no  franchise  except  that  of  being  a  corporation,  is  guilty  of 


not  provide  that  charters  shall  be  for- 
feited for  non-payment  of  corporate 
obligations,  so  far  as  corporations  ex- 
isting before  the  statute  are  concerned. 
Aurora,  etc.,  Co.  v.  Holthouse,  7  Ind.,  59 
(1855).  But  it  may  prescribe  that  the 
charter  be  repealed  unless  within  cer- 
t  tin  time  the  company  do  certain 
things  —  here  make  good  its  capital. 
Lothrop  v.  Stedman,  42  Conn.,  583  (1875). 
And  may  force  the  dissolution  of  in- 
solvent insurance  corporations  or  cor- 
porations whose  continuance  of  busi- 
n  >ss  will  be  dangerous  to  the  public. 
Ward  v.  Farwell,  97  111.,  593  (1881); 
Chicago  Life  Ins.  Co.  v.  Auditor,  101 
III.,  82  (1881).  So  also  as  to  banks. 
The  remedy  "for  a  violation  of  duty 
may  be  altered  and  changed  by  I 
lative  provisions  if  tin'  power  of  ac- 
complishing the  same  objects  by  any 
means  is  within  the  legitimate  scope  of 
legislative  authority."  Commonwealth 
r.  Farmers',  etc.,  Bank.  21  Pick.,  542 
(1839),  Quo  warranto  does  not  lie 
against  a  corporation  for  ultra  vin  8 
acts,  such  as  issuing  watered  stock  or 
purchasing  its  own  stock.  "Acts  in 
■a  of  power  may  undoubtedly  be 
tarried  so  far  as  to  amount  t<>  a  mis- 
user of  the  franchise  to  be  a  corpora- 
tion and  a  ground  for  its  forfeiture." 
The  courts  refuse  to  define  what  ultra 
roes  arts  will  and  what  will  not  sus- 
tain quo  warranto  proceeding.  They 
must  be  acts  which  "so  derauge  or  de- 
stroy the  business  of  the  corporation 
that  it  no  longer  fulfills  the  end  for 
which  it  was  created."'  State  v.  Minn., 
etc.,  Co.,  41  N.  W.  Rep.,  1020  (Minn., 
1889). 

The  following  acts  and  facts  do  not 
constitute  a  misuser.  There  is  no  mis- 
user of  franchises  by  a  corporation 
where  the  objectionable  act  was  by  a 
cashier  in  direct  violation  of  orders 
given  to  him  by  the  directors.  State  v. 
Commercial  Bank,  6  Sm.  &  M.  (Miss.), 


218  (1846);  or  where  a  railroad  or  turn- 
pike company  has  constructed  its  road 
over  land  without  obtaining  the  right 
of  way,  State  v.  Kile,  etc.,  Co.,  38  Ind., 
71  (1871);  People  v.  Hillsdale,  etc.,  T. 
Co.,  2  Johns.,  190  (1807) ;  or  where  the 
company  deviates  slightly  from  its 
route,  fails  to  file  a  map  of  the  route, 
and  neglects  to  elect  new  directors, 
Harris  v.  Mississippi,  etc..  R  R  Co.,  51 
Miss.,  602  (1875) ;  or  fails  to  file  a  state- 
ment of  ite  condition  as  required  by 
statute,  the  object  of  such  filing  having 
ceased,  People  v.  Improvement  Co., 
supra;  or  where  the  public  are  com- 
pelled to  open  a  draw-bridge  for  them- 
selves, Commonwealth  v.  Bried,  21 
)l;i-..  160(1827);  or  where  a  bank  has 

ued  its  assets  to  trustees  to  pay  its 
debts,  State  v.  Commercial  Bauk,  13 
Sm.  A:  M..  5G9  (1850);  or  for  the  insolv- 
ency <>f  a  bank,  it  having  since  then  be- 
come solvent.  People  '•.  Bank  of  Niagara, 

w.,  198  1826);  People  n  Washing- 
ton, etc.,  Bank.  6  Cow..  312  (1826)  (but 
the  contrary  has  been  held  as  regards  a 
suspension  of  specie  payments  and  a 
subsequent  resumption,  Commercial 
Bank  r.  State,  6  Sm.  &  M.  (Miss.),  599 
(1846);  Planters'  Bank  u  state,  7  id., 
163—  1846);  or  where  a  bridge  company 
gives  reduced  rates  to  constant  patrons, 
ami  gives  free  passage  in  payment  for 
land  and  fails  to  fde  required  state- 
ments. Commonwealth  V.  Alleghany, 
etc.,  Co..  20  Pa.  St.,  185  (1852);  or  that 
the  corporation  has  incorporated  also  in 
another  state.  Commonwealth  v.  Pitts- 
burg, etc..  R  R  Co..  58  Pa  St,  26(1868); 
or  that  required  statements  are  not  filed, 
state  v.  Barron,  58  N.  11..  370  (1 
Though  a  corporation  take  more  inter- 
est than  allowed  by  charter  it  may  re- 
cover. The  only  penalty  is  such  as  the 
usury  law  prescribes.  (J rand  G.  Bank 
r.  Archer,  16  Miss..  151  (1847).  For  a 
vigorous  and  interesting  but  futile  ef- 
fort to  oust  a  going  railroad  company 


868 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  635. 


a  non-user.     The  weight  of  authority  holds   that   quo  loarranto 
will  lie.1 

§  635.  Forfeiture  for  ultra  vires  acts  and  usurpation  of  fran- 
chises —  Quo  warranto  and  injunction  at  the  instance  of  the 
state. —  Frequently  a  corporation  does  acts  which  its  charter  does 
not  authorize  it  to  do,  or  which  its  charter  or  a  statute  expressly 
prohibits  it  from  doing.  The  question  then  arises,  What  is  the  rem- 
edy of  the  state?  The  right  of  a  stockholder,  or  the  corporation 
itself,  or  a  person  contracting  with  the  corporation,  to  object  to 
such  acts  is  discussed  elsewhere.2  But  may  the  state  object?  Un- 
doubtedly it  may.  It  seems  that  the  state  has  four  remedies.  Its 
legislature  may  repeal  the  charter  of  the  corporation  under  the  re- 


from  its  franchises  for  all  kinds  of 
misfeasances,  malfeasances  and  non- 
feasances, see  International,  etc.,  R'y  v. 
State,  12  S.  W.  Rep.,  685  (Tex.,  1889) ; 
and  for  a  successful  case  in  the  same 
line,  see  East,  etc.,  R  R  v.  State,  12 
S.  W.  Rep.,  690  (Tex.,  1889).  It  is  not 
for  the  state  to  institute  an  action  to 
dissolve  and  wind  up  a  mutual  benefit 
and  building  corporation  merely  because 
some  of  the  members  are  dissatisfied. 
People  v.  Lowe,  117  N.  Y,  175,  190 
(1889).  No  quo  warranto  lies  for  using 
an  abbreviated  corporate  name.  People 
v.  Bogart,  45  Cal.,  73  (1872).  The  aver- 
ments of  misuser  must  be  definite  and 
certain.  Danville,  etc.,  P.  Co.  v.  State. 
16  Ind.,  456  (1861).  And  the  misuser 
must  be  wilful.  State  v.  Columbia, 
etc.,  Co.,  2  Sneed  (Tenn.),  254  (1854); 
Baltimore  v.  Connellsville,  etc.,  R'y  Co., 
6  Phil.,  190  (1866).  Concerning  the 
pleadings  in  quo  warranto,  see  People 
v.  Stanford,  19  Pac.  Rep.,  693  (Cal.,  1888). 
An  information  in  the  nature  of  quo 
warranto  to  forfeit  the  charter  of  a 
temperance  enterprise  is  not  definite 
enough  in  its  charges  when  it  charges  a 
perversion  of  funds.  People  v.  Dash- 
away,  24  Pac.  Rep.,  277  (Cal.,  1890),  con- 
taining also  a  discussion  on  the  plead- 
ings and  practice. 

i  The  state  may  forfeit  a  charter  for 
wilful  non-user,  although  the  corpora- 
tion is  a  private  one.  People  v.  Milk 
Exchange,  133  N.  Y.,  565  (1892).  See 
Attorney-General  V.  Simonton,  7s  N.  ( '.. 


57  (1878),  holding  that  the  suit  will  not 
lie,  although  only  five  shares  of  stock 
were  subscribed  for  and  no  other  act 
done  by  the  corporation.  State  v.  Societe, 
etc.,  9  Mo.  App.,  114  (1880),  holding  the 
same,  though  the  company  was  dormant 
But  the  case  of  State  v.  Pipher,  28  Kan., 
128  (1882),  forfeited  the  charter  of  an 
agricultural  college  for  non-user  for 
nineteen  years.  And  see  dicta  in  Terrell 
v.  Taylor,  4  Cranch,  43,  51  (1815);  State 
v.  Commercial  Bank,  13  Sm.  &  M.,  569 
(1850).  In  New  York  by  statute  such  a 
suit  will  lie.  Code  of  C.  P.,  §  1798.  See, 
also,  In  re  Jackson,  etc.,  Ins.  Co.,  4  Sand. 
Ch.,  559  (1847).  Where  a  corporation 
has  abandoned  its  authorized  business 
and  engaged  in  another  it  will  be  wound 
up.  This  is  different  from  a  case  where 
the  directors  have  mereby  and  incident- 
ally committed  ultra  vires  acts.  Re 
Crown,  etc.,  Bank,  62  L.  T.  Rep,  823 
(1890).  An  abandonment  by  a  corpora- 
tion of  part  of  the  purposes  of  its  incor- 
poration is  no  cause  for  dissolution. 
Norwegian  Titanic  Iron  Co..  3"i  B 
223  (1865),  where,  its  purpose  being  to 
purchase  English  and  Norway  mines,  it 
sold  the  English  mines.  By  the  terms  of 
a  new  constitution  all  corporations 
which  have  failed  to  organize  befoi 
adoption  may  1"-  deemed  to  have  for- 
feited their  franchises  thereby.  Chin- 
ch clamanch,  etc.,  ( '<<.  v.  Commonwealth, 
100  Pa  St..  488  (188S  . 
2  Set  Part  IV. 


869 


§  635.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH. 


rxxvin. 


served  right  of  the  state  to  repeal;1  or  the  state  may  institute  a  suit 
at  law  to  forfeit  the  charter  for  misuser  of  powers ;  or  such  suit  may 
be  only  to  oust  the  corporation  from  the  exercise  of  the  usurped 
powers ;  or,  according  to  some  authorities,  the  suit  may  be  in  equity 
for  an  injunction  restraining  the  corporation  from  committing  the 
ultra  vires  acts.  It  seems  that  the  judgment  in  an  ordinary  quo 
warranto  suit  herein  may  be  either  a  forfeiture  of  all  the  corporate 
franchises  and  of  its  charter,  or  may  be  a  forfeiture  only  of  the 
rierht  to  continue  to  do  the  illegal  acts,  and  that  it  is  in  the  discre- 
tion  of  the  court  to  say  which  decree  shall  be  made.2  The  nature 
of  scire  facias,  quo  warranto  and  information  in  the  nature  of  a 
quo  warranto  is  explained  in  the  notes  below. :! 


i  See  §  639,  infra. 

2  State  v.  People's,  etc.,  Assoc.,  42  Ohio 
St,  579  (1885),  where  only  a  discontinu- 
ance of  the  acts  complained  of  was  or- 
dered; People  v.  Improvement  Co.,  108 
111.,  491  (1882),  where  a  complete  forfeit- 
ure of  chart']-,  eta,  was  decreed.  See, 
also,  People  v.  Utica  Ins.  Co.,  15  Johns., 
357  1 1818),  where  an  insurance  company 
bad  engaged  in  banking  contrary  to 
statute     In  Stat-  v.  Buildin  ■..  85 

Ohio  St..  258  isT'.' .  the  court  -aid  thai 
where  the  corporation  is  guilty  of  an 
offense  which  by  Btatute  is  cause  for 
forfeiture  of  us  franchise  as  a  corpora- 
tion, the  court  will  decre  that  forfeit- 
ure; bul  where  the  cause  of  forfeiture 
is  outside  of  those  prescribed  in  the  stat- 
utes, then  the  court  may  decree  either  a 
forfeiture  of  the  franchise  to  be  a  corpo- 
ration or  an  ouster  from  the  powers  and 
nets  illegally  assumed  or  done. 

'Professor  Dwight  explained  these  as 
follows  : 

"Scire  facias  is  resorted  to  where 
there  is  original  defect  in  the  charter,  as 
if.  ft  ;/..  a  grant  obtained  by  fraud.  It 
may  be  used  also  in  the  case  where  the 

charter  was    valid    but    the  powers  of  a 

corporation  have  been  abused.  The  dis- 
tinction taken  in  England  is  this:  that  a 
scire  facias  may  be  resorted  to  where  a 
'  corporation  in  full  possession  of 
its  powers  abuses  them,  while  a  quo 
warranto  is  applicable  where  a  corpora- 
tion, from  a  detect  in  its  constitution, 


such  as  a  loss  of  part  of  its  members 
which  are  integral   to   its  existence,  be- 
comes an  imperfect  body,  but  nevertl 
less  continues  to  act  as  a  corporation. 
See  Grant  on  Corpora.. 

"Writ  of  quo  warranto.  This  is  au 
ancient  writ,  employed  by  the  king 
linst  any  one  who  claims  or  usurps 
an  office  or  franchise,  or  who.  having 
had  a  right  to  the  franchise,  neglects  to 
exercise  it.  to  inquire  by  what  warrant 
he  still  claims  to  exercise  it.  The  theory 
of  the  writ  is,  there  is  an  unlawful  en- 
croachment upon  the  royal  prerogative, 
and.  being  a  dilatory  proceeding  and 
bnical,  it  is  not  now  so  much  em- 
ployed as  the  snec lin.^  remedy. 

••  Information  in  the  nature  of  a  quo 
warranto.  This  is  in  form  a  criminal 
proceeding.  There  were  two  proceed- 
ings in  the  criminal  law  for  the  convic- 
tion of  criminals.  One  is  termed  an  En- 
formation  and  the  other  an  indictment. 
They  differ  in  this  respect,  that  while  an 
indictment  is  found  by  a  grand  jury,  an 
information  is  simply  the  allegation  of 
an  officer  who  files  it.  In  this  case  the 
attorney-general  proceeds  on  twofold 
ground,  both  to  punish  the  usurper  and 
t  i  prevent  the  unlawful  exercise  of  its 
franchises.  In  the  case  of  a  corpora- 
tion the  main  object  is  to  interfere  with 
the  exercise  of  the  franchise.  The  in- 
quiry is  the  same  as  in  the  writ  of  quo 
warranto;  that  is.  by  what  warrant  the 
franchise  is  exercised.    The  reason  why 


870 


OH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC.. 


[§  635. 


Quo  warranto  or  an  information  in  the  nature  thereof  is  the 
proper  remedy  where  the  corporation  has  not  been  legally  incor- 
porated.1 

it  is  more  resorted  to  is  that  it  is  easy  v.  Moore,  19  Ala.,  514  (1851).  When  the 
and  simple  of  application.  information  has  for  its  object  to  oust 
"  Under  the  New  York  code  the  pro-  the  defendants  from  acting  as  a  corpo- 
•ceeding  is  simply  an  action  brought  by  ration,  and  to  test  the  fact  of  their  m- 
the  attorney-general,  governed  by  the  corporation,  it  must  be  filed  against  in- 
same  general  rules  as  an  action  at  com-  dividuals.  When  the  object  is  to  effect 
mon  law.     If  judgment  goes  against  the  a  dissolution  of  a  corporation  which  has 


corporation  it  is  liable  to  be  dissolved 
This  proceeding  in  England  was  insti- 
tuted in  the  great  criminal  court,  the 
king's  or  queens  bench,  and  in  New 
York  in  the  supreme  court  only,  which 
represents  the  queen's  bench." 

In  the  case  of  State  v.  Merchants',  etc., 
Trust  Co.,  8  Humph.  (Tenn.),  235  (1847). 
the  court  said  :  "  By  the  common  law 
the  forfeiture  of   a  charter  can  be  en- 
forced in  a  court  of  law  only ;  and  the 
proceeding  to  repeal   it  is    by  a  scire 
facias  or  an  information  in  the  nature 
of  a  writ  of  quo  ivarranto.     A  scire 
facias  is  the  proper  remedy  where  there 
is  a  legal  existing  body  capable  of  act- 
ing, but  which  had  been  guilty  of  an 
abuse  of  the  power  intrusted  to  it ;  a 
quo  ivarranto  where  there  is  a  body 
corporate  de  facto,   which  takes  upon 
itself  to  act  as  a   body  corporate,  but 
from  some  defect  in  its  constitution  it 
cannot    legally    exercise    the  power  it 
affects  to  use."     Citing  8  Wheat,  483-4. 
In  Pennsylvania,  where  the  state  filed 
an  information  to  declare  ultra  vires  a 
contract  between  a  canal  company  and 
a  coal  company,   whereby  one-half  of 
the  canal  facilities  were   monopolized 
by  the  latter,  the  court  held  that  the  in- 
formation was  a  proper  remedy,  and 
that  the  court  in  its  judgment  in  favor 
of  the  state  might  order  the  corporation 
to  discontinue  the  unauthorized  act  and 


had  an  actual  existence,  or  to  oust  such 
corporation  of  some  franchise  which  it 
has  unlawfully  exercised,  the  informa- 
tion must  be  filed  against  the  corpora- 
tion. People  v.  Rensselaer,  etc.,  R.  R, 
15  Wend.,  113  (1836).  Although  the 
state  proves  the  case,  yet  the  court  will 
not  adjudge  a  forfeiture  unless  justice 
requires  it  State  v.  Essex  Bank,  8  Yt.. 
489  (1836).  Pleadings  in  quo  ivarranto. 
People  v.  Stanford,  19  Pac.  Rep.,  693 
(Cal.,  1888). 

iThe  state  may  forfeit  a  charter 
where  the  statute  required  five  persons 
to  sign  and  acknowledge  the  articles, 
but  only  four  out  of  the  five  actually 
did  acknowledge  them.  People  v. 
Montecito,  etc.,  Co.,  32  Pac.  Rep.,  236 
(Cal.,  1893).  In  quo  warranto  proceed- 
ings on  the  ground  that  the  company 
was  not  properly  incorporated,  the  cor- 
poration itself  is  a  necessary  party  de- 
fendant. Id.  Under  the  statutes  of 
Alabama  in  reference  to  watered  stock 
quo  7carranto  lies  where  si. 000,000  of 
stock  is  issued  for  the  possibility  of  pat- 
ents to  be  thereafter  granted.  In  such 
quo  warranto  proceedii  kholders 

need  not  be  made  parties.  State  r. 
Webb,  12  S.  Rep.,  377  (Ala.,  1893>  In 
an  action  by  the  state  to  forfeit  a  rail- 
road charter  the  state  must  prove  not 
only  that  a  cause  of  forfeiture  did  exist 
but  that  it  still  continues  to  exist   Bfore- 


that  the  judgment  need  not  oust  the  over  Borne  public  interest  must  be  in- 
corporation from  its  charter  and  fran-  volved  in  obtaininRtte  forfeiture.  Feo- 
chises.  Commonwealth  v.  Delaware,  pie  r.  Ulster,  eta,  1,  1,.  138  N.  5  ..  .» 
etc  Canal  Co.,  43  Pa  St.  295  (1SW).  (1891).  A  charter  of  the  company  will 
For  the  ancient  learning  as  to  the  scire  be  forfeited  at  the  instance  of  the  state 
facias  in  forfeiting  charters,  see  State  whereaome  of  the  partus  who  are  al- 

871 


§  635.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CII.  XXXVIII. 


Quo  warranto  lies  against  foreign  corporations  doing  business 
illegally  in  the  state.1 

The  state  by  quo  warranto  may  oust  a  railroad  from  discrimina- 
tions in  favor  of  oil  shipped  in  tank  cars.2 

An  exemption  from  taxation  is  not  a  franchise.  Hence,  quo 
warranto  does  not  lie  to  oust  the  corporation  from  such  exemp- 
tion.3 

Although  quo  warranto  can  be  only  for  acts  committed  within 
live  years  in  Ohio,  yet  it  serves  to  oust  a  company  from  exercising 
a  power  which  it  has  not  exercised  continuously  for  twenty  years.* 

It  is  very  doubtful  whether  the  state  may  file  a  bill  in  equity 
to  enjoin  a  corporation  from  committing  an  ultra  vires  act.  The 
remedy  of  the  Btate  is  quo  warranto.     In  England  a  bill  has   been 


I  to  join  in  the  corporation  « 1  i <  1  aot 
so  join,  but  their  names  wore  ins 
withoul  their  sanction  or  authority. 
Such  parties  are  ool  liable  as  stockhold- 
ers, L.i  Banque  d'Hochelaga  '■.  Murray, 
68  I..  T.  Rep.,  68  1 1890 .  In  a  </'">  »•<"•- 
rmitn  proceeding  to  declare  void  -'in 
.ill-  '.■■!  charter  1 1 1 •  -  corporation  i-  a 
essary  party  defendant  People  ft  Flint, 
28  I'm-.  Rep.,  196  (Gal.,  Ifi  Lfter  the 

attorney-general    institutes    guo    war- 
ranto proceedings,  and  much  testimony 
is  taken,  and  then  the  proceeding  is  dis- 
continued and   the  company  ; 
to  expend  money  and  make  conti 
the  attorney-general  will  not  !«•  rill 

t"  institute  new   proc linga      In    re 

Equity  Gas-Light  <'.>..  i<»  n.  v.  Snpp., 
801  (1880),  In  '/»"  warranto,  charging 
defendants  with  usurping  ■  public  fran- 
chise  to  operate  a  ferry,  where  they  at- 
tempted i"  defend  on  the  ground  that 
they  had  a  legal  right  t.>  use  the  ferry, 
tin-  burden  was  on  them  t.>  show  a  valid 
title.  Gunterman  ft  People,  88  N.  EL 
Rep,  1067  III.'.  Where  an  incorpora- 
tion is  f(  R3,  "Hi'  nf  which 
is  illegal,  the  charter  will  be  forfeited, 
the  objects  not  being  clearly  separable 
People  ft  Chicago  Gas  T.  Co.,  88  N.  EL 
Rep.,  798  II!..  1889).  The  issuing  of 
transferable  certificates  of  stock  is  not 
assuming  the  functions  of  a  corpora- 
tion. Rice  '•.  Rockefeller,  56  Hun,  617 
d-1."".     \  suit  instituted  by  the  Btate  to 


forfeit  a  charter  cannot  be  removed  to 

the  federal  COUrt  <>n   the  ground  that  a. 
contract  exists  between  the  itaon 

and    the  state,   and   that    BUCh   contract 

will  be   violated.     Commonwealth    of 
Ky.    a   Louisville  Bridge 
Rep.,  841  (1890),     The  curt  may  forfeit 
charter  "f  a  railn  poration 

for  illegally  leasing  its  road,  and  • 
Dot   merely  enjoin  the  continuation  of 
the  lease.     East  Line,  etc.  R  R.  ft  State. 
\v.  i;,|,.  690  (Tex.,  1889).     \  cor- 
poration in.  1  for  an  illegal  pur- 
ii  as  baying  a  majority  or  all  of 
itock  in  each  nf  four  comp  'ting 
corporations,  and    thereby  creating   a 
monopoly,  is  Bubje  t  u<  having  its  char- 
ter forfeited  at  the  instance  of  tl> 
torney-general.    people  e.  Chicago 
I  \    E   Rep.,  798  III..  18 

'state  ft  Western,  etc    -    ..  ! A  N.  EL 
Rep.,  808  (Ohio,  189  a  Fidelity, 

I  '....  U  N.  W.  Rep,  108  Minn.,  I 
Quo  warranto  against  a  foreign  corpo- 
ration illegally  doing  business  in  the 
state  must  be  against  the  corporationaa 
smh  and  not  merely  against  its  .>t; 
and  agents.  State  n  Bowerby,  18  N.  W« 
Rep,  688  Minn.,  18* 

-  State    n  ( 'incinnati.  eta,  R  R.  23  N. 
r.  I.vp..  928  "hi...  iv, 

■  International,  etc.,  R'y  ft  State,  12  S. 
\v.  ft  p..  685  Tex.,  188 

•State   ft   Standard   Oil   Co..  80   N.  & 
R  P..  879  (Ohio,  188 

Q 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  635. 


sustained  to  restrain  a  railroad  corporation  from  engaging  in  the 
coal  business.1  It  lies  to  enjoin  a  corporation,  the  same  as  an  in- 
dividual, from  creating  a  public  nuisance.2  In  Wisconsin  it  is  held 
that  the  attorney-general  may  enjoin  railroad  companies  from 
taking  greater  rates  than  are  prescribed  by  statute ; 3  and  in  many 
of  the  states  such  a  bill  will  lie  by  statute.4 

The  decided  weight  of  authority,  however,  is  that  the  remedy 
of  the  state  is  by  quo  warranto  and  not  by  a  bill  in  equity  for  an 
injunction.5 


1  Attorney-General  v.  Great  Northern 
R'y  Co.,  1  Dr.  &  Sm.,  154  (1860).  But 
the  attorney-general  cannot  enjoin  a 
corporate  act  merely  because  it  is  ultra 
vires.  Some  injury  to  the  public  must 
be  inYolTed.  Attorney-general's  suit  at 
instance  of  a  manufacturer  to  enjoin 
one  railroad  from  leasing  rolling-stock 
to  another  failed.  Attorney-General  v. 
Great  Eastern  R'y  Co.,  L.  R„  11  Ch.  D., 
449  (1879).  A  court  of  equity  cannot 
compel  a  corporation  to  cease  collecting 
tolls,  although  it  has  not  improved  the 
stream  as  required  by  its  charter.  Pix- 
ley  v.  Roanoke,  etc.,  Co.,  75  Va.,  320 
(1881).  In  Attorney-General  v.  Mid. 
Kent  R'y  Co.,  L.  R,  3  Ch.,  100  (1867), 
a  mandatory  injunction  requiring  the 
defendant  to  construct  a  bridge  was 
granted. 

2  Attorney -General  v.  Jamaica,  etc., 
Corp.,  133  Mass.,  361  (1882). 

3  Attorney-General  v.  Railroad  Cos..  35 
Wis.,  523,  553  (1874),  reviewing  many 
cases;  but  cf.  Strong  v.  McCagg,  55 
Wis.,  624.  A  lease  by  a  domestic  rail- 
road company  of  its  railroad  to  a  for- 
eign railroad  corporation  is  illegal,  es- 
pecially where  it  is  expressly  prohibited 
by  statute.  The  court  will  enjoin  the 
lease  upon  the  application  of  the  at- 
torney-general where  the  effect  of  the 
lease  would  be  to  create  a  combination 
in  the  transportation  of  coal  and  to  de- 
stroy competition  in  production  and 
sale.  Stockton,  Att'y-Gen'l,  v.  Central 
R.  Co.  of  N.  J.  et  al,  24  Atl.  Rep..  964 
(N.  J.,  1892).  A  telegraph  company  has 
no  power  to  sell  and  assign  its  lines  un- 
less such  power  is  expressly  given  to  it. 

8 


The  franchise  is  personal.  United  States 
v.  Western  U.  Tel.  Co..  50  Fed.  Rep.,  28 
(1892),  holding  also  that  the  government 
may  file  a  bill  in  equity  to  set  aside  an 
illegal  telegraph  consolidation  and  need 
not  resort  to  mandamus.  All  of  the  cor- 
porations were  state  corporations  in  this 
case. 

4  State  v.  Merchants',  etc.,  Co.,  8 
Humph.  (Tenn.),  254  (1874).  where  an 
insurance  company  was  restrained  from 
banking.  So,  also,  in  New  York  Bank 
Com'rs  v.  Bank  of  Buffalo,  6  Paige,  496 
(1837);  Brinckerhoff  v.  Bostwick,  88 
N.  Y.,  52  (1882),  explaining  the  difference 
between  this  class  of  cases  and  cases 
whei'e  other  parties  are  complainants. 
Concerning  the  power  of  the  state  to  ob- 
ject to  an  ultra  vires  act  of  a  private 
corporation  by  any  proceeding  other 
than  quo  icarranto,  see  People  v.  Bal- 
lard, 134  N.  Y,  269  (1892),  a  carefully 
considered  case. 

5  Attorney-General  v.  Utica  Ins.  Co., 
2  John.  Ch.,  371  (1817);  Attorney-Gen- 
eral v.  Bank  of  Niagara,  Hopk.  Ch.,  354 
(1825).  But  see  People  v.  Ballard,  supra. 
In  Attorney-General  v.  Tudor  Ice  Co., 
104  Mass.,  239  (1870),  an  injunction  re- 
straining an  ice  company  from  import- 
ing teas  was  denied.  Where  a  railroad 
leases  its  line  in  violation  of  a  f<  >ns!  ii  u- 
tional  provision  prohibiting  the  consoli- 
dation of  parallel  lines  it  is  subject  to 
forfeiture.  So,  also,  where  it  issues 
"watered  stock''  in  violation  of  tin- 
constitution.     State    r.    Atchison, 

l,\   K.  88  N.  W.  Rep.,  48  [Neb.,    1888 
A  state  creating  a  corporation  has  no 
visitorial  power  over  it  —  i.  c,  power  to 
73 


§  636.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH. 


XXXVIII. 


§  636.  The  state  may  waive  its  right  to  forfeit  a  charter. —  Vari- 
ous acts  have  been  held  to  constitute  such  a  waiver.  "  "When  a  leg- 
islature has  full  power  to  create  corporations,  its  act  recognizing  as 
valid  a  de  facto  corporation,  whether  private  or  municipal,  oper- 
ates to  cure  all  defects  in  steps  leading  up  to  the  organization,  and 
makes  a  de  jure  out  of  what  before  was  only  a  de  facto  corpora- 
tion." There  must,  however,  be  a  de  facto  organization  upon  which 
tli is  recognition  may  act.1  Numerous  instances  of  acts  of  the  leg- 
islature which  constitute  a  waiver  are  set  forth  in  detail  in  the 
notes  below.2 


correct  corporate  abuses  —  except  "(1) 
where  municipal,  charitable,  religious 
or  eleemosynary  corporations,  public  in 
their  nature,  bad  abused  their  fran- 
chises, perverted  the  purpose  of  their 
organization  or  misappropriated  their 
funds;  and  as  they,  from  the  nature  of 
their  corporate  functions,  were  more 
or  less  under  government  supervision, 
the  attorney-general  proceeded  against 
them  to  obtain  correction  of  the  abuse; 
or  (2)  where  private  corporations,  char- 
tered for  private  and  limited  purposes, 
had  exceeded  their  powers  and  were 
restrained  or  enjoined  in  the  same  man- 
ner from  the  further  violation  of  the 
limitation  to  which  their  powers  were 
subject"  Hence  the  United  States  as 
the  creator  of  the  Union  Pacific  Rail- 
road cannot  exercise  visitorial  power 
<>vrr  it  iii  respect  to  frauds  in  its  man- 
agement United  States  ft  Union  Pa- 
cific R  K.  Co.,  98  U.  S.,  569,  617  (1878) 
Cf.  Attorney-General  r  Wilson,  l  Cr.  & 
Ph.,  1  (1840),  holding  that  the  court  had 
jurisdiction  over  charitable  corpora- 
tions, and  that  when  the  trustees  of 
them  abused  their  trust  the  court  would 
take  notice  of  such  abuse  by  reason  of 
its  \  isitorial  powers.    Also,  on  this  point, 

Attorney-General  ft  Foundling  Hospital, 

4  Bra  Ch.  Rep,  165  (1793).  For  plead- 
ings in  quo  warranto  proceedings  by 
the  state  to  oust  a  corporation  from 
usurped  Francises  and  to  forfeit  a  rail- 
road charter,  see  People  ft  Staudford,  18 
Pac.  Rep,  85  (Cal,  1888),  holding  also 
that  the  statute  of  limitations  is  no  bar. 
But  see  the  Pennsylvania  cases  in  g  315, 

8 


supra,  where  the  state  enjoined  an  ille- 
gal purchase  of  stock  by  a  corporation. 

'Comanche  County  v.  Lewis,  188 
U.S..  198  (18 

-'  A  legislative  recognition  of  a  char- 
ter cures  any  unconstitutionality  in  the 
statute  creating  it  Snell  r.  Chicago,  2 1 
N.  K.  Rep.,  582  (111.,  1890)  The  exten- 
sion of  time  to  complete  railroads  applies 
so  as  to  prevent  forfeiture  for  non- 
completion  within  the  original  time. 
state  r.  Bergen,  eta,  R'y,  20  Atl.  Rep., 
762  (N.  •!..  1890)  Although  suit  is 
brought  to  forfeit  a  street  railway  fran- 
chise for  using  electric  power  without 
authority,  the  legislature  may  cure  the 
defect  of  power.  To  forfeit  for  not 
commencing  work  within  a  year  the 
pleading  must  allege  when  the  work 
was  commenced.  People  r.  Los  An- 
geteaeta,  R'y,  27  Paa  Rep.,  67:5  (Cal.. 
1891)  An  amendment  to  a  charter  is  a 
waiver  of  any  forfeiture  thereof  due  to 
not  commencing  business  within  the 
prescribed  time.  Farnswortb  ft  Lime 
Rock  R.  R..  92  Atl.  Rep.,  :S7:J  (Me.,  1891). 
Although  the  act  requires  the  certifi- 
cate of  incorporation  to  specify  the 
termini,  and  the  certificate  merely  say^ 
the  termini  are  in  a  certain  city,  yet  if 
the  legislature  subsequently  by  special 
act  recognizes  the  company,  the  legality 
of  its  existence  cannot  be  questioned. 
Koch  ft  North,  etc..  R'y,  89  Atl.  Rep.. 
4(1:'.  Aid.,  1893)  In  this  case  the  organ- 
ization was  under  the  general  railroad 
law.  Under  such  a  charter  the  route 
and  its  termini  are  to  be  determined  by 
the  mayor  and  city  council  'under 
7-1 


I   if.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§63; 


§  637.   Who  may  allege  that  forfeiture  or  non-incorporation  or 
dissolution  exists. —  It  has  already  been  shown  that  no  one  but  the 


their  general  power  of  control  and  reg- 
ulation of  the  streets." 

A  waiver  may  be  express  or  by  stat- 
utes recognizing  its  continued  existence, 
In  re  New  York  El.  R  R  Co.,  70  N.  Y., 
327,   338  (1877);    People  v.   Manhattan 
Co.,  9  Wend.,  352,  380  (1832) ;  or  requir- 
ing it  to  make  alterations  on  its  road, 
Att'y-Gen'l    v.   Petersburg,    etc.,   R.    R 
Co.,  6  Ired.  L,  (N.  G),  470  (1846);  or  au- 
thorizing   a   transfer    of    its    property 
and  franchises  to  another  corporation, 
Chesapeake,   etc.,   Canal    Co.    r.   Balti- 
more, etc..  R  R  Co..  4  G.  &  J.  (Md),  1, 
127  (1*32);    or   requiring  a  bank  to  re- 
sume   specie    payments    by   a    certain 
date,  Commercial  Bank  v.  State,  6  Sm. 
&  M.  (Miss.).  599.  622  (1846).    But  waiver 
as  to  terminus  is  not  a  waiver  of  an 
abandonment  of  part  of  the  road,  nor 
of  a  defect  as  to  the  width  of  the  turn- 
pike.    People   v.    Fishkill.   etc..    Co..  27 
Barb.,  445       -"'       Waiver    may  arise 
by   a   statue    extending   the    corporate 
powers,  People  V.  Ottawa,  etc..  Co..  115 
111.,  281  (1885);  Central,  etc..  R.  R  Co.  r. 
Twenty,  etc..  R.  R.  Co.,  51  How.  Pr..  168, 
186  (1877) ;  or  by  authorizing  a  change 
of  route.   State  v.  Fourth,  etc.,  Co..  15 
N.  H..  162    1844);  or  by  expressly  waiv- 
ing the  cause  for  forfeiture,  Lumpkin 
v.  Jones,  1   Ga.,   27  (1846).     Legislature 
mav  expressly  waive  forfeiture  arising 
by     suspension     of     specie     payments. 
Atehafalaya  Bank  v.  Dawson.   13  La.. 
497  (1829).     May   waive    by   extending 
the  time   for  completion.     La   Gn 
etc.,   R   R.   Co.    v.    Rainey,    7    Coldw. 
(Tenn.l  420  (1870).     Amending  charter, 
etc.,  is  a  waiver.     White's,  etc,  Co.  v. 
Davidson    County,    3    Tenn.    Ch.,    :'.'."'. 
(1877'.     An  act  reviving  a  corporation 
i-  a  waiver,  even  though  the   act  was 
fraudulently  passed.    In  re  Mechanics1 
Soc,    31    La.    Ann..    627  The 

waiver  protects  the  turnpike  corpora- 
tion from  an  indictment  for  obstructing 
the  road.     State   v.   GodwinsvUle,  eto 


Co.,  44  N.  J.  L.,  496  (1882).  But  the 
waiver  must  have  been  clearly  in- 
tended. People  v.  Kingston,  etc.,  Co., 
2:i  Wend.,  193  (1840).  The  appointment 
of  a  corporate  officer  by  the  governor 
and  senate  is  not  a  waiver.  Peopl  •  v. 
Phoenix  Bank,  24  Wend.,  431  (1840). 
Long  delay  in  bringing  the  quo  war- 
ranto may  be  a  waiver.  People  r.  Will- 
iamsburgh,  etc..  Co.  47  N.  Y..  586  (1872  : 
People  v.  Oakland,  etc.,  Bank,  1  Doug. 
(Mich.),  282.  Dictum,  that  the  state 
may  waive.  Briggs  v.  Cape  Cod,  etc., 
Co.,  137  Mass..  71  (1884),  citing  cases. 
Special  act  amending  charter  waives 
defects  in  the  articles  of  association  as 
filed.  Basshor  v.  Dressel,  34  Md.,  503 
(1871).  Amendment  to  charter  waives 
right  of  forfeiture  for  fraud,  non-user 
and  misuser.  People  v.  Ottawa,  etc., 
Co.,  115  111.,  281  (1886).  An  amendment 
of  the  charter  is  a  waiver.  Att"y-Gen'l 
v.  Petersburgh.  etc.,  R.  R  Co..  6  Ired.  L. 
456(1846);  Charles  River  Bridge  Co.  v. 
Warren  Bridge,  24  Mass.,  344  I  I 
The  waiver  may  be  express.  State  v. 
Bank  of  Charleston.  2  McMullan,  439 
(1843);  Enfield  Bridge  Co  v.  I  '.urn.,  etc., 
Co.,  7  Conn.,  2s  1828);  Kanawha,  etc., 
Co.  v.  Kanawha,  etc.,  Co.,  7  Blateh.,  391 
(1^7o.  Where  the  incorporation  had 
l^een  irregular,  the  recognition  of  a  cor- 
poration by  the  legislature  is  equivalent 
to  a  charter.  McAuley  v.  Columbus, 
etc.,  R'y,  B8  111..  31-  1876);  Cowell  v. 
Colorado,  etc.,  Co.,  3  CoL,  BS 
Mead  r.  N.  Y..  etc.,  R  R,  45  Conn.,  199 

(1877);    Kanawha,  eta,  I  '••.  V.  Kanawha. 

eta,  Ca,  7  Blateh.,  891      -         St  Louis 
R  R  v.  N.  W..  eta,  R'y,  3  Ma  Ap] 

\tlantie.  eta,  R  R  '•.  St.  Louis, 
66  Ma,  n   s.  W.  ! 

:T.\..    1889).     Contra,   where    charters 
must  be  granted  by  general  lawa 
\  ill.-,  etc.,  R  R  '".  BuperviB  CaL, 

854      -  But  see  Brent  v.  - 


B75 


§  037.]  DISSOLUTION,  FOKFEITUKE,  ETC.  [CII.   XXXVIII. 

state  can  institute  a  suit  to  declare  a  forfeiture.1  Also,  that  no  one 
can  institute  a  suit  in  equity  to  dissolve  a  corporation.2  The  ques- 
tion now  arises  whether  the  state  or  any  person,  either  as  plaintiff 
or  defendant,  may  allege  forfeiture  or  dissolution  or  non-incorpo- 
ration where  there  have  been  no  quo  warranto  proceedings  instituted 
and  prosecuted  by  the  state  to  judgment.  With  a  few  exceptions 
such  an  allegation  is  not  allowed.  A  creditor  of  a  supposed  corpo- 
ration cannot  ordinarily  hold  the  stockholders  liable  as  partners 
although  they  did  not  legally  incorporate.3  It  is  true,  also,  in  cer- 
tain cases  where  a  stockholder  is  made  liable  to  corporate  creditors 
upon  the  dissolution  of  the  corporation,  a  dissolution  is  held  to 
exist  where  the  corporation  is  hopelessly  insolvent.4  And  it  is  the 
law  that  where  a  railroad  corporation  attempts  to  acquire  a  right 
of  way,  the  persons  whose  property  will  be  affected  thereby  may 
oppose  the  acquisition  of  the  right  of  way  by  showing  that  the 
company  is  not  legally  incorporated.8  Bat  aside  from  these  excep- 
tions no  one  is  allowed  to  assert  that  the  corporation  is  dissolved, 
or  its  franchise  forfeited,  or  its  incorporation  illegal,  until  after 
such  a  result  has  been  decreed  by  a  court  in  a  proceeding  instituted 
for  that  purpose  by  the  state.  Thus,  a  stockholder  sued  on  his 
subscription  cannot,  unless  his  subscription  was  made  previous  to 
the  incorporation,  set  up  that  the  company  was  not  legally  incor- 
porated.6 

The  corporation  is  called  a  de  facto  corporation,  and  only  the 
state  is  allowed  to  question  its  existence.  There  are  many  instances 
where  attempts  have  been  made  to  avoid  this  rule  of  law  by  set- 
ting up  that  the  charter  has  been  rendered  forfeitable  at  the  in- 
stance of  the  state,  but  they  have  uniformly  failed.7 

i§  632,  supra.  corporation  seeks  to  take  under  powei 
2 §629,  supra  of  eminent  domain  cannot  set  up  that 
3See  ch.  XIII,  supra.  tlieai  tides  of  incorporation  had  not  been 
*See  g  631,  supra.  filed  with  the  secretary  of  state  as  re- 
sin re  Brooklyn,  etc.,  R'y  Ca,  72  N.  Y.,  quired  by  the  incorporating  statute. 
245  N".  Y.  Cable  Co.  r.  Portland,  etc,  Co.  v.  Bobb,  10  S.  W.  Rep., 
Mayor,  etc.,  104  X.  Y..  1  (1887).     In  con-  794  (Ky„    1889)     A  railroad  charter  is 

demnation    pro lings  the  incorpora-  not  good  so  far  as  the  right  to  condemn 

ti<>n   may  1»-  attacked  as  not  being  de  land  is  concerned,  where  the  terminus 

facto.     It-  -A-  jure  existence  cannot  be  is  stated  to  be  on  the  state  line  in  a  cer- 

so  attacked    Brown    r.   Calumet,  etc.,  tain  county.    Atlantic,  etc.,  R.  R.  v.  Sul- 

R'y,  18  N.  E,  Rep.,  288  (111..  1888).     An  livant,  5  Ohio  St..  876  (18K 

adjacent  owner  cannot  enjoin  a  street  6§§  188-186,  supra.     Concerning  the 

railway  company  on  the  ground  that  its  question  of  who  can  complain  of  inis- 

charter  is  invalid,  unless  his   property  takes,   irregularities   and   illegalities    in 

rights    are   affected.      Nichols   v.   Ann  the  corporation,  see  ch.  I,  supra. 

Arbor,  etc..  St  R'y.  49  N.  W.  Rep.,  538  -Thus,  a  person  sued  for  tolls  cannot 

(Mich.,  1891).     A  person  whose  land  a  set  up  that  the  corporation  has  not  ren- 

876 


■CH.  XXXVIII.]  DISSOLUTION,  FORFEITURE,  ETC.  [§  637. 

So,  also,  a  party  contracting  with  a  corporation  cannot  defeat 


dered  required  statements,  and  hence 
its  charter  is  forfeitable.  Kellogg  v. 
Union  Co.,  12  Conn.,  7  (1837).  Nor  that 
the  charter  was  never  legally  vested  or 
lias  been  violated.  Dyer  v.  Walker,  40 
Pa.  St.,  157  (1861).  Where  two  railroad 
companies  claim  a  right  of  way,  one 
cannot  allege  that  the  other's  charter  is 
forfeitable.  Central,  etc.,  R.  R  Co.  v. 
Twenty-third,  etc.,  R  R  Co.,  54  How. 
Pr..  168,  185  (1877).  A  religious  corpo- 
ration suing  for  its  real  estate  cannot 
be  met  by  a  plea  of  dissolution,  there 
haviug  been  no  decree.  Baptist  House 
v.  Webb,  66  Me.,  398  (1S77).  A  corpora- 
tion suing  for  personal  property  is  not 
defeated  by  a  plea  that  it  was  not  legally 
organized  or  is  dissolved  by  non-user. 
Penobscot,  etc.,  Corp.  v.  Lamson,  16 
Me.,  224  (1839).  A  grantee  of  a  corpora- 
tion's right  to  overflow  land  is  not  de- 
prived of  his  right  by  dormancy  and 
non-user  of  its  franchises  by  the  corpo- 
ration. Heard  v.  Talbot,  73  Mass.,  113 
(1856).  Attachment  lies  against  the  land 
of  a  foreign  corporation  though  a  re- 
ceiver of  it  exists  in  the  state  creating 
it  Moseby  v.  Burrow,  52  Texas,  396 
(1880).  One  corporation  cannot  enjoin 
a  competing  corporation  from  proceed- 
ing on  the  ground  that  the  latter  has 
subjected  its  charter  to  forfeiture  by 
misuser  or  non-user.  Elizabethtown  G. 
L.  Co.  v.  Green,  18  Atl.  Rep.,  844  (N.  J., 
1889).  A  county  cannot  seize  a  turn- 
pike, although  the  company  is  guilty  of 
misuser  or  non-user.  A  judgment  of 
forfeiture  is  first  necessary.  Moore  v. 
Sehoppert,  22  W.  Va,  282  (1883).  A  city 
seeking  to  lay  out  a  road  on  a  right  of 
way  cannot  claim  that  the  railroad  com- 
pany's right  is  forfeited  by  non-user. 
New  Jersey  R  R  Co.  v.  Long  Branch 
Com'rs,  39  N.  J.  L,  28  US76).  The  cor- 
poration cannot  avoid  a  tax  on  the 
ground  that  it  has  ceased  business. 
Bank  of  IT.  S.  v.  Commonwealth.  17  Pa. 
St.,  400  (1851).  A  grantor  of  land  to  a 
corporation   cannot   reclaim   it  on  the 


ground  of  a  dissolution,  there  having 
been  no  decree  of  dissolution.  Bohan- 
nan  v.  Binns,  31  Miss.,  355  (1856). '  Serv- 
ice on  a  corporation  cannot  be  made  by 
service  on  a  stockholder  on  the  ground 
that  it  has  forfeited  its  charter  by  non- 
user.  Bache  v.  Nashville,  etc..  Soc,  1<> 
Lea  (Tenn.),  436  (1882).  A  suit  by  the 
corporation  on  a  bond  is  not  to  be  met 
by  a  plea  of  forfeiture  for  non-u-  r. 
West  v.  Carolina,  etc..  Ins.  Co.,  31  Ark.. 
476  (1876).  Nor  its  suit  on  a  note  by  the 
plea  that  it  has  abandoned  its  fran- 
chises. John  v.  Farmers',  etc..  Bank.  2 
Blackf.,  367  (1830);  East  Tenn.,  etc.,  Co. 
v.  Gaskell,  2  Lea  (Tenn.),  742  (1879); 
President,  etc.,  v.  Hamilton,  34  Ind.,  506 
(1870).  The  forfeiture  can  exist  only 
after  a  decree  to  that  effect.  Chesa- 
peake, etc.,  Co.  v.  Baltimore,  etc.,  R  R 
Co.,  4  Gill  &  J.  (Md.),  1  (1832).  An 
agent  sued  for  conversion  of  funds  can- 
not allege  that  the  corporation  is  guilty 
of  a  non-user  of  its  franchises.  Eliza- 
beth, etc.,  Acad.  v.  Lindsey,  6  Ired.  L 
(N.  C),  476  (1846).  A  railroad  suing  on 
a  note  cannot  be  defeated  by  the  defense 
that  it  has  forfeited  its  charter,  there 
being  no  adjudication  to  that  effect. 
Toledo,  etc.,  R  R  v.  Johnson,  49  Mich., 
148  (1882).  A  squatter  on  corporate  land 
cannot  dispute  the  corporate  title  by  al- 
leging that  it  was  not  legally  incorpo- 
rated or  organized.  Only  the  state  can 
object.  East,  etc.,  Church  v.  Froislie,  35 
N.  W.  Rep.,  260  (Minn.,  1887).  In  a  suit 
b}-  a  toll  road  to  recover  a  penalty  for 
refusal  to  pay  toll,  the  validity  of  the 
company's  organization  and  the  condi- 
tion of  the  road  cannot  be  brought  into 
the  controversy  by  way  of  defense. 
Canal  St.,  etc.,  Co.  v.  Paas.  54  N.  W.  Ri  p., 
907  (Mich..  1893).  But  a  turnpike  com- 
pany cannot  recover  fares  for  the  part 
of  its  road  which  is  constructed  beyond 
its  chartered  limits.  Pontiac,  etc.,  Co.  v. 
Hilton,  36  N.  W.  Rep.,  739  (Mich..  1888). 
Statutory  provisions  as  to  notice  of  the 
first  meeting  are  directory.     They  need 


^77 


§  <»37.j 


DISSOLUTION',  FORFEITURE,  ETC 


[CH.  XXXVIII. 


his  obligation  by  showing  that  the  corporation  was  never  legally 
incorporated.1 


not  be  observed  if  the  stockholders  ac- 
quiesce. Braintree,  etc.,  v.  Braintree,  16 
N.  E.  Rep.,  420  (Mass..  1881).  But  the 
failure  of  a  railroad  to  cause  to  be  paid 
in  a  certain  amount  of  its  capital  stock 
before  incorporation  may  defeat  munic- 
ipal bonds  which  are  given  to  it  Farn- 
ham  v.  Benedict,  107  N.  Y.,  159  (1887). 
Indorser  sued  by  the  corporation  cannot 
claim  that  it  has  rendered  its  charter 
liable  to  forfeiture  by  suspension  of 
specie  payments.  Atchafalaya  Bank  v. 
Dawson,  13  La..  497  (1839).  Corporation 
cannot  defeat  its  taxes  by  alleging  fail- 
ure to  comply  with  conditions  subse- 
quent in  its  charter.  Baltimore,  etc.,  K. 
R  v.  Marehall  Co.,  3  W.  Va.,  319  (1869). 
Though  the  provision  in  the  Kentucky 
statutes  requiring  publication  of  the 
charter  is  not  complied  with,  yet  the 
corporation  is  valid  and  complete,  ex- 
cept that  the  state  may  proceed  to  annul 
the  charter.  No  other  party  can  raise 
the  objection.  Stutz  r.  Bandley,  11  Fed 
Rep.,  531  (1890);  Walton  v.  Riley,86  Ky.. 
413,  421;  overruling  Beinig  v.  Manu- 
facturing Co.,  81  Ky..  BOO.  Runnings 
blockade  is  not  a  forfeiture  per  ae.  Im- 
porting, etc.,  Co.  v.  Locke,  60  Ala..  882 
(1878) 

i  Commercial  Bank  r.  Pfeiffer,  108 
N.  Y.,  242  i  1888).  The  maker  of  a  note 
to  a  bank  cannot  question  its  incorpora- 
tion. Exchange  National  Bank  t\  Hast- 
ings, 49  N.  W.  Rep.,  228  (Neb.,  1801); 
Columbia  Electric  Co.  V.  Dixon,  49 
N.  W.  Rep.,  244  (Minn.,  1891).  An  of- 
ficer cannot  defend  against  an  action 
to  make  him  account,  by  setting  up 
that  the  company  was  fraudulently  or- 
ganized. Haacke  v.  Knights,  etc.,  Club, 
25  Atl.  Rep,  422  (Md.,  1892).  In  the 
case  of  Perine  v.  Grand  Lodge,  etc.,  50 
N.  W.  Rep.,  1022  (Minn..  1892k  where  an 
insurance  policy  was  sued  upon,  the 
court  held  that  it  was  immaterial  that 
the  defendant  was  not  incorporated,  in- 
asmuch as  it  had  held  itself  out  as  a 

8 


corporation.     Bou.  etc.,  Co.  v.  Standard, 
etc.,  Ins.  Co.,  12  S.  E.  Rep.,  771  (W.  Va„ 
1891).     "Where   a  corporation  sues   for 
the  price  of  articles  sold,  the  defendant 
cannot  set  up  that  the  plaintiff  sold  the 
articles  before  its  capital  stock  was  fully 
paid  up  as  required  by  statute.     Chasis, 
etc.,  Co.  v.   Baston,  etc.,  Co.,  28  N.  E. 
Rep.,    300   (Mass.,    1891);  McCord.    etc.. 
Co.   v.   Glen,   21  Pac.  Rep.,  500  (Utah, 
1889).     In  a  suit  by  a  bona  fide  indorsee 
of  a  note  from  a  corporation  as  indorser, 
the  maker  cannot  set  up  that  the  com- 
pany   was   not    properly    incorporated. 
Brickley  V.  Edwards,  30  N.  E.  Rep.,  708 
(Ind„  1892).     The  defendant  cannot  al- 
lege  that  the  corporation  was   for  an 
illegal  purpose that  of  running  block- 
ades—the   charter    not    showing    that 
fact.    Importing,  eftx,  ( !a   v.  Lock,  50 
Ala..  B82  (1873).     Where  the  suit  is  on  a 
bond,  a  stockholder  cannot  sue  to  have 
the  corporation   declared  a  copartner- 
ship by  reason  of  irregular  incorpora- 
tion.   Baker  v.  Backus,  82  111.,  79(186 
Nor  can  the  maker  of  a  note  to  a  corpo- 
ration defeat  it   by   Bhowing  that  the 
corporation  was  not  duly  incorporated. 
Butchers',  etc.,  Bank  v,  McDonald,  130 
Mass.,  264  (1881);  Jones  r.  Bank  of  Ten- 

n, .   -    B.   Monr.   (Ky.).    122  (1847); 

l ,,  nardaville  Bank  aWillard.  25  N.Y., 
574  (1862  ;  Nutting  0.  Hill.  71  (ia..  557 
(1888  :  Irvine  v.  Lumberman's  Bank. 
2  W.  &  S.  (Pa  ,204  (1841);  Congrega- 
tional Soc.  r.  Berry.  6  N.  II..  164(1881 
Massey  <••  Bldg.  Ass'n,  22  Kan.,  624 
(1879);  Vatert*  Lewis,  86  Ind,,  288  1871); 
Smith  t\  Miss.,  etc.,  R.  R  Co..  14  Miss., 
179  (1846),  where  the  maker  of  the  note 
claimed  that  the  corporation  was  fraud- 
ulently and  illegally  organized  :  Stude- 
baker,  etc.,  Co.  n  Montgomery,  74  Mo., 
101(1881);  Stoutimore  r.  Clark,  70  Ma, 
471  (187.->i  ;  Blake  r.  Ilolley,  14  Ind..  383 
(1860);  Jones  r.  Cincinnati,  etc.,  Co.,  14 
Ind..  SO  (I860),  holding  also  that  the  cor- 
poration need  not  prove  even  a  de  facto 
78 


cir.  xxxviii.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  637. 


A  person  who  gives  a  bond  to  a  corporation  is  not  allowed  to 
defeat  the  bond  by  alleging  that  the  corporation  was  not  duly 
incorporated ; l  nor  can  the  corporation  defeat  its  bonds  by  alleging 
its  want  of  lawful  incorporation.2  A  person  who  mortgages  land 
to  a  supposed  corporation  cannot  defeat  a  foreclosure  of  the  mort- 
gage by  alleging  that  the  mortgagee  is  not  a  corporation ; 3  nor  can 


existence.    To  saTiie  effect,  Montgomery 
R.  R.  Co.  v.  Hurst,   9  Ala.,  513  (1846). 
Cf.    White    v.    Campbell,    5     Humph. 
(Tenn.),  38  (1844),  where  the  remarkable 
decision  was  made  that,  if  the  corpora- 
tion had  been  dissolved  at  the  time  the 
note  was  given,  the  maker  was  not  liable 
and  could  have  a  mortgage  which  he 
gave  as  security  set  aside.     A  de  facto 
corporation,  as  indorsee  of  a  note,  may 
enforce  it.     Wilcox  v.  Toledo,  etc.,  R.  R. 
Co.,  43  Mich.,  584  (1880).     A  corporation 
cannot  be  defeated  in  an  action  on  a 
contract  by  the  fact  that  twenty-four 
instead  of  twenty-five  persons  signed 
the  articles  of  incorporation.     Buffalo, 
etc.,  R'y  Co.  v.  N.  Y.,  etc.,  R.  R.  Co.,  23 
Alb.  L.  J..  134  (N.  Y.,   1886).     Proof  of 
organization  in  fact  and  user  meets  a 
plea  of  nvl  tiel  corporation  by  the  maker 
of  a  note  to  the  corporation.     Mitchell 
v.  Deeds,  49  111.,  416  (1867);  Smelser  v. 
Wayne,  etc.,  T.  Co.,  82  Ind.,  417  (1882). 
But  see  Williams  v.  Bank  of  Michigan. 
7  Wend.,  540  (1831).     The  corporation  it- 
self, when  sued  upon  notes  which  it  lias 
made,  cannot  set  up  any  informality  in 
its  incorporation.     Kelley  v.  Newbury- 
port,  etc.,  R.  R.  Co..  141  Mass.,  496  (1886) ; 
Empire  Mfg.  Co.  v.  Stuart,  46  Mich..  182 
(1881),  where  the  corporation  re-incorpo- 
rated in  order  to  cure  the  irregularity. 
Estoppel  as  to  corporate  existence  seems 
to  mean  that  the  corporation  is  obliged 
to  prove  only  a  de  facto  existence,  and 
heed  not  prove  the  details  of  incorpora- 
tion.    Leouanlsville  Bank  o.  Willard,  25 
N.Y.,  574  (1862).   A  person  taking  water 
from  an  irrigation  company  under  con- 
tract cannot  defeud  against  an  action 
thereon  by  alleging   that  the  company 
was  not  incorporated.     Fresno,  etc..  <  '<>. 
v.  Warner,  14  Pac.  Ren..  37  (CaL,  1887). 


In  a  suit  by  a  corporation  on  a  note,  the 
execution  of  the  note  to  the  corporation 
is  prima  facie  proof  of  its  incorpora- 
tion. A  de  facto  corporation  may  en- 
force a  note  given  to  it.  Hudson  v. 
Green,  etc.,  113  111.,  618  (18s:»  i;  5  S. 
Rep.,  247  (Fla„  1888);  21  N.  E.  Rep.,  12 
(111.,  1889).  That  the  corporation  may 
ratify  and  pnforce  contracts  entered 
into  in  its  behalf  by  its  promoters  before 
incorporation,  see  §  705,  etc.,  infra. 

1  McFarland  v.  Triton  Ins.  Co.,  4  Denio, 
392  (1847) ;  City  of  St  Louis  v.  Shields, 
62  Mo.,  247  (1876):  Loaners"  Bank  v. 
Jacoby,  10  Hun,  143  (1877);  Commis- 
sioners, etc.,  v.  Bolles,  94  U.  S.,  104(1876) ; 
Henriijues  ?•.  Dutch  West  India  Co..  2 
Ld.  Raym.,  1532  (1729),  where  a  foreign 
corporation  sued,  and  the  general  issue 
was  not  pleaded. 

2  Independent,  etc..  Aid  v.   Paine,  14 
N.  E.  Rep.,  42  (111..  1887);  Blackburn  v. 
Selma,  etc.,  R.  R.  Co.,  2  Flipp,  525   1  ^79) ; 
Racine,  etc..  R  R.  v.  Farmers',  etc.,  Co., 
49  111.,  331.  346  (1S68);  Liter  v.  Ozokerite 
Min.  Co..  27  Pac.  Rep.,  690  (Utah,  188 
Aller  v.  Town   of  Cameron,  3  Dill..   198 
(1874).  where  a  municipality  set  up  this 
defense:  Empire, etc.,  Mfg.  Co.  r.  Stuart, 
46  Mich.,  182    1882),  a  promissory  n< 
case.     A    corporation    cannot    defend 
against  its  contracts  by  alleging  that  it 
never  published  its  articles  of  associa- 
tion as  required   by  Btatute.    Wo  <1  >: 
Wiley,  etc., Co.,  18  At!.  Rep,  187  Conn., 
1888),     A  corporation  is  liable  for  a  t   i 

6V(  D  thougb  it   failed   t<»  tile   its  articli  s 

of  association  with  the  secretary  <<(  state 
as  required  by  statute.    Walton  <-.  Rilej . 
■    W.  hvp..  806   Ky..  18ft 

Bar.    Hank    r.    Collins. 
Conn.,  i  iv  :,,,  sav.  Bank 

Ford,  id  :  and  Basenritt.  r 

79 


§  637.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


In  like  manner  the  corporation  itself  is  not  allowed  to  defeat  its 
contracts  by  such  a  plea,1  But  in  suits  where  the  party  is  not  es- 
topped from  denying  the  incorporation  of  the  other  party,  such  a 
denial  may  of  course  be  made.2 

The  mere  fact  that  a  person  contracts  with  a  party  and  desig- 
nates the  latter  as  a  "  company  "  will  not  estop  the  former  from 
denying  the  incorporation  of  the  latter.  This  is  the  law,  and  is 
reasonable,  since  many  copartnerships  do  business  and  make  con- 


and   the    defendant    alleges  that  it  is 
doing    all  its  business   outside   of  the 
state  incorporating  it.     Newburg,  etc., 
Co.  v.   Weare,  27   Ohio  St.,  343  (1875). 
See,  also,  §§  237-239,  supra.     Or  where 
a  foreign  corporation   sues  the  sheriff 
for    trespass.     Persse,    etc.,    Works    v. 
Willett,  1  Rob.  (N.  Y.),  131  (1863).    Or 
where  the  company  sues  for  tolls.     Sin- 
clair v.  Wayne,  etc.,  T.  Co.,  82  Ind.,  417 
(1882).     A  de  facto  corporation  exists 
where  the  company  might  have  incor- 
porated   under    the    statutes    and   has 
acted  as  a  corporation.     Methodist,  etc., 
Church  v.  Pickett,  19  N.  Y.,  482  (1859). 
But  a  person  who  agreed  to  and  did 
convey  property  to  a  company  to  be  in- 
corporated may  subsequently  repudiate 
the  corporation  and  his  conveyance  as 
against  his  associates   who    shared  in 
the  stock  received  therefor.     Doyle  v. 
Mizner,  42  Mich.,  332  (1879).     The  case 
of  Boyce  v.  Trustees,  etc.,  40  Md.,  359 
(1876),  allowed  a  corporation  to  deny  its 
existence  as  against  a  director  who  sued 
it  for  moneys  advanced  to  it     Welland 
Canal  Co.  v.  Hathaway,  8   Wend.,  480 
(1832),  allowed  a  contractor  to  deny  the 
existence  of  a  corporation  which  sued  to 
recover  back   money  which  had   been 
overpaid  to  him.     A  corporation  receiv- 
ing the  stock  of  another  corporation  in 
consideration  of  certain  agreements  as 
to  renting  machines  belonging  to  said 
latter  company  cannot,  when  enjoined 
from  violating  that  agreement,  set  up 
that  the  latter  company  was  not  prop- 
erly organized.     Automatic,  etc.,  Co.  v. 
North  American,  etc.,  Co.,  45  Fed  Rep., 
1  (1891).     Although  there  are  less  stock- 
holders and  less  directors  than  the  stat- 


ute or  charter  require,  yet  the  acts  of 
these  are  sufficient  to  sustain  obligations 
incurred  by  the  corporation  with  third 
persons.  Welch  v.  Importers',  etc.,  Bank, 
122  N.  Y.,  177  (1890).  It  is  no  defense  to 
a  proceeding  by  a  religious  corporation 
to  collect  a  legacy  to  allege  that  there 
were  irregularities  in  its  incorporation, 
and  that  there  has  been  a  non-user  of 
its  franchises.  Matter  of  Congregational 
Church,  etc.,  131  N.  Y.,  1  (1892).  In  order 
to  constitute  a  de  facto  corporation 
"there  must  at  least  be  an  organization 
under  some  existing  charter  or  law. 
And  such  organization  must  be  in  good 
faith."  Welch  v.  Old  Dominion,  etc., 
R'y,  56  Hun,  650  (1890).  Where  an  at- 
torney sues  for  his  services  the  supposed 
corporation  may  set  up  that  it  is  not  a 
de  facto  nor  de  jure  corporation.  Id. 
The  California  code  provides  that  the 
existence  of  a  de  facto  corporation  shall 
not  be  called  in  question  in  private  suits. 
Lakeside,  etc.,  Co.  v.  Crane,  22  Pac.  Rep., 
76  (Cal.,  1889) ;  Golden,  etc.,  Co.  v.  Joshua, 
etc..  Works,  23  Pac.  Rep.,  45  (Cal.,  1890). 

1  Dooley  v.  Cheshire  Glass  Co.,  81  Mass., 
494  (1860);  Callender  v.  Painesville,  etc., 
R  R.,  10  Ohio  St.,  516  (I860).  See,  also, 
Bommer  v.  American,  etc.,  Co.,  81  N.  Y., 
468  (1880),  where  the  corporation  sought 
to  escape  royalties  by  alleging  that  it 
incorporated  after  the  contract  by  it  to 
pay  them  was  made.  A  corporation 
sued  for  work  done  cannot  set  up  that 
it  was  not  regularly  incorporated.  Mer- 
rick v.  Reynolds,  etc.,  Co.,  101  Mass.,  381 
(1869). 

2  Carey  v.  Cincinnati,  etc.,  R  R,  5 
Iowa,  357  (1857),  and  the  principles  and 
cases  supra.    See,  also,  §  638,  infra. 


882 


CH.  XXXVIII.] 


DISSOLUTION,  FOKFEITUKE,  ETC. 


[§  638. 


tracts  under  the  name  of  "  company." '  Such,  also,  is  the  rule  where 
a  supposed  incorporation  is  not  even  a  de  facto  corporation.2  But 
where  the  party  contracted  with  is  a  de  facto  corporation,  then  the 
rules  given  above  apply.  It  is  true,  also,  that  a  company  which  is 
supposed  to  be  incorporated,  but  is  not,  may  after  incorporation 
ratify  and  enforce  contracts  made  in  its  behalf.3 

§638.  Lapse  of  charter  oy  failure  to  comply  with  conditions  — 
Effect  of  failure  to  complete  road  within  a  specified  time. —  Fre- 
quently a  charter  of  a  railroad  corporation  requires  it  to  complete 
its  road  or  a  certain  number  of  miles  of  road  within  a  certain  time, 
and  the  charter  expressly  declares  that  for  failure  to  comply  with 
this  requisite  the  corporate  powers  and  existence  shall  cease.  There 
is  a  strong  line  of  decisions  to  the  effect  that  such  a  provision  as 
this  forfeits  the  charter  absolutely  upon  non-compliance,  and  that 
no  decree  of  a  court  is  necessary  to  effectuate  that  forfeiture.4 


iSee§§233,  234,  supra. 

2  Id. 

3  See  §  705,  etc.,  infra. 

4  See  Brooklyn,  etc.,  Co.  v.  City,  78 
N.  Y.,  524  (1879);  In  re  Brooklyn,"  etc., 
R  R  Co.,  72  N.  Y.,  245  (1878);  id.,  75 
N.  Y,  335  (1878);  Commonwealth  v.  Ly- 
kens,  etc.,  Co.,  110  Pa  St,  391  (1885); 
Farnham  v.  Benedigt,  107  N.  Y,  159 
(1887).  Cf.  Re  Kings  County  El.  R'y 
Co.,  105  N.  Y.,  97  (1887),  rev'g  41  Hun, 
415;  People  v.  Nat'l  Sav.  Bank,  11  N.  E. 
Rep.,  170  (111.,  1887);  aff'd,  22  id.,  283 
(1889).  A  new  state  constitution  may 
forfeit  all  charters  previously  existing, 
but  which  have  not  been  used  by  the 
incorporators.  Chincleclamonche  Lum- 
ber, etc.,  Co.  v.  Commonwealth,  100  Pa. 
St,  438  (1882),  holding  also  that  a  con- 
stitutional provision  that  charters  un- 
der which  no  organization  has  been 
made  and  business  has  been  commenced 
shall  lapse  forthwith  is  constitutional 
and  self-enforcing.  In  the  case  of  Put- 
nam v.  Ruch,  54  Fed.  Rep.,  216  (1893), 
the  court  in  a  dictum,  said  that  the  re- 
peal of  a  charter  by  a  constitutional 
enactment  may  be  self-executing,  but 
that  in  the  case  before  the  court  the 
judgment  of  the  court  was  necessary. 
Where  by  its  charter  a  street  railroad 
is  to  be  commenced  within  three  years 
and  completed  within  ten,  but  it  does 


883 


not  even  open  books  for  subscriptions 
until  nearly  twenty  years  have  elapsed, 
the  corporation  never  came  into  exist- 
ence, and  an  abutting  property  owner 
may  enjoin  the  laying  of  tracks.  Bona- 
parte v.  Bait,  etc.,  R.  R,  23  Atl.  Rep.. 
784  (Md.,  1892).  Contra,  N.  Y,  etc.,  R. 
R  v.  N.  Y,  N.  H.,  etc.,  R  R,  52  Conn.. 
274,  284  (1884).  Cf.  State  v.  Bull,  16 
Conn.,  179.  In  Texas  the  statute  is  self- 
executing,  the  words  used  being  the 
same  as  in  the  New  York*statute.  But 
the  property  rights  survive  for  the  ben- 
efit of  creditors  and  stockholders.  Sul- 
phur Springs,  etc.,  Co.  v.  St  Louis,  etc., 
Co.,  22  S.  W.  Rep.,  107  (Tex.,  1893).  A 
provision  that  unless  certain  roads 
should  be  completed  within  a  certain 
time,  "its  corporate  existence  and  its 
powers  shall  cease,  so  far  as  it  relates  to 
that  portion  of  said  road  then  unfin- 
ished," is  self-executing.  Mayor,  etc.. 
of  City  of  Houston  v.  Houston,  etc.,  Co., 
19  S.  W.  Rep.,  786  (Tex.,  1892).  A  sub- 
scriber, sued  on  his  subscription  for 
stock,  may  defeat  the  suit  by  showing 
that  by  statute  the  charter  was  to  be 
void  if  no  work  was  commenced  with'in 
two  years,  and  that  such  two  years  have 
elapsed  and  no  work  has  been  done. 
By  waters  v.  Paris,  etc.,  R'y,  US.  W. 
Rep,  856  (Tex.,  1889).  Under  the  Vir- 
ginia law  requiring  organization  within 


§  638.] 


DISSOLUTION,   FORFEITURE,  ETC. 


[ch.  XXWIU. 


But  this  drastic  and  dangerous  construction  of  charters  does  not 
commend  itself  to  law  and  justice.  It  adds  one  more  to  the  perils 
which  are  attached  to  all  great  corporate  enterprises.  Even  in 
New  York,  where  the  above  doctrine  seems  to  have  had  its  origin, 
the  courts  are  inclined  to  limit  its  application.  The  New  York 
courts  have  recently  held  that  a  provision  in  a  charter,  that  unless 
certain  things  are  done  within  a  certain  time  the  company  should 
"  forfeit  the  rights  acquired,"  does  not  work  a  forfeiture  ipso  facto} 
It  is  good  cause  for  forfeiture  of  a  charter  by  judicial  decree 
where  a  railroad  company  does  not  complete  its  road  or  does  not 
complete  it  within  a  prescribed  time.2  And  such  a  forfeiture  at 
the  instance  of  the  state  by  reason  of  the  failure  of  the  corpora- 


two  years  or  else  the  charter  is  void, 
the  charter  becomes  void,  ••  without  le- 
gal proceedings  of  any  kind,  from  mere 
operation  of  law."  Welch  v.  Old  Do- 
minion, etc.,  Co.,  10  X.  Y.  Supp.,  171 
(1890);  Silliman  v.  Fredericksburg,  etc., 
R.  R.,  27  Gratt.  (Va.),  119(1876).  A  pro- 
vision m  the  general  statutes  to  the  ef- 
fect that  the  powers  of  a  corporation 
shall  cease  if  it  does  not  organize  within 
one  year  does  not  apply  to  a  special 
charter  the  terms  of  which  indicate 
that  organization  might  be  after  one 
year.  People  v.  Bowen,  :!'»  Barb.,  24 
(1859):  affirmed  on  oth<r  groundt 
N.  Y.,  517.  *ln  the  case  of  Bybee  v. 
Oregon,  etc..  R  R,  139  U.  s.  608  1891> 
the  court  reviewed  the  conflicting  de- 
cisions on  the  question  whether  a  cor- 
porate charter  could  be  made  by  the 
legislature  to  lapse  and  cease  ipao  facto 
aud  without  judicial  action. 

'Consequently  this  is  no  defense  to 
condemnation  proceedings.  In  re  Brook- 
lyn, etc.,  R.  R,  125  N.  Y..  484  (1891).  A 
provision  that  if  the  road  is  not  com- 
pleted within  a  certain  time  "the  char- 
ter shall  be  forfeited  "  is  not  self-execut- 
ing. Galveston,  etc..  R'y  v.  State.  17 
S.  W.  Hep.  07  (Tex..  1891).  This  princi- 
ple is  not  applicahle  where  the  statute 
merely  limits  the  term  of  existence  of 
the  corporation.  Elizabeth  G.  L.  Co.  t\ 
Green,  18  Atl.  Rep,  844  (X.  J.,  1889). 

2  The  failure  of  a  railroad  corporation 
to  complete  its  line  as  laid  down  in  the 
charter  is  ordinarily  good  cause  for  for- 


feiture of  its  charter,  but  the  state  may 
waive  it.  People  v.  Ulster,  etc.,  R  R., 
128  X.  Y.,  240  (1891).  See,  also.  X.  Y.. 
etc.,  R  R  t\  N.  Y.  &  N.  H.,  etc.,  R  R. 
ntpra.  A  railroad  may  construct  its 
line  long  subsequently  to  the  date  of 
its  charter,  there  being  no  limit  in  its 
charter  as  to  time  of  construction. 
W,  -tern,  etc.,  R  R's  Appeal,  104  Pa. 
St.,  899  (1888);  Union  Canal  Co.  v. 
Young,  1  Whart.  iPa.\  410  (ISM).  Fail- 
ure to  commence  work  within  a  time 
specified  in  the  Charter,  and  a  penalty 
that  therefor  the  company  should  be 
dissolved,  does  not  effect  dissolution. 
A  judgment  is  necessary.  I 'ay  v.  Og- 
densburg.  eta,  R  R  Co.,  107  X.  Y.,  139 
If  the  time  limited  for  the  com- 
pletion of  the  road  has  expired,  tin.-  i-  a 
use  to  eminent  domain  proceedings. 
Morris,  etc.,  R  R  Co.  v.  Central,  etc., 
R.  R.  31  X.  J.  L.,  205  (1865).  Cf.  %  637, 
tupra.  The  state  may  forfeit  the  char- 
ter where  the  road  is  not  constructed 
within  the  time  fixed  by  the  charter 
and  amendments;  also  where  it  aban- 
dons a  part  of  its  lines.  Stater.  Xon- 
cannah,  etc.,  Co..  17  S.  W.  Rep.,  128 
(Tenn..  1875).  "Where  a  railroad  com- 
pany mortgages  such  part  of  its  road  as 
is  completed,  and  the  mortgage  is  fore- 
closed, the  purchasers  are  not  bound  to 
go  on  and  complete  the  road.  Failure 
on  their  part  to  complete  it  is  no  de- 
fense to  an  action  on  a  subscription. 
Chartiers  R'y  v.  Hodgens,  85  Pa.  St.. 
501  (1877). 


884 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  63S. 


tion  to  complete  its  enterprise  as  required  by  charter  has  often 
been  decreed.1  But  forfeture  ipso  facto  is  a  doctrine  of  modern 
date.    It  is  contrary  to  reason,  justice  and  the  weight  of  authority.2 


1  People  v.  Kingston,  etc.,  T.  Co.,  23 
Wend.,  193  (1840),  where  the  road  was 
not  constructed  as  required  ;  Thompson 
v.  People,  23  Wend.,  537  (1840).  revers- 
ing 21  id.,  235,  holding  that  an  imma- 
terial omission  is  not  fatal ;  People  v. 
National  Sav.  Bank,  11  N.  E.  Rep.,  170 
(111.,  1887),  forfeiting  for  failure  to  com- 
plete subscriptions  as  required  by  char- 
ter; Eastern,  etc.,  Co.  v.  Regina,  22 
Eng.  L.  &  Eq.,  328  (1853).  for  failure  to 
pay  in  capital  stock  as  required  by 
charter ;  People  v.  City  Bank,  7  Col.,  226 
(1883),  to  same  effect.  See  People  v. 
Jackson,  etc.,  P.  Co.,  9  Mich.,  285  (1861), 
for  a  case  of  the  construction  of  a  road 
in  sections.  And  where  the  charter 
prescribes  that  a  certain  number  of  miles 
shall  be  completed  within  a  certain  time, 
but  does  not  prescribe  that  the  effect 
of  non-compliance  shall  be  a  forfeiture, 
then  the  only  way  of  forfeiting  the 
charter  is  by  a  suit  and  a  decree  of  a 
court.  Hughes  v.  Northern  Pac.  R'y 
Co.,  18  Fed.  Rep.,  106  (1883);  Arthur  v. 
Commercial  Bank,  17  Miss.,  394,  430 
(1848).  The  fact  that  a  corporation 
commences  business  in  another  state 
within  a  year  suffices  for  a  charter  pro- 
vision that  it  must  commence  business 
within  a  year.  Re  Capital,  etc.,  Ins. 
Co.,  47  L.  T.  Rep.,  123  (1882) ;  The  Peo- 
ple v.  Kankakee  Improvement  Co.,  103 
111.,  491  (1882).  In  this  case  the  charter 
required  the  proposed  improvements  to 
be  completed  within  eight  years  as  far 
east  as  the  state  line.  The  company 
completed  as  far  east  as  Kankakee  City 
and  claimed  the  right  to  exercise  the 
option  of  making  or  not  making  further 
improvements  between  that  point  aud 
the  state  line.  The  court  say:  "The 
non-compliance  with  the  requirements 
was  per  se  a  misuser,  and  a  cause  of 
forfeiture  of  the  franchise  as  for  condi- 


tion broken ; "  and  "  we  can  see  here 
but  one  entire  franchise  for  the  improve- 
ment of  these  streams,  and  that  this  ob- 
ligation to  make  the  improvements 
above  Kankakee  City  was  a  condition 
annexed  to  this  entire  franchise.  .  .  . 
We  think  the  non-compliance  with  the 
requirement  in  question  was  a  cause  of 
forfeiture  of  the  entire  franchise." 
Briggs  v.  Cape  Cod  Land  Co.,  137  Mass., 
71  (1884).  In  this  case  the  charter  of  a 
corporation  required  it  to  deposit  with 
the  state  treasurer  within  four  months 
from  its  date  the  sum  of  $200,000  as  se- 
curity for  certain  purposes,  among 
others  for  the  payment  of  damages  for 
taking  land,  and  the  corporation  did  not 
deposit  the  $200,000  in  cash  but  in  bonds 
of  the  United  States  of  the  par  value  of 
$200,000,  and  of  the  market  value  of 
$230,000.  Held,  a  sufficient  compliance, 
as  the  object  of  the  provision  was  to 
provide  security  to  various  interests. 
Also  held  that  the  question  whether  a 
corporation  has  ceased  to  exist  for  non- 
compliance with  charter  provisions 
could  only  be  judicially  determined  in  a 
suit  to  which  the  commonwealth  was  a 
party.  The  corporation  itself,  when 
sued  for  taxes,  cannot  set  up  this  de- 
fense. Baltimore,  etc.,  R.  R.  v.  Mar- 
shall Co..  3  W.  Va.,  319  (1869).  Where  a 
charter,  by  its  terms,  is  to  be  void  un- 
less the  capital  stock  is  subscribed 
within  two  years  and  business  com- 
menced, a  failure  to  secure  the  whole 
subscription  within  that  time  renders 
the  charter  void  though  business  was 
commenced.  Qtto  warranto  lies.  Peo- 
ple v.  Nat'l  Sav.  Bank,  11  N.  E.  Rep..  170 
(111.,  1887).  An  owner  of  land  which  a 
railroad  has  taken  cannot  reclaim  pos- 
session by  reason  of  the  failure  of  the 
company  to  complete  its  road  within 
the   time  limited   by   charter.     Cincin- 


2  See  §  637,  and  notes. 

885 


§  639.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH. 


XXXVIII. 


§  639.  Repeals  of  charters  —  Right  of  stockholders  to  object.—  The 
repeal  by  the  state  of  a  charter  before  the  expiration  of  the  time  it 
was  to  exist,  or  the  repeal  at  any  time  where  the  charter  is  per- 
petual, is  an  unconstitutional  breach  of  the  contract  between  the 
state  and  the  cor) (oration  and  the  stockholders.1  Where,  however, 
the  right  of  repeal  is  reserved  by  the  legislature,  then  such  reserva- 
tion becomes  a  part  of  the  contract,  and  the  repeal  of  the  charter 
rests  in  the  discretion  of  the  legislature.2     Upon  a  repeal  the  cor- 


nati,  etc.,  R  R  v.  Clifford,  IB  N.  E. 
Rep.,  524  (Ind.,  1833);  Bravard  >-.  Cin- 
cinnati, eta,  R  R,  17  N.  E.  Rep..  188 
(Ind.,  1888).  The  bondholders  of  the 
company  take  the  rUk  of  tins  forfeiture 
of  the  charter  for  non-compliance  with 
conditions  Billimantx  Fredericksburg; 
etc.,  R   I:..  t.  (Va.),   110  (1 

where,  however,  the  corporate  officers 
were  endeavoring  to  enforce  fraudulent 
bonda  Borne  <>r  the  English  railway 
arts  are  plainly  not  obligatory  bui  only 
enabling;  ami  it  h  held  that  the  evident 
intention  of  parliament  was  to  permit 
the  companies  to  complete  their  lin 
far  as  possible  or  desirable  before  the 
limit  of  time  Bet,  and  to  abandon  the  re- 
maining portion.  York  ft  North  Mill. 
l:\  <■.,.  ,-.  Queen,  I  Ellis  ft  BL,« 
reversing  same  L,  p.  178 

Western   R'y  « !a  v.  Queen,  id.,  9\ 

ag  same  case,  id.,  £        I   linburgh, 
etc.,  R')    I  'o,   r.   Philip 
\,i..  in  II.  ol    I..  .  51 1.  B                  Scot- 
tish N.  r   R'3    «  ...  '•  Stewart,  8  id 
41 1    1859      8  •    also,   R 
ham  Canal,  8  W.  BL,  71         -      bj  Lord 
M  insfield  ;     Bakemore    n    <  Ham<  u 
Bhire  Canal,  l  MyL  ft  K..  ; 
Lord  Eldon;  Queen  n  Eastern  Counties 
R'y  Ca,  10  \.l.  ft  II..  •". n 

l  ancashire,  eta,  R'y  Co.,  1    El  .v  BL, 
228  I  188 

lGn  enw 1  a  Freight  Ca,  108  ' 

18  (1881).  "  A  grant  of  corporate  privi- 
-  for  a  specified  period  cannot  be 
ri  Burned  by  the  Btate  within  such  period, 
[f  the  charter  in- without  limitation  as 
to  time  it  is  forever  irrepealabli 
ft  Northeast  1.'.  R  tx  Casey,  28  1' 

ill.,  legislature  cannot  for- 


f'-it  a  charter.  Forfeiture  can  be  de- 
creed only  by  the  Courta  It  is  not  a  leg- 
islative function  unless  reserved  Allen 
v.  Buchanan,  9  Phil.  (Pa.),  283  (U 
Cougros  may  repeal  a  charter  granted 
by  a  territory.  Mormon  Church  t\ 
United  Btates,  188  U.  s..  l  fl800>  A  for- 
feiture of  land  by  the  government  for 
non-compliance  with  the  terms  of  the 
errant  may  l>e  by  legislative  enactment 
Farnsworth  v.  Minn..  <  t--.,  R.  p..  :•. 

ader  a  i  I  povi  et  I  tl  at 

the  pleasure  of  the  legislature  the  courts 
raniMt  question  the  becesaity  nor  the 

ith s  motiv<  b  leading  to  ■  repeal 

■  I        108  U.  s..  18 

(1881) ;  Lothrop  n.  Stedman,  18  Blatch., 

Binking  Fund  Caeca,  99 

U.  S ..   :  North..!.  i:.   l:. 

.  Miller,  10  Barb.,  i 
etc.  R  i:    i  Pa  Bt 

BOS;  Miners1   Bank  v.  United  sta* 

nan, 

•■.  Pennington,  l 
Paige,  108;  i  88  Pick, 

884,844.  If  the  power  of  repeal  arises 
only  upon  an  abuse  of  franchise  the 
court  may  revie*  the  question  whether 
i  was  an  abuse.  Erie  &  Northeast 
R  1;  supra;  Mayor,  etc,  of 

Baltimore  v.  Pittsburgh  >v  Connefiaville 
R  R  Ca,  l  Abb.  U.  S.  Rep.,  9  (1 
Hence  the  legislature  cannot  forfeit  a 
charter  merely  because  the  corporation 
n  incorporated  elsewhere  and 
has  brought  suits  in  the  f<  d<  ral  courts. 
( iommonwealth  v.  Pittsburgh,  etc..  R  R. 
68  r.i.  Bt,  88  (1888  -  .  in 
Flint  etc.,  Plank-road  Ca  u  Woodhull, 
85  Mich..  89  ncry  i:  Mi  r- 


888 


«  :i.  xxxviii.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  640. 


porate  property  becomes  a  trust  fund,  to  be  applied  first  to  the 
payment  of  the  debts  of  the  corporation,  and  the  balance  to  be 
distributed  among  the  stockholders.1 

§  640.  Acceptance  of  a  charter  hy  the  corporation  arises  from 
merely  acting  under  it,  and  a  want  of  formal  acceptance  is  no  de- 
fense to  actions  on  its  contracts.—  It  is  an  old  principle  of  law  that 
individuals  cannot  be  compelled  by  the  state  to  accept  a  charter  to 
act  as  a  private  corporation.  Accordingly  an  acceptance  of  the 
charter  by  them  is  necessary  to  the  actual  existence  of  the  corpo- 
ration. But  there  is  no  rigid  rule  of  law  requiring  them  to  indi- 
cate such  acceptance  in  a  formal  manner.  Any  acts  which  prove 
an  intent  on  the  part  of  the  corporators  to  proceed  under  the 
charter  is  a  sufficient  acceptance  of  it.  It  has  been  frequently  held 
that  an  acceptance  may  be  shown  by  proof  that  corporate  meetings 
and  elections  have  been  held  and  other  corporate  acts  entered  into. 
Mere  user  of  the  right  to  act  as  a  corporation  is  sufficient.'2 


rill,  18  Mich.,  338  (1869) :  State  v.  Noyes, 
47  Me.,  189 ;  Canal  Co.  v.  Railroad  Co.,  4 
Gill  &  J..  122 ;  Regents  v.  Williams,  9 
Gill  &  J.,  365;  Cooley's  Con.  Lim.,  106  ; 
Mayor,  etc.,  v.  Twenty,  etc.,  113  N.  Y, 
311.    Under  this  reserved  power  the  state 


gin  Bridge  v.  Bragg,  11  N.  H.,  102  (1840) : 
Bank  of  Manchester  v.  Allen,  11  Vt.,  302 
(1839);  Tallediga  Ins.  Co.  v.  Landers,  43 
Ala.,  115,  136  (1869);  Trustees,  etc.,  v. 
Gibbs,  56  Mass.,  39  (1848);  Gleaves  v. 
Brick,   etc.;    Co.,    1   Sneed    (Tenn.),   491 


may  authorize  one  corporation1  to  build     (1853);  Perkins  v.  Sanders,  56  Miss.,  733 


its  road  on  a  route  which  a  prior  corpo 
ration  has  designated  but  not  acquired. 
Re  Cable  R'y,  40  Hun.  1  (1886).  A  gen- 
eral statute  or  constitutional  provision 
reserving  the  right  to  repeal,  alter  or 
amend  charters  enters  into  all  charters 


(1879);  Mutual,  etc.,  Ins.  Co.  v.  Stokes,  9 
Phil.,  80(1872);  Penobscot  Boom  Corp. 
v.  Lamson,  16  Me.,  224  (1839);  Sampson 
v.  Bowdoinham,  etc.,  Corp.,  36  Me.,  78 
(1853);  Lincoln,  etc.,  v.  Richardson,  1 
id  ,  79  (1820) ;  Bow  v.  Allenstown,  34  N. 


granted  subsequent  thereto  as  much  as     H.,  351,  372  (1857) ;  Jameson  v.  People 


if  actually  inserted  in  such  charters. 
Re  Lee's  Bank  of  Buffalo,  21  N.  Y..  9 
(1860) ;  Commissioners,  etc.,  v.  Holyoke 
Water-power  Co.,  104  Mass.,  446  (1870) ; 
Delaware  R  R.  Co.  v.  Tharp,  5  Hair. 
(Del.),  454.  The  repeal  of  a  general  in- 
corporating act  and  the  enactment  of  a 
new  one  does  not  repeal  charters  which 


16  111.,  257  (1855);  City  of  Covington  v. 
Covington,  etc.,  Co.,  10  Bush  (Ky.),  69 
(1873);  People  v.  Farnham,  35  111.,  562 
(1864);  Middlesex,  etc.,  v.  Davis,  44 
Mass.,  133  (1841);  Commonwealth  v. 
Bakeman,  105  Mass.,  53  (1870) ;  Palfrey 
v.  Paulding,  7  La.  Ann.,  363  (1852) ;  Trott 
r.  Warren,  11  Me.,  227  (1834).     Building 


have  already  been  taken  out  under  the    a  part  of  the  road  is  an  acceptance  of  a 


old  act.  Freehold,  etc.,  Assoc,  v.  Brown, 
29  N.  J.  Eq.,  121  (1878);  United,  etc., 
Assoc.  V.  Benshimol,  130  Mass.,  •  325 
(1881).  Contra,  Wilson  v.  Tessou,  12 
Ind.,  285  (1859). 

i  See  §  641. 

2  Acceptance  of  a  charter  is  sufficiently 
shown  by  user  under  it.  Demarest  v. 
Flack,  128  N.  Y,  205  (1891);  Androscog- 


887 


special  charter.  St  Joseph,  etc.,  R  R 
v.  Shambaugh,  17  S.  W.  Rep.,  581  (Mo., 
1891).  Acceptance  is  sufficient  where 
the  grantees  afterwards  apply  for  an 
amendment  to  the  charter.  Farnsworth 
v.  Lime  Rock  R  R,  22  Atl.  Rep.,  373 
(Me.,  1891);  and  see  cases  in  g§  183-86. 
supra,  holding  that  a  subscriber  cannot 
defeat  an  action  to  collect  his  subscrip- 


§  611.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


§611.  The  assets  upon  dissolution. —  Upon  the  dissolution  of  a 
corporation  all  its  property,  both  personal  and  real,  is  to  be  used 
to  pay  the  debts  of  the  corporation,  and   after  the  debts  are  paid 


tion  by  alleging  informalities  in  organi- 
zation. Formerly  it  was  customary  at 
the  first  meeting  of  the  corporation  to 
pass  a  formal  vote  accepting  the  char- 
ter. This,  however,  is  not  necessary. 
The  fact  of  holding  the  meeting  is  a 
sufficient  acceptance.  See  same  ca> 
also  City  Of  Atlanta  v.  Grate  <  ity.  etc, 
Gas  Co.,  71  Ga..  106  (1883),  where  a  char- 
ter granted  in  1808  was  not  acted  on 
until  1877.  It  was  held  that  the  appli- 
cation for  a  charter  constituted  an  ac- 
ceptance in  advance  McKay  v.  Beard, 
30  s.  c.  156  (1888),  holding  that  an 
ceptance  existed  thongh  no  meeting  at 
all  for  organization  was  held,  but  the 
c  irporation  pi  I  to  business     I   i 

gnn  >:  McAllister,  2  DeL  Ch.,  176  (1856  . 
holding  that  irregularities  in  organiza- 
tion are  immaterial ;  Russell  v.  McLellan, 
;?l  Mass., 63  (1888),  where  no  notice  was 

■n  of  the  first  m<  eting,  and  a  stock- 
holder Bued  for  a  dissolution  of  the  com- 
pany as  a  copartnership  The  best  evi- 
dence possible  of  the  acceptance  should 
b  •  given.  Hudson  v.  <  larraan,  n  Me.,  84 
Where  subscription  books  are 
opened  and  then  abandoned,  and  t>  □ 
irs  later  are  secrt  tlj  re-op  ned  and 
subscriptions  taken  without  giving  the 
statutory  notice  to  the  i ml »1  i. •  that  they 
may  subscribe,  the  charter  is  forf<  it  ible. 

ite  r.  Bull,  16  Conn..  179  (1844 
also,  where  a  new  charter  is  granted  t<> 
au  existing  corporation,  and  it  contra- 
il -  to  act,  the  jury  are  t..  say  whether 
t  ie  corporation  continued  under  the  old 
charter  or  accepted  the  new  one,  Ham- 
mond   r.   Straus,  58   Md..  1   1 1879]      \- 

uds    tin'    acceptance    of  a  charl 
amendment  l>y  simply  acting  under  it. 

State  r.  Sibley,  85  Mum.. 

Smut-all    r.  Sun,    I  tC.,    In-.    C...     |n    Mo., 

M   ;  King  r.  Hughes,  3  K  &  c. 
>x   1828  .  a  municipal  corporation  cas 
Bangor,  etc.,  U.  R.  Co  a  Smith,  i:  Me., 
34    (1839);  Lyons     r.    Orange,     etc.,     K 


R  Co..  32   Md..  18  (1869);  Wetumpka, 
etc.,  R  R  Co.   v.   Bingham,  5   Ala..  657 
(1843),  and  many  cases  in  ch.  XXVIII, 
supra.     Failure    to    organize    uuder    a 
special   charter  until  after  a   constitu- 
tional   amendment   prohibiting   special 
charters,  i>  fatal  to  it    State  a  Dawson, 
16Ind.,40  (1861}    Acceptance  must  be 
in  toto  or  d   I  at  all.    Rex  v.  Westw 
ni.  &  a,  781  (1825),     A  person 
not  i"-  compt  Ued  to  ad  as  a  a  rporator 
in  a  private  corporation,     r.llis  r.  Mar- 
shall. 2  :■  Hence  hie 
ceptance  must   be  proved   by   user  at 

in    r.    Collins,    17  Me.,    MO 
(1840),      Organizing    <>nt   of    the 
may  not  b    legal,  yet  't  BufBces  for  an 

of  the  charter.     Heath   >: 
Silverthorn,    etc.,    i  I    Wia,    146 

I 1875)     a  Bpccial  charter  must  be  ao- 

i ■■    the  corporation  •  lists, 
and  Buch  acceptance    c  innot  be  at   a 

ting  held  onl  of  the  Btate.     H<  d 
bill  by  a  stockholder  to  Ie  a  for- 

feiture of  hi-  stock  w  is  dismissed  bj 
the  COUrt     Smith    r.  Si  .  (  •,>..  -jo 

Atl.  Rep.,  1082  (Md.,  186  »  ptance 

of  a  new  charter  is  n<>t  necessarily  an 
abandonment  of  theold  one.  Johnston 
r.  Crav  816  (1858);  \\ 

fork   r.    Union   Hank.  8  Cold  <Tenn.), 

\  <  "i  poratioc  cannot  w 
part  of  asp  cial  charter  and  reject  the 

•    of   Mi  tropolitan,  •■(<•..   T. 
Co.,  ill   N.  v..  588  Acceptance 

of  the  chai  ter  i>  not  implied  by  accept- 
ing th>-  benefits  but  performing  none  <>t 
the   burdens  im|  is   where  a  toll 

r.ad  was  established  over  a  highway. 
Welsh  >:  Plumas  Co..  '2'J  Par.  Rep,  720 
(CaL,  1892)i  Acceptance  must  be  within 
a  reasonable  time  alter  ten  years' de- 
lay befoi  izing,  the  state  may  ob- 
ject by  an  information  in  the  natun 
ijim  warranto.  State  t\  Bull,  10  Conn., 
179(1844). 


SsS 


CH.  XXXVIII.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[§  641. 


the  remainder  is  to  be  distributed  among  the  stockholders.1  For- 
merly it  was  held  that  the  real  estate  of  the  corporation  upon  disso- 
lution reverted  to  the  grantor,  its  personal  property  to  the  state  or 
sovereign,  and  the  debts  due  to  it  and  from  it  were  forgiven  and 


extinguished.2 


But  a  contrary  rule  now  prevails. 


i  Krebs  v.  Carlisle  Bank,  2  Wall.  (C. 
C),  33  (1850) ;  Heath  v.  Barmore,  50  N. 
Y,  302  (1872) ;  Burrall  v.  Bushwick  R. 
R.  Co.,  75  N.  Y.,  211  (1878):  James  v. 
Woodruff,  10  Paige,  541  (1844) ;  Froth- 
iugharn  v.  Barney,  6  Hun,  366  (1876) ; 
Wood  v.  Dummer,  3  Mason,  308,  322 
(1824).  Cf.  In  re  Hodges  Distillery  Co., 
L.  R,  6  Chan.,  51  (1870);  Nathan  v. 
Whitlock,  9  Paige,  152  (1841);  Curran 
v.  State  of  Arkansas,  15  How.,  304,  307 
(1853) ;  Hastings  v.  Drew,  76  N.  Y.,  9 
(1879);  affirming  S.  C,  50  How.  Prac, 
254  (1887).  The  same  rule  prevails  where 
the  charter  is  repealed  by  the  legisla- 
ture. Lothrop  v.  Stedman,  13  Blatch., 
134  (1875);  McLaren  v.  Pennington,  1 
Paige,  102  (1828),  by  statute ;  Detroit  v. 
Detroit  &  Howell  Plank-road  Co.,  43 
Mich.,  140  (1880);  County  of  San  Mateo 
v.  Southern  Pacific  R.  R  Co.,  8  Sawyer, 
238,  per  Field,  J.,  holding  that  "the 
property  of  the  corporation  acquired 
in  the  exercise  of  its  functions  is  held 
independently  of  such  reserved  power, 
and  the  state  can  only  exercise  over  it 
the  control  which  it  exercises  over  the 
property  of  individuals  engaged  in  sim- 
ilar business"  (p.  279).  Ill  N.  Y.,  1.  The 
legislature  cannot  repeal  a  charter 
granted  by  the  constitution  of  the  state. 
New  Orleans  v.  Houston,  119  U.  S.,  265 
(1886). 

2Hightower  v.  Thornton,  8  Ga.,  486 
(1850);  Life  Association  of  America  v. 
Fassett,  102  111.,  315  (1883):  Commercial 
Bank  v.  Lockwood,  2  Harr.  (Del.),  8 
(1835);  State  v.  Rives,  5  Ired.  Law  <N. 
C),  297  (1844);  White  v.  Campbell,  5 
Humph.  (Tenn.),  38  (1844);  Fox  v. 
Horah,  1  Ired.  Eq.  (N.  C).  358  (1841); 
Ma  Hoy  V.  Mallett.  6  Jones'  Eq.  (N.  C), 
345  (1863),  hoiding  also  that  the  stock- 
holder's liability  was  extinguished; 
President,  etc.,  of  Port  Gibson  v.  Moore, 


21  Miss.,  157  (1849);  Bingham  v.  \Xvu\- 
erwax,  1  N.  Y.,  509  (1848);  Owen  v. 
Smith,  31  Barb.,  641  (1860);  State  Bank 
v.  State,  1  Blackf.  (Ind.),  267,  282  (1823) ; 
Acklin  v.  Paschal,  48  Texas,  147  (1877): 
St.  Philip's  Church  v.  Zion,  etc.,  Church, 
23  S.  C,  297  (1885) ;  Coulter  v.  Robert- 
son, 24  Miss.,  278  (1852);  Bank  of  Miss. 
v.  Duncan,  56  Miss.,  166  (1878) ;  Hamilton 
v.  Accessory,  etc.,  Co.,  26  Barb.,  46  (1857). 
3  Bacon  v., Robertson,  18  How.  (U.  S.), 
480  (1855);  Heath  v.  Barmore,  50  N.  Y., 
302  (1872);  Lumn.  Robertson,  6  Wall.. 
277  (1867);  Robinson  v.  Lane,  19  Ga.. 
337  (1856);  Lothrop  v.  Stedmau.  13 
Blatch.,  134  (1875);  Blake  v.  Ports- 
mouth, etc.,  R.  R.  Co.,  39  N.  H,  435 
(1859);  Matter  of  Woven  Tape  Skirt 
Co.,  8  Hun,  508  (1876);  Mumma  r.  Poto- 
mac Co.,  8  Peters,  281  (1834);  Fox  v. 
Horah,  1  Ired.  Eq.  (N.  C),  358  (1841): 
Bingham  v.  Weiderwax,  1  N.  Y,  509 
(1848);  Curry  v.  Woodward,  53  Ala., 
371  (1875);  2  Kent's  Com.,  307,  n. : 
Powell  v.  North  Mo.  R  R  Co.,  42  Mo., 
63  (1867) ;  Wood  v.  Dummer,  3  Mason, 
308  (1824).  Statutes  are  frequently  en- 
acted to  this  effect.  Nevitt  v.  Bank, 
etc.,  14  Miss.,  513  (1846);  McCoy  v. 
Farmer,  65  Mo.,  244  (1877);  Owen  v. 
Smith,  31  Barb.,  641  (1860).  A  deed  of 
property  to  a  railroad  for  fifty  years  or 
so  long  as  its  charter  continued,  which 
by  charter  is  fifty  years,  passes  the  land 
to  a  corporation  which  by  legislative 
enactment  succeeds  to  the  rights  of  the 
first  corporation.  Davis  v.  Memphis, 
etc.,  R.  R.,  6  S.  Rep.,  140  (Ala.,  1889).  So 
far  as  land  grants  are  concerned  the 
consolidated  company  is  the  same  as  the 
old  company.  United  States  v.  Southern 
P.  R.  R,  45  Fed.  Rep.,  5S6  (1891).  A 
consolidated  company  succeeds  to  land 
owned  by  one  of  the  consolidating  com- 
panies,    Cushman  v.  Brownlee,  27  N.  E. 


889 


§  641.] 


DISSOLUTION,  FORFEITURE,  ETC. 


[CH.  XXXVIII. 


When  the  corporation  owns  a  right  of  way  or  other  franchise 
obtained  from  a  municipality  or  by  the  exercise  of  the  state's  power 
of  eminent  domain,  this  right  of  way  franchise  is  a  corporate  asset 
upon  the  dissolution  of  the  corporation.  It  does  not  revert  to  the 
state  or  municipality.1 

This  is  the  natural  and  logical  result  of  the  principle  of  law  that  a 
railroad  company  may  make  a  contract  to  run  longer  than  its  char- 
tered existence;2  may  take  a  deed  of  land  in  fee,  although  the 
company's  duration  is  limited,3  and  may  acquire  a  perpetual  right 
of  way  under  the  same  circumstances.4     On  the  dissolution  of  a  cor- 


Rep.,  500  (Ind.,  1891).  An  agreement 
that  upon  dissolution  of  the  company 
the  telegraph  line  .should  go  to  the  rail- 
road is  hiudiug.  Latrobe  a  Western 
Tel.  Co.,  21  Atl.  Rep.,  788  lid.,  1891>  A 
corporation  cannot  deed  land  i  fter  its 
charter  has  expired.  Bfarysville,  etc., 
Co.  v.  Bfunson,  24  Pac  Rep,  ht;  (Kan., 
1890).  A  deed  duly  authorized  is  K«>od 
though  executed  after  the  corporation 
is  consolidated  with  another.  Edison, 
etc.,  (  <>.  r.  n ,.\\  i [aven,  i  l  J;'y 

&  Corp  L.  J.,  4  (1888). 

1  Where  a   legislature,  under  it 
served  right  "t   repeal,  repeals  a  sti 
railroad  charter,  the  right  to   use  the 
Btreeta  and  operate  the  road  d 
vert  to  the  state,  but  passes  as  property 
to  the  receiver  for  the  benefit  of  the 
on  ditora  and  stockholders  of  the  corpo- 
ration    People  r.  i  i "I'.i  i.  n.  Ill   N.  V..  1 
(1888)l     in  Pennsylvania  the  franchise 
of  the  right  of  way  of  a  railroad  vests, 
upon  its  dissolution,  in   the  Mat",  and 
the  state  may  grant  it   to  another  rail- 
road.    Erie,  etc.,  R   R  <  la   o,  ■ 
Pa  St..  287  (1856).     Bee,  also,  Plitt    v. 
..  18  Pa  St..  486  (18621     In  Ohio  it 
ins  that  the  right  ofwaj  reverts  to 

tl wni  r  of  tin' fee.    New  York,  el 

R.  R  Co.  v.  Parmalee,  1  Ohio  G  G  Rep., 
839  (1885).  Bee,  also,  as  to  the  rule  in 
New  York.  Beard  u  City  of  Brooklyn, 
60  N.  V..  942  1875  ;  People  r.  White,  11 
Barb.,  26  (1851  ;  Booki  r  a  fJtica  &  M. 
I.  R,  «'o..  ]•>  Wend.,  871  (1884>  There  is 
no  reversion  of  the  right  of  way  on  the 
dissolution  of  the  company  after  fifty 
year-       havis    i>.    Memphis,    etc,    R    R 


G  S.  Rep.,  140  (Ala,  1889).  A  lot- 
tery grant  cannot  be  repealed,  when 
mortgaged  by  the  corporation,  until  the 
mortgage  is  paid  Gregory's  Ex.  v. 
Trustees,  8  M<  tc    k  I  (1859}    C/.. 

in  general,  Turnpike  Co.  n  Illinois.  96 
1     -    '        3Ti       V        e  the  stockhold- 
ers  of  an  old  plank-road  company  are 
still  operating  the  road  but  under  an- 

:  <li. uter,  they  cannot  be  ousted 
from  the  latter  by  an  injunction  suit 
against  their  operating  under  the  former. 
The  tated  that  it  did  not  favor 

such  a  confiscating  suit,    l  De 

Grauw,  188  N.  Y.,  Unused 

right  of  way  does  not  revert  to  original 
owner.    M.  i  onihaj  o.  Wi  Lht.  LSI  1    - 

L887>    The  state  may  grant  an  un- 

raflway   franchise  to  au- 

other  company.     Henderson  r.  Central, 

.  tc,  B'y,  8]   Fed  R  p,  No 

revei  ter  a  here  the  railroad  tak( 

it.  56  N.  V.. 
(1874  dso,  in  general,  Norton  v. 

WalikilL .  t&,  i:.  i;.  (  ....  12  Bow.  Pi 
(1871  5    In  1.  (N.  C.\ 

1844  ;  Bopkins  r.  Whiteside*  1 
I  h  a.l,  81  1858  .  w  i  ■  re  a  turnpike  com- 
pany is  authorized  to  collect  tolls  only 
for  fifteen  years,  the  road  is  free  after 
that  date.      People   n 

.  18  Pac  !:•  p..  806  (CaL,  1886 

tion  u  hose  charter  ex] 
in  forty  yean  may  nevertheless  make  a 
contract  for  nine  hundred  and  ninety- 
nine  years    Union  Pac  R'y  o.  Chicago, 

\i\.  :.i  Fed  Rep, 

icoll  >:  Railroad  12  N.  V..  121. 
<  Miner  v.  N.  5  .  R  R.,  138  N. 


S..U 


CH.  XXXVIII.] 


DISSOLUTION,  forfeiture:,  etc. 


[§  641. 


poration  having  no  stockholders  the  common-law  rules  of  reverter 
and  appropriation  apply.1  Upon  dissolution  the  stockholders  are 
entitled  to  an  immediate  settlement  of  the  corporate  debts  and  a 
distribution  of  the  residue.2  They  are  not  obliged  to  accept  the 
stock  of  another  corporation  as  payment  upon  a  final  distribution, 
but  may  demand  that  the  distribution  be  in  cash.3  The  company 
by  unanimous  consent  may  distribute  the  assets  without  a  dissolu- 
tion provided  all  creditors  are  paid.4 

When  corporate  assets  are  placed  in  the  hands  of  a  corporate 
officer  or  other  person  for  distribution,  a  stockholder  may  file  a 
bill  in  equity  for  his  part,  but  in  such  a  suit  the  corporation  is  a 
necessary  party.5     The  remedy  in  such  a  case  is  not  at  law.6     The 


Y.,  242  (1890) ;  Davis  v.  Memphis,  etc., 
R.  R,  6  S.  Rep.,  140 ;  Bailey  v.  Piatt,  etc., 
Co.,  21  Pac.  Rep.,  35.  Taft,  J.,  reached 
a  contrary  conclusion  in  City  of  Detroit 
v.  Detroit  Street  R'y,  56  Fed.  Rep.,  $67 
(1893),  and  held  that  a  city  ordiuance 
granting  street  rights  to  a  company  for 
a  longer  period  than  the  duration  of  the 
corporation  was  void.  Dissolution  does 
not  terminate  a  lease  to  a  corporation. 
People  v.  Nat'l  Trust  Co.,  82  N.  Y.,  284 
(1880). 

1  Upon  the  dissolution  of  a  public  or 
charitable  corporation  its  property  goes 
to  the  state  and  former  owners,  subject 
to  the  trust  that  the  property  shall  still 
be  used  for  similar  purposes  if  those 
purposes  be  legal.  Mormon  Church  v. 
United  States,  136  U.  S.,  1  (1890).  Upon 
the  dissolution  of  an  eleemosynary  cor- 
poration having  no  stockholders  or 
creditors,  the  title  to  its  land  reverts  to 
the  donor.  Danville  Seminary  v.  Mott, 
28  N.  E.  Rep.,  54  (111.,  1891).  A  private 
corporation — a  normal  college  —  can- 
not by  act  of  the  legislature  be  converted 
into  a  public  corporation  and  the  prop- 
erty vested  in  the  state.  Bakewell  v. 
Board  of  Education,  33  N.  E.  Rep.,  186 
(111.,  1893).  In  California,  on  the  dissolu- 
tion of  a  corporation  for  literary  pur- 
poses, its  land  goes  to  the  stp  te.  People  v. 
Pres.,  etc.,  38  Cal.,  166  (1869).  Upon  dis- 
solution of  a   mutual   insurance  com- 


pany having  no  stockholders,  its  assets, 
after  the  payment  of  its  liabilities,  be- 
long to  the  stale.  Titcomb  v.  Kennebec, 
etc.,  Co.,  9  Atl.  Rep.,  732  (Me.,  1887). 
But  where  an  insurance  company  is 
organized  both  on  the  stock  and  mutual 
plau,  upon  a  dissolution  of  the  stock 
part  of  the  organization  the  guaranty 
accumulations  belong  to  the  stockhold- 
ers. Traders',  etc.,  Ins.  Co.  v.  Brown,  8 
N.  E.  Rep.,  134  (Mass.,  1886).  Land  re- 
verts to  the  former  owner.  Mott  v.  Dan- 
ville Sem.,  21  N.  E.  Rep.,  927  (111.,  1889). 
Distribution  of  funds  of  incorporated 
association.  Aston  v.  Dashaway,  22 
Pac.  Rep.,  660;  affirmed  in  23  id.,  1091, 
1890.  As  to  unincorporated  associations, 
see  ch.  XXIX,  sujira. 

2Frothinghara  v.  Barney,  6  Hun,  3G6 
(1876). 

s  See  §  667,  infra. 

4  Rorke  v.  Thomas,  56  N.  Y,  559  (1874). 
Although  the  state  is  prosecuting  a  suit 
to  forfeit  the  charter  for  entering  into  a 
combination,  yet  a  sale  of  part  of  the 
corporate  property  to  a  stockholder 
pending  the  suit  is  legal  and  the  re- 
ceiver cannot  follow  the  property.  A 
writ  of  prohibition  will  issue  against 
him.  Haveme3Ter  v.  Superior  Court, 
24  Pac.  Rep.,  121  (Cal.,  1890). 

5  Young  v.  Moses,  53  Ga.,  628  (1875). 
For  the  remedies  and  procedures  when 
the    directors   on  dissolution   have  di- 


fi  Brown  v.  Adams,  5  Biss..  181  (1870).     Rep.,  638  (1886);  Hodsdon  v.  Copeland, 
Cf.  Pacific  R  R  Co.  v.  Cutting,  27  Fed.     16  Me.,  314  (1839). 

891 


§  641.] 


DISSOLUTION,   FORFEITURE,  ETC. 


[CH.  XXXVIIL 


stockholders  may  insist  on  the  statute  of  limitations  as  a  bar  to 
the  claim  of  corporate  creditors  upon  the  assets.1  The  right 
the  stockholders  in  the  assets  upon  a  dissolution  depend  upon  the 
law  of  the  country  creating  the  corporation.2  And  these  rights 
cannot  be  taken  from  the  stockholders  by  an  act  repealing  the 
charter.3  It  has  been  held  that  assets  ought  to  be  distributed  in 
proportion  as  the  subscriptions  to  the  stock  have  been  paid.4 

Debts  due  from  the  stockholder  to  the  corporation  are  in  any 
event  to  be  deducted  from  his  Interest  in  the  assets.5  And  an  as- 
signment or  transfer  of  stock  by  a  stockholder  after  the  dissolu- 
tion of  the  corporation  is  merely  an  e  suitable  assignment  of  Ins 
interest  in  the  assets  of  the  concern  as  it  may  appear  upon  the 
settlement.'1 


vided  the  assets  fraudulently,  see  Hor- 
Der  r.  Carter,  n  Fed.  Rep.,  863  I 
The  minority  may  bring  the  officers  to 
;m  accounting  for  an  unfair  distribution 
of  the  bonds,  eta,  owned  by  a  construc- 
tion company.  Meyers  v.  Scott,  2  N.  Y. 
Supp.,  758  (1888>  The  corporation  may 
file  a  l>ill  to  distribute  a  specific  fund 
only,  and  m  ed  not  in  that  l  •  i  1 1  have  a 
general  distribution  of  all  in  funds. 
Pacific  R  l:.  a  Cutting,  81  Fed.  Rep., 
1886).  If  the  directors,  who  by 
statute  are  made  trustees  t"  wind  op  the 
corporation  upon  dissolution,  delay  in 
eo  doing,  tli.'  court  will  appoint  a  n 
ceiver.  Blatter  of  Pontius,  88  Hun,  288 
1882).  Although  the  charter  is  forfeited 
:it  the  instance  of  the  \  the  .h- 

rectors  are  trustees  to  w  ind  up  the  com- 
pany under  the  statute,  unless  a  receiver 
i-  appointed  ;it  tin'  instance  <>t  ;i  cred- 
itoror  stockholder.  BaVemeyei  u.  Su- 
perior Court,  34  Pac  Rep.,  LSI  (CaL, 
L890),  Although  the  fund  upon  dissolu- 
tion is  small  and  the  number  of  stock- 
holders large,  yet  the  directors  cannot 
avoid  their  dut]  as  to  the  distribution  of 
the  fund  l>>  turning  it  over  t<>  ;i  court  to 
administer.  In  n  « Centennial  Board  of 
Finance,  18  Fed  Rep.,85  .It  the 

directors  are  by  Btatute  authorized  t.> 
administer  the  assets  upon  dissolution, 
but  fail  to  do  bo,  the  court  will  appoint 
a  receiver.     />'.  Pontius,  supra. 
» Johnston  r.  Talley,  60  Qa.,540  (1878 


t  )n  a  bill  to  wind  up  an  insolvent  cor- 
poration   the   stockholder    may   prove 
that  some  claims  against  the  company 
not   legally  contracted.     Crutch- 
a.  Mutual.  I  S  v7.  Rep, 

1  Hamilton  a  Accessory  Transit 

80  Carl...    M 

'Lothrop  tx  Stedman,  18  Blatch.,  184 

<Krebs  p.  Carlisle  Bank,  8  Wall 
(18  i  >-.  Scinde, 

l;\  <  ...  58  I.  T.  i:.  p.,  1  i  :  fa  re 

l..  i:.  6  Ch.,  51    ' 
<)i  winding  up,  stockholders  who  have 
advanced  on  the  subscription  price  more 
than  the  calls  required,  under  an  a 

•  of  repayment  with  interest^  are 
entitled  (•>  repaj  ment  i 
dividend  is  mada  So  held  where  full- 
paid  >t.».-k  was  issued  for  property,  but 
other  stock  t".>r  cash  was  not  fully  paid 
up     Bzchai  9  LT.  I 

This  is  the  rule  by  statute  in 
New  York  upon  the  voluntary  dissolu- 
tion of  a  corporation.    '•'<  Rev,  Stat 
.Will.  art. 

,i  mi.  -   r.   Woodruff,   10  Paige,  541 
(1844);    Nathan    v.    Whitlock,    0   Paige, 

841);  Purton  u  New  I  Means, 
K.  1  La.  Aim..  1988   1848 

'James   v.   Woodruff,   i<»  Paige,  541 
(1844);    S   G    affirmed,    2    Denio,   ■>:  l 
(1845  :  Sewall  r.  Chamberlain,  18 Gray, 
SOX 


892 


I 


CH.  XXXVIII.]  DISSOLUTION,  FORFEITURE,  ETC.  [§  G42. 

A  person  who  conveys  property  to  the  corporation  in  payment 
for  stock  may  contract  that  upon  dissolution  he  shall  receive  back 
that  property.1 

§  642.  The  liabilities  upon  dissolution,  consolidation  or  sale. — 
As  already  seen,  the  old  rule  tnat  upon  dissolution  all  debts  by  or 
to  the  corporation  are  rendered  unenforceable  is  no  longer  the  law.2 

An  important  question  arises  in  this  connection  where  one  cor- 
poration sells  out  all  its  property  to  another  corporation  leaving 
some  of  the  debts  of  the  former  corporation  unpaid.  The  rights 
and  remedies  of  the  creditors  in  such  a  case  are  fully  considered 
elsewhere.3  So  also  it  frequently  becomes  important  to  know 
whether  a  consolidated  company  is  liable  for  the  debts  of  the  con- 
stituent companies,4  and  whether  a  purchaser  at  a  foreclosure  sale 
is  liable  for  the  debts  of  the  foreclosed  corporation.5 

The  question  of  liability  where  the  corporation  is  a  mere 
"dummy"  is  considered  elsewhere.6 

Another  interesting  and  difficult  question  is  whether  a  person  or 
corporation  which  owns  all  the  stock  of  another  corporation  is  ever 
liable  for  the  debts  of  the  latter  on  the  ground  that  the  latter  is  a 
mere  "dummy"  for  the  former.  This  subject  also  is  considered 
elsewhere.7 

At  common  law  upon  dissolution  of  a  corporation  all  suits  by  or 
against  it  abate.5 

Suit  does  not  lie  against  a  corporation  which  has  been  dissolved.9 

1  Fish  v.  Nebraska,  etc.,  Co.,  25  Fed.  action  for  tort  abates  upon  the  expira- 
Rep.,  795  (1885).  tion  of  the  corporate  charter.     Grafton 

2  See  preceding  section.  But  a  judg-  v.  Union  Ferry  Co.,  13  N.  Y.  Supp.,  878 
nient  declaring  a  corporation  illegal,  (1891).  Corporate  suits  end  when  the 
void  and  the  association  dissolved  puts  charter  expires.  Logan  v.  Western,  etc., 
an  end  to  a  contract  by  it  to  pay  cer-  R.  R.,  13  S.  E.  Rep.,  516  (Ga.,  1891).  An 
tain  parties  its  bonds  and  stock  if  they  action  against  a  corporation  may  be 
would  build  its  road.  Vinal  v.  Conti-  continued  against  those  who  administer 
nental,  etc.,  Co.,  32  Fed.  Rep.,  345  (1887).  its  assets  where  the  corporation  is  dis- 

3  See  ch.  XL,  infra.  solved  pending  the  suit     Hepworth  v. 

4  See  ch.  LIII.  Union  Ferry  Co..  62  Hun,  258  (1891). 

*  Seech.  LII.  9  Dobson  v.  Simonton,  86  N.  C,  492 

6  See  §£  6  and  663a,  infra.  (1882).     The  legislature  may  provide  for 

7  See  Id.  suits  against  corporations  after  dissolu- 

8  McCulloch  v.  Norwood,  58  N.  Y.,  562 ;  tion,  thus  changing  the  common-law 
In  re  Norwood,  32  Hun,  196  (1884) ;  Gree-  rule.  Stetson  v.  City  Bank,  etc.,  2  Ohio 
ley  v.  Smith,  3  Story.  C.  C,  657  (1845);  St.,  167  (1853);  Foster  v.  Essex  Bank,  16 
Saltmarsh  v.  Planters',  etc.,  Bank,  17  Mass.,  244  (1819).  A  corporation  may  be 
Ala.,  761  (1850);  Merrill  v.  Suffolk  Bank,  sued  as  such  for  a  tort  committed  by  it 
31  Me.,  57  (1849);  Ingraham  v.  Terry,  11  after  its  charter  has  expired.  Miller  v. 
Humph.  (Tenn.),  572  (1851) ;  Life  Asso-  Nevvberg,  etc.,  Co.,  8  S.  E.  Rep.,  600 
ciation  v.  Fassett,  102  111.,  315  (1882) ;  (W.  Va.,  1888).  No  action  after  dissolu- 
Platt  v.  Ashman,  32  Hun,  230  (1884).    An  tion.     Gold  v.  Clyne,  58  Hun,  419  (1S90). 

893 


§  642.] 


DISSOLUTION,  FORFEITURE}  ETC. 


[CH.  XXXVIII. 


A  contract  made  by  the  officers  after  the  charter  has  been  for- 
feited does  not  bind  the  stockholders.1 

A  director  who  is  a  creditor  of  the  corporation  may  share  pro- 
portionately with  other  creditors  in  the  assets.2 

Where  a  company  owing  debts  allows  a  foreclosure  of  a  mortgage 
and  buys  in  the  property  and  holds  it  secretly  in  the  name  of  a 
trustee,  an  execution  may  be  levied  on  it  by  a  judgment  creditor 
of  the  company.3 


Where  an  attorney  brings  suit  in  the 
name  of  a  corporation  that  has  been 
dissolved  before  the  action  he  is  liable 
for  costs  if  beaten.  Attleboro  Nat'l  Bank 
v.  Wendell,  64  Hun,  208  (1892).  After 
dissolution  has  been  decreed  it  is  too  late 
for  a  corporate  creditor  to  bring  an  ac- 
tion to  hold  the  directors  liable  for 
declaring  dividends  out  of  the  capital 
stock,  no  fraud  in  obtaining  the  dissolu- 
tion being  alleged.     Coxon  v.  Gorst,  64 


L,  T.  Rep.,  444  (1891).  Upon  dissolution, 
the  directors  becoming  trustees  by  stat- 
ute, the  statute  of  limitations  begins  to 
run  against  claims  against  the  secretary. 
Landis  v.  Saxton,  16  S.  W.  Rep.,  912 
(Mo.,  1891). 

1  Wilson  v.  Terson,  12  Ind.,  285  (1859). 

2  Thompson  n  Huron  Lumber  Co.,  30 
Pac.  Rep.,  741  (Wash.,  1892). 

3  State  r.  McBride,  15  S.  W.  Rep.,  72 
(Ma,  1891). 


894 


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